================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 20-F/A
(Mark One)
/ / REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
-----------------
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 Number 1-9216
----------------------
HANSON PLC
(Exact name of registrant as specified in its charter)
ENGLAND AND WALES
(Jurisdiction of incorporation or organisation)
1 Grosvenor Place
London SW1X 7JH, England
(Address of principal executive offices)
----------------------
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
American Depositary Shares New York Stock Exchange
Ordinary Shares of (pound)2 each New York Stock Exchange*
----------------------
* Listed, not for trading, but only in connection with the registration of
American Depositary Shares, pursuant to the requirements of the Securities and
Exchange Commission.
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
OF THE ACT:
None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Ordinary Shares of (pound)2 each....................735,876,751
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
Indicate by check mark which financial statement item the registrant has elected
to follow.
ITEM 17 / / ITEM 18 /X/
================================================================================
EXPLANATORY NOTE
Hanson PLC has restated its consolidated financial results as reported under the
generally accepted accounting principles in the United States ("US GAAP") for
the fiscal period ended December 31, 1997, the three months ended December 31,
1997, the year ended September 30, 1997 and the fiscal years ended December 31,
1998, 1999, 2000 and 2001. Hanson has also restated its consolidated
shareholders' equity as reported under US GAAP as at September 30, 1997 and
December 31, 1997, 1998, 1999, 2000 and 2001.
These restatements relate to an underprovision for deferred taxation, under US
GAAP, of (pound)197.6 million, identified in the 2001 fiscal year and previously
reflected as a movement in shareholders' equity in respect of taxation in 2001.
Hanson has restated its results as reported under US GAAP for 2001 and prior
periods and its shareholders' equity as reported under US GAAP at December 31,
2001 and prior period ends in order to reflect the relevant amounts of this
underprovision in the periods to which they relate together with consequential
amendments to goodwill and goodwill amortisation.
As required by FAS144, the US GAAP results have been revised to reflect as
discontinued, certain operations sold in 2002 that were reported as discontinued
for both UK GAAP and US GAAP in the six months ended June 30, 2002. They do not
qualify to be treated as discontinued in these financial statements under UK
GAAP.
The results and shareholders' funds under UK GAAP are not affected by these
changes.
This Form 20-F/A amends Items 3, 8 and 18 of the Form 20-F filed by Hanson on
May 21, 2002 (the "Form 20-F") in the following manner:
Item 3A "Selected Financial Data". The Consolidated Profit and Loss
Account Data and Consolidated Balance Sheet Data tables amend in their
entirety the corresponding tables in the Form 20-F to provide
information regarding the effect of the restatement as of and for all
periods presented.
Item 8A "Consolidated Statements and Other Financial Information" is
amended to include additional disclosure regarding legal proceedings.
The financial statements filed pursuant to Item 18 have been amended
to reflect additional information with respect to acquisitions and
liabilities in Note 23 and new accounting standards in Note 26 and
revised and restated US GAAP information in Note 27.
Other than as set forth above, this Form 20-F/A does not amend, update or
restate any other Items or sections of the Form 20-F.
2
ITEM 3 KEY INFORMATION
ITEM 3A SELECTED FINANCIAL DATA
The consolidated financial statements of Hanson appearing in this Annual Report
(the "Consolidated Financial Statements") are presented in pounds sterling and
are prepared in accordance with accounting principles generally accepted in the
UK ("UK GAAP"). UK GAAP differ in certain respects from accounting principles
generally accepted in the US ("US GAAP"). The significant differences between UK
GAAP and US GAAP relevant to Hanson are set out in Note 27 of the Notes to
Consolidated Financial Statements.
The selected financial data set forth below as of December 31, 2000 and 2001 and
for each of the three fiscal years in the period ended December 31, 2001 are
derived from the Consolidated Financial Statements included elsewhere in this
Annual Report, which have been audited by Ernst & Young LLP, Hanson's
independent auditors. These selected financial data are qualified in their
entirety by reference to, and should be read in conjunction with, the
Consolidated Financial Statements and Item 5 "Operating and Financial Review and
Prospects" included elsewhere in this Annual Report. The selected financial data
as of and for the fiscal period ended December 31, 1997 and as of and for the
fiscal year ended December 31, 1998 have been derived from Hanson's consolidated
financial statements not included herein, which have also been audited by Ernst
& Young LLP. The selected financial data for the three months ended December 31,
1997 and as of and for the year ended September 30, 1997 have been derived from
Hanson's unaudited consolidated financial statements which, in Hanson's opinion,
reflect all adjustments, consisting only of normal recurring accruals, necessary
to present fairly the data presented for such periods.
The US GAAP selected financial data as of and for each period presented have
been restated for the effects of an underprovision for deferred taxation of
(pound)197.6 million, identified in the 2001 fiscal year and previously included
as a movement in shareholders' equity, and the consequential effects on goodwill
and goodwill amortisation. The necessary adjustments to the relevant periods are
set out in the tables below as required by APB20.
3
CONSOLIDATED PROFIT AND LOSS ACCOUNT DATA
YEAR YEAR YEAR YEAR 15 MTHS 3 MTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC 31, DEC 31, DEC 31, DEC 31, DEC 31, DEC 31, SEPT 30,
2001 2000 1999 1998 1997 1997 1997
------- ------- ------- ------- ------- ----- -------
(POUNDS STERLING - MILLIONS, EXCEPT PER ORDINARY SHARE AMOUNTS)
(2) (2)
AMOUNTS IN ACCORDANCE WITH UK GAAP:
Turnover - group and share of joint ventures and
associates 4,179.4 3,417.0 1,993.7 1,893.5 5,251.7 604.5 4,647.2
Turnover - group excluding share of joint ventures
and associates 3,823.7 3,136.1 1,920.5 1,825.2 5,211.1 595.9 4,615.2
Profit on ordinary activities before taxation 275.4 307.2 316.4 180.1 848.9 478.2 370.7
Profit available for appropriation (net income) 278.8 236.4 302.2 338.5 778.7 475.3 303.4
Per Ordinary Share:
Basic profit after taxation 37.9p 33.4p 46.4p 51.9p 119.6p 73.0p 46.6p
Diluted (1) 37.8p 33.3p 46.1p 51.7p 119.4p 72.9p 46.5p
AMOUNTS IN ACCORDANCE WITH US GAAP (RESTATED) (3):
Turnover 3,734.7 3,041.1 1,841.5 1,748.7 5,101.7 568.6 4,533.1
Profit on ordinary activities before taxation 301.1 333.7 312.3 265.5 782.7 465.0 317.7
Profit from continuing operations:
Before effect of restatement 471.5 257.5 311.4 71.0 42.6 8.7 33.9
Effect of restatement for period (6.4) (2.5) 3.6 (40.0) (4.0) (1.0) (3.0)
Total 465.1 255.0 315.0 31.0 38.6 7.7 30.9
Profit available for appropriation (net income):
Before effect of restatement 308.7 259.2 314.3 428.1 698.5 459.3 239.2
Effect of restatement for period (6.4) (2.5) 3.6 (63.0) (4.0) (1.0) (3.0)
Total 302.3 256.7 317.9 365.1 694.5 458.3 236.2
Per Ordinary Share:
Basic earnings from continuing operations:
Before effect of restatement 64.1p 36.3p 47.8p 10.9p 6.5p 1.3p 5.2p
Effect of restatement for period (0.9)p (0.4)p 0.6p (6.1)p (0.6)p (0.1)p (0.5)p
Total 63.2p 35.9p 48.4p 4.8p 5.9p 1.2p 4.7p
Diluted earnings from continuing operations:
Before effect of restatement 63.9p 36.2p 47.5p 10.8p 6.5p 1.3p 5.2p
Effect of restatement for period (0.9)p (0.4)p 0.5p (6.1)p (0.6)p (0.1)p (0.5)p
Total 63.0p 35.8p 48.0p 4.7p 5.9p 1.2p 4.7p
Basic earnings available for appropriation:
Before effect of restatement 42.0p 36.6p 48.2p 65.7p 107.3p 70.5p 36.8p
Effect of restatement for period (0.9)p (0.4)p 0.6p (9.7)p (0.6)p (0.1)p (0.5)p
Total 41.1p 36.2p 48.8p 56.0p 106.7p 70.4p 36.3p
Diluted earnings available for appropriation:
Before effect of restatement 41.8p 36.5p 47.9p 65.4p 107.1p 70.4p 36.7p
Effect of restatement for period (0.9)p (0.4)p 0.5p (9.6)p (0.6)p (0.1)p (0.5)p
Total 40.9p 36.1p 48.4p 55.8p 106.5p 70.3p 36.2p
4
CONSOLIDATED BALANCE SHEET DATA
AS AT
-----------------------------------------------------------------------
DEC 31, DEC 31, DEC 31, DEC 31, DEC 31, SEPT 30,
2001 2000 1999 1998 1997 1997
-----------------------------------------------------------------------
(2) (2)
(POUNDS STERLING - MILLIONS)
AMOUNTS IN ACCORDANCE WITH
UK GAAP:
Total assets 6,953.0 7,300.9 5,212.6 4,654.3 4,848.4 5,398.2
Long-term debt 1,599.3 1,634.1 1,005.7 1,007.0 1,030.7 1,075.3
Share capital 1,471.8 1,470.3 1,304.0 1,303.4 1,302.8 1,302.1
Shareholders' funds 2,720.8 2,420.6 1,847.0 1,592.3 876.5 650.7
AMOUNTS IN ACCORDANCE WITH
US GAAP (RESTATED) (3):
Total assets 8,388.8 8,740.2 6,459.0 5,913.9 6,418.0 6,789.2
Long-term debt 1,599.3 1,634.1 1,005.7 1,007.0 1,030.7 1,075.3
Share capital 1,471.8 1,470.3 1,304.0 1,303.4 1,302.8 1,302.1
Shareholders' equity 3,556.5 3,369.0 2,733.2 2,520.6 2,186.8 1,785.1
____________
(1) Based on the following adjusted weighted average Ordinary Shares
outstanding: 738 million (2001), 711 million (2000), 656 million (1999), 654
million (1998) and 652 million (1997).
(2) The UK GAAP profit and loss account data for fiscal 2000 and fiscal 1999 and
the UK GAAP balance sheet data at December 31, 2000, but not for prior
periods, have been restated for the adoption of FRS19 "Deferred Tax"
(see Note 22 of the Notes to Consolidated Financial Statements).
(3) The US GAAP data for the periods presented have been restated to adjust for
an underprovision of deferred taxation, of (pound)197.6 million, identified
in the 2001 fiscal year. The cumulative effect of the restatement on results
for periods prior to fiscal 1997 is (pound)66.6 million.
DIVIDENDS
Hanson has paid cash dividends on its ordinary shares of (pound)2 each
("Ordinary Shares") (including its ordinary shares of 25p each prior to their
consolidation into Ordinary Shares in February 1997) in every fiscal period
since 1964.
Cash dividends are paid to shareholders as of record dates that are fixed after
consultation between Hanson and the London Stock Exchange. Throughout fiscal
1996 Hanson paid cash dividends on a quarterly basis. Following the payment of
the quarterly dividend on January 10, 1997 and the demerger of The Energy Group
PLC, Hanson changed its fiscal year end to December 31 from September 30 and
reverted to paying an interim dividend, normally paid in September, and a final
dividend, subject to receiving shareholder approval at the Annual General
Meeting ("AGM"), normally paid in May. Future cash dividends will be dependent
upon Hanson's earnings, financial condition and other factors.
The table below sets forth the amounts of the cash dividends in pence per
Ordinary Share and translated, solely for convenience, into US cents per
Ordinary Share at the Noon Buying Rate on each of the respective payment dates
for such dividends, in each case net of the associated advance corporation tax
("ACT") through to April 6, 1999, when ACT was abolished (referred to in Item
10E "Taxation" of this Annual Report).
5
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
-------------------------------------------------------------------------
TRANSLATED INTO
PENCE PER US CENTS PER
ORDINARY SHARE ORDINARY SHARE
15 months to
December 31, 1997 * -- -- -- 4.00 -- -- -- 6.52
Year ended
December 31, 1998 -- 8.00 -- 4.00 -- 13.12 -- 6.76
Year ended
December 31, 1999 -- 8.75 4.20 -- -- 14.18 6.64 --
Year ended
December 31, 2000 -- 9.20 4.35 -- -- 13.95 6.60 --
Year ended
December 31, 2001 -- 9.35 4.45 -- -- 13.47 6.41 --
___________
* On January 10, 1997 Hanson paid a dividend of 1.00p on its ordinary shares of
25p prior to their consolidation into Ordinary Shares in February, 1997. The
1.00p dividend translated into 1.63 cents per ordinary share of 25p.
Hanson has established a dividend reinvestment programme with the Depositary for
holders of its American Depositary Shares ("ADSs"). This programme is only
available to registered holders of ADSs who reside in the US or Canada. It is
intended to provide holders of ADSs with a convenient and economical method of
investing cash dividends and additional cash deposits in ADSs.
In respect of dividends paid before April 5, 1999 a holder of Ordinary Shares or
ADSs who was a resident of the US for purposes of the US/UK double taxation
convention relating to income and gains (the "Income Tax Convention") was
generally entitled under the Income Tax Convention and UK law to receive, in
addition to any dividend received from Hanson, a payment from the UK Inland
Revenue of an ACT Related Tax Credit related to that dividend, less a UK
withholding of 15% of the sum of the dividend paid and such ACT Related Tax
Credit. Amounts in respect of the ACT Related Tax Credit (including any related
withholding) paid to a US holder were dividend income to the holder for US
federal income tax purposes, but were not eligible for the dividends received
deduction allowed to corporations.
With the abolition of ACT on April 6, 1999, dividends are no longer subject to a
UK withholding of 15%. The tax credit arrangements for dividend payments to a US
holder from April 6, 1999 are as described in Item 10E "Taxation" of this Annual
Report.
The following table sets forth, for each of the periods indicated, (i) the
amount in pence of the sum of the cash dividend amount and ACT Related Tax
Credit, per five Ordinary Shares or per ADS (representing five Ordinary Shares);
and (ii) the amount of the gross cash dividend, per five Ordinary Shares or per
ADS (representing five Ordinary Shares), translated, solely for convenience,
into US cents at the Noon Buying Rate on each of the respective dividend payment
dates since January 10, 1997.
6
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
---------------------------------------------------------------------------
GROSS CASH DIVIDEND GROSS CASH DIVIDEND
IN PENCE* TRANSLATED INTO US CENTS**
15 months to
December 31, 1997 *** -- -- -- 25.00 -- -- -- 34.65
Year ended
December 31, 1998 -- 50.00 -- 25.00 -- 69.70 -- 35.91
Year ended
December 31, 1999 -- 48.61 23.33 -- -- 78.75 36.86 --
Year ended
December 31, 2000 -- 51.11 24.17 -- -- 77.51 36.66 --
Year ended
December 31, 2001 -- 51.94 24.72 -- -- 74.81 35.60 --
__________
* The rate of the ACT Related Tax Credit was one-fifth of the gross cash
dividend for each of the UK tax years up to April 5, 1999.
** Includes gross cash dividend and any ACT Related Tax Credit, net of the 15%
UK withholding tax, prior to April 6, 1999, and includes gross cash dividend
and foreign tax credit of one-ninth of dividend paid from April 6, 1999.
Fluctuations in the exchange rate between the pound sterling and the US
dollar and expenses of the Depositary will have affected the US dollar
amounts actually received by holders of ADSs upon conversion by the
Depositary of the cash dividend received.
*** The gross cash dividend paid on January 10, 1997 on five ordinary shares of
25p each amounted to 6.25p, equivalent to 8.66 cents per ADS (representing
five ordinary shares of 25)p.
EXCHANGE RATES
The following table sets forth for the periods indicated the average Noon Buying
Rates in US dollars per (pound)1 (to the nearest cent), calculated by using the
average of the exchange rates on the last day of each full calendar month during
the period.
AVERAGE
15 months to December 31, 1997 1.64
Year ended December 31, 1998 1.66
Year ended December 31, 1999 1.61
Year ended December 31, 2000 1.61
Year ended December 31, 2001 1.45
Year ending December 31, 2002 (through April 23, 2002) 1.43
The following table sets forth the high and low Noon Buying Rates for the last
six months in US dollars per (pound)1 (to the nearest cent).
HIGH LOW
November 2001 1.46 1.41
December 2001 1.46 1.42
January 2002 1.45 1.41
February 2002 1.43 1.41
March 2002 1.43 1.41
April 2002 1.45 1.43
May 2002 (through May 10) 1.47 1.44
7
ITEM 8 FINANCIAL INFORMATION
ITEM 8A CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Reference is made to Item 18 of this Annual Report for this information.
LEGAL PROCEEDINGS
Existing and former subsidiaries, including subsidiaries not transferred
pursuant to the demergers referred to below, have engaged in businesses and
activities, unrelated to the businesses and activities presently being carried
on by Hanson, which give rise to bodily injury and property damage claims
concerning environmental and health issues. Claims and lawsuits have been filed
against these subsidiaries, either directly or as a result of indemnity
obligations, relating to products incorporating asbestos, coal by-products and
chemicals, in particular for the wood treating industry.
With regard to asbestos claims, various of Hanson's US subsidiaries are
defendants, typically with many other companies, in a substantial number of
lawsuits filed in numerous state and federal courts by claimants who allege that
they have suffered bodily injury as a result of exposure to asbestos-containing
products, the manufacture of which by such subsidiaries ceased, depending on the
subsidiary involved, between 1973 and 1984. The products include coke oven
batteries, roofing products, electrostatic precipitators, hot top rings, gun
plastic cement, wallboard joint compounds and textured paints.
Each of Hanson's relevant US subsidiaries, together with its insurance carriers
and outside counsel, review each asbestos claim that is pursued by the
claimants. In many cases the claimants are unable to demonstrate that any injury
they have suffered resulted from exposure to the subsidiary's products, in which
case their claim is generally dismissed without payment. In those cases where a
compensatable disease, exposure to the subsidiary's products and causation can
be established, the subsidiary generally settles for amounts that reflect the
type of disease, the seriousness of the injury, the age of the claimant, the
particular jurisdiction of the claim and the number and solvency of the other
defendants.
Set out in tabular form below is certain information regarding asbestos claims
against Hanson's US subsidiaries (the numbers are approximate only):
Claimants resolved: Jan 98 to Sep 02 37,000
% dismissed 52%
Claimants resolved: Jan 02 to Sep 02 11,400
% dismissed Over 75%
New claimants: Jan 02 to Sep 02 13,100
% mass claims 37%
Claimants outstanding Oct 02 75,000
%* mass claims 32%
* Mass claims are cases with 100 or more claimants covered under a single court
docket number, where no individual claimant has his/her own case number.
The amounts of compensation formally claimed in the cases initially filed by
these claimants vary but typically follow standard formulations that are used in
various jurisdictions by various plaintiffs' law firms. Of the 75,000 claimants
outstanding as of October 31, 2002, Hanson estimates that approximately 50% do
not specify a dollar claim for damages, approximately 32% claim an amount
"greater than $25,000", approximately 9% specify a standard claim for $6 million
and approximately 6% specify a standard claim for $30 million. The remaining 3%
claim various amounts, typically "greater than" specified amounts between
$25,000 and $100,000. Hanson is not aware of any claim specifying an amount
greater than $30 million. Hanson does not believe that the specific dollar
amount that may be mentioned in a claim is an accurate gauge of what relief, if
any, the claimant may eventually recover from one of Hanson's US subsidiaries.
The lawsuits outstanding typically include many companies as defendants in
addition to Hanson's US subsidiaries, and most claimants fail to allocate their
alleged claims of liability among the various named defendants. Hanson's
experience is that in the vast majority of cases, the cases are either dismissed
without payment or settled for only a fraction of the amount claimed.
Nevertheless, the aggregate amount of damages ultimately claimed and recovered
from Hanson's US subsidiaries by outstanding asbestos claimants may
significantly exceed our estimates.
8
The aggregate amounts paid in settlement and average settlement payments in any
given period, together with related defence costs, have fluctuated widely and
are expected to continue to fluctuate widely depending on the nature of the
claims resolved, including the proportion which are mass claims, disease mix,
number of other defendants and jurisdiction of claim.
From January 1, 1998 (the start of the first complete financial year following
demerger) to September 30, 2002, Hanson's US subsidiaries that are defendants in
these actions have spent a cumulative of $6.0 million (before tax relief of $2.4
million) resolving the cases of approximately 37,000 US asbestos related
claimants. This figure is after insurance recoveries of $79.7 million and
includes defence costs. Of the claimants whose cases were resolved during this
period, approximately 52% were dismissed without payment and settlement costs
for the remainder represent approximately 54% of the total gross amount spent.
Hanson estimates that the gross liability for the cost of resolving current and
probable future asbestos claims against its US subsidiaries until 2010 will be
approximately $250 million, including defence costs, but before tax benefit and
not discounted to present value. Provisions totalling $125 million are in place
to cover these estimated costs, after expected insurance recoveries of an
approximately equal amount. In establishing the provisions, other assumptions
have been made as to the number, disease mix and location of future claims,
trends in dismissal rates, settlement and defence costs, resolution of all
existing claims and time scale of resolution of new claims five years after
receipt and the continued solvency of co-defendants. In light of the significant
uncertainty associated with asbestos claims, there can be no guarantee that the
assumptions used to estimate the provisions for the cost of resolving asbestos
claims until 2010 will be an accurate prediction of the actual costs that may be
incurred and as a result the provisions will be subject to potential revision
from time to time as additional information becomes available and developments
occur.
Each of the subsidiaries involved with asbestos claims has a separate agreement
with its insurance carriers regarding the defence and settlement of asbestos
claims, the terms of which vary for each such subsidiary. These insurance
arrangements have resulted in the insurance companies having met substantially
all of the amounts such subsidiaries have paid to date in settlements and
defence costs. Hanson assumes that the amounts received from its insurers will
decline significantly over time.
One of Hanson's subsidiaries is involved in litigation proceedings in California
with its insurers, with a view to establishing whether or not substantially all
of the primary cover available to that subsidiary has been exhausted and, to the
extent that such cover has been exhausted, the amount of excess cover that is
available to it. In estimating the level of insurance cover for the purposes of
establishing the above provisions, Hanson is using what it believes to be a
cautious view of the amount the subsidiary expects to recover under the
applicable policies.
Hanson does not believe that adequate information currently exists to allow it
to estimate reasonably the amount of liability and costs associated with
asbestos claims that its relevant US subsidiaries expect to resolve after 2010,
even though Hanson expects claims will continue to be asserted against its
subsidiaries, the resolution of which will take place after 2010. However,
assuming that current trends continue, Hanson does not expect that the liability
and costs associated with such claims would have a material adverse effect on
its consolidated financial position, liquidity or results of operations.
Factors which could cause actual results to differ from such estimates and
expectations include: (i) adverse trends in the ultimate number of asbestos
claims filed against Hanson's US subsidiaries; (ii) increases in the cost of
resolving current and future asbestos claims as a result of adverse trends
relating to settlement costs, dismissal rates, legal fees and/or judgment sizes;
(iii) decreases in the amount of insurance available to cover asbestos claims as
a result of adverse changes in the interpretation of insurance policies or the
insolvency of insurers; (iv) the emergence of new trends or legal theories that
enlarge the scope of potential claimants; (v) the impact of bankruptcies of
other companies whose share of liability may be imposed on Hanson's US
subsidiaries under certain state liability laws; (vi) the unpredictable aspects
of the US litigation process; (vii) adverse changes in the mix of
asbestos-related diseases with respect to which asbestos claims are made against
Hanson's US subsidiaries, and (viii) potential legislative changes.
In light of such factors, the liability of Hanson's US subsidiaries for
resolving asbestos claims may be materially different from current estimates and
the impact of such claims, both before and after 2010, might have a material
adverse impact on Hanson's financial condition, results of operations and cash
flow.
In addition to US asbestos claims, Hanson's former and existing subsidiaries are
subject from time to time to bodily injury and property damage claims and
lawsuits, both on an individual and class action basis. Such claims and lawsuits
relate primarily to former US chemical products and operations, in particular
those relating to the wood treating and coal tar derivative industries; products
and operations which are unrelated to Hanson's present business and activities.
In such cases the subsidiary concerned is often one of several potential
defendants who are involved in the claim or lawsuit.
Since the demergers discussed under Item 4A "History and Development of the
Company" of this Annual Report, which were effected in 1996 and 1997, no
settlements have been paid by (whether pursuant to judgements or indemnity
obligations), or judgements rendered against, any of Hanson's subsidiaries which
have had or could have a material adverse effect on Hanson's financial
condition, results of operations or cash flow in connection with any such claims
or lawsuits. In a number of instances, the claim or lawsuit has not been pursued
and the subsidiary concerned has been dismissed. With respect to those claims or
lawsuits that have been or are being pursued, the subsidiary concerned generally
believes itself to have had or to have meritorious defences and such claims and
lawsuits have been and are being vigorously defended.
Insurance issues do arise on these claims and lawsuits, both in terms of
indemnity and defence coverage, the outcome of which can be uncertain. In
certain instances no insurance coverage may be available to the relevant
subsidiary.
Hanson and various of its subsidiaries are also the subject of a number of other
pending legal proceedings incidental to present and former operations,
acquisitions and disposals. Hanson does not anticipate that the outcome of these
proceedings, either individually or in the aggregate, will have a material
impact upon Hanson's financial position or results of operations.
However, in light of the uncertainties involved in any litigation and in
particular in the US, where there is the added potential for punitive damage
awards, there can be no guarantee that a settlement might have to be made by, or
an unfavourable judgement may be rendered against, Hanson or one of its
subsidiaries, which could have a material adverse effect on Hanson's financial
condition, results of operations or cash flow.
9
In connection with the demergers referred to above, each of the three companies
into which Hanson demerged its chemicals, tobacco and energy businesses, as well
as a fourth company into which Hanson had previously demerged a group of
primarily US consumer, building products and industrial businesses, agreed to
indemnify Hanson against, among other things, the past, present and future
obligations and liabilities of the businesses transferred to it on its
respective demerger while Hanson agreed to indemnify each of these companies
against, among other things, the past, present and future obligations and
liabilities of all other businesses owned or previously owned by Hanson
(including the businesses transferred to the other demerged companies). No
member of Hanson has incurred any liability in respect of any claim that related
to the above-mentioned businesses demerged by it, any such liability being borne
by the relevant demerged company without liability to Hanson. Energy, one of the
demerged companies, was acquired by TXU Corp. in 1988. In November 2002, TXU
Corp. announced that Energy and several of TXU Corp.'s other U.K. subsidiaries
had been placed under the administration process in the United Kingdom (similar
to bankruptcy proceedings in the United States). As a result, there can be no
assurance that Energy will be able to fulfill its indemnification obligations to
Hanson if and when required.
For information concerning certain environmental proceedings relating to
Hanson's subsidiaries, see "Government Regulation (including Environmental)" in
Item 4B "Business Overview" of this Annual Report.
DIVIDENDS
It is the intention of the board of Hanson to adopt a prudent but over time,
progressive, approach to dividends, while recognising the requirement to grow
the business through bolt-on acquisitions and capital expenditure.
10
ITEM 18 FINANCIAL STATEMENTS
The following consolidated balance sheets of Hanson as at December 31, 2001 and
December 31, 2000 and the related consolidated profit and loss accounts and
consolidated statements of total recognised gains and losses, cash flows and
changes in shareholders' equity and financial statement schedule for each of the
three years in the period ended December 31, 2001, together with the report of
Ernst & Young LLP thereon, are filed as part of this Annual Report.
Report of Independent Auditors.......................................... F-1
Consent of Independent Auditors......................................... F-1
Consolidated Profit and Loss Accounts................................... F-2
Consolidated Balance Sheets............................................. F-3
Statement of Total Recognised Gains and Losses.......................... F-4
Consolidated Cash Flow Statements....................................... F-5
Consolidated Statement of Changes in Shareholders' Funds................ F-10
Notes to Consolidated Financial Statements.............................. F-11
Schedule II--Valuation and Qualifying Accounts......................... F-66
11
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F/A and that it has duly caused and authorised the undersigned to
sign this Annual Report on its behalf.
HANSON PLC
(Registrant)
By: /s/ Graham Dransfield
....................................
GRAHAM DRANSFIELD
LEGAL DIRECTOR
Date: January 22, 2003
CERTIFICATIONS
I, Alan J. Murray, certify that:
1. I have reviewed this amendment to the annual report on Form 20-F of
Hanson PLC;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: January 22, 2003
By: /s/ Alan J Murray
....................................
ALAN J. MURRAY
CHIEF EXECUTIVE
CERTIFICATIONS
I, Jonathan C. Nicholls, certify that:
1. I have reviewed this amendment to the annual report on Form 20-F of
Hanson PLC;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: January 22, 2003
By: /s/ Jonathan C. Nicholls
....................................
JONATHAN C. NICHOLLS
FINANCE DIRECTOR
12
****
HANSON PLC
REPORT OF INDEPENDENT AUDITORS
To: The Board of Directors
Hanson PLC
We have audited the accompanying consolidated balance sheets of Hanson PLC as at
December 31, 2001 and 2000, and the related consolidated profit and loss
accounts and consolidated statements of total recognised gains and losses, cash
flow and changes in shareholders' funds for each of the three years in the
period ended December 31, 2001. Our audits also included the financial statement
schedule listed in the Index at Item 18. These financial statements and schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with United Kingdom auditing standards and
United States generally accepted auditing standards. 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 consolidated financial position of Hanson
PLC at December 31, 2001 and 2000, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United Kingdom which differ in certain respects from
those followed in the United States (see Note 27 of Notes to Consolidated
Financial Statements). Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 27, the reconciliations to accounting principles generally
accepted in the United States therein at December 31, 2001 and 2000 and for each
of the three years of the period ended December 31, 2001 have been restated for
an underprovision of deferred taxation.
ERNST & YOUNG LLP
London, England
February 21, 2002
except for Note 23 -- Subsequent Events,
Note 26 - New Accounting Standards and
Note 27 - Differences between United Kingdom
and United States Generally Accepted
Accounting Principles,
as to which the date is January 17, 2003
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form F-4 No 33-11186 and Form S-8 Nos 33-15028, 33-33143, 33-46810, 333-13968
and 383-14022) of our report dated February 21, 2002 except for Note 23 -
Subsequent Events, Note 26 - New Accounting Standards and Note 27 - Differences
between United Kingdom and United States Generally Accepted Accounting
Principles as to which the date is January 17, 2003, on the consolidated
financial statements and schedule included in the Annual Report (Form 20-F/A) of
Hanson PLC for the year ended December 31, 2001.
ERNST & YOUNG LLP
London, England
January 22, 2003
F-1
HANSON PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(POUNDS STERLING - MILLIONS EXCEPT SHARES)
YEAR ENDED DECEMBER 31
-------------------------------------
NOTES 2001 2000 1999
TURNOVER RESTATED (1) RESTATED (1)
-------------------------------------
Turnover - group and share of joint ventures and associates 4,179.4 3,417.0 1,993.7
Less share of joint ventures' turnover (271.8) (173.8) --
Less share of associates' turnover (83.9) (107.1) (73.2)
-------------------------------------
3,823.7 3,136.1 1,920.5
-------------------------------------
Continuing operations 3,736.4 2,952.9 1,785.1
Acquisitions 23.1 -- --
Discontinued 64.2 183.2 135.4
-------------------------------------
GROUP TURNOVER 1 3,823.7 3,136.1 1,920.5
-------------------------------------
COSTS AND OVERHEADS LESS OTHER INCOME
(EXCEPTIONAL 2001(POUND)(191.3), 2000(POUND)
(22.7), 1999(POUND)NIL) 2 (3,592.3) (2,775.4) (1,607.5)
-------------------------------------
GROUP OPERATING PROFIT 231.4 360.7 313.0
Share of operating profit of joint ventures 27.7 20.4 --
Share of operating profit of associates 13.1 13.5 10.6
-------------------------------------
OPERATING PROFIT INCLUDING JOINT VENTURES AND ASSOCIATES 272.2 394.6 323.6
-------------------------------------
Continuing operations (exceptional 2001(pound)(191.3),
2000(pound)(22.7), 1999(pound)nil) 274.3 380.8 306.1
Acquisitions (exceptional 2001(pound)nil,
2000(pound)nil, 1999(pound)nil) 0.4 -- --
-------------------------------------
274.7 380.8 306.1
Discontinued operations (2.5) 13.8 17.5
-------------------------------------
OPERATING PROFIT INCLUDING JOINT VENTURES AND ASSOCIATES 1 272.2 394.6 323.6
EXCEPTIONAL ITEMS
DISCONTINUED OPERATIONS
Profit (loss) on disposal and termination of operations 116.2 6.9 (3.7)
(Loss) profit on write down and disposal of fixed assets (0.5) 4.4 5.8
-------------------------------------
4 115.7 11.3 2.1
NET INTEREST (PAYABLE) AND SIMILAR CHARGES
Net interest payable 5 (106.5) (91.9) (1.5)
Unwinding of discount on provisions 5 (6.0) (6.8) (7.8)
-------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1 275.4 307.2 316.4
Taxation
Charge for year (exceptional 2001(pound)9.3,
2000(pound)11.9, 1999(pound)18.8) (96.6) (88.4) (65.7)
Release relating to prior years 100.0 -- 50.0
Receipt from demerged undertakings for group relief -- 17.6 1.5
-------------------------------------
6 3.4 (70.8) (14.2)
-------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION (2) 278.8 236.4 302.2
DIVIDENDS
Paid (32.6) (31.7) (27.4)
Proposed (70.3) (68.7) (60.0)
-------------------------------------
TRANSFER TO RESERVES FOR THE YEAR 175.9 136.0 214.8
=====================================
Earnings per ordinary share of(pound)2 7
Basic 37.9p 33.4p 46.4p
Basic pre-goodwill amortisation 46.0p 39.4p 47.8p
Diluted 37.8p 33.3p 46.1p
Diluted pre-goodwill amortisation 45.9p 39.3p 47.5p
Dividends per ordinary share of(pound)2 14.0p 13.7p 13.4p
Average outstanding ordinary shares of(pound)2 (in millions)
Undiluted 735 709 652
Diluted 738 711 656
--------------
(1) The December 2000 and 1999 amounts have been restated for FRS19, the new
accounting standard on deferred taxation (see Note 22 of Notes to
Consolidated Financial Statements).
(2) A summary of significant adjustments to profit on ordinary activities after
taxation and earnings per ordinary share which would be required if US GAAP
had been applied instead of UK GAAP is given in Note 27 of Notes to
Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
F-2
HANSON PLC
CONSOLIDATED BALANCE SHEETS
(POUNDS STERLING - MILLIONS)
DECEMBER 31
----------------------
NOTES 2001 2000
FIXED ASSETS RESTATED (1)
----------------------
Intangible fixed assets 8 1,102.1 1,110.1
Tangible fixed assets 9 2,863.4 3,069.6
Investment in joint ventures: 10
Share of gross assets 307.9 285.2
Share of gross liabilities (100.3) (117.8)
----------------------
207.6 167.4
Loans to joint ventures and other investments 10 15.2 58.8
Investment in associates 10 45.7 80.9
----------------------
4,234.0 4,486.8
CURRENT ASSETS
Stocks 11 379.3 365.9
Debtors 12 981.9 952.2
Investments 10 373.6 411.9
Cash at bank 778.4 917.2
----------------------
2,513.2 2,647.2
PREPAYMENTS AND ACCRUED INCOME
Amounts due from insurers for Koppers liabilities (see below) 16 205.8 166.9
----------------------
2,719.0 2,814.1
CREDITORS - due within one year 13
Debenture loans 581.2 950.4
Bank loans and overdrafts 401.2 563.8
Trade creditors 329.5 360.1
Other creditors 382.5 442.1
Dividends 70.3 68.7
----------------------
1,764.7 2,385.1
----------------------
NET CURRENT ASSETS 954.3 429.0
----------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 5,188.3 4,915.8
======================
CREDITORS - due after one year 14
Debenture and other loans 1,569.2 1,583.5
Bank loans 30.1 50.6
----------------------
1,599.3 1,634.1
PROVISIONS FOR LIABILITIES AND CHARGES
Koppers liabilities transferred to insurers (see above) 16 205.8 166.9
Provisions for other liabilities 15 662.4 694.2
----------------------
868.2 861.1
CAPITAL AND RESERVES
Called up share capital 17 1,471.8 1,470.3
Share premium account 1,492.6 1,492.2
Other reserves 216.3 216.3
Profit and loss account (459.9) (758.2)
----------------------
EQUITY SHAREHOLDERS' FUNDS (2) 2,720.8 2,420.6
----------------------
5,188.3 4,915.8
======================
--------------
(1) The December 2000 amounts have been restated for FRS19, the new accounting
standard on deferred taxation (see Note 22 of Notes to Consolidated
Financial Statements).
(2) A summary of the significant adjustments to equity shareholders' funds
which would be required if US GAAP had been applied instead of UK GAAP is
given in Note 27 of Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
F-3
HANSON PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(POUNDS STERLING - MILLIONS)
Year Ended December 31
-------------------------------------
2001 2000 1999
Restated (1) Restated (1)
-------------------------------------
Profit on ordinary activities for the financial year excluding share
of profits of joint ventures and associates 251.0 235.9 295.5
Share of joint ventures' profits for the year 18.3 4.5 --
Share of associates' profits (losses) for the year 9.5 (4.0) 6.7
-------------------------------------
Profit for the financial year attributable to members of the parent
company 278.8 236.4 302.2
Currency translation differences on foreign net equity 8.3 30.5 6.9
-------------------------------------
Total recognised gains and losses for the period 287.1 266.9 309.1
Prior year adjustment on adoption of FRS19 (Note 22) 3.3 -- --
Prior year adjustment on adoption of FRS12 -- -- 52.9
-------------------------------------
Total gains and losses recognised since the last annual report 290.4 266.9 362.0
=====================================
--------------
(1) The December 2000 and 1999 amounts have been restated for FRS19, the new
accounting standard on deferred taxation (see Note 22 of Notes to
Consolidated Financial Statements).
(2) A statement of comprehensive income under US GAAP is given in Note 27 in
Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
F-4
HANSON PLC
CONSOLIDATED CASH FLOW STATEMENTS
(POUNDS STERLING - MILLIONS)
YEAR ENDED DECEMBER 31
-------------------------------------
NOTES 2001 2000 1999
-------------------------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES A 625.5 507.6 356.8
-------------------------------------
DIVIDENDS RECEIVED FROM ASSOCIATES 7.6 14.6 1.6
-------------------------------------
DIVIDENDS RECEIVED FROM JOINT VENTURES 19.5 10.0 --
-------------------------------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 67.1 67.7 102.2
Interest paid (173.8) (156.5) (105.0)
Interest element of finance lease rental payments (0.6) (0.8) (1.2)
-------------------------------------
NET CASH (OUTFLOW) FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (107.3) (89.6) (4.0)
-------------------------------------
TAXATION (73.0) (60.3) (71.1)
-------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (161.4) (176.0) (166.1)
Purchase of fixed asset investments (18.4) (2.8) (3.2)
Purchase of current asset investments -- -- (11.6)
Sale of tangible fixed assets 49.2 18.4 19.8
Sale of fixed asset investments -- 23.4 95.6
-------------------------------------
NET CASH (OUTFLOW) FROM CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (130.6) (137.0) (65.5)
-------------------------------------
ACQUISITIONS AND DISPOSALS
Cash in acquired and disposed subsidiary undertakings 7.1 20.6 8.9
Demerger costs (3.1) (0.2) (21.2)
Acquisition of subsidiary undertakings B (57.8) (1,420.8) (417.3)
Disposal of subsidiary undertakings B 224.0 30.2 --
-------------------------------------
NET CASH INFLOW (OUTFLOW) FROM 170.2 (1,370.2) (429.6)
ACQUISITIONS AND DISPOSALS --------------------------------------
DIVIDENDS PAID (101.3) (91.7) (84.4)
-------------------------------------
MANAGEMENT OF LIQUID RESOURCES
Decrease (increase) in current asset investments 51.5 71.8 (408.4)
Cash withdrawn from deposits 163.1 562.8 364.9
-------------------------------------
214.6 634.6 (43.5)
-------------------------------------
NET CASH INFLOW (OUTFLOW) BEFORE FINANCING 625.2 (582.0) (339.7)
-------------------------------------
FINANCING
Issue of ordinary share capital 1.9 1.7 0.9
(Repayments of) proceeds from short-term loans (179.7) 440.1 123.4
Proceeds of debenture loans 1.3 506.6 3.7
Repayment of bank loans (3.6) -- (33.6)
Repayments of debenture loans (57.1) (175.9) (10.3)
Capital element of finance lease rental payments (5.7) (6.6) (0.3)
-------------------------------------
NET CASH (OUTFLOW) INFLOW FROM FINANCING (242.9) 765.9 83.8
-------------------------------------
NET CASH INFLOW (OUTFLOW) FOR THE YEAR AFTER FINANCING 382.3 183.9 (255.9)
=====================================
--------------
A summary of significant adjustments to cash flows which would be required if US
GAAP had been applied instead of UK GAAP is given in Note 27 of Notes to
Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
F-5
HANSON PLC
CONSOLIDATED CASH FLOW STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
NOTE A
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
YEAR ENDED DECEMBER 31
-------------------------------------------------------
2001 2001 2001 2000 1999
RESTATED(1) RESTATED(1)
CONTINUING DISCONTINUED TOTAL TOTAL TOTAL
-------------------------------------------------------
Group operating profit 233.9 (2.5) 231.4 360.7 313.0
Goodwill amortisation 59.7 -- 59.7 42.7 9.2
Impairments 163.4 -- 163.4 -- --
Depreciation 183.7 4.1 187.8 169.9 98.7
Depletion 40.8 0.3 41.1 38.5 30.8
Movement in provisions (34.7) (1.9) (36.6) (39.5) (83.8)
Acquisition creditors -- -- -- (36.5) --
(Profit) loss on sales of tangible fixed assets (11.1) (0.1) (11.2) 1.0 (1.9)
Decrease (increase) in stocks 0.8 0.7 1.5 (28.3) 0.9
(Increase) decrease in debtors (3.0) 1.0 (2.0) 12.5 13.0
(Decrease) increase in creditors (19.4) 9.8 (9.6) (13.4) (23.1)
-------------------------------------------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 614.1 11.4 625.5 507.6 356.8
=======================================================
NOTE B
PURCHASE AND DISPOSAL OF SUBSIDIARY UNDERTAKINGS
YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------
PURCHASES DISPOSALS
------------------------------------ ------------------------------------
2001 2000 1999 2001 2000 1999
RESTATED(1) RESTATED(1) RESTATED (1) RESTATED
---------------------------------- ------------------------------------
Fixed assets (39.7) (1,068.3) (158.8) 98.3 26.0 --
Stocks (7.1) (67.4) (36.3) 6.7 1.8 --
Debtors (34.3) (346.6) (64.3) 32.5 7.0 --
Cash at bank and in hand and liquid (7.1) (103.6) (9.7) -- 1.9 --
resources
Creditors 18.1 293.5 57.6 (16.7) (9.0) --
Bank overdrafts -- 1.8 0.8 -- -- --
Short-term loans -- 48.0 -- -- -- --
Loans and finance leases -- 237.0 4.4 -- (0.5) --
Provisions for liabilities 2.2 15.4 19.2 (26.7) (1.0) --
---------------------------------- ------------------------------------
(67.9) (990.2) (187.1) 94.1 26.2 --
Profit on disposals -- -- -- 104.6 1.2 --
Equity issued -- 381.1 -- -- -- --
Other non-cash consideration 35.3 -- -- -- -- --
Goodwill (Note 18) (25.2) (811.7) (230.2) 25.3 2.8 --
---------------------------------- ------------------------------------
Cash consideration (57.8) (1,420.8) (417.3) 224.0 30.2 --
================================== ====================================
--------------
(1) The December 2000 and 1999 amounts have been restated for FRS19, the new
accounting standard on deferred taxation (see Note 22 of Notes to
Consolidated Financial Statements).
F-6
HANSON PLC
CONSOLIDATED CASH FLOW STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
NOTE C
ANALYSIS OF NET (DEBT) CASH
OTHER
JANUARY 1, NON-CASH EXCHANGE DECEMBER 31,
2001 CASH FLOW MOVEMENT MOVEMENT 2001
---------------------------------------------------------------
Cash in hand and at bank 113.0 9.1 -- (0.6) 121.5
Liquid resources
- Deposits 804.2 (163.1) -- 15.8 656.9
- Securities 411.9 (51.5) -- 13.2 373.6
----------------------------------------------------------------
Cash and investments per balance sheet 1,329.1 (205.5) -- 28.4 1,152.0
----------------------------------------------------------------
Overdrafts (560.8) 373.2 (3.8) 24.2 (167.2)
Bank debt due within 1 year (3.0) (210.4) (15.7) (4.9) (234.0)
----------------------------------------------------------------
Bank loans and overdrafts per balance sheet (563.8) 162.8 (19.5) 19.3 (401.2)
----------------------------------------------------------------
Debt due within 1 year
- Debenture debt (942.7) 390.1 (10.4) (15.7) (578.7)
- Finance leases (7.7) 6.6 (1.4) -- (2.5)
----------------------------------------------------------------
Debenture loans per balance sheet (950.4) 396.7 (11.8) (15.7) (581.2)
----------------------------------------------------------------
Debt due after 1 year
- Debenture and bank debt (1,627.4) 59.4 23.1 (48.2) (1,593.1)
- Finance leases (6.7) (0.9) 1.4 -- (6.2)
----------------------------------------------------------------
Long term debt per balance sheet (1,634.1) 58.5 24.5 (48.2) (1,599.3)
----------------------------------------------------------------
Net (debt) (1,819.2) 412.5 (6.8) (16.2) (1,429.7)
================================================================
--------------
The cash flows represented by cash in hand and at bank (pound)9.1 and overdrafts
of (pound)373.2, which total (pound)382.3 (including acquisitions (pound)7.1)
represent the consolidated cash inflow for the year after financing.
F-7
HANSON PLC
CONSOLIDATED CASH FLOW STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
NOTE C (CONTINUED)
ANALYSIS OF NET (DEBT) CASH
OTHER
JANUARY 1, NON-CASH EXCHANGE DECEMBER 31,
2000 CASH FLOW ACQUISITIONS MOVEMENT MOVEMENT 2000
---------------------------------------------------------------------------
Cash in hand and at bank 40.3 47.1 22.4 -- 3.2 113.0
Liquid resources - deposits 1,256.4 (562.8) 76.3 -- 34.3 804.2
Liquid resources - securities 448.4 (71.8) 3.0 -- 32.3 411.9
---------------------------------------------------------------------------
Cash per balance sheet 1,745.1 (587.5) 101.7 -- 69.8 1,329.1
---------------------------------------------------------------------------
Overdrafts (589.7) 116.2 (1.8) -- (85.5) (560.8)
Bank debt due within 1 year (42.6) 87.0 (46.2) -- (1.2) (3.0)
---------------------------------------------------------------------------
Overdrafts and bank debt per balance (632.3) 203.2 (48.0) -- (86.7) (563.8)
sheet
---------------------------------------------------------------------------
Debt due within 1 year
- Debenture debt (377.1) (524.1) (1.8) (1.3) (38.4) (942.7)
- Finance leases (1.7) (3.0) -- (3.0) -- (7.7)
---------------------------------------------------------------------------
Debenture loans per balance sheet (378.8) (527.1) (1.8) (4.3) (38.4) (950.4)
---------------------------------------------------------------------------
Debt due after 1 year
- Debenture and bank debt (991.6) (330.7) (234.3) 0.9 (71.7) (1,627.4)
- Finance leases (14.1) 6.6 (2.2) 3.0 -- (6.7)
---------------------------------------------------------------------------
Long term net debt per balance sheet (1,005.7) (324.1) (236.5) 3.9 (71.7) (1,634.1)
---------------------------------------------------------------------------
Net (debt) (271.7) (1,235.5) (184.6) (0.4) (127.0) (1,819.2)
===========================================================================
---------------
The cash flows, including acquisitions, of cash in hand and at bank (pound)69.5
and overdrafts (pound)114.4 totalling (pound)183.9 represent the consolidated
cash outflow for the period after financing.
OTHER
JANUARY 1, NON-CASH EXCHANGE DECEMBER 31,
1999 CASH FLOW ACQUISITIONS MOVEMENT MOVEMENT 1999
------------ ---------- ------------ ----------- ----------- --------------
Cash in hand and at bank 35.4 (4.7) 9.7 -- (0.1) 40.3
Liquid resources - deposits 1,588.3 (364.9) -- -- 33.0 1,256.4
Liquid resources - securities 36.5 408.4 -- -- 3.5 448.4
---------------------------------------------------------------------------
Cash per balance sheet 1,660.2 38.8 9.7 -- 36.4 1,745.1
---------------------------------------------------------------------------
Overdrafts (321.5) (260.1) (0.8) -- (7.3) (589.7)
Bank debt due within 1 year (44.8) (0.7) -- (1.1) 4.0 (42.6)
---------------------------------------------------------------------------
Overdrafts and bank debt per balance (366.3) (260.8) (0.8) (1.1) (3.3) (632.3)
sheet
---------------------------------------------------------------------------
Debt due within 1 year
- Debenture debt (245.0) (126.6) -- -- (5.5) (377.1)
- Finance leases (4.3) 3.9 -- (1.3) -- (1.7)
---------------------------------------------------------------------------
Debenture loans per balance sheet (249.3) (122.7) -- (1.3) (5.5) (378.8)
---------------------------------------------------------------------------
Debt due after 1 year
- Debenture and bank debt (991.3) 40.2 (4.4) 0.9 (37.0) (991.6)
- Finance leases (15.7) 0.3 -- 1.3 -- (14.1)
---------------------------------------------------------------------------
Long term net debt per balance sheet (1,007.0) 40.5 (4.4) 2.2 (37.0) (1,005.7)
---------------------------------------------------------------------------
Net cash (debt) 37.6 (304.2) 4.5 (0.2) (9.4) (271.7)
===========================================================================
---------------
The cash flows, including acquisitions, of cash in hand and at bank (pound)5.0
and overdrafts (pound)(260.9) totalling (pound)(255.9) represent the
consolidated cash outflow for the period after financing.
F-8
HANSON PLC
CONSOLIDATED CASH FLOW STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
NOTE D
RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN NET (DEBT) CASH
YEAR ENDED DECEMBER 31
----------------------------------------
2001 2000 1999
----------------------------------------
Net cash inflow (outflow) after financing 382.3 183.9 (255.9)
Decrease (increase) in long term debt 59.4 (330.7) 37.5
Cash withdrawn from deposits (163.1) (562.8) (364.9)
(Decrease) increase in liquid resources (51.5) (71.8) 408.4
Decrease (increase) in short-term loans 179.7 (440.1) (123.4)
Capital element of finance leases 5.7 6.6 3.0
----------------------------------------
Change in net debt resulting from cash flows 412.5 (1,214.9) (295.3)
Loans and finance leases acquired with subsidiaries -- (237.0) (4.4)
Loans and finance leases relating to disposals -- 0.5 --
Deposits and liquid resources of business acquired -- 31.3 --
Other financing movements (6.8) (0.4) (0.2)
Exchange movement (16.2) (127.0) (9.4)
----------------------------------------
Movement in net debt in the period 389.5 (1,547.5) (309.3)
Opening net (debt) cash (1,819.2) (271.7) 37.6
----------------------------------------
Closing net (debt) (1,429.7) (1,819.2) (271.7)
========================================
---------------
Liquid resources continue to constitute term deposits with banks of no more than
one year to maturity and include marketable securities traded on an active
market.
NOTE E
CASH FLOWS RELATING TO NON-OPERATING EXCEPTIONAL ITEMS
YEAR ENDED DECEMBER 31
---------------------------------------
2001 2000 1999
---------------------------------------
Taxation receipt for group relief 0.6 17.6 1.5
Disposal of subsidiary undertakings 224.0 30.2 --
Disposal of fixed asset investments -- 23.4 95.6
Settlement of environmental and related provisions 5.6 5.7 --
Demerger costs -- -- (21.2)
=======================================
F-9
HANSON PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS FUNDS
(POUNDS STERLING - MILLIONS EXCEPT SHARES)
SHARE CAPITAL TOTAL
-------------------------- PROFIT AND SHARE-
ORDINARY SHARES OF (POUND)2 SHARE LOSS ACCOUNT HOLDERS
-------------------------- PREMIUM OTHER (B)(C)(D)(E) EQUITY(E)
AUTHORISED ISSUED ACCOUNT (A) RESERVE(A) RESTATED
---------------------------------------------------------------------------
Balance at January 1, 1999 1,850.0 1,303.4 1,491.7 -- (1,202.8) 1,592.3
Prior year adjustment 53.6 53.6
--------------------------------------------------------------------------
Restated 1,850.0 1,303.4 1,491.7 -- (1,149.2) 1,645.9
Share options exercised 0.6 0.3 0.9
Profit available for appropriation 302.2 302.2
Dividends on ordinary shares (87.4) (87.4)
Exchange fluctuation 6.9 6.9
-------------------------------------------------------------------------
Balance at December 31, 1999 (restated) 1,850.0 1,304.0 1,492.0 -- (927.5) 1,868.5
Share options exercised 1.5 0.2 1.7
Shares issued on Pioneer
Acquisition 164.8 216.3 381.1
Goodwill relating to UGI 2.8 2.8
Profit available for appropriation 236.4 236.4
(restated)
Dividends on ordinary shares (100.4) (100.4)
Exchange fluctuation 30.5 30.5
------------------------------------------------------------------------
Balance at December 31, 2000 (restated) 1,850.0 1,470.3 1,492.2 216.3 (758.2) 2,420.6
Share options exercised 1.5 0.4 1.9
Goodwill impaired previously written
off to reserves 88.8 88.8
Goodwill on disposals previously
written off to reserves 25.3 25.3
Profit available for appropriation 278.8 278.8
Dividends on ordinary shares (102.9) (102.9)
Exchange fluctuation 8.3 8.3
------------------------------------------------------------------------
Balance at December 31, 2001 1,850.0 1,471.8 1,492.6 216.3 (459.9) 2,720.8
========================================================================
--------------
(a) Under the provisions of the Companies Act 1985 of Great Britain the share
premium account and other reserve are not distributable.
(b) Retained earnings at December 31, 2001, 2000 and 1999
include(pound)10.9,(pound)16.2 and(pound)19.4, respectively, in respect of
joint ventures and associates.
(c) At December 31, 2001, (pound)367.6 was available in the parent company for
the payment of dividends.
(d) Cumulative goodwill written off directly to reserves in respect of
acquisitions prior to January 1, 1998, net of amounts disposed of or
recognised as impaired, amounted to (pound)1,112.1, (2000 (pound)1,226.2,
1999 (pound)1,229.0).
(e) The amounts for 2000 and 1999 have been restated for FRS19, the new
accounting standard on deferred taxation (see Note 22 of Notes to
Consolidated Financial Statements).
See accompanying Notes to Consolidated Financial Statements.
F-10
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(POUNDS STERLING - MILLIONS)
ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements have been prepared in accordance with applicable UK
accounting standards, using the historical cost convention.
The following financial reporting standards have been adopted in these financial
statements for the first time;
i) FRS17 "Retirement Benefits" requires the assets of a defined benefit
pension scheme to be measured at their market value and the liabilities to
be measured using a specified actuarial valuation method and discounted
using a corporate bond rate. Any pension scheme surplus or deficit arising
is required to be recognised immediately on the group balance sheet. Any
resulting actuarial gains and losses must be recognised immediately in the
group statement of total recognised gains and losses. Adoption of the
standard in full is not required until the period ending December 2003;
however, transitional disclosures have been complied with in note 21.
ii) FRS18 "Accounting Policies" has been complied with, but has not caused the
group to amend any of its accounting policies.
iii) FRS19 "Deferred Tax" has been adopted in preparing these financial
statements. Subject to specific exceptions (see Deferred taxation below),
this standard requires deferred tax to be recognised on all timing
differences, where the periods over which gains and losses are recognised
in the accounts differ from those in which they are recognised in the tax
assessments. Previously, provision was only made to the extent that a gain
or loss was expected to crystallise. This represents a change in accounting
policy, which has resulted in restatement of certain amounts in respect of
the years ended December 31, 2000 and 1999 (see note 22).
BASIS OF CONSOLIDATION
The accounting reference date of Hanson PLC ("the company") is December 31. The
consolidated financial statements incorporate the financial statements of the
company and all its subsidiary undertakings (together "the group").
ACCOUNTING FOR ACQUISITIONS AND DISPOSALS
The results of companies and businesses acquired during the year are dealt with
in the consolidated financial statements from the date of acquisition. Upon the
acquisition of a business the fair values that reflect the condition at the date
of acquisition are attributed to the identifiable assets and liabilities
acquired. Adjustments are also made to bring the accounting policies of
businesses acquired into alignment with those of the group. Where the
consideration paid for a business exceeds the fair value of the net assets the
difference is treated as goodwill and since the adoption of FRS10 on January 1,
1998 has been carried on the balance sheet and is amortised over the estimated
economic life to a maximum of 20 years. Goodwill written off to reserves prior
to January 1, 1998 has not been reinstated. On disposal of a business the profit
or loss on disposal is determined after including the attributable amount of any
purchased goodwill, including any previously written off direct to reserves.
The results of companies and businesses disposed of during the year are dealt
with in the consolidated financial statements until the date of disposal.
JOINT VENTURES AND ASSOCIATES
Entities in which the group holds an interest on a long-term basis and are
jointly controlled by the group and one or more other ventures under a
contractual arrangement are treated as joint ventures. In the consolidated
financial statements, joint ventures are accounted for using the gross equity
method. Entities, other than subsidiary undertakings or joint ventures, in which
the group has a participating interest and over whose operating and financial
policies the group exercises a significant influence are treated as associates.
Associates are accounted for using the equity method.
TURNOVER
Turnover, which includes landfill tax, represents the net amounts charged or
chargeable in respect of services rendered and goods supplied, excluding inter
company sales and sales taxes.
ASSETS HELD UNDER LEASES
Assets held under finance leases are included within fixed assets at the
capitalised value of the future minimum lease payments and are depreciated over
the shorter of their lease period and their useful life. The capital element of
the future payments is treated as a liability and the interest element is
charged to the profit and loss account so as to reflect a constant annual rate
of interest on the remaining balance of the outstanding obligation. Rentals paid
on operating leases are charged to the profit and loss account on a straight
line basis over the shorter of the lease period and the useful life of the
leased asset.
F-11
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
DEFERRED TAXATION
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events have occurred at that date that will result in an obligation to pay more,
or right to pay less or to receive more, tax, with the following exceptions:
- Provision is made for tax on gains arising from the revaluation (and
similar fair value adjustments) of fixed assets, or gains on disposal of
fixed assets, only to the extent that, at the balance sheet date, there is
a binding agreement to dispose of the assets concerned. However, no
provision is made where, on the basis of all available evidence at the
balance sheet date, it is more likely than not that the taxable gain will
be rolled over into replacement assets.
- Provision is made for gains which have been rolled over into replacement
assets only to the extent that at the balance sheet date, there is a
commitment to dispose of the replacement assets.
- Provision is made for deferred tax that would arise on remittance of the
retained earnings of overseas subsidiaries, associates and joint ventures
only to the extent that, at the balance sheet date, dividends have been
accrued as receivable.
- Deferred tax assets are recognised only to the extent that the directors
consider that it is more likely than not that there will be suitable
taxable profits from which the underlying timing differences can be
deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are
expected to apply in the periods in which timing differences reverse, based on
tax rates and laws enacted or substantively enacted at the balance sheet date.
STOCKS
Stocks are valued at the lower of cost, on a first in first out basis, and net
realisable value. Cost includes an addition for overheads where appropriate.
TANGIBLE FIXED ASSETS
Tangible fixed assets are shown at cost less depreciation and depletion. Costs
to develop new commercial aggregate deposits and for major development
programmes at existing sites are capitalised and amortised over the life of the
quarry.
No depreciation is provided on freehold land except for mineral reserves which
are depleted on the basis of tonnage extracted. Depreciation of other fixed
assets is calculated to write off their cost or valuation over their expected
useful lives allowing for estimated residual value. The majority of fixed assets
are written off on a straight line basis over the following periods:
Motor vehicles 3-8 years
General plant and equipment 2-20 years
Freehold and leasehold buildings up to 50 years
ASSET IMPAIRMENT
Intangible and tangible assets are tested for potential impairment where an
event has taken place that could have affected their carrying values. An
impairment loss is recognised where the carrying amount is not covered by the
discounted cash flows resulting from continued use of the assets, or from their
disposal.
RESEARCH AND DEVELOPMENT
Expenditure on development and improvement of new and existing products is
written off in the year in which it is incurred.
PENSIONS AND OTHER POST RETIREMENT BENEFITS
The cost of providing pension and other post retirement benefits is charged to
the consolidated profit and loss account over employee service lives. Variances
arising from actuarial valuations are charged or credited to profit over the
estimated remaining service lives of the employees, to the extent that any
resulting credit does not exceed the regular cost.
PROVISIONS
Provisions for long term obligations except deferred taxation are discounted at
a rate of 2.5% on current prices, except where more appropriate discounting
rates have been used having regard to information provided by actuaries or other
independent advisers.
F-12
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
DERIVATIVES AND FINANCIAL INSTRUMENTS
Financial instruments, in particular, forward currency contracts and currency
swaps, are used to manage the financial risks arising from the business
activities of the group and the financing of those activities. There is no
trading activity in financial instruments.
Financial instruments are accounted for as follows:
o forward exchange contracts are used as balance sheet hedging instruments to
hedge foreign currency investments and borrowings. The difference between
the spot and forward rate for these contracts is recognised as part of the
net interest payable over the period of the contract. The spot rate of such
contracts is revalued to the rate of exchange at the balance sheet date and
any aggregate unrealised gains or losses arising on revaluation are
included in other debtors/other creditors. Both realised and unrealised
gains and losses on these contracts are taken to reserves in the same way
as those for the foreign investments and borrowings to which the contracts
relate.
o interest rate swaps are used to hedge the group's exposure to movements in
interest rates. The interest payable or receivable on such swaps is accrued
in the same way as interest arising on deposits or borrowings. Interest
rate swaps are not revalued to fair value prior to maturity.
o cross currency interest rate swaps (currency swaps) are used to hedge
foreign currency assets and borrowings. The future currency exchange within
such contracts is revalued to the rate of exchange at the balance sheet
date and any unrealised gain or loss is matched with that on the underlying
asset or liability in reserves. The interest coupon on such swaps is
accrued in the same way as that on borrowings and deposits.
o interest rate options are occasionally used to hedge the group's exposure
to movements in interest rates. Option premiums paid (received) are
recognised in the group balance sheet as prepayments and amortised over the
life of the contract.
o currency options are occasionally used as balance sheet hedging instruments
to hedge foreign currency investments and borrowings. Option premiums paid
(received) are recognised at their historic cost in the group balance sheet
as prepayments and amortised over the life of the option.
The aggregate fair values at the balance sheet date of the hedging instruments
described above are disclosed in Note 14 to the financial statements.
FOREIGN CURRENCIES
Average rates of exchange ruling during the year have been used to translate the
profit and loss accounts of overseas subsidiary and associated undertakings.
The balance sheets of overseas subsidiaries and associates are translated at
rates ruling at the balance sheet date. Differences on translation arising from
changes in the sterling value of overseas net assets and related foreign
currency loans and foreign exchange contracts and currency swaps at the
beginning of the accounting year, or at the date of any later capital currency
conversions, together with the differences between profit and loss accounts
translated at average rates and at balance sheet rates, are shown as a movement
on reserves and in the statement of recognised gains and losses. Other exchange
rate differences are dealt with in the profit and loss account for the year.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ADVERTISING COSTS
Expenditure on advertising is written off in the period in which it is incurred.
NON-MONETARY TRANSACTIONS
Exchanges of assets that are similar in nature and that have a similar use in
the same line of business are not regarded as transactions that generate
revenue. The cost of the new asset is based on the carrying value of the asset
given up. When dissimilar assets are exchanged, the transaction generates
revenue. The cost of the asset received is measured by its fair value, which is
equivalent to the fair value of the asset given up adjusted by the amount of
cash transferred.
F-13
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
1. BUSINESS SEGMENT ANALYSIS
Throughout the year Hanson's trading operations were divided into five segments
(see note 23): Hanson Building Materials America, Hanson Quarry Products Europe,
Hanson Bricks Europe, Hanson Australia and Hanson Pacific. These operations are
conducted primarily in five geographical regions, UK, Continental Europe, North
America, Australia and south east Asia.
The following tables show, for each of Hanson's last three full fiscal years,
turnover (net of inter-company transactions, which are not material), profit on
ordinary activities, identifiable assets and capital employed attributable to
each business segment and each geographical region, and capital expenditures and
depreciation by business segment.
TURNOVER, INCLUDING JOINT VENTURES AND ASSOCIATES
YEAR ENDED DECEMBER 31
--------------------------------------
BY BUSINESS SEGMENT 2001 2000 1999
--------------------------------------
Hanson Building Materials America 1,994.7 1,536.4 1,029.8
Hanson Quarry Products Europe 1,233.5 988.2 607.7
Hanson Bricks Europe 226.8 225.1 207.1
Hanson Australia 379.7 286.3 --
Hanson Pacific 280.5 197.8 13.7
--------------------------------------
Trading operations 4,115.2 3,233.8 1,858.3
Discontinued operations - disposals (a) 64.2 183.2 135.4
--------------------------------------
4,179.4 3,417.0 1,993.7
======================================
BY GEOGRAPHICAL REGION
North America 1,994.7 1,536.4 1,029.8
UK 1,059.1 899.8 709.2
Continental Europe 401.2 313.5 105.6
Australia 379.7 286.3 --
Asia 280.5 197.8 13.7
--------------------------------------
4,115.2 3,233.8 1,858.3
Discontinued operations - disposals (a) 64.2 183.2 135.4
--------------------------------------
4,179.4 3,417.0 1,993.7
======================================
GROSS JOINT VENTURES GROUP
TURNOVER AND ASSOCIATES TURNOVER
--------------------------------------
YEAR ENDED DECEMBER 31, 2001
--------------------------------------
TURNOVER
Hanson Building Materials America 1,994.7 77.0 1,917.7
Hanson Quarry Products Europe 1,233.5 105.9 1,127.6
Hanson Bricks Europe 226.8 -- 226.8
Hanson Australia 379.7 130.3 249.4
Hanson Pacific 280.5 42.5 238.0
--------------------------------------
4,115.2 355.7 3,759.5
Discontinued 64.2 -- 64.2
--------------------------------------
4,179.4 355.7 3,823.7
======================================
YEAR ENDED DECEMBER 31, 2000
--------------------------------------
Hanson Building Materials America 1,536.4 60.5 1,475.9
Hanson Quarry Products Europe 988.2 80.5 907.7
Hanson Bricks Europe 225.1 -- 225.1
Hanson Australia 286.3 100.5 185.8
Hanson Pacific 197.8 39.4 158.4
--------------------------------------
3,233.8 280.9 2,952.9
Discontinued 183.2 -- 183.2
--------------------------------------
3,417.0 280.9 3,136.1
======================================
F-14
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
TURNOVER (CONTINUED) YEAR ENDED DECEMBER 31, 1999
--------------------------------------
Hanson Building Materials America 1,029.8 2.6 1,027.2
Hanson Quarry Products Europe 607.7 69.5 538.2
Hanson Bricks Europe 207.1 -- 207.1
Hanson Pacific 13.7 1.1 12.6
--------------------------------------
1,858.3 73.2 1,785.1
Discontinued 135.4 -- 135.4
--------------------------------------
1,993.7 73.2 1,920.5
======================================
YEAR ENDED DECEMBER 31
-------------------------------------
2001 2000 1999
-------------------------------------
ANALYSIS OF GROUP'S SHARE OF JOINT VENTURES AND GEOGRAPHICAL LOCATION
Hanson Building Materials America 75.1 23.9 --
Hanson Quarry Products Europe 26.6 14.6 --
Hanson Australia 130.3 100.5 --
Hanson Pacific 39.8 34.8 --
-------------------------------------
271.8 173.8 --
=====================================
ANALYSIS OF GROUP'S SHARE OF ASSOCIATES AND GEOGRAPHICAL LOCATION
Hanson Building Materials America 1.9 36.6 2.6
Hanson Quarry Products Europe 79.3 65.9 69.5
Hanson Pacific 2.7 4.6 1.1
-------------------------------------
83.9 107.1 73.2
=====================================
The analysis on page F-14 and above of turnover shows the geographical segments
from which products are supplied. This also represents the analysis of turnover
by geographical destination.
The contribution from acquisitions during the year is shown in the consolidated
profit and loss account on page F-2.
PROFIT ON ORDINARY ACTIVITIES (b) YEAR ENDED DECEMBER 31
-------------------------------------
2001 2000 1999
-------------------------------------
BY BUSINESS SEGMENT
Hanson Building Materials America 315.4 266.7 196.5
Hanson Quarry Products Europe 105.2 89.7 85.2
Hanson Bricks Europe 27.8 31.9 33.0
Hanson Australia 4.6 16.5 --
Hanson Pacific 9.9 7.7 (0.1)
-------------------------------------
Trading operations 462.9 412.5 314.6
Discontinued operations - disposals (a) (2.5) 13.8 17.5
Property and other income 20.6 9.1 8.1
Central expenses (17.5) (18.1) (16.6)
Operating exceptional items
- Goodwill impaired previously written off to reserves (88.8) -- --
- Other exceptional items (102.5) (22.7) --
------------------------------------
Operating profit 272.2 394.6 323.6
Non operating exceptional items net 115.7 11.3 2.1
Net interest expense (106.5) (91.9) (1.5)
Unwinding of discount on provisions (6.0) (6.8) (7.8)
-------------------------------------
Profit on ordinary activities before taxation 275.4 307.2 316.4
=====================================
F-15
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
YEAR ENDED DECEMBER 31
-------------------------------------
BY GEOGRAPHICAL REGION (INCLUDING JOINT VENTURES AND ASSOCIATES) 2001 2000 1999
RESTATED
-------------------------------------
North America 315.0 272.0 202.3
UK 116.7 99.1 100.4
Continental Europe 19.8 8.2 3.5
Australia 4.6 16.5 --
Asia 9.9 7.7 (0.1)
Discontinued operations - disposals (a) (2.5) 13.8 17.5
Operating exceptional items (191.3) (22.7) --
-------------------------------------
272.2 394.6 323.6
=====================================
TRADING PROFIT BEFORE GOODWILL AMORTISATION AND EXCEPTIONAL ITEMS
YEAR ENDED DECEMBER 31, 2001
--------------------------------------
GROSS GOODWILL NET
AMORTISATION
--------------------------------------
Hanson Building Materials America 345.4 30.0 315.4
Hanson Quarry Products Europe 112.9 7.7 105.2
Hanson Bricks Europe 28.6 0.8 27.8
Hanson Australia 14.5 9.9 4.6
Hanson Pacific 21.2 11.3 9.9
--------------------------------------
522.6 59.7 462.9
======================================
YEAR ENDED DECEMBER 31, 2000
-------------------------------------
GROSS GOODWILL NET
AMORTISATION
RESTATED RESTATED RESTATED
-------------------------------------
Hanson Building Materials America 288.9 22.2 266.7
Hanson Quarry Products Europe 94.8 5.1 89.7
Hanson Bricks Europe 32.4 0.5 31.9
Hanson Australia 23.6 7.1 16.5
Hanson Pacific 15.1 7.4 7.7
--------------------------------------
454.8 42.3 412.5
======================================
YEAR ENDED DECEMBER 31, 1999
--------------------------------------
GROSS GOODWILL NET
AMORTISATION
--------------------------------------
Hanson Building Materials America 204.3 7.8 196.5
Hanson Quarry Products Europe 85.8 0.6 85.2
Hanson Bricks Europe 33.0 -- 33.0
Hanson Pacific 0.7 0.8 (0.1)
--------------------------------------
323.8 9.2 314.6
======================================
YEAR ENDED DECEMBER 31
-------------------------------------
2001 2000 1999
-------------------------------------
ANALYSIS OF GROUP'S SHARE OF JOINT VENTURES AND GEOGRAPHICAL LOCATION
Hanson Building Materials America 10.1 9.3 --
Hanson Quarry Products Europe 5.5 4.6 --
Hanson Australia 12.7 8.1 --
Hanson Pacific (0.6) (1.6) --
-------------------------------------
27.7 20.4 --
=====================================
F-16
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
YEAR ENDED DECEMBER 31
-------------------------------------
2001 2000 1999
-------------------------------------
ANALYSIS OF GROUP'S SHARE OF ASSOCIATES AND GEOGRAPHICAL LOCATION
Hanson Building Materials America 0.9 3.8 0.6
Hanson Quarry Products Europe 12.5 10.0 10.1
Hanson Pacific (0.3) (0.3) (0.1)
-------------------------------------
13.1 13.5 10.6
=====================================
DECEMBER 31
-------------------------------------
IDENTIFIABLE ASSETS 2001 2000
BY BUSINESS SEGMENT RESTATED
-------------------------------------
Hanson Building Materials America 2,940.5 2,795.6
Hanson Quarry Products Europe 1,326.3 1,334.1
Hanson Bricks Europe 336.7 409.6
Hanson Australia 604.2 639.6
Hanson Pacific 435.0 455.8
-------------------------------------
Trading operations 5,642.7 5,634.7
Discontinued operations - disposals (a) -- 154.6
Central, Property and other 1,310.3 1,511.6
-------------------------------------
6,953.0 7,300.9
=====================================
BY GEOGRAPHICAL REGION
North America 2,940.5 2,795.6
UK 1,390.8 1,399.5
Continental Europe 272.2 344.2
Australia 604.2 639.6
Asia 435.0 455.8
Central (c) 1,310.3 1,511.6
Discontinued operations - disposals (a) -- 154.6
-------------------------------------
6,953.0 7,300.9
=====================================
DECEMBER 31
-------------------------------------
IDENTIFIABLE LONG-LIVED ASSETS 2001 2000
BY BUSINESS SEGMENT RESTATED
-------------------------------------
Hanson Building Materials America 1,649.5 1,628.2
Hanson Quarry Products Europe 814.7 842.5
Hanson Bricks Europe 227.7 297.5
Hanson Australia 341.0 363.8
Hanson Pacific 96.4 136.7
-------------------------------------
Trading operations 3,129.3 3,268.7
Discontinued operations - disposals (a) -- 98.4
Central, Property and other 2.6 9.6
-------------------------------------
3,131.9 3,376.7
=====================================
BY GEOGRAPHICAL REGION
North America 1,649.5 1,628.2
UK 946.3 796.2
Continental Europe 96.1 343.8
Australia 341.0 363.8
Asia 96.4 136.7
Central 2.6 9.6
Discontinued operations - disposals (a) -- 98.4
-------------------------------------
3,131.9 3,376.7
=====================================
F-17
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
YEAR ENDED DECEMBER 31
-------------------------------------
2001 2000 1999
CAPITAL EXPENDITURES BY BUSINESS SEGMENT RESTATED
-------------------------------------
Hanson Building Materials America 94.6 91.9 87.0
Hanson Quarry Products Europe 42.3 41.3 54.7
Hanson Bricks Europe 8.6 11.1 10.7
Hanson Australia 11.9 10.7 --
Hanson Pacific 2.1 12.2 2.6
Central -- 0.1 --
Discontinued operations - disposals (a) 1.9 8.7 11.1
-------------------------------------
161.4 176.0 166.1
=====================================
DEPRECIATION BY BUSINESS SEGMENT
Hanson Building Materials America 96.3 81.4 51.0
Hanson Quarry Products Europe 43.4 41.4 26.7
Hanson Bricks Europe 12.3 13.1 10.4
Hanson Australia 17.8 13.9 --
Hanson Pacific 13.9 8.8 0.6
Central -- 0.6 --
Discontinued operations - disposals (a) 4.1 10.7 10.0
-------------------------------------
187.8 169.9 98.7
=====================================
DEPLETION BY BUSINESS SEGMENT
Hanson Building Materials America 25.0 23.5 24.4
Hanson Quarry Products Europe 7.0 8.0 4.9
Hanson Bricks Europe 1.5 1.5 1.5
Hanson Australia 3.5 2.5 --
Hanson Pacific 3.8 2.6 --
Discontinued operations - disposals (a) 0.3 0.4 --
-------------------------------------
41.1 38.5 30.8
=====================================
GOODWILL AMORTISATION BY BUSINESS SEGMENT
Hanson Building Materials America 30.0 22.2 7.8
Hanson Quarry Products Europe 7.7 5.1 0.6
Hanson Bricks Europe 0.8 0.5 --
Hanson Australia 9.9 7.1 --
Hanson Pacific 11.3 7.4 0.8
Discontinued operations - disposals (a) -- 0.4 --
-------------------------------------
59.7 42.7 9.2
=====================================
DECEMBER 31
-------------------------------------
2001 2000
RESTATED
-------------------------------------
CAPITAL EMPLOYED BY BUSINESS SEGMENT
Hanson Building Materials America 2,435.1 2,322.5
Hanson Quarry Products Europe 1,051.8 1,082.7
Hanson Bricks Europe 260.6 332.1
Hanson Australia 538.2 583.7
Hanson Pacific 334.1 386.0
-------------------------------------
Trading operations 4,619.8 4,707.0
Discontinued operations - disposals (a) -- 99.6
-------------------------------------
4,619.8 4,806.6
=====================================
F-18
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
DECEMBER 31
-------------------------------------
2001 2000
RESTATED
-------------------------------------
BY GEOGRAPHICAL LOCATION
North America 2,435.1 2,322.5
UK 1,167.8 1,217.0
Continental Europe 144.6 197.8
Australia 538.2 583.7
Asia 334.1 386.0
Discontinued operations - disposals (a) -- 99.6
-------------------------------------
4,619.8 4,806.6
=====================================
RECONCILIATION OF CAPITAL EMPLOYED
Capital employed is reconciled to the consolidated balance sheet as follows:
DECEMBER 31
-------------------------------------
2001 2000
RESTATED
-------------------------------------
Shareholders' funds 2,720.8 2,420.6
Current taxation and dividends 100.7 178.8
Provisions for non current tax (Note 15) 152.8 149.8
Net debt, investments and non-operating assets 1,645.5 2,057.4
-------------------------------------
4,619.8 4,806.6
=====================================
--------------
(a) The principal operations included in "Discontinued Operations" are the
Waste management division of HQPE, the quarrying operations in Utah and Las
Vegas and the Australian roof tiles operation in the year ended December
31, 2001 and Acme Materials Construction and UGI for the year ended
December 31, 2000.
(b) Represents profit before taxation.
(c) Includes cash on deposit of 2001:(pound)656.9 (2000:(pound)804.2),
principally with banks in Western Europe.
F-19
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
2. COSTS AND OVERHEADS LESS OTHER INCOME
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
2001 2000 1999
-------------------------------- ----------------------- --------------------
CONT'G ACQ'NS DISC. CONT'G DISC. CONT'G DISC.
RESTATED RESTATED
----------------------------------------------------------------------------------
Changes in inventory 14.4 0.6 0.3 (10.9) 0.3 (4.4) 1.4
Raw materials and consumables 1,005.4 7.3 16.0 744.2 33.9 290.4 27.3
Employment costs 686.7 3.9 14.1 580.6 32.4 389.3 22.4
Depreciation and depletion 218.1 2.7 4.4 192.1 11.2 115.9 8.8
Depreciation of finance leased 3.7 -- -- 4.9 0.2 4.6 0.2
assets
Amortisation of goodwill 59.1 0.6 - 42.3 0.4 9.2 --
Other operating charges 1,324.2 7.6 31.9 1,030.1 91.0 684.6 57.8
Exceptional operating items 191.3 -- -- 22.7 -- -- --
----------------------------------------------------------------------------------
3,502.9 22.7 66.7 2,606.0 169.4 1,489.6 117.9
--------------------- ----------- ---------
Acquisitions 22.7 -- --
Discontinued operations 66.7 169.4 117.9
---------- ---------- ----------
3,592.3 2,775.4 1,607.5
---------- ---------- ----------
Included above:-
Operating lease rental 46.7 51.8 16.6
Research and development 1.2 2.2 3.8
Advertising costs 4.5 4.8 2.9
Remuneration paid to auditors for
Group audit 1.5 1.5 1.3
Fees for non-audit services paid to
Ernst & Young LLP within the UK 0.7 1.6 0.5
Fees for non-audit services paid to
Ernst & Young LLP outside the UK 1.4 0.6 0.7
In addition, included in the Pioneer acquisition costs in 2000 are fees of
(pound)0.5 relating to transaction support services provided by Ernst & Young
LLP.
Non-audit services mainly relate to acquisitions & disposals, regulatory advice,
overseas filings and taxation. Payments to auditors for audit and non-audit
services are reviewed by the audit committee and approved by the board.
3. DIRECTORS AND EMPLOYEES
The analysis of employment costs is as follows:
YEAR ENDED DECEMBER 31
-----------------------------------
2001 2000 1999
-----------------------------------
Aggregate gross wages and salaries 637.3 552.0 373.5
Employers' social security costs 53.2 51.5 31.9
Post retirement benefits 3.4 0.9 1.7
Employers' pension contributions 10.8 8.6 4.6
-----------------------------------
704.7 613.0 411.7
===================================
F-20
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
YEAR ENDED DECEMBER 31
------------------------------------
2001 2000 1999
NUMBER NUMBER NUMBER
------------------------------------
THE AVERAGE NUMBER OF PERSONS EMPLOYED DURING THE YEAR
UK 6,800 6,300 6,500
Continental Europe 2,300 2,600 1,000
North America 12,600 11,700 8,600
Australia 2,300 1,600 --
Asia 2,900 2,500 800
------------------------------------
26,900 24,700 16,900
====================================
The total number of employees at the year end was 26,800 (2000: 27,000, 1999:
17,300).
POLICY OF REMUNERATION OF EXECUTIVE DIRECTORS AND SENIOR EXECUTIVES
Hanson operates in competitive and international markets. To continue to compete
successfully it is essential that the company attracts, develops, retains and
motivates talented and high-achieving executive directors in the best interests
of shareholders. To ensure that its remuneration rates are competitive, whilst
not being excessive, the remuneration committee, which keeps remuneration under
regular review, has had access during the year to advice from independent
external consultants, Stern Stewart, William M Mercer Limited and AON
Compensation Consulting, and from national and international surveys on
executive remuneration.
The remuneration packages, which take account of an individual's
responsibilities and performance, are designed:
i) in the knowledge of what comparable, in terms of size and complexity, UK
and international companies are paying;
ii) in the context of packages offered throughout Hanson; and
iii) to include short and long-term performance related elements to motivate the
highest performance and to support the board's strategy to enhance
shareholder value while aligning the interests of directors and
shareholders. Details of the performance related elements are set out
below.
Share incentives are considered to be an important part of the incentive policy
for directors. While there is no specific shareholding requirement for
directors, shares arising from the long term share based incentive plans are
expected to be retained by directors.
ANNUAL BONUS SCHEME
The annual bonus scheme for the executive directors and other senior executives
is aligned with changes in shareholder value through the economic value added
(EVA(R)) methodology. The main principle of EVA(R) is to recognise that over
time a company should generate revenues sufficient to cover its operating costs
and the cost of capital - the return that lenders and shareholders expect of the
company each year.
The annual bonus scheme is calibrated by reference to target levels of bonus.
Each year the participant will receive one-third of an accumulated bonus pool,
which is updated for the year's performance compared to target.
For the executive directors, other than for A J Murray, chief executive of
Hanson Building Materials America Inc ("HBMA"), the target level of bonus for
2001 was 25% of basic salary. Consistent with US market practices A J Murray's
target level of bonus for 2001 was higher, at 50% of his basic salary.
For 2002, following a review of the executive directors' remuneration and to act
as an added incentive for enhanced performance, the target levels of bonus have
been increased to 62.5% of basic salary for A J Murray and to 37.5% of basic
salary for all other executive directors.
For A J Murray and S N Vivian, chief executive of Hanson Quarry Products Europe
Limited ("HQPE") throughout the year, the EVA(R) performance of their respective
businesses in 2001 determined three quarters of the addition to their bonus pool
with one quarter of the addition based on the performance of the group overall.
It is the group's overall EVA(R) performance which determines the bonus pool
addition for the other executive directors. The bonuses paid in respect of the
year to December 31, 2001 to the directors are set out in the table of
directors' remuneration on page F-25.
Performance targets under the annual bonus scheme, based on improvements in
EVA(R), are set by the remuneration committee, after taking advice from Stern
Stewart.
Bonuses are not pensionable.
F-21
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
LONG TERM INCENTIVE PLAN
At the 2001 annual general meeting, shareholders approved changes to the
long-term incentive plan (the "LTIP"), permitting an increased level of
conditional awards.
Under the LTIP, participants are conditionally awarded shares in the company
with the proportion of those shares which may vest subject to the achievement of
performance targets over a performance period set by the remuneration committee.
In 2001, conditional awards of shares were made to executive directors, other
than for A J Murray, of 100% of basic salary. Consistent with US market
practices and taking into account that no conditional option grant was made to
him (similarly for other US based executives) during the year under the share
option plan, A J Murray received a higher conditional award, of 200% of basic
salary.
The conditional awards made in 2001 are subject to performance criteria and the
remuneration committee determined that 50% of the conditional award should be
subject to the attainment of an EVA(R) target and 50% to a total shareholder
return ("TSR") target. For the conditional award made in 2001, the EVA(R) target
requires an improvement in EVA(R) over a period of three years based on the
results for the year to December 31, 2000. For this measurement, a linear
vesting schedule applies in order that only a small proportion of the award will
vest at the minimum performance level with the maximum award vesting only on the
achievement of substantial performance improvement.
TSR is the aggregate of share price growth and dividends paid on the assumption
that such dividends are reinvested in Hanson shares during the performance
period.
For the TSR measurement in 2001 the conditional awards made will vest only if
Hanson achieves a TSR over the three year performance period, from the date of
the award in May 2001, which is greater than the TSR achieved by at least 50% of
the members of a comparator group of international building materials companies
at the date of the award (the "comparator group"). If so 30% of the award will
vest. All of the award will vest if the company achieves a TSR over the
performance period which is greater than that achieved by 80% of the comparator
group over the same period. Between these two points the award will vest in the
proportion of 2.33% of the award for each 1% improvement in the company's
ranking.
There is no retesting of performance under either the EVA(R) measurement or the
TSR measurement.
The table below shows the conditional interests in shares of directors relating
to awards made under the LTIP in 1998, 1999, 2000 and 2001. Following the end of
the three year performance period for the conditional award made in 1998,
approximately 1.6m shares vested on September 11, 2001 in the participants,
including the directors as set out in the table below. Hanson's TSR for the
three year performance period exceeded that of 80% of the members of the
comparator group and therefore in accordance with the performance criteria 100%
of these conditional awards vested. For A J Murray and S N Vivian, the
performance criteria for the conditional award made in 1998 was based on cash
returns on cash invested by HBMA and HQPE over a three year performance period,
being on the same basis as other executives within the respective operating
companies. For A J Murray 100% of his conditional award vested and for S N
Vivian 45% of his conditional award vested with the balance of the award
lapsing. Other than A J Murray, the directors elected to satisfy their income
tax liabilities, arising on the vesting of shares, out of the share award.
BALANCE AT AWARDED VESTED LAPSED BALANCE AT
JAN 1, 2001 DURING YEAR DURING YEAR DURING YEAR DEC 31, 2001
-------------------------------------------------------------------
NUMBER OF SHARES
-------------------------------------------------------------------
C D Collins 69,840 -- 69,840 -- --
A J H Dougal 190,176 84,512 60,829 -- 213,859
G Dransfield 161,373 61,272 58,576 -- 164,069
A J Murray 179,630 172,220 55,349 -- 296,501
J C Nicholls 138,852 61,272 45,058 -- 155,066
S N Vivian 116,118 57,046 15,040 18,753 139,371
Conditional awards under the LTIP will usually be made annually and, initially,
will not exceed 200% of basic salary. In any year where a director receives a
conditional option grant under the share option plan, awards under the LTIP will
initially be limited to not more than 100% of basic salary for UK based
directors and 150% for US based directors.
Awards vesting under the LTIP are not pensionable.
F-22
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - EXCEPT NUMBERS OF SHARES)
SHARE OPTIONS
SHARE OPTION PLAN
At the 2001 annual general meeting shareholders approved the introduction of a
new share option plan.
Under the plan, participants are granted options over a number of shares in the
company but the proportion of those shares under option which may be exercised
is subject to the achievement of performance targets over a three year
performance period set by the remuneration committee.
The EVA(R) and TSR performance targets for the conditional options granted to
directors in the year ending December 31, 2001 were the same as for the awards
made in 2001 under the LTIP, as detailed above, with no retesting.
The conditional options granted to directors under the share option plan are
shown below.
WEIGHTED
AVERAGE
EXERCISE
BALANCE AT GRANTED EXERCISED BALANCE AT PRICE
JAN 1, 2001 DURING YEAR DURING YEAR DEC 31, 2001 (PENCE)
----------------------------------------------------------------------
NUMBER OF SHARES
--------------------------------------------------------
A J H Dougal -- 84,512 -- 84,512 473.3
G Dransfield -- 61,272 -- 61,272 473.3
J C Nicholls -- 61,272 -- 61,272 473.3
S N Vivian -- 57,046 -- 57,046 473.3
Under the Black-Scholes option valuation model, on the basis of the company's
three year share price performance, the value of an option over an ordinary
share at the date of grant was equal to approximately 35% of the share's current
market value. On this basis, with no discount of the Black-Scholes value because
of the application of performance conditions on exercise, the conditional
options granted during 2001 at 100% of basic salary had a Black-Scholes value of
about 35% of basic salary.
Grants of conditional options under the share option plan will be considered
annually in conjunction with the awards to be made under the LTIP and, other
than in exceptional cases which would be reported to shareholders in the next
annual report, for directors receiving an LTIP award will not exceed 100%.
Any gains made under the share option plan will not be pensionable.
EXECUTIVE SHARE OPTION SCHEMES
Options to subscribe for ordinary shares granted to directors under the
executive share option schemes are shown below.
No further grants will be made under these schemes, the last grant having been
made in December 1995.
WEIGHTED
AVERAGE
SURRENDERED EXERCISE RANGE OF
BALANCE AT FOR CASH EXERCISED BALANCE AT PRICE EXERCISE
JAN 1, 2001 DURING YEAR DURING YEAR DEC 31, 2001 (PENCE) DATES
------------------------------------------------------- -------------- -------------
NUMBER OF SHARES
-------------------------------------------------------
C D Collins* 42,685 -- -- 42,685 482.6 1/97-1/04
C D Collins 245,541 58,373 13,140 174,028 403.4 1/96-12/05
A J H Dougal* 46,012 -- -- 46,012 482.6 1/97-1/04
A J H Dougal 127,291 25,340 5,704 96,247 356.7 12/97-12/05
G Dransfield* 28,272 -- -- 28,272 482.6 1/97-1/04
G Dransfield 158,364 -- -- 158,364 387.7 6/95-12/05
A J Murray* 21,065 -- -- 21,065 482.6 1/97-1/04
A J Murray 124,941 12,195 -- 112,746 377.7 1/96-12/05
S N Vivian* 24,392 -- -- 24,392 482.6 1/97-1/04
S N Vivian 67,681 30,915 6,831 29,935 412.3 12/97-12/04
*In respect of options with exercise prices greater than the market price at
December 31, 2001 of 474p per ordinary share.
The range of the market quotations for Hanson ordinary shares, as derived from
the daily official list of the UK Financial Services Authority, during the
period January 1 to December 31, 2001 was 388.5p to 553p.
F-23
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - EXCEPT NUMBERS OF SHARES)
C D Collins and A J H Dougal exercised options over 13,140, and 5,704 ordinary
shares, respectively, and surrendered for cash options over 58,373 and 25,340
ordinary shares, respectively, all options being at a subscription price of
381.6p and with a market price on the date of exercise/surrender of 467.5p.
S N Vivian exercised an option over 6,831 ordinary shares and surrendered for
cash an option over 30,915 ordinary shares, both options being at a subscription
price of 356.4p and with a market price on the date of exercise/surrender of
467.5p.
A J Murray surrendered for cash an option over 12,195 ordinary shares, the
option being at a subscription price of 381.6p and with a market price on the
date of exercise of 498.75p.
The total gains made by directors on options exercised or surrendered for cash
under the executive share option schemes and the sharesave scheme during the
year were (pound)155,898 (2000: (pound)42,267, 1999: (pound)98,511).
Gains made under the executive share option schemes and the sharesave scheme are
not pensionable.
SHARESAVE SCHEME
A UK Inland Revenue approved savings related sharesave scheme open to all UK
employees was approved by shareholders at the extraordinary general meeting on
February 21, 1997. At December 31, 2001 there were approximately 3,600
participants in the sharesave scheme. The options granted to directors under the
sharesave scheme are shown in the table below:
BALANCE AT GRANTED EXERCISED EXERCISE MARKET BALANCE AT WEIGHTED RANGE OF
JAN 1, 2001 DURING DURING PRICE PRICE AT DEC 31, AVERAGE EXERCISE
YEAR YEAR (PENCE) DATE OF 2001 EXERCISE DATES
EXERCISE (NUMBER) PRICE
(PENCE) (PENCE)
-----------------------------------------------------------------------------------------------------
NUMBER OF SHARES
-------------------------------------
C D Collins 1,471 -- 1,471 265 459.375 -- -- --
A J H Dougal 7,700 -- -- -- -- 7,700 224 6/02-11/02
G Dransfield 7,223 -- -- -- -- 7,223 238.8 6/02-5/04
A J Murray 4,620 -- -- -- -- 4,620 224 6/02-11/02
J C Nicholls 4,113 2,263 4,113 237 449 2,263 428 12/04-5/05
S N Vivian 7,700 -- -- -- -- 7,700 224 6/02-11/02
SERVICE CONTRACTS The chairman and the executive directors are employed on
rolling contracts subject to 52 weeks' notice.
YEAR ENDED DECEMBER 31
----------------------------------------------------
2001 2000 1999
DIRECTORS' REMUNERATION (POUND)'000 (POUND)'000 (POUND)'000
----------------------------------------------------
DIRECTORS' EMOLUMENTS
Non-executive directors' fees 214 237 181
Chairman and executive directors' salaries and benefits 1,969 1,807 1,521
Long-term incentive plan ("LTIP") 1,399 1,386 -
Executive directors' annual bonuses 589 436 711
----------------------------------------------------
4,171 3,866 2,413
----------------------------------------------------
Emoluments of the highest paid director
representing salary, annual bonus, benefits and LTIP 898 788 580
====================================================
F-24
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING MILLIONS)
Remuneration during the year to December 31, 2001 of the directors in office at
the end of the year:
SALARY/ ANNUAL BENEFITS TOTAL LTIP TOTAL TOTAL
FEES BONUS (1) 2001 VESTED (2) 2000 1999
(POUND)'000 (POUND)'000 (POUND)'000 (POUND)'000 (POUND)'000 (POUND)'000 (POUND)'000
-----------------------------------------------------------------------------------------------------------------------------
C D Collins 160 -- 17 177 321 170 177
A J H Dougal (4) 400 118 19 537 279 492 469
G Dransfield 290 85 19 394 269 366 424
A J Murray 403 216 25 644 254 548 580
J C Nicholls 290 85 58 433 207 373 356
S N Vivian 270 85 18 373 69 294 226
The Rt. Hon. the Lord Baker 43 -- -- 43 -- 42 40
of Dorking CH PC
The Baroness Noakes DBE (3) 11 -- -- 11 -- -- --
S L Keswick 46 -- -- 46 -- 31 30
W F Blount 37 -- -- 37 -- 21 --
D M Hoare 30 -- -- 30 -- 20 --
J M Schubert 30 -- -- 30 -- 61 --
-------------
1) Benefits include the provision of a company car (or cash allowance),
accommodation allowance (for A J Murray), health insurance, life cover and
cash in lieu of pension allowance (for J C Nicholls).
2) The value of the shares vesting under the LTIP in 2001 is based on the
share price on the day of vesting, September 11, 2001.
3) Appointed as a director on September 1, 2001.
4) Retired as a director on May 14, 2002.
Amounts paid to directors retiring during the year to December 31, 2001.
YEAR ENDED DECEMBER 31
----------------------------------
TOTAL TOTAL TOTAL
2001 2000 1999
(POUND)'000 (POUND)'000 (POUND)'000
----------------------------------
Sir David Hardy 17 52 50
----------------------------------
No remuneration was paid to former directors during the year to December 31,
2001.
F-25
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
DIRECTORS' INTERESTS IN ORDINARY SHARES
The interests of the directors, who held office at December 31, 2001, in the
ordinary shares of the company on January 1, 2001 and December 31, 2001
(excluding options granted under the executive share option schemes, the share
option plan and the sharesave scheme, details of which are shown on pages F-23
and F-24) were as follows:
CONDITIONAL INTEREST
UNDER LTIP
----------------------------
DEC 31, 2001 JAN 1, 2001* DEC 31, 2001 JAN 1, 2001*
--------------------------------------------------------
NUMBER OF SHARES
--------------------------------------------------------
C D Collins 130,862 74,347 -- 69,840
A J H Dougal 135,718 93,517 213,859 190,176
G Dransfield 111,611 76,465 164,069 161,373
A J Murray 139,581 84,232 296,501 179,630
J C Nicholls 48,215 30,585 155,066 138,852
S N Vivian 39,491 23,636 139,371 116,118
The Rt Hon. the Lord Baker of Dorking CH PC 3,625 3,625 -- --
W F Blount 1,000 1,000 -- --
D M Hoare 7,707 7,707 -- --
S L Keswick 1,554 1,554 -- --
Baroness Noakes DBE 7,600 7,600 -- --
J M Schubert 16,000 16,000 -- --
--------------
*or date of appointment if later.
The only non-beneficial interests included in the above table are 6,875 (2000:
6,875) and 6,095 (2000: 6,095) ordinary shares held by C D Collins and D M
Hoare, respectively.
DIRECTORS' PENSIONS
The pension arrangements of the chairman and each of the executive directors are
explained in note 21.
F-26
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
4. EXCEPTIONAL ITEMS
YEAR ENDED DECEMBER 31
----------------------------------
OPERATING EXCEPTIONAL ITEMS 2001 2000 1999
----------------------------------
Continuing operations
Integration and reorganisation costs (24.3) (22.7) --
Impairment of continental European brick operations:
- Net assets (74.6) -- --
- Goodwill impaired previously written off to reserves (88.8) -- --
Other impairments (3.6) -- --
----------------------------------
Operating exceptional items (191.3) (22.7) --
----------------------------------
NON OPERATING EXCEPTIONAL ITEMS
Discontinued operations
Profit (loss) on disposal and termination of operations
Profit on disposal of Waste Management (note 18) 125.2 -- --
Loss on disposal of Las Vegas operations (note 18) (13.6) -- --
Loss on disposal of Utah operations (note 18) (5.2) -- --
Settlement of environmental and related provisions 5.6 5.7 --
Release of demerger provisions and other creditors 12.1 -- --
Loss on sale of Spectrum -- -- (4.7)
(Loss) profit on other disposals and terminations (7.9) 1.2 1.0
----------------------------------
116.2 6.9 (3.7)
PROFIT ON DISPOSAL OF FIXED ASSETS (CONTINUING OPERATIONS)
(Loss) profit on sale of fixed assets and investments (0.5) 4.4 5.8
----------------------------------
Non operating exceptional items 115.7 11.3 2.1
----------------------------------
TOTAL EXCEPTIONAL ITEMS BEFORE INTEREST AND TAXATION (75.6) (11.4) 2.1
==================================
The group has received a conditional offer for the Continental European Bricks
operations, which indicates its assets are impaired. Accordingly, the directors
have recorded a charge of (pound)163.4 to write down the net assets to their
anticipated net realisable value and to write off goodwill previously taken to
reserves.
Integration and reorganisation costs reflect(pound)11.3 (2000:(pound)12.4,
1999:(pound)nil) of employment costs and(pound)13.0 (2000: (pound)10.3,
1999:(pound)nil) of other operating charges.
See note 6 for an analysis of tax relating to exceptional items.
The net tax credit in respect of the exceptional items amounts to(pound)8.7
(2000:(pound)11.9, 1999:(pound)18.8).
F-27
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
5. NET INTEREST PAYABLE
YEAR ENDED DECEMBER 31
----------------------------------
2001 2000 1999
----------------------------------
INTEREST PAYABLE AND SIMILAR CHARGES:
On loans wholly repayable within five years:
payable by instalments (1.4) (9.2) (8.4)
not payable by instalments (135.0) (153.2) (61.2)
On loans not wholly repayable within five years:
payable by instalments (0.1) (0.1) (0.9)
not payable by instalments (34.3) (12.8) (31.3)
----------------------------------
Total payable
(including 2001: (pound)0.7, 2000: (pound)0.8 and 1999:
(pound)0.7 relating to finance leases) (170.8) (175.3) (101.8)
INTEREST RECEIVABLE AND SIMILAR INCOME 67.1 85.0 99.6
Associates and joint ventures (2.8) (1.6) 0.7
----------------------------------
Net interest payable (106.5) (91.9) (1.5)
Unwinding of discount (net) (6.0) (6.8) (7.8)
----------------------------------
(112.5) (98.7) (9.3)
==================================
6. TAXATION
A) ANALYSIS OF TAX CHARGE IN THE YEAR
YEAR ENDED DECEMBER 31, 2001
----------------------------------
BEFORE
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS TOTAL
----------------------------------
UK
Current tax:
UK corporation tax at 30.0% (123.1) -- (123.1)
Double tax relief 130.6 -- 130.6
Receipt for group relief -- 0.6 0.6
----------------------------------
UK corporation tax credit 7.5 0.6 8.1
Foreign tax (84.2) 7.0 (77.2)
Release relating to prior years -- 100.0 100.0
Share of joint ventures (see note below) (11.5) -- (11.5)
Share of associates (3.7) -- (3.7)
----------------------------------
TOTAL CURRENT TAX (91.9) 107.6 15.7
UK deferred tax:
-- Origination and reversal of timing differences (3.3) (9.4) (12.7)
Foreign deferred tax:
-- Origination and reversal of timing differences (10.7) 11.1 0.4
----------------------------------
TOTAL DEFERRED TAX (14.0) 1.7 (12.3)
----------------------------------
TAX ON PROFIT ON ORDINARY ACTIVITIES (105.9) 109.3 3.4
==================================
Included within share of joint ventures is (pound)5.0 relating to tax on US
partnership profits borne by the group.
F-28
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
YEAR ENDED DECEMBER 31, 2000
------------------------------------
BEFORE
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS TOTAL
RESTATED RESTATED RESTATED
------------------------------------
UK
Current tax:
UK corporation tax at 30.0% (49.7) -- (49.7)
Double tax relief 53.7 -- 53.7
Receipt for group relief -- 17.6 17.6
------------------------------------
UK corporation tax credit 4.0 17.6 21.6
Foreign tax (85.2) 20.7 (64.5)
Share of joint ventures (see note below) (7.0) -- (7.0)
Share of associates (4.2) -- (4.2)
------------------------------------
TOTAL CURRENT TAX (92.4) 38.3 (54.1)
Foreign deferred tax:
--Origination and reversal of timing differences (7.9) (8.8) (16.7)
------------------------------------
TAX ON PROFIT ON ORDINARY ACTIVITIES (100.3) 29.5 (70.8)
====================================
Included within share of joint ventures is (pound)4.0 relating to tax on US
partnership profits borne by the group.
YEAR ENDED DECEMBER 31, 1999
----------------------------------
BEFORE
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS TOTAL
RESTATED RESTATED RESTATED
----------------------------------
UK
Current tax:
UK corporation tax at 30.3% (1.8) (1.8)
Receipt for group relief -- 1.5 1.5
----------------------------------
UK corporation tax credit (1.8) 1.5 (0.3)
Foreign tax (59.7) 20.5 (39.2)
Release relating to prior years 4.0 56.6 60.6
Share of joint ventures (see note below) -- -- --
Share of associates (3.0) -- (3.0)
----------------------------------
TOTAL CURRENT TAX (60.5) 78.6 18.1
UK deferred tax:
- Origination and reversal of timing differences -- -- --
Foreign deferred tax:
- Origination and reversal of timing differences (24.0) (8.3) (32.3)
----------------------------------
TOTAL DEFERRED TAX (24.0) (8.3) (32.3)
----------------------------------
TAX ON PROFIT ON ORDINARY ACTIVITIES (84.5) 70.3 (14.2)
==================================
F-29
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
B) FACTORS AFFECTING TAX CHARGE FOR THE PERIOD
YEAR ENDED DECEMBER 31, 2001
--------------------------------
BEFORE
EXCEPTIONAL
ITEMS TOTAL
--------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX (pound)351.0 (pound)275.4
--------------------------------
% %
Tax on ordinary activities at 30.0% 30.0 30.0
Permanent differences 1.6 2.0
Overseas tax rate differences (3.5) (4.4)
Accelerated capital allowances (2.4) (3.1)
Current tax losses not utilised 3.4 4.3
Other (2.9) (3.6)
Exceptionals, principally release relating to prior years -- (30.9)
--------------------------------
TOTAL CURRENT TAX 26.2 (5.7)
================================
YEAR ENDED DECEMBER 31, 2000
--------------------------------
BEFORE
EXCEPTIONAL
ITEMS TOTAL
--------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX (pound)318.6 (pound)307.2
--------------------------------
% %
Tax on ordinary activities at 30.0% 30.0 30.0
Permanent differences 1.2 1.2
Overseas tax rate differences (3.0) (3.2)
Accelerated capital allowances (2.4) (2.5)
Current tax losses not utilised 3.3 3.4
Exceptionals, principally release relating to prior years -- (11.3)
--------------------------------
TOTAL CURRENT TAX 29.1 17.6
================================
YEAR ENDED DECEMBER 31, 1999
--------------------------------
BEFORE
EXCEPTIONAL
ITEMS TOTAL
--------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX (pound)314.3 (pound)316.4
--------------------------------
% %
Tax on ordinary activities at 30.3% 30.3 30.3
Permanent differences (10.4) (10.3)
Overseas tax rate differences (0.6) (0.6)
Accelerated capital allowances (1.3) (1.3)
Current tax losses not utilised 2.4 2.4
Other (1.1) (1.1)
Exceptionals, principally release relating to prior years -- (25.0)
--------------------------------
TOTAL CURRENT TAX 19.3 (5.6)
================================
C) FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
No provision has been made for deferred tax where potentially taxable gains have
been rolled over into replacement assets, except where there is a commitment to
dispose of these assets. Such gains would only become taxable if the assets were
sold without it being possible to claim rollover relief or offset existing
capital losses. The group does not expect any tax to become payable in the
foreseeable future.
No deferred tax has been recognised in respect of tax on gains arising from the
revaluation of fixed assets, as the group is not committed to disposal of these
assets.
No deferred tax has been recognised in respect of the earning of overseas
subsidiaries as no dividends have been accrued.
Tax losses with a value of (pound)44.0 have not been recognised as their use is
uncertain or not currently anticipated.
F-30
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
7. EARNINGS PER SHARE
The calculation of the basic earnings per ordinary share of 37.9p (2000: 33.4p,
1999: 46.4p) was based on the weighted average of 735,427,260 (2000:
708,632,341, 1999: 651,861,357) ordinary shares in issue during the year and
profit after taxation of(pound)278.8 (2000:(pound)236.4, 1999:(pound)302.2). The
basic earnings per ordinary share pre goodwill amortisation of 46.0p (2000:
39.4p, 1999: 47.8p) are calculated using the same number of shares referred to
above and on earnings of(pound)338.5 (2000:(pound)279.1, 1999:(pound)311.4).
The calculation of the diluted earnings per ordinary share of 37.8p (2000:
33.3p, 1999: 46.1p) was based on the weighted average of 737,709,825 (2000:
710,856,066, 1999: 656,240,621) ordinary shares in issue during the year and the
profit after taxation of(pound)278.8 (2000:(pound)236.4, 1999:(pound)302.2). The
diluted earnings pre goodwill amortisation per ordinary share of 45.9p (2000:
39.3p, 1999: 47.5p) is calculated using the same number of shares referred to
immediately above and on earnings of(pound)338.5 (2000:(pound)279.1,
1999:(pound)311.4).
The reconciliation from basic earnings per share to diluted earnings per share
is given as follows:
YEAR ENDED DECEMBER 31, 2001
---------------------------------------------------
EARNINGS PER
SHARES SHARE,
NO. PROFIT PENCE
---------------------------------------------------
Basic 735,427,260 278.8 37.9
Options 541,923 --
Sharesave 1,740,642 --
---------------------------------------------------
Diluted 737,709,825 278.8 37.8
---------------------------------------------------
Adjustment for goodwill amortisation -- 59.7
---------------------------------------------------
Basic before goodwill 735,427,260 338.5 46.0
---------------------------------------------------
Diluted before goodwill 737,709,825 338.5 45.9
---------------------------------------------------
8. INTANGIBLE FIXED ASSETS
GOODWILL
----------
COST
At January 1, 2000 304.4
Additions (restated) 812.2
Exchange adjustments 47.1
----------
At December 31, 2000 (restated) 1,163.7
Additions 63.1
Disposals (5.7)
Exchange adjustments 6.9
----------
At December 31, 2001 1,228.0
==========
AMORTISATION
At January 1, 2000 10.2
Provided during the year (restated) 42.7
Exchange adjustments 0.7
----------
At December 31, 2000 (restated) 53.6
Provided during the year 59.7
Provision for impairment 12.3
Disposals (0.5)
Exchange adjustments 0.8
----------
At December 31, 2001 125.9
==========
Net book value at December 31, 2000 (restated) 1,110.1
----------
Net book value at December 31, 2001 1,102.1
==========
F-31
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
9. TANGIBLE FIXED ASSETS
LAND, BUILDINGS
AND NATURAL PLANT AND
RESOURCES EQUIPMENT TOTAL
---------------------------------------------------------------
COST
At January 1, 2000 1,811.8 1,146.4 2,958.2
Exchange adjustments 106.5 47.3 153.8
Acquisitions 408.5 416.6 825.1
Additions at cost 21.6 154.4 176.0
Disposals (142.8) (100.7) (243.5)
---------------------------------------------------------------
At December 31, 2000 2,205.6 1,664.0 3,869.6
Exchange adjustments 23.9 4.0 27.9
Acquisitions 9.5 13.2 22.7
Additions at cost 23.4 146.3 169.7
Disposals (125.7) (138.6) (264.3)
---------------------------------------------------------------
At December 31, 2001 2,136.7 1,688.9 3,825.6
===============================================================
DEPRECIATION
At January 1, 2000 361.5 387.6 749.1
Exchange adjustments 24.0 16.6 40.6
Provision in the year 59.0 149.4 208.4
Released on disposals (139.3) (58.8) (198.1)
---------------------------------------------------------------
At December 31, 2000 305.2 494.8 800.0
Exchange adjustments 4.6 (5.9) (1.3)
Provision in the year 54.6 174.3 228.9
Provision for impairment 33.0 27.9 60.9
Released on disposals (41.7) (84.6) (126.3)
---------------------------------------------------------------
At December 31, 2001 355.7 606.5 962.2
===============================================================
NET BOOK AMOUNTS
At December 31, 2000 1,900.4 1,169.2 3,069.6
---------------------------------------------------------------
At December 31, 2001 1,781.0 1,082.4 2,863.4
===============================================================
Land, buildings and natural resources comprise the following:
DECEMBER 31, 2001
----------------------------------------------------------------
LONG SHORT
FREEHOLD LEASEHOLD LEASEHOLD TOTAL
----------------------------------------------------------------
Aggregates 1,091.1 6.3 126.0 1,223.4
Clay 136.0 -- -- 136.0
Other land and buildings 319.5 4.5 97.6 421.6
----------------------------------------------------------------
At December 31, 2001 1,546.6 10.8 223.6 1,781.0
===============================================================
DECEMBER 31, 2000
----------------------------------------------------------------
LONG SHORT
FREEHOLD LEASEHOLD LEASEHOLD TOTAL
----------------------------------------------------------------
Aggregates 1,164.7 35.3 89.8 1,289.8
Clay 137.5 -- -- 137.5
Other land and buildings 380.7 1.5 90.9 473.1
---------------------------------------------------------------
At December 31, 2000 1,682.9 36.8 180.7 1,900.4
===============================================================
F-32
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
DECEMBER 31
--------------------------
2001 2000
--------------------------
Cost of finance leased assets included in plant and equipment 86.3 95.0
Cumulative depreciation of finance leased assets (51.7) (51.8)
--------------------------
Net book amounts at December 31, 2001 34.6 43.2
--------------------------
Capital expenditure contracted 30.3 62.8
==========================
10. INVESTMENTS
LISTED
INVESTMENTS UNLISTED INVESTMENTS
------------ ------------------------------------------------------------------------
OTHER JOINT- ASSOCIATES LOANS TO OTHER PROVISIONS TOTAL
VENTURES JOINT-
VENTURES
------------ ------------------------------------------------------------------------
FIXED ASSET INVESTMENTS
At January 1, 2000 59.3 -- 49.5 -- -- (40.0) 68.8
Exchange movements (1.5) 2.0 1.8 2.5 -- -- 4.8
Additions -- -- -- 2.7 0.1 -- 2.8
Share of retained profit -- 4.5 (4.0) -- -- -- 0.5
(loss)
Acquisitions -- 160.9 34.9 47.4 -- -- 243.2
Reallocations 6.0 -- -- -- 0.3 -- 6.3
Disposals (Note 18) (58.0) -- -- -- -- 38.7 (19.3)
------------ ------------------------------------------------------------------------
At December 31, 2000 5.8 167.4 82.2 52.6 0.4 (1.3) 307.1
Exchange movements -- (4.4) -- 1.7 -- -- (2.7)
Additions -- 1.0 0.1 -- -- -- 1.1
Share of retained profit -- (1.2) 2.0 -- -- -- 0.8
(loss)
Acquisitions -- 17.3 -- -- -- -- 17.3
Provisions charged in year -- -- -- -- -- (1.1) (1.1)
Reallocations (0.1) 27.5 (36.2) (38.2) -- -- (47.0)
Disposals (5.4) -- -- (1.5) (0.1) -- (7.0)
Provisions allocated -- -- (2.4) -- -- 2.4 --
------------ ------------------------------------------------------------------------
At December 31, 2001 0.3 207.6 45.7 14.6 0.3 -- 268.5
============ ========================================================================
The market value of marketable securities, all of which are traded on recognised
stock exchanges, at the year end was(pound)0.3 (2000:(pound)5.8). Of
this,(pound)0.3 (2000:(pound)5.7) was in respect of investments listed in the
United Kingdom. The directors estimated the value of unlisted investments at the
year ends to be(pound)268.2 (2000: (pound)301.3).
On May 31, 1995 Hanson established an employee share trust ("the trust")
approved by shareholders on May 15, 1995. The trust as at December 31, 2001 held
0.1 million ordinary shares in Hanson at a cost of (pound)0.3. The trust waived
its rights to dividends payable during the year and to its future dividends on
its holding of the Hanson shares.
Included within reallocations of (pound)47.0 is the reclassification of Campbell
Ready Mix LP from associated undertaking to joint venture ((pound)36.2), and the
acquisition of the remaining 50% shareholding of Sungei Way with the consequent
reclassification of its loan ((pound)47.8).
F-33
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
Principal joint ventures and associated undertakings, none of which are held
directly by Hanson PLC, are as follows:
PRINCIPAL JOINT VENTURES AT DECEMBER 31, 2001
FULL YEAR
YEAR SHARE CAPITAL PRE-TAX %
COUNTRY ENDED AND RESERVES PROFIT OWNED
---------------------------------------------------------------------------------------------------------------
United Marine Holdings Ltd (a) UK December 25.3 10.3 50.0
Australian Cement Holdings Pty Ltd (b) Australia December 97.6 18.8 50.0
Pioneer Road Services Pty Ltd (c) Australia December 26.9 (3.7) 50.0
Metromix Pty Ltd (d) Australia March 9.3 0.9 50.0
Pioneer Sunmix Concrete Sdn Bhd (e) Malaysia December 6.7 (2.4) 50.0
North Texas Cement LP (b) USA December 64.7 22.7 50.0
Campbell Ready Mix LP (e) USA December 76.4 4.8 50.0
Piedras y Arenas Baja, S de R L de CV (a) Mexico December (0.1) (0.4) 50.0
PRINCIPAL ASSOCIATED UNDERTAKINGS AT DECEMBER 31, 2001
Midland Quarry Products Ltd (a) UK December 65.5 16.8 50.0
(a) Principal activity is quarry operations (b) Principal activity is cement production
(c) Principal activity is road surfacing (d) Principal activity is ready-mixed concrete and
quarry operations
(e)Principal activity is ready-mixed concrete operations
CURRENT ASSET INVESTMENTS
DECEMBER 31
--------------------------------
2001 2000
--------------------------------
Unlisted 373.6 411.9
--------------------------------
The unlisted investments of (pound)373.6 (2000: (pound)411.9) are taken as
liquid resources in the net debt calculation as they constitute term deposits of
no more than one year to maturity.
11. STOCKS
DECEMBER 31
--------------------------------
2001 2000
--------------------------------
Raw materials 36.9 44.6
Work in progress 7.0 7.2
Finished goods and items for resale 335.4 314.1
--------------------------------
379.3 365.9
================================
12. DEBTORS
DECEMBER 31
--------------------------------
2001 2000
RESTATED
--------------------------------
DUE WITHIN ONE YEAR
Trade debtors 627.8 583.5
Other debtors 139.6 172.8
--------------------------------
767.4 756.3
DUE AFTER ONE YEAR
Pension prepayment 155.4 140.4
Other debtors 59.1 55.5
--------------------------------
981.9 952.2
================================
F-34
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
Consistent with the disclosures required by FRS17 - Retirement Benefits, the
pension prepayment of Hanson Building Materials America, which was previously
netted against provisions for health care and obligations to employees (note
15), is now separately disclosed within debtors. Prior year amounts have been
restated accordingly.
13. CREDITORS DUE WITHIN ONE YEAR
Debenture loans include (pound)220.1 (2000: (pound)642.8) relating to US dollars
borrowed under US and European commercial paper programmes and (pound)290.3
(2000: (pound)241.7) relating to euro borrowed under a European commercial paper
programme. Bank loans, overdrafts and debenture loans bear interest at rates
ranging from 1.4% to 6.7% per annum. Outstanding instalments under finance
leases totalling (pound)2.5 (2000: (pound)7.7) are included in debenture loans.
Hanson has unused committed bank facilities of (pound)644.0 at December 31,
2001, which expire as follows:
UNUSED COMMITTED BANK FACILITIES
DECEMBER 31
--------------------------
2001 2000
--------------------------
2001 -- 382.3
2002 -- --
2003 315.8 96.8
2004 and after 328.2 2.1
--------------------------
644.0 481.2
==========================
ANALYSIS OF OTHER CREDITORS
DECEMBER 31
--------------------------
2001 2000
--------------------------
Taxation and social security
Corporate taxes 30.4 110.1
Other taxes 12.9 13.6
--------------------------
43.3 123.7
Accruals and deferred income 186.7 163.3
Other 152.5 155.1
--------------------------
382.5 442.1
==========================
14. CREDITORS DUE AFTER ONE YEAR
DECEMBER 31
--------------------------
2001 2000
--------------------------
Loans not wholly repayable within 5 years
7.875% notes 2010 512.3 496.1
Secured long-term loans (including bank loans of(pound)nil ((pound)3.6)) 2.2 4.4
Unsecured long-term bank loans 2.9 19.7
--------------------------
517.4 520.2
Loans repayable within five years
6.75% guaranteed notes 2005 516.4 500.4
7.375% unsecured notes 2003 436.7 475.3
Secured loans 8.2 9.3
Unsecured bank loans 27.2 27.3
Unsecured other loans 93.4 101.6
--------------------------
1,081.9 1,113.9
--------------------------
1,599.3 1,634.1
==========================
F-35
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
Long-term debt is repayable as follows:
December 31
---------------------------
2001 2000
---------------------------
2002 -- 20.5
2003 523.8 564.3
2004 36.6 40.7
2005 518.5 507.1
2006 4.0 3.8
thereafter 516.4 497.7
---------------------------
1,599.3 1,634.1
===========================
Bank loans, other loans and finance leases bear interest at rates which are
either fixed or fluctuate in line with market rates and at the year end these
ranged from 3.0% to 10.6% per annum.
Outstanding instalments under finance leases totalling (pound)6.2 (2000:
(pound)6.7) are included above. Obligations of commercial banks under standby
letters of credit totalled (pound)59.3 (2000: (pound)28.9). Loans repayable by
instalments after five years of (pound)1.1 (2000: (pound)2.0) and within five
years of (pound)10.1 (2000: (pound)28.9) are included in long-term debt.
FINANCIAL RISK MANAGEMENT
The group's approach to managing financial risk is described in Item 11 -
Quantitative and Qualitative Disclosures about Market Risk.
The following table summarises Hanson's net currency exposure as at December 31,
2001:
NET FOREIGN NET
GROSS CAPITAL NET (DEBT) NET EXCHANGE CURRENCY
EMPLOYED CASH ASSETS CONTRACTS EXPOSURE
-----------------------------------------------------------------------------
Sterling 791.5 238.8 1,030.3 (30.7) 999.6
US dollar 2,185.4 (1,160.6) 1,024.8 37.4 1,062.2
Australian dollar 542.0 (222.0) 320.0 (4.1) 315.9
Other 631.6 (285.9) 345.7 (2.6) 343.1
-----------------------------------------------------------------------------
Total 4,150.5 (1,429.7) 2,720.8 -- 2,720.8
============================================================================
F-36
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
INTEREST RATE RISK
The interest rate and currency profile of the financial assets and liabilities
of the group at December 31, 2001 was:
FIXED RATE FINANCIAL
ASSETS AND LIABILITIES
---------------------------
FINANCIAL WEIGHTED
ASSETS, AVERAGE
FLOATING RATE FIXED RATE (LIABILITIES) WEIGHTED PERIOD
FINANCIAL FINANCIAL ON WHICH NO AVERAGE FOR WHICH
ASSETS, ASSETS, INTEREST IS INTEREST RATE IS
TOTAL (LIABILITIES) (LIABILITIES) PAID RATE FIXED
% (YEARS)
----------------------------------------------------------------------------------
STERLING
Assets 901.9 683.4 -- 218.5
Liabilities (751.6) (475.2) -- (276.4)
-----------------------------------------------------
Net 150.3 208.2 -- (57.9)
-----------------------------------------------------
US DOLLAR
Assets 1,501.2 797.9 -- 703.3
Liabilities (2,326.9) (1,185.8) (735.3) (405.8) 6.95 4.5
Net (825.7) (387.9) (735.3) 297.5
-----------------------------------------------------
AUSTRALIAN DOLLAR
Assets 80.3 19.6 -- 60.7
Liabilities (295.4) (165.8) (79.9) (49.7) 6.72 3.7
-----------------------------------------------------
Net (215.1) (146.2) (79.9) 11.0
-----------------------------------------------------
EURO
Assets 293.6 215.0 -- 78.6
Liabilities (381.0) (323.3) -- (57.7)
-----------------------------------------------------
Net (87.4) (108.3) -- 20.9
-----------------------------------------------------
OTHER
Assets 166.4 39.8 -- 126.6
Liabilities (317.9) (216.6) (3.5) (97.8) 6.00 1.5
-----------------------------------------------------
Net (151.5) (176.8) (3.5) 28.8
-----------------------------------------------------
TOTAL
Assets 2,943.4 1,755.7 -- 1,187.7
Liabilities (4,072.8) (2,366.7) (818.7) (887.4) 6.92 4.4
-----------------------------------------------------
Net (1,129.4) (611.0) (818.7) 300.3
Less financial (assets)
liabilities on which no
interest is paid (300.3)
-----------------------------------------------------
Net debt (1,429.7) (611.0) (818.7)
100% 43% 57%
=====================================================
The amounts shown in the table above are shown after taking account of currency
and interest rate swaps undertaken to manage the interest rate exposure of the
group. They also include the principal amount of any forward exchange contracts
and options undertaken to manage the translation exposure of the net assets of
overseas subsidiaries. They additionally contain debtors, creditors (excepting
those for taxation) and the asset and liability in respect of Koppers, none of
which are interest bearing.
Fixed rate US dollar liabilities represent US dollar interest rate swaps with a
net notional principal of $65.0, the $750.0 bond repayable on September 15, 2005
and $250.0 of the $750.0 bond due September 27, 2010, $50.0 of which may be
converted to floating rates in 2005 on the basis of current market conditions.
The fixed rate liabilities in Australian dollars, represent the net notional
principal of interest rate swaps.
During the year the average period for which rates are fixed increased by 0.3
years. This was achieved primarily by the group entering into $250 of interest
rate swaps which start in 2005 and end in 2008/9. These interest rate swaps are
included in the weighted average period, but excluded from the weighted average
rate, in the table above.
Floating rate financial assets comprise cash deposits, the receivable element of
forward exchange contracts and commercial paper. The majority of floating rate
financial assets and liabilities bear interest based on the equivalents of
LIBOR.
F-37
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
With the exception of the Koppers liability (note 16), financial liabilities on
which no interest is paid mature within one year.
The interest rate and currency profile of the financial assets and liabilities
of the group as at December 31, 2000 was:
FIXED RATE FINANCIAL
ASSETS AND LIABILITIES
----------------------------
FINANCIAL WEIGHTED
FLOATING RATE FIXED RATE ASSETS, AVERAGE
FINANCIAL FINANCIAL (LIABILITIES) WEIGHTED PERIOD
ASSETS, ASSETS, ON WHICH NO AVERAGE FOR WHICH
TOTAL (LIABILITIES) (LIABILITIES) INTEREST IS PAID INTEREST RATE RATE IS FIXED
(%) (YEARS)
----------------------------------------------------------------------------------------
STERLING
Assets 732.1 447.6 107.1 177.4 6.95 1.7
Liabilities (766.3) (481.1) -- (285.2)
---------------------------------------------------------------
Net (34.2) (33.5) 107.1 (107.8)
---------------------------------------------------------------
US DOLLAR
Assets 1,651.9 1,093.4 -- 558.5
Liabilities (2,763.4) (1,499.1) (876.6) (387.7) 6.86 4.0
---------------------------------------------------------------
Net (1,111.5) (405.7) (876.6) 170.8
---------------------------------------------------------------
AUSTRALIAN DOLLAR
Assets 67.6 10.8 -- 56.8
Liabilities (295.2) (176.1) (84.4) (34.7) 6.72 5.1
---------------------------------------------------------------
Net (227.6) (165.3) (84.4) 22.1
---------------------------------------------------------------
EURO
Assets 221.4 140.2 -- 81.2
Liabilities (344.9) (280.9) -- (64.0)
---------------------------------------------------------------
Net (123.5) (140.7) -- 17.2
---------------------------------------------------------------
OTHER
Assets 125.4 20.6 -- 104.8
Liabilities (328.1) (236.9) (3.8) (87.4) 6.00 2.5
---------------------------------------------------------------
Net (202.7) (216.3) (3.8) 17.4
---------------------------------------------------------------
TOTAL
Assets 2,798.4 1,712.6 107.1 978.7 6.95 1.7
Liabilities (4,497.9) (2,674.1) (964.8) (859.0) 6.85 4.1
---------------------------------------------------------------
Net (1,699.5) (961.5) (857.7) 119.7
Less financial (assets) liabilities
on which no interest is paid (119.7)
---------------------------------------------------------------
Net debt (1,819.2) (961.5) (857.7)
100% 53% 47%
===============================================================
DECEMBER 31
------------------------
2001 2000
------------------------
MATURITY OF FINANCIAL LIABILITIES
In one year or less, or on demand 2,267.7 2,589.8
In more than one year but not more than two years 523.8 127.6
In more than two years but not more than five years 559.1 1,112.1
In more than five years 722.2 668.4
------------------------
4,072.8 4,497.9
========================
CURRENCY EXPOSURES
As explained in Item 11 - Quantitative and Qualitative Disclosures about Market
Risk, the group manages its currency exposures arising from its net investment
overseas. The group has no significant transactional currency exposures in its
day to day business.
F-38
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
HEDGES
As explained in Item 11 - Quantitative and Qualitative Disclosures about Market
Risk, the group's policy is to hedge the following exposures:
o interest rate risk - using currency swaps, interest rate swaps and interest
rate options
o foreign exchange risk - using forward foreign currency contracts, foreign
exchange options and currency swaps.
The effects of any interest rate hedges are recognised over the life of the
hedge. Foreign exchange hedges are evaluated against the closing exchange rate
at the balance sheet date and the resultant gain or loss is matched with that of
the underlying asset or liability in the accounts. As a result, the unrecognised
gain or loss is a function of market rates at the balance sheet date and is not
indicative of gains or losses which will be recognised in future accounting
periods.
DECEMBER 31
---------------------------------------------------
2001 2000
------------------------ ------------------------
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
------------------------ ------------------------
Primary financial instruments held or issued to finance
the group's operation:
Short-term borrowings and current position of long-term
borrowings (977.6) (977.6) (1,514.2) (1,514.2)
Long-term borrowings (1,576.7) (1,639.4) (1,623.0) (1,636.5)
Other financial liabilities (874.1) (874.1) (849.6) (849.6)
Cash deposits 778.4 778.4 917.2 917.2
Other financial assets 1,548.0 1,548.0 1,389.2 1,389.2
------------------------ ------------------------
Derivative financial instruments held to manage the interest
rate and currency profile of financial assets and
liabilities:
Interest rate swaps and options 8.0 46.5 (4.8) 27.8
Currency swaps (24.3) (8.2) (14.3) (15.4)
------------------------ ------------------------
Derivative financial instruments held to manage the currency
profile of the net asset investment in overseas subsidiaries:
Forward exchange contracts and options (11.1) (11.1) -- --
------------------------ ------------------------
(1,129.4) (1,137.5) (1,699.5) (1,681.5)
======================== ========================
For those financial assets and liabilities which bear either a floating rate of
interest or no interest, fair value is estimated to be equivalent to book value.
For long-term, traded fixed rate financial liabilities, fair value is assessed
by reference to the latest market price. For currency swaps and interest rate
swaps, fair value is estimated as the net present value of the future cash flows
as implied by current yield curves. Interest rate options are valued at market
price. Foreign exchange contracts, being generally short-term in nature, are
valued against the spot exchange rate ruling at the balance sheet date.
F-39
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
15. PROVISIONS FOR LIABILITIES AND CHARGES
ENVIRONMENTAL HEALTH CARE DEFERRED
OBLIGATIONS AND AND
AND OBLIGATIONS OTHER RECLMATION LEGAL AND
RELATED COSTS TO EMPLOYEES TAXATION OBLIGATIONS INSURANCE OTHER TOTAL
------------------------------------------------------------------------------------
At January 1, 2000 89.4 30.7 159.4 131.1 51.9 61.0 523.5
Prior year adjustment -- -- (21.5) -- -- -- (21.5)
------------------------------------------------------------------------------------
At January 1, 2000 (as restated) 89.4 30.7 137.9 131.1 51.9 61.0 502.0
Increase in provisions due to
unwinding of discount 1.3 1.0 -- 4.5 -- -- 6.8
Provided in year (restated) -- 5.5 16.7 6.6 4.2 (1.5) 31.5
Acquisitions (disposals) (restated) -- 5.5 0.5 3.9 -- 5.0 14.9
Reallocation and transfer
(from) to current liabilities 19.4 142.8 (2.8) 37.2 (24.1) 5.0 177.5
Utilised and other (15.7) (15.3) (7.8) (15.6) (2.7) (5.6) (62.7)
Exchange movements 7.1 2.1 5.3 6.6 1.4 1.7 24.2
------------------------------------------------------------------------------------
At January 1, 2001 (restated) 101.5 172.3 149.8 174.3 30.7 65.6 694.2
Increase in provisions due to
unwinding of discount 0.9 -- -- 5.1 -- -- 6.0
Provided in year -- 7.7 12.3 6.7 6.4 13.0 46.1
Released in year -- (1.1) -- (3.1) (6.3) -- (10.5)
Acquisitions (disposals) -- -- 2.1 (28.0) -- (0.6) (26.5)
Reallocation and transfer
(from) to current liabilities -- (6.5) (14.0) 21.7 (1.9) 0.7 --
Utilised and other (8.5) (16.5) 0.2 (13.9) (7.8) (13.2) (59.7)
Exchange movements 3.2 4.4 2.4 1.8 0.5 0.5 12.8
------------------------------------------------------------------------------------
At December 31, 2001 97.1 160.3 152.8 164.6 21.6 66.0 662.4
====================================================================================
Long term provisions except deferred tax have been discounted at a rate of 2.5%
on current prices except where more appropriate discounting rates have been used
having regard to information provided by actuaries or other independent
advisers.
Health care and obligations to employees relates to post retirement health and
benefit costs of current and retired employees and are described in note 21.
Environmental provisions have been established to cover those situations where
the group has either a legal or constructive obligation to remedy known
exposures. Reclamation, legal and insurance and other provisions relate to
acquisitions, disposals and rationalisations both established on acquisitions
and provided for in current and prior years. Reclamation provisions are expected
to be utilised over the life of the relevant quarry. Legal and insurance,
environmental and other provisions are expected to be utilised on a reducing
basis over the next five years, depending in each case on the nature of the
underlying obligation.
Where appropriate, environmental and reclamation provisions have been
established after taking into account the advice of suitably qualified and
experienced consultants and after estimating the costs in line with current
practice and standards.
The liabilities for deferred and other taxation provided were as follows:
DECEMBER 31
---------------------
2001 2000
RESTATED
---------------------
Excess of capital allowances over depreciation 117.6 119.1
Short-term timing differences (33.3) (43.0)
Other timing differences 68.5 73.7
---------------------
Provision for deferred tax 152.8 149.8
=====================
Accounting policies - Deferred taxation (F-12) outlines those categories for
which no deferred tax is provided.
F-40
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
16. KOPPERS' LIABILITIES
Koppers environmental obligations and related costs relate to the former US
chemical operations disposed of by Beazer PLC prior to its acquisition by Hanson
in 1991. Beazer and certain of its subsidiaries remain contractually and
statutorily liable for certain environmental costs relating to these
discontinued operations. During 1998 an agreement was signed under which the
funding and risk of the environmental liabilities were underwritten by
subsidiaries of two re-insurance companies, Centre Solutions and Swiss Re. A
one-off premium and related transaction costs totalling $275.0 was paid
providing insurance cover of $800.0 in perpetuity after payment by the group of
the first $100.0 of remediation costs arising since January 1, 1998. The
discounted liability is now recognised in provisions and a corresponding asset
representing the amounts receivable is shown in prepayments. These costs are
payable, on a reducing basis, over periods of up to 30 years.
The Koppers' amount due from insurers, as shown in prepayments, and liabilities
transferred to insurers, as shown in provision for liabilities and charges, are
as follows:
At January 1, 2000 175.0
Exchange movements 8.8
Increase in prepayment/liability due to unwinding of discount 13.5
Decrease in prepayment/liability due to settlements (30.4)
------------
At January 1, 2001 166.9
Increase in prepayment/liability due to unwinding of discount 13.2
Increase in prepayment/liability due to reappraisal of liabilities 61.2
Decrease in prepayment/liability due to settlements (40.6)
Exchange movements 5.1
------------
At December 31, 2001 205.8
============
The matched increase in the asset/liability during 2001 recognises the
possibility of increased claims in future years. The insurance agreement
provides cover significantly in excess of projected liabilities.
17. SHARE CAPITAL
DECEMBER 31
--------------------------
2001 2000
--------------------------
AUTHORISED
925,000,000 ordinary shares of(pound)2 1,850.0 1,850.0
--------------------------
ALLOTTED, CALLED UP AND FULLY PAID
735,876,751 ordinary shares of(pound)2 1,471.8 1,470.3
--------------------------
DECEMBER 31, 2001
On January 1, 2001 there were 735,162,855 ordinary shares of (pound)2 each in
issue.
During the year to December 31, 2001 (pound)1.5 nominal of ordinary share
capital was allotted in respect of the following:
i) 30,766 ordinary shares under the company's executive share option schemes
for an aggregate consideration of (pound)0.1.
ii) 683,130 ordinary shares under the company's sharesave schemes for an
aggregate consideration of(pound)1.8.
At December 31, 2001 9,731,533 ordinary shares were reserved to satisfy rights
in respect of various employee share option schemes and other option
arrangements. The nominal value of reserved shares totalled (pound)19.5
((pound)22.3) at the balance sheet date as set out below:
i) options were exercisable over 2,997,952 ordinary shares under the closed
executive share option schemes at dates up to 2005 with subscription
prices ranging from 356.4p to 482.6p per share with an average of 415.6p;
ii) conditional options were granted during the year and remain outstanding
over 836,418 ordinary shares under the share option plan, all at a
subscription price of 473.3p per share;
iii) options were exercisable over 5,162,106 ordinary shares under the
sharesave scheme at dates up to 2009 with subscription prices ranging
from 224p to 428p per share with an average of 308.7p;
F-41
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
iv) options were exercisable over 420,670 ordinary shares under the Quantum
(a former subsidiary undertaking) stock option and long-term performance
plans at dates up to 2003 with an average subscription price of $4.34;
and
v) an option granted to Stern Stewart & Co over 314,387 ordinary shares at a
subscription price of 790p exercisable at any time from July 1, 2002 to
July 1, 2004 at which time the option, if unexercised, will lapse.
DECEMBER 31, 2000
On January 1, 2000 there were 651,978,399 ordinary shares of (pound)2 each in
issue.
During the year to December 31, 2000 (pound)166.3 nominal of ordinary share
capital was allotted in respect of the following:
i) 82,428,103 ordinary shares in respect of the offer for Pioneer for an
aggregate consideration of (pound)381.1.
ii) 20,215 ordinary shares under the company's executive share option schemes
for an aggregate consideration of (pound)0.1.
736,138 ordinary shares under the company's sharesave schemes for an aggregate
consideration of (pound)1.7.
At December 31, 2000 11,128,168 ordinary shares were reserved to satisfy rights
in respect of various employee share option schemes and other option
arrangements. The nominal value of reserved shares totalled (pound)22.3
((pound)23.2) at the balance sheet date as follows:
i) options were exercisable over 4,071,313 ordinary shares under the closed
executive share option schemes at dates up to 2005 with adjusted
subscription prices ranging from 325.6p to 482.6p per share with an
average of 409.6p;
ii) options were exercisable over 5,433,948 ordinary shares under the
sharesave schemes at dates up to 2006 with subscription prices ranging
from 224p to 425p per share with an average of 283.4p;
iii) options were exercisable over 1,308,520 ordinary shares under the Quantum
(a former subsidiary undertaking) stock option and long-term performance
plans at dates up to 2003 with an average subscription price of $4.35;
and
iv) an option granted to Stern Stewart & Co over 314,387 ordinary shares at a
subscription price of 790p exercisable at any time from July 1, 2002 to
July 1, 2004 at which time the option, if unexercised, will lapse.
DECEMBER 31, 1999
On January 1, 1999 there were 651,727,338 ordinary shares of (pound)2 each in
issue.
During the year to December 31, 1999 (pound)0.6 nominal of ordinary share
capital was allotted in respect of the following:
i) 128,854 ordinary shares under the company's executive share option
schemes for an aggregate consideration of (pound)0.5; and
ii) 122,207 ordinary shares under the company's sharesave schemes for an
aggregate consideration of(pound)0.4.
At December 31, 1999 11,624,540 ordinary shares were reserved to satisfy rights
in respect of various employee share option schemes and other option
arrangements. The nominal value of reserved shares totalled (pound)23.3
((pound)41.2) at the balance sheet date as follows:
i) options were exercisable over 4,777,963 ordinary shares under the closed
executive share option schemes at dates up to 2005 with adjusted
subscription prices ranging from 325.6p to 482.6p per share with an
average of 405.6p;
ii) options were exercisable over 5,139,675 ordinary shares under the
sharesave schemes at dates up to 2006 with subscription prices ranging
from 224p to 425p per share with an average of 266.1p;
iii) options were exercisable over 1,392,515 ordinary shares under the Quantum
(a former subsidiary undertaking) stock option and long-term performance
plans at dates up to 2003 with an average subscription price of $4.36;
and
iv) an option granted to Stern Stewart & Co over 314,387 ordinary shares at a
subscription price of 790p exercisable at any time from July 1, 2002 to
July 1, 2004 at which time the option, if unexercised, will lapse.
F-42
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
18. ACQUISITIONS & Disposals
During the past three fiscal years Hanson made a number of acquisitions, all of
which were accounted for as purchases, and a number of disposals. They are
included in the accompanying financial statements from their respective dates of
acquisition or disposal.
ACQUISITIONS DURING 2001
Hanson Building Materials America acquired, in Canada, Centennial Pipe and
Products Inc for (pound)41.1 on December 24, 2001.
Hanson Quarry Products Europe acquired, in the UK, the John Mould aggregates
recycling business for (pound)6.7 on April 6, 2001 and the quarrying assets in
Spain of Murcia for (pound)5.2 on September 30, 2001.
Hanson Bricks Europe acquired in the UK, a 51% shareholding in Thermaliner
Insulation Systems Ltd (TIS), for (pound)3.4 on February 15, 2001.
In April 2001 Hanson Pacific acquired, in Malaysia, the remaining 50% of the
aggregates joint venture Sungei Way, for (pound)36.7.
The total consideration for all acquisitions was (pound)93.1. The operating
assets and liabilities of these acquisitions are as follows:
ALIGNMENT OF
TOTAL FAIR VALUE ACCOUNTING TOTAL
BOOK VALUE ADJUSTMENTS POLICY FAIR VALUE
-------------------------------------------------------
Fixed assets - tangible 39.0 0.7 -- 39.7
- intangible 0.5 (0.5) -- --
- goodwill 9.8 (9.8) -- --
Stock 7.3 (0.2) -- 7.1
Debtors 36.0 (1.7) -- 34.3
Cash 7.1 -- -- 7.1
Creditors and overdrafts (17.9) (0.2) -- (18.1)
Provision for liabilities (2.2) -- -- (2.2)
-------------------------------------------------------
79.6 (11.7) -- 67.9
----------------------------------------------
Total consideration 93.1
----------
Goodwill 25.2
Transfer from joint venture 21.7
----------
Goodwill on 2001 acquisitions 46.9
==========
For the period since acquisition, turnover of (pound)23.1 and operating profit
of (pound)0.4 in respect of these acquisitions is included within the profit and
loss account as continuing operations, acquisitions.
Fair value adjustments were made to the book value of the assets and liabilities
of the above acquisitions to adjust, where applicable, the carrying values of
certain assets and liabilities. There were no material adjustments to bring book
values into alignment with Hanson accounting policies.
The above figures reflect a preliminary allocation of the purchase consideration
to the net assets and liabilities of acquisitions made during the year. The
preliminary allocation will be reviewed based on additional information up to
December 31, 2002. The directors do not believe that any net adjustments
resulting from such review would have a material adverse effect on Hanson. For
the year prior to the acquisition, the acquired companies reported a post-tax
profit of (pound)3.9.
F-43
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
The preliminary values ascribed to Davon Inc and Joelson Taylor Concrete
Products acquired during 2000, have been adjusted by (pound)16.2. A more
detailed assessment of these companies' fixed assets has resulted in the fair
values of the mineral reserves in Davon Inc being revised downward by (pound)6.9
and restatement of the plant and equipment held in Joelson Taylor by
(pound)10.1. The operating assets and liabilities are summarised as follows:
ALIGNMENT OF
TOTAL FAIR VALUE ACCOUNTING REVISED
BOOK VALUE ADJUSTMENTS POLICY FAIR VALUE
-------------------------------------------------------
NON-PIONEER ACQUISITIONS DURING 2000
Fixed assets - tangible 147.2 (17.0) -- 130.2
Stock 15.0 -- -- 15.0
Debtors 27.4 0.8 -- 28.2
Cash 1.4 -- -- 1.4
Creditors and overdrafts (11.3) -- -- (11.3)
Loans and finance leases (1.9) -- -- (1.9)
Provision for liabilities (11.1) -- -- (11.1)
-------------------------------------------------------
166.7 (16.2) -- 150.5
---------------------------------------------
Cash consideration 259.1
-----------
Goodwill 108.6
Goodwill reported in 2000 92.4
-----------
Increase in goodwill on 2000 acquisitions 16.2
===========
DISPOSALS DURING 2001
On January 31, 2001 the waste management division of Hanson Quarry Products
Europe was sold for (pound)185.0. Waste Management contributed (pound)0.6 in the
year ended December 31, 2001.
On May 18, 2001 Hanson Building Materials America disposed of quarrying
operations in Utah for (pound)17.3. On September 14, 2001 it sold its quarrying
operations in Las Vegas for (pound)13.6.
The group's investment in Pioneer Roof Tiles was sold on November 10, 2001 for
(pound)6.4.
NET BOOK DISPOSAL
VALUE GOODWILL COSTS PROCEEDS PROFIT (LOSS)
------------------------------------------------------------
DISPOSALS
Waste Management 32.1 25.3 2.4 185.0 125.2
Utah 22.5 -- -- 17.3 (5.2)
Las Vegas 27.2 -- -- 13.6 (13.6)
Other 12.3 -- 0.2 10.7 (1.8)
------------------------------------------------------------
94.1 25.3 2.6 226.6 104.6
============================================================
ACQUISITIONS DURING 2000
PIONEER
On November 29, 1999 Hanson announced that it had agreed the terms of a
recommended offer for Pioneer International Limited ("Pioneer"). The offer was
on the basis of A$35.75 in cash plus one Hanson ordinary share for every 10
Pioneer shares held. The total acquisition cost was (pound)1,542.8 on the basis
of the mid-market price per Hanson ordinary share at the opening of business on
April 26, 2000 the date that the offer was announced unconditional. In
accounting for the issue of shares made in connection with the acquisition of
Pioneer, Hanson had applied section 131 of the Companies Act whereby the premium
arising on the shares was credited not to Share premium account, but to Other
reserves.
For the period following acquisition, turnover of (pound)1,117.2 (including
joint ventures and associates of (pound)210.8) and operating profit of
(pound)47.7 (after exceptional integration costs of (pound)21.7) in respect of
Pioneer are included within the 2000 consolidated profit and loss account as
continuing operations.
F-44
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
THE OPERATING ASSETS AND LIABILITIES OF PIONEER ACQUIRED DURING THE YEAR WERE AS
FOLLOWS:
ALIGNMENT OF
TOTAL FAIR VALUE ACCOUNTING TOTAL
BOOK VALUE ADJUSTMENTS POLICY FAIR VALUE
-------------------------------------------------------
Fixed assets
tangible 627.5 50.4 -- 677.9
investments 228.2 15.0 -- 243.2
goodwill 66.7 (66.7) -- --
Other assets 12.0 -- (12.0) --
Inventory 52.4 -- -- 52.4
Debtors 323.5 -- (4.3) 319.2
Cash and liquid resources 102.2 -- -- 102.2
Creditors and overdrafts (325.4) (6.6) -- (332.0)
Loans and finance leases (235.1) -- -- (235.1)
Provision for liabilities (20.3) -- 5.4 (14.9)
-------------------------------------------------------
831.7 (7.9) (10.9) 812.9
---------------------------------------------
Total consideration 1,542.8
-----------
Goodwill 729.9
-----------
Consideration for Pioneer was discharged as follows:
Cash consideration to Pioneer shareholders 1,121.7
Shares issued to Pioneer shareholders 381.1
Costs 40.0
-----------
1,542.8
===========
Fair value adjustments were made to the book value of the assets and liabilities
to adjust where applicable the carrying values of certain assets and
liabilities.
OTHER ACQUISITIONS
Hanson Building Materials America acquired, in the US, Joelson Taylor Concrete
Products, Cincinnati Concrete Pipes and Milan Concrete Products for a combined
price of (pound)91.2 on May 11, 2000, Tufco Ready Mix and Aggregate Rock
Quarries for (pound)12.3 on October 10, 2000, Pacific International Pipe
Enterprises, Inc for (pound)19.3 on December 19, 2000, Davon Inc for (pound)65.9
on December 22, 2000, and other minor acquisitions in the USA amounted to
(pound)7.9.
Hanson Quarry Products Europe acquired, in the UK, Birchwood Concrete Products
Ltd & Birchwood Omnia (Birchwood) Ltd for (pound)8.5 on July 7, 2000, six
limestone quarries, six sand and gravel quarries, one asphalt plant and one
ready-mix concrete plant from the Tarmac group for (pound)33.5 on September 12,
2000, and the quarrying assets in Germany of ROBA Baustoff GmbH for (pound)4.8
on September 7, 2000.
Hanson Bricks Europe acquired the Polish brick operations of the Boral group for
(pound)13.6 on February 14, 2000. Hanson Pacific acquired minor operations in
south-east Asia during the year totalling (pound)2.1.
The total cash consideration for acquisitions other than Pioneer was
(pound)259.1. The operating assets and liabilities of these acquisitions were as
follows:
TOTAL FAIR VALUE TOTAL
BOOK VALUE ADJUSTMENTS FAIR VALUE
-----------------------------------------
Fixed assets - tangible 106.3 40.9 147.2
Inventory 15.0 -- 15.0
Debtors 27.4 --
27.4
Cash 1.4 -- 1.4
Creditors and overdrafts (11.3) -- (11.3)
Loans and finance leases (1.9) -- (1.9)
Provision for liabilities (7.9) (3.2) (11.1)
-----------------------------------------
129.0 37.7 166.7
-------------------------------
Cash consideration 259.1
----------
Goodwill 92.4
==========
F-45
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
For the period following acquisition, turnover of (pound)52.9 (including joint
ventures and associates of (pound)0.7) and operating profit of (pound)6.1 in
respect of these acquisitions are included within the profit and loss account as
continuing operations.
Fair value adjustments were made to the book value of the assets and liabilities
of the above acquisitions to adjust where applicable the carrying values of
certain assets and liabilities. There were no material adjustments to bring book
values into alignment with Hanson accounting policies.
The figures in the tables on F-44 reflect a preliminary allocation of the
purchase consideration to the net assets and liabilities of acquisitions made
during the year. The preliminary allocation was reviewed based on additional
information up to December 31, 2001 and the net adjustments resulting from the
review are disclosed in the tables. For the year prior to the acquisition, the
acquired companies reported a post-tax profit of (pound)111.5.
In respect of acquisitions in 1999 there were no material subsequent amendments
to the preliminary allocations made.
PRINCIPAL DISPOSALS DURING 2000
In June 2000 the operations of Acme Materials and Construction a US aggregate
company were sold for (pound)24.1. Acme contributed operating profit of
(pound)2.7 in the year ended December 31, 1999.
On October 2, 2000 the gas meter operations of UGI Group were sold for
(pound)6.1. UGI contributed operating profit of (pound)3.0 in the year ended
December 31, 1999.
During the year, the group's investment in Goldfields Ltd was sold for
(pound)23.4.
NET
DISPOSALS BOOK VALUE GOODWILL PROCEEDS PROFIT (LOSS)
----------------------------------------------------
UGI 3.9 2.8 6.1 (0.6)
Acme 22.3 -- 24.1 1.8
Goldfields Ltd 19.0 -- 23.4 4.4
----------------------------------------------------
45.2 2.8 53.6 5.6
====================================================
ACQUISITIONS DURING 1999
Hanson Building Materials America acquired Jannock Brick group operating in
Canada and the US for (pound)177.1 on May 17, 1999, Greenwood quarry for
(pound)2.3 on May 21,1999, Tidewater Sand and Gravel Inc for (pound)27.2 on July
7, 1999, Opelika quarry for (pound)4.9 on June 30, 1999, Locpipe Incorporated
for (pound)6.8 on August 3, 1999, United Spancrete Products Corporation for
(pound)7.6 on September 2, 1999, and Gainesville Limestone Products, Georgia and
Conners Crushed Stone, Texas for (pound)6.5 on September 23, 1999, B.R. DeWitt
Inc and Superior Products Company for (pound)44.0 on November 15, 1999, Olin
Jones Sand Co., Jones Sand Co. and Brewer Sand Co., for (pound)34.1 on December
9, 1999 and other minor acquisitions in the US amounting to (pound)2.5.
Hanson Quarry Products Europe acquired in the UK FC Precast Concrete Ltd for
(pound)3.4 on March 30, 1999, Coln Gravel Ltd for (pound)1.4 on April 8, 1999,
Albion Concrete for (pound)1.2 on July 26, 1999, Brindister quarry for
(pound)0.4 on July 1, 1999, Gamble waste for (pound)1.6 on September 27, 1999,
Ashbridge concrete and Garrick quarry for (pound)2.0 on December 1, 1999 and
RENA in Germany for (pound)6.7 on October 31, 1999.
Hanson Bricks Europe acquired the Dutch and German European brick operations of
the Boral group for (pound)44.7 on October 8, 1999. Hanson acquired in Malaysia
the Tanah Raya Group for (pound)16.8 on January 5, 1999, and Guthrie quarry for
(pound)5.7 on December 6, 1999, and in Singapore, Highway International Pte Ltd
for (pound)9.9 and Rite-Mix Pte Ltd for (pound)6.1 on November 4, 1999, Concrete
Innovators Co Ltd for (pound)2.7 on December 3, 1999. Other South East Asian
acquisitions amounted to (pound)1.7.
The acquisition costs included acquired debt. For the period following
acquisition, turnover of (pound)141.9 and operating profit of (pound)22.7 in
respect of these acquisitions are included within the 1999 consolidated profit
and loss account as continuing operations.
F-46
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
The total cash consideration for all acquisitions was (pound)417.3. The
operating assets and liabilities of acquisitions during the year were as
follows:
TOTAL FAIR VALUE TOTAL
BOOK VALUE ADJUSTMENTS FAIR VALUE
------------------------------------------
Fixed assets 138.3 20.5 158.8
Stocks 37.3 (1.0) 36.3
Debtors 64.6 (0.3)
64.3
Cash 9.7 - 9.7
Creditors and overdrafts (55.2) (3.2) (58.4)
Loans and finance leases (4.2) (0.2) (4.4)
Provision for liabilities (6.2) (13.0) (19.2)
------------------------------------------
184.3 2.8 187.1
-------------------------------
Cash consideration (417.3)
-----------
Goodwill 230.2
===========
Fair value adjustments were made to the book value of the assets and liabilities
of the above acquisitions to adjust where applicable the carrying values of
certain assets and liabilities. There were no material adjustments to bring book
values into alignment with Hanson accounting policies.
The above figures reflected a preliminary allocation of the purchase
consideration to the net assets and liabilities of acquisitions made during the
year. The preliminary allocation was reviewed based on additional information up
to December 31, 2000 and the net adjustments resulting from the review had no
material adverse effect on Hanson. For the year prior to the acquisition, the
acquired companies reported a post-tax profit of (pound)33.0.
PRINCIPAL DISPOSALS DURING 1999
On March 3, 1999 the 24% fixed asset investment in Westralian Sands Ltd
(formerly RGC Ltd) was sold for A$224.3 ((pound)87.0). Other investments were
sold for total proceeds of (pound)8.6.
NET BOOK VALUE PROCEEDS PROFIT
--------------------------------------------
Westralian 82.1 87.0 4.9
Other 7.7 8.6 0.9
--------------------------------------------
89.8 95.6 5.8
============================================
19. CONTINGENT LIABILITIES
At December 31, 2001, in addition to those issued by banks identified under note
14, Hanson had provided third parties with guarantees and performance bonds
amounting to (pound)176.3 (2000: (pound)157.6). These relate to the trading
activities of current subsidiaries ((pound)162.8) and former subsidiaries
((pound)13.5).
Hanson is the subject of a number of pending legal proceedings and claims
incidental to present and former operations, acquisitions and disposals. The
directors do not anticipate that the outcome of these proceedings and claims,
either individually or in aggregate, will have a material adverse effect upon
Hanson's financial position.
F-47
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
20. LEASES AND OTHER COMMITMENTS
Rental expense for operating leases was as follows:
YEAR ENDED DECEMBER 31
------------------------------------
2001 2000 1999
------------------------------------
Minimal rentals 17.9 42.0 11.3
====================================
The future minimum rental commitments as of December 31, 2001 for finance
(capital) leases and non-cancellable operating leases together with the present
value of minimum lease payments under finance leases are as follows:
OPERATING FINANCE
LEASES LEASES
--------------------------
2002 27.9 2.7
2003 19.4 2.7
2004 16.2 1.8
2005 13.2 --
2006 12.3 --
Thereafter 72.6 --
--------------------------
Total minimum lease payments 161.6 7.2
--------------
Less amount representing interest (0.9)
------------
Present value of minimum lease payments 6.3
============
The annual commitment under non-cancellable operating leases was:
LAND AND BUILDINGS PLANT AND EQUIPMENT
DECEMBER 31
2001 2000 2001 2000
-----------------------------------------
Leases expiring:
Within one year 2.0 1.2 2.4 6.4
Within two to five years 7.0 3.9 5.5 6.7
After five years 10.7 9.5 0.3 0.3
-----------------------------------------
19.7 14.6 8.2 13.4
==========================================
21. PENSIONS AND OTHER POST-RETIREMENT BENEFITS
Hanson has several defined benefit pension plans, the principal ones being in
the US and the UK which cover a majority of employees. The benefits of these
plans are based primarily on years of credited service and final average
pensionable pay as defined under the respective plan provisions.
Employee contributions, which are at rates set according to the rules, vary
between nil and 6% of pensionable pay. In relation to US funds, the company
funding policy is to contribute amounts sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional amounts as the company may determine to be appropriate from
time to time. In relation to UK funds, the company's funding policy is to ensure
that assets are always sufficient to cover accrued service liabilities with
projection of future pay increases. In relation to overseas, other than US
plans, the company's policy is to determine contributions in accordance with
best local practice.
Hanson also sponsors defined contribution plans and participates in several
multi-employer plans, which provide defined benefits to the company's union
employees. Contributions relating to defined contribution plans are made based
upon the respective plan's provisions and contributions relating to
multi-employer plans are based on negotiated collective bargaining agreements.
The total cost of all pensions to the group in the year ended December 31, 2001
was(pound)10.8 (2000:(pound)8.6, 1999: (pound)4.6) of which(pound)4.4
(2000:(pound)0.8, 1999:(pound)0.4) relates to plans outside the UK. Defined
contributions amounted to (pound)5.3 (2000:(pound)7.4, 1999:(pound)1.8).
The pension cost relating to UK funds is assessed in accordance with the advice
of independent qualified actuaries using, in general, the projected unit method.
The latest actuarial assessments of the principal funds have all been within the
last three years. Past service surpluses and deficits are amortised as a level
percentage of pensionable pay over the average future working lifetimes of the
members.
F-48
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
A complete valuation of each US fund is undertaken by independent qualified
actuaries every year. Pension costs for such plans are charged based upon
actuarial calculations determined in accordance with required accounting
standards. Costs relating to defined contribution plans are recognised based
upon the respective plans' provisions.
The assumptions used by the actuaries for the most recent valuations are set out
below:
UNITED UNITED
KINGDOM STATES
(% PA) (% PA)
------------------------
Rate of general increase in salaries 4.1 4.25
Rate of increase to pensions in payment 2.5 --
Discount rate applied to scheme liabilities 5.3 7.25
Expected return on assets N/A 9.0
At the dates of the latest actuarial valuations of the defined benefit schemes
which were within the group at December 31, 2001, the market values of the
assets of the schemes amounted to approximately (pound)1,700.0. The assessed
value of these assets represented approximately 110% of the liabilities for
benefits that had accrued to members, allowing for expected future increases in
salaries.
Hanson also provides post-retirement health care and life insurance benefits,
mainly in the US, under plans to certain groups of its retired and active
employees. Hanson conforms with the provisions of the Urgent Issues Task Force
Abstract 6 "Accounting for Post-Retirement Benefits other than Pensions", which
requires accrual of these costs over the period during which employees become
eligible for such benefits.
At December 31, 2001 the accumulated post-retirement medical benefit obligation,
as assessed by independent qualified actuaries, for retirees and currently
active employees is approximately (pound)86.0 (2000: (pound)90.2). In addition,
at December 31, 2001 the group had related post retirement obligations in
respect of deferred actuarial variations, calculated in accordance with the
requirements of SSAP 24, of (pound)37.5 (2000: (pound)34.3), and other unfunded
post retirement obligations of (pound)31.8 (2000: (pound)39.1). The 2001 expense
has been accrued based upon actuarial calculations determined in accordance with
required accounting standards. This resulted in the recognition of service costs
for benefits earned during the 12 month period of approximately (pound)1.1
(2000: (pound)1.1, 1999: (pound)1.0). The actuarial assumptions used to estimate
the obligations vary according to the claims experience and economic conditions
relevant to each plan. It has been assumed that the annual per capita cost of
benefits will increase by 7.5% depending on claims experience and economic
conditions relevant to each plan. This rate is assumed to decrease by 0.75% a
year to 5.0%. The weighted average discount rates used in determining the
accumulated post-retirement benefit obligation were 7.25% at December 31, 2001
and December 31, 2000, and 7.75% at December 31, 1999.
The additional disclosures required by FRS 17 "Retirement Benefits" are set out
below:
The date of most recent actuarial valuation of the principal UK plan is January
1, 2001. The date of the most recent valuations of the US plans is January 1,
2001. Qualified independent actuaries have updated these valuations to December
31, 2001.
The major assumptions used to determine the liabilities on a FRS 17 basis for
the significant defined benefit plans as at December 31, 2001 are set out below:
UNITED UNITED
KINGDOM STATES
(% PA) (% PA)
------------------------------------------------------------------------------
Rate of general increase in salaries 4.50 4.25
Rate of increase to pensions in payment 2.50 --
Discount rate applied to scheme liabilities 5.80 7.25
Inflation assumption 2.50 3.50
F-49
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
The expected rate of returns and market values of the assets of the principal
defined benefit plans at December 31, 2001, were as follows:
UNITED KINGDOM UNITED STATES
EXPECTED EXPECTED
LONG TERM MARKET LONG TERM MARKET
RATE OF RETURN VALUE RATE OF RETURN VALUE
---------------------------------------------------------
MARKET VALUE OF ASSETS % %
Equities 8.4 707.7 10.0 371.0
Bonds 5.2 244.2 7.0 211.4
Other 4.0 83.9 5.0 22.5
---------------------------------------------------------
Total 7.3 1,035.8 8.8 604.9
Present value of scheme liabilities (873.3) (558.0)
---------------------------------------------------------
Surplus in the plans 162.5 46.9
Surplus restriction -- --
---------------------------------------------------------
Pension asset before deferred tax 162.5 46.9
Deferred tax (48.7) (16.4)
---------------------------------------------------------
Net pension asset 113.8 30.5
=========================================================
In addition, the post retirement medical benefits in the US give rise to a FRS
17 liability before deferred tax of (pound)86.0 and after deferred tax of
(pound)55.9.
The effect of the FRS 17 pension asset and post retirement medical liability on
the net assets and reserves of Hanson is set out below:
DEC 31, 2001
-------------
NET ASSETS
Net assets as stated in balance sheet 2,720.8
Pension asset recognised under SSAP24 (note 12) (155.4)
Pension liability recognised under SSAP24 (note 15) 5.0
Other retirement benefits recognised under UITF6 (note 15) 155.3
Related deferred tax 2.2
-------------
Net assets excluding defined benefit asset/liabilities 2,727.9
FRS17 pension asset (net of deferred tax) 144.3
FRS17 pension liabilities (5.0)
FRS17 other retirement benefits (net of deferred tax) (76.6)
-------------
Net assets including defined benefit asset/liabilities 2,790.6
=============
RESERVES
Profit and loss reserve as stated in balance sheet (459.9)
Pension asset recognised under SSAP24 (note 12) (155.4)
Pension liability recognised under SSAP24 (note 15) 5.0
Other retirement benefits recognised under UITF6 (note 15) 155.3
Related deferred tax 2.2
-------------
Profit and loss reserve excluding amounts relating to defined benefit asset/liabilities (452.8)
FRS17 pension asset (net of deferred tax) 144.3
FRS17 pension liabilities (5.0)
FRS17 other retirement benefits (net of deferred tax) (76.6)
-------------
Profit and loss reserve including amounts relating to defined benefit asset/liabilities (390.1)
=============
Over 2001, Hanson contributed (pound)6.4 to the defined benefit plans. In
addition, contributions of (pound)5.3 were made to defined contribution plans
and (pound)6.8 to multi-employer plans. The multi-employer plans have been
treated as defined contribution plans for FRS17 purposes since it is not
possible for Hanson to identify its share of the assets of the plans.
The Chairman and the executive directors are members of defined benefit plans
(the "pension plans") which, in accordance with UK Inland Revenue limits,
provide them with a maximum pension of 2/3 of basic salary on retirement. The
pension plans are contributory to the extent of 5% of pensionable salary (which
does not include bonuses). The directors have a normal retirement age of 60,
with provision for early retirement pensions to be paid from age 55 in certain
circumstances.
F-50
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
The following tables give details of each director in office at December 31,
2001 of:
o the annual accrued pension payable from normal retirement age, calculated
as if he had left service at December 31, 2001;
o the increase in the accrued pension (excluding leaver revaluation)
attributable to service since December 31, 2000; and
o the transfer value of the increase in the accrued pension excluding
director's contribution towards pension. This has been calculated in
accordance with Guidance Note 11 issued by the Faculty and Institute of
Actuaries.
These amounts exclude any benefits attributable to additional voluntary
contributions.
Directors at December 31, 2001:
INCREASE IN
ACCRUED ACCRUED DIRECTOR'S TRANSFER VALUE
PENSION PENSION CONTRIBUTION OF INCREASE FURBS
AGE AT AT EARNED TOWARDS IN ACCRUED CONTRIBUTIONS
DEC 31, 2001 DEC 31, 2001 IN YEAR PENSION PENSION (NOTE 2 BELOW)
(POUND)'000 (POUND)'000 (POUND)'000 (POUND)'000 (POUND)'000
---------------------------------------------------------------------------------------------------
A J H Dougal 50 207 14 20 216 --
G Dransfield 50 188 8 15 129 --
A J Murray 48 184 26 20 420 --
J C Nicholls 44 18 3 5 33 97
S N Vivian 44 90 11 14 181 --
--------------
1) No additional pension accrued to C D Collins who reached his normal
retirement age under the pension plan prior to the start of the year.
2) Directors who joined the pension plan after May 1989 are subject to the
earnings cap (currently (pound)95,400) on UK Inland Revenue approved
pension plans. It is the company's current policy to provide executives
with appropriate benefits outside the pension plan in relation to that part
of their salary which exceeds the cap. The contributions made during the
year were subject to income tax as a benefit in kind and the director
concerned (J C Nicholls) was liable to settle the tax liability himself.
3) The accrued pension benefit of the highest paid director for the year ended
December 31, 2000 was (pound)150,000.
22. IMPLEMENTATION OF FRS 19
The adoption of Financial Reporting Standard 19, "Deferred Tax" has required
changes in the method of accounting for deferred tax. The new standard requires
deferred tax to be provided on all timing differences, except those which it
specifically exempts, including in certain circumstances: revalued assets, gains
to which rollover relief is to be applied and the remittance of retained
earnings of overseas subsidiaries. These are described in more detail on F-12
under the heading Deferred taxation.
As a result of these changes in accounting policy the comparatives have been
restated as follows:
DEFERRED AND SHAREHOLDERS'
OTHER TAX GOODWILL FUNDS
----------------------------------------------
A) CONSOLIDATED BALANCE SHEET
2000 as previously reported 162.8 (1,119.8) 2,417.3
----------------------------------------------
Adoption of FRS 19 at January 1, 2000 (21.5) -- 21.5
Goodwill on acquisitions (10.1) 10.1 --
During 2000 (see below) 18.6 (0.4) (18.2)
----------------------------------------------
Adoption of FRS 19 at December 31, 2000 (13.0) 9.7 3.3
----------------------------------------------
2000 restated 149.8 (1,110.1) 2,420.6
==============================================
F-51
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
The principal changes arise from the recognition of deferred tax balances which
under SSAP 15 were not required to be provided for, since the liability was not
expected to crystallise in the foreseeable future, or where it was not
considered prudent to recognise a deferred tax asset.
TAX CHARGE PROFIT ON EPS
FOR YEAR BEFORE ORDINARY BASIC AFTER
GOODWILL EXCEPTIONAL EXCEPTIONAL ACTIVITIES AFTER EXCEPTIONAL
AMORTISATION ITEMS TAX CREDIT TAXATION ITEMS
------------------------------------------------------------------------------------
B) CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year to December 31, 2000 reported (43.1) (90.5) 38.3 254.6 35.9p
Adoption of FRS 19 0.4 (9.8) (8.8) (18.2)
------------------------------------------------------------------------------------
2000 restated (42.7) (100.3) 29.5 236.4 33.4p
====================================================================================
TAX CHARGE PROFIT ON EPS
FOR YEAR BEFORE ORDINARY BASIC AFTER
GOODWILL EXCEPTIONAL EXCEPTIONAL ACTIVITIES AFTER EXCEPTIONAL
AMORTISATION ITEMS TAX CREDIT TAXATION ITEMS
------------------------------------------------------------------------------------
Year to December 31, 1999 reported (9.2) (60.7) 78.6 334.3 51.3p
Adoption of FRS 19 -- (23.8) (8.3) (32.1)
------------------------------------------------------------------------------------
1999 restated (9.2) (84.5) 70.3 302.2 46.4p
====================================================================================
23. SUBSEQUENT EVENTS
On January 11, 2002 Hanson announced that it was combining Hanson Quarry
Products Europe and Hanson Bricks Europe to form a new division to be called
Hanson Building Materials Europe.
On February 19, 2002 Hanson announced that agreement had been reached to sell
the Hanson Brick Continental European business to Wienerberger AG for a cash
consideration of EUR64.5m ((pound)39.3). Completion of the disposal took place
on April 22, 2002.
On May 29, 2002 Hanson announced that it had acquired Choctaw Inc for $135.0m
((pound)92.5) in cash.
On November 29, 2002 Hanson announced that Hanson Building Materials Europe had
completed five bolt on acquisitions totalling (pound)47.7. The acquisitions,
which all occurred in the second half of 2002, bring four additional quarries in
Spain and further UK production outlets for concrete products, clay bricks and
bagged aggregates. They are in addition to two quarries which HBME added to its
operations in the Czech Republic in May.
In December 2002 Hanson announced the sale of its 50% interest in North Texas
Cement Company to its joint venture partner, Ash Grove Cement Company, for
$125.4m ((pound)78.8) in cash, subject to final adjustments. The disposal was
completed on January 3, 2003.
On May 14, 2002 Andrew J H Dougal retired from his position as chief executive
of the Company and as a member of the board of directors of Hanson. Alan J
Murray, chief executive of HBMA, succeeded him as chief executive.
On November 14, 2002 Hanson disclosed additional information in relation to its
environmental contingencies.
Various of the Company's US subsidiaries are defendants, typically with many
other companies, in a substantial number of lawsuits filed in numerous state and
federal courts by claimants who allege that they have suffered bodily injury as
a result of exposure to asbestos-containing products ("asbestos claims"), the
manufacture of which by such subsidiaries ceased, depending on the subsidiary
involved, between 1973 and 1984. The products include coke oven batteries,
roofing products, electrostatic precipitators, hot top rings, gun plastic
cement, wallboard joint compounds and textured paints.
Each of the Company's relevant US subsidiaries, together with its insurance
carriers and outside counsel, review each asbestos claim that is pursued by the
claimants. In many cases the claimants are unable to demonstrate that any injury
they have suffered resulted from exposure to the subsidiary's products, in which
case their claim is generally dismissed without payment. In those cases where a
compensatable disease, exposure to the subsidiary's products and causation can
be established, the subsidiary generally settles for amounts that reflect the
type of disease, the seriousness of the injury, the age of the claimant, the
particular jurisdiction of the claim and the number and solvency of the other
defendants.
F-52
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
Set out in tabular form below is certain information regarding asbestos claims
against the Company's US subsidiaries (the numbers are approximate only).
Claimants resolved: Jan 98 to Sep 02 37,000
% dismissed 52%
Claimants resolved: Jan 02 to Sep 02 11,400
% dismissed Over 75%
New claimants: Jan 02 to Sep 02 13,100
% mass claims 37%
Claimants outstanding Oct 02 75,000
%* mass claims 32%
* Mass claims are cases with 100 or more claimants covered under a single court
docket number, where no individual claimant has his/her own case number.
The aggregate amounts paid in settlement and average settlement payments in any
given period, together with related defence costs, have fluctuated widely and
are expected to continue to fluctuate widely depending on the nature of the
claims resolved, including the proportion which are mass claims, disease mix,
number of other defendants and jurisdiction of claim.
The Company estimates that the gross liability for the cost of resolving current
and probable future asbestos claims against its US subsidiaries until 2010 will
be approximately $250 million, including defence costs, but before tax benefit
and not discounted to present value. Provisions totalling $125 million are in
place to cover these estimated costs, after expected insurance recoveries of an
approximately equal amount. In establishing the provisions, other assumptions
have been made as to the number, disease mix and location of future claims,
trends in dismissal rates, settlement and defence costs, resolution of all
existing claims and time scale of resolution of new claims five years after
receipt and the continued solvency of co-defendants. In light of the significant
uncertainty associated with asbestos claims, there can be no guarantee that the
assumptions used to estimate the provisions for the cost of resolving asbestos
claims until 2010 will be an accurate prediction of the actual costs that may be
incurred and as a result the provisions will be subject to potential revision
from time to time as additional information becomes available and developments
occur.
Each of the subsidiaries involved with asbestos claims has a separate agreement
with its insurance carriers regarding the defence and settlement of asbestos
claims, the terms of which vary for each such subsidiary. These insurance
arrangements have resulted in the insurance companies having met substantially
all of the amounts such subsidiaries have paid to date in settlements and
defence costs. Hanson assumes that the amounts received from its insurers will
decline significantly over time.
One of the Company's subsidiaries is involved in litigation proceedings in
California with its insurers, with a view to establishing whether or not
substantially all of the primary cover available to that subsidiary has been
exhausted and, to the extent that such cover has been exhausted, the amount of
excess cover that is available to it. In estimating the level of insurance cover
for the purposes of establishing the above provisions, the Company is using what
it believes to be a cautious view of the amount the subsidiary expects to
recover under the applicable policies.
The Company does not believe that adequate information currently exists to allow
it to estimate reasonably the amount of liability and costs associated with
asbestos claims that its relevant US subsidiaries expect to resolve after 2010,
even though Hanson expects claims will continue to be asserted against its
subsidiaries, the resolution of which will take place after 2010. However,
assuming that current trends continue, Hanson does not expect that the liability
and costs associated with such claims would have a material adverse effect on
its consolidated financial position, liquidity or results of operations.
Factors which could cause actual results to differ from such estimates and
expectations include: (i) adverse trends in the ultimate number of asbestos
claims filed against Hanson's US subsidiaries; (ii) increases in the cost of
resolving current and future asbestos claims as a result of adverse trends
relating to settlement costs, dismissal rates, legal fees and/or judgment sizes;
(iii) decreases in the amount of insurance available to cover asbestos claims as
a result of adverse changes in the interpretation of insurance policies or the
insolvency of insurers; (iv) the emergence of new trends or legal theories that
enlarge the scope of potential claimants; (v) the impact of bankruptcies of
other companies whose share of liability may be imposed on Hanson's US
subsidiaries under certain state liability laws; (vi) the unpredictable aspects
of the US litigation process; (vii) adverse changes in the mix of
asbestos-related diseases with respect to which asbestos claims are made against
Hanson's US subsidiaries, and (viii) potential legislative changes.
F-53
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
In light of such factors, the liability of Hanson's US subsidiaries for
resolving asbestos claims may be materially different from current estimates and
the impact of such claims, both before and after 2010, might have a material
adverse impact on Hanson's financial condition, results of operations and cash
flow.
In addition to US asbestos claims, former and existing subsidiaries of the
Company are subject from time to time to bodily injury and property damage
claims and lawsuits, both on an individual and class action basis. Such claims
and lawsuits relate primarily to former US chemical products and operations, in
particular those relating to the wood treating and coal tar derivative
industries; products and operations which are unrelated to the present business
and activities of the Company. In such cases the subsidiary concerned is often
one of several potential defendants who are involved in the claim or lawsuit.
Since the demergers effected in 1996 and 1997, no settlements have been paid by
(whether pursuant to judgements or indemnity obligations), or judgements
rendered against, any of the Company's subsidiaries which have had or could have
a material adverse effect on Hanson's financial condition, results of operations
or cash flow in connection with any such claims or lawsuits. In a number of
instances, the claim or lawsuit has not been pursued and the subsidiary
concerned has been dismissed. With respect to those claims or lawsuits that have
been or are being pursued, the subsidiary concerned generally believes itself to
have had or to have meritorious defences and such claims and lawsuits have been
and are being vigorously defended.
Insurance issues do arise on these claims and lawsuits, both in terms of
indemnity and defence coverage, the outcome of which can be uncertain. In
certain instances no insurance coverage may be available to the relevant
subsidiary. The insurance cover referred to in note 16 relating to the Kopper's
environmental obligations does not apply to the claims and lawsuits described in
this note.
Hanson is also the subject of a number of other pending legal proceedings and
claims incidental to present and former operations, acquisitions and disposals.
The directors do not anticipate that the outcome of these proceedings and
claims, either individually or in the aggregate, will have a material impact
upon Hanson's financial position or results of operations.
However, in light of the uncertainties involved in any litigation and in
particular in the US, where there is the added potential for punitive damage
awards, there can be no guarantee that a settlement might have to be made by, or
an unfavourable judgement may be rendered against, the Company or one of its
subsidiaries, which could have a material adverse effect on Hanson's financial
condition, results of operations or cash flow.
24. OTHER RELATED PARTY TRANSACTIONS
During the year the group entered into transactions, in the ordinary course of
business, with other related parties. Transactions entered into and trading
balances outstanding at December 31, 2001 are as follows:
2001 2000
---------------------
Sales to related parties 27.9 15.5
Purchases from related parties 77.8 61.4
Amounts owed from related parties 8.5 60.8
Amounts owed to related parties 18.3 3.8
The related parties transactions shown above are in respect of joint ventures
and associates.
25. COMPANIES ACT 1985
These financial statements do not comprise the Company's `statutory accounts'
within the meaning of section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the three fiscal years in the period ended December 31,
2001, on which the auditors have given unqualified audit reports, have been
delivered to the Registrar of Companies for England and Wales.
F-54
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
26. NEW ACCOUNTING STANDARDS
UNITED KINGDOM
FRS 17, Retirement Benefits, issued in November 2000, is fully effective for
accounting periods ending on or after June 22, 2005. Certain of these disclosure
requirements are, however, effective for periods prior to the June 2003 deadline
and those required for the current year are given in Note 21 to the Financial
Statements. The standard requires that financial statements reflect at fair
value the assets and liabilities arising from an employer's retirement benefit
obligations and related funding. The operating costs of providing retirement
benefits are recognised in the period in which they are earned together with any
related finance costs and changes in the value of the related assets and
liabilities. Had FRS 17 been implemented at December 31, 2000, the group would
have reported a pension and other post retirement benefit asset of (pound)91.6
before allowance for deferred tax which compares with the pre tax prepayment of
(pound)0.3 recorded in the Financial Statements under the existing rules. The
impact of FRS 17 on net income has not yet been determined and is currently
under review.
UNITED STATES
FAS 141 - "Business Combinations", was issued in July 2001 and requires that all
business combinations initiated after June 30, 2001 are accounted for in
accordance with the purchase method of accounting. FAS 141 has no impact on the
financial information presented.
FAS 142 - "Goodwill and other intangible assets", was issued in July 2001. This
statement applies to accounting periods commencing after December 15, 2001. It
requires that goodwill and other intangible assets with indefinite useful lives
are tested at least annually for impairment rather than amortised periodically.
Additionally, FAS 142 requires that goodwill included in the carrying value of
equity method investments be no longer amortised. Intangible assets with finite
economic lives continue to be amortised over their useful lives. Goodwill and
intangible assets acquired prior to July 1, 2001 are still amortised and subject
to impairment tests until the statement is adopted. Once the statement is
adopted, all intangible assets with indefinite useful lives and goodwill must be
tested for impairment annually. Where no impairment is revealed, amortisation is
not necessary. Hanson has adopted FAS 142 from January 1, 2002. The Group will
test goodwill for impairment using the two-step process prescribed in FAS 142.
The first step is a screen for potential impairment, while the second step
measures the amount of the impairment, if any. Based on steps the Group has
taken to date to comply with the adoption of FAS 142, it is likely that a
portion of the goodwill held in divisions that were indicated by step 1 of the
test to have suffered impairment, will be impaired. This is expected to fall
within the range of (pound)600 to (pound)800, a substantial part of which
relates to goodwill on acquisitions prior to January 1, 1998, which was written
off directly to reserves under UK GAAP. Any impairment that is required to be
recognised when adopting FAS 142 will be reflected in net income under US GAAP
as the cumulative effect of a change in accounting principle in the year ended
December 31, 2002. Other intangible assets continue to be amortised over their
useful lives.
FAS 143 - "Accounting for asset retirement obligations", was issued on August
16, 2001. This statement deals with accounting for obligations associated with
the retirement of long-lived assets and the associated asset retirement costs.
It requires entities to record the fair value of the liability for an asset
retirement obligation in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset retirement costs are
capitalised as part of the carrying amount of the long-lived asset. The group is
required to adopt the statement in the fiscal 2003 financial statements. The
financial effect of adopting FAS 143 is still being considered.
FAS 144 - "Accounting for the impairment or disposal of long-lived assets",
supersedes FAS 121, "Accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of", although it retains many of its provisions
but excludes goodwill and intangible assets not being amortised and
significantly changes the criteria that have to be met in order to classify
long-lived assets as held for resale.
It also supersedes the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30 (APB 30), "Reporting the results of
operations-reporting the effects of disposal of a segment of a business, and
extraordinary, unusual and infrequently occurring events and transactions", for
the disposal of a segment of a business. It requires expected future operating
losses from discontinued operations in the period to be displayed in
discontinued operations in the period in which the losses are incurred rather
than as of the measurement date as currently. The requirement in APB 30 to
report discontinued operations separately is retained and extended to a
component of an entity that has either been disposed of (by sale, abandonment,
or in a distribution to owners) or is classified as held for sale. The
provisions of FAS 144 have been applied prospectively from January 1, 2002.
Prior period financial statements have been restated to reflect as discontinued
those operations which have been subsequently discontinued.
FAS 146 - "Accounting for costs associated with exit or disposal activities",
was issued in June 2002. FAS 146 supersedes Emerging Issues Task Force (EITF)
issue no. 94-3, "liability recognition for certain employees termination
benefits and other costs to exit an activity (including certain costs incurred
in a restructuring)". FAS 146 requires that a liability for a cost associated
with an exit or disposal activity be recognised when the liability is incurred.
Under EITF 94-3, a liability is recognised at the date an entity commits to an
exit plan. FAS 146 also establishes that the liability should initially be
measured and recorded at fair value. The provisions of FAS 146 will be effective
for any exit and disposal activities initiated after December 31, 2002. The
adoption of this standard is not expected to have a material impact on the
group's financial statements.
F-55
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
27. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The accounting policies, under which the consolidated financial statements of
Hanson are prepared, conform with UK GAAP, which differ in certain respects from
US GAAP. Differences which have a significant effect on consolidated net income
and shareholders' equity are as follows:
GOODWILL
As from January 1, 1998 Hanson adopted FRS 10 and for all subsequent
acquisitions capitalises all acquired goodwill and amortises it over a period
not exceeding 20 years. Prior to this all goodwill arising on the acquisition of
a subsidiary was written off directly to reserves in the year in which that
subsidiary was acquired. On disposal of a business, the profit or loss on
disposal is determined after incorporating the attributable amount of any
purchased goodwill, including any previously written off to reserves. Under US
GAAP, goodwill arising during the period to June 30, 2001 has been capitalised
and amortised through the profit and loss account over its estimated useful
life, not exceeding 40 years. Goodwill which has arisen during the period
subsequent to July 1, 2001, has been capitalised, however, in compliance with
the transitional provisions of FAS 142 which was adopted on January 1, 2002, has
not been amortised. This goodwill is currently being subjected to a transitional
impairment test and will be subject to an annual impairment review thereafter.
ESOP SHARES
Included in fixed asset investments are amounts in respect of Hanson PLC
ordinary shares held by the employee share trust. Under US GAAP, these amounts
would be treated as treasury stock and deducted from shareholders' equity.
PENSIONS AND OTHER POST RETIREMENT BENEFITS
The cost of pension benefits is based on consistent percentages of employee's
pensionable pay as recommended by independent actuaries.
Under US GAAP, the pension cost or credit is determined by reference to the
pension liability and the market value of the underlying plan assets, after
adjustment to reflect any previously unrecognised pension obligations or assets.
The Group recognises liabilities resulting from scheme amendments or recognition
of actuarial gains and losses under US GAAP over the future service lives of
relevant employees, or the remaining life expectancy of inactive participants.
Experience surpluses or deficiencies, which may result where the actual
performance of the scheme differs from previous actuarial assumptions, are dealt
with on an aggregate basis. Hanson applies the 10% corridor test at the
beginning of the year, to determine whether amortisation of the gain or loss is
necessary. Where the gain or loss exceeds 10% of the greater of the projected
benefit obligation or the market related value of the scheme's assets, this is
amortised over the active participants' average remaining service periods.
Hanson also provides post retirement healthcare and life insurance benefits,
mainly in the US, under plans to certain groups of its retired and active
employees. Hanson conforms with the provisions of the Urgent Issues Task Force
("UITF") Abstract 6 "Accounting for Post-Retirement Benefits other than
Pensions", which requires accruals of these costs over the period during which
employees become eligible for such benefits. UITF Abstract 6 permits UK parent
undertakings with US subsidiaries to adopt the cost of post retirement benefits
calculated for FAS 106 in their SSAP 24 calculations under UK GAAP and therefore
there is no reconciling item in respect of Hanson's US post retirement benefits.
TAXATION
Deferred taxation is provided on all timing differences, except those that
relate to revaluations where no sale is in process, or where it is probable that
rollover relief or losses will be applied to the gain, and also to the
remittance of retained earnings of overseas subsidiaries. Under US GAAP,
deferred taxation liabilities are provided on all differences between the book
and tax bases of assets and liabilities. Deferred taxation assets under US GAAP
and UK GAAP are recognised only to the extent that it is more likely than not
that they will be realised.
DISCONTINUED OPERATIONS
Discontinued operations are those clearly distinguishable operations and
activities which either ceased or left the group in the accounting period or
soon thereafter. Under US GAAP, prior to the implementation of FAS 144 on
January 1, 2002, the operation or activity must previously have been reported as
a separate segment or line of business. Following the implementation of FAS 144,
certain operations sold in 2002 were reported as discontinued for both UK GAAP
and US GAAP in the six months ended June 30, 2002 and have been reflected as
discontinued operations under US GAAP in the reconciliations below. They do not
qualify to be treated as discontinued in these financial statements under UK
GAAP.
ACQUISITION ACCOUNTING
US GAAP requires that a deferred tax asset or liability be raised to reflect the
difference between the tax basis of assets acquired and liabilities assumed, and
their fair values at the time of acquisition. The recognition of deferred tax
assets or liabilities affects the amount of
F-56
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
goodwill recognised on acquisition. Net income under US GAAP will differ from
that under UK GAAP to the extent that the pattern of reversal of the temporary
differences acquired differs from the pattern of goodwill amortisation.
Under UK GAAP, on acquisition, provisions for reorganisation costs are not
included in the fair value of assets and liabilities acquired, but are included
in post acquisition costs. Certain reorganisation provisions under US GAAP are
allowed to be included within the fair value at the time of acquisition.
JOINT VENTURES AND ASSOCIATES
Operating profit, interest and taxation in respect of joint ventures and
associates are included in the financial statements separately under each
appropriate heading. Under US GAAP, joint ventures' and associates' profit after
tax is included on a single line within the profit and loss account.
DIVIDENDS
Final ordinary dividends are provided in the year in respect of which they are
proposed on the basis of the recommendation by the directors which requires
subsequent approval by the shareholders. Under the US GAAP, dividends are not
provided until the dividend is formally declared.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Group adopted FAS 133, Accounting for Derivative Instruments and Hedging
Activities, on January 1, 2001. In the adoption of FAS 133 Hanson has elected
not to seek hedge accounting for derivative instruments. Under US GAAP,
derivative instruments are therefore held at fair value in the balance sheet and
the change in fair value for a period is passed through net income. As hedge
accounting under FAS 133 has not been sought, the net income statement fully
includes the changes in fair value of the derivatives. In addition, transition
adjustments were required to include the fair value of derivatives on the
balance sheet on the adoption of FAS 133 at January 1, 2001. For those
derivatives considered as fair value hedges, the January 1, 2001 opening fair
value of (pound)17.1 was shown as current assets and liabilities - derivatives
and as an adjustment to debt. The adjustment to debt will subsequently be
amortised through the income statement over the residual life of the debt. For
those derivatives considered as cash flow hedges, the January 1, 2001 opening
value of (pound)0.5 was shown as current assets and liabilities - derivatives
and as an adjustment to other comprehensive income. The amounts in other
comprehensive income are recognised as adjustments to interest expense in future
periods as the related cash flows are recognised.
During the year ended December 31, 2001, the group recognised a net gain of
(pound)18.5 in the income statement as a result of the adoption of FAS 133. This
comprised (pound)16.2 arising from changes in the fair value of derivatives that
did not qualify for hedge accounting and net gains reclassified from other
comprehensive income of (pound)2.3. Substantially all derivatives held by the
group at December 31, 2000, and during the year, did not quality for hedge
accounting under FAS 133.
Prior to the adoption of FAS 133, all transactions used to hedge foreign
currency risks were accounted for in accordance with the requirements of FAS 52.
FAS 52 was broadly in line with UK GAAP and no differences previously arose in
the reconciliation between UK and US GAAP.
ACCOUNTING FOR STOCK BASED COMPENSATION
FAS 123 Accounting for Stock-Based Compensation, which establishes financial
accounting and reporting standards for stock-based employee compensation plans,
was effective for accounting periods beginning after December 15, 1995. The
Statement provides the option to continue under the accounting provisions of
Accounting Principles Board Opinion No 25 "Accounting for stock issued to
Employees" (APB No. 25), providing that pro forma footnote disclosures of the
effects on net income and earnings per share, calculated as if the new method
had been implemented, are included. Hanson has elected to continue under APB No.
25, but the pro forma disclosures have been omitted, as the effects on net
income are not material and earnings per share are not affected.
Hanson operates an Inland Revenue approved Sharesave Scheme open to all
employees, which gives a 20% discount on the fair value of the shares. Under the
provisions of UITF 17, no cost is recognised on awards under such scheme. Under
US GAAP, in accordance with FIN 44, which was issued in July 2000 and confirmed
by EITF 00-23 in January 2002, the 20% discount should be expensed over the
vesting period. The only plans impacted are the 2000 and 2001 schemes.
Hanson operates two schemes which incorporate performance criteria, the Hanson
Share Option Plan and the Long Term Incentive Program. Hanson recognises the
cost over the performance period, based on a reasonable expectation of the
extent to which the performance criteria will be met. Adjustments to this cost
are made as the estimates of the final cost are refined. Under US GAAP, the
plans are treated as variable compensatory plans and the expense is based on the
intrinsic value at each balance sheet date, spread over the performance period.
Hanson has not included a reconciling item for these schemes, as the effect on
net income is not material.
F-57
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
EXCEPTIONAL ITEMS
Certain exceptional items are shown on the face of the profit and loss account
statement after operating profit. These items are mainly gains or losses on the
sale of business and fixed assets, and the costs of fundamental reorganisations.
Under US GAAP these items would be classified as operating profit or expenses.
F-58
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
The following is a summary of the significant adjustments to profit and
shareholders' equity which would be required if US GAAP had been applied instead
of UK GAAP. This summary has been restated as required by APB 20 to reflect
changes to the provisions for deferred taxes totalling (pound)197.6, which were
identified in the year ended December 31, 2001 and previously reflected as a
movement in shareholders' equity, with consequential adjustments to goodwill and
goodwill amortisation.
PROFIT AVAILABLE FOR APPROPRIATION
YEAR ENDED DECEMBER 31
---------------------------------
2001 2000 1999
RESTATED RESTATED RESTATED
---------------------------------
Profit available for appropriation as reported in the consolidated
profit and loss account under UK GAAP 278.8 236.4 302.2
Significant adjustments:
Goodwill amortisation (39.3) (37.0) (32.0)
Impairment - goodwill 11.6 -- --
Change in fair value of derivatives 18.5 -- --
Pensions 30.4 36.0 23.2
Profit and loss on disposals - goodwill 4.5 1.6 --
Interest - unwinding of discount -- 6.8 7.8
Provisions - operating costs -- -- 0.6
Integration costs relating to Pioneer -- 21.7 --
Taxation on above adjustments (3.8) (11.0) (9.9)
Taxation methodology 1.6 2.2 26.0
---------------------------------
23.5 20.3 15.7
---------------------------------
Net income as adjusted to accord with US GAAP 302.3 256.7 317.9
=================================
Arising from:
Profit from continuing operations:
Before effect of restatement of deferred taxes 471.5 257.5 311.4
Effect of restatement of deferred taxes in the year (6.4) (2.5) 3.6
---------------------------------
Total 465.1 255.0 315.0
Discontinued operations - (loss)/profit from operations (162.8) 1.7 2.9
---------------------------------
Net income 302.3 256.7 317.9
=================================
Earnings per ordinary share: PER SHARE (PENCE)
---------------------------------
Basic earnings from continuing operations:
Before effect of restatement of deferred taxes 64.1p 36.3p 47.8p
Effect of restatement of deferred taxes (0.9)p (0.4)p 0.6p
Total 63.2p 35.9p 48.4p
Diluted earnings from continuing operations:
Before effect of restatement of deferred taxes 63.9p 36.2p 47.5p
Effect of restatement of deferred taxes (0.9)p (0.4)p 0.5p
Total 63.0p 35.8p 48.0p
Basic earnings from discontinued operations (22.1)p 0.2p 0.4p
Diluted earnings from discontinued operations (22.1)p 0.2p 0.4p
Basic earnings available for appropriation:
Before effect of restatement of deferred taxes 42.0p 36.6p 48.2p
Effect of restatement of deferred taxes (0.9)p (0.4)p 0.6p
Total 41.1p 36.2p 48.8p
Diluted earnings available for appropriation:
Before effect of restatement of deferred taxes 41.8p 36.5p 47.9p
Effect of restatement of deferred taxes (0.9)p (0.4)p 0.5p
Total 40.9p 36.1p 48.4p
F-59
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
STATEMENT OF COMPREHENSIVE INCOME
The consolidated statement of comprehensive income under US GAAP is as follows:
YEAR ENDED DECEMBER 31
------------------------------------------
2001 2000 1999
RESTATED RESTATED RESTATED
------------------------------------------
Net income as adjusted to accord with US GAAP 302.3 256.7 317.9
Other comprehensive income:
Translation adjustments for the period 0.9 31.2 6.4
Change in fair value of derivatives, net of tax of(pound)nil (2.3) -- --
Cumulative effect of prior years on adoption of FAS 133 0.5 -- --
------------------------------------------
Total comprehensive income 301.4 287.9 324.3
==========================================
Movements in other comprehensive income amounts (net of related tax) are as
follows:
DERIVATIVE CURRENCY
FINANCIAL TRANSLATION
INSTRUMENTS) DIFFERENCES TOTAL
AINS/(LOSSES RESTATED RESTATED
------------------------------------------
At January 1, 1999 -- (4.5) (4.5)
Movement in the year -- 6.4 6.4
------------------------------------------
At December 31, 1999 -- 1.9 1.9
Movement in the year -- 31.2 31.2
------------------------------------------
At December 31, 2000 -- 33.1 33.1
Effect on adoption of FAS 133 0.5 -- 0.5
Movement in the year (2.3) 0.9 (1.4)
------------------------------------------
At December 31, 2001 (1.8) 34.0 32.2
==========================================
Shareholders' equity
DECEMBER 31
------------------------
2001 2000
RESTATED RESTATED
------------------------
Shareholders' funds as reported in the
consolidated balance sheet 2,720.8 2,420.6
Significant adjustments:
Goodwill - cost 1,310.5 1,413.0
Goodwill - accumulated amortisation (350.5) (311.2)
Prepayments 52.7 70.2
Current assets - derivatives 121.4 --
Current liabilities - derivatives (89.3) --
Fixed asset investments (0.3) (5.7)
Pensions 302.0 273.0
Debt (15.4) --
Provisions (52.7) (56.2)
Taxation on above adjustments (90.6) (86.8)
Taxation methodology (422.4) (416.6)
Dividends 70.3 68.7
------------------------
835.7 948.4
------------------------
Shareholders' equity as adjusted
to accord with US GAAP 3,556.5 3,369.0
========================
F-60
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
CONSOLIDATED CASH FLOW STATEMENT
The consolidated statements of cash flows prepared under UK GAAP present
substantially the same information as those required under US GAAP. These
statements differ, however, with regard to classification of items within them.
Under US GAAP cash and cash equivalents include short-term liquid resources but
not overdrafts. Under UK GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditure and financial investments, acquisitions and disposals, dividends,
management of liquid resources and financing. US GAAP, however, requires only
three categories of cash flow activity to be reported: operating, investing and
financing. Cash flows from taxation and returns on investments and servicing of
finance shown under UK GAAP, would be included as operating activities under US
GAAP. The payment of dividends would be included as a financing activity under
US GAAP. Under US GAAP, capitalised interest is treated as part of the cost of
the asset to which it relates and thus included as part of investing cash flows;
under UK GAAP all interest is treated as part of returns on investments and of
servicing of finance.
The categories of cash flow activity under US GAAP can be summarised as follows:
YEAR ENDED DECEMBER 31
------------------------------------
2001 2000 1999
------------------------------------
Cash inflows from operating activities 445.2 357.7 281.7
Cash (outflows) on investing activities (52.0) (40.6) (472.5)
Cash (outflows) from financing activities (547.2) (734.0) (169.1)
------------------------------------
(Decrease) in cash and cash equivalents (154.0) (416.9) (359.9)
Effect of foreign exchange rate changes 15.2 37.5 32.9
Cash and cash equivalents at January 1 917.2 1,296.7 1,623.7
------------------------------------
Cash and cash equivalents at December 31 778.4 917.3 1,296.7
====================================
ADDITIONAL INFORMATION REQUIRED BY US GAAP IN RESPECT OF DEFERRED TAXATION
The components of the estimated net deferred tax liability that would be
recognised under FAS 109 are as follows:
DECEMBER 31
------------------------
2001 2000
RESTATED RESTATED
------------------------
Excess of capital allowances over depreciation 342.2 345.6
Other 323.6 307.6
------------------------
665.8 653.2
========================
ADDITIONAL INFORMATION REQUIRED BY US GAAP IN RESPECT OF PENSIONS AND OTHER
POST-RETIREMENT BENEFITS
A summary of the component of net periodic pension cost for Hanson's pension
plans is as follows:
YEAR ENDED DECEMBER 31
------------------------------------
2001 2000 1999
------------------------------------
Defined benefit plans (34.8) (37.6) (23.7)
Defined contribution plans 5.0 7.4 1.8
Multi-employer plans 6.8 1.8 2.9
------------------------------------
Total pension expense under US GAAP (23.0) (28.4) (19.0)
====================================
F-61
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
Assumptions used in the US GAAP accounting for the defined benefit plans were as
follows:
Year Ended December 31
------------------------------------
2001 2000 1999
------------------------------------
US PLANS
Weighted-average discount rates 7.25% 7.25% 7.75%
Rates of increase in compensation levels 4.25% 4.25% 4.25%
Expected long-term rates of return on assets 9.00% 9.00% 9.00%
UK PLANS
Weighted-average discount rates 5.80% 5.80% 6.10%
Rates of increase in compensation levels 4.50% 4.50% 4.90%
Expected long-term rates of return on assets 6.80% 6.80% 7.10%
The assumptions have been used for the funded statuses at December 31, 2001,
2000, and 1999 respectively.
Assumed health care trend rates have a significant effect on the amounts
reported for the post retirement medical benefit plans. A one-percentage point
change in assumed health care cost trend rates would have the following effects
on active and non active liabilities as at December 31, 2001:
1-PERCENTAGE POINT INCREASE 1-PERCENTAGE POINT DECREASE
Effect on total of service and interest cost components (pound)0.4 (pound)(0.6)
Effect on post retirement medical benefit obligation (pound)4.9 (pound)(6.1)
The following table shows the items that would be disclosed under US GAAP for
Hanson's defined benefit pension plans and post retirement benefit arrangements.
Of the total amounts shown for pension plans, approximately one third applies to
US defined benefit plans.
PENSION BENEFITS POST RETIREMENT BENEFITS
------------------------------ -------------------------------
2001 2000 1999 2001 2000 1999
------------------------------ -------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year 1,372 1,223 1,211 90 81 113
Service cost 32 27 26 1 1 1
Interest cost 86 84 73 6 7 6
Currency adjustment 17 38 19 4 5 4
Plan participant's contributions 7 6 5 -- -- --
Actuarial (gain) loss 29 24 (52) 2 6 (2)
Benefits paid (88) (84) (76) (10) (8) (7)
Business combinations -- 46 16 -- -- --
Plan amendments 1 11 2 (7) -- --
Divestitures, curtailments & settlements -- -- 1 -- (2) (34)
Others (4) (3) (2) -- -- --
-----------------------------------------------------------------
BENEFIT OBLIGATION AT END OF YEAR 1,452 1,372 1,223 86 90 81
=================================================================
Change in plan assets
Fair value of plan assets at beginning of year 1,835 1,750 1,559 -- -- --
Actual return on plan assets (116) 64 221 -- -- --
Currency adjustments 20 47 22 -- -- --
Employer contributions 6 8 7 10 8 7
Plan participant's contributions 7 7 5 -- -- --
Benefits paid (89) (84) (76) (10) (8) (7)
Business combinations -- 46 -- -- -- --
Divestitures, curtailments & settlements -- -- 1 -- -- --
Others (4) (3) 11 -- -- --
-----------------------------------------------------------------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR 1,659 1,835 1,750 -- -- --
=================================================================
F-62
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
PENSION BENEFITS POST RETIREMENT BENEFITS
------------------------------ -------------------------------
2001 2000 1999 2001 2000 1999
------------------------------ -------------------------------
FUNDED STATUS
Funded status of plans at December 31 207 463 522 (86) (90) (81)
Unrecognised prior service cost 20 21 11 (7) (1) (4)
Unrecognised net actuarial (gain)/loss 270 (14) (110) (30) (30) (35)
Unrecognised transition (asset)/obligation (42) (56) (72) -- -- --
-----------------------------------------------------------------
NET AMOUNT RECOGNISED 455 414 351 (123) (121) (120)
=================================================================
AMOUNTS RECOGNISED IN THE BALANCE SHEET
CONSIST OF:
Prepaid benefit cost 460 417 354 -- -- --
Accrued benefit liability (7) (4) (4) (123) (121) (120)
Accumulated other comprehensive income 2 1 1 -- -- --
-----------------------------------------------------------------
NET AMOUNT RECOGNISED 455 414 351 (123) (121) (120)
=================================================================
COMPONENTS OF NET PERIODIC PENSION COST
Service cost 32 27 26 1 1 1
Interest cost 86 84 73 6 7 6
Expected return on assets (139) (136) (112) -- -- --
Amortisation of transition (asset) obligations (15) (15) (15) -- -- --
Recognised (gain) loss -- -- 1 (2) (3) (2)
Recognised prior service cost 2 2 3 -- -- --
(Gain) loss due to settlement or curtailment -- -- -- (1) (5) --
-----------------------------------------------------------------
NET PERIODIC BENEFIT COST (INCOME) (34) (38) (24) 4 -- 5
=================================================================
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the plans with accumulated benefit obligations in excess of
plan assets were (pound)24.4, (pound)22.3 and (pound)15.0 respectively as at
December 31, 2001, (pound)5.4, (pound)5.4 and (pound)0.0 respectively as at
December 31, 2000 and (pound)4.1, (pound)4.1 and (pound)nil as at December 31,
1999.
The assignment of the purchase price for acquired businesses to net assets
recognises a liability or asset for the difference between the projected benefit
obligation as compared to plan assets as of the acquisition dates in accordance
with FAS No. 87.
The US plans' assets are primarily included in the Hanson Building Materials
America Inc. Pension Trust ("Trust"), which invests in listed stocks and bonds.
At December 31, 1999, December 31, 2000 and at December 31, 2001 the Trust had
no investment in Hanson ordinary shares.
Within the UK, the fund assets are dealt with by several directly invested funds
and as at December 31, 2001, 2000 and 1999 ordinary shares of Hanson within
these funds comprised 0.01%, 0.03% and 0.02% respectively of the total market
value of such funds.
ADDITIONAL US GAAP INFORMATION REGARDING REVENUE RECOGNITION
Revenue is recognised when all of the following conditions are met: evidence of
a binding arrangement exists (generally, purchase orders), products have been
delivered and there is no future performance required and amounts are
collectible under normal payment terms.
Revenue represents the amounts charged or chargeable in respect of services
rendered and goods supplied, excluding inter company sales and sales taxes.
Revenue is recognized net of discounts, where these have been agreed with the
customer, when finished products are shipped to unaffiliated customers or
services have been rendered. Revenue on long-term construction contracts is
recognised as the value of measured works, claims and variations on contracts in
the year, which have been invoiced. Claims and variations are only valued where
they have been agreed with the client. Where it is foreseen that a loss will
arise to the Group on a long-term contract, full provision is made for that loss
in the year.
F-63
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING - MILLIONS)
ADDITIONAL INFORMATION REQUIRED BY US GAAP IN RESPECT OF SHARE OPTIONS
OPTIONS
Hanson has various share option and sharesave schemes. The movements in the
options outstanding under the various schemes for the three fiscal years in the
periods ended December 31, 2001 are as follows:
SHARE
SHARESAVE SCHEMES OPTION SCHEMES
--------------------------- -------------------------
NO. OF RANGE OF NO. OF RANGE OF
ORDINARY EXERCISE ORDINARY EXERCISE
SHARES PRICES SHARES PRICES
(000'S) (PENCE PER (000'S) (PENCE PER
SHARE) SHARE)
--------------------------- -------------------------
Options outstanding at January 1, 1999 4,880 224 - 391.4 15,606 242.7 - 482.6
Granted 794 425 -- --
Exercised (147) 224 - 391.4 (132) 325.6 - 482.6
Lapsed or cancelled (387) 224 - 391.4 (9,069) 242.7 - 482.6
---------- -----------
Options outstanding at December 31, 1999 5,140 224 - 425 6,405 242.7 - 482.6
Granted 1,460 323 -- --
Exercised (750) 224 - 425 (36) 325.6
Lapsed or cancelled (416) 224 - 425 (755) 242.7 - 482.6
---------- -----------
Options outstanding at December 31, 2000 5,434 224 - 425 5,614 262.8 - 482.6
Granted 840 428.0 -- --
Exercised (680) 224 - 428 (967) 325.6 - 482.6
Lapsed or cancelled (432) 224 - 428 (1,054) 325.6 - 482.6
---------- -----------
Options outstanding at December 31, 2001 5,162 224 - 428 3,593 325.6 - 482.6
---------- -----------
Options exercisable - December 2001 28 237 - 265 3,593 331.25 - 482.6
Options exercisable - December 2000 21 224 5,379 262.8 - 482.6
Options exercisable - December 1999 4 391.4 6,171 242.7 - 482.6
Fair value of options granted
during the periods ended
December 31, 2001 175.3 --
December 31, 2000 130.7 --
December 31, 1999 280.4 --
The weighted average fair value of options granted were estimated using the
Black-Scholes option pricing model with the following assumptions: dividend
yield 3.0% (2000: 3.0%, 1999: 3.0%) expected volatility of 31.0% (2000: 32.5%,
1999: 30.5%) risk free interest rate of 5.5% (2000: 5.1%, 1999: 6.25%) and
expected life of 4.2 (2000: 4.3, 1999: 4.8 years).
F-64
HANSON PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(POUNDS STERLING)
Movements in the options outstanding under the share option and sharesave
schemes are as follows.
SHARESAVE SHARE
SCHEMES OPTION SCHEMES
--------------------------- -------------------------
NO. OF WEIGHTED NO. OF WEIGHTED
ORDINARY AVERAGE ORDINARY AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
(000'S) (PENCE PER (000'S) (PENCE PER
SHARE) SHARE)
--------------------------- -------------------------
Options outstanding at January 1, 1999 4,880 240.8 15,606 386.1
Granted 794 425.0 -- --
Exercised (147) 325.0 (132) 378.0
Lapsed or cancelled (387) 250.7 (9,069) 391.5
---------- -----------
Options outstanding at December 31, 1999 5,140 266.1 6,405 373.5
Granted 1,460 323.0 -- --
Exercised (750) 225.1 (36) 325.6
Lapsed or cancelled (416) 311.8 (755) 433.8
---------- -----------
Options outstanding at December 31, 2000 5,434 283.4 5,614 378.7
Granted 840 428.0 -- --
Exercised (680) 250.1 (967) 304.3
Lapsed or cancelled (432) 297.1 (1,054) 394.4
---------- -----------
Options outstanding at December 31, 2001 5,162 308.7 3,593 396.8
---------- -----------
Options exercisable - December 2001 28 256.3 3,593 396.8
Options exercisable - December 2000 21 224.0 5,379 393.9
Options exercisable - December 1999 4 391.4 6,171 375.1
Summarised information about share option and sharesave schemes is as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -----------------------
Weighted Weighted
AVERAGE AVERAGE WEIGHTED
REMAINING EXERCISE AVERAGE
NUMBER CONTRACT PRICE NUMBER EXERCISE
OUTSTANDING LIFE (PENCE EXERCISABLE PRICE
RANGE OF EXERCISE PRICES (PENCE PER SHARE) (000'S) (YEARS) PER (000'S) (PENCE
SHARE) PER SHARE)
----------------------------------- -----------------------
Sharesave Schemes
-----------------
224.0 - 265.0 2,493 1.30 236.7 28 256.3
265.1 - 425.0 2,669 3.52 376.1 -- --
------------ -----------
5,162 2.45 308.7 28 256.3
------------ -----------
Share Option Schemes
--------------------
277.25 - 331.24 421 2.02 291.4 421 291.4
331.25 - 397.8 1,162 3.19 356.8 1,162 356.8
397.9 - 482.6 2,010 2.29 442.2 2,010 442.2
------------ -----------
3,593 2.55 396.8 3,593 396.8
------------ -----------
F-65
SCHEDULE II
-----------
HANSON PLC
VALUATION AND QUALIFYING ACCOUNTS
(POUNDS STERLING - MILLIONS)
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND DEDUCTIONS END OF
PERIOD EXPENSES (A) PERIOD
------------- ------------ ------------- -------------
Allowances for doubtful accounts
For the year ended December 31, 2001 17.4 10.6 (2.6) 25.4
For the year ended December 31, 2000 15.5 4.1 (2.2) 17.4
For the year ended December 31, 1999 15.7 1.6 (1.8) 15.5
--------------
(a) Represents the excess of amounts written off over recoveries and
subsidiaries disposed.
F-66