SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its
current report on Form 8-K as set forth in the pages attached
hereto:
Item 7.(a) Financial Statements
Item 7.(b) Pro forma Financial Statements
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, there unto duly
authorized.
Clear Channel Communications, Inc.
Date July 26, 1995 By Herbert W. Hill, Jr.
Herbert W. Hill, Jr.
Vice President/Controller and
Principal Financial Officer
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES ("THE COMPANY"), AND THE
AUSTRALIAN RADIO NETWORK, INC ("ARN")
The following pro forma condensed consolidated statements of earnings for the
year ended December 31, 1994 and the three months ended March 31, 1995 give
effect to the acquisition of a 50% interest in ARN, an Australian
corporation. ARN consists principally of two operating units, WESGO Limited
and its controlled subsidiaries (WESGO), and the Albert Radio Group (Albert)
which own and operate radio stations in Australia. The pro forma information
is based on the historical results of operations of the Company and its
proportionate share of the historical results of operations of ARN's two
principal operating units. The Company's investment in ARN is being
accounted for utilizing the equity method of accounting. The pro forma
information also includes certain assumptions and adjustments as described in
the accompanying notes to the pro forma condensed consolidated statements of
earnings.
The pro forma statements have been prepared by the Company based upon its
proportionate share of the historical results of operations of ARN included
elsewhere herein. These pro forma statements may not be indicative of the
results that actually would have occurred if the acquisition had been in
effect on the dates indicated or which may be obtained in the future. The
pro forma statements should be read in conjunction with the audited financial
statements for year ended June 30, 1994 and six months ended December 31,
1994 of WESGO and Albert included herein. These financial statements were
prepared under Australian generally accepted accounting principles and
include a footnote reconciling net income and equity to U.S. generally
accepted accounting principles. All conversions to U.S. currency have been
prepared by the Company based on the average published rate of exchange in
effect for the periods covered.
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES AND AUSTRALIAN
RADIO NETWORK
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE
YEAR ENDED DECEMBER 31, 1994 (IN THOUSANDS EXCEPT PER SHARE DATA)
Clear Channel Communications, Inc. ("CCC")
Australian Radio Network (ARN)
Year Ended December 31, 1994
Increase
(Decrease)
CCC ARN Income Pro
Hist. Investment forma Adj. Pro
__(1)__ __(2)__ __(3)__ forma
Gross broadcasting revenue $200,695 $200,695
Net broadcasting revenue 173,109 173,109
Operating expenses (105,537) (105,537)
Depreciation and amort. (24,668) (24,668)
------ ---- ------ -------
Operating income 42,904 42,904
Interest expense (7,669) (4,268) (11,937)
Equity in earnings of
nonconsolidated affiliates $(786) (786)
Other income 1,161 1,161
------ ---- ----- ------
Income (loss) before income taxes 36,396 (786) (4,268) 31,342
Income tax benefit (expense) (14,387) 1,478 (12,909)
------ ---- ----- ------
Net income (loss) $ 22,009 $(786) $(2,790) $18,433
====== ==== ===== ======
Per common share:
Net income $ 1.27 $1.06
==== ====
Weighted average common
shares outstanding 17,331 17,331
====== ======
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
RADIO NETWORK
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE
THREE MONTHS ENDED MARCH 31, 1995 (IN THOUSANDS EXCEPT PER SHARE DATA)
Clear Channel Communications, Inc. ("CCC")
Australian Radio Network (ARN)
Three Months Ended March 31, 1995
Increase
(Decrease)
CCC ARN Income Pro
Hist. Investment forma Adj.
__(4)__ __(5)__ __(6)__ Pro forma
Gross broadcasting revenue $58,646 $58,646
Net broadcasting revenue 50,476 50,476
Operating expenses (33,331) (33,331)
Depreciation and amort. (8,399) (8,399)
------ ---- ----- -------
Operating income 8,746 8,746
Interest expense (4,448) $(1,333) (5,781)
Equity in earnings of
nonconsolidated affiliates $289 289
Other income 258 258
------ ---- ----- ------
Income (loss) before income taxes 4,556 289 (1,333) 3,512
Income tax benefit (expense) (1,877) 453 (1,424)
------ ---- ----- ------
Net income (loss) $ 2,679 $289 $(880) $2,088
===== ==== ===== ======
Per common share:
Net income $ .15 $.12
==== ====
Weighted average common
shares outstanding 17,331 17,331
====== ======
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
OF EARNINGS
Year ended December 31, 1994
(1) Historical Condensed Consolidated Statement of Earnings for Clear
Channel Communications, Inc. and Subsidiaries.
(2) The Company's 50% interest in ARN's proforma net income for the year
end December 31, 1994. Such amounts were derived from the historical
financial statements of WESGO and Albert converted to U.S. GAAP. In
addition, these amounts were translated from Australian dollars to U.S.
dollars at the average exchange rate for the year. (See Table 1)
(3) Represents the pro forma effect of the acquisition Increase
assuming it was acquired at January 1, 1994. (Decrease)
Income
In Thousands
(A) Increase in interest expense due to a higher amount of
average debt outstanding and a higher average interest
rate. (4,268)
(B) Tax effect of the above adjustment, along with ARN
historical financial information at the federal
statutory tax rate effective for 1994 (35%). 1,478
Table 1
Year Ended Three Months Ended
December 31, 1994 March 31, 1995
Pro forma net income WESGO $ 361 $517
Pro forma net income Albert 414 155
----- ----
Subtotal 775 672
Less amortization of excess cost (1,561) (383)
----- ----
Total $(786) $289
===== ===
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
OF EARNINGS
Three Months Ended March 31, 1995
(4) Historical Condensed Consolidated Statement of Earnings for Clear
Channel Communications, Inc. and Subsidiaries.
(5) The Company's 50% interest in ARN's proforma net income for the three
months end March 31, 1995. Such amounts were derived from the historical
financial statements of WESGO and Albert converted to U.S. GAAP. In
addition, these amounts were translated from Australian dollars to U. S.
dollars at the average exchange rate for the year. (See Table 1)
(6) Represents the pro forma effect of the acquisition Increase
assuming it was acquired at January 1, 1995. (Decrease)
Income
In Thousands
(A) Increase in interest expense due to a higher amount of
average debt outstanding and a higher average interest
rate. (1,333)
(B) Tax effect of the above adjustment, along with ARN
historical financial information at the federal
statutory tax rate effective for 1995 (35%). 453
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
AND ARN
PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(IN THOUSANDS)
March 31, 1995
- ------------------------------------------------
Increase
(Decrease)
CCC ARN Income Pro
Hist. Investment forma Adj.
(7) (8) (9) Pro forma
Current Assets
Cash $ 10,476 $ $ 10,476
Accounts receivable
(net) 34,645 34,645
Film rights - current 8,398 8,398
Other current assets 453 453
------ ----- ------
Total Current Assets 53,519 53,972
Property, plant and equipment 132,204 132,204
Less accumulated depreciation 46,556 46,556
------- ----- -------
85,648 85,648
Film rights - non current 11,380 11,380
Intangible assets (net) 262,522 262,522
Investments in nonconsolidated
affiliates 74,883 289 75,172
Other investments 1,194 1,194
Other assets 8,114 8,114
$422,377 $74,883 $498,002
======= ====== =======
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
Increase
(Decrease)
CCC ARN Income Pro
Hist. Investment forma Adj.
(7) (8) (9) Pro forma
Current Liabilities
Accounts payable $ 4,967 $ 4,967
Accrued expenses 3,104 3,104
Accrued income and other taxes 1,727 1,727
Current portion of film right
liabilities 9,130 9,130
Current portion of long-term
debt 4,569 4,569
Accrued interest 958 1,333 2,291
------ ------ ------
Total Current Liabilities 24,455 25,788
Long term debt 251,029 74,883 325,912
Film right liabilities 11,007 11,007
Deferred income taxes 2,599 2,599
Shareholders' equity
Common Stock 1,726 1,726
Additional paid-in capital 92,673 92,673
Retained earnings (deficit) 39,025 (591) 38,434
Less cost of shares held in
treasury (137) (137)
------- ------ -------
133,287 132,696
$422,377 $74,883 $498,002
======= ====== =======
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
Note 1: Business Acquisition
On May 11, 1995, the Company purchased 50% of the equity of the
Australian Radio Network an Australian corporation, for approximately $74.9
million. The transaction has been accounted for as an investment under the
equity method of accounting. The investment of ARN has been included in the
accompanying financial statements as of March 31, 1995.
The unaudited pro forma consolidated statements of earnings for the year
ended December 31, 1994 and three months ended March 31, 1995 assumes the
investment occurred on January 1 of each year. The results are as follows:
Year Ended Three Months Ended
December 31, 1994 March 31, 1995
(In thousands except per share)
Revenues $200,695 $58,646
Net income 18,433 2,088
Earnings per share 1.06 .12
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(7) Historical Condensed Consolidated Balance Sheet for Clear Channel
Communications, Inc. and Subsidiaries as of March 31, 1995.
(8) Investment in ARN as of March 31, 1995, acquired on May 11, 1995.
(9) Effect of income statement adjustments.
Independent Auditors' Report
The Board of Directors
Wesgo Limited
We have audited the accompanying consolidated balance sheet of
Wesgo Limited and subsidiaries as of June 30, 1994, and the
related consolidated profit and loss account and statement of
cash flows for the year ended June 30, 1994, all expressed in
Australian dollars. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the Australian
standards that are substantially equivalent to 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 audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Wesgo Limited and subsidiaries as of June 30, 1994,
and the results of their operations and their cash flows for the
year ended June 30, 1994 in conformity with the accounting
principles generally accepted in Australia.
Generally accepted accounting principles in Australia vary in
certain significant respects from generally accepted according
principles in the United States. Application of generally
accepted accounting principles in the United States would have
affected results of operations for the year ended June 30, 1994,
and shareholders' equity as of June 30, 1994, to the extent
summarized in Note 27 to the consolidated financial statements.
KPMG
Sydney, Australia
July 25, 1995
A.J. Clark
Partner
Wesgo Limited and its Controlled Entities
Profit and Loss Account
For the year ended 30 June 1994
CONSOLIDATED
1994
$'000
Note
OPERATING REVENUE 2 50,867
------
OPERATING PROFIT
before Interest Expense and Abnormals 3(i) 11,098
Interest Expense - other persons (1,871)
Abnormal Items 3(ii) 1,061
--------
Operating Profit 10,288
after Interest and Abnormals
Income Tax applicable to operating profit 7 2,636
--------
OPERATING PROFIT
after income tax applicable to members of
chief entity 7,652
RETAINED PROFITS
- - 1 July 1993 2,581
--------
Total available for appropriation 10,233
Interim dividends paid for current year (1,681)
Final dividends provided for current year (2,817)
--------
RETAINED PROFITS - 30 June 1994 5,735
========
The above profit and loss account is to be read in conjunction
with the notes to and forming part of the financial statements
set out on 5 to 26.
<PAGE>
Wesgo Limited and its Controlled Entities
Balance Sheet
As at 30 June 1994
CONSOLIDATED
1994
$'000
Note
CURRENT ASSETS
Cash 2,000
Receivables 5 8,638
Other 6 1,759
------
TOTAL CURRENT ASSETS 12,397
NON CURRENT ASSETS
Property, plant and equipment 8 11,685
Intangibles 9 600
Other 6 67,155
------
TOTAL NON CURRENT ASSETS 79,440
TOTAL ASSETS 91,837
------
CURRENT LIABILITIES
Creditors and borrowings 10 1,526
Accrued Expenses 11 7,616
Other 12 3,142
------
TOTAL CURRENT LIABILITIES 12,284
------
NON CURRENT LIABILITIES
Creditors and borrowings 10 17,000
Accrued Expenses 11 350
------
TOTAL NON CURRENT LIABILITIES 17,350
------
TOTAL LIABILITIES 29,634
------
NET ASSETS 62,203
======
SHAREHOLDERS' EQUITY
Share capital 13 14,083
Reserves 14 42,385
Retained profits 5,735
------
TOTAL SHAREHOLDERS' EQUITY 62,203
======
The above balance sheet is to be read in conjunction with the
notes to and forming part of the financial statements set out on
pages 5 to 26.
Wesgo Limited and its Controlled Entities
Statement of Cash Flows
for the year ended 30 June 1994
CONSOLIDATED
1994
$'000
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations 49,628
Interest received 302
Interest paid (2,036)
Cash payments in the course of operations (38,997)
Income Taxes paid (1,075)
Abnormal items 3(ii) (1,091)
------
Net cash provided by operating activities 25(i) 6,731
------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment (1,913)
Proceeds from sale of non-current assets 25
Proceeds from disposal of controlled entities 25(ii) 3,700
Cost of disposal of controlled entities (391)
Other (98)
------
Net cash provided by investing activities 1,323
------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (3,662)
Proceeds from issue of shares 113
Repayment of borrowings (7,000)
------
Net cash used in financing activities (10,549)
------
Net (decrease) in cash held (2,495)
Cash at the beginning of the financial year 4,495
------
Cash at the end of the financial year 2,000
======
Non-cash items:
Issues of shares in satisification of dividends 810
---
The statement of cash flows is to be read in conjunction with the
notes to and forming part of the financial statements set out on
pages 5 to 26.
<PAGE>
Wesgo Limited and its Controlled Entities
Notes to and Forming Part of the Financial Statements
For the year ended 30 June 1994
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted in the
preparation of these financial statements are:
a. Basis of Preparation
The consolidated accounts of the economic entity have been
drawn up in accordance with applicable Australian Accounting
Standards, the provisions of Schedule 5 to the Corporations
Regulations, and the requirements of law. They have been
prepared on the basis of historical costs and do not take
into account changing money values or, except where stated,
current valuations of non-current assets. Except as
described in Note 4, the accounting policies have been
consistently applied. The economic entity's functional and
reporting currency is Australian dollars.
b. Principles of Consolidation
The consolidated accounts comprise the accounts of the
company, being the chief entity, and its controlled
entities.
All material inter entity transactions and balances,
including unrealized profits arising from transactions
within the economic entity have been eliminated.
Where controlled entities were disposed of or acquired
during the year, their results are included only up until
the date of disposal or from the date of acquisition.
c. Goodwill
Goodwill, representing the excess of the purchase
consideration over the fair value of the identifiable net
assets acquired on the acquisition of a business entity, is
amortised on a straight line basis. The period of
amortisation is 10 years and represents the period of time
during which benefits are expected to arise.
The unamortized balance of goodwill is reviewed annually.
Where the balance exceeds the value of expected future
benefits, the difference is charged to the profit and loss
account.
d. Income Tax
The economic entity adopts the liability method of tax
effect accounting.
Income tax expense is calculated on operating profit
adjusted for permanent differences between taxable and
accounting income. Income tax on timing differences which
arise from items being brought to account in different
periods for income tax and accounting purposes, is carried
forward in the balance sheet as a future income tax benefit
or a deferred tax liability.
Future income tax benefits are not brought to account unless
realization of the asset is assured beyond reasonable doubt.
Future income tax benefits which include tax losses are only
brought to account when their realization is virtually
certain.
Capital gains tax will be provided in the profit and loss
account in the period in which the asset is sold except
where the sale relates to non-current assets which have
previously been revalued.
Where a non-current asset is revalued, capital gains tax
will be provided at the time of revaluation when it is known
that the asset will eventually be sold. This provision is
made against the asset revaluation reserve, with the result
that when the asset is sold, there is no charge to the
profit and loss account for capital gains tax except to the
extent of adjustments for over/under provisions in previous
periods.
e. Radio Licenses
Radio licenses, which are classified as Other Non Current
Assets, are carried in the accounts at Directors' valuation.
Revaluations are performed regularly by the Directors.
Apart from any annual specific decrease in value, it is
policy to only increase the total value of radio licenses
every three years.
On an annual basis, the Directors review the radio license
values to ensure they are not in excess of the net
discounted cash inflows and outflows arising from their
continued use and subsequent disposal.
Taking these matters into account the Directors believe
that, on a going concern basis, the Balance Sheet value
attributed to the economic entity's radio licenses at 30
June 1994 does not exceed the amount which could reasonably
be expected to be expended to acquire those radio licenses.
The commercial radio licenses held by the economic entity
are renewable every five years under the provisions of the
Broadcasting Services Act and the Directors have no reason
to believe that the licenses will not be renewed from time
to time for the five year period allowable under the Act and
without imposition of any conditions.
f. Land, Buildings, Plant & Equipment
On acquisition, land, buildings, plant and equipment are
recorded at cost.
Where from time to time an independent valuation is
available that indicates values for assets have varied
permanently and significantly to those maintained in the
books, a revaluation of relevant assets will take place in
the books to reflect an appropriate carrying value.
On an annual basis the Directors review the values for land,
buildings, plant and equipment to ensure they are not in
excess of their recoverable amount. In assessing
recoverable amount, the relevant cash flows have been
discounted to their present value.
Buildings, plant, equipment and motor vehicles are
depreciated over their estimated economic life on the
straight line basis.
g. Cash
Cash as shown in the balance sheet and statement of cash
flows includes cash on hand and at bank and short term
deposits at call, net of outstanding bank overdrafts.
h. Provision for Doubtful Debts
The collectibality of debts is assessed at the end of the
year and specific provision is made for any doubtful
accounts.
i. Radio License Fees
The economic entity accrues license fees which are expected
to be charged by the Australian Broadcasting Authority,
based on current earnings.
j. Employee Benefits
The amounts expected to be paid to employees for their pro
rata legal and contractual entitlement to long service and
annual leave are provided at current pay rates.
k. Operating Leases
Payments made under operating leases are charged against
profits in equal installments over the accounting periods
covered by the lease term, except where an alternative basis
is more representative of the pattern of benefits to be
derived from the leased property.<PAGE>
CONSOLIDATED
1994
$'000
2. REVENUE
a. Sales Revenue 50,565
b. Other Revenue
Interest Received
- - Other 302
------
OPERATING REVENUE 50,867
Gross proceeds from sale of non-current assets 6,725
------
57,592
======
3. OPERATING PROFIT
The operating profit before income tax is arrived at after
charging or crediting the following specific items:
i. Charges
Amortization of:
- - Goodwill 62
- - Other Intangible Assets 75
Depreciation of fixed assets 1,307
Provisions:
- - Doubtful debts 480
- - Holiday pay 1,030
- - Long service leave 162
- - Directors' retirement 89
Operating lease rentals 1,508
ii. Abnormal Items
Surplus on sale of:
- - Controlled entities 2,152
Costs associated with the launch of new services
or FM conversion of existing services (770)
Termination payment to former
Chief Executive (186)
Other (135)
-----
1,061
-----
Income tax benefit (expense) applicable
to abnormal items 398
-----
<PAGE>
4. EARNINGS PER SHARE
1994
Basic earnings per share (cents per share) 13.7
Weighted average number of ordinary shares
on issue used in the calculation of basic
earnings per share. 56,012,133
The diluted earnings per share is not disclosed as it is not
materially different from the basic earnings per share.
Potential ordinary shares not considered dilutive
At 30 June 1994, the company had on issue 1,805,000 options,
which have the right to convert to ordinary shares. Each issue
has been considered separately in determining whether it would be
dilutive.
Changes in Accounting Policy
There were no changes in accounting policy during the financial
period ending 30 June 1994.
Conversion, call, subscription or issue after 30 June 1994
There have been no conversions to, calls of, or subscription for
ordinary shares or issues of potential ordinary shares since the
reporting date and before the completion of these accounts with
the exception of the exercise of the 1,640,000 options as
disclosed in Note 13 to the accounts.
CONSOLIDATED
1994
$'000
5. RECEIVABLES
Current:
Trade Debtors 9,309
Less provision for doubtful debts (671)
-----
8,638
=====
During the year, bad debts amounting to $457,000 were written off
against the provision for doubtful debts.<PAGE>
CONSOLIDATED
1994
$'000
6. OTHER
Current Assets:
Prepayments 1,220
Sundry debtors 539
-----
TOTAL 1,759
=====
Non-Current Assets:
Radio licenses at Directors' valuation (i) 63,659
------
Total Radio Licenses 63,659
Sundry debtors (ii) 2,750
Future income tax benefit 746
------
Total 67,155
======
(i)Radio licenses were revalued by the Directors at 30 June 1994.
In reviewing the value of radio licenses, the Directors have
adjusted individual licenses in line with their recoverable
amount. The Directors have maintained, in accordance with the
Group's policy, the total value of the Group's remaining radio
licenses at $63.6 million.
(ii) Under the terms of sale of the operational assets and radio
license of Radio KAFM, which were owned by KAFM Broadcasters Pty
Limited, the proceeds of the sale were receivable by a controlled
entity in installments over the period ending August 1998. This
debt, which is included in sundry debtors, is secured by a
floating charge over the assets and undertakings of the
purchaser, Adelaide FM Radio Pty Ltd (5MMM).
<PAGE>
CONSOLIDATED
1994
$'000
7. TAXATION
Prima facie income tax expense calculated
at 33% on the operating profit 3,395
Increase in income tax expense due to non
tax deductible items 231
Decrease in income tax expense due to:
- - Surplus on sale of capital items (788)
-----
2,838
-----
Income tax under/(over) provided
in prior year (192)
Prior year tax losses and
timing differences (10)
-----
(202)
-----
Income tax expense on operating profit 2,636
=====
Total income tax expense is made up of:
- - Current income tax expense 2,808
- - Over provision in prior year (192)
- - Deferred income tax expense 20
-----
Income tax expense on operating profit 2,636
=====
The chief economic entity is taxed as a public company.
As at 30 June 1994, certain controlled entities have estimated
carry forward losses of $8,697,000 available but not brought to
account, to be offset against future years taxable income of
these entities. The potential future income tax benefit of these
losses is $2,870,000 but will only be obtained if:
(i) the relevant company and/or the economic entity derives
future assessable income of a nature and an amount
sufficient to enable the benefit to be realized;
(ii) the relevant company and/or the economic entity continues
to comply with the conditions for deductibility imposed
by the law; and
(iii) no changes in tax legislation adversely affect the
relevant company and/or the
economic entity in realizing the benefit.<PAGE>
CONSOLIDATED
1994
$'000
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are included in the accounts on the
following basis:
Land and Buildings
- - Cost 532
- - Independent valuation 1993 (i) 3,924
-----
4,456
Less accumulated depreciation on buildings 62
-----
4,394
Broadcasting equipment - at cost 10,373
Less accumulated depreciation 4,882
------
5,491
Office furniture and equipment - at cost 3,999
Less accumulated depreciation 2,243
------
1,756
Motor vehicles - at cost 136
Less accumulated depreciation 92
------
44
Total property, plant and equipment
- - net book value 11,685
======
(i) The independent valuation was carried out in April and May
1993 by Edward Rushton Pty Ltd and was prepared on the basis of
market value for the existing use. The Directors are of the
opinion that this value is not in excess of recoverable amount.
<PAGE>
CONSOLIDATED
1994
$'000
9. INTANGIBLES
Goodwill on consolidation 666
Accumulated amortization (175)
---
491
Other 109
---
600
===
10. CREDITORS AND BORROWINGS
Current:
Trade creditors 1,359
Other 167
-----
1,526
=====
Non current:
Bank loan - secured 17,000
======
The bank loan is secured by:
(i) a negative pledge over the assets of the economic entity as
well as guarantees by all wholly-owned controlled entities.
(ii) an equitable mortgage over the assets and uncalled capital
of Wesgo Limited and its wholly-owned controlled entities.
The Group has unused lines of credit amounting to $7 million at
30 June 1994.
CONSOLIDATED
1994
$'000
11. ACCRUED EXPENSES
Current:
Accrued Expenses:
- - Holiday pay 1,027
- - Long service leave 408
- - Directors' retirement 408
- - Dividends for current year 2,817
- - Income tax
- current 2,808
- prior period 148
-----
7,616
=====
Non current:
Accrued expense for long service leave 350
=====
CONSOLIDATED
1994
$'000
12. OTHER - CURRENT LIABILITIES
Current Liabilities:
Broadcasting license fee 720
Sundry creditors and accruals 2,422
-----
3,142
=====
13. SHARE CAPITAL
Authorized Capital:
800,000,000 ordinary shares of 25 cents each 200,000
Issued and paid up capital:
56,331,706 ordinary shares and one Former
Qualified Holder's share of 25 cents each,
fully paid 14,083
Movements during the year:
Balance at beginning of year 13,955
90,000 ordinary shares were issued under the Employee Share
Option scheme 23
420,016 ordinary shares issued under Dividend Reinvestment Plan
105
------
Balance 30 June 1994 14,083
======
During the year the company issued one share titled the Former
Qualified Holder's share which has the following restrictions
placed on it:
a) it has no right to vote;
b) confers no right to any distribution, except in the case of a
winding up and then it is limited to 25 cents;
c) cannot be transferred, and is currently held in trust by
Wesgo Investments Pty Ltd.
The purpose of issuing this share was to allow the company to
participate in the electronic transfer of shares on the
Australian Stock Exchange, whilst at the same time ensuring that
the company complied with the provision of the Broadcasting
Services Act.
During the financial year, 200,000 options on the 25 cents
ordinary shares of the company were issued to Mr. G. Rice on 28
June 1994, details of which are included in the table below.
The options outstanding at 30 June 1994 were:
Date of Issue No.Options Exercise Exercise Date
Price Earliest Latest
2 April '92 550,000 $0.89 4-2-95 4-2-97
25 June '93 890,000 $0.94 6-25-96 6-25-98
28 June '94 200,000 $1.38 7-4-95 6-24-99
On 9 January 1995 all 1,640,000 options at 31 December 1994 were
exercised pursuant to the successful takeover of the company by
APN Broadcasting Pty Ltd.
CONSOLIDATED
1994
$'000
14. RESERVES
Share premium reserve 31,582
Asset revaluation reserve 10,803
------
42,385
======
Movements during the year:
Share premium reserve
Balance at beginning of year 30,787
90,000 ordinary shares were issued under the
Employee Share Option scheme at a premium of $1.00 90
420,016 ordinary shares issued under Dividend
Reinvestment Plan at a premium of $1.68 705
------
Balance 30 June 1994 31,582
======
15. CONTINGENT LIABILITIES
Pursuant to ASC Class Order 91/996, relief has been granted to
all the company's wholly-owned subsidiaries, with the exception
of KAFM Broadcasters Pty Ltd, from the requirements of the
Corporations Law for, among other things, preparation and
publication of accounts.
It is a condition of the Class Order that the company and each of
the subsidiaries enter into a deed. The effect of the deed is
that the company has guaranteed to pay any deficiency in the
event of winding up of any of the subsidiaries. The subsidiaries
have also given similar guarantees in the event that the company
is wound up.
At balance date there is no liability in respect of these
guarantees.
At balance date the company and subsidiaries which are a party to
the deed have aggregate assets of $88,790,000; aggregate
liabilities of $28,903,000; and their contribution to the
consolidated operating profit after income tax for the year was
$5,749,000.
CONSOLIDATED
1994
$'000
16. COMMITMENTS FOR EXPENDITURE
Lease Rental Commitments
1. Future operating lease rentals of plant and equipment
and motor vehicles payable as follows:
- - not later than one year 309
- - later than one year but not later than two years 208
- - later than two years but not later than five years 149
---
666
===
2. Future operating lease rentals of studio and
transmitter sites payable as follows:
- -not later than one year 1,129
- -later than one year but not later than two years 1,136
- -later than two years but not later than five years 3,305
- -later than five years 5,093
-----
10,663
======
Representing:
Cancelable operating leases 1,505
Non-cancelable operating leases 9,824
------
11,329
======
Cancelable operating lease rentals are payable as follows:
- -not later than one year 136
- -later than one year but not later than two years 143
- -later than two years but not later than five years 473
- -later than five years 753
---
1,505
=====
Capital Expenditure Commitments
Due within one year 560
===
CONSOLIDATED
1994
$'000
17. AUDITORS' REMUNERATION
Amounts received, or due and receivable by the
auditors of the company for:
a) Audit services 120
b) Other services 106
---
226
===
18. DIRECTORS' AND EXECUTIVES' REMUNERATION
Remuneration of Directors
The number of Directors of the company who received or in respect
of whom income is due and receivable, from the company and
related bodies corporate, excluding amounts included under
retirement payments within the following bands is:
1994
$ 0 - $10,000 2
$20,001 - $30,000 1
$30,001 - $40,000 3
$40,001 - $50,000 1
CONSOLIDATED
1994
$'000
Total income received, or due and receivable by:
The Directors of the company 167
Independent Directors of the Superannuation Fund 5
---
172
===
At the General Meeting held on 7 June 1991, the shareholders
approved an increase in the maximum amount of fees payable to the
Directors of Wesgo Limited and its unlisted entities to $250,000.
Remuneration of Executives
The number of Executive Officers who received, or in respect of
whom income is due and receivable, which equals or exceeds
$100,000 per annum, from the company and related bodies
corporate, excluding amounts included under retirement payments,
within the following bands is:
1994
$100,001 - $110,000 2
$110,001 - $120,000 1
$120,001 - $130,000 1
$130,001 - $140,000 1
$140,001 - $150,000 1
$150,001 - $160,000 1
$300,001 - $310,000 1
$340,001 - $350,000 1
CONSOLIDATED
1994
$'000
Total income received, or due and
receivable, by these Executives from
the company and related bodies
corporate, excluding amounts included
under retirement payments but including
termination payment to former Chief
Executive of $186,000 1,519
=====
CONSOLIDATED
1994
$'000
Included in sundry creditors and accruals is an amount of
$272,000, which represents the Directors' estimate of bonuses
payable to various employees in respect of over-achievement of
individual station results for the year ended 30 June 1994.
These amounts have been included in the calculation of
remuneration of executives.
The notice period for all executives in the economic entity is
three months with the exception of the Company Secretary, whose
notice period is twelve months.
Superannuation and Retirement Payments
Amounts paid to superannuation funds
in connection with the retirement of the
Principal Executive Officer of the
company and controlled entities 17
==
Retiring allowances paid in connection
with the retirement of persons from the
offices of Director of the company and
controlled entities. The amounts are
disclosed in aggregate only as the
Directors believe that the provision of
full particulars would be unreasonable. -
===
The company has entered into agreements with non-executive
Directors providing for benefits to be paid on their retirement
or death. The maximum benefit payable to a Director is the
maximum allowable under the Corporations Law. That is the
aggregate of the last three years' fees paid by the Company to
the Director.
19. SUPERANNUATION COMMITMENTS
At 30 June 1994, the company and its controlled entities
participated in seven accumulation superannuation plans (defined
contribution plans). Employees are entitled to benefits on
retirement, disability or death. The company and its controlled
entities contribute to the plans at various percentages of
employees' salaries and wages.
<PAGE>
20. REPORTING BY SEGMENTS
The economic entity operates solely within the Australian radio
broadcasting industry and consequently the consolidated accounts
reflect the operations of this segment alone.
21. RELATED PARTIES
Directors
The names of each person holding the position of Director of
Wesgo Limited during the year are Messrs K. Moremon, G. Herring,
K. Jacobsen, J. Kennedy and M. Cleary. Details of the
remuneration of Directors are set out in Note 18.
Details of transactions:
Directors of Wesgo Limited:
Various companies with which Directors are associated have
purchased advertising, funded joint promotions and purchased
news and program services from various companies within the
economic entity, in the ordinary course of business on normal
terms and conditions.
Controlled Entities
Details of interests in controlled entities are set out in Note
22.
Superannuation Fund
Details of the economic entity's employee superannuation funds
(defined contribution plans) are set out in Note 19.
Contributions to the funds were $986,000 for the year.
Directors' Holdings of Shares and Share Options
Directors have the following beneficial interest in:
i) Ordinary shares 156,822
ii) Options Nil
On 15 March 1994, 2,348 shares were issued to the Directors in
accordance with the provisions of the Dividend Reinvestment Plan.
<TABLE>
<CAPTION>
<PAGE>
22. PARTICULARS IN RELATION TO CONTROLLED ENTITIES
Place of Class of % Held % Held Contributions to
Incorp. Share 30/6/94 30/6/93 Consolidated Profit
1994
$'000
<S> <C> <C> <C> <C> <C>
Wesgo Limited NSW (573)
Controlled Entities
Wesgo Investments Pty Ltd NSW ORD 100% 100% (2,151)
Wesgo Comm.Pty Ltd NSW ORD 100% 100% 8,965
West Sydney Radio Pty Ltd NSW ORD 100% 100% 69
Wesgo Superann.Pty Ltd NSW ORD 100% 100% -
Central Coast Brd.Pty Ltd NSW ORD 100% 100% 71
Radiowise Pty Ltd NSW ORD 100% 100% -
Westat Research Pty Ltd NSW ORD 100% 100% 5
Greater West TV Pty Ltd NSW ORD 100% 100% (31)
Airplay Media Serv.Pty Ltd NSW ORD 100% 100% 211
Radio 2SM Pty Ltd NSW ORD 100% 100% (2,603)
Sun Coastal FM Radio Pty LtdQLD ORD 100% 100% -
Universal Radio Pty Ltd QLD ORD 100% 100% -
Radio Albury Wodonga Pty LtdACT ORD 100% 100% 705
Malbend Pty Ltd ACT ORD 100% 100% 345
Actraint No. 116 Pty Ltd ACT ORD 100% 100% -
KAFM Broadcasters Pty Ltd SA ORD 100% 100% 1,903
Radio Airtime Sales Pty Ltd VIC ORD 100% 50% 736
-----
7,652
=====
</TABLE>
<PAGE>
23. ACQUISITION/DISPOSAL OF CONTROLLED ENTITIES
The following controlled entities were acquired or disposed of
during the year:
Consideration Net Consolidated The
Tangible Profit/Loss Company's
Assets at on Disposal Interest
Date of
Acquisition/
Disposal
$'000 $'000 $'000 %
Acquisitions:
1994:
Radio Airtime Sales
Pty Ltd 200 (108) - 50
The entity was acquired
for cash, effective
from 1 July 1993
Disposals:
1994:
Malbrink Pty Ltd
(Radio 3BO Bendigo) 3,000 2,337 663 100
Operational assets and
liabilities of KAFM
Broadcasters Pty Ltd 3,700 1,672 2,028 -
----- ----- -----
6,700 4,009 2,691
Less costs on disposal - - 539
6,700 4,009 2,152
===== ===== =====
24. NOTES TO THE STATEMENTS OF CASH FLOWS
(i) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
CONSOLIDATED
1994
$'000
Operating profit after income tax 7,652
Add/(less) items classified as
investing/financing activities:
Provision for doubtful debts 441
Surplus on sale of:
- - controlled entities (2,152)
Add/(less)non-cash items:
Amortisation 137
Depreciation 1,307
Loss on sale of fixed assets 38
Increase in tax payable 1,540
-----
Net cash provided by operating activities
before change in assets and liabilities 8,963
=====
Changes in assets and liabilities adjusted
for effects of purchase and disposal
of controlled entities during the financial
year:
Decrease in other assets 418
(Increase) in trade debtors (1,795)
(Decrease) in creditors and borrowings (1,828)
Increase in provisions 72
Increase in other liabilities 881
Increase in deferred taxes payable 20
------
(2,232)
======
Cash provided by operating activities 6,731
======<PAGE>
25. NOTES TO THE STATEMENTS OF CASH FLOWS (Cont'd)
(ii) DISPOSAL OF CONTROLLED ENTITIES
1994
$'000
During the year, the operational assets and radio license
of KAFM Adelaide, and the controlled entity which owns 3BO
Bendigo, (Malbrink Pty Ltd) were sold. Details of the
disposals are as follows (in aggregate):
Consideration
- Cash 3,700
- Deferred consideration (Note 6) 3,000
-----
6,700
-----
Fair value of net assets of entities disposed:
Cash 74
Property, plant and equipment 1,738
Receivables 357
Radio licenses 2,072
Other assets 29
Creditors and borrowings (85)
Provisions (117)
Other liabilities (59)
-----
4,009
-----
Surplus on sale 2,691
=====
(iii)ACQUISITION OF CONTROLLED ENTITIES
1994
$'000
During the year, the remaining 50% of Radio Airtime
Sales Pty Ltd was acquired. Details of the acquisition
are as follows:
Consideration - Cash 200
Fair value of net assets acquired:
Cash 131
Receivables 475
Other assets 80
Property, plant and equipment 111
Creditors and borrowings (758)
Provisions (147)
-----
(108)
Goodwill on acquisition 308
----
200
====
Outflow of cash to acquire controlled entities, net of cash
acquired:
Cash consideration 200
Less cash balances acquired 131
---
Outflow of cash 69
===
26. OPERATIONS TO BE DISPOSED
In order to comply with the control and ownership requirements
for commercial broadcasting licenses of the Australian
Broadcasters Act, the company is required to sell 3 stations.
Summarized below are the sales, pre-tax income, total assets and
net assets as of and for the year ended 30 June 1994, of the
stations which the company intends to sell.
Sales Pre-Tax Assets Net Assets
$A'000 $A'000 $A'000 $A'000
Profit/(Loss)
Gold 1269 AM 2,074 (1,385) 2,832 (3,445)
2GO (FM 107.7) 3,804 559 4,611 4,611
3MP (MAGIC 693) 7,665 (5,838) 17,158 2,732
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
A description of the Australian generally accepted accounting
policies that significantly differ from US generally accepted
accounting principles follows:
(a) Radio Licenses: In accordance with Australian generally
accepted accounting principles radio licenses, which are
classified as Other Non Current Assets, are carried in the
accounts at Directors' valuation. Revaluations are performed
regularly by the Directors. Apart from any annual specific
decrease in value, it is company policy under Australian
accounting principles to only increase the total value of radio
licenses every three years. No amortisation is recorded on the
radio licenses under Australian accounting practices.
Under US accounting principles, radio licenses must be carried at
cost less accumulated amortisation. For purposes of the
adjustment required under US generally accepted accounting
principles, the period of benefit of the radio licenses is
estimated to be 25 years.
(b) Land and Buildings: Certain land and buildings are stated at
valuations determined by the Directors and/or independent valuers
under Australian generally accepted accounting principles.
Accounting principles generally accepted in the United States do
not permit the revaluation of assets in the primary financial
statements. Under US generally accepted accounting principles,
buildings are depreciated based on historical costs, utilizing an
average life of 25 years.
(c) Share Options: In accordance with accepted Australian
accounting practice, no element of employee compensation has been
recognized on share options issued to employees on which the
exercise price is less than the share price at the time of issue.
While this results in an adjustment to earnings, no adjustment to
shareholders' equity is needed.
US accounting practices require compensation expense to be
recognized for the excess of the share price over exercise price
over the vesting period.
(d) Dividends: In accordance with the Australian Corporations
Law, the company records the proposed final dividend which is
declared after 30 June of each year in the period to which it
relates.
The company has recorded a dividend for this period of
$2,817,000, which was not declared until subsequent to 30 June
1994. As this is not accepted under U.S. accounting practices an
increase of $2,817,000 in shareholders' equity is reflected in
the reconciliation of shareholders' equity to that under U.S.
accounting principles.
<PAGE>
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd)
(e) Income Tax: The economic entity adopts the liability method
of tax effect accounting under Australia accounting practices.
Income tax expense is calculated on operating profit adjusted for
permanent differences between taxable and accounting income.
Income tax on timing differences which arise from items being
brought to account in different periods for income tax and
accounting purposes, is carried forward in the balance sheet as a
future income tax benefit or a deferred tax liability.
Future income tax benefits are not brought to account unless
realization of the asset is assured beyond reasonable doubt.
Future income tax benefits which include tax losses are only
brought to account when their realization is virtually certain
under Australian accounting practices.
Under US generally accepted accounting principles deferred tax
assets are recognized and measured based on the likelihood of
realization of the related tax benefits in the future. A
deferred tax asset must be recognized for deductible temporary
differences and operating loss and tax credit carryforwards, and
a valuation allowance is established to reduce that deferred tax
asset if it is "more likely than not" that the related tax
benefits will not be realized. "More likely than not" is
intended to mean a level of likelihood that is slightly more than
50 percent.
As at 30 June 1994, certain controlled entities have estimated
carry forward losses of $8,697,000 available but not brought to
account, to be offset against future years taxable income of
these entities (in Australia tax losses and capital losses can be
carried forward indefinitely). The potential future income tax
benefit of these losses is $2,870,000.
In assessing the realization of deferred tax assets for US
reporting purposes, management has considered whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of
deferred tax assets is dependant upon the generation of future
taxable income during the periods in which those temporary
differences become deductible. Management considered the
schedule reversal of deferred tax liabilities, projected future
taxable income and capital gains, and tax planning strategies in
making this assessment. Based upon the level of historical
taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management
believes it is more likely than not the economic entity will
realize these benefits.
Consequently, the available tax losses have been recorded as a
deferred tax asset for US reporting purposes with a valuation
allowance of nil.
<PAGE>
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd)
Application of accounting principles generally accepted in the
United States would have had the following effect on net income
and shareholders' equity:
1994
$A'000
Net income as reported in the Consolidated Profit and Loss
Account 7,652
Increase (decrease) for:
Radio licenses amortisation (1,999)
Buildings - depreciation (98)
Compensation expense on employee share options (52)
-------
Net increase (decrease) (2,149)
-------
Net income in accordance with US GAAP 5,503
=======
Primary earnings per share under US GAAP
(cents per share) 9.8 cents
1994
$A'000
Shareholders' equity as reported in the
Consolidated Balance Sheet 62,203
Increase (decrease) for:
Radio Licenses:
-Revaluations (10,630)
-Amortisation (10,623)
Property, plant and equipment
-Revaluations (173)
-Amortisation (488)
Deferred tax asset 2,870
Current period dividends accrued prior to declaration 2,817
--------
Net decrease (16,227)
--------
Shareholders' equity in accordance with US GAAP 45,976
========
<PAGE>
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd)
Application of accounting principles generally accepted in the
United States would have had the following effect on the
Statement of Cash Flows:
The economic entity presents its Cash Flows in accordance with
accounting standard AASB 1026 "Statement of Cash Flows" ("AASB
1026"). Its objectives and principles are similar to those set
out in the US FASB statement No. 95 "Statement of Cash Flows"
("FASB 95"). The principle difference relates to the definition
of cash. Under AASB 1026 , cash is expressed net of overdrafts
where a right of offset with the bank exists. FASB 95 requires
this to be separately shown under financing activities.
Summarized cash flow data by operating, investing and financing
activities in accordance with FASB 95 is set out below:
Year ended 30 June 1994
Net cash inflow / (outflow) from: $A'000
Operating activities 6,731
Investing activities 1,323
Financing activities (11,139)
--------
Increase / (decrease) in cash (3,085)
--------
Cash at July 1, 1993 5,256
Cash at June 30, 1994 2,171
=======
The Board of Directors Australian Radio Network Pty Limited
We have audited the accompanying combined balance sheet of the
Albert s Radio Stations acquired by the Australian Radio Network
Pty Limited ( Australian Radio Network ), as described in Note
1(c) to the combined financial statements as of June 30 1994, and
the related combined profit and loss account and statement of
cash flows for the year ended 30 June 1994, all expressed in
Austalian dollars. These combined financial statements are the
responsibility of the Australian Radio Network s management. Our
responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with the Australian
standards that are substantially equivalent to U.S. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the financial
position of the Albert s Radio Stations acquired by the
Australian Radio Network as of June 30 1994, and the results of
their operations and their cash flows for the year ended June 30,
1994, in conformity with the accounting principles generally
accepted in Australia.
Generally accepted accounting principles in Australia vary in
certain significant respects from generally accepted accounting
principles in the United States. Application of generally
accepted accounting principles in the United States would have
affected results of operations for the year ended June 30, 1994,
and shareholders equity as of June 30, 1994, to the extent
summarised in Note 21 to the combined financial statements.
KPMG
Sydney, Australia
July 25, 1995
A. J. Clark
Partner
12 months to
30 June 1994
$
Note
Operating profit before
income tax 2, 3 1,144,349
---------
Income tax (expense)
attributable to operating profit 4 (240,832)
Operating profit after income tax 903,517
----------
Retained profit - 1 July 1993 163,294
Retained profit - 30 June 1994 1,066,811
----------
The combined profit and loss account should be read in
conjunction with the notes to and forming part of the financial
statements set out on pages 5 to 22.
<PAGE>
Note 30 June
1994
$
CURRENT ASSETS
Cash 5 -
Receivables 6 11,111,517
Other 7 302,360
----------
TOTAL CURRENT ASSETS 11,413,877
----------
NON-CURRENT ASSETS
Receivables 6 17,282,510
Plant and Equipment 9 7,240,730
Intangibles 10 21,523,500
Investments 8 79,650
Other 11 552,262
----------
TOTAL NON-CURRENT ASSETS 46,678,652
----------
TOTAL ASSETS 58,092,529
----------
CURRENT LIABILITIES
Creditors and Borrowings 12 34,752,661
Accrued Expenses 13 1,662,596
Other 14 11,551
----------
TOTAL CURRENT LIABILITIES 36,426,808
----------
NON-CURRENT LIABILITIES
Creditors and Borrowings 12 17,658
Accrued Expenses 13 289,254
Other 14 18,582,094
----------
TOTAL NON-CURRENT LIABILITIES 18,889,006
----------
TOTAL LIABILITIES 55,315,814
----------
NET ASSETS 2,776,715
----------
SHAREHOLDERS' EQUITY
Reserves 16 1,398,450
Share Capital 25 311,454
Retained Profits 1,066,811
----------
TOTAL DEFICIENCY OF SHAREHOLDERS' FUNDS 2,776,715
----------
The combined balance sheet is to be read in conjunction with the
notes to and forming part of the financial statements set out on
pages 5 to 22.
<PAGE>
Note 30 June
1994
$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations 25,850,424
Cash payments in the course of operations (24,026,081)
Income tax paid (656,094)
------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 19 1,168,249
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash payments for FM licence
conversion costs (9,325,567)
Proceeds from sale of property,
plant and equipment 510,304
Payment for property, plant and equipment (2,013,662)
-----------
NET CASH USED IN INVESTING ACTIVITIES (10,828,925)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings -
former related parties 9,669,464
Repayment of borrowings -
former related parties (547,081)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,122,383
------------
NET INCREASE (DECREASE) IN CASH HELD (538,293)
------------
CASH AT THE BEGINNING OF THE FINANCIAL YEAR 285,197
CASH AT THE END OF THE FINANCIAL YEAR 19 (253,096)
------------
The combined statement of cash flows is to be read in conjunction
with the notes and forming part of the financial statements set
out on pages 5 to 22.
<PAGE>
1. STATEMENT OF ACCOUNTING POLICIES
Set out below is a summary of the significant accounting
policies adopted by the entity in the preparation of the
accounts.
a. Change of Accounting Period
Pursuant to the acquisition of the entity by the
Australian Radio Network (formerly APN Broadcasting Pty
Ltd) the entity has changed its financial year end to
31 December.
b. Basis of Preparation
The combined financial statements of the economic
entity have been drawn up in accordance with applicable
Australian Accounting Standards, the provisions of
Schedule 5 to the Corporations Regulations, and the
requirements of law. They have been prepared on the
accrual basis using the going concern assumption of
accounting and the historical cost convention and do
not take into account changing money values or, except
where stated, current valuations of non-current assets.
The accounting policies have been consistently applied.
All amounts are expressed in Australian dollars.
The financial statements have been prepared in
accordance with Australian Accounting Standards and the
provisions of Schedule 5 of the Corporations Law, with
the exception of AASB 1017, Related Party Disclosures.
The carrying amount of all non-current assets are
reviewed at least annually to ensure that they are not
in excess of their recoverable amount. If the carrying
amount of a non-current asset exceeds the recoverable
amount, the asset is written down to the lower value.
In assessing recoverable amounts, except for radio
licences, which are discussed in Note 1(f), the
relevant cash flows have not been discounted to their
present value.
<PAGE>
c. Principles of Combination
The combined accounts comprise the accounts of the
economic entity, being the following companies:
- Capital City Broadcasters Pty Limited (Canberra FM
and 2 CC AM)
- Double T Radio Pty Limited (TTFM)
- Commonwealth Broadcasting Corporation Pty Limited
(MIX FM)
- Gold Radio Service Pty Limited (4GR)
- Maryborough Broadcasting Company Pty Limited (4MB)
- Rockhampton Broadcasting Company Pty Limited (4RO)
- ARN Sales Pty Limited
All material inter entity transactions and balances,
including unrealised profits arising from transactions
within the economic entity have been eliminated.
In order to comply with the Australian Broadcasting
Act s requirements for the control and ownership of
commercial broadcasting licences the entity is required
to sell three stations. Details of the sales, pre-tax
income, total assets and net assets of the companies
that own these stations as of, and for the year ended
30 June 1994 are summarised in Note 20.
d. Income Tax
The economic entity adopts the liability method of tax
effect accounting.
Income tax expense is calculated on operating profit
adjusted for permanent differences between taxable and
accounting income. Income tax on timing differences
which arise from items being brought to account in
different periods for income tax and accounting
purposes, is carried forward in the balance sheet as a
future income tax benefit or a deferred tax liability.
Future income tax benefits are not brought to account
unless realisation of the asset is assured beyond
reasonable doubt. Future income tax benefits which
include tax losses are only brought to account when
their realisation is virtually certain.
Capital gains tax will be provided in the profit and
loss account in the period in which the asset is sold
except where the sale relates to non-current assets
which have previously been revalued.
d. Income Tax cont.
Where a non-current asset is revalued, capital gains
tax will be provided at the time of revaluation when it
is known that the asset will eventually be sold and a
capital gains tax liability will be incurred. This
provision is made against the asset revaluation
reserve, with the result that when the asset is sold,
there is no charge to the profit and loss account for
capital gains tax except to the extent of adjustments
for over/under provisions in previous periods.
<PAGE>
e. Fixed Assets
Fixed assets are capitalised at historical cost and
depreciated as outlined below.
Land and buildings were independently valued in 1989 on
an existing use basis of valuation and included in the
financial statements at the revalued amounts.
Disposal of Revalued Assets
The gain or loss on disposal of revalued assets is
calculated as the difference between the carrying
amount of the asset at the time of disposal and the
proceeds of disposal, and is included in the result of
the economic entity in the year of disposal.
Depreciation
Fixed assets, including buildings but excluding
freehold land, are depreciated over their estimated
useful lives. Fixed assets are depreciated from the
month of acquisition.
f.Radio Licences
The commercial radio licences held by the economic
entity are renewable every five years under the
provisions of the Broadcasting Services Act and the
Directors have no reason to believe that the licences
will not be renewed from time to time for the five year
period allowable under the Act and without imposition
of any conditions.
Radio licences are carried in the accounts at the lower
of cost or recoverable amount.
On an annual basis, the Directors review the radio
licence values to ensure they are not in excess of the
discounted cash inflows and outflows arising from their
continued use and subsequent disposal.
g. Provisions
Doubtful Trade Debtors
The collectibility of debts is assessed at year end and
provision is made for doubtful accounts.
Employee Entitlements
This provision relates to annual leave and long service
leave and has been calculated on the basis of pro-rata
entitlements under appropriate awards, based on current
wage rates.
h. Superannuation
The Company contributes to a defined contribution plan
an amount for each employee as required by the
Superannuation Guarantee Legislation. Such company
contributions are charged against income.
i. Leases
Leases under which the lessor retains substantially all
the risks and benefits of ownership are classified as
operating leases. Minimum lease payments are charged
against profits over the accounting periods covered by
the lease term.
Leases of plant and equipment under which the economic
entity assumes substantially the risks and benefits of
ownership are classified as finance leases.
Finance leases are capitalised. A lease asset and a
liability equal to the present value of the minimum
lease payments are recorded at the inception of the
lease. Contingent rentals are written off as an expense
of the accounting period in which they are incurred.
Capitalised lease assets are amortised on a straight
line basis over the term of the relevant lease, or
where it is likely the economic entity will obtain
ownership of the asset, the life of the asset. Lease
liabilities are reduced by repayments of the principal.
The interest components of the lease payments are
charged to the profit and loss account.
j. Investments
Investments are valued at the lower of cost or
recoverable amount. Income from investments is
recognised when received.
k. Cash
Cash as shown in the balance sheet and statement of
cash flows includes cash on hand and at bank and short
term deposits at call, net of outstanding bank
overdrafts. See Note 5.
<PAGE>
l. Radio Licence Fees
The economic entity accrues licence fees which are expected
to be charged by the Australian Broadcasting Authority,
based on current earnings.
30 June
1994
$
2. OPERATING REVENUE
Included in operating revenue are
the following itemsentering into
the determination of operating profit:
Sales Revenue 26,694,908
Contra Revenue 48,053
Other Income 10,759
Trust Income 12,929
Proceeds from Sale of Fixed Assets 510,304
Other Revenue 276,891
----------
27,553,844
==========
<PAGE>
30 June
1994
$
3. OPERATING PROFIT
Included in operating profit
are the following items of expense:
Bad trade debts written off 486,406
Depreciation of property, plant
& equipment 991,884
Lease rentals - operating lease 25,882
Lease rentals - operating lease:
former related party 300,000
Amortisation of leased assets 8,530
Profit on sale of fixed assets 15,125
Finance charges on finance lease 4,946
Amounts set aside to provisions for:
Doubtful trade debts 58,318
Employee entitlements
- Long Service leave 70,693
- Annual leave 10,319
Remuneration of auditors due and
payable for:
Auditing the accounts 38,390
Other Services 6,000
<PAGE>
30 June
1994
$
Note
4. INCOME TAX
Income Tax Expense
Prima facie income tax calculated
at 33% on the operating profit: 377,635
Increase/(Decrease) in income tax
expense due to:
Legal 2,390
Depreciation on buildings 11,014
Depreciation on transmission
facilities 7,213
Non deductible promotions 16,187
Fringe Benefits Tax 31,789
Sundry (including entertainment) 84,588
Book capital profits (88,997)
Late payment of group tax penalty 384
Over provision in prior years (201,371)
---------
Total income tax expense 240,832
--------
Income tax expense is made up of:
Current income tax expense 472,176
Over provision in prior year (201,371)
---------
270,805
Future income tax (benefit)/expense (29,973)
---------
240,832
--------
Provision for Current Income Tax
Movements during the year were as follows:
Balance at the beginning of the year 434,262
Current year tax expense 472,176
Income tax paid (656,094)
Net tax losses transferred to related companies
by members of the economic entity 391,977
--------
Balance at the end of the year 13 642,321
========
<PAGE>
30 June
1994
$
4. INCOME TAX (Continued) Note
Future Income Tax Benefit
Future income tax benefits reflects
the future benefits at income rates
of 33% on items not currently
deductible (payable) for income tax.
Provision for employee entitlements 396,605
Provision for doubtful debts 118,281
Accrued licence fees 25,432
Accrued audit fees 11,649
Accrued superannuation contributions 7,729
Accrued fringe benefits tax 3,985
Difference between book/tax
depreciation of fixed assets 20,720
Provision for diminution in investments 2,470
Provision for diminution in production library 9,900
Prepayments (44,509)
--------
11 552,262
-------
Provision for Deferred Income Tax
Provision for deferred income tax
comprises the estimated expense at
current income tax rates of 33%
Difference in depreciation of property,
plant & equipment for accounting and
income tax purposes 82,186
Capitalised leases 3,472
Prepayments 22,034
-------
13 107,692
-------
Future Income Tax Benefit Not Brought to Account:
Capital losses carried forward at
33% (Double T Radio Pty Limited) 2,034,314
The potential future income tax benefit
will only be obtained if:
4. INCOME TAX (Continued)
(i) the relevant company derives future assessable
income of a nature and an amount sufficient to
enable the benefit to be realised;
(ii) the relevant company continues to comply with the
conditions for deductibility imposed by the law;
and
(iii) no changes in the tax legislation affect the
relevant company in realising the benefit.
5. CASH
Cash at Bank -
(Cash has been offset against overdrafts in Note 12 under
group borrowing arrangements)
<PAGE>
30 June
1994
$
6. RECEIVABLES
Current
Trade debtors 5,489,617
Less: Provision for doubtful debts (358,429)
----------
5,131,188
Other debtors 155,073
Loans to former related companies 5,647,940
Loans to staff member 177,316
---------
5,980,329
11,111,517
----------
Loans receivable from a staff member bear interest at 5%
interest per annum and are repayable by regular amounts over
a specified period.
Non-Current
Loan to former holding company 3,527,415
Loan to former related companies 13,520,095
Non trade receivable 235,000
----------
17,282,510
==========
Loans receivable from former holding and related companies
are non-interest bearing and were subsequently forgiven as a
condition of the purchase of the economic entity by the
Australian Radio Network.
7. OTHER CURRENT ASSETS
Prepayments 204,617
Inventories (production library) 81,251
Sundry debtors 16,492
==========
302,360
----------
<PAGE>
8. INVESTMENTS
Non-current
Shares in related entities (unquoted) 542
Units in Capital Property Trust 79,108
Total Investments 79,650
-------
9. PROPERTY, PLANT & EQUIPMENT
Freehold Land - at cost 830,000
Leasehold property - at cost 8,617,403
Buildings - at independent valuation 1989 575,000
Less: Accumulated depreciation (4,596,570)
-----------
4,595,833
Plant & equipment - at cost 7,366,113
Plant and Equipment - at directors
valuation 1971 40,008
Less: Accumulated depreciation (5,591,224)
-----------
1,814,897
Total property, plant and equipment
at net book value 7,240,730
----------
10. INTANGIBLES
Radio Licences - at cost 21,523,500
----------
11. OTHER NON-CURRENT ASSETS
Future income tax benefit 552,262
12. CREDITORS AND BORROWINGS
Current
Bank overdraft - secured, net of cash at bank 253,096
Trade creditors and accruals 1,503,109
Other creditors 14,641
Lease liability 27,814
Amounts due to former controlling entity 16,397,478
Amounts due to former related entities 16,556,523
----------
34,752,661
==========
12. CREDITORS AND BORROWINGS Continued.
Loans payable to former holding and related companies are
non-interest bearing and were subsequently forgiven as a
condition of the purchase of the economic entity by the
Australian Radio Network.
Non-Current
Lease liability 17,658
-------
13. ACCRUED EXPENSES
Current
Income Taxes 642,321
Employee entitlements:
Annual leave 615,047
Long Service Leave 405,228
1,662,596
----------
Non-Current
Employee entitlements:
Long service leave 181,562
Deferred income taxes 107,692
----------
289,254
----------
14. OTHER LIABILITIES
Current
Other 11,551
---------
Non-Current
Loans from former holding company 15,095,190
Loans from former related companies 3,486,904
----------
18,582,094
----------
Loans payable to former holding and related companies are
non-interest bearing and were subsequently forgiven as a
condition of the purchase of the economic entity by the
Australian Radio Network.
<PAGE>
30 June
1994
$
15. COMMITMENTS AND CONTINGENCIES
Capital Expenditure Commitments
Finance lease rentals are due as follows:
Not later than one year 30,343
Later than one year but not later than two 5,027
Later than two years but not later than five 14,664
--------
50,034
--------
Less amounts provided for in the financial statements:
Current 27,814
Non-Current 17,658
--------
Total lease liability 45,472
--------
Future finance charges not provided
for in the financial statements 4,562
--------
Commitment and Contingent Liabilities
The economic entity pays a monthly rental for the station
premises to the Australian Broadcasting Company Pty Limited,
its former controlling entity, and no formal lease exists
between the parties. The amount paid under this arrangement
during the year ended 30 June 1994 was $300,000.
16. RESERVES
Capital Profits Reserve 70,709
General Reserve 139,825
Asset revaluation reserve 9,007
Property Revaluation reserve 1,178,909
---------
1,398,450
---------
<PAGE>
17. EVENTS SUBSEQUENT TO BALANCE DATE
Since June 30 1994, the companies comprising the economic
entity were purchased by the Australian Radio Network
(formerly APN Broadcasting Services Pty Limited). The
following companies were subsequently sold on 30 June 1995
in order to comply with Australian Broadcasting Authority
requirements:
- Maryborough Broadcasting Pty Limited
- Gold Radio Service Pty Limited; and
- Rockhampton Broadcasting Pty Limited
The sales, pre-tax income, total assets and net assets of
these entities are disclosed in Note 20.
A group entity, Capital City Broadcasters Pty Limited sold
its AM Radio Licence (2CC AM) and the operating assets and
broadcasting and transmission equipment of this station on
28 December 1994. The operating results of 2CC AM are
included in these combined financial statements. The sales,
pre-tax profit and book value of assets sold are disclosed
in Note 20.
18. INDUSTRY SEGMENTS
The economic entity operates solely within the Australian
Radio Broadcasting industry and consequently the combined
accounts reflect the operations of this segment alone.
<PAGE>
30 June
1994
$
19. NOTES TO THE STATEMENT OF CASH FLOWS
(i) RECONCILIATION OF CASH
For purposes of the Statement of Cash Flows, cash includes
cash on hand and at bank and short term deposits at call,
net of outstanding bank overdrafts. Cash as at the end of
the financial year as shown in the Statement of Cash Flows
is reconciled to the related items in the balance sheet as
follows:
Bank overdraft - secured, net of cash at bank (253,096)
(ii) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Operating profit after income tax 903,517
Add (less) items classified as investing/financing
activities:
(Profit)/Loss on sales of non-current assets (15,125)
Add (less) non-cash items:
Depreciation and amortisation 1,000,414
---------
Net cash provided by operating activities
before change in assets and liabilities 1,888,806
Change in assets and liabilities during the financial year
(Increase) / decrease in trade/term debtors (1,137,317)
(Increase) / decrease in prepayments (154,705)
Increase / (decrease) in trade creditors 332,184
Increase / (decrease) in accrued expenses 76,960
Increase / (decrease) in income taxes payable 208,060
Increase / (decrease) in deferred taxes payable (45,739)
-------
Net cash provided by operating activities 1,168,249
=========
<PAGE>
20. STATIONS AND ASSETS TO BE DISPOSED
In order to comply with the Australian Broadcasting Act s
requirements for the control and ownership of commercial
broadcasting licences, the economic entity is required to sell
three stations. Summarised below are the sales, pre-tax income,
total assets and net assets as of and for the year ending
30 June 1994 of the companies which own the stations and
licences that were sold on 30 June 1995.
As of and for the Year ended 30 June 1994
Company Sales Pre-Tax Total Assets Net Assets
(Station) $ Income $ $ $
Maryborough 1,509,409 491,409 2,967,126 1,971,005
Broadcasting
Pty Limited
(Radio 4MB)
Gold Radio 2,710,925 977,474 6,631,674 5,130,629
Service
Pty Limited
(Radio 4GR)
Rockhampton 2,036,997 367,311 3,712,508 2,683,719
Broadcasting
Service
(Radio 4RO)
A group entity, Capital City Broadcasters Pty Limited also sold its
AM Radio Licence (2CC AM) and the operating assets and broadcasting
and transmission equipment of this station on 28 December 1994.
The operating results of 2CC AM are included in these combined
financial statements.
<PAGE>
The sales, pre-tax profit and book value of assets of 2CC - AM sold
on 28 December 1994 for consideration of $300,000, are detailed
below:
2CC - AM - Capital City Broadcasters Pty Limited
Sales - year ended 30 June 1994 $1,824,895
Net pre-tax profit / (loss) -
year ended 30 June 1994 $(31,463)
Total Assets Sold (book
value) as at 30 June 1994 $68,611
Profit on Sale on 28 December 1994 $231,389
21. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
A description of the accounting policies that significantly differ
in certain respects from US generally accepted accounting principles
follow:
(a) Radio Licences: In accordance with Australian generally
accepted accounting principles radio licences are carried in the
accounts at the lower of cost or recoverable amount. The radio
licences are renewable every five years under the provisions of the
Broadcast Services Act.
Under US accounting principles, radio licences must be carried at
cost less accumulated amortisation. For purposes of the adjustment
required under US generally accepted accounting principles, the
estimated period of benefits of the radio licences is estimated to
be 25 years.
(b) Plant, Property and Equipment: Certain plant, property and
equipment are stated at valuations determined by the Directors
and/or independent valuers. Accounting principles generally
accepted in the United States do not permit the revaluation of
assets in the primary financial statements.
Under Australian accounting practices, the economic entity is
depreciating buildings over 100 years. The estimated useful lives
under US accounting principles has been set at 25 years, resulting
in an increase in the depreciation expense under US accounting
practices.
(c) Income Tax: The economic entity adopts the liability method of
tax effect accounting under Australia accounting practices. Income
tax expense is calculated on operating profit adjusted for permanent
differences between taxable and accounting income. Income tax on
timing differences which arise from items being brought to account
in different periods for income tax and accounting purposes, is
carried forward in the balance sheet as a future income tax benefit
or a deferred tax liability.
Future income tax benefits are not brought to account unless
realisation of the asset is assured beyond reasonable doubt. Future
income tax benefits which include tax losses are only brought to
account when their realisation is virtually certain under Australian
accounting practices.
Under US generally accepted accounting principles deferred tax
assets are recognised and measured based on the likelihood of
realisation of the related tax benefits in the future. A deferred tax
asset must be recognised for deductible temporary differences and
operating loss and tax credit carryforwards, and a valuation allowance
is established to reduce that deferred tax asset if it is more likely
than not that the related tax benefits will not be realised. More
likely than not is intended to mean a level of likelihood that is
slightly more than 50 percent.
As at 30 June 1994, one of the combined entities, Double T Radio Pty
Ltd, has estimated carry forward capital losses with a potential future
income tax benefit of $2,034,314 available but not brought to account,
to be offset against future years taxable capital gains of the entity
(in Australia tax losses and capital losses can be carriedforward
indefinitely).
In assessing the realisation of deferred tax assets for US reporting
purposes, management has considered whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realised. The ultimate realisation of deferred tax assets relating to
capital losses is dependant upon the generation of future taxable
capital gains. Management considered the projected future taxable
capital gains and tax planning strategies in making this assessment.
Based upon the level of historical taxable capital gains and
projections for future taxable capital gains, management does not
believe it is more likely than not the economic entity will realise
these benefits.
Consequently, the available capital losses have been recorded as a
deferred tax asset for US reporting purposes with a valuation allowance
of $2,034,314, resulting in a US GAAP adjustments of nil.
Application of accounting principles generally accepted in the
United States would have had the following effect on net income and
shareholders equity.
30 June
1994
$
Net operating profit after income tax as
reported in the Combined Profit and
Loss Account 903,517
Increase (Decrease) for:
Radio Licences - amortization (609,660)
Property, plant and equipment - depreciation (17,000)
-------
Net increase (decrease) (626,660)
-------
Net income in accordance with US GAAP 276,857
-------
Shareholders' equity as reported in the
Combined Balance Sheet 2,776,715
Increase (decrease) for:
Radio Licences - amortization (2,062,720)
Property, plant and equipment: revaluations (1,178,678)
Property, plant and equipment: depreciation (222,000)
---------
Net increase (3,463,398)
---------
Shareholders equity in accordance with US GAAP (686,683)
-------
<PAGE>
Application of accounting principles generally accepted in the
United States would have had the following effect on the
Statement of Cash Flows:
The economic entity presents its Cash Flows in accordance with
accounting standard AASB 1026 Statement of Cash Flows ( AASB
1026 ). Its objectives and principles are similar to those set
out in the US FASB statement No. 95 Statement of Cash Flows
( FASB 95 ). The principle difference relates to the definition
of cash. Under AASB 1026, cash is expressed net of overdrafts,
where a right of offset with the bank exists. FASB 95 requires
these overdrafts to be separately shown under financing
activities.
Summarised cash flow data by operating, investing and financing
activities in accordance with FASB95 is set out below:
Year ended 30 June 1994
Net cash inflow / (outflow) from:
Operating activities $ 1,168,249
Investing activities (10,828,925)
Financing activities 9,538,852
Increase/(decrease) in cash and cash
equivalents (121,824)
Cash at July 1, 1993 356,897
Cash at June 30, 1994 235,073
30 June
1994
$
22. DIRECTORS REMUNERATION
The directors at the date of this report were appointed
subsequent to the balance date. The directors in office
during the financial year ended 30 June 1994 were
remunerated by the former parent company.
23. CONTRIBUTION TO GROUP PROFITS
The following group companies made contributions to the group
profit / (loss) before tax as follows:
Capital City Broadcasters Pty Limited (695,285)
Double T Radio Pty Limited 1,557,121
Commonwealth Broadcasting Corporation Pty Limited (1,030,277)
Gold Radio Service Pty Limited 977,474
Maryborough Broadcasting Company Pty Limited 491,409
Rockhampton Broadcasting Company Pty Limited 367,311
ARN Sales Pty Limited (523,404)
---------
1,144,349
24. SHARE CAPITAL
Authorised Capital:
30,000 ordinary shares of $2 each 60,000
1,300,000 ordinary shares of $1 each 1,300,000
---------
1,360,000
25. ISSUED AND PAID UP CAPITAL
Ordinary shares, fully paid:
17,225 ordinary shares of $2 each 34,450
277,004 ordinary shares of $1 each 277,004
-------
311,454
Independent Auditors' Report
The Board of Directors
Wesgo Limited
We have audited the accompanying consolidated balance sheet of
Wesgo Limited and subsidiaries as of December 31, 1994, and the
related consolidated profit and loss account and statement of
cash flows for the six months ended December 31, 1994, all
expressed in Australian dollars. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the Australian
standards that are substantially equivalent to 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 audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Wesgo Limited and subsidiaries as of December 31,
1994, and the results of their operations and their cash flows
for the six months ended December 31, 1994 in conformity with
the accounting principles generally accepted in Australia.
Generally accepted accounting principles in Australia vary in
certain significant respects from generally accepted according
principles in the United States. Application of generally
accepted accounting principles in the United States would have
affected results of operations for the six months ended December
31, 1994, and shareholders equity as of December 31, 1994, to
the extent summarised in Note 27 to the consolidated financial
statements.
KPMG
Sydney, Australia
July 25, 1995
A.J. Clark
Partner
Wesgo Limited and its Controlled Entities
Profit and Loss Account
For the period ended 31 December 1994
CONSOLIDATED
6 months
to 31.12.94
$'000
Note
OPERATING REVENUE 2 29,654
------
OPERATING PROFIT 3(i)
before Interest Expense and Abnormals 7,758
Interest Expense - other persons (783)
Abnormal Items 3(ii) (3,153)
-------
Operating Profit
after Interest and Abnormals 3,822
Income Tax applicable to
operating profit 7 2,365
-------
OPERATING PROFIT 1,457
after income tax applicable to
members of chief entity
RETAINED PROFITS - 1 July 1994 5,735
-------
Total available for appropriation 7,192
-------
RETAINED PROFITS - 31 December 1994 7,192
-------
The above profit and loss accounts are to be read in conjunction
with the notes to and forming part of the financial statements set
out on pages 5 to 24.
<PAGE>
Wesgo Limited and its Controlled Entities
Balance Sheet
As at 31 December 1994
CONSOLIDATED
6 months
to 31.12.94
$'000
Note
CURRENT ASSETS
Cash 3,731
Receivables 5 9,484
Other 6 2,266
-------
TOTAL CURRENT ASSETS 15,481
-------
NON CURRENT ASSETS
Property, plant and equipment 8 11,607
Intangibles 9 -
Other 6 110,224
-------
TOTAL NON CURRENT ASSETS 121,831
-------
TOTAL ASSETS 137,312
-------
CURRENT LIABILITIES
Creditors and borrowings 10 2,715
Accrued Expenses 11 6,009
Other 12 2,919
-------
TOTAL CURRENT LIABILITIES 11,643
-------
NON CURRENT LIABILITIES
Creditors and borrowings 10 14,000
Accrued Expenses 11 407
-------
TOTAL NON CURRENT LIABILITIES 14,407
-------
TOTAL LIABILITIES 26,050
-------
NET ASSETS 111,262
=======
SHAREHOLDERS' EQUITY
Share capital 13 14,339
Reserves 14 89,731
Retained profits 7,192
-------
TOTAL SHAREHOLDERS' EQUITY 111,262
=======
The above balance sheet is to be read in conjunction with the notes
to and forming part of the financial statements set out on pages 5
to 24.
Wesgo Limited and its Controlled Entities
Statement of Cash Flows
For the period ended 31 December 1994
CONSOLIDATED
6 months
to 31.12.94
$'000
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the
course of operations 28,431
Interest received 146
Interest paid (719)
Cash payments in the course of operations (22,056)
Income Taxes paid (555)
Abnormal items 3(ii) (1,450)
Net cash provided by operating activities 25(i) 3,797
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for controlled entities -
Payments for property, plant and equipment (831)
Proceeds from sale of non-current assets 6
Proceeds from repayment of loans receivable 3,000
Cost of disposal of controlled entities -
Payments to other creditors (167)
-------
Net cash provided by investing activities 2,008
-------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (1,074)
Repayment of borrowings (3,000)
Repayment of loans by controlled entities -
-------
Net cash used in financing activities (4,074)
-------
Net increase/(decrease) in cash held 1,731
Cash at the beginning of the period 2,000
-------
Cash at the end of the period 3,731
-------
Non - Cash Items
Issue of shares in satisfaction of
dividends 13 1,743
=======
The statement of cash flow is to be read in conjunction with the
notes to and forming part of the financial statements set out on
pages 5 to 24.
<PAGE>
Wesgo Limited and its Controlled Entities
Notes to and Forming Part of the Financial Statements
For the period ended 31 December 1994
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted in the
preparation of these financial statements are:
a. Change of Accounting Period
Pursuant to the acquisition of the company by APN
Broadcasting Pty Ltd (APN), the company and its consolidated
entities have changed their financial year end to 31
December, consistent with the holding company. Accordingly,
the period covered by these accounts is the six months ended
31 December 1994.
b. Basis of Preparation
The consolidated accounts of the economic entity have been
drawn up in accordance with applicable Australian Accounting
Standards, the provisions of Schedule 5 to the Corporations
Regulations, and the requirements of law. They have been
prepared on the basis of historical costs and do not take into
account changing money values or, except where stated, current
valuations of non-current assets. The accounting policies
have been consistently applied. All amounts are expressed in
Australian dollars.
c. Principles of Consolidation
The consolidated accounts comprise the accounts of the
company, being the chief entity, and its controlled entities.
All material inter entity transactions and balances, including
unrealised profits arising from transactions within the
economic entity have been eliminated.
Where controlled entities were disposed of or acquired during
the year, their results are included only up until the date of
disposal or from the date of acquisition.
d. Goodwill
Goodwill, representing the excess of the purchase
consideration over the fair value of the identifiable net
assets acquired on the acquisition of a business entity, is
amortised on a straight line basis. The period of
amortisation is 10 years and represents the period of time
during which benefits are expected to arise.
The unamortised balance of goodwill is reviewed annually.
Where the balance exceeds the value of expected future
benefits, the difference is charged to the profit and loss
account.
e. Income Tax
The economic entity adopts the liability method of tax effect
accounting.
Income tax expense is calculated on operating profit adjusted
for permanent differences between taxable and accounting
income. Income tax on timing differences which arise from
items being brought to account in different periods for income
tax and accounting purposes, is carried forward in the balance
sheet as a future income tax benefit or a deferred tax
liability.
Future income tax benefits are not brought to account unless
realisation of the asset is assured beyond reasonable doubt.
Future income tax benefits which include tax losses are only
brought to account when their realisation is virtually
certain.
Capital gains tax will be provided in the profit and loss
account in the period in which the asset is sold except
where the sale relates to non-current assets which have
previously been revalued.
Where a non-current asset is revalued, capital gains tax will
be provided at the time of revaluation when it is known that
the asset will eventually be sold and a capital gains tax
liability will be incurred. This provision is made against
the asset revaluation reserve, with the result that when the
asset is sold, there is no charge to the profit and loss
account for capital gains tax except to the extent of
adjustments for over/under provisions in previous periods.
f. Radio Licences
Commercial radio licences are accounted for as identifiable
assets and are brought to account either at valuation or cost
as described in Note 6 to the accounts. The Directors do not
consider the commercial radio licences have determinable
finite lives. In such circumstances they consider that
commercial radio licences are appropriately carried at
valuation or cost.
On an annual basis, the Directors review the radio licences
values to ensure they are not in excess of the discounted cash
inflows and outflows arising from their continued use and
subsequent disposal.
Taking these matters into account, the Directors believe that,
on a going concern basis, the Balance Sheet value attributed
to the economic entity's commercial radio licences at 31
December 1994 does not exceed the amount which could
reasonably be expected to be expended to acquire those radio
licences.
The commercial radio licences held by the economic entity are
renewable every five years under the provisions of the
Broadcasting Services Act and the Directors have no reason to
believe that the licences will not be renewed from time to
time for the five year period allowable under the Act and
without imposition of any conditions.
g. Land, Buildings, Plant & Equipment
On acquisition, land, buildings, plant and equipment are
recorded at cost.
Where from time to time an independent valuation is available
that indicates values for assets have varied permanently and
significantly to those maintained in the books, a revaluation
of relevant assets will take place in the books to reflect an
appropriate carrying value.
On an annual basis the Directors review the values for land,
buildings, plant and equipment to ensure they are not in
excess of their recoverable amount. In assessing recoverable
amount, the relevant cash flows have been discounted to their
present value.
Buildings, plant, equipment and motor vehicles are depreciated
over their estimated economic life on the straight line basis.
h. Cash
Cash as shown in the balance sheet and statement of cash flows
includes cash on hand and at bank and short term deposits at
call, net of outstanding bank overdrafts.
i. Provision for Doubtful Debts
The collectability of debts is assessed at the end of the
period and specific provision is made for any doubtful
accounts.
j. Radio Licence Fees
The economic entity accrues licence fees which are expected to
be charged by the Australian Broadcasting Authority, based on
current earnings.
k. Employee Benefits
The amounts expected to be paid to employees for their pro
rata legal and contractual entitlement to long service and
annual leave are provided at current pay rates.
l. Operating Leases
Payments made under operating leases are charged against
profits in equal instalments over the accounting periods
covered by the lease term, except where an alternative basis
is more representative of the pattern of benefits to be
derived from the leased property.
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
2. REVENUE
a. Sales Revenue 29,508
b. Other Revenue
Interest Received- Other 146
-------
OPERATING REVENUE 29,654
Gross proceeds from sale of non-current assets 7
-------
29,667
=======
3. OPERATING PROFIT
Operating profit before income tax is arrived at after charging
or crediting the following specific items:
i. Charges
Amortisation of:
- - Goodwill 30
- - Other Intangible Assets 37
Depreciation of fixed assets 770
Provisions:
- - Doubtful debts 231
- - Holiday pay 540
- - Long service leave 114
- - Directors' retirement 42
Operating lease rentals 669
-------
ii. Abnormal Items
Takeover defence costs 1,200
Settlement discount on early repayment of
receivable (Note 6(ii)) 250
-------
Items arising from the reassessment of assets
and liabilities and other costs
on acquisition of the Group by APN: 1,450
=======
- - Write-off of goodwill, other intangibles
and deferred items .598
- - Provision for restructuring costs 250
- - Legal, valuation and audit costs 145
- - Employee incentives 236
- - Other associated costs 310
- - Early termination of interest rate caps on bank loans 138
Other 26
-------
3,153
-------
Income tax benefit (expense)
applicable to abnormal items 359
=======
4. EARNINGS PER SHARE
Six
months to
31.12.94
Basic earnings per share (cents per share)
after abnormal items and income tax.2.6
Basic earnings per share (cents per share) before abnormal items
and after income tax. 7.1
===
Weighted average number of ordinary shares on issue used in the
calculation
of basic earnings per share. 56,766,418
==========
The diluted earnings per share is not disclosed as it is not
materially different from the basic earnings per share.
Potential ordinary shares not considered dilutive
At 31 December 1994, the company had on issue 1,640,000 options,
which have the right to convert to ordinary shares. Each issue has
been considered separately in determining whether it would be
dilutive.
Conversion, call, subscription or issue after 31 December 1994
There have been no conversions to, calls of, or subscription for
ordinary shares or issues of potential ordinary shares since the
reporting date and before the completion of these accounts with the
exception of the exercise of 1,640,000 options as disclosed in Note
13 to the accounts.
CONSOLIDATED
6 months
to 31.12.94
$'000
5. RECEIVABLES
Current:
Trade Debtors 10,046
Less provision for doubtful debts (562)
------
9,484
======
During the period, bad debts amounting to $340,000 were written
off against the provision for doubtful debts.<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
6. OTHER
Current Assets:
Prepayments 1,081
Sundry debtors 1,185
-----
TOTAL 2,266
=====
Non-Current Assets:
Radio licences at:
- - Directors' valuation (i) (b) 3,000
- - Independent valuation (i) (a) 106,643
-------
109,643
Sundry debtors (ii) -
Future income tax benefit 581
-------
Total 110,224
=======
(i) Radio licences were revalued at 31 December 1994.
In revaluing radio licences the Directors have based their
valuation on:
(a) An independent valuation prepared by Mr. Stephen Wilson M.Com
(Hons), ACA, FSIA of Grant Samuel and Associates Pty Ltd on the
basis of fair market value as a going concern. Grant Samuel's
opinion has been based on the capitalisation of adjusted earnings
before depreciation, interest and tax (EBDIT) for each station;
and
(b) A nominal value of $1 million on the radio licences of those
radio stations not producing an operating profit.
(ii) Under the terms of sale of the operational assets and radio
licence of Radio KAFM, which were owned by KAFM Broadcasters Pty
Limited, the proceeds of the sale were receivable by a controlled
entity in instalments over the period ending August 1998. The
receivable was repaid in early August 1994. An early settlement
discount of $250,000 was allowed to the purchaser, Adelaide FM
Radio Pty Ltd.
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
7. TAXATION
Prima facie income tax expense (benefit) calculated at 33%
on the operating profit 1,261
-----
Increase in income tax expense due to:
- - Non tax deductible items 44
- - Abnormal items not tax deductible:
- Takeover defence costs 396
- Debt settlement discount 82
- Additional costs on acquisition of economic
entity by APN 202
----
724
1,985
-----
Income tax under/(over) provided in prior year 144
Write off of future income tax benefits 236
-----
380
Income tax expense on operating profit 2,365
=====
Total income tax expense is made up of:
- - Current income tax expense 2,056
- - Over provision in prior year 144
- - Deferred income tax expense 165
-----
Income tax expense on operating profit 2,365
=====
The chief economic entity is taxed as a public company.
As at 31 December 1994, certain controlled entities have
estimated carry forward losses of $8,616,000 available but not
brought to account, to be offset against future years taxable
income of these entities. The potential future income tax
benefit of these losses is $2,843,000 but will only be obtained
if:
(i)the relevant company and/or the economic entity derives
future assessable income of a nature and an amount sufficient
to enable the benefit to be realised;
(ii)the relevant company and/or the economic entity continues
to comply with the conditions for deductibility imposed by the
law; and
(iii)no changes in tax legislation adversely affect the elevant
company and/or the economic entity in realising the benefit.
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are included in the accounts on the
following basis:
Land and Buildings
- - Cost -
- - Independent valuation 1994 (i) 4,165
------
4,165
Less accumulated depreciation on buildings -
------
4,165
Broadcasting equipment - at cost 10,580
Less accumulated depreciation 5,280
------
5,300
Office furniture and equipment - at cost 4,561
Less accumulated depreciation 2,566
-----
1,995
Motor vehicles - at cost 270
Less accumulated depreciation 123
-----
147
Total property, plant and equipment
- - net book value 11,607
======
(i) The independent valuation was carried out in December 1994
by John Nelson, F.V.L.E. (Val. Econ) registered valuer and Frank
Julier A.V.L.E. (Val.) registered valuer of Edward Rushton
Australia Pty Ltd and was prepared on the basis of market value
for the existing use.
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
9. INTANGIBLES
Goodwill on consolidation 666
Less accumulated amortisation (666)
-----
-
10. CREDITORS AND BORROWINGS
Current:
Trade creditors 2,715
=====
Non current:
Bank loan - secured 14,000
======
The bank loan is secured by:
(i) a negative pledge over the assets of the economic entity as
well as guarantees by all wholly-owned controlled entities.
(ii)an equitable mortgage over the assets and uncalled capital of
Wesgo Limited and its wholly-owned controlled entities.
The Group has unused lines of credit amounting to $10 million at
31 December 1994.
CONSOLIDATED
6 months
to 31.12.94
$'000
11. ACCRUED EXPENSES
Current:
Accrued expenses for
- - Holiday pay 1,062
- - Long service leave 456
- - Directors' retirement 140
- - Dividends -
- - Income tax - current 2,056
- prior period 2,295
-----
6,009
=====
Non current:
Accrued expenses for long service leave 407
=====
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
12. OTHER - CURRENT LIABILITIES
Current Liabilities:
Broadcasting licence fee 435
Sundry creditors and accruals 2,484
-----
2,919
=====
13. SHARE CAPITAL
Authorised Capital:
800,000,000 ordinary shares of 25 cents each 200,000
=======
Issued and paid up capital:
57,357,180 ordinary shares and one Former Qualified Holder's
share
of 25 cents each, fully paid 14,339
======
Movements during the period:
Balance at beginning of period 14,083
1,025,474 ordinary shares issued
under Dividend Reinvestment Plan; 256
----
Balance 31 December 1994 14,339
======
The Former Qualified Holder's share has the following
restrictions placed on it:
a) it has no right to vote;
b) confers no right to any distribution, except in the case of a
winding up and then it is limited to 25 cents;
c) cannot be transferred, and is currently held in trust by
Wesgo Investments Pty Ltd.
The purpose of issuing this share was to allow the company to
participate in the electronic transfer of shares on the
Australian Stock Exchange, whilst at the same time ensuring that
the company complied with the provision of the Broadcasting
Services Act.
<PAGE>
The options outstanding on the company's share capital at 31
December 1994 were:
Date of Issue No. Options Exercise Exercise Date
Price Earliest Latest
2 April '92 550,000 $0.89 2 April '95 2 April '97
25 June '93 890,000 $0.94 25 June '96 25 June '98
28 June '94 200,000 $1.38 4 July '95 24 June '99
-------
1,640,000
=========
On 9 January 1995, all options outstanding at 31 December 1994
were exercised pursuant to the successful takeover of the company
by APN Broadcasting Pty Ltd.
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
14. RESERVES
Share premium reserve 33,069
Asset revaluation reserve 56,662
------
89,731
======
Movements during the period:
Share premium reserve
Balance at beginning of period 31,582
1,025,474 ordinary shares issued under
Dividend Reinvestment Plan
at a premium of $1.45; 1,487
-----
Balance 31 December 1994 33,069
======
Asset revaluation reserve:
Balance at beginning of period 10,803
Revaluation of radio licences 45,984
Revaluation of land and buildings (125)
------
Balance at 31 December 1994 56,662
======
15. CONTINGENT LIABILITIES
Pursuant to ASC Class Order 91/996, relief has been granted to
all the company's wholly-owned subsidiaries, with the exception
of KAFM Broadcasters Pty Ltd, from the requirements of the
Corporations Law for, among other things, preparation and
publication of accounts.
It is a condition of the Class Order that the company and each of
the subsidiaries enter into a deed. The effect of the deed is
that the company has guaranteed to pay any deficiency in the
event of winding up of any of the subsidiaries. The subsidiaries
have also given similar guarantees in the event that the company
is wound up.
At balance date there is no liability in respect of these
guarantees.
At balance date the company and subsidiaries which are a party to
the deed have aggregate assets of $90,990,000; aggregate
liabilities of $25,912,000; and their contribution to the
consolidated operating profit after income tax for the year was
$1,911,000.
<PAGE>
CONSOLIDATED
6 months
to 31.12.94
$'000
16. COMMITMENTS FOR EXPENDITURE
Lease Rental Commitments
1. Future operating lease rentals of plant and equipment and
motor vehicles payable as follows:
- - not later than one year 431
- - later than one year but not later than two years 361
- - later than two years but not later than five years 227
----
1,019
=====
2.Future operating lease rentals of studio and transmitter sites
payable as follows:
- - not later than one year 1,106
- - later than one year but not later than two years 1,177
- - later than two years but not later than five years 3,354
- - later than five years 4,534
-----
10,171
======
Representing:
Cancellable operating leases -
Non-cancellable operating leases 11,190
------
11,190
======
Capital Expenditure Commitments
Due within one year 26
==
CONSOLIDATED
6 months
to 31.12.94
$'000
17. AUDITORS' REMUNERATION
Amounts received, or due and receivable by the auditors of the
company for:
a) Audit services 100
b) Other services 39
---
139
===
<PAGE>
18. DIRECTORS' AND EXECUTIVES' REMUNERATION
Remuneration of Directors
The number of Directors of the company who received or in respect
of whom income is due and receivable, from the company and
related bodies corporate, excluding amounts included under
retirement payments within the following bands is:
6 months
to 31.12.94
$'000
$ 0 - $10,000 2
$10,001 - $20,000 3
$20,001 - $30,000 2
$30,001 - $40,000 -
$40,001 - $50,000 -
CONSOLIDATED
6 months
to 31.12.94
$'000
Total income received, or due and receivable by:
The Directors of the company 100
Independent Directors of the Superannuation Fund 2
---
102
===
At the General Meeting held on 7 June 1991, the shareholders
approved an increase in the maximum amount of fees payable to the
Directors of Wesgo Limited and its unlisted entities to $250,000.
<PAGE>
18. DIRECTORS' AND EXECUTIVES' REMUNERATION (Cont'd)
Remuneration of Executives
The number of Executive Officers who received, or in respect of
whom income is due and receivable, which equals or exceeds
$100,000 per annum, from the company and related bodies
corporate, excluding amounts included under retirement payments
is shown below. The income for the six months to 31 December
1994 has been disclosed on the basis of annualised income equal
to or exceeding $100,000:
6 months
31.12.94
$100,001 - $110,000 2
$110,001 - $120,000 -
$120,001 - $130,000 -
$130,001 - $140,000 -
$140,001 - $150,000 -
$150,001 - $160,000 3
$290,001 - $300,000 1
$300,001 - $310,000 -
$340,001 - $350,000 -
$370,001 - $380,000 1
CONSOLIDATED
6 months
to 31.12.94
$'000
Total income received, or due and
receivable, by these Executives from
the company and related bodies
corporate, excluding amounts included
under retirement payments. 717
====
Included in sundry creditors and accruals is an amount of
$236,000, which represents the Directors estimate of
employee incentives payable to various employees in respect
of over-achievement of individual station results for the
period ended 31 December 1994. These amounts have been
included in the calculation of remuneration of executives.
The notice period for all executives in the economic entity
is three months with the exception of:
(i)Chief Executive, whose notice period is six months.
(ii)Company Secretary, whose notice period is twelve months.
<PAGE>
Superannuation and Retirement Payments
Amounts paid to superannuation funds
in connection with the retirement of the
Principal Executive Officer of the
company and controlled entities 9
==
Retiring allowances paid in connection
with the retirement of persons from the
offices of Director of the company and
controlled entities. The amounts are
disclosed in aggregate only as the
Directors believe that the provision of
full particulars would be unreasonable. 310
===
The company has entered into agreements with non-executive
Directors providing for benefits to be paid on their
retirement or death. The maximum benefit payable to a
Director is the maximum allowable under the Corporations
Law. That is the aggregate of the last three years' fees
paid by the Company to the Director.
19. SUPERANNUATION COMMITMENTS
At 31 December 1994, the company and its controlled entities
participated in seven accumulation superannuation plans
(defined contribution plans). Employees are entitled to
benefits on retirement, disability or death. The company
and its controlled entities contribute to the plans at
various percentages of employees' salaries and wages.
20. EVENTS SUBSEQUENT TO BALANCE DATE
Since 31 December 1994 the following events have occurred:
(i) The exercise of 1,640,000 options on 9 January 1995;
(ii) The following transactions have resulted in the Wesgo
Group being required to divest itself of both its
Melbourne radio licences and Gold 1269 in Sydney to
comply with the provisions of the Broadcasting
Services Act:
(a) The purchase of Melbourne radio station Gold 104FM by a
related company, APN Broadcasting Services Pty Ltd;
(b) The purchase of the radio operations known as "The
Australian Radio Network" by the Wesgo Group and its parent
company, APN Broadcasting Pty Ltd.
21. REPORTING BY SEGMENTS
The economic entity operates solely within the Australian
radio broadcasting industry and consequently the
consolidated accounts reflect the operations of this segment
alone.
22. RELATED PARTIES
Directors
The names of each person holding the position of Director of
Wesgo Limited during the period are Messrs K. Moremon, M.
Cleary, A. Harris, G. Herring, K. Jacobsen, J. Kennedy,
C. O'Reilly and J. Reynolds. Details of the remuneration of
Directors are set out in Note 18.
Various companies with which Directors are associated have
purchased advertising, funded joint promotions and purchased
news and programme services from various companies within
the economic entity, in the ordinary course of business on
normal terms and conditions.
Ultimate Parent Entity
The immediate chief entity is APN Broadcasting Pty Ltd. The
ultimate Australian chief entity is Ligon 157 Pty Ltd.
Controlled Entities
Details of interests in controlled entities are set out in
Note 23.
Superannuation Fund
Details of the economic entity's employee superannuation
funds are set out in Note 19. Contributions to the funds
were $566,000 for the period.
Directors' Holdings of Shares and Share Options
The beneficial interest in all the issued capital of the
company was held by APN Broadcasting Pty Ltd.
<TABLE>
<CAPTION>
<PAGE>
23. PARTICULARS IN RELATION TO CONTROLLED ENTITIES (Cont'd)
Place of Class of % Held % Held Contributions to
Incorp. Share 31/12/94 30/6/94 Consolidated Profit
31.12.94
$'000
<S> <C> <C> <C> <C> <C>
Wesgo Limited NSW (581)
Controlled Entities
Wesgo Investments Pty Ltd NSW ORD 100% 100% (649)
Wesgo Communications Pty Ltd NSW ORD 100% 100% 2,965
West Sydney Radio Pty Ltd NSW ORD 100% 100% 25
Wesgo Superannuation Pty Ltd NSW ORD 100% 100% -
Central Coast Broadcasting
Pty Ltd. NSW ORD 100% 100% 26
Radiowise Pty Ltd NSW ORD 100% 100% -
Westat Research Pty Ltd NSW ORD 100% 100% (3)
Greater West Television Pty Ltd NSW ORD 100% 100% 3
Airplay Media Services Pty Ltd NSW ORD 100% 100% 37
Radio 2SM Pty Ltd NSW ORD 100% 100% (844)
Sun Coastal FM Radio Pty Ltd QLD ORD 100% 100% -
Universal Radio Pty Ltd QLD ORD 100% 100% -
Radio Albury Wodonga Pty Ltd ACT ORD 100% 100% 320
Malbend Pty Ltd ACT ORD 100% 100% 36
Actraint No. 116 Pty Ltd ACT ORD 100% 100% -
KAFM Broadcasters Pty Ltd SA ORD 100% 100% (464)
Radio Airtime Sales Pty Ltd VIC ORD 100% 100% 586
1,457
</TABLE>
<PAGE>
23. PARTICULARS IN RELATION TO CONTROLLED ENTITIES (Cont'd)
Dividends
No dividends were received from controlled entities during the
period to 31 December 1994.
In the year ended 30 June 1994 Wesgo Limited received dividends
from the following controlled entities:
Wesgo Investments Pty Ltd 2,179,121
Central Coast Broadcasting Pty Ltd 13,095
---------
2,192,216
=========
24. ACQUISITION/DISPOSAL OF CONTROLLED ENTITIES
There were no acquisitions or disposals of controlled entities
during the period to 31 December, 1994.
25. NOTES TO THE STATEMENT OF CASH FLOWS
CONSOLIDATED
6 months
to 31.12.94
$'000
(i) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating profit after income tax 1,457
Add/(less)non-cash items:
Amortisation 600
Depreciation 770
Loss on sale of fixed assets 8
Provision for doubtful debts 231
----
Net cash provided by operating activities
before change in assets and liabilities 3,066
Changes in assets and liabilities adjusted
for effects of purchase and disposal
of controlled entities during the financial
period:
(Increase) in other assets (757)
Increase in tax payable 1,395
(Increase) in trade debtors (1,077)
<PAGE>
25. NOTES TO THE STATEMENT OF CASH FLOWS (Table Cont.)
Increase in creditors 1,356
(Decrease) in provisions (128)
(Decrease) in other liabilities (223)
Increase in deferred taxes payable 165
-----
731
Net cash provided by operating activities 3,797
======
26. OPERATIONS TO BE DISPOSED
In order to comply with the control and ownership requirements
for commercial broadcasting licences of the Australian
Broadcasters Act, the company is required to sell 3 stations.
Summarised below are the sales, pre-tax income, total assets and
net assets as of and for the six months ended 31 December 1994,
of the stations which the company intends to sell.
Sales Pre-Tax Assets Net Assets
$A'000 Profit/(Loss) $A'000 $A'000
Gold 1269 AM 1,015 (23) 2,708 (3,468)
2GO (FM 107.7) 2,402 547 8,296 8,296
3MP (MAGIC 693) 4,530 (69) 18,857 2,663
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
A description of the Australian accounting policies that
significantly differ in certain respects from US generally
accepted accounting principles follows:
(a) Radio Licences: In accordance with Australian generally
accepted accounting principles radio licences, which are
classified as Other Non Current Assets, are carried in the
accounts at Directors' valuation. Revaluations are performed
regularly by the Directors. Apart from any annual specific
decrease in value, it is company policy under Australian
accounting principles to only increase the total value of radio
licences every three years. No amortisation is recorded on the
radio licences under Australian accounting practices.
Under US accounting principles, radio licences must be carried at
cost less accumulated amortisation. For purposes of the
adjustment required under US generally accepted accounting
principles, the period of benefit of the radio licences is
estimated to be 25 years.
<PAGE>
(b) Land and Buildings: Certain land and buildings are stated at
valuations determined by the Directors and/or independent valuers
under Australian generally accepted accounting principles.
Accounting principles generally accepted in the United States do
not permit the revaluation of assets in the primary financial
statements. Under U.S. generally accepted accounting principles,
buildings are depreciated based on historical costs, utilising an
average life of 25 years.
(c) Share Options: In accordance with accepted Australian
accounting practice, no element of employee compensation has been
recognised on share options issued to employees on which the
exercise price is less than the share price at the time of issue.
While this results in an adjustment to earnings, no adjustment to
shareholders equity is needed.
US accounting practices require compensation expense to be
recognised for the excess of the share price over exercise price
over the vesting period.
(d) Restructuring: As a result of the acquisition by APN as
discussed in Note 1(a), a general provision to cover anticipated
restructure costs was recorded. No formal plans for restructure
or redundancies were in place at that time nor have any material
payments relating to the restructuring provision been made since
that time to the date of these financial statements. As such,
under US generally accepted accounting principles, this provision
is not allowed and has been reversed.
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont d)
(e) Push Down Accounting: Under Australian generally accepted
accounting principles, the acquisition of the company by APN, as
disclosed in note 1(a) does not result in a change to the
recorded amounts of assets and liabilities to reflect the new
accounting basis resulting from such acquisition. Under U.S.
generally accepted accounting principles and in accordance with
Staff Accounting Bulletin No.54, such new accounting basis is
effectively "pushed-down" to the separate consolidated financial
statements of the economic entity. Accordingly, the
reconciliation to U.S. generally accepted accounting principles
includes such adjustments; primarily an increase of $ 65.2
million to the historical cost carrying value of the radio
licences and a $500 thousand increase to the historical carrying
value of land and buildings, with an increase to shareholders
equity of $65.7 million. The increased amortisation resulting
from such new bases was $219 thousand for the period from
acquisition (30 November 1994) to 31 December 1994.
(f) Income Tax: The economic entity adopts the liability method
of tax effect accounting under Australia accounting practices.
Income tax expense is calculated on operating profit adjusted for
permanent differences between taxable and accounting income.
Income tax on timing differences which arise from items being
brought to account in different periods for income tax and
accounting purposes, is carried forward in the balance sheet as a
future income tax benefit or a deferred tax liability.
Future income tax benefits are not brought to account unless
realisation of the asset is assured beyond reasonable doubt.
Future income tax benefits which include tax losses are only
brought to account when their realisation is virtually certain
under Australian accounting practices.
Under US generally accepted accounting principles deferred tax
assets are recognised and measured based on the likelihood of
realisation of the related tax benefits in the future. A
deferred tax asset must be recognised for deductible temporary
differences and operating loss and tax credit carryforwards, and
a valuation allowance is established to reduce that deferred tax
asset if it is "more likely than not" that the related tax
benefits will not be realised. "More likely than not" is
intended to mean a level of likelihood that is slightly more than
50 percent.
As at 31 December 1994, certain controlled entities have
estimated carry forward losses of $8,616,000 available but not
brought to account, to be offset against future years taxable
income of these entities (in Australia tax losses and capital
losses may be carriedforward indefinitely). The potential future
income tax benefit of these losses is $2,843,000.
In assessing the realisation of deferred tax assets for US
reporting purposes, management has considered whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realised. The ultimate realisation of
deferred tax assets is dependant upon the generation of future
taxable income during the periods in which those temporary
differences become deductible. Management considered the
schedule reversal of deferred tax liabilities, projected future
taxable income and capital gains, and tax planning strategies in
making this assessment. Based upon the level of historical
taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management
believes it is more likely than not the economic entity will
realise these benefits.
Consequently, the available tax losses have been recorded as a
deferred tax asset for US reporting purposes, with a valuation
allowance of nil.
<PAGE>
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd)
Application of accounting principles generally accepted in the
United States would have had the following effect on net income
and shareholders' equity:
$A'000
Operating profit as reported in
the Profit and Loss Account 1,457
=====
Increase (decrease) for:
Radio licences amortisation (1,217)
Buildings - depreciation (59)
Compensation expense on employee share options (82)
Accrued expense restructuring reserve 250
Tax effect of US GAAP adjustments (83)
-------
Net increase (decrease) (1,191)
-------
Net income in accordance with US GAAP 266
=======
Basic earnings per share under US GAAP 0.5 cents
=========
$A'000
Shareholders' equity as reported in
the Consolidated Balance Sheet 111,262
Increase (decrease) for:
Radio Licences:
Revaluation under Australian GAAP (56,614)
Amortisation (11,840)
Property, plant and equipment (595)
Push down accounting 65,682
Accrued expenses - restructuring reserve 250
Deferred tax asset 2,843
Tax effects of U.S. GAAP adjustments. (83)
--------
Net decrease (357)
--------
Shareholders equity in accordance with US GAAP 110,905
=======
<PAGE>
27. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Cont'd)
Application of accounting principles generally accepted in the
United States would have had the following effect on the
Statement of Cash Flows:
The economic entity presents its Cash Flows in accordance with
accounting standard AASB 1026 "Statement of Cash Flows" ("AASB
1026"). Its objectives and principles are similar to those set
out in the US FASB statement No. 95 "Statement of Cash Flows"
(:FASB 95"). The principle difference relates to the definition
of cash. Under AASB 1026,cash is expressed net of overdrafts
where a right of offset with the bank exists. FASB 95 requires
this to be separately shown under financing activities.
Summarised cash flow data by operating, investing and financing
activities in accordance with FASB 95 is set out below:
Period ended 31 December 1994
Net cash inflow / (outflow) from:
A$'000
Operating activities 3,797
Investing activities 2,008
Financing activities (2,460)
-------
Increase/(decrease) in cash and cash equivalents 3,345
Cash at July 1, 1994 2,171
--------
Cash at December 31, 1994 5,516
========
Australian Radio Network Pty Limited
We have audited the accompanying combined balance sheet of the
Albert's Radio Stations acquired by the Australian Radio Network
Pty Limited ("Australian Radio Network") as described in Note
1(c), as of December 31 1994, and the related combined profit and
loss account and statement of cash flows for the six months ended
31 December 1994, all expressed in Australian dollars. These
combined financial statements are the responsibility of the
Australian Radio Network's management. Our responsibility is to
express an opinion on these combined financial statements based
on our audit.
We conducted our audit in accordance with the Australian
standards that are substantially equivalent to U.S. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the financial
position of the Albert's Radio Stations acquired by the
Australian Radio Network and subsidiaries as of December 31 1994,
and the results of their operations and their cash flows for the
six months ended December 31, 1994, in conformity with the
accounting principles generally accepted in Australia.
Generally accepted accounting principles in Australia vary in
certain significant respects from generally accepted accounting
principles in the United States. Application of generally
accepted accounting principles in the United States would have
affected results of operations for the six months ended December
31, 1994, and shareholders' equity as of December 31, 1994, to
the extent summarised in Note 21 to the combined financial
statements.
KPMG
Sydney, Australia
July 25, 1995
A. J. Clark
Partner
Note 6 months to
31 December 1994
$
Operating profit before income tax 2,3 2,815,953
_________
Income tax (expense) attributable to
operating profit 4 (913,068)
Operating profit after income tax 1,902,885
__________
Retained profits - 1 July 1994 1,066,811
---------
Retained profits - 31 December 1994 2,969,696
---------
The combined profit and loss account should be read in
conjunction with the notes to and forming part of the financial
statements set out on pages 5 to 23.
Note 31 December
1994
$
CURRENT ASSETS
Cash 5 -
Receivables 6 14,446,518
Other 7 321,442
----------
TOTAL CURRENT ASSETS 14,767,960
----------
NON-CURRENT ASSETS
Receivables 6 18,713,844
Plant and Equipment 9 6,944,679
Intangibles 10 21,523,500
Investments 8 79,649
Other 11 718,476
----------
TOTAL NON-CURRENT ASSETS 47,980,148
----------
TOTAL ASSETS 62,748,108
----------
CURRENT LIABILITIES
Creditors and Borrowings 12 35,850,384
Accrued Expenses 13 2,237,947
Other 14 3,726
---------
TOTAL CURRENT LIABILITIES 38,092,057
----------
NON-CURRENT LIABILITIES
Creditors and
Borrowings 12 15,994
Accrued Expenses 13 275,745
Other 14 19,684,712
----------
TOTAL NON-CURRENT
LIABILITIES 19,976,451
----------
TOTAL LIABILITIES 58,068,508
----------
NET ASSETS 4,679,600
----------
SHAREHOLDERS' EQUITY
Reserves 16 1,398,450
Share Capital 25 311,454
Retained Profits 2,969,696
---------
TOTAL SHAREHOLDERS' FUNDS 4,679,600
---------
The combined balance sheet is to be read in conjunction with the
notes to and forming part of the financial statements set out on
pages 5 to 23.
Note 6 months to
31 December 1994
$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of
operations 16,801,833
Cash payments in the course of
operations (13,868,391)
Income tax paid (642,322)
------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 19 2,291,120
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and
equipment 300,213
Payment for property, plant and
equipment (239,172)
----------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 61,041
------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings -
former related parties 1,375,926
Repayment of borrowings -
former related parties (3,769,939)
-----------
NET CASH USED IN FINANCING
ACTIVITIES (2,394,013)
-----------
NET INCREASE (DECREASE) IN CASH HELD (41,852)
-------
CASH AT THE BEGINNING OF THE FINANCIAL
PERIOD (253,096)
CASH AT THE END OF THE FINANCIAL
PERIOD 19 (294,948)
---------
The combined statement of cash flows is to be read in conjunction
with the notes and forming part of the financial statements set
out on pages 5 to 23.
1. STATEMENT OF ACCOUNTING POLICIES
Set out below is a summary of the significant accounting policies
adopted by the entity in the preparation of the accounts.
a. Change of Accounting Period
Pursuant to the acquisition of the entity by the Australian Radio
Network (formerly APN Broadcasting Pty Ltd) the entity has
changed its financial year end to 31 December.
b. Basis of Preparation
The combined financial statements of the economic entity have
been drawn up in accordance with applicable Australian Accounting
Standards, the provisions of Schedule 5 to the Corporations
Regulations, and the requirements of law. They have been
prepared on the accrual basis using the going concern assumption
of accounting and the historical cost convention and do not take
into account changing money values or, except where stated,
current valuations of non-current assets. The accounting
policies have been consistently applied. All amounts are
expressed in Australian dollars.
The financial statements have been prepared in accordance with
Australian Accounting Standards and the provisions of Schedule 5
of the Corporations Law, with the exception of AASB 1017, Related
Party Disclosures.
The carrying amount of all non-current assets are reviewed at
least annually to ensure that they are not in excess of their
recoverable amount. If the carrying amount of a non-current asset
exceeds the recoverable amount, the asset is written down to the
lower value. In assessing recoverable amounts, except for radio
licences which are discussed in Note 1(f), the relevant cash
flows have not been discounted to their present value.
c. Principles of Combination
The combined accounts comprise the accounts of the economic
entity, being the following companies:
- - Capital City Broadcasters Pty Limited (Canberra FM and 2 CC
AM)
- - Double T Radio Pty Limited (TTFM)
- - Commonwealth Broadcasting Corporation Pty Limited (MIX FM)
- - Gold Radio Service Pty Limited (4GR)
- - Maryborough Broadcasting Company Pty Limited (4MB)
- - Rockhampton Broadcasting Company Pty Limited (4RO)
- - ARN Sales Pty Limited
All material inter entity transactions and balances, including
unrealised profits arising from transactions within the economic
entity have been eliminated.
In order to comply with the Australian Broadcasting Act's
requirements for the control and ownership of commercial
broadcasting licences the entity is required to sell three
stations. Details of the sales, pre-tax income, total assets and
net assets of the companies that own these stations as of, and
for the six months ended 31 December 1994 are summarised in Note
20.
d. Income Tax
The economic entity adopts the liability method of tax effect
accounting.
Income tax expense is calculated on operating profit adjusted for
permanent differences between taxable and accounting income.
Income tax on timing differences which arise from items being
brought to account in different periods for income tax and
accounting purposes, is carried forward in the balance sheet as a
future income tax benefit or a deferred tax liability.
Future income tax benefits are not brought to account unless
realisation of the asset is assured beyond reasonable doubt.
Future income tax benefits which include tax losses are only
brought to account when their realisation is virtually certain.
Capital gains tax will be provided in the profit and loss account
in the period in which the asset is sold except where the sale
relates to non-current assets which have previously been
revalued.
Where a non-current asset is revalued, capital gains tax will be
provided at the time of revaluation when it is known that the
asset will eventually be sold and a capital gains tax liability
will be incurred. This provision is made against the asset
revaluation reserve, with the result that when the asset is sold,
there is no charge to the profit and loss account for capital
gains tax except to the extent of adjustments for over/under
provisions in previous periods.
e. Fixed Assets
Fixed assets are capitalised at historical cost and depreciated
as outlined below.
Land and buildings were independently valued in 1989 on an
existing use basis of valuation and included in the financial
statements at the revalued amounts.
Disposal of Revalued Assets
The gain or loss on disposal of revalued assets is calculated as
the difference between the carrying amount of the asset at the
time of disposal and the proceeds of disposal, and is included in
the result of the economic entity in the year of disposal.
Depreciation
Fixed assets, including buildings but excluding freehold land,
are depreciated over their estimated useful lives. Fixed assets
are depreciated from the month of acquisition.
f. Radio Licences
The commercial radio licences held by the economic entity are
renewable every five years under the provisions of the
Broadcasting Services Act and the Directors have no reason to
believe that the licences will not be renewed from time to time
for the five year period allowable under the Act and without
imposition of any conditions.
Radio licences are carried in the accounts at the lower of cost
or recoverable amount.
On an annual basis, the Directors review the radio licence values
to ensure they are not in excess of the discounted cash inflows
and outflows arising from their continued use and subsequent
disposal.
g. Provisions
Doubtful Trade Debtors
The collectibility of debts is assessed at year end and provision
is made for doubtful accounts.
Employee Entitlements
This provision relates to annual leave and long service leave and
has been calculated on the basis of pro-rata entitlements under
appropriate awards, based on current wage rates.
h. Superannuation
The Company contributes to a defined contribution plan an amount
for each employee as required by the Superannuation Guarantee
Legislation. Such company contributions are charged against
income.
i. Leases
Leases under which the lessor retains substantially all the risks
and benefits of ownership are classified as operating leases.
Minimum lease payments are charged against profits over the
accounting periods covered by the lease term.
Leases of plant and equipment under which the economic entity
assumes substantially the risks and benefits of ownership are
classified as finance leases.
Finance leases are capitalised. A lease asset and a liability
equal to the present value of the minimum lease payments are
recorded at the inception of the lease. Contingent rentals are
written off as an expense of the accounting period in which they
are incurred. Capitalised lease assets are amortised on a
straight line basis over the term of the relevant lease, or where
it is likely the economic entity will obtain ownership of the
asset, the life of the asset. Lease liabilities are reduced by
repayments of the principal. The interest components of the lease
payments are charged to the profit and loss account.
j. Investments
Investments are valued at the lower of cost or recoverable
amount. Income from investments is recognised when received.
k. Cash
Cash as shown in the balance sheet and statement of cash flows
includes cash on hand and at bank and short term deposits at
call, net of outstanding bank overdrafts. See Note 5.
l. Radio Licence Fees
The economic entity accrues licence fees which are expected to be
charged by the Australian Broadcasting Authority, based on
current earnings.
2. OPERATING REVENUE
Included in operating revenue are the following items entering
into the determination of operating profit:
Sales Revenue 17,804,384
Contra Revenue 73,101
Other Income 12,099
Trust Income 7,330
Proceeds from Sale of Fixed
Assets 300,213
Other Revenue 111,645
-------
18,308,772
----------
3. OPERATING PROFIT
Included in operating profit are the following items of expense:
Bad trade debts written off 72,587
Depreciation of property, plant &
equipment 466,400
Lease rentals - operating lease 49,018
Lease rentals - operating lease:
former related party 150,000
Profit on sale of fixed assets 231,389
Amounts set aside to provisions for:
Doubtful trade debts 330,939
Employee entitlements
- Long Service leave 3,082
- Annual leave 17,368
Remuneration of auditors due and payable for:
Auditing the accounts 16,306
Note
4. INCOME TAX
Income Tax Expense
Prima facie income tax expense calculated at 33% on the operating
profit: 929,264
Increase / (Decrease) in income tax expense due to:
Legal 248
Depreciation on
buildings 11,586
Non deductible
promotions 9,111
Sundry (including
entertainment)32,489
Book capital
profits (76,358)
Payroll tax
penalty 6,728
-----
Total income tax expense 913,068
-------
Income tax expense is made up of:
Current income tax
expense 1,077,088
Future income tax
(benefit)/expense (164,020)
---------
913,068
-------
Provision for Current Income Tax
Movements during the period were as follows:
Balance at the beginning of the
period 642,322
Current period tax expense1,077,088
Income tax paid (642,322)
Net tax losses transferred to related companies
by members of the economic
entity 107,023
-------
Balance at the end of the
period 13 1,184,111
---------
Future Income Tax Benefit
Future income tax benefits reflects the future benefits at income
rates of 33% on items not currently deductible (payable) for
income tax.
Provision for employee
entitlements 403,356
Provision for doubtful debts227,492
Accrued licence fees 25,432
Accrued audit fees 7,977
Accrued superannuation
contributions 12,171
Difference between book/tax depreciation of fixed
assets 22,542
Provision for diminution in production
library 11,532
Other accrued expenses 47,850
Prepayments (42,468)
--------
11 715,884
-------
Provision for Deferred Income Tax
Provision for deferred income tax comprises the estimated expense
at current income tax rates of 33%
Difference in depreciation of property, plant & equipment for
accounting and income tax purposes83,807
Capitalised leases 3,472
Prepayments 20,015
------
13 107,294
-------
Future Income Tax Benefit Not Brought to Account:
Capital losses carried forward at 33% (Double T Radio Pty
Limited) 2,034,314
The potential future income tax benefit will only be
obtained if:
(i) the relevant company derives future assessable income of a
nature and an amount sufficient to enable the benefit to be
realised;
(ii) the relevant company continues to comply with the
conditions for deductibility imposed by the law; and
(iii) no changes in the tax legislation affect the relevant
company in realising the benefit.
5. CASH
Cash at Bank -
(Cash has been offset against overdrafts in Note 12 under group
borrowing arrangements)
6. RECEIVABLES
Current
Trade debtors 6,954,182
Less: Provision for doubtful debts (689,369)
---------
6,264,813
Other debtors 17,844
Loans to former related companies 7,959,940
Loans to staff member 203,921
-------
8,181,705
14,446,518
----------
Loans receivable from a staff member bear interest at 5% interest
per annum and are repayable by regular amounts over a specified
period.
Non-Current
Loan to former holding company 4,106,146
Loan to former related companies 14,372,698
Non trade receivable 235,000
-------
18,713,844
----------
Loans receivable from former holding and related companies are
non-interest bearing and were subsequently forgiven as a
condition of the purchase of the economic entity by the
Australian Radio Network.
7. OTHER CURRENT ASSETS
Prepayments 230,589
Inventories (production library) 70,630
Sundry debtors 20,223
------
321,442
-------
8. INVESTMENTS
Non-current
Shares (unquoted) 541
Units in Capital Property Trust 79,108
------
Total Investments 79,649
------
9. PROPERTY, PLANT & EQUIPMENT
Freehold Land - at cost 830,000
Leasehold property - at cost 8,362,853
Buildings - at independent valuation 1989 575,000
Less: Accumulated depreciation (4,950,071)
-----------
3,987,782
Plant & equipment - at cost 7,799,187
Plant and Equipment - at directors valuation 1971 40,008
Less: Accumulated depreciation (5,712,298)
-----------
2,126,897
Total property, plant and equipment
at net book value 6,944,679
---------
10. INTANGIBLES
Radio Licences - at cost 21,523,500
----------
11. OTHER NON-CURRENT ASSETS
Deposits 2,592
Future income tax benefit 715,884
-------
718,476
-------
12. CREDITORS AND BORROWINGS
Current
Bank overdraft - secured, net of cash at bank 294,948
Trade creditors and accruals 2,316,662
Other creditors 6,240
Lease liability 5,225
Amounts due to former controlling entity 16,704,319
Amounts due to former related entities 16,522,990
----------
35,850,384
----------
Loans payable to former holding and related companies are non-
interest bearing and were subsequently forgiven as a condition of
the purchase of the economic entity by the Australian Radio
Network.
Non-Current
Lease liability 15,994
------
13. ACCRUED EXPENSES
Current
Income Taxes 1,184,111
Employee entitlements:
Annual leave 631,068
Long Service Leave 422,768
-------
2,237,947
---------
Non-Current
Employee entitlements:
Long service leave 168,451
Deferred income taxes 107,294
-------
275,745
-------
14. OTHER LIABILITIES
Current
Other 3,726
-----
Non-Current
Loans from former holding company 15,443,472
Loans from former related companies 4,241,240
----------
19,684,712
----------
Loans payable to former holding and related companies are non-
interest bearing and were subsequently forgiven as a condition of
the purchase of the economic entity by the Australian Radio
Network.
15. COMMITMENTS AND CONTINGENCIES
Capital Expenditure Commitments
Finance lease rentals are due as follows:
Not later than one year 5,027
Later than one year but not later than two 5,027
Later than two years but not later than five 12,151
------
22,205
------
Less amounts provided for in the financial statements:
Current 3,249
Non-Current 15,994
------
Total lease liability 19,243
------
Future finance charges not provided for in the financial
statements 2,962
-----
Commitment and Contingent Liabilities
The economic entity pays a monthly rental for the station
premises to the Australian Broadcasting Company Pty Limited, its
former controlling entity, and no formal lease exists between the
parties. The amount paid under this arrangement during the six
months ended 31 December 1994 was $150,000.
16. RESERVES
Capital Profits Reserve 70,709
General Reserve 139,825
Asset revaluation reserve 9,007
Property Revaluation reserve 1,178,909
---------
1,398,450
---------
17. EVENTS SUBSEQUENT TO BALANCE DATE
Since June 30 1994, the companies comprising the economic entity
were purchased by the Australian Radio Network (formerly APN
Broadcasting Services Pty Limited). The following companies were
subsequently sold on 30 June 1995 in order to comply with
Australian Broadcasting Authority requirements:
- - Maryborough Broadcasting Pty Limited
- - Gold Radio Service Pty Limited; and
- - Rockhampton Broadcasting Pty Limited
The sales, pre-tax income, total assets and net assets of
these entities are disclosed in Note 20.
A group entity, Capital City Broadcasters Pty Limited sold
its AM Radio Licence (2CC AM) and the operating assets and
broadcasting and transmission equipment of this station on 28
December 1994. The operating results of 2CC AM are included in
these combined financial statements. The sales, pre-tax profit
and book value of assets sold are disclosed in Note 20.
18. INDUSTRY SEGMENTS
The economic entity operates solely within the Australian Radio
Broadcasting industry and consequently the combined accounts
reflect the operations of this segment alone.
19. NOTES TO THE STATEMENT OF CASH FLOWS
(i) RECONCILIATION OF CASH
For purposes of the Statement of Cash Flows, cash includes cash
on hand and at bank and short term deposits at call, net of
outstanding bank overdrafts. Cash as at the end of the financial
period as shown in the Statement of Cash Flows is reconciled to
the related items in the balance sheet as follows:
Bank overdraft - secured, net of cash balances (294,948)
-----------
(ii) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Operating profit after income
tax 1,902,885
Add/(less) items classified as investing/financing
activities:
Profit on sale of property, plant and equipment (231,389)
Add (less) non-cash items:
Depreciation and amortisation 466,400
-------
Net cash provided by operating activities
before change in assets and liabilities 2,137,896
---------
Change in assets and liabilities during the financial
period
(Increase)/decrease in trade/term debtors (996,396)
(Increase)/decrease in prepayments (21,674)
Increase/(decrease) in trade creditors 773,074
Increase/(decrease) in accrued expenses 20,450
Increase/(decrease) in income taxes payable 541,790
Increase/(decrease) in deferred taxes payable (164,020)
---------
Net cash provided by operating activities 2,291,120
---------
20. STATIONS AND ASSETS TO BE DISPOSED
In order to comply with the Australian Broadcasting Act's
requirements for the control and ownership of commercial
broadcasting licences, the economic entity is required to sell
three stations. Summarised below are the sales, pre-tax income,
total assets and net assets as of and for the six months ending
31 December 1994 of the companies which own the stations and
licences that were sold on 30 June 1995.
As of and for the Six months ended December 31, 1994
Company Sales Pre-Tax Total Assets Net Assets
(Station) $ Income $ $ $
Maryborough 877,530 309,741 3,194,917 2,177,805
Broadcasting
Pty Limited
(Radio 4MB)
Gold Radio 1,305,722 446,932 7,760,699 5,425,184
Service Pty
Limited
(Radio 4GR)
Rockhampton 1,089,912 203,324 3,874,137 2,818,442
Broacasting
Service
(Radio 4RO)
A group entity, Capital City Broadcasters Pty Limited also
sold its AM Radio Licence (2CC AM) and the operating assets and
broadcasting and transmission equipment of this station on 28
December 1994. The operating results of 2CC AM are included in
these combined financial statements.
The sales, pre-tax profit and book value of assets of 2CC - AM
sold on 28 December 1994 for consideration of $300,000, are
detailed below:
2CC-AM - Capital City Broadcasters Pty Limited
Sales - six months ended December 28, 1994 726,464
Net pre-tax profit/(loss) - six months ended
December 28, 1994 (171,002)
Total Assets Sold (book value) as at
December 28, 1994 68,611
Profit on Sale on December 28, 1994 231,389
21. US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
A description of the accounting policies that significantly
differ in certain respects from US generally accepted accounting
principles follow:
(a) Radio Licences: In accordance with Australian generally
accepted accounting principles radio licences are carried in the
accounts at the lower of cost or recoverable amount. The radio
licences are renewable every five years under the provisions of
the Broadcast Services Act.
Under US accounting principles, radio licences must be
carried at cost less accumulated amortisation. For purposes of
the adjustment required under US generally accepted accounting
principles, the estimated period of benefits of the radio
licences is estimated to be 25 years.
(b) Plant, Property and Equipment: Certain plant, property
and equipment are stated at valuations determined by the
Directors and/or independent valuers. Accounting principles
generally accepted in the United States do not permit the
revaluation of assets in the primary financial statements.
Under Australian accounting practices, the economic entity
is depreciating buildings over 100 years. The estimated useful
lives under US accounting principles has been set at 25 years,
resulting in an increase in the depreciation expense under US
accounting practices.
(c) Income Tax: The economic entity adopts the liability
method of tax effect accounting under Australia accounting
practices. Income tax expense is calculated on operating profit
adjusted for permanent differences between taxable and accounting
income. Income tax on timing differences which arise from items
being brought to account in different periods for income tax and
accounting purposes, is carried forward in the balance sheet as a
future income tax benefit or a deferred tax liability.
Future income tax benefits are not brought to account unless
realisation of the asset is assured beyond reasonable doubt.
Future income tax benefits which include tax losses are only
brought to account when their realisation is virtually certain
under Australian accounting practices.
Under US generally accepted accounting principles deferred
tax assets are recognised and measured based on the likelihood of
realisation of the related tax benefits in the future. A
deferred tax asset must be recognised for deductible temporary
differences and operating loss and tax credit carryforwards, and
a valuation allowance is established to reduce that deferred tax
asset if it is "more likely than not" that the related tax
benefits will not be realised. "More likely than not" is
intended to mean a level of likelihood that is slightly more than
50 percent.
As at 30 June 1994, one of the combined entities, Double T
Radio Pty Ltd, has estimated carry forward capital losses with a
potential future income tax benefit of $2,034,314 available but
not brought to account, to be offset against future years taxable
capital gains of the entity (in Australia tax losses and capital
losses can be carried forward indefinitely).
In assessing the realisation of deferred tax assets for US
reporting purposes, management has considered whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realised. The ultimate realisation of
deferred tax assets relating to capital losses is dependant upon
the generation of future taxable capital gains. Management
considered the projected future taxable capital gains and tax
planning strategies in making this assessment. Based upon the
level of historical taxable capital gains and projections for
future taxable capital gains, management does not believe it is
more likely than not the economic entity will realise these
benefits.
Consequently, the available capital losses have been recorded as
a deferred tax asset for US reporting purposes with a valuation
allowance of $2,034,314, resulting in a US GAAP adjustments of
nil.
Application of accounting principles generally accepted in the
United States would have had the following effect on net income
and shareholders' equity.
Net income (loss) as reported in the Combined Profit and
Loss account 1,902,885
Increase (Decrease) for:
Radio Licences - amortisation (430,470)
Property, plant and equipment -
depreciation (6,000)
-------
Net increase (decrease) (436,470)
---------
Approximate net income in accordance with
US GAAP 1,466,415
---------
Shareholders' equity as reported in the Combined Balance
Sheet 4,679,600
---------
Increase (decrease) for:
Radio Licences: amortisation (2,493,190)
Property, plant and equipment:
revaluations (1,178,678)
Property, plant and equipment:
depreciation (228,000)
---------
Net decrease (3,899,868)
-----------
Shareholders' equity in accordance with US GAAP 779,732
-------
Statement of Cash Flows:
The economic entity presents its Cash Flows in accordance with
accounting standard AASB 1026 "Statement of Cash Flows" ("AASB
1026"). Its objectives and principles are similar to those set
out in the US FASB statement No. 95 "Statement of Cash Flows"
("FASB 95"). The principle difference relates to the definition
of cash. Under AASB 1026, cash is expressed net of overdrafts,
where a right of offset with the bank exists. FASB 95 requires
this to be separately shown under financing activities.
Summarised cash flow data by operating, investing and financing
activities in accordance with FASB95 is set out below:
Six months ended 31 December 1994
Net cash inflow / (outflow) from:
Operating activities 2,291,120
Investing activities 61,041
Financing activities (2,380,651)
-----------
Increase / (decrease) in cash (28,490)
________
Cash at July 1, 1994 235,068
Cash at December 31, 1994 206,578
_______
22. DIRECTORS REMUNERATION
The directors at the date of this report were appointed
subsequent to balance date. The directors in office during the
six months ended 31 December 1994 were remunerated by the former
parent company.
23. CONTRIBUTION TO GROUP PROFITS
The following group companies made contributions to the group
profit / (loss) before tax as follows:
Capital City Broadcasters Pty Limited (109,306)
Double T Radio Pty Limited 1,607,045
Commonwealth Broadcasting Corporation Pty Limited 588,455
Gold Radio Service Pty Limited 446,932
Maryborough Broadcasting Company Pty Limited 309,741
Rockhampton Broadcasting Company Pty Limited 203,324
ARN Sales Pty Limited (230,238)
---------
2,815,953
---------
24. SHARE CAPITAL
Authorised Capital:
30,000 ordinary shares of $2 each 60,000
1,300,000 ordinary shares of $1 each 1,300,000
---------
1,360,000
---------
25. ISSUED AND PAID UP CAPITAL
Ordinary shares, fully paid:
17,225 ordinary shares of $2 each 34,450
277,004 ordinary shares of $1 each 277,004
-------
311,454
-------
WESGO Limited
BALANCE SHEET March 31, 1995
3-31-95
(in thousands)
--------------
CURRENT ASSETS
Cash 427
Receivables 7,984
Other 2,878
-------
TOTAL CURRENT ASSETS 11,289
NON CURRENT ASSETS
Investments 6,046
Property, Plant & Equipment 11,275
Intangibles 0
Other 110,381
-------
TOTAL NON CURRENT ASSETS 127,702
-------
TOTAL ASSETS 138,991
CURRENT LIABILITIES
Creditors & Borrowings 1,898
Provisions 4,895
Other 3,196
-------
TOTAL CURRENT LIABILITIES 9,989
NON CURRENT LIABILITIES
Creditors & Borrowings 14,000
Provisions 439
Other 0
-------
TOTAL NON CURRENT LIABILITIES 14,439
-------
TOTAL LIABILITIES 24,428
-------
NET ASSETS 114,563
=======
SHAREHOLDERS' EQUITY
Share Capital 14,749
Reserves 90,924
Retained Profits 8,890
-------
TOTAL SHAREHOLDERS' EQUITY 114,563
=======
WESGO Limited
PROFIT & LOSS March 31, 1995
3-31-95
(in thousands)
--------------
REVENUE 13,114
======
TRADING PROFIT 2,873
INTEREST EXPENSE (339)
ABNORMAL ITEMS 0
-------
OPERATING PROFIT 2,534
INCOME TAX EXPENSE (836)
-------
OPERATING PROFIT after tax 1,698
MINORITY INTEREST 0
-------
1,698
RETAINED PROFITS, January 1, 1995 7,192
-------
TOTAL AVAILABLE FOR APPROPRIATION 8,890
DIVIDEND PROVIDED 0
-------
RETAINED PROFITS, March 31, 1995 8,890
=======
Albert's Economic Entity
DRAFT/UNAUDITED
Financial Statements
For the three months ended
March 31, 1995
Three months ended
March 31, 1995
------------------
PROFIT AND LOSS STATEMENT TOTAL
Net Revenue 7,490,686
Expenses (6,514,185)
---------
Profit Before Tax 976,501
Tax Expense (341,775)
---------
Profit After Tax 634,726
=========
BALANCE SHEET
CURRENT ASSETS
Cash 8,030,097
Intercompany-Former holding company 88,055
Receivable from related parties 1,047,491
Trade debtors 6,189,788
Provision for doubtful accounts (654,465)
Sundry debtors 60,831
Staff advances 9,711
Prepayments 79,203
Production Studio 70,630
----------
TOTAL CURRENT ASSETS 14,921,341
----------
NON-CURRENT ASSETS
Property, Plant & Equipment:
Land 1,448,769
Buildings 1,083,904
Plant and Equipment 15,686,860
Less: Accumulated Depreciation (10,248,879)
----------
Property, Plant & Equipment-Net Book Value 7,970,654
BALANCE SHEET Three months ended
March 31, 1995
------------------
Intercompany receivables 19,709,808
Loan to staff member 167,256
Future income tax benefit 536,641
Investments 79,148
Receivables from former related parties 2,363,909
Radio licenses 21,523,000
----------
TOTAL NON-CURRENT ASSETS 52,350,416
----------
TOTAL ASSETS 67,271,757
----------
CURRENT LIABILITIES
Sundry Creditors and accrued expenses 429,195
Trade Creditors 2,028,597
Payable to former related parties 347,013
Other 171,585
---------
TOTAL CURRENT LIABILITIES 2,976,390
---------
NON-CURRENT LIABILITIES
Provision for Income Tax 1,525,886
Provision for Long Service Leave 588,542
Provision for Annual Leave 639,369
Payables to former related parties 59,865,569
Other, including provision for deferred tax liab 418,095
----------
TOTAL NON-CURRENT LIABILITIES 63,037,461
----------
TOTAL LIABILITIES 66,013,851
----------
NET ASSETS 1,257,906
==========
SHAREHOLDERS' EQUITY
Paid up Capital 311,454
Capital Reserve 50,022
Property Revaluation Reserve 1,178,909
Asset Revaluation Reserve 29,694
General Reserve 139,825
Dividend Paid (4,056,420)
Tax Expense (Benefit) 0
Retained Profits 2,969,696
Profit (Loss) for period 634,726
----------
TOTAL SHAREHOLDERS' EQUITY 1,257,906
==========
