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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
FORM 10-K/A
Amendment No. 1 to
Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the fiscal year
ended December 31, 1996
Commission File Number 0-19150
WISCONSIN CENTRAL TRANSPORTATION
CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3541743
------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6250 North River Road, Suite 9000
Rosemont, Illinois 60018
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (847) 318-4600
This Amendment No. 1 amends Registrant's Annual Report on Form
10-K by adding the consolidated financial statements of
English Welsh & Scottish Railway Holdings Limited pursuant to
Rule 3-09 of Regulation S-X.
================================================================================
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
AND SCHEDULES
PAGE
INDEPENDENT AUDITORS' REPORT............................................. 30*
FINANCIAL STATEMENTS
Consolidated Balance Sheets.............................................. 31-32*
Consolidated Statements of Income........................................ 33*
Consolidated Statements of Changes in Stockholders' Equity............... 34*
Consolidated Statements of Cash Flows.................................... 35*
Notes to Consolidated Financial Statements............................... 36-50*
FINANCIAL STATEMENTS OF ENGLISH WELSH & SCOTTISH RAILWAY HOLDINGS LIMITED **
Auditor's Report........................................................ A-4
Consolidated Profit and Loss Account.................................... A-5
Consolidated Balance Sheet.............................................. A-6-7
Reconciliation of Movement in Shareholders' Funds....................... A-8
Consolidated Cash Flow Statement........................................ A-9
Notes to Consolidated Financial Statements.............................. A-10-32
Note*: The page numbers indicated are those under which such information was
filed as part of the Company's Report on Form 10-K filed on March 21, 1997. Such
information is not being amended by this Report on Form 10-K/A.
Note**: The amounts shown in the English Welsh & Scottish Railway Holdings
Limited financial statements are stated in pounds sterling. At March 31, 1997,
each pound sterling equaled US $1.6395.
A-1
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this Report:
PAGE
(a)(1) Financial Statements
Consolidated Balance Sheets................................... 31-32*
Consolidated Statements of Income............................. 33*
Consolidated Statements of Changes in Stockholders' Equity.... 34*
Consolidated Statements of Cash Flows......................... 35*
Notes to Consolidated Financial Statements.................... 36-49*
(2) Schedules
Financial Statements of English Welsh & Scottish Railway Holdings
Limited **
Auditor's Report............................................... A-4
Consolidated Profit and Loss Account........................... A-5
Consolidated Balance Sheet..................................... A-6-7
Reconciliation of Movement in Shareholders' Funds.............. A-8
Consolidated Cash Flow Statement............................... A-9
Notes to Consolidated Financial Statements..................... A-10-32
(3) Exhibits
The exhibits set forth in the Index to Exhibits in the Report on Form
10-K filed on March 21, 1997 are not being amended by this Report on
Form 10-K/A.
(b) Reports on Form 8-K filed during the quarter ended December 31, 1996.
The information provided on the Report on Form 10-K filed on March 21,
1997 is not being amended by this Report on Form 10-K/A.
Note*: The page numbers indicated are those under which such information was
filed as part of the Company's Report on Form 10-K filed on March 21,
1997. Such information is not being amended by this Report on Form
10-K/A.
Note**: The amounts shown in the English Welsh & Scottish Railway Holdings
Limited financial statements are stated in pounds sterling. At March
31, 1997, each pound sterling equaled US $1.6395.
A-2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
WISCONSIN CENTRAL TRANSPORTATION
CORPORATION
(Registrant)
Date: September 29, 1997 By: /s/ Walter C. Kelly
---------------------
Walter C. Kelly
Vice-President, Finance
A-3
<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholders of English Welsh & Scottish Railway
Holdings Limited
We have audited the accompanying consolidated balance sheet of English Welsh &
Scottish Railway Holdings Limited and subsidiaries as of 31 March 1997 and the
related consolidated profit and loss account, reconciliation of movements in
shareholders' funds and consolidated cash flows for the period from the
company's incorporation on 16 October 1995 to 31 March 1997. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements.
We conducted our audits in accordance with generally accepted auditing standards
in the United Kingdom which are substantially consistent with those in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of English Welsh &
Scottish Railway Holdings Limited and subsidiaries as of 31 March 1997 and the
results of their operations and their cash flows for the period from the
company's incorporation on 16 October 1995 to 31 March 1997 in conformity with
generally accepted accounting principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom 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 effected the results of operations for the period from the
company's incorporation on 16 October 1995 to 31 March 1997 and shareholders'
equity at 31 March 1997 to the extent summarised in supplemental note 25 to the
consolidated financial statements.
KPMG
Chartered Accountants London
Registered Auditors 30 September 1997
A-4
<PAGE>
Consolidated profit and loss account
for the period ended from 16 October 1995 to 31 March 1997
<TABLE>
<CAPTION>
Before
Exceptional Exceptional
Items Items Total
Note 1997 1997 1997
---- ----------- ----------- -----------
'000 '000 '000
<S> <C> <C> <C> <C>
Turnover 2 609,044 - 609,044
(acquisitions & continuing operations)
Operating costs 3 (530,851) (63,010) (593,861)
(acquisitions and continuing operations)
-------- -------- --------
Operating profit
(acquisitions and continuing operations) 4 78,193 (63,010) 15,183
======== ========
Other interest receivable and similar income 2,404
Interest payable and similar charges 7 (20,313)
--------
Loss on ordinary activities before taxation 4 (2,726)
Tax on loss on ordinary activities 8 900
--------
Retained loss on ordinary activities after
taxation for the period (1,826)
========
</TABLE>
There were no gains or losses other than the loss for the period.
There were no differences between the profit and loss account shown above and
that prepared on a historical cost basis.
A-5
<PAGE>
Consolidated balance sheet
at 31 March 1997
<TABLE>
<CAPTION>
Note 1997
---- -----------------------
'000 '000
<S> <C> <C> <C>
Fixed assets:
Tangible assets 9 274,121
Current assets:
Stocks 11 8,969
Debtors due in more than one year 12 66,817
Debtors due within one year 12 99,055
Cash at bank and in hand 28,096
--------
202,937
Creditors: amounts falling due within one year 13 (106,326)
--------
Net current assets 96,611
--------
370,732
Total assets less current liabilities
Creditors: amounts falling due after more than one year 14 (137,106)
Provisions for liabilities and charges 15 (110,068)
Deferred income 16 (4,352)
--------
Net assets 119,206
========
Capital and reserves
Called up share capital 17 98,603
Share premium reserve 18 1,187
Capital reserve 18 21,242
Profit and loss account 18 (1,826)
--------
Equity shareholders' funds 119,206
========
</TABLE>
These financial statements were approved by the board of directors on 18 July
1997 and were signed on its behalf by:
E A Burkhardt
Chairman
A-6
<PAGE>
Company balance sheet
at 31 March 1997
<TABLE>
<CAPTION>
Note 1997
---- ------------------------
'000 '000
<S> <C> <C> <C>
Fixed assets:
Investments 10 67,062
Current assets:
Debtors 12 110,094
--------
110,094
Creditors: amounts falling due within one year 13 (2,786)
--------
Net current assets 107,308
--------
Total assets less current liabilities 174,370
Creditors: amounts falling due after more than one year 14 (55,164)
--------
Net assets 119,206
========
Capital and reserves
Called up share capital 17 98,603
Share premium reserve 18 1,187
Revaluation reserve 18 20,622
Profit and loss account (1,206)
--------
Equity shareholders' funds 119,206
========
</TABLE>
These financial statements were approved by the board of directors on 18 July
1997 and were signed on its behalf by:
E A Burkhardt
Chairman
A-7
<PAGE>
Reconciliation of movements in shareholders' funds
for the period from 16 October 1995 to 31 March 1997
<TABLE>
<CAPTION>
1997
-----------------------------
Group Company
--------- ---------
'000 '000
<S> <C> <C>
Loss for the financial period (1,826) (1,206)
New share capital subscribed 98,603 98,603
Share premium arising on new share capital 1,187 1,187
Capital reserve arising on acquisition 21,242 -
Revaluation of investment in subsidiaries - 20,622
-------- --------
Net addition to shareholders' funds 119,206 119,206
Opening shareholders' funds - -
-------- --------
Closing shareholders' funds 119,206 119,206
======== ========
</TABLE>
A-8
<PAGE>
Consolidated cash flow statement
for the period from 16 October 1995 to 31 March 1997
<TABLE>
<CAPTION>
Note 1997
---- ------------------------
'000 '000
<S> <C> <C> <C>
Net cash inflow from operating activities 21 74,635
Return on investments and servicing of finance 22 (13,646)
Capital expenditure and financial investment 22 (28,503)
Acquisitions and disposals 22 (243,847)
--------
(211,361)
Net cash outflow before financing
Financing:
Issue of ordinary share capital 99,790
Long term loans raised 185,000
Costs of raising long term loans (11,720)
Repayment of long term loans (32,403)
--------
Net cash inflow from financing 22 240,667
Taxation paid (1,210)
--------
Increase in cash and cash equivalents 23 28,096
========
</TABLE>
A-9
<PAGE>
Notes
(forming part the financial statements)
1 Accounting Policies
The following accounting policies have been applied consistently in
dealing with items which are considered material in relation to the
group's financial statements.
Basis of Preparation
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention modified to
include the revaluation of investments in subsidiaries within the
financial statements of the company.
Basis of consolidation
The group accounts consolidate the accounts of English Welsh & Scottish
Railway Holdings Limited and all its subsidiary undertakings. These
accounts are made up to 31 March 1997.
The consolidated accounts are based on accounts of subsidiary
undertakings, all of which are coterminous with those of the parent
company, and on the accounts of the parent company.
The acquisition method of accounting has been adopted. Under this method,
the results of subsidiary and associated undertakings acquired in the
period are included in the consolidated profit and loss account from the
date of acquisition. Goodwill arising on consolidation has been written
off to reserves. Any excess of the aggregate of the fair value of the
separate net assets acquired over the fair value of the consideration
given (negative goodwill) is credited directly to reserves.
In the company's accounts, investments in subsidiary undertakings are
revalued to reflect the underlying book value of the net assets of the
subsidiaries.
The amount of the loss for the financial period dealt with in the
financial statements of English Welsh & Scottish Railway Holdings Limited
is disclosed in note 18 to these accounts. The company has taken
advantage of section 230(4) of the Companies Act 1985 and has not
presented its own profit and loss account.
Fixed assets and depreciation
Depreciation is provided by the company to write off the cost less the
estimated residual value of tangible fixed assets by equal instalments
over their estimated useful economic lives from the time assets come into
service as follows:
- Freehold buildings 40 years
- Leasehold land and buildings life of lease
- Plant, machinery and equipment 3 to 10 years
- Rolling stock 20 to 50 years
- Infrastructure 10 to 30 years
No depreciation is provided on freehold land.
A-10
<PAGE>
Notes continued
1 Accounting Policies continued
Leases
Where the group enters into a lease which entails taking substantially
all the risks and rewards of ownership of an asset, the lease is treated
as a 'finance lease'. The asset is recorded in the balance sheet as a
tangible fixed asset and is depreciated over its estimated useful life or
the term of the lease, whichever is shorter. Future instalments under
such leases, net of finance charges, are included within creditors.
Rentals payable are apportioned between the finance element, which is
charged to the profit and loss account, and the capital element which
reduces the outstanding obligation for future instalments.
All other leases are accounted for as 'operating leases' and the rental
charges are charged to the profit and loss account on a straight line
basis over the life of the lease.
Government grants
Capital based government grants are included within accruals and deferred
income in the balance sheet and credited to trading profit over the
estimated useful economic lives of the assets to which they relate.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Pensions and other post-retirement benefits
The group participates in a pension scheme providing benefits based on
final pensionable pay. The assets of the scheme are held separately from
those of the group in an independently administered fund. Contributions
to the scheme are charged to the profit and loss account so as to spread
the cost of pensions over employees' working lives with the group.
In addition the group participates in a defined contribution pension
scheme. The assets of the scheme are held separately from those of the
group in an independently administered fund. The amount charged against
profits represents the contributions payable to the scheme in respect of
the accounting period.
Details of the pension scheme are provided in note 20.
Taxation
The credit for taxation is based on the profit for the period and takes
into account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes.
Provision is made for deferred tax only to the extent that it is probable
that an actual liability will crystallise.
A-11
<PAGE>
Notes continued
1 Accounting Policies continued
Foreign Exchange
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction or at the contract rate if the transaction is
covered by a forward exchange contract. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of exchange
ruling at balance sheet date or, if appropriate, at the forward exchange
contract rate. All differences are taken to the profit and loss account.
Research and Development
Research and development expenditure is written off as incurred, except
that development expenditure incurred on an individual project is carried
forward when its future recoverability can reasonably be regarded as
assured. Any expenditure carried forward is amortised in line with
expected future sales or cost savings from the related project.
2 Turnover
Turnover is stated net of value added tax and represents amounts invoiced
to third parties and estimates in respect of amounts not invoiced.
Turnover and operating profit is attributable to one activity, the
haulage of freight and mail by rail and other related services throughout
England, Wales and Scotland.
3 Operating costs
<TABLE>
<CAPTION>
Before
Exceptional Exceptional
Items Items Total
1997 1997 1997
--------- --------- ---------
'000 '000 '000
<S> <C> <C> <C>
Change in stock of spares 2,069 - 2,069
Other operating income (262) - (262)
Raw materials and consumables 83,315 - 83,315
Other external charges 236,813 3,312 240,125
Staff costs (Note 6) 193,788 59,698 253,486
Depreciation and other amounts written
off tangible and intangible fixed assets 15,128 - 15,128
------- ------- -------
530,851 63,010 593,861
======= ======= =======
</TABLE>
The exceptional item is a provision for redundancy and restructuring
costs of which 28,331,000 had been spent by the end of the period.
A-12
<PAGE>
Notes continued
4 Loss on ordinary activities before taxation
The operating loss dealt with in the accounts of the parent company was
339,187.
1997
----
'000
Loss on ordinary activities before taxation
is stated after charging:
Auditors' remuneration:
Audit 350
Other services 460
Depreciation and other amounts written off
tangible fixed assets:
Owned 13,436
Leased 1,692
Loss on sale of fixed assets 194
Hire of plant and machinery - rentals payable
under operating leases 192
Other operating leases 1,618
Hire of plant and machinery - finance charges
under finance leases 16
after crediting:
Grants credited to profit and loss account 272
Rents receivable from property 8,510
In addition to the above, the auditors received 1,931,000 during the
period in relating to the acquisition of subsidiaries. These costs have
been capitalised.
5 Remuneration of directors
Aggregate emoluments of directors 168,970
Number of directors for whom retirement benefits are 1
are accruing under a money purchase scheme
Number of directors for whom retirement benefits are 1
accruing under a defined benefits scheme
Number of directors eligible for shares under a long 1
term incentive scheme
Directors interests in the ordinary share capital of the company and
options granted during the year are disclosed in the Director's Report.
1,453,772 was paid to Wisconsin Central Transportation Incorporated in
relation to a management contract incorporating among other things, the
provision of the services of EA Burkhardt, R Henke and TF Power.
32,000 was paid or is payable to Berkshire Partners for the services of
C Ferenbach and RK Lubin
16,000 was paid or is payable to Fay Richwhite for the services of
DM Richwhite.
12,000 was paid or is payable to McLachlan Rissman & Doll for the
services of T W Rissman.
A-13
<PAGE>
Notes continued
5 Remuneration of directors continued
Transactions involving directors
Clarke & Co. a business owned by RJG Clarke was paid 59,208 during the
period for the provision of consultancy and other professional services.
McLachlan Rissman & Doll a partnership in which TW Rissman has an
interest, was paid 137,888 during the period for the provision of legal
and other professional services.
6 Staff numbers and costs
Number of Number of Average Number
employees at employees at 31 of Employees
acquisition March 1997 during the period
----------- ----------- -----------
Executive 74 106 90
Management 673 510 591
Other Staff 7,005 5,765 6,385
----------- ----------- -----------
7,752 6,381 7,066
=========== =========== ===========
The aggregate payroll costs of these persons were as follows:
Before Exceptional Total
Exceptional Items
Items
1997 1997 1997
----------- ----------- -----------
'000 '000 '000
Wages & salaries 159,125 - 159,125
Social security costs 12,524 - 12,524
Other pension costs 3,037 3,037
(see note 20)
Other staff costs 19,102 59,698 78,800
----------- ----------- -----------
193,788 59,698 253,486
=========== =========== ===========
7 Interest payable and similar charges
1997
-----------
'000
On bank loans, overdrafts and other loans
repayable within five years 15,650
On bank loans repayable in more than five years 4,273
Finance charges payable in respect of finance
leases and hire purchase contracts (279)
Exchange loss on monies on deposit 669
-----------
20,313
===========
A-14
<PAGE>
Notes continued
8 Taxation
1997
-----------
'000
UK corporation tax at 33% on the profit for the period on
ordinary activities from incorporation to 31 March 1996 (2,125)
Deferred Taxation 3,025
-----------
900
===========
Deferred taxation includes a credit of 1,319,000 resulting from the
reduction in the rate of corporation tax from 33% to 31% announced in
the budget on 2 July 1997.
9 Tangible fixed assets
<TABLE>
<CAPTION>
Plant, Assets in
machinery course of
Land & Rolling & Infra- cons-
buildings stock equipment structure truction Total
--------- --------- --------- --------- ---------- ---------
'000 '000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C> <C>
Group:
Cost (or valuation):
Acquisition of subsidiaries 30,094 224,341 16,278 680 819 272,212
Additions 40 2,201 68 14 27,967 30,290
Disposals (126) (1,104) (276) - - (1,506)
Transfers 452 - 194 - (646)
------- ------- ------- ------- ------- -------
At 31 March 1997 30,460 225,438 16,264 694 28,140 300,996
======= ======= ======= ======= ======= =======
Depreciation and diminution
in value:
Acquisition of subsidiaries - - (11,604) (401) - (12,005)
Charge for period (1,057) (12,673) (1,360) (38) - (15,128)
On disposals 9 10 239 - - 258
------- ------- ------- ------- ------- -------
At 31 March 1997 (1,048) (12,663) (12,725) (439) - (26,875)
======= ======= ======= ======= ======= =======
Net book value
At 31 March 1997 29,412 212,775 3,539 255 28,140 274,121
======= ======= ======= ======= ======= =======
</TABLE>
A-15
<PAGE>
Notes continued
9 Tangible fixed assets continued
On acquisition of the companies detailed in Note 10 to the financial
statements, fair values were assigned to the assets and liabilities in
accordance with FRS 7.
The net book value of land and buildings at 31 March 1997 comprises:
Group Company
1997 1997
-------- --------
'000 '000
Land - -
Freehold Buildings 18,806 -
Long leasehold 10,426 -
Short leasehold 180 -
-------- --------
29,412 -
======== ========
Included within the amounts for fixed assets are the following amounts
relating to leased assets. These assets are held on subleases granted by
the British Railways Board to subsidiary companies prior to their
acquisition by the company. The headleases are finance leases which
continue to be held by the British Railways Board. The subleases transfer
all the benefits and obligations of ownership inherent in the headleases
to the subsidiaries. All future liabilities arising under the headleases,
and included within the subleases, were discharged to the British
Railways Board on acquisition of the subsidiaries. In addition, within
the analysis below are assets with a net book value of 174,000 for which
liabilities continue to exist.
Assets held under finance leases
Plant,
machinery
Rolling and
stock equipment Total
--------- --------- ---------
'000 '000 '000
Cost:
Additions on acquisition 27,616 237 27,853
--------- --------- ---------
At 31 March 1997 27,616 237 27,853
Depreciation:
Additions on acquisition - - -
Provided in the period (1,629) (63) (1,692)
--------- --------- ---------
At 31 March 1997 (1,629) (63) (1,692)
--------- --------- ---------
Net Book Value
At 31 March 1997 25,987 174 26,161
========= ========= =========
A-16
<PAGE>
Notes continued
10 Fixed asset investments - company
Cost of shares
in Loans to
subsidiaries subsidiaries Total
--------- --------- ---------
'000 '000 '000
Company:
Additions at cost 46,440 32,650 79,090
Repayment of loans - (32,650) (32,650)
--------- --------- ---------
At 31 March 1997 46,440 - 46,440
Revaluation 20,622 - 20,622
--------- --------- ---------
At 31 March 1997 67,062 - 67,062
========= ========= =========
Investments in group companies have been revalued to reflect the
underlying book value of the net assets of the subsidiaries.
The companies in which the company's interest is more than 10% are as
follows:
<TABLE>
<CAPTION>
Class and
Country of percentage of
registration or shares held
incorporation Principal activity Group & company
--------------- --------------------------- ---------------
<S> <C> <C> <C>
Subsidiary undertakings:
Boreal & Austral Railfreight Ltd England & Wales Holding company 100% 1 Ordinary
New Locomotive Finance Ltd England & Wales Acquisition and leasing of 100% 1 Ordinary
rolling stock
Res (December) Ltd England & Wales Holding company 100% 1 Ordinary
Rail Express Systems Ltd England & Wales Haulage of mail by rail and 100% 1 Ordinary
provision of charter
passenger services
Loadhaul Ltd England & Wales Haulage of freight by rail 100% 1 Ordinary
English Welsh & Scottish England & Wales Haulage of freight by rail 100% 1 Ordinary
Railway Ltd
Mainline Freight Ltd England & Wales Haulage of freight by rail 100% 1 Ordinary
NPJV Ltd England & Wales Invoicing agent 100% 1 Ordinary
LGJV Ltd England & Wales Invoicing agent 100% 1 Ordinary
EWS Finance Ltd England & Wales Dormant 100% 1 Ordinary
East & West Ltd England & Wales Dormant 100% 1 Ordinary
</TABLE>
At the date of signing of these accounts the company had exchanged
contracts with British Railways Board for the acquisition of Railfreight
Distribution Limited. The completion of the acquisition is subject to an
approval being granted by the European Commission. Railfreight
Distribution Limited has not been consolidated on the grounds that it was
neither owned nor controlled by the company at the date of the accounts.
A-17
<PAGE>
Notes continued
10 Fixed asset investments continued
On 9 December 1995 the company acquired all of the 1 Ordinary shares of
Res (December) Ltd and 90% of the 1 Ordinary shares of Rail Express
Systems Ltd (the remaining 10% being held by Res (December) Ltd). The
cash consideration given was 11,930,000 and the discharge of an overdraft
of 8,152,000 owed by Rail Express Systems Limited. Acquisition costs
incurred at 31 March 1997 totalled 865,303. The estimated fair value of
the net assets acquired was 15,347,000 (see table below). The resulting
goodwill of 5,600,303 was written off on acquisition to capital reserve.
On 24 February 1996, the intercompany loan of 8,152,000 resulting from
the discharge of the overdraft, was discharged by issuing 8,152,000 fully
paid ordinary shares of 1 to English Welsh & Scottish Railway Holdings
Limited. In addition, at 31 March 1996 a further 3,600,000 fully paid
ordinary shares of 1 were issued to discharge working capital advances
from the parent company to Rail Express Systems Limited.
Acquisition of Res (December) Ltd and Rail Express Systems Ltd
--------------------------------------------------------------
<TABLE>
<CAPTION>
Change in Fair value
Book Re- accounting to the
value valuation Provisions policies group
--------- --------- --------- --------- --------
'000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C>
Fixed assets:
Tangible 7,756 11,703 - - 19,459
Current assets:
Stock 960 - - - 960
Debtors 10,121 - - - 10,121
Pension prepayment - - - 7,291 7,291
------- ------- ------- ------- -------
Total assets 18,837 11,703 - 7,291 37,831
------- ------- ------- ------- -------
Liabilities:
Provisions:
Other 2,140 - 650 2,699 5,489
Creditors:
Trade creditors 7,497 - - - 7,497
Other creditors 8,455 - - - 8,455
Accruals 1,043 - - - 1,043
------- ------- ------- ------- -------
Total Liabilities 19,135 - 650 2,699 22,484
------- ------- ------- ------- -------
Net assets (298) 11,703 (650) 4,592 15,347
======= ======= ======= ======= =======
</TABLE>
Included in group loss for the period is a profit of 3,134,000 relating
to the above acquisition. The acquired group made a loss of 10,638,000
from 1 April 1995 to the date of acquisition.
A-18
<PAGE>
Notes continued
10 Fixed asset investments continued
On 24 February 1996 the company acquired all of the 1 Ordinary shares of
Boreal & Austral Railfreight Ltd which owned the entire share capital of
Loadhaul Ltd, Mainline Freight Ltd and Transrail Freight Ltd. The cash
consideration given was 215,544,000. Acquisition costs incurred at 31
March 1997 totalled 7,355,697. An amount of 2,789,000 being the estimated
post tax value of claims for employee injuries indemnified by the vendor
remains outstanding and is subject to the final resolution of these
claims. The fair value of the net assets acquired was 246,953,000 (see
table below). The resulting negative goodwill of 26,842,303 is included
in the consolidated balance sheet as a capital reserve.
Acquisition of Boreal & Austral Railfreight Ltd
-----------------------------------------------
<TABLE>
<CAPTION>
Change in Fair value
Book Re- accounting to the
value valuation Provisions policies group
--------- --------- --------- --------- --------
'000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C>
Fixed assets:
Tangible 227,602 13,146 - - 240,748
Current assets:
Stock 10,081 - - - 10,081
Debtors 77,500 - (634) - 76,866
Pension prepayment - - - 58,681 58,681
------- ------- ------- ------- -------
Total assets 315,183 13,146 (634) 58,681 386,376
------- ------- ------- ------- -------
Liabilities
Provisions:
Other 6,034 - 34,711 20,348 61,093
Creditors:
Trade creditors 43,401 - - - 43,401
Other creditors 26,030 - - - 26,030
Accruals 8,899 - - - 8,899
Total Liabilities 84,364 - 34,711 20,348 39,423
------- ------- ------- ------- -------
Net assets 230,819 13,146 (35,345) 38,333 246,953
======= ======= ======= ======= =======
</TABLE>
Included in group loss for the period is a loss of 3,275,000 relating to
the above acquisition. The acquired group made a profit of 17,599,000
from 1 April 1995 to the date of acquisition. On 13 October 1996 the
assets, liabilities and trade of Loadhaul Limited and Mainline Freight
Limited transferred to Transrail Freight Limited which changed its name
to English Welsh & Scottish Railway Limited.
11 Stocks
Stocks held by the group comprise spare parts held for the maintenance of
the group's assets. No stocks were held by the company.
A-19
<PAGE>
Notes continued
12 Debtors
Group Company
1997 1997
-------- --------
'000 '000
Amounts falling due within one year:
Trade debtors 84,245 -
Amounts owed by group undertakings - 107,264
Other debtors 8,127 2,830
Prepayments and accrued income 6,683 -
-------- --------
99,055 110,094
Amounts falling due after more than one year:
Pension fund prepayment 66,817 -
-------- --------
165,872 110,094
======== ========
13 Creditors: amounts falling due within one year
Group Company
1997 1997
-------- --------
'000 '000
Bank loans and overdrafts 7,500 672
Obligations under finance leases
and hire purchase contracts 46 -
Trade creditors 60,384 -
Other creditors including taxation
and social security:
Corporation tax 915 -
Other taxes and social security costs 15,203 -
Other creditors 10,160 1,080
-------- --------
94,208 1,752
Accruals and deferred income 12,118 1,034
-------- --------
106,326 2,786
======== ========
14 Creditors: amounts falling due after more than one year
Group Company
1997 1997
-------- --------
'000 '000
Bank loans 136,971 55,164
Obligations under finance leases
and hire purchase contracts 135 -
-------- --------
137,106 55,164
======== ========
A-20
<PAGE>
Notes continued
14 Creditors: amounts falling due after more than one year continued
Interest Rates and Security on Loans
The bank loans include 89,307,000 attracting interest at LIBOR plus 2%.
The loans are secured by a first fixed and floating charge over all the
assets and shares of the Group, except for those to which a charge
attaches under the terms of the contract for the carriage of mail for the
post office and the assets of New Locomotive Finance Ltd. Cash balances
include an amount of 11,048,000 on deposit as cash collateral for a
letter of credit facility.
The bank loans also include 55,164,000 attracting interest at LIBOR plus
0.65% and is secured in the same manner as the Term Loans but ranks after
them in order of preference.
Creditors payable by instalments:
<TABLE>
<CAPTION>
Instalments Instalments
payable payable Instalments
between one between two payable after
and two years and five years five years Total
1997 1997 1997 1997
----------- ----------- ----------- -----------
'000 '000 '000 '000
<S> <C> <C> <C> <C>
Group:
Bank loans 5,000 76,807 55,164 136,971
======= ======= ======= =======
Company:
Bank loans - - 55,164 55,164
======= ======= ======= =======
</TABLE>
The maturity of obligations under finance leases and hire purchase
contracts is as follows:
Group Company
1997 1997
------- -------
'000 '000
Within one year 46 -
In the second to fifth years 135 -
Over five years - -
------- -------
Less future finance charges - -
------- -------
181 -
======= =======
A-21
<PAGE>
Notes continued
15 Provisions for liabilities and charges
<TABLE>
<CAPTION>
Redundancy
Contaminated Deferred &
Land Tax Restructuring Other Total
Provision Provision Provision Provisions Provisions
1997 1997 1997 1997 1997
----------- ----------- ----------- ----------- -----------
'000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C>
Group:
On acquisition 16,375 21,771 4,217 24,219 66,582
Utilised during period (309) - (32,548) (2,534) (35,391)
Charge/(credit) for the
period in the profit and
loss account - (3,025) 66,594 5,308 78,877
------- ------- ------- ------- -------
At 31 March 1997 16,066 18,746 38,263 36,993 110,068
======= ======= ======= ======= =======
</TABLE>
The amounts provided for deferred taxation and the amounts not provided
are set out below:
1997
Provided Unprovided
--------- ---------
'000 '000
Difference between accumulated depreciation
and amortisation and capital allowances 52,009
Timing difference on Pension fund surplus 20,714 -
Timing difference on provision for
redundancies and restructuring (1,968) (4,841)
Other timing differences - (9,562)
--------- ---------
18,746 37,606
========= =========
Deferred taxation has not been provided for on accelerated capital
allowances as significant fixed asset purchases will be made in the
foreseeable future which will prevent the deferred taxation from
crystallising.
16 Deferred Income
Government Total
capital deferred
grants Other income
1997 1997 1997
------- ------- -------
'000 '000 '000
Additions arising on acquisition 1,732 3,327 5,059
Receivable during period - 85 85
Credited to profit and loss account (98) (694) (792)
------- ------- -------
At 31 March 1997 1,634 2,718 4,352
======= ======= =======
A-22
<PAGE>
Notes continued
17 Called up share capital
Number of Group and
Shares Company
1997 1997
----------- --------
No '000
Authorised:
Ordinary shares of 1 each
At incorporation 1,000 1
Increased on 8 December 1995 6,000,000 6,000
Increased on 24 February 1996 118,999,000 118,999
----------- -------
125,000,000 125,000
=========== =======
Allotted, called up and fully paid:
Ordinary shares of 1 each
At incorporation
Shares issued on 8 December 1995 at par 6,000,000 6,000
Shares issued on 24 February 1996 at par 85,000,000 85,000
Shares issued on 2 August 1996 at par 2,300,000 2,300
Shares issued on 10 September 1996 at par 1,346,500 1,346
Options exercised on 21 February 1997 at a
premium of 0.30. 3,956,522 3,957
----------- -------
98,603,022 98,603
=========== =======
As at 31 March 1997 options and warrants totalling 3,565,747 and
7,546,521 respectively had been granted but not exercised. Subsequent to
the balance sheet date a further 716,513 options were granted giving rise
to an entitlement to a further 66,913 warrants.
18 Reserves
<TABLE>
<CAPTION>
Group: Group & Group Company Group
Company Profit
Share premium Capital Revaluation and loss
Account reserve reserve account
1997 1997 1997 1997
------ ------ ------ ------
'000 '000 '000 '000
<S> <C> <C> <C> <C>
At incorporation - - - -
Premium on options
exercised during the period 1,187 -
Retained loss for period - - - (1,826)
Arising on acquisition - 21,242 - -
Revaluation surplus - - 20,622 -
------ ------ ------ ------
At 31 March 1997 1,187 21,242 20,622 (1,826)
====== ====== ====== ======
</TABLE>
Company:
The company's loss for the financial period was 1,365,000.
A-23
<PAGE>
Notes continued
19 Commitments
(i) Capital commitments at the end of the financial year for which
no provision has been made.
Group Company
1997 1997
-------- --------
'000 '000
Contracted 1,054 -
Authorised but not contracted 300 -
--------- --------
1,354 -
========= ========
Amounts contracted for but not provided for in the accounts to acquire
new rolling stock totalled not less than 133.4 million.
(ii) At the end of the financial year neither the company nor the group
had entered into commitments in respect of finance leases (and
similar hire purchase contracts), the inception of which occurs
after the year end.
(iii) Annual commitments under non-cancellable operating leases are as
follows:
1997
---------------------
Land and
buildings Other
-------- --------
'000 '000
Group:
Operating leases which expire:
Within one year 1,481 132
In the second to fifth years inclusive 4,159 211
Over five years 8,270 -
-------- --------
13,910 343
======== ========
The company did not have any commitments under non-cancellable
operating leases.
(iv) Fuel Hedge Contracts
English Welsh & Scottish Railway Ltd has entered into a number of
fuel hedge contracts for gas oil, none of which extend beyond 31
March 1998. The quantity hedged is equivalent to eleven weeks
consumption.
(v) Foreign Currency Contracts
As indicated in the capital commitments note the group has
significant commitments denominated in US dollars. In order to
reduce exposure to exchange rate fluctuations the company has
entered into a number of contracts to purchase US$190 million in
total. These contracts mature between 2 March 1998 and 2 November
1998 at various rates ranging between 1.57 and 1.636.
A-24
<PAGE>
Notes continued
19 Commitments continued
(vi) Interest Rate Contracts
English Welsh & Scottish Railway Ltd entered into a contract
commencing on 17 January 1997 of three years duration to pay or
receive as appropriate the difference between interest on 25
million at a fixed rate of 7.08% and 3 month LIBOR on the first
day of each three month period commencing on 17 January 1997.
(vii) On 12 March 1997 the company exchanged contracts with the British
Railway Board to acquire Railfreight Distribution Limited.
Consideration for the acquisition has been agreed as 500,000
subject to any adjustments which arise as a result of the
completion process. Completion of the acquisition is subject to
approval being obtained from the European Commission. If approval
is not forthcoming from the European Commission by 30 August 1997
the company is under no obligation to continue with the
acquisition.
20 Pension scheme
Contributions to the group's defined benefit pension scheme are charged
to the profit and loss account so as to spread the cost of pensions over
employees' working lives with the group. The contributions are determined
by a qualified actuary using the projected unit method. The most recent
valuation was at 1 April 1996. The assumptions adopted by the pension
fund's actuary which have the most significant effect on the results of
the valuation are detailed below.
These assumptions are:
- Salary inflation has been assumed to be 6.5% per annum.
- Pensions growth has been assumed to be 4.5% per annum.
- Return on investments has been assumed to be 8.5% per annum.
The most recent actuarial valuation showed that the market value of the
scheme's assets was 348.2 million and that the actuarial value of those
assets represented 152% of the liabilities for benefits that had accrued
to members, after allowing for expected future increases in earnings. The
contributions of the group and employees will remain at 7.5% and 5% of
earnings respectively.
In addition, the group operates a defined contribution pension scheme
which requires the employer to match employees contributions on a pound
for pound basis. The pension cost charge for the period represents
contributions payable by the group to the fund and amounted to
3,037,000.
The Chancellor of the Exchequer announced in his Budget on 2 July 1997
that pension schemes would no longer be able to reclaim tax credits
arising on dividends form UK shares. The implications of this are being
assessed and will be dealt with in the 1998 accounts in accordance with
the provisions of SSAP24.
A-25
<PAGE>
Notes continued
21 Reconciliation of operating profit to net cash inflow from operating
activities
1997
---------
'000
Operating profit 14,514
Depreciation charge 15,128
Profit on sale of tangible fixed assets (539)
Decrease in stocks 2,069
Increase in debtors (10,124)
Increase in creditors and provisions 53,587
---------
Net cash inflow from operating activities 74,635
=========
22 Analysis of cash flows for headings netted in the cash flow statement
<TABLE>
<CAPTION>
1997
---------------------
'000 '000
<S> <C> <C>
Returns on investments and servicing of finance:
Interest received 2,404
Interest paid (16,050)
Interest element of finance lease rental payments
--------
Net cash outflow for returns on investments and servicing of finance (13,646)
Capital expenditure and financial investment:
Purchase of tangible fixed assets (30,290)
Sale of tangible fixed assets 1,787
--------
Net cash outflow for capital expenditure and financial investment (28,503)
Acquisitions and disposals:
Acquisition of subsidiaries (243,847)
Net cash acquired with subsidiaries -
--------
Net cash outflow for acquisitions and disposals (243,847)
Financing:
Issue of ordinary share capital 99,790
Debt due within one year 7,500
Debt due after one year 145,097
Financing costs (11,720)
--------
Capital element 140,877
--------
Net cash inflow from financing 240,667
========
</TABLE>
A-26
<PAGE>
Notes continued
23 Analysis of net debt
<TABLE>
<CAPTION>
At Non cash At 31 March
incorporation Cash flow Acquisition changes 1997
-------- -------- -------- -------- --------
'000 '000 '000 '000 '000
<S> <C> <C> <C> <C> <C>
Cash at bank - 28,768 - - 28,768
Overdraft - (672) - - (672)
-------- -------- -------- -------- --------
- 28,096 - - 28,096
Debt due after - (133,377) - (3,594) (136,971)
one year
Debt due within - (7,500) - - (7,500)
one year
Finance leases - - (181) - (181)
-------- -------- -------- -------- --------
- (140,877) (181) (3,594) (144,652)
-------- -------- -------- -------- --------
Total - (112,781) (181) (3,594) (116,556)
======== ======== ======== ======== ========
</TABLE>
1997
---------
'000
Reconciliation of net cash flow to movement in debt:
Increase in cash in the period 28,096
Cash inflow from increase in debt and lease financing (140,877)
---------
Change in debt resulting from cash flows (112,781)
Finance leases required with subsidiaries (181)
Amortisation of finance costs (3,594)
---------
Movement in net debt in period (116,556)
Net debt at incorporation -
---------
Net debt at 31 March 1997 (116,556)
=========
24 Ultimate parent company and parent undertaking of larger group
The company has no parent undertaking and therefore its results are not
consolidated in the accounts of any other entity.
A-27
<PAGE>
Notes continued
25 Supplemental US GAAP information
As at 31 March 1997, Wisconsin Central Transportation Corporation (WCTC),
a US company registered with the US Securities and Exchange Commission
(SEC), held an approximate 34% interest in English Welsh & Scottish
Railway Holdings Limited (EWSRH).
a.) Basis of analysis:
In compliance with UK legislation, the first accounts of EWSRH
covered a period from incorporation to 31 March 1997, a period of
approximately seventeen and a half months. Set out below (to comply
with the SEC's rule that precludes audited financial statements
covering periods in excess of twelve months) is a summary of those
results analysing how they arose between the period from
incorporation to 31 March 1996 and the year ended 31 March 1997.
<TABLE>
<CAPTION>
5 1/2 months Year ended Period ended
ended 31 31 March 31 March
March 1996 1997 1997
--------- --------- ---------
'000 '000 '000
<S> <C> <C> <C>
Profit and loss account:
Turnover 73,500 535,544 609,044
Change in stock of spares (1,527) (542) (2,069)
Other operating income 135 127 262
Raw materials and consumables (3,355) (79,960) (83,315)
Other external charges (36,695) (200,118) (236,813)
Staff costs (21,144) (172,644) (193,788)
Redundancy and restructuring costs - (63,010) (63,010)
Depreciation (1,447) (13,681) (15,128)
------- -------- --------
Operating costs (64,033) (529,828) (593,861)
------- -------- --------
Operating profit 9,467 5,716 15,183
Other interest receivable and similar income 605 1,799 2,404
Interest payable and similar charges (1,980) (18,333) (20,313)
------- -------- --------
Profit/(loss) on ordinary activities before taxation 8,092 (10,818) (2,726)
Current taxation (3,188) 1,063 (2,125)
Deferred taxation - 3,025 3,025
------- -------- --------
Retained profit/(loss) for the period 4,904 (6,730) (1,826)
======= ======== ========
Reconciliation of movement in shareholders' funds:
Retained profit/(loss) for the period 4,904 (6,730) (1,826)
New share capital subscribed 91,000 7,603 98,603
Share premium arising on new share capital - 1,187 1,187
Capital reserve arising on acquisition 23,156 (1,914) 21,242
------- -------- --------
Net addition to shareholders' funds 119,060 146 119,206
Opening shareholders' funds - 119,060 -
------- -------- --------
Closing shareholders' funds 119,060 119,206 119,206
======= ======== ========
</TABLE>
A-28
<PAGE>
Notes continued
25 Supplemental US GAAP information continued
<TABLE>
<CAPTION>
5 1/2 months Year ended Period ended
ended 31 31 March 31 March
March 1996 1997 1997
--------- --------- ---------
'000 '000 '000
<S> <C> <C> <C>
Cash flow statement:
Operating profit 9,467 5,716 15,183
Depreciation charge 1,447 13,681 15,128
Profit on sale of fixed assets (44) (495) (539)
Decrease in stocks 1,527 542 2,069
(Increase)/Decrease in debtors (45,389) 35,265 (10,124)
Increase in creditors 43,092 9,826 52,918
-------- -------- --------
Net cash flow from operating activities 10,100 64,535 74,635
Interest received 605 1,799 2,404
Interest paid (1,980) (14,070) (16,050)
-------- -------- --------
Net cash outflow from returns on investment and
servicing of finance (1,375) (12,271) (13,646)
Purchase of fixed assets (2,465) (27,825) (30,290)
Sale of fixed assets 1,367 420 1,787
-------- -------- --------
Net cash outflow from capital expenditure and
financial investment (1,098) (27,405) (28,503)
Acquisitions of subsidiaries (244,237) 390 (243,847)
Financing:
Issue of ordinary share capital 91,000 8,790 99,790
Long term loans raised 180,000 5,000 185,000
Costs of raising long term finance (8,711) (3,009) (11,720)
Repayment of long term loans - (32,403) (32,403)
-------- -------- --------
Net cash inflow from financing 262,289 (21,622) 240,667
Taxation paid - (1,210) (1,210)
-------- -------- --------
Increase in cash and cash equivalents 25,679 2,417 28,096
======== ======== ========
</TABLE>
A-29
<PAGE>
Notes continued
25 Supplemental US GAAP information continued
<TABLE>
<CAPTION>
31 March 31 March
1996 1997
-------- --------
'000 '000
<S> <C> <C>
Balance sheets:
Fixed assets:
Tangible assets 259,020 274,121
Current assets:
Stocks 9,850 8,969
Debtors due in more than one year 66,298 66,817
Debtors due within one year 136,364 99,055
Cash at bank and in hand 26,930 28,096
-------- --------
239,442 202,937
Creditors: amounts falling due within one year (143,291) (106,326)
-------- --------
Net current assets 96,151 96,611
-------- --------
Total assets less current liabilities 355,171 370,732
Creditors: amounts falling due after more than one year (165,626) (137,106)
Provisions for liabilities and charges (65,351) (110,068)
Deferred income (5,134) (4,352)
-------- --------
Net assets 119,060 119,206
======== ========
Capital and reserves:
Called up share capital 91,000 98,603
Share premium reserve - 1,187
Capital reserve 23,156 21,242
Profit and loss account 4,904 (1,826)
-------- --------
Equity shareholders' funds 119,060 119,206
======== ========
</TABLE>
A-30
<PAGE>
Notes continued
25 Supplemental US GAAP information continued
b.) Summary of significant differences between UK and US GAAP
Set out below is a reconciliation of the profit/(loss) and
shareholders' funds as set out above under UK GAAP to those under
US GAAP to comply with SEC requirements.
<TABLE>
<CAPTION>
5 1/2 months Year ended
ended 31 31 March
March 1996 1997
-------- --------
'000 '000
<S> <C> <C>
Net profit/(loss) in accordance with UK GAAP 4,904 (6,730)
Redundancy and restructuring costs (a) - 63,010
Expenditure on rolling stock (b) 6,452 21,838
Pensions (c) 275 1,410
Capitalisation of interest (d) - 2,366
Taxation (e) (2,219) (29,246)
Amortisation of goodwill (f) (167) (1,736)
------- -------
Net profit in accordance with US GAAP 9,245 50,912
======= =======
</TABLE>
<TABLE>
<CAPTION>
As at As at
31 March 31 March
1996 1997
-------- --------
'000 '000
<S> <C> <C>
Shareholders' funds in accordance with UK GAAP 119,060 119,206
Restatement of pension fund surplus in accordance with SFAS 87 and 88 (c) (13,903) (15,038)
Restatement of deferred taxation (e) (9,253) (6,204)
Adjustments to results as set out above 4,341 61,983
------- -------
Shareholders' funds in accordance with US GAAP 100,245 159,947
======= =======
</TABLE>
The material adjustments made for US GAAP purposes as analysed above
are as follows:
a. redundancy and restructuring costs in connection with the
acquisition of businesses, which must be expensed under FRS 7:
"Fair Values in Acquisition Accounting" in the UK, but treated
as fair value adjustments in the acquisition balance sheet for
US GAAP purposes, provided certain criteria are met;
b. deferral, net of 138,000 and 2,810,000 of amortisation, for the
periods ended 31 March 1996 and 1997 respectively, of certain
expenditures relating to rolling stock and track renewals which
has been expensed in the UK GAAP accounts;
c. difference in calculation of pension surplus and charge between
SSAP 24: "Accounting for Pensions" in the UK and SFAS 87:
"Employers' Accounting for Pensions" and SFAS 88: "Employers'
Accounting for Settlements and Curtailments of Defined Benefit
Plans and for Termination Benefits" for US GAAP purposes;
d. capitalisation of interest costs relating to the purchase of
fixed assets which have been expensed in the UK GAAP accounts;
e. full provisions for deferred taxation under US GAAP for the
consequences of all temporary differences between carrying
values for financial reporting and tax purposes (UK GAAP only
recognises deferred tax assets and liabilities to the extent
that they relate to timing differences which are expected to
reverse in the foreseeable future) and taxation adjustments for
other items included in the reconciliation above;
A-31
<PAGE>
Notes continued
25 Supplemental US GAAP information continued
f. Goodwill has been adjusted as a result of certain US/UK GAAP
differences, notably being increased by the redundancy and
restructuring costs resulting in the elimination of the capital
reserve (negative goodwill) arising under UK GAAP. Goodwill is
amortised over a 40 year period for US GAAP purposes;
g. The Group prepares its Consolidated Statements of Cashflows
under Financial Reporting Standard No. 1 "Cashflow Statements"
(FRS 1). Its objectives and principles are similar to those set
out in the US Statement of Financial Accounting Standards
No. 95, "Statement of Cash Flows" (SFAS 95). The principal
difference between the standards relates to classification.
Under FRS 1, the Group presents its cashflows from (a) operating
activities; (b) returns on investments and servicing of finance;
(c) taxation; (d) investing activities, and (e) financing
activities. SFAS 95 requires only three categories of cashflow
activities: (a) operating; (b) investing and (c) financing.
Cashflows from taxation and returns on investments and servicing
of finance shown under FRS 1 would be included as cashflow from
operating activities under SFAS 95. In addition, under FRS 1,
cash and cash equivalents include short term borrowings with
original maturities of three months or less. SFAS 95 requires
movement on such short term borrowings to be shown under
financial activities.
A-32
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