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Previous: JONES APPAREL GROUP INC, S-4/A, 1999-09-30 |
Next: KANSAS TAX EXEMPT TRUST SERIES 42, 485BPOS, 1999-09-30 |
================================================================================
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, 1998
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........................................ 28*
FINANCIAL STATEMENTS
Consolidated Balance Sheets..................................... 29-30*
Consolidated Statements of Income............................... 31*
Consolidated Statements of Changes in Stockholders' Equity...... 32*
Consolidated Statements of Cash Flows........................... 33*
Notes to Consolidated Financial Statements...................... 34-49*
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
Group Statement of Total Recognised Gains and Losses............ A-8
Reconciliation of Movements in Shareholders' Funds.............. A-8
Consolidated Cash Flow Statement................................ A-9
Notes to Consolidated Financial Statements ..................... A-10-30
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
30, 1999. 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, 1999, each pound sterling equaled US $1.6118.
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............................... 29-30*
Consolidated Statements of Income......................... 31*
Consolidated Statements of Changes in Stockholders' Equity 32*
Consolidated Statements of Cash Flows..................... 33*
Notes to Consolidated Financial Statements................ 34-49*
(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
Group Statement of Total Recognised Gains and Losses...... A-8
Reconciliation of Movements in Shareholders' Funds........ A-8
Consolidated Cash Flow Statement.......................... A-9
Notes to Consolidated Financial Statements................ A-10-30
(3) Exhibits
The exhibits set forth in the Index to Exhibits in the Report on Form
10-K filed on March 30, 1999 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, 1997.
The information provided on the Report on Form 10-K filed on March
30, 1999 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
30, 1999. 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, 1999, each pound sterling equaled US $1.6118.
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 to
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
WISCONSIN CENTRAL TRANSPORTATION
CORPORATION
(Registrant)
By: /s/ Ronald G. Russ
-----------------------------
Ronald G. Russ
Executive Vice President
Chief Financial Officer
Date: September 29, 1999
A-3
<PAGE>
English Welsh & Scottish Railway Holdings Limited
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 1999 and the
related consolidated profit and loss account, statement of total recognised
gains and losses, reconciliation of movements in shareholders' funds and
consolidated cash flows for the year ended 31 March 1999. 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 1999 and the
results of their operations and their cash flows for the year ended 31 March
1999 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 year ended 31 March
1999 and shareholders' equity at 31 March 1999 to the extent summarised in
supplemental note 26 to the consolidated financial statements.
KPMG London
Chartered Accountants 29 September 1999
Registered Auditors
A-4
<PAGE>
<TABLE>
<CAPTION>
Consolidated profit and loss account
for the year ended 31 March 1999
in millions Note 1999 1998
---- ----- -----
<S> <C> <C> <C>
Turnover 2 523.9 528.2
Operating costs 3 (474.1) (460.1)
----- -----
Operating profit 49.8 68.1
Profit on sale of fixed assets 2.0 0.1
Net interest payable and similar charges 7 (13.2) (11.3)
----- -----
Profit on ordinary activities before taxation 4 38.6 56.9
Tax on profit on ordinary activities 8 (5.8) (8.5)
----- -----
Retained profit on ordinary activities after
taxation for the year 19 32.8 48.4
===== =====
</TABLE>
There were no differences between the profit and loss account shown above and
that prepared on a historical cost basis.
All of the group's activities are continuing.
A-5
<PAGE>
<TABLE>
<CAPTION>
Consolidated balance sheet
at 31 March 1999
in millions Note 1999 1998
------ ------ ------
<S> <C> <C> <C>
Fixed assets:
Tangible assets 9 469.7 445.6
Goodwill 11 5.1 5.4
Negative goodwill 11 (136.2) (126.2)
----- -----
(131.1) (120.8)
Investments 10 1.3 1.3
----- -----
339.9 326.1
Current assets:
Stocks 12 20.3 20.3
Debtors due in more than one year 13 79.8 96.3
Debtors due within one year 13 127.0 113.8
----- -----
206.8 210.1
Cash at bank and in hand 18.4 20.6
----- -----
245.5 251.0
Creditors: amounts falling due within one year 14 (146.9) (126.8)
----- -----
Net current assets 98.6 124.2
----- -----
Total assets less current liabilities 438.5 450.3
Creditors: amounts falling due after more than one year 15 (185.6) (187.7)
Provisions for liabilities and charges 16 (57.1) (105.6)
Deferred income 17 (10.9) (6.1)
----- -----
Net assets 184.9 150.9
===== =====
Capital and reserves:
Called up share capital 18 100.2 99.4
Share premium reserve 19 1.9 1.5
Profit and loss account 19 82.8 50.0
----- -----
Equity shareholders' funds 184.9 150.9
===== =====
</TABLE>
These financial statements were approved by the board of directors on 14 July
1999 and were signed on its behalf by:
Lord Brian Griffiths of Fforestfach
Deputy Chairman
A-6
<PAGE>
<TABLE>
<CAPTION>
Company balance sheet
at 31 March 1999
in millions Note 1999 1998
---- ------ ------
<S> <C> <C> <C>
Fixed assets:
Investments 10 131.0 96.0
Current assets:
Debtors 13 195.7 202.8
Creditors : amounts falling due within one year 14 (85.3) (92.1)
----- -----
Net current assets 110.4 110.7
----- -----
Total assets less current liabilities 241.4 206.7
Creditors: amounts falling due after more than one year 15 (56.5) (55.8)
------ -----
Net assets 184.9 150.9
===== =====
Capital and reserves
Called up share capital 18 100.2 99.4
Share premium reserve 19 1.9 1.5
Revaluation reserve 19 87.6 52.6
Profit and loss account 19 (4.8) (2.6)
----- -----
Equity shareholders' funds 184.9 150.9
===== =====
</TABLE>
These financial statements were approved by the board of directors on 14 July
1999 and were signed on its behalf by:
Lord Brian Griffiths of Fforestfach
Deputy Chairman
A-7
<PAGE>
<TABLE>
<CAPTION>
Group Statement of Total Recognised Gains and Losses
for the year ended 31 March 1999
in millions 1999 1998
---- ----
<S> <C> <C>
Profit for the year 32.8 48.4
Prior year adjustments - 3.4
---- ----
Total recognised gains and losses recognised in the year 32.8 51.8
==== ====
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of movements in shareholders' funds
for the year ended 31 March 1999
in millions 1999 1998
------------------ -------------------
Group Company Group Company
----- ------- ----- -------
<S> <C> <C> <C> <C>
Profit/(loss) for the year 32.8 (2.2) 48.4 (2.2)
New share capital subscribed 0.8 0.8 0.8 0.8
Share premium arising on new share capital 0.4 0.4 0.3 0.3
Revaluation of investment in subsidiaries - 35.0 - 50.6
----- ----- ----- -----
Net addition to shareholders' funds 34.0 34.0 49.5 49.5
Opening shareholders' funds 150.9 150.9 101.4 101.4
----- ----- ----- -----
Closing shareholders' funds 184.9 184.9 150.9 150.9
===== ===== ===== =====
</TABLE>
A-8
<PAGE>
<TABLE>
<CAPTION>
Consolidated cash flow statement
for the year ended 31 March 1999
in millions Note 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net cash inflow from operating activities 22 50.2 61.6
Return on investments and servicing of finance 23 (18.3) (13.1)
Taxation paid (0.9) -
Capital expenditure and financial investment 23 (44.8) (77.2)
Acquisitions and disposals 23 (3.2) (22.9)
---- ----
Net cash outflow before financing (17.0) (51.6)
Financing
Issue of ordinary share capital 0.3 0.3
Long term loans raised 40.0 68.8
Costs of raising long term loans - (0.9)
Repayment of long term loans (25.0) (24.0)
Repayment of finance leases (0.5) (0.1)
---- ----
Net cash inflow from financing 14.8 44.1
---- ----
Decrease in cash and cash equivalents 24 (2.2) (7.5)
==== ====
</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 and associated
undertakings. These accounts are made up to 31 March 1999. 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. 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 result for the year dealt with in
the financial statements of English Welsh & Scottish Railway Holdings
Limited is disclosed in note 19 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.
Goodwill
Goodwill whether negative or positive is disclosed as an intangible
asset. Negative goodwill up to the fair value of non - monetary assets
acquired is amortised to the profit and loss account in periods in
which these assets are recovered. Negative goodwill in excess of the
fair value of the assets acquired is amortised over the period in which
the losses to which it relates are expected to accrue. Positive
goodwill is amortised over 20 years.
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
Capitalisation of interest
Interest incurred on funding fixed assets in the course of construction
is capitalised up until the date the asset in question is commissioned.
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. Revenue based government grants are credited to trading profit
in the period in which the expenditure to which they relate is
incurred.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Pensions and other post-retirement benefits
The expected cost of providing pensions, as calculated periodically by
professionally qualified actuaries, is charged to the profit and loss
account so as to spread the cost over the service lives of employees in
the scheme in such a way that the pension cost is a substantially level
percentage of current and expected future pensionable payroll.
Differences between the amount charged to the profit and loss account
and payments made to schemes are treated as assets or liabilities in
the Balance Sheet. Further details are given in Note 21 to the
accounts.
Taxation
The charge 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 within the
foreseeable future. Partial provision is also made for timing
differences arising on the pension fund prepayment.
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 except where they arise on loans or deposits
which are being used to fund capital expenditure in which case they are
capitalised up until the asset in question is commissioned.
Hedging
Gains and losses on hedge contracts are recognised in the profit and
loss account as they arise.
A-11
<PAGE>
Notes continued
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>
in millions 1999 1998
----- -----
<S> <C> <C>
Change in stock of spares - (11.3)
Raw materials and consumables 58.8 79.3
Other external charges 211.0 203.0
Staff costs (Note 6) 195.1 174.1
Depreciation and other amounts written off tangible and intangible fixed assets 9.2 15.0
----- -----
474.1 460.1
===== =====
</TABLE>
4 Profit on ordinary activities before taxation
<TABLE>
<CAPTION>
in millions 1999 1998
---- ----
<S> <C> <C>
Profit on ordinary activities before taxation is stated after
charging Auditors' remuneration:
Audit - group 0.2 0.2
Other services - group 0.1 0.2
Depreciation and other amounts written off tangible fixed assets:
Owned 17.5 13.5
Leased 0.9 1.6
Hire of plant and machinery - rentals payable under operating leases 8.6 0.2
Other operating leases 1.2 2.0
Year 2000 costs 1.8 0.3
Exchange costs 0.2 0.4
after crediting
Release of unutilised provisions (Note 16) 11.4 -
Government grants credited to profit and loss account 0.4 4.0
Rents receivable from property 9.4 8.4
Amortisation of negative goodwill 9.5 2.7
</TABLE>
The operating loss dealt with in the accounts of the parent company was
0.3 million (1998: 1.4 million).
The release of unutilised provisions during the year includes 9.3
million in respect of environmental risks. Detailed evaluations of the
degree of contamination at sites occupied by the group were carried out
during the year. The results of these surveys indicate that the
degree of contamination is less than initially assessed permitting
the provision to be reduced by 7 million. A further reduction of 2.3
million resulted from technological advances since the earlier
assessment.
A-12
<PAGE>
Notes continued
5 Remuneration of directors
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Aggregate emoluments of directors 180,277 196,434
Number of directors for whom retirement benefits are accruing under a 1 1
money purchase scheme
Number of directors for whom retirement benefits are accruing under a 1 1
defined benefits scheme
Number of directors eligible for shares under a long term incentive scheme 1 1
</TABLE>
Directors interests in the ordinary share capital of the company and
options granted during the year are disclosed in the Director's Report.
1,347,518 (1998:1,448,695) was paid to Wisconsin Central Transportation
Corporation in relation to a management contract incorporating among
other things, the provision of the services of E A Burkhardt and
T F Power.
119,200 (1998: 32,000) was paid or is payable to Berkshire Partners for
the services of C Ferenbach and R K Lubin.
22,267 (1998: 16,000) was paid or is payable to Fay Richwhite for the
services of D M Richwhite.
26,600 (1998: 12,000) was paid or is payable to McLachlan Rissman
& Doll for the services of T W Rissman.
16,000 was paid or is payable to BIL Consultants for the services of
R.F. Price and R.O.H. Morley.
Transactions involving directors
McLachlan Rissman & Doll a partnership in which T W Rissman has an
interest, was paid 72,436 (1998: 139,230) during the period for the
provision of legal and other professional services.
Railroad Financial Corporation, a specialist adviser on financing rail
equipment, in which T W Rissman has an interest was paid 483,810 (1998:
160,911) during the period for the provision of consultancy services.
6 Staff numbers and costs
1999 1998
No. No.
----- -----
Average number of people employed:
Management and operation of rail freight services 6,866 7,070
===== =====
The acquisition of English Welsh & Scottish Railway International
Limited on 22 November 1997 results in an artificially reduced average
number of employees for the year ended 31 March 1998. At 31 March 1998
7,021 people were employed by the group which total had reduced to
6,564 by 31 March 1999.
A-13
<PAGE>
Notes continued
6 Staff numbers and costs contd
The aggregate payroll costs of these persons were as follows:
in millions Total Total
1999 1998
----- -----
Wages & salaries 163.3 149.2
Social security costs 13.1 11.9
Other pension costs (see note 21) 2.4 1.9
Other staff costs 16.3 11.1
----- -----
195.1 174.1
===== =====
7 Net interest payable and similar charges
<TABLE>
<CAPTION>
in millions 1999 1998
---- ----
<S> <C> <C>
Other interest receivable and similar income 0.6 1.1
Other interest payable and similar charges:
On bank loans, overdrafts and other loans repayable within five years (18.4) (14.0)
On bank loans repayable in more than five years - (2.5)
Finance charges payable in respect of finance leases and hire
purchase contracts - (0.1)
Exchange gain on monies on deposit - 0.1
---- ----
(18.4) (16.5)
Interest capitalised 4.6 4.1
---- ----
Total other interest payable and similar charges (13.8) (12.4)
---- ----
Net interest payable and similar charges (13.2) (11.3)
==== ====
</TABLE>
8 Taxation
<TABLE>
<CAPTION>
in millions 1999 1998
---- ----
<S> <C> <C>
UK corporation tax at 30% (1998: 31%) on the profit on ordinary
activities for the year to 31 March 1999 - (4.7)
Deferred Taxation (5.8) (3.8)
--- ---
(5.8) (8.5)
=== ===
</TABLE>
The group has a low effective tax rate due to the current and
prospective availability of substantial capital allowances.
Deferred taxation includes a credit of nil million (1998: 0.8 million)
resulting from the reduction in the rate of corporation tax from 31% to
30% announced in the budget on 17 March 1998.
A-14
<PAGE>
Notes continued
9 Tangible fixed assets
<TABLE>
<CAPTION>
in millions Plant,
machinery Assets in
Land & Rolling & Infra- course of
buildings stock equipment structure construction Total
---------- -------- --------- --------- ------------ -----
Group
<S> <C> <C> <C> <C> <C> <C>
Cost
At 1 April 1998 56.2 317.7 20.8 5.8 86.7 487.2
Additions 6.8 22.9 5.9 1.7 49.6 86.9
Disposals - (19.2) (0.9) - (25.2) (45.3)
Transfers 2.8 4.0 4.8 2.0 (13.6) -
---- ----- ---- --- ---- -----
At 31 March 1999 65.8 325.4 30.6 9.5 97.5 528.8
==== ===== ==== === ==== =====
Depreciation and
diminution in value
At 1 April 1998 (2.1) (25.1) (13.8) (0.6) - (41.6)
Charge for period (1.3) (14.1) (2.5) (0.5) - (18.4)
On disposals - 0.1 0.8 - - 0.9
--- ---- ---- --- ---- ----
At 31 March 1999 (3.4) (39.1) (15.5) (1.1) - (59.1)
=== ==== ==== === ==== ====
Net book value
At 31 March 1999 62.4 286.3 15.1 8.4 97.5 469.7
==== ===== ==== === ==== =====
At 31 March 1998 54.1 292.6 7.0 5.2 86.7 445.6
==== ===== ==== === ==== =====
</TABLE>
The net book value of land and buildings at 31 March 1999 comprises:
in millions Group Company Group Company
1999 1999 1998 1998
Freehold land and buildings 34.8 - 27.2 -
Long leasehold 25.5 - 24.8 -
Short leasehold 2.1 - 2.1 -
---- --- ---- ---
62.4 - 54.1 -
==== === ==== ===
Included in freehold land and buildings is land valued at 4.8 million
which is not depreciated. Following the sale and lease back of the
related assets, no capitalised interest is included in fixed assets
(1998: 6.2 million).
A-15
<PAGE>
Notes continued
9 Tangible fixed assets continued
Assets held under finance leases
in millions Plant,
machinery
Rolling and
stock equipment Total
----- --------- -----
Cost:
At 1 April 1998 40.0 1.0 41.0
Terminated finance leases (17.4) - (17.4)
---- --- ----
At 31 March 1999 22.6 1.0 23.6
---- --- ----
Depreciation:
At 1 April 1998 (15.5) (0.9) (16.4)
Terminated finance leases 8.3 - 8.3
Charge for the period (0.9) - (0.9)
---- --- ----
At 31 March 1999 (8.1) (0.9) (9.0)
---- --- ----
Net Book Value
At 31 March 1999 14.5 0.1 14.6
==== === ====
At 31 March 1998 24.5 0.1 24.6
==== === ====
10 Fixed asset investments
in millions Trade
Own Shares Associates Investment Total
---------- ---------- ---------- -----
Group
Cost
At 1 April 1998 0.8 0.6 0.6 2.0
Additions 1.1 - - 1.1
Disposals (0.2) - - (0.2)
--- --- --- ---
At 31 March 1999 1.7 0.6 0.6 2.9
--- --- --- ---
Provisions
At 1 April 1998 (0.7) - - (0.7)
Created during the year (1.1) - - (1.1)
Utilised during the year 0.2 - - 0.2
--- --- --- ---
(1.6) - - (1.6)
--- --- --- ---
At 31 March 1999
Net Book Value
31 March 1999 0.1 0.6 0.6 1.3
=== === === ===
31 March 1998 0.1 0.6 0.6 1.3
=== === === ===
A-16
<PAGE>
Notes continued
10 Fixed asset investments - company contd
EW & S Employee Share Trust, was created on 14 November 1996. The
trustee, EWS Trustees Ltd, at its absolute discretion determines which
directors and employees are to participate in a bonus share plan in any
fiscal year. All costs incurred in the administration of the trust are
charged to the profit and loss account as incurred.
At the date of signing these accounts the trust held 1,188,005 (1998:
1,277,554) shares of which 1,070,520 (1998: 1,164,977) were under
option to employees and directors. The historic cost of these shares
is 1.1 million.
in millions Own Value of shares
shares in subsidiaries Total
------ --------------- -----
Company
Cost/Valuation
At 1 April 1998 0.8 95.9 96.7
Additions at cost 1.1 - 1.1
Disposals (0.2) - (0.2)
Revaluation - 35.0 35.0
--- ----- -----
At 31 March 1999 1.7 130.9 132.6
--- ----- -----
Provisions
At 1 April 1998 (0.7) - (0.7)
Credited during the year (1.1) - (1.1)
Utilised during the year 0.2 - 0.2
--- ----- -----
(1.6) - (1.6)
--- ----- -----
Net Book Value 31 March 1999 0.1 130.9 131.0
=== ===== =====
Net Book Value 31 March 1998 0.1 95.9 96.0
=== ===== =====
Investments in group companies have been revalued to reflect the
underlying book value of the net assets of the subsidiaries. This
revaluation is eliminated on consolidation.
The companies in which the company's interest is more than 10% are as
follows:
<TABLE>
<CAPTION>
Country of Principal activity Class and
registration or percentage of
incorporation shares held
Group & company
--------------- ------------------ ---------------
<S> <C> <C> <C>
Subsidiary undertakings
Boreal & Austral Railfreight England & Wales Holding company 100% 1 Ordinary
Limited
New Locomotive Finance Limited England & Wales Acquisition and leasing 100% 1 Ordinary
of rolling stock
Res (December) Limited England & Wales Holding company 100% 1 Ordinary
Rail Express Systems Limited England & Wales Transportation and allied 100% 1 Ordinary
services
Loadhaul Limited England & Wales Dormant 100% 1 Ordinary
English Welsh & Scottish Railway England & Wales Haulage of freight 100% 1 Ordinary
Limited
Mainline Freight Limited England & Wales Dormant 100% 1 Ordinary
NPJV Limited England & Wales Dormant 100% 1 Ordinary
</TABLE>
A-17
<PAGE>
Notes continued
<TABLE>
<CAPTION>
10 Fixed asset investments - company continued
Country of Principal activity Class and
registration or percentage of
incorporation shares held
Group & company
--------------- ------------------ ---------------
<S> <C> <C> <C>
Subsidiary undertakings continued
LGJV Limited England & Wales Dormant 100% 1 Ordinary
EWS Finance Limited England & Wales Acquisition and leasing 100% 1 Ordinary
of rolling stock
East & West Limited England & Wales Holding company 100% 1 Ordinary
English Welsh & Scottish Railway England & Wales Haulage of freight 100% 1 Ordinary
International Limited
EW & S Trustees Limited England & Wales Trustee of employee 100% 1 Ordinary
share trust
Locomotive 6667 Limited England & Wales Dormant 100% 1 Ordinary
Associated undertakings
Allied Continental Intermodal
Services Limited England & Wales Railfreight 25% 1 Ordinary
Autotrax Limited England & Wales Terminal management 24% 1 Ordinary
Intermodal Wagon Systems Limited
England & Wales Railfreight 25% 1 Ordinary
Unilog NV Belgium Railfreight 45% 1BFr Ordinary
</TABLE>
The investments in associated undertakings are unlisted. In the opinion
of the directors, the aggregate value of these investments is not less
than the amounts at which they are stated in the balance sheet.
11 Goodwill
Intangible assets consist of goodwill arising on the acquisition of
businesses acquired by the group. No goodwill is recorded in the books
of the company.
<TABLE>
<CAPTION>
in millions Negative Positive Total
Goodwill Goodwill Goodwill
-------- -------- --------
<S> <C> <C> <C>
Gross Value
At 1 April 1998 (130.7) 6.0 (124.7)
Impact of the finalisation of fair values and
consideration on the acquisition of EWSI (19.5) - (19.5)
----- --- -----
At 31 March 1999 (150.2) 6.0 (144.2)
----- --- -----
Accumulated amortisation
At 1 April 1998 4.5 (0.6) 3.9
Amortisation of goodwill during the year 9.5 (0.3) 9.2
----- --- -----
At 31 March 1999 14.0 (0.9) 13.1
----- --- -----
Net Book Value
At 31 March 1999 (136.2) 5.1 (131.1)
===== === =====
At 31 March 1998 (126.2) 5.4 (120.8)
===== === =====
</TABLE>
38.6 million of the negative goodwill is being amortised over the
period from the 22 November 1997 to 31 May 2005. The remaining
negative goodwill is amortised over the life of the assets to which it
relates. All positive goodwill is amortised over 20 years.
A-18
<PAGE>
Notes continued
11 Goodwill contd
EWSI was acquired by the group in the prior year. During the year the
group has finalised its assessments of fair values of the assets
acquired. The resulting adjustments to negative goodwill are as
follows.
in millions
Increase in value of indemnities provided by BR (2.4)
Reduction in value assigned to stocks 2.0
Reduction in provisions required (3.8)
Reduction in other creditors (1.9)
Recognition of deferred tax asset (16.6)
Increase in consideration 3.2
----
(19.5)
====
12 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.
13 Debtors
<TABLE>
<CAPTION>
in millions Group Company Group Company
1999 1999 1998 1998
----- ------ ----- ------
<S> <C> <C> <C> <C>
Amounts falling due within one year
Trade debtors 71.6 - 79.2 -
Amounts owed by group undertakings - 194.4 - 200.9
Amounts owed by associate undertakings 1.6 - 1.2 -
Other debtors 37.1 1.3 24.6 1.9
Prepayments and accrued income 16.7 - 8.8 -
----- ----- ----- -----
127.0 195.7 113.8 202.8
===== ===== ===== =====
Amounts falling due after more than one year
Pension fund prepayment 79.8 - 82.1 -
Promissory notes - - 14.2 -
----- ----- ----- -----
79.8 - 96.3 -
===== ===== ===== =====
</TABLE>
14 Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
in millions Group Company Group Company
1999 1999 1998 1998
----- ------ ----- ------
<S> <C> <C> <C> <C>
Bank loans and overdrafts 23.3 6.9 5.0 12.6
Obligations under finance leases and hire purchase contracts 0.3 - 0.5 -
Amounts owed to group undertakings - 77.7 - 77.7
Amounts owed to associate undertakings - - 0.1 -
Trade creditors 52.4 - 50.8 0.1
Other creditors including taxation and social security:
Corporation tax 4.7 - 5.6 -
Other taxes and social security costs 8.7 - 14.3 -
Other creditors 2.3 0.1 3.1 1.3
Accruals 55.2 0.6 47.4 0.4
----- ---- ----- ----
146.9 85.3 126.8 92.1
===== ==== ===== ====
</TABLE>
A-19
<PAGE>
Notes continued
15 Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
in millions Group Company Group Company
1999 1999 1998 1998
----- ------ ----- ------
<S> <C> <C> <C> <C>
Bank loans (net of unamortised financing costs) 183.9 56.5 185.7 55.8
Obligations under finance leases and hire purchase contracts 1.7 - 2.0 -
----- ---- ----- ----
185.6 56.5 187.7 55.8
===== ==== ===== ====
</TABLE>
Interest Rates and Security on Loans
The bank loans include:
73.6 million (1998: 76.8 million) 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 shares and assets
of New Locomotive Finance Ltd, English Welsh & Scottish Railway
International Ltd, EWS Finance Ltd and East & West Ltd, and is
repayable in six monthly instalments between August 1999 and August
2001.
56.5 million (1998: 55.8 million) attracting interest at LIBOR plus
0.65% and is secured in the same manner as the above loan but ranks
after it in order of preference and is repayable in February 2004.
44.1 million (1998: 31.1 million) secured by a fixed and floating
charge over the assets of New Locomotive Finance Ltd. The timing of
the repayment of this loan is dependent upon dates on which the final
Class 66 locomotives are delivered.
33.0 million (1998: 27.0 million) secured by a fixed and floating
charge over the assets of EWS Finance Ltd. This loan is repayable in
equal quarterly instalments between September 1999 and September 2004.
Bank loans payable by instalments
<TABLE>
<CAPTION>
in millions Group Company
----------------- -------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Amounts falling due:
in more than 1 year but not more than 2 years 36.7 22.8 - -
in more than 2 years but not more than 5 years 145.5 98.8 56.5 -
in more than 5 years 1.7 64.1 - 55.8
----- ----- ---- ----
183.9 185.7 56.5 55.8
===== ===== ==== ====
</TABLE>
A-20
<PAGE>
Notes continued
15 Creditors: amounts falling due after more than one year contd
<TABLE>
<CAPTION>
The interest rate and currency profiles of bank loans are as follows:
Total Weighted Weighted Fair value of
borrowings average average time borrowings
millions interest rate for which rate millions
is fixed
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Group
Sterling
Variable rate 130.4 - - 130.4
Fixed rate 50.0 7.8% 4 years 51.0
US Dollars
Fixed rate 32.1 7.5% 2 years 32.4
----- -----
212.5 8.1% - 213.8
=====
Less unamortised finance costs (5.3)
-----
207.2
=====
Company
Variable rate 10.0 - - 10.0
Fixed rate 50.0 7.8% 4 years 51.0
----- -----
60.0 - 61.0
=====
Less unamortised finance costs (3.5)
-----
56.5
=====
</TABLE>
The fair value of borrowings has been determined by marking interest
rate swaps to market at 31 March 1999.
The maturity of obligations under finance leases and hire purchase
contracts is as follows:
in millions Group Company Group Company
1999 1999 1998 1998
----- ------ ----- ------
Within one year 0.5 - 0.5 -
In the second to fifth years 1.3 - 2.0 -
Over five years 0.2 - - -
--- --- --- ---
2.0 - 2.5 -
=== === === ===
A-21
<PAGE>
Notes continued
16 Provisions for liabilities and charges
<TABLE>
<CAPTION>
in millions Environmental Deferred Redundancy Claims Other Total
Provision Tax Provision Provision Provisions Provisions
Provision
--------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Group
At 1 April 1998 20.0 25.3 24.1 15.0 21.2 105.6
Utilised during year (1.7) - (9.2) (2.4) (4.3) (17.6)
Arising on the finalisation
of fair values on the
acquisition of a subsidiary
undertaking (2.8) (16.6) - (0.8) (0.2) (20.4)
Transferred to deferred
income during the year - - - - (6.2) (6.2)
Unutilised amounts released
in the year (9.3) - - (1.9) (0.2) (11.4)
Provisions created in the year - 5.8 - 1.3 - 7.1
--- ---- ---- ---- ---- ----
At 31 March 1999 6.2 14.5 14.9 11.2 10.3 57.1
=== ==== ==== ==== ==== ====
</TABLE>
The environmental provision represents the anticipated future costs of
rectifying existing pollution at sites occupied by the group. The
redundancy provision reflects the anticipated future costs of
implementing plans to restructure the group. The claims provision
represents the anticipated costs of claims made by third parties
against group companies to the extent they are not recoverable from the
group's insurers. The amounts provided and not provided for deferred
tax are analysed below:
<TABLE>
<CAPTION>
in millions 1999 1998
----------------------- -----------------------
Provided Unprovided Provided Unprovided
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Difference between accumulated depreciation and
amortisation and capital allowances (2.8) 56.4 3.7 45.9
Timing difference on pension fund surplus 23.9 - 24.6 -
Timing difference on provision for redundancies (4.5) - (5.0) -
Other timing differences (2.1) (1.9) 2.0 10.7
---- ---- ---- ----
14.5 54.5 25.3 56.6
==== ==== ==== ====
</TABLE>
17 Deferred Income
in millions 1999 1998
---- ----
Government capital grants 4.9 1.8
Other deferred income 6.0 4.3
---- ---
10.9 6.1
==== ===
Government capital grants
At 1 April 1998 1.8
Receivable during the period 3.5
Credited to profit and loss account (0.4)
---
At 31 March 1999 4.9
===
A-22
<PAGE>
Notes continued
18 Called up share capital
<TABLE>
<CAPTION>
Number of shares Group and Company
----------------------- -------------------
1999 1998 1999 1998
No No million million
------ ------ ------- -------
<S> <C> <C> <C> <C>
Authorised
Ordinary shares of 1 each 125,000,000 125,000,000 125 125
=========== =========== === ===
</TABLE>
No million
----------- -------
Allotted, called up and fully paid
Ordinary shares of 1 each
At 1 April 1998 99,432,820 99.4
Shares issued at a premium of 0.30 75,000 0.1
Shares issued at a premium of 0.69 648,131 0.7
----------- -----
100,155,951 100.2
=========== =====
At 31 March 1999 options totalling 7,941,521 (1998: 7,821,019) were in
issue exercisable at the prices and over the time frames detailed
below.
Exercisable between Exercise Number
price options
----- ---------
10 September 1999 and 10 September 2003 1.00 2,550,000
10 September 1999 and 10 September 2006 1.00 960,000
16 September 2000 and 16 September 2004 1.30 100,000
16 September 2000 and 16 September 2004 1.69 179,498
18 November 2000 and 18 November 2004 1.69 35,000
18 September 2001 and 18 September 2005 1.69 85,502
18 September 2001 and 18 September 2008 3.00 40,000
8 March 2002 and 8 March 2006 1.69 35,000
At any time up to 23 February 2000 2.86 3,956,521
---------
7,941,521
=========
At 31 March 1999 warrants totalling 3,631,181 (1998: 3,602,842) were in
issue which are exercisable at the warrant holders discretion at a
price of 0.01 each.
A-23
<PAGE>
Notes continued
19 Reserves
<TABLE>
<CAPTION>
Group & Company Company Group Company
in millions Share premium Revaluation Profit and loss Profit and loss
account reserve account account
------- ------- ------- -------
<S> <C> <C> <C> <C>
At 1 April 1998 1.5 52.6 50.0 (2.6)
Premium on shares issued 0.4 - - -
Retained profit for year - - 32.8 (2.2)
Revaluation of investment
in subsidiaries - 35.0 - -
--- ---- ---- ---
At 31 March 1999 1.9 87.6 82.8 (4.8)
=== ==== ==== ===
</TABLE>
20 Commitments
<TABLE>
<CAPTION>
(i) Capital commitments at the end of the financial year for which no provision has been made.
in millions Group Company Group Company
1999 1999 1998 1998
----- ------ ----- ------
<S> <C> <C> <C> <C>
Contracted 123.4 - 411.0 -
Authorised but not contracted - - 45.1 -
----- --- ----- ---
123.4 - 456.1 -
===== === ===== ===
</TABLE>
(ii) There were no commitments at the year end to enter into finance
leases starting after the year end.
(iii) Annual commitments under non-cancellable operating leases for
land and buildings and equipment delivered by the year end are
as follows:
<TABLE>
<CAPTION>
in millions 1999 1998
------------------ -------------------
Land and Other Land and Other
buildings buildings
--------- ----- --------- -----
000's 000's 000's 000's
<S> <C> <C> <C> <C>
Group
Operating leases which expire:
Within one year 0.2 4.1 1.5 0.4
In the second to fifth years inclusive - 1.7 - -
Over five years 0.8 12.1 - -
--- ---- --- ---
1.0 17.9 1.5 0.4
=== ==== === ===
</TABLE>
On the 26 August 1998 New Locomotive Finance Limited, a wholly owned
subsidiary, agreed to novate to Angel Trains the right to acquire 250
Class 66 and 30 Class 67 locomotives. On the same date English Welsh
& Scottish Railway Limited, a wholly owned subsidiary, entered a
contract to rent the same locomotives under an operating lease of 15
years duration from the date of the completion of manufacture of the
last locomotive. The additional annual rental payable on these
locomotives which had not been delivered by the year end is estimated
to be 17.8 million all of which would fall into the over five years
category in the above table. On the 29 January 1999 the group entered
a contract to sell 310 wagons and rent them back under an operating
lease.
A-24
<PAGE>
Notes continued
20 Commitments continued
(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 2000. The quantity hedged is equivalent to 30% of the
projected annual consumption.
(v) Interest Rate Contracts
English Welsh & Scottish Railway Holdings 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.
English Welsh & Scottish Railway Holdings Ltd entered into a
contract commencing on 4 September 1997 of five years duration to
pay or receive as appropriate the difference between interest on
25 million at a fixed rate of 7.269% and 3 month LIBOR.
On 15 January 1998 New Locomotive Finance Limited, a wholly owned
subsidiary, entered a contract of 27 months duration to pay or
receive as appropriate the difference between interest on US$52
million at a fixed rate of 6.07% and 3 month US$ LIBOR.
(vi) Channel Tunnel Access
On 22 November 1997 EWS completed the acquisition of 100% of the
share capital of English Welsh & Scottish Railway International
Limited ("EWSI"), formerly Railfreight Distribution Limited, from
the British Railways Board ("BRB"). In connection with that
acquisition:
.. BRB has agreed that EWSI will not be required to pay toll
charges for access to the Channel Tunnel until 30 April 2005,
such charges being met by BRB.
.. In the event that freight operations through the Channel
Tunnel are terminated, EWSI may be required to sell certain
tunnel related assets to a publicly owned railway company and to
pay a 5m penalty. A provision was raised for this penalty on the
acquisition of EWSI.
.. EWSI intends to continue its Channel Tunnel operations after
April 2005, but will not be able to do so unless Eurotunnel
materially reduces its charges. The present contractual
arrangements do not compel Eurotunnel to do this, and there is no
certainty that it will. Full provision is therefore made for all
liabilities that would arise if EWSI discontinued Channel Tunnel
operations after April 2005.
.. BRB has agreed to pay a restructuring grant to EWSI in respect
of specified expenditure to a maximum of 25 million within two
years of the acquisition date. The amount of the grant received
during the year was 12.7 million. The grant is potentially
repayable over 10 years from 2007 if average total access charges
fall below and volumes exceed specified levels. No provision has
been made for repayment of grants received to date.
21 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 1999. The assumptions adopted by
the pension fund's actuary which have the most significant effect on
the results of the valuation are;
A-25
<PAGE>
Notes continued
21 Pension scheme contd
.. 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 9.0% (1998: 9.0%) per
annum.
The most recent actuarial valuation showed that the market value of
the scheme's assets was 580.1 million (1998: 580.1 million) and that
the actuarial value of those assets represented at least 110% of the
liabilities for benefits that had accrued to members, after allowing
for expected future increases in earnings. Since acquisition a surplus
has arisen of 16.2 million which is being amortised to the profit and
loss account over the estimated working lives of the employees.
On 15 October 1997 the trustees of the Railway Pension Scheme agreed a
package of benefit improvements for members. At the same time it was
agreed that employer contributions, previously 7.5% of pensionable pay,
would cease for three years and that employee contributions would
continue at 5% of pensionable pay.
On 22 June 1998 the trustees of the Railway Pension Scheme, agreed the
same package of benefit improvements for RfD employees. Similarly it
was agreed that employer contributions, previously 7.5% of pensionable
pay, would cease for three years and that employee contributions would
continue at 5% of pensionable pay.
In addition, the group operates a defined contribution pension scheme
under which members contributions are matched on a pound for pound
basis. The pension cost charge for the period amounted to 2.5 million
(1998: 1.9 million).
22 Reconciliation of operating profit to net cash inflow from operating
activities
in millions 1999 1998
---- ----
Operating profit 49.8 68.1
Depreciation charge 18.4 15.1
Amortisation of goodwill (9.2) (2.7)
Provision against shares held by EW & S
Employee Share Trust 0.9 0.7
(Increase)/Decrease in stocks (2.0) (3.8)
(Increase)/Decrease in debtors 14.6 65.9
Increase/(Decrease) in creditors and provisions (22.3) (81.7)
---- ----
Net cash inflow from operating activities 50.2 61.6
==== ====
A-26
<PAGE>
Notes continued
23 Analysis of cash flows for headings netted in the cash flow statement
<TABLE>
<CAPTION>
in millions 1999 1998
----- -----
<S> <C> <C>
Returns on investments and servicing of finance
Interest received 0.6 1.1
Interest paid (18.9) (14.2)
---- ----
Net cash outflow for returns on investments and servicing of finance (18.3) (13.1)
==== ====
Capital expenditure and financial investment
Purchase of tangible fixed assets (86.9) (77.7)
Sale of tangible fixed assets 42.1 0.5
---- ----
Net cash outflow for capital expenditure and financial investment (44.8) (77.2)
==== ====
Acquisitions and disposals
Acquisition of subsidiary (3.2) (4.2)
Acquisition of National Power rail unit assets - (18.7)
---- ----
Net cash outflow for acquisitions and disposals (3.2) (22.9)
==== ====
</TABLE>
24 Analysis of net debt
<TABLE>
<CAPTION>
in millions At 1 April Cash flow Non cash At 31 March
1998 changes 1999
------ -------- ------- -------
<S> <C> <C> <C> <C>
Cash at bank 33.2 (7.9) - 25.3
Overdraft (12.6) 5.7 - (6.9)
---- --- --- ----
20.6 (2.2) - 18.4
Debt due after one year (185.7) 3.3 (1.5) (183.9)
Debt due within one year (5.0) (18.3) - (23.3)
Finance leases (2.5) 0.5 - (2.0)
----- ---- --- -----
(193.2) (14.5) (1.5) (209.2)
----- ---- --- -----
Total (172.6) (16.7) (1.5) (190.8)
===== ==== === =====
</TABLE>
A-27
<PAGE>
Notes continued
24 Analysis of net debt contd
<TABLE>
<CAPTION>
in millions 1999 1998
------ ------
<S> <C> <C>
Reconciliation of net cash flow to movement in debt
Decrease in cash in the period (2.2) (7.5)
Cash inflow from increase in debt and lease financing (17.5) (43.8)
---- ----
Change in debt resulting from cash flows (19.7) (51.3)
Finance leases acquired with subsidiaries - (2.4)
Amortisation of finance costs 1.5 (2.3)
---- ----
Movement in net debt in period (18.2) (56.0)
Net debt at 31 March 1998 (172.6) (116.6)
----- -----
Net debt at 31 March 1999 (190.8) (172.6)
===== =====
</TABLE>
25 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-28
<PAGE>
Notes continued
26 Supplemental US GAAP information
As at 31 March 1999, 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).
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>
in millions Year ended Year ended
31 March 31 March
1999 1998
-------- --------
<S> <C> <C>
Net profit/(loss) in accordance with UK GAAP 32.8 48.4
Expenditure on rolling stock (b) 7.8 13.1
Pensions (c) 2.0 2.0
Taxation (e) (4.3) (11.5)
Amortisation of goodwill (f) (1.7) (0.5)
Application of negative goodwill to fixed assets (g) 2.2 0.8
Provision releases (h) (7.2) -
---- ----
Net profit in accordance with US GAAP 31.6 52.3
==== ====
</TABLE>
<TABLE>
<CAPTION>
in millions As at As at
31 March 31 March
1999 1998
------- -------
<S> <C> <C>
Shareholders' funds in accordance with UK GAAP 184.9 150.9
Redundancy and restructuring costs (a) 63.0 63.0
Expenditure on rolling stock (b) 49.1 41.3
Pensions (c) 5.7 3.7
Capitalisation (d) 0.2 0.2
Taxation (e) (47.2) (42.9)
Amortisation of goodwill (f) (5.4) (3.7)
Application of negative goodwill to fixed assets (g) 3.0 0.8
Provision releases (h) (7.2) -
----- -----
Shareholders' funds in accordance with US GAAP 246.1 213.3
===== =====
</TABLE>
A-29
<PAGE>
Notes continued
26 Supplemental US GAAP information contd
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 8,291,000 and 6,874,000 amortisation, for the
periods ended 31 March 1999 and 1998, respectively, of certain
expenditures relating to rolling stock 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 SFAS88: "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;
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) Under acquisition accounting for US GAAP the capital reserve
(negative goodwill) arising under UK GAAP is partially eliminated
against fixed assets;
h) 7,025,000 of environmental provision and 206,000 of claims
provision were credited to the profit and loss account for UK
GAAP but were treated as adjustments to Goodwill for US GAAP
purposes;
i) The group prepares its consolidated statements of cashflow 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 movements on
such short-term borrowings to be shown under financing
activities.
A-30
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