<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 25, 1997
LAYNE CHRISTENSEN COMPANY
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-20578 48-0920712
-------------- ----------------------- ------------------
State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation
1900 Shawnee Mission Parkway, Mission, Kansas 66205
------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number; including area code (913) 362-0510
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 20, 1997, Layne Christensen Company (the "Company"), through its
wholly-owned subsidiary Layne Christensen Australia Pty Limited, made a
tender offer to the security holders of Stanley Mining Services Limited
("Stanley"), a company listed on the Australian Stock Exchange. Stanley is a
leading Australian mineral exploration drilling company that provides
services predominantly to gold mining companies in Australia and West Africa,
principally Ghana. As of October 1, 1996, the operations of Stanley have
included those of its 51% owned subsidiary, Glindemann & Kitching Pty Ltd.
("G&K"), a leading drilling contractor based and operating in Western
Australia that specializes in diamond core exploration drilling for gold
projects. The purchase price for the acquisition of Stanley is estimated at
$57,990,000, consisting of a cash purchase price for the tender offer
estimated at $51,666,000, or A$.95 per share for the approximately 70.2
million shares of Stanley capital stock issued and outstanding, and an
estimated liability of $6,324,000 relating to G&K's obligation to repurchase
the remaining 49% of the outstanding capital stock of G&K.
On July 7, 1997, the close of the tender offer period, 98% of the Stanley
shares then outstanding had been tendered. The tender offer was consummated
on July 25, 1997. Layne Australia will purchase the shares of Stanley that
were not tendered, at the tender offer share price, pursuant to legal
procedures available to corporations owning at least 90% of the shares of a
target corporation. The acquisition of the remaining 49% of G&K is expected
to be completed by September 30, 1997.
Stanley specializes in diamond core, reverse circulation and percussion
drilling techniques, principally in gold mines, and has recently expanded
into the iron ore market. Stanley also provides drill and blast services at
production-stage open pit mines, a business line not currently offered by the
Company. In drill and blast operations, the driller drills holes for the
placement of explosives; the explosives are then detonated to loosen and
dislodge earth, which is hauled away by the mining company for processing.
Drill and blast contracts typically have lower margins than traditional
mineral exploration drilling projects; however, they provide more stable
revenues because drill and blast contracts typically have a duration of three
to five years whereas traditional mineral exploration projects typically have
substantially shorter terms. For its fiscal year ended June 30, 1996,
approximately 49% of Stanley's revenues were derived from traditional
exploration drilling and 51% were derived from its drill and blast
operations. In addition, Stanley has equity interests in mining companies
with limited gold mining concessions in Ghana and Cote D' Ivoire; the Company,
however, does not presently intend to expand this portion of Stanley's
business. Stanley began its operations in 1980 in Australia as an
exploration drilling company, expanding into drill and blast operations in
1990. Stanley established its presence in Africa in 1991 as mining companies
focused increasingly on that continent. As of May 31, 1997, Stanley
(excluding G&K) owned or leased 20 drill rigs in West Africa and 21 drill
rigs in Western Australia and employed in excess of 380 employees. G&K had
over 150 employees and owned or leased 22 rigs as of May 31, 1997.
In connection with the acquisition of Stanley, the Company entered into a
three year employment agreement with Ross F. Stanley, the principal founder
of Stanley. The Company and Mr. Stanley also agreed that he would purchase
$1,500,000 of the Company's common stock and would be granted options to
purchase three times the number of such purchased shares.
2
<PAGE>
The acquisition of Stanley is being financed through a $100,000,000
reducing revolving credit facility provided by Bank of America National Trust
and Savings Association ("Bank of America") and a syndicate arranged by
BancAmerica Securities, Inc. (the "New Credit Agreement").
A press release of Registrant issued July 29, 1997 announcing the
consummation of the tender offer, is attached as an exhibit to this report
and incorporated herein by reference.
Item 7. Financial Statements, and Exhibits.
<TABLE>
<CAPTION>
(a) Financial statements of business acquired. Page Number
-----------
<S> <C>
Stanley Mining Services Limited.
Report of Independent Auditors.................................................. 4
Consolidated Statements of Profit for the Years Ended June 30, 1996 and
1995.......................................................................... 5
Consolidated Balance Sheets as of June 30, 1996 and 1995........................ 6
Consolidated Statements of Changes in Shareholders' Equity for Years
Ended June 30, 1996 and 1995.................................................. 7
Consolidated Statements of Cash Flows for the Years Ended June 30, 1996
and 1995...................................................................... 8
Notes to Consolidated Financial Statements...................................... 9
Unaudited Consolidated Statements of Profit for the Nine Months Ended
March 31, 1997 and 1996....................................................... 40
Unaudited Consolidated Balance Sheets as of March 31, 1997 and 1996............. 41
Unaudited Consolidated Statements of Changes in Shareholders' Equity
for the Nine Months Ended March 31, 1997 and 1996............................. 42
Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 1997 and 1996................................................. 43
Notes to Unaudited Consolidated Financial Statements............................ 45
Glindemann & Kitching Pty Ltd.
Report of Independent Auditors
Statement of Profit for the Year Ended June 30, 1996............................ 53
Balance Sheet as of June 30, 1996............................................... 54
Statement of Changes in Shareholders' Equity for the Year Ended................. 55
June 30, 1996................................................................. 56
Statement of Cash Flows for the Year Ended June 30, 1996........................ 57
Notes to Financial Statements................................................... 58
Unaudited Statements of Profit for the Nine Months Ended March 31,
1997 and 1996................................................................. 69
Unaudited Balance Sheets as of March 31, 1997 and 1996.......................... 70
Unaudited Statements of Changes in Shareholders' Equity for the
Nine Months Ended March 31, 1997 and 1996..................................... 71
Unaudited Statements of Cash Flows for the Nine Months Ended 31 March
1997 and 1996................................................................. 72
Notes to Unaudited Financial Statements......................................... 73
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Members of Stanley Mining Services Limited:
We have audited the accompanying consolidated balance sheets of Stanley
Mining Services Limited and its controlled entities (Economic Entity) as of June
30, 1996 and 1995 and the related consolidated statements of profit, statements
of changes in shareholders' equity and statements of cash flows for each of the
years in the two year period ended June 30, 1996, all expressed in Australian
dollars. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally
accepted in Australia which do not differ in any significant respect from
auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the economic
entity of June 30, 1996 and June 30, 1995 and the results of their operations
and their cash flows for the years in the two year period ended June 30, 1996,
in conformity with accounting principles generally accepted in Australia.
Accounting principles generally accepted in Australia vary in certain
significant respects from accounting principles in the United States. The
application of United States generally accepted accounting principles would have
affected the results of operations for each of the years in the two year period
ended June 30, 1996 and shareholders' equity as of June 30, 1996 and June 30,
1995, to the extent summarised in Note 33 to the consolidated financial
statements.
KPMG
CHARTERED ACCOUNTANTS
PERTH, WESTERN AUSTRALIA
Dated: 12 September 1996,
except as to Notes 32 and 33,
are as of 17 June 1997.
4
<PAGE>
STANLEY MINING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF PROFIT
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
NOTE A $'000 A $'000
----- ---------- ----------
<S> <C> <C> <C>
Operating profit before abnormal items
and income tax........................ 2,3 5,622 4,363
Abnormal items.......................... 5 -- (494)
---------- ----------
Operating profit before income tax...... 5,622 3,869
Income tax expense attributable to
operating profit...................... 6 (2,049) (1,508)
---------- ----------
Operating profit after income tax....... 3,573 2,361
---------- ----------
Basic earnings per share--cents......... 8 10.1 9.3
</TABLE>
See the accompanying notes to and
forming part of the consolidated financial statements.
5
<PAGE>
STANLEY MINING SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
NOTE 1996 1995
----- --------- ---------
<S> <C> <C> <C>
A $'000 A $'000
CURRENT ASSETS
Cash.................................................................................... 1,384 2,407
Receivables............................................................................. 10 9,974 6,019
Inventories............................................................................. 12 4,875 2,790
Other................................................................................... 13 695 667
--------- ---------
TOTAL CURRENT ASSETS.................................................................... 16,928 11,883
--------- ---------
NON-CURRENT ASSETS
Investments............................................................................. 11 503 237
Property, plant and equipment........................................................... 14 17,099 12,109
Other................................................................................... 13 866 169
--------- ---------
TOTAL NON-CURRENT ASSETS................................................................ 18,468 12,515
--------- ---------
TOTAL ASSETS............................................................................ 35,396 24,398
--------- ---------
--------- ---------
CURRENT LIABILITIES
Creditors and borrowings................................................................ 15 6,325 5,627
Provisions.............................................................................. 18 3,290 1,434
--------- ---------
TOTAL CURRENT LIABILITIES............................................................... 9,615 7,061
--------- ---------
NON-CURRENT LIABILITIES
Creditors and borrowings................................................................ 15 8,010 2,784
Provisions.............................................................................. 18 2,886 2,015
--------- ---------
TOTAL NON-CURRENT LIABILITIES........................................................... 10,896 4,799
--------- ---------
TOTAL LIABILITIES....................................................................... 20,511 11,860
--------- ---------
SHAREHOLDERS' EQUITY
Share capital........................................................................... 19 7,218 7,016
Reserves................................................................................ 20 2,422 1,940
Retained profits........................................................................ 5,245 3,582
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.............................................................. 14,885 12,538
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................................. 35,396 24,398
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to and
forming part of the consolidated financial statements.
6
<PAGE>
STANLEY MINING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
NOTE A $'000 A $'000
----- --------- ---------
<S> <C> <C> <C>
AUTHORISED CAPITAL
Ordinary shares of 20 cents each........................................................ 19 50,000 50,000
--------- ---------
Opening balance......................................................................... 7,016 3,626
Additional shares issued................................................................ 202 3,390
--------- ---------
Total share capital..................................................................... 19 7,218 7,016
--------- ---------
RETAINED PROFITS
Retained profits at the beginning of the year as stated................................. 3,582 22
Dividend rescinded...................................................................... -- 1,900
Dividend provided for or paid........................................................... (1,910) (701)
Operating profit after income tax....................................................... 3,573 2,361
--------- ---------
Retained profits at the end of the year as stated....................................... 5,245 3,582
--------- ---------
RESERVES
SHARE PREMIUM RESERVE
Opening balance......................................................................... 1,937 --
Premium on additional shares issued..................................................... 343 2,700
Share placement costs................................................................... -- (763)
--------- ---------
Closing balance......................................................................... 20 2,280 1,937
--------- ---------
ASSET REVALUATION RESERVE
Opening balance......................................................................... 3 3
Revaluation increment on freehold land and buildings.................................... 139 --
--------- ---------
Closing balance......................................................................... 20 142 3
--------- ---------
Reserves closing balance................................................................ 2,422 1,940
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.............................................................. 14,885 12,538
--------- ---------
</TABLE>
See the accompanying notes to and
forming part of the consolidated financial statements.
7
<PAGE>
STANLEY MINING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
NOTE A $'000 A $'000
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations........................................... 43,026 25,236
Cash payments in the course of operations........................................... (39,614) (22,513)
Income taxes paid................................................................... (900) (712)
Withholding taxes paid.............................................................. (513) (310)
Interest received................................................................... 83 90
Interest paid....................................................................... (457) (325)
--------- ---------
Net cash provided by operating activities........................................... 30 (ii) 1,625 1,466
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of investments..................................................... 76 37
Proceeds on sale of plant and equipment............................................. 109 403
Payments for property, plant and equipment.......................................... (7,733) (7,539)
Payment for exploration............................................................. -- (534)
Payments for investments............................................................ (362) (96)
--------- ---------
Net cash used in investing activities............................................... (7,910) (7,729)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank loan........................................................................... 8,542 648
Proceeds from share issue........................................................... 545 5,327
Lease payments...................................................................... -- (27)
Hire purchase finance............................................................... -- 3,894
Hire purchase payments.............................................................. (4,402) (1,358)
Dividends paid...................................................................... (701) --
--------- ---------
Net cash provided by financing activities........................................... 3,984 8,484
--------- ---------
NET INCREASE/DECREASE IN CASH HELD.................................................. (2,301) 2,221
CASH AT THE BEGINNING OF THE FINANCIAL YEAR......................................... 2,364 143
--------- ---------
CASH AT THE END OF THE FINANCIAL YEAR............................................... 30 (i) 63 2,364
--------- ---------
</TABLE>
See the accompanying notes to and
forming part of the consolidated financial statements.
8
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted by the economic entity in
the preparation of these financial statements are:
(A) BASIS OF PREPARATION
The financial statements are a financial report which has been drawn up in
accordance with Accounting Standards, Urgent Issues Group Consensus Views, the
provisions of Schedule 5 to the Corporations Regulations and the requirements of
the Corporations Law. They have been prepared on the basis of historical costs
and except where stated do not take into account changing money values or
current valuations of non-current assets. The accounting policies have been
consistently applied by each entity in the economic entity and except where
there is a change in accounting policy, are consistent with those of the
previous year.
A reconciliation of the major differences between these accounts and those
applicable under General Accepted Accounting Principles in the United States
("US GAAP") is included in note 33.
(B) PRINCIPLES OF CONSOLIDATION
The Consolidated Accounts of the economic entity include the financial
statements of the Company, being the chief entity, and its controlled entities.
Where an entity either began or ceased to be controlled during the year, the
results are included only from the date control commenced or up to the date
control ceased.
All inter-entity balances, transactions and unrealised profits resulting
from transactions within the economic entity have been eliminated.
(C) REVENUE RECOGNITION
SALES REVENUE
Sales revenue comprises revenue earned (net of returns, discounts and
allowances) from the provision of products or services to entities outside the
economic entity. Sales revenue is recognised when earned and the fee in respect
of services provided is receivable.
INTEREST INCOME
Interest income is recognised as it accrues.
ASSET SALES
The gross proceeds of asset sales are included as revenue of the entity. The
profit or loss on disposal of assets is brought to account at the date an
unconditional contract of sale is signed.
OTHER REVENUE
Revenue recognition policies for investments are described in Note (g).
9
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) FOREIGN CURRENCY TRANSACTIONS
TRANSACTIONS
Foreign currency transactions are translated to Australian currency at the
rates of exchange ruling at the dates of the transactions. Amounts receivable
and payable in foreign currencies at balance date are translated at the rates of
exchange ruling on that date.
Exchange differences relating to amounts payable and receivable in foreign
currencies are brought to account as exchange gains or losses in the profit and
loss account in the financial year in which the exchange rates change.
HEDGES
All non-specific hedge transactions are initially recorded at the spot rate
at the date of the transaction. Hedges outstanding at balance date are
translated at the rates of exchange ruling on that date and any exchange
differences are brought to account in the profit and loss account. Costs or
gains arising at the time of entering into the hedge are deferred and amortised
over the life of the hedge.
Where hedge transactions are designed to hedge the purchase or sale of goods
or services, exchange differences arising up to the date of purchase or sale,
together with any costs or gains arising at the time of entering into the hedge,
are deferred and included in the measurement of the purchase or sale. Any
exchange differences on the hedge transaction after that date are included in
the consolidated statements of profit.
TRANSLATION OF FOREIGN OPERATIONS
The operating results of overseas operations that are integrated foreign
operations are translated using the temporal method. Monetary assets and
liabilities are translated into Australian currency at rates of exchange current
at balance date, while non-monetary items and revenue and expense items are
translated at exchange rates current when the transactions occurred. Exchange
differences arising on translation are brought to account in the consolidated
statements of profit.
(E) INCOME TAX
The economic entity adopts the liability method of tax effect accounting.
Income tax expense is calculated on operating profit adjusted for permanent
differences between taxable and accounting income. The tax effect of timing
differences which arise from items being brought to account in different periods
for income tax and accounting purposes, is carried forward in the balance sheet
as a future income tax benefit or a provision for deferred income tax.
Future income tax benefits are brought to account as realisation of the
asset is assured beyond reasonable doubt. Future income tax benefits relating to
tax losses have been brought to account when their realisation is virtually
certain.
The Company is not taxed as a private company.
10
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) NON-CURRENT ASSETS
The carrying amounts of all non-current assets, other than exploration
expenditure, are reviewed at least annually to determine whether they are in
excess of their recoverable amount. If the carrying amount of a non-current
assets exceeds the recoverable amount, the asset is written down to the lower
value.
In assessing recoverable amounts the relevant cash flows have not been
discounted to their present value, except where specifically stated.
(G) INVESTMENTS
ASSOCIATED COMPANIES
An associated company is one in which: the economic entity exercises
significant influence; and the investment is long-term.
Investments in associated companies are carried at the lower of cost and
recoverable amount. In the case of interim dividends, dividends are brought to
account in the consolidated statements of profit as they are received, and in
the case of final dividends after they have been declared by the associated
company in a general meeting.
OTHER COMPANIES
Investments in other companies are carried at the lower of cost, or
recoverable amount, being a directors valuation based on market values at the
time of the valuation. Dividends are brought to account as they are received.
(H) INVENTORIES
Drilling supplies and consumables are valued at the lower of cost
(calculated on the first-in first-out basis) and net realisable amount.
(I) PROPERTY, PLANT AND EQUIPMENT
ACQUISITION
Items of property, plant and equipment are initially recorded at cost and
depreciated as outlined below.
CAPITAL WORKS IN PROGRESS
The cost of property, plant and equipment constructed by the Company
includes the cost of materials and direct labour and an appropriate proportion
of fixed and variable overheads.
REVALUATIONS
Land and buildings are independently valued every three years on an existing
use basis of valuation and included in the financial statements at the revalued
amounts.
11
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The potential capital gains tax liability is assessed each time an asset
acquired after 19 September, 1985 is revalued. A provision for capital gains tax
is only provided when it is known that the asset will eventually be sold. This
provision, when required, is made against the asset revaluation reserve.
The tax effect on capital losses is not recorded unless realisation is
virtually certain.
DISPOSAL OF REVALUED ASSETS
The gain or loss on disposal of revalued assets is calculated as the
difference between the carrying amount of the asset at the time of disposal and
the proceeds on disposal and is included in the results in the year of disposal.
Any related revaluation increment standing in the asset revaluation reserve
at the time of disposal is transferred to the capital profits reserve.
DEPRECIATION AND AMORTISATION
Items of property, plant and equipment, including buildings and leasehold
property but excluding freehold land, are depreciated/amortised over their
estimated useful lives ranging from 3 to 20 years.
Assets are depreciated or amortised from the date of first use.
LEASED PLANT AND EQUIPMENT
Leases of plant and equipment under which the Company or its controlled
entities assume substantially all the risks and benefits of ownership are
classified as finance leases. Other leases are classified as operating leases.
Finance leases are capitalised. A lease asset and a lease liability equal to
the present value of the minimum lease payments are recorded at the inception of
the lease. Contingent rentals are written off as an expense of the accounting
period in which they are incurred. Capitalised lease assets are amortised on a
straight line basis over the term of the relevant lease, or where it is likely
the economic entity will obtain ownership of the asset, the life of the asset.
Lease liabilities are reduced by repayments of principal. The interest
components of the lease payments are charged to consolidated statement of
profit.
(J) EXPLORATION EXPENDITURE
Exploration, evaluation and development costs are accumulated in respect of
each separate area of interest. These costs are carried forward where the right
of tenure of the area of interest is current and they are expected to be
recouped through sale or successful development and exploitation of the area of
interest, or where activities in the area of interest have not yet reached a
stage that permits reasonable assessment of the existence of economically
recoverable reserves.
When an area of interest is abandoned or the directors decide that it is not
commercial, any accumulated costs in respect of that area are written-off in the
financial period the decision is made. Each area of interest is also reviewed at
the end of each accounting period and accumulated costs written-off to the
extent that they will not be recoverable in the future.
12
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Amortisation is not charged on costs carried forward in respect of areas of
interest in the development phase until production commences.
(K) DEFERRED EXPENDITURE
Material items of expenditure are deferred to the extent that the benefits:
are recoverable out of future revenue: do not relate solely to revenue which has
already been brought to account and will contribute to the future earning
capacity of the economic entity.
Deferred expenditure is amortised over the shorter of the period in which
the related benefits are expected to be realised or three years. Deferred
expenditure is reviewed in accordance with the policy set out in Note (f).
(L) EMPLOYEE ENTITLEMENTS
WAGES, SALARIES, ANNUAL LEAVE AND SICK LEAVE
The provisions for employee entitlements to wages, salaries, annual leave
and sick leave represents the amount which the economic entity has a present
obligation to pay resulting from employees' services provided up to the balance
date. The provisions have been calculated at nominal amounts based on current
wage and salary rates and includes related on-costs.
LONG SERVICE LEAVE
The liability for employee's entitlement to long service leave represents
the present value of the estimated future cash outflows to be made by the
employer resulting from employees' services provided up to the balance date.
Liabilities for employee entitlements which are not expected to be settled
within twelve months are discounted using the rates attaching to national
government securities at balance date, which most closely match the terms of
maturity of the related liabilities.
In determining the liability for employee entitlements, consideration has
been given to future increases in wage and salary rates, and the economic
entity's experience with staff departures. Related on-costs have also been
included in the liability.
EMPLOYEE SHARE OPTION PLAN
The Company intends to grant options to certain employees under an employee
share plan. Further information is set out in Note 19 of the financial
statements. Other than the costs incurred in administering the schemes which are
expended as incurred, the scheme does not result in any expense to the economic
entity. No options have been granted at 30 June 1996.
13
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUPERANNUATION
The Company contributes to a defined contribution superannuation fund on
behalf of employees in accordance with the requirements of the Superannuation
Guarantee Administration Act 1992. The contributions are charged against income
as they are made.
(M) PROVISION FOR DOUBTFUL DEBTS
The collectability of debts is assessed at year end and specific provision
is made for any doubtful accounts.
(N) DERIVATIVES
The economic entity is exposed to changes in interest rates and foreign
exchange rates. It is the economic entity's policy to use derivative financial
instruments to hedge a portion of these risks. Economic entity policy is not to
enter, hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments that are designated as hedges of firm
commitments and are effective as hedges of underlying exposures are accounted
for on the same basis as the underlying exposure. Gains/ losses relating to
hedges of specific purchase/sale commitments are deferred and recognised as
adjustments to the carrying amount of the hedged transactions
2. OPERATING REVENUE
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
--------- ---------
<S> <C> <C>
Operating profit is determined after crediting the following items:
Sales revenue................................................................................ 43,026 27,334
Other revenue
Insurance recovery........................................................................... -- 29
Interest received from other persons......................................................... 83 90
Foreign currency gains....................................................................... 502 70
Sundry....................................................................................... 780 244
Gross proceeds from sale of non-current assets............................................... 185 440
Write back provision for doubtful debts...................................................... -- 194
--------- ---------
44,576 28,401
--------- ---------
</TABLE>
14
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
3. OPERATING PROFIT
Operating profit is determined after charging the following items:
A) OPERATING EXPENSES
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
----------- -----------
<S> <C> <C>
Contributions to superannuation................................................................ 497 271
Interest paid or due and payable to other persons.............................................. 457 325
Finance charges on capitalised leases.......................................................... -- 3
Lease rental expenses, operating leases........................................................ 33 14
Depreciation of property, plant and equipment.................................................. 2,842 1,734
Foreign currency losses........................................................................ 480 --
Write down in value of inventories............................................................. 899 1,212
Amounts set aside to provision for:
Employee entitlements.......................................................................... 29 136
</TABLE>
B) SALE OF NON-CURRENT ASSETS
<TABLE>
<S> <C> <C>
Profit on sales of property, plant and equipment.......................... 69 252
Profit/(loss) on sale of investments...................................... (20) 27
</TABLE>
4. AUDITORS' REMUNERATION
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
----------- -----------
<S> <C> <C>
Amounts received or due and receivable for audit and other services provided by KPMG
--audit services............................................................................. 79 65
--other services............................................................................. 59 154
--- ---
138 219
--- ---
</TABLE>
5. ABNORMAL ITEM
<TABLE>
<S> <C> <C>
Exploration expenditure written off....................................... -- 494
--- ---
Aggregate abnormal items before income tax................................ -- 494
--- ---
</TABLE>
15
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
6. INCOME TAX EXPENSE
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
----------- -----------
<S> <C> <C>
A) The prima facie income tax expense at 36% (1995: 33%) on operating profit................... 2,024 1,276
Increase in income tax expense due to non-tax deductible items:
Depreciation of revaluation increment on property, plant and equipment....................... -- 22
Write-off of exploration expenditure......................................................... -- 163
Write down in Ghana withholding tax.......................................................... 36 --
Sundry items (including entertainment)....................................................... (3) 1
Capital losses on disposal of investments.................................................... 7 --
Decrease in income tax expense due to:
Allowable preliminary expenses............................................................... -- (80)
----------- -----
Income tax expense on operating profit....................................................... 2,064 1,382
Add: Income tax expense under (over) provided from prior period.............................. 142 (30)
Add: Income tax expense arising from tax rate adjustment..................................... -- 156
Less: Foreign tax credit..................................................................... (157) --
----------- -----
Total income tax expense attributable to operating profit.................................... 2,049 1,508
----------- -----
Total income tax expense is made up of:
Current income tax provision............................................................... 1,734 788
Deferred income tax provision.............................................................. 870 798
Future income tax benefit.................................................................. (697) (48)
Under (over) provision in prior year....................................................... 142 (30)
----------- -----
2,049 1,508
----------- -----
</TABLE>
B) PROVISION FOR CURRENT INCOME TAX
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
----------- -----------
<S> <C> <C>
Movements during the year were as follows:
Balance at beginning of year................................................................... 466 612
Current year's income tax expense on operating profit.......................................... 1,734 788
Paid in year................................................................................... (1,413) (712)
Foreign tax credit............................................................................. 178 (187)
Under (over) provision prior year.............................................................. 77 (35)
----------- -----
Balance at the end of year..................................................................... 1,042 466
----------- -----
</TABLE>
16
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
6. INCOME TAX EXPENSE (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
----------- -----------
<S> <C> <C>
</TABLE>
C) PROVISION FOR DEFERRED INCOME TAX
Provision for deferred income tax comprises the estimated expense at current
income tax rates on the following items:
<TABLE>
<S> <C> <C>
Difference in depreciation and amortisation of property, plant and equipment for accounting and
income tax purposes.......................................................................... 1,140 814
Expenditure currently deductible but deferred and amortised for accounting
purposes.................................................................. 1,739 1,195
----------- -----
2,879 2,009
----------- -----
</TABLE>
D) FUTURE INCOME TAX BENEFIT
Future income tax benefit comprises the estimated future benefit at current
income tax rates of the following items:
<TABLE>
<S> <C> <C>
Provisions and accrued employee entitlements not currently deductible....... 126 169
Unrealised currency differences............................................. 74 --
Excess foreign tax credit carried forward................................... 666 --
----------- -----
866 169
----------- -----
E) Future Income Tax Benefit not brought to account......................... 228 228
</TABLE>
The potential future income tax benefit in a controlled entity, which is a
company, arising from exploration expenditure has not been recognised as an
asset because recovery is not virtually certain.
The potential future income tax benefit will only be obtained if:
(i) the relevant company derives future assessable income of a nature and an
amount sufficient to enable the benefit to be realised, or the benefit can
be utilised by another company in the economic entity in accordance with
Section 80G of the Income Tax Assessment Act 1936;
(ii) the relevant Company and/or the economic entity continues to comply with
the conditions for deductibility imposed by the law; and
(iii) no changes in tax legislation adversely affect the relevant company and/or
the economic entity in realising the benefit.
17
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
7. DIVIDENDS
A) DIVIDENDS RESCINDED
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
------------ ------------
<S> <C> <C>
A partially franked ordinary dividend of 10.5 cents per share which had been
provided for at 30 June, 1994 was subsequently rescinded by a resolution of
shareholders on 1 November, 1994. .................................................. -- 1,900
</TABLE>
B) DIVIDENDS PROVIDED FOR
<TABLE>
<S> <C> <C>
Dividends provided for by the Company are a final ordinary dividend
of 4 cents per share (1995: 2 cents) fully franked to 100% from
profits taxed at 36% (1995:fully franked to 72% from profits taxed
at 39% and to 28% from profits taxed at 33%) is recommended by the
Directors. ........................................................ 1,910 701
</TABLE>
C) DIVIDEND FRANKING ACCOUNT
<TABLE>
<S> <C> <C>
Estimated amounts of retained profits and reserves that could be
distributed as franked dividends using franking credits already in
existence or which will arise from income tax payments in the
following period, and after deducting franking credits to be used
in payment of the above dividends:
--franked at 36%................................................... 2,391 1,922
</TABLE>
8. BASIC EARNINGS PER SHARE
<TABLE>
<S> <C> <C>
Basic Earnings per Share........................................... 10.1c 9.3c
Weighted average number of ordinary shares used in calculation of
basic earnings per share........................................... 35,416,388 25,375,624
</TABLE>
9. STATEMENT OF OPERATIONS OF SEGMENTS CONSOLIDATED
INDUSTRY SEGMENTS
The economy entity operates predominantly in the mining industry.
18
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
9. STATEMENT OF OPERATIONS OF SEGMENTS CONSOLIDATED (CONTINUED)
GEOGRAPHICAL SEGMENTS
The economic entity has operations and assets in Australia and Africa. Segmental
revenue and assets are as follows.
<TABLE>
<CAPTION>
AUSTRALIA AFRICA EUROPE ELIMINATIONS CONSOLIDATIONS
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------- ---------- ---------- ---------- ----- ---------- ---------- ---------- ---------- ----------
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------- ---------- ---------- ---------- ----- ---------- ---------- ---------- ---------- ----------
Revenue.... 28,585 14,156 25,608 18,713 -- 182 (9,617) (4,650) 44,576 28,401
Segment
operating
profit
before
tax...... 4,415 2,937 2,162 1,169 -- 5 (955) (242) 5,622 3,869
Income tax
attributable
to the
operating
profit... (2,049) (1,508)
Operating
profit
after
income
tax...... 3,573 2,361
Segment
Assets... 17,659 10,533 18,692 14,107 (955) (242) 35,396 24,398
</TABLE>
10. RECEIVABLES
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
--------- ---------
<S> <C> <C> <C>
CURRENT
Trade debtors............................................................................. 9,586 5,781
Other debtors............................................................................. 388 238
--------- ---------
9,974 6,019
--------- ---------
</TABLE>
19
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
11. INVESTMENTS
<TABLE>
<S> <C> <C> <C>
Investment in other corporations Shares in listed companies--at
cost.............................................................. 8 97
Investments in associated entities.................................. 495 140
----- -----
503 237
----- -----
Shares in listed companies--at market value......................... 17 123
----- -----
The amount of capital gains tax that would be payable if the quoted
shares in other corporations were sold at balance date at the
disclosed market values should not exceed:........................ 3 8
Associated Companies
The Company holds a 50% interest in Equigold (Ghana) Limited.
</TABLE>
12. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
----------- -----------
<S> <C> <C> <C>
Drilling supplies, stores and spare parts for drilling rigs
- -- unused items at cost................................................................. 3,711 1,530
- -- used items at impaired value......................................................... 1,164 1,260
----- -----
4,875 2,790
----- -----
</TABLE>
13. OTHER
<TABLE>
<CAPTION>
1996 1995
NOTE A $'000 A $'000
--------- ----------- -----------
<S> <C> <C> <C>
CURRENT
Prepayments............................................................................. 513 436
Withholding tax......................................................................... -- 231
Deferred expenditure.................................................................... 182 --
----- -----
695 667
----- -----
NON-CURRENT
Future income tax benefit............................................................... 6 866 169
----- -----
</TABLE>
20
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
14. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1996 1995
A $'000 A $'000
--------- ---------
<S> <C> <C> <C>
Freehold land
--at independent valuation 1996 (1995:1992)........................................... 156 30
Freehold buildings
--at independent valuation 1996 (1995:1992)........................................... 92 123
--accumulated depreciation............................................................ (1) (33)
--------- ---------
91 90
--------- ---------
Buildings on concessional land
--at cost............................................................................. 323 277
--accumulated depreciation............................................................ (55) (24)
--------- ---------
268 253
--------- ---------
359 343
--------- ---------
Plant and equipment
--at cost............................................................................. 2,432 1,632
--accumulated depreciation............................................................ (868) (510)
--------- ---------
1,564 1,122
--------- ---------
--at independent valuation 1987....................................................... 75 75
--accumulated depreciation............................................................ (75) (75)
--------- ---------
-- --
--------- ---------
1,564 1,122
--------- ---------
Motor vehicles and drilling rigs
-at cost.............................................................................. 20,148 13,812
-accumulated depreciation............................................................. (6,230) (4,225)
--------- ---------
13,918 9,587
--------- ---------
--at independent valuation 1987....................................................... 1,250 1,300
--accumulated depreciation............................................................ (1,136) (1,062)
--------- ---------
114 238
--------- ---------
14,032 9,825
Capital works in progress--at cost...................................................... 988 789
--------- ---------
Total property, plant & equipment
--net book value...................................................................... 17,099 12,109
--------- ---------
</TABLE>
a) Freehold land and buildings were revalued in May 1996, by an independent
valuer, Brad Reed, AVLE (Val & Econ), on the basis of the open market value
of the properties concerned in their existing use. The directors are of the
opinion that this basis provides a reasonable estimate of recoverable
amount.
21
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The net surplus on revaluation of the land and buildings during 1996 of
$139,000 was transferred to the asset revaluation reserve (note 20).
This valuation is in accordance with the Company's policy of obtaining an
independent valuation of land and buildings every three years.
In revaluing freehold land and buildings the Directors have not taken into
account the potential impact of capital gains tax on the grounds that the
assets are an integral part of the Company's operations and there is no
intention to sell the assets.
15. CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
1996 1995
NOTE A $'000 A $'000
--------- ----------- -----------
<S> <C> <C> <C>
CURRENT
Trade creditors....................................................................... 3,824 3,318
Bank overdraft
--secured........................................................................... 16 1,321 --
--unsecured......................................................................... -- 43
Hire purchase liabilities
--secured........................................................................... 16, 22 -- 2,266
Bank loan
--unsecured......................................................................... 16 1,180 --
----- -----
6,325 5,627
----- -----
NON-CURRENT
Hire purchase liabilities
--secured........................................................................... 16, 22 -- 2,136
Bank bill facility
--secured........................................................................... 16 7,767 --
Bank loan
--unsecured......................................................................... 16 243 648
----- -----
8,010 2,784
----- -----
----- -----
</TABLE>
22
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
16. FINANCING ARRANGEMENTS
<TABLE>
<CAPTION>
1996 1995
A S`000 A $`000
--------- ---------
<S> <C> <C>
The economic entity has access to the following lines of credit:
Total facilities available:
Bank overdraft/bill facility................................................................... 9,300 300
Bank credit facility........................................................................... 50 30
Bank loan...................................................................................... 1,423 648
Floating debenture............................................................................. -- 1,078
Hire purchase facilities....................................................................... -- 3,324
--------- ---------
10,773 5,380
--------- ---------
Facilities utilised at balance date:
Bank overdraft................................................................................. 1,321 --
Bank bill facility............................................................................. 7,767 --
Bank credit facility........................................................................... -- --
Bank loan...................................................................................... 1,423 648
Floating debenture............................................................................. -- 1,078
Hire purchase facilities....................................................................... -- 3,324
--------- ---------
10,511 5,050
--------- ---------
Facilities not utilised at balance date:
Bank overdraft/bill facility................................................................... 212 300
Bank credit facility........................................................................... 50 30
--------- ---------
262 330
--------- ---------
</TABLE>
BANK OVERDRAFT/CREDIT FACILITY
The bank overdraft/credit facilities are secured by a registered first
mortgage debenture over the economic entity's assets and undertakings.
The bank overdraft/credit facility is of a continuous nature, subject to
satisfactory annual review.
BANK LOAN
The bank loan is unsecured and was established to finance the purchase of 3
drilling rigs for the Company's Ghana operations.
The loan is payable according to a schedule of payment due for completion in
May 1998.
23
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
17. AMOUNTS PAYABLE/RECEIVABLE IN FOREIGN CURRENCIES
The Australian dollar equivalents to unhedged amounts payable or receivable
in foreign currencies calculated at year end exchange rates are as follows:
<TABLE>
<CAPTION>
1996 1995
A S`000 A $`000
--------- ---------
<S> <C> <C>
United States Dollars
Amounts payable--current....................................................................... 188 57
Amounts receivable--current.................................................................... 5,851 4,460
Ghanaian Cedis
Amounts payable--current....................................................................... 189 250
Amounts receivable--current.................................................................... 116 36
Swedish Kroner
Amounts payable--current....................................................................... 275 297
</TABLE>
18. PROVISIONS
<TABLE>
<CAPTION>
1996 1995
NOTE A $'000 A $'000
--------- ----------- -----------
<S> <C> <C> <C>
CURRENT
Dividends............................................................................... 7 1,910 701
Employee entitlements................................................................... 21 338 267
Income tax.............................................................................. 6 1,042 466
----- -----
3,290 1,434
----- -----
NON-CURRENT
Employee entitlements................................................................... 21 7 6
Deferred income tax..................................................................... 6 2,879 2,009
----- -----
2,886 2,015
----- -----
</TABLE>
19. SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1995
A S`000 A $`000
--------- ---------
<S> <C> <C>
(A) AUTHORISED CAPITAL
250,000,000 ordinary shares of $0.20 each................................................... 50,000 50,000
--------- ---------
(B) ISSUED CAPITAL
36,089,420 ordinary shares of $0.20 each (1995: 35,079,870)................................. 7,218 7,016
--------- ---------
7,218 7,016
--------- ---------
</TABLE>
24
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
19. SHARE CAPITAL (CONTINUED)
ORDINARY SHARES
On 1 March, 1996, the Company made an issue of 1,009,550 ordinary shares of
20 cents each at 54 cents per share in accordance with the Dividend Reinvestment
Plan.
EMPLOYEE SHARE OPTION PLAN
On 30 May, 1996, the Directors resolved to issue 1,000,000 options to the
employees of the Company at an exercise price of 67 cents each under the terms
of the Stanley Mining Services Limited Employee Share Option Plan. On 28 June,
1996, the Shareholders approved the issue of up to 200,000 of these options to
Mr. L. D. Humfrey, a director of the Company.
At 30 June 1996 no options have been allocated.
20. RESERVES
<TABLE>
<CAPTION>
1996 1995
NOTE A$'000 A$'000
----- ----------- -----------
<S> <C> <C> <C>
Asset revaluation reserve................................................................. 142 3
Share premium............................................................................. 2,280 1,937
----- -----
2,422 1,940
----- -----
Movements during the year
Share premium
Balance at beginning of year.............................................................. 1,937 --
Add: Premium on ordinary shares issued during the year.................................... 19 343 2,700
Less: Share issue expenses applied........................................................ -- 763
----- -----
Balance at end of year.................................................................... 2,280 1,937
----- -----
Asset revaluation
Balance at beginning of year.............................................................. 3 3
Add: Revaluation increment on freehold land and buildings................................. 14 139 --
----- -----
Balance at end of year.................................................................... 142 3
----- -----
</TABLE>
21. EMPLOYEE ENTITLEMENTS
<TABLE>
<CAPTION>
1996 1995
NOTE A$'000 A$'000
----- ----------- -----------
<S> <C> <C> <C>
Aggregate employee entitlements, including on-costs
- --Current................................................................................. 18 338 267
- --Non-Current............................................................................. 18 7 6
----- -----
345 273
----- -----
</TABLE>
25
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
21. EMPLOYEE ENTITLEMENTS (CONTINUED)
The present value of employee entitlements not expected to be settled within
twelve months of balance date have not been calculated as the amounts are
considered to be immaterial.
22. COMMITMENTS
<TABLE>
<CAPTION>
1996 1995
NOTE A$'000 A$'000
----- ----------- -----------
<S> <C> <C> <C>
NON CANCELLABLE OPERATING LEASE COMMITMENTS
Future operating leases not provided for in the financial statements & payable:
Not later than one year................................................................. 138 17
Later than one year but not later than two years........................................ 138 --
Later than two years but not later than five years...................................... 414 --
----- -----
690 17
----- -----
HIRE PURCHASE COMMITMENTS
Future hire purchase commitments are payable as follows:
Not later than one year................................................................. -- 2,628
Later than one year but not later, than two years....................................... -- 1,592
Later than two years but not later that five years...................................... -- 721
----- -----
-- 4,941
Less: Future term charges................................................................. -- (539)
----- -----
-- 4,402
----- -----
Disclosed as:
Current................................................................................. 15 -- 2,266
Non-current............................................................................. 15 -- 2,136
----- -----
-- 4,402
----- -----
CAPITAL EXPENDITURE COMMITMENTS
Contracted but not provided for and payable as follows:
Not later than one year................................................................. 732 --
Later than one year but not later than two years........................................ 284 --
----- -----
1,016 --
----- -----
</TABLE>
SUPERANNUATION COMMITMENTS
The Company and its controlled entities contribute to various employee
defined contribution superannuation funds in accordance with the requirements of
the Superannuation Guarantee Administration Act 1992. The contributions are
based on a percentage of employee gross salaries. All employees are entitled to
benefits on retirement, disability or death.
The Company and other controlled entities are under no legal obligation to
make up any shortfall in the fund's assets to meet payments due to employees.
26
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
23. DEED OF CROSS GUARANTEE
Pursuant to an ASC Class Order 95/1530 dated 31 October, 1995, relief was
granted to the wholly-owned subsidiaries listed below from the Corporations Law
requirements for preparation, audit, and publication of accounts.
It is a condition of the Class Order that the Company and each of the
subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is
that the Company guarantees to each creditor payment in full of any debt in the
event of winding up of any of the subsidiaries under certain provisions of the
Corporations Law. If a winding up occurs under other provisions of the Law, the
Company will only be liable in the event that after six months any creditor has
not been paid in full. The subsidiaries have also given similar guarantees in
the event that the Company is wound up.
The Subsidiaries subject to the Deed are:
Stanmines NL (ACN 009 248 122)
International Mining Services Pty Ltd (ACN 008 945 471)
At balance date, the Company and subsidiaries which are a party to the Deed
have aggregate assets of $35,606,308 (1995: $25,042,078); aggregate liabilities
of $19,673,046 (1995: $10,600,721); and their contribution to the consolidated
operating profit after income tax for the year was $3,573,251 (1995:
$2,754,587).
24. PARTICULARS IN RELATION TO CONTROLLED ENTITIES
<TABLE>
<CAPTION>
CONTRIBUTION
BOOK VALUE OF TO
EACH PARENT CONSOLIDATED
INTEREST HELD ENTITY'S INVESTMENT PROFIT
AFTER TAX
CLASS OF ------------- ---------------------- ---------
NOTE SHARES 1996 1995 1996 1995 1996
----- ----------- ----- ----- --------- ----- ---------
% % $ $ $'000
----- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley Mining Services Limited.......... 1,766
CONTROLLED ENTITIES
International Mining Services Pty Ltd.... (i) Ord....... 100 100 100 100 1,807
Stanmines NL............................. (i) Ord 100 100 5 5 --
Stanley Exploration & Mining Company
Ltd.................................... (ii) Ord 100 100 50 50 --
Stanmines Ghana Ltd...................... (ii) Ord 100 100 50 50 --
Stanley Mining Services (Tanzania) Ltd... (iii) Ord 100 100 4 -- --
---------
3,573
---------
<CAPTION>
1995
---------
$'000
---------
<S> <C>
Stanley Mining Services Limited.......... 2,381
CONTROLLED ENTITIES
International Mining Services Pty Ltd.... 475
Stanmines NL............................. (1)
Stanley Exploration & Mining Company
Ltd.................................... (494)
Stanmines Ghana Ltd...................... --
Stanley Mining Services (Tanzania) Ltd... --
---------
2,361
---------
</TABLE>
NOTES
(i) International Mining Services Pty Ltd and Stanmines NL have each entered
into a Deed of Cross Guarantee with Stanley Mining Services in respect of
relief granted from specified accounting and financial reporting
requirements in accordance with a class order. Refer Note 23.
(ii) Stanley Exploration & Mining Company Ltd and Stanmines Ghana NL were
incorporated in and carry on business in Ghana.
27
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
24. PARTICULARS IN RELATION TO CONTROLLED ENTITIES (CONTINUED)
(iii) Stanley Mining Services(Tanzania) Ltd was incorporated in and carries on
business in Tanzania.
25. ACQUISITION/DISPOSAL OF CONTROLLED ENTITIES
During the year the economic entity ceased to have management control in
Equigold (Ghana) Ltd. The economic entity retains its 50% interest in the
entity.
26. INVESTMENTS IN ASSOCIATED COMPANIES
EQUITY INFORMATION
Investments in associated companies are accounted for on a cost basis in the
Company Financial Statements and the Consolidated Accounts.
Information about the investments under the equity accounting method is set
out below:
<TABLE>
<CAPTION>
1996 1995
A$'000 A$'000
----------- -----------
<S> <C> <C>
Share of associated companies' operating profit/(loss) and extraordinary items after income
tax............................................................................................ (5) --
--- ---
Share of associated companies' profits/(losses) not brought to account in the consolidated
accounts....................................................................................... (5) --
--- ---
Share of associated companies' accumulated losses................................................ (5) --
Cost of Investment............................................................................... 495 140
--- ---
Equity Accounted Amount of Investment............................................................ 490 140
--- ---
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT
CARRYING VALUE
INTEREST
---------------------- ------------------------
PRINCIPLES PLACE OF CLASS OF 1996 1995 1996 1995
NAME ACTIVITIES INCORP. SHARE % % $'000 $'000
- --------------------------------- ----------- ------------- ----------- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Equigold (Ghana) Ltd............. Exploration Ghana Ord. 50 50 339 140
Equigold (Cote D'Ivoire) SA...... Exploration Cote D'Ivoire Ord....... 42.5 -- 156 --
--- ---
495 140
--- ---
</TABLE>
The balance date of Associated Companies is June 30 1996.
28
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
27. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C> <C>
REMUNERATION OF DIRECTORS
The number of Directors of the Company, including Executive Directors, whose income from
the Company or related bodies corporate, falls within the following bands:
$ 10,000-$19,999........................................................................ -- 2
$ 20,000-$29,999........................................................................ 2 --
$ 30,000-$39,999........................................................................ -- 1
$160,000-$169,999....................................................................... -- 1
$200,000-$209,999....................................................................... 1 --
$210,000-$219,999....................................................................... 1 1
<CAPTION>
A$'000 A$'000
----------- -----------
<S> <C> <C> <C>
Total income received or due and receivable by all Directors of each entity in the
economic entity from the Company, related bodies corporate, or controlled entities. .... 467 444
</TABLE>
The above amounts (including the comparatives) are disclosed in accordance
with ASC Class Order 95/741 dated 27 June, 1995. These amounts are disclosed in
aggregate as the Directors believe that provision of full particulars would be
unreasonable.
Directors' income includes amounts paid by the Company during the year to
indemnify executives, but does not include insurance premiums paid by the
Company or related bodies corporate in respect of Directors' and Officers'
liabilities insurance contracts as the insurance policies do not specify
premiums paid in respect of individual Directors. Details of insurance premiums
paid are set out in the Directors Report.
29
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
28. EXECUTIVES REMUNERATION
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C> <C>
EXECUTIVES INCOME
The income of executives who work wholly or mainly outside Australia is not included in
this disclosure.
The number of executive officers of the economic entity whose income from the Company,
entities in the economic entity, or related entities falls within the following bands:
$100,000--$109,999...................................................................... 1 --
$110,000--$119,999...................................................................... 1 1
$160,000--$169,999...................................................................... -- 1
$200,000--$209,999...................................................................... 1 --
$210,000--$219,999...................................................................... 1 1
<CAPTION>
A$'000 A$'000
----------- -----------
<S> <C> <C> <C>
Total income received, or due and receivable, from the Company, entities in the economic
entity, or related entities by executive officers of the economic entity whose income
exceeds $100,000........................................................................ 641 492
</TABLE>
29. RELATED PARTIES
DIRECTORS
The names of each person holding the position of Director of Stanley Mining
Services Limited during the financial year are Messrs M. D. Perrott, R. F.
Stanley, L. D. Humfrey, N. Giorgetta, P. E. Huston and T. R. Kestel. Details of
Directors' remuneration are set out in Note 27.
Apart from the details disclosed in this note, no Director has entered into
a material contract with the Company or the economic entity since the end of the
previous financial year, and there were no material contracts involving
Directors' interests subsisting at year end.
The following transactions with Directors and their Director related
entities were conducted on normal commercial terms and conditions no more
favourable than those available, or which might reasonably be expected to be
available, on similar transactions to non-director related entities on an arm's
length basis.
1. Mr. Stanley and Mr. Kestel are directors of Sierra Bay Pty Ltd which
has entered into a contract with the Company. The contract is an agreement
to enter into an operating lease with the Company at the completion of
construction of an office and workshop complex. Mr. Kestel has no beneficial
interest in Sierra Bay Pty Ltd.
2. Mr. Huston is the Principal in the law firm Huston Partners being
the law firm which provided services to the Company.
3. Mr. Kestel is a director in the accounting firm Nissen Kestel and
Harford which supplied accounting and taxation advice to the Company.
30
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
29. RELATED PARTIES (CONTINUED)
4. Mr. Perrott is a director in Perrott Management Pty Ltd which has
provided management consultancy services to the Company during the year.
The value of transactions during the year with Directors and their Director
related entities were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED
--------------------
DIRECTOR RELATED 1996 1995
DIRECTOR ENTITY $ $
- ---------- ---------------------- --------- ---------
<S> <C> <C> <C>
P. Huston Huston Partners 83,256 162,620
R. Kestel Nissen Kestel &
Harford 55,590 154,352
M. Perrott Perrott Management 84,500 49,000
</TABLE>
Amounts payable to Directors and their Director related entities are as follows:
<TABLE>
<CAPTION>
CONSOLIDATED
--------------------
1996 1995
ENTITY $ $
- ---------- --------- ---------
<S> <C> <C> <C>
Huston Partners................... -- 7,868
Nissen Kestel and Harford......... -- 7,262
Perrott Management................ 7,000 7,000
</TABLE>
DIRECTORS HOLDINGS OF SHARES
The relevant interest of Directors of the reporting entity and their
Director related entities in shares of entities within the economic entity at
year end are set out below:
<TABLE>
<CAPTION>
CONSOLIDATED
NUMBER HELD
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Stanley Mining Services Limited
$0.20 Ordinary Shares.............................. 22,820,388 21,330,703
--------- ---------
</TABLE>
WHOLLY OWNED GROUP
Details of interests in wholly owned controlled entities are set out in Note
24. Details of dealings with these entities are set out below.
TRANSACTIONS WITHIN THE WHOLLY-OWNED GROUP
Transactions between the Company and related parties in the wholly owned
group consisted of:
i) Sales and purchases of consumables and spares
ii) Administrative and management services
iii) Loans to entities in the wholly owned group
31
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
29. RELATED PARTIES (CONTINUED)
iv) Loans repaid by entities in the wholly owned group
Loans between entities within the wholly owned group have no fixed term or
repayment schedule. There is no interest charged or receivable.
ASSOCIATED COMPANIES
Refer to Note 26
30. NOTES TO THE STATEMENTS OF CASH FLOWS
(I) RECONCILIATION OF CASH
For the purposes of the Statements of Cash Flows, cash includes cash on hand
and at bank, net of outstanding bank overdrafts. Cash as at the end of the
financial year as shown in the Statements of Cash Flows is reconciled to the
related items in the Balance Sheet as follows:
<TABLE>
<CAPTION>
1996 1995
NOTE A$'000 A$'000
----------- --------- -----------
<S> <C> <C> <C>
Cash..................................................................................... 1,384 2,407
Bank overdraft........................................................................... 15 (1,321) (43)
--------- -----
63 2,364
--------- -----
</TABLE>
(II) RECONCILIATION OF OPERATING PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<S> <C> <C> <C>
Operating profit after income tax................................... 3,573 2,361
Add: Items classified as financing/investing:
Finance charges..................................................... -- 3
Add (less) non-cash items:
(Profit) loss on sale of investments.............................. 20 (27)
(Profit) loss on sale of property, plant and equipment............ (69) (252)
Depreciation and amortisation....................................... 2,842 1,734
Foreign exchange losses on withholding tax.......................... 243 --
Exploration expenditure written off................................. -- 494
Withholding tax written off......................................... 100 --
----------- -----
Net cash provided by operating activities before change in assets
and liabilities................................................... 6,709 4,313
----------- -----
</TABLE>
32
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
30. NOTES TO THE STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
A$'000 A$'000
--------- ---------
<S> <C> <C> <C>
Change in assets and liabilities during the financial year
Increase in inventories............................................................... (2,085) (812)
Increase in other assets.............................................................. (371) (406)
Increase in trade and other debtors................................................... (3,955) (3,102)
Increase in creditors and accruals.................................................... 506 851
Increase in income taxes payable...................................................... 749 487
Amounts set aside to provisions....................................................... 72 135
--------- ---------
Net cash provided by operating activities............................................. 1,625 1,466
--------- ---------
</TABLE>
FINANCING ARRANGEMENTS
Refer Note 16
31. EVENTS SUBSEQUENT TO BALANCE DATE
During July, 1996 the Company allotted 11,666,667 ordinary shares of 20
cents each at an issue price of 60 cents per share for cash.
32. EVENTS SUBSEQUENT TO 12 SEPTEMBER 1996
On 31 October 1996, the Company issued 2,050,799 fully paid ordinary shares
of 20 cents each at 65 cents per share in accordance with the Dividend
Reinvestment Plan.
On 25 November 1996, the Company announced a 1:3 Rights Issue of 17,554,439
shares of 20 cents each to fund the purchase of Glindemann & Kitching Pty Ltd.
This issue was completed on 21 February 1997.
On 17 December 1996 the Company acquired 51% of Glindemann & Kitching Pty
Ltd effective from 1 October 1996. The remaining 49% will be completed in July
1997.
On 17 December 1996 the Company made a cash issue of 2,858,000 ordinary
shares of 20 cents each at 70 cents per share as part consideration of the
acquisition of 51% of Glindemann & Kitching Pty Ltd.
On 27 February 1997 the Directors resolved to allot 2,000,000 options to
employees of the Company at an exercise price of 63 cents each under the terms
of the Stanley Mining Services Limited Employee Share Option Plan.
On 27 February 1997 the 1,000,000 options to employees of the Company at an
exercise price of 67 cents, as previously disclosed, lapsed.
On 27 March 1997, the Company approved the issue of 2,000,000 options to
Michael Perrott, the Chairman and Managing Director, at an exercise price of 70
cents each.
33
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
32. EVENTS SUBSEQUENT TO 12 SEPTEMBER 1996 (CONTINUED)
On 8 April 1997, the Company announced it had received a notice of a
proposed takeover from Layne Christensen Australia Pty Ltd which is a fully
owned subsidiary of Layne Christensen Company of Mission Woods, Kansas, USA. The
takeover documents were posted to shareholders during May 1997.
33. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP
Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP"). In
Australia financial statements are prepared in accordance with applicable
accounting standards issued by the Australian Accounting Standards Board, the
Australian Corporations Law, Schedule 5 to the Corporations Regulations and
other mandatory professional reporting requirements (Urgent Issues Consensus
Views) collectively referred to as "Australian GAAP." The principle differences
between Australian GAAP and US GAAP which are material to the preparation of the
consolidated financial statements of the Company are set out below in this note.
(A) MARKETABLE INVESTMENTS SECURITIES
Under Australian GAAP marketable equity securities held for trading purposes
are stated at the lower of aggregate cost or net realisable value. Marketable
equity securities held for investment are stated at cost or directors'
valuation.
Under US GAAP Statement of Financial Accounting Standard No. 115 "Accounting
for Certain Investments in Debt and Equity Securities ("SFAS 115"), requires
investments to be classified into three categories and accounted for as follows:
debt securities that the Company has the positive intent and ability to hold to
maturity are classified as "held-to-maturity securities" and reported at
amortised costs; debt and marketable equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
"trading securities" and reported at fair value, with unrealised gains and
losses included in earnings; and debt and marketable equity securities not
classified as either held-to-maturity securities or trading securities are
classified as "available-for-sale securities" and reported at fair value, with
unrealised gains and losses excluded from earnings and reported as a separate
component of shareholders' equity net of tax effect.
(B) INVESTMENTS IN ASSOCIATES
Under Australian GAAP investments in associates are initially recorded at
cost. Investments in associates may be revalued. Income from investments in
associates is recognised only to the extent of dividends received or receivable
from post-acquisition profits of the investee.
Under US GAAP investments in associates are accounted for under the equity
method of accounting. The equity method of accounting requires the investor to
recognise its proportionate share of the associates' net profit or loss for the
period. Dividends received or receivable are accounted for as reductions in the
carrying value of the investor's investment.
34
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
33. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(C) DEFERRED EXPENDITURE
SHARE ISSUE EXPENSES
Under Australian GAAP, costs of raising additional share capital are
capitalised and offset against the share premium reserve when the share issue is
finalised.
Under US GAAP a similar treatment is allowed.
INTERNAL COSTS OF ACQUISITIONS AND BUSINESS COMMENCEMENTS
Under Australian GAAP the Company capitalises certain internal costs
incurred in connection with certain business acquisitions and start up of
businesses.
Under US GAAP the internal costs incurred in connection with certain
business acquisitions and business start up are expensed as incurred.
EXPLORATION EXPENDITURE
Under Australian GAAP, all exploration expenditure is capitalised to the
extent that it is expected to be recouped through successful exploitation of the
area or where exploration and evaluation activities have not yet reached a stage
which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves and significant activities are continuing.
Under US GAAP, exploration expenditure in the search for mineralisation
deposits is expensed as incurred. Once it is determined that mineral reserves
exist and are commercially recoverable future expenditure is capitalised as
development expenditure.
(D) ASSET REVALUATIONS
Under Australian GAAP non-current assets may be revalued both upwards and
downwards based on directors' valuations. An upwards revaluation is recorded by
a credit to the asset revaluation reserve as a component of shareholders' equity
and is not taken through the profit and loss account except where a previous
revaluation decrement has been recorded for that class of assets through the
profit and loss account. An impairment or downwards revaluation is taken through
the profit and loss account except where there is a revaluation reserve for that
particular class of assets, in which case the decrement may be debited to that
asset revaluation reserve, to the extent a credit exists, rather than the profit
and loss account.
The Company assesses the recoverability of non-current assets by comparing
the carrying value to the asset's undiscounted cash flow. To the extent that the
asset's carrying value exceeds its undiscounted cash flow, the asset is written
down to that amount.
US GAAP does not permit the upward revaluation of such assets. US GAAP
requires that an impairment of long-lived assets be recognised through the
profit and loss account. Under US GAAP SFAS 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
35
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
33. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
entities, when assessing an asset for impairment, compare the carrying value of
the asset or group of assets to the relevant expected cash flow, undiscounted
and without interest. If the sum of the undiscounted cash flow is less than the
asset carrying value the asset must be written down to "fair value". One method
of determining an asset's fair value, in the absence of an active market, is its
discounted cash flow. Once impairment is recorded, subsequent recoveries through
the profit and loss account are not allowed until the asset is sold.
Under Australian GAAP, the Company may pay dividends out of its asset
revaluation reserve to the extent that a credit balance exists. Under US GAAP
since no asset revaluation reserve exists, all dividends are paid out of
retained earnings.
(E) INCOME TAXES
Under Australian GAAP, income taxes are accounted for in accordance with the
liability method which is equivalent in many respects to United States Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires deferred tax assets and liabilities to be recognised for
the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. A valuation allowance is provided on deferred tax assets
to the extent it is not "more likely than not" that such deferred tax assets
will be realised. Under SFAS 109, "more likely than not" is defined as a
likelihood of more than 50 percent.
Under Australian GAAP, deferred tax assets related to temporary differences
are brought to account when they are "assured beyond a reasonable doubt" and net
operating losses pass a "virtually certain" threshold. The effect of a change in
tax rate is recorded in the period the government approves the budget which in
financial year 1995 preceded the enactment date under US GAAP. Accordingly, the
effect of the increase in the Australian tax rate from 33% to 36% is recognised
for US GAAP purposes in fiscal 1996.
With respect to business combinations accounted for as purchases, under
Australian GAAP, differences in the bases of assets and liabilities as a result
of purchase price adjustments do not result in the creation of a deferred tax
asset or liability at the acquisition date. Under US GAAP, the differences
between the assigned values and tax bases of assets and liabilities acquired in
such business combinations require the recognition of deferred tax assets and
liabilities at the acquisition date.
(F) DIVIDENDS
Under Australian GAAP, dividends declared subsequent to year end are
provided (accrued) for in the financial statements at year end if the
declaration date is prior to the date the financial statements are signed. Under
US GAAP dividends are recorded in the period declared.
36
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
33. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(G) STOCK BASED COMPENSATION
EMPLOYEE COMPENSATION
Under Australian GAAP, the issuance of employee stock options does not
result in compensation expense. Under US GAAP, entities may account for employee
stock compensation either in accordance with APB Opinion 25 "Accounting for
Stock Issued to Employees" or Statement of Financial Accounting Standard 123
"Accounting for Stock Based Compensation." APB 25 requires that entities record
compensation expense to the extent that the quoted market price of the
underlying shares at the defined measurement date is greater than the exercise
price to be paid by the employee.
Alternatively, FAS 123 specifics that compensation costs related to stock
based compensation plans shall be based on the estimated fair value of the stock
option as at the grant date, with the resulting compensation being recognised
over the employee vesting period. The fair value of employee stock options is
determined using option pricing models such as the binomial or Black Scholes
models. Presently the Company will be following APB 25 for US GAAP purposes.
Given stock options granted to date have had an exercise price equal to or
greater than the share trading price at date of grant. There is no impact on net
income or shareholders' equity.
NON-EMPLOYEES STOCK OPTIONS
Under Australian GAAP, the issuance of stock options to non-employees with
an exercise price equal to the current market price at date of grant results in
no compensation.
Under US GAAP, the issuance of stock options to non-employees must be
accounted for under the fair value method prescribed in SFAS 123 "Accounting for
Stock-Based Compensation." The fair value of the options granted will be
recorded as expense over their service or vesting period.
37
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
33. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(H) PROFIT AND LOSS ACCOUNT
Under Australian GAAP, the Company has disclosed certain items as "abnormal"
in the profit and loss statement in the June 1996 accounts. There is no
"abnormal items" category in a US GAAP statement of profit such that these items
would be included as operating income.
<TABLE>
<CAPTION>
FOR YEAR ENDED FOR YEAR ENDED
1996 1995
A$'000 A$'000
--------------- ---------------
<S> <C> <C>
Operating profit after income tax in accordance with Australian GAAP.............. 3,573 2,361
Adjustments:
(Realised) Unrealised gains on trading securities............................... (26) 26
Share of associates' net loss consisting of deferred exploration expenditure.... (199) --
Deferred exploration expenditure................................................ -- (41)
Deferred internal costs of acquisition & business commencements................. (149) --
Depreciation relating to revalued assets........................................ 33 34
Gain on sale of revalued asset.................................................. 7 --
Change in tax rates............................................................. (156) 156
Tax effect of US GAAP adjustments............................................... 72 14
----- -----
Net profit--US GAAP............................................................. 3,155 2,550
----- -----
</TABLE>
38
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
33. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
<TABLE>
<CAPTION>
AS AT JUNE 30, 1996 AS AT JUNE 30, 1995
A$'000 A$'000
------------------- -------------------
<S> <C> <C>
Shareholders equity attributable to members of the parent entity--
Australian GAAP......................................................... 14,885 12,538
Adjustments:
Unrealised gains on trading securities.................................. -- 26
Unrealised gains on available-for-sale securities....................... 9 --
Share of associates' net loss consisting of deferred exploration
expenditure........................................................... (199) --
Deferred exploration expenditure........................................ (140) (140)
Deferred internal costs of acquisitions & business commencements........ (149) --
Asset revaluation reserve............................................... (142) (3)
Dividend paid from asset revaluation reserve............................ (188) (188)
Accumulated depreciation of revalued assets............................. 102 69
Gain on sale of revalued asset.......................................... 7 --
Dividend proposed....................................................... 1,910 701
Change in tax rates..................................................... -- 156
Cumulative tax effect of US GAAP adjustments............................ 122 46
------ ------
Shareholders' equity--US GAAP........................................... 16,217 13,205
------ ------
</TABLE>
39
<PAGE>
STANLEY MINING SERVICES LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE A$'000 A$'000
------ --------- ---------
<S> <C> <C> <C>
Sales revenue......................................................................... 47,237 30,521
Other revenue......................................................................... 3,416 660
--------- ---------
TOTAL OPERATING REVENUE............................................................... 50,653 31,181
--------- ---------
Operating profit before income tax.................................................... 2 5,278 3,875
Income tax attributable to operating profit........................................... 2,061 1,386
--------- ---------
OPERATING PROFIT AFTER INCOME TAX..................................................... 3,217 2,489
Outside equity interests in operating profit.......................................... 1,219 --
--------- ---------
OPERATING PROFIT AFTER INCOME TAX ATTRIBUTABLE TO MEMBERS OF THE COMPANY.............. 1,998 2,489
Retained profits at the beginning of the financial period............................. 5,245 3,582
--------- ---------
Retained profits at the end of the financial period................................... 7,243 6,071
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited consolidated financial statements
40
<PAGE>
STANLEY MINING SERVICES LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
NOTE 1997 1996
A$'000 A$'000
--------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash................................................................. 7 4,573 389
Receivables.......................................................... 14,207 9,405
Inventories.......................................................... 8,084 4,542
Other................................................................ 966 432
--------- ---------
TOTAL CURRENT ASSETS................................................. 27,830 14,768
--------- ---------
NON-CURRENT ASSETS
Investments.......................................................... 1,324 104
Property, plant & equipment.......................................... 28,139 14,236
Other................................................................ 1,479 508
--------- ---------
TOTAL NON-CURRENT ASSETS............................................. 30,942 14,848
--------- ---------
TOTAL ASSETS......................................................... 58,772 29,616
--------- ---------
--------- ---------
CURRENT LIABILITIES
Accounts payable..................................................... 5,599 4,373
Borrowings........................................................... 1,620 1,348
Provisions........................................................... 2,821 1,055
--------- ---------
TOTAL CURRENT LIABILITIES............................................ 10,040 6,776
--------- ---------
NON-CURRENT LIABILITIES
Borrowings........................................................... 1,270 4,664
Provisions........................................................... 4,663 2,604
--------- ---------
TOTAL NON-CURRENT LIABILITIES........................................ 5,933 7,268
--------- ---------
TOTAL LIABILITIES.................................................... 15,973 14,044
--------- ---------
SHAREHOLDERS' EQUITY
Share capital........................................................ 5 14,044 7,218
Reserves............................................................. 13,880 2,283
Retained profits..................................................... 7,243 6,071
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO MEMBERS OF THE COMPANY.... 35,167 15,572
Outside equity interests in controlled entities...................... 7,632 --
--------- ---------
TOTAL SHAREHOLDERS' EQUITY........................................... 42,799 15,572
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................... 58,772 29,616
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited consolidated financial statements
41
<PAGE>
STANLEY MINING SERVICES LIMITED
UNAUDITED CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
--------- ---------
<S> <C> <C>
AUTHORISED CAPITAL
Ordinary shares of 20 cents each............................................................... 50,000 50,000
--------- ---------
Opening balance................................................................................ 7,218 7,016
Additional shares issued....................................................................... 6,826 202
--------- ---------
Total share capital............................................................................ 14,044 7,218
--------- ---------
RETAINED PROFITS
Retained profits at the beginning of the financial period as stated............................ 5,245 3,582
Operating profit after income tax attributable to members of the Company....................... 1,998 2,489
--------- ---------
Retained profits at the end of the financial period as stated.................................. 7,243 6,071
--------- ---------
RESERVES
SHARE PREMIUM RESERVE
Opening balance................................................................................ 2,280 1,937
Premium on additional shares issued............................................................ 12,285 343
Share placement costs.......................................................................... (827) --
--------- ---------
Closing balance................................................................................ 13,738 2,280
--------- ---------
ASSET REVALUATION RESERVE
Opening balance................................................................................ 142 3
--------- ---------
Closing balance................................................................................ 142 3
--------- ---------
Total reserves................................................................................. 13,880 2,283
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE MEMBERS OF THE COMPANY.......................... 35,167 15,572
--------- ---------
OUTSIDE EQUITY INTERESTS IN CONTROLLED ENTITIES................................................ 7,632 --
--------- ---------
TOTAL SHAREHOLDERS' EQUITY..................................................................... 42,799 15,572
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited consolidated financial statements
42
<PAGE>
STANLEY MINING SERVICES LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
A $'000 A $'000
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations.................................................... 45,489 27,196
Cash payments in the course of operations.................................................... (40,741) (24,284)
Income taxes paid............................................................................ (929) (627)
Withholding taxes paid....................................................................... (322) (471)
Interest and other items of a similar nature received........................................ 277 71
Interest and other finance costs paid........................................................ (282) (308)
Dividends received........................................................................... 9 --
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................................... 3,501 1,577
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for controlled entity................................................................ (6,057) --
Cost of acquisition.......................................................................... (361) --
Proceeds on sale of investments attributable to minority interests........................... 1,372 --
Proceeds on sale of investments.............................................................. -- 1
Proceeds on sale of plant and equipment...................................................... 182 47
Payments for property, plant and equipment................................................... (5,257) (4,398)
Payment for investments...................................................................... (821) (7)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES........................................................ (10,942) (4,357)
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited consolidated financial statements
43
<PAGE>
STANLEY MINING SERVICES LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE A $'000 A $'000
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid....................................................................... (577) (702)
Proceeds from share issue............................................................ 17,777 545
Repayment of borrowings.............................................................. (16,426) (38)
Proceeds from borrowings............................................................. 8,506 4,664
Hire purchase payments............................................................... -- (4,402)
Cost of capital raising.............................................................. (827) --
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.................................. 8,453 67
--------- ---------
NET INCREASE (DECREASE) IN CASH HELD................................................. 1,012 (2,713)
CASH AT THE BEGINNING OF THE FINANCIAL PERIOD........................................ 63 2,364
CASH BALANCES IN CONTROLLED ENTITIES ACQUIRED........................................ 1,878 --
--------- ---------
CASH AT THE END OF THE FINANCIAL PERIOD.............................................. 7 2,953 (349)
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited consolidated financial statements
44
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PREPARATION OF NINE MONTHS FINANCIAL STATEMENTS
The general purpose nine months consolidated financial statements have been
prepared in accordance with the requirements of the Corporations Law on the
basis of Accounting Standard AASB 1029 and other mandatory professional
reporting requirements (Urgent Issues Group Consensus Views) with the exception
of disclosures of the dividend franking account and earnings per share. It is
recommended that the nine months financial statements and report be read in
conjunction with the 30 June 1996 Annual Financial Statements and Reports and
any public announcements by Stanley Mining Services Limited and its controlled
entities during the nine months in accordance with continuous disclosure
obligations arising under the Corporations Law.
The accounting policies have been consistently applied by the entities in
the economic entity and are consistent with those of the previous financial
year.
The carrying amount of non-current assets are reviewed to determine whether
they are in excess of their recoverable amount at the end of the nine months. If
the carrying amount of a non-current asset exceeds the recoverable amount, the
asset is written down to the lower amount. In assessing recoverable amounts the
relevant cash flows have not been discounted to their present value.
For the purposes of preparing the nine months financial statements, the nine
months has been treated as a discrete reporting period.
A reconciliation of the major differences between these accounts and those
applicable under generally accepted accounting principles in the United States
("US GAAP") is included in note 9.
2. OPERATING PROFIT BEFORE INCOME TAX
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
----------- -----------
<S> <C> <C>
Operating profit before income tax has been arrived at after including:
Interest received or due and receivable.......................................................... 277 71
Interest paid or due and payable (including lease finance charges)............................... 282 308
Depreciation including all forms of amortisation................................................. 3,823 2,000
</TABLE>
3. DIVIDENDS
Stanley Mining Services Limited paid the following dividends in respect of
the nine months ended 31 March 1997 and 1996:
4 cents per share franked to 100% with class "C" (36%) franking credits paid
on 31 October 1996. The dividend was provided for at 30 June 1996.
2 cents per share franked to 72% from profits taxed at 39% being $505,204
and franked to 28% from profit taxed at 39% being $196,393 giving a total
dividend of $701,597. The dividend was paid on 1 March, 1996.
45
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
4. CONTROL GAINED OVER ENTITY
The economic entity gained control over the following entity during the
period:
<TABLE>
<CAPTION>
CONTRIBUTION
------------------------
(2)
1997 1996
NAME DATE (1) A$'000 A$'000
- ---------------------------------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Glindemann & Kitching Pty Ltd............................................... 1 October 1996 733 --
</TABLE>
- ------------------------
(1) Date is date control was gained.
(2) Contribution to consolidated profit after tax.
5. SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
--------- ---------
<S> <C> <C>
(a) Authorised capital 250,000,000 shares of $0.20 each........................................ 50,000 50,000
--------- ---------
(b) Issued capital 70,219,325 ordinary shares of $0.20 each [1996: 36,089,420]................. 14,044 7,218
--------- ---------
Total.......................................................................................... 14,044 7,218
--------- ---------
</TABLE>
ORDINARY SHARES
Between 3 July and 16 July 1996 the Company made a cash issue of 11,666,667
ordinary shares of 20 cents each at an issue price of 60 cents to fund expansion
of the drilling operations of the Company in Australia and Ghana, and to provide
$1.5 million to fund the Company's portion of exploration expenditure on its
mining interests in Ghana.
On 31 October 1996, the Company issued 2,050,799 fully paid ordinary shares
of 20 cents each at 65 cents per share in accordance with the Dividend
Reinvestment Plan.
On 17 December 1996 the Company made a cash issue of 2,858,000 ordinary
shares of 20 cents each at 70 cents per share as part consideration of the
acquisition of 51% of Glindemann & Kitching Pty Ltd.
EMPLOYEE SHARE OPTION PLAN
On 27 February 1997, the Company issued 2,000,000 options to employees of
the Company at an exercise price of 63 cents each under the terms of the Stanley
Mining Services Limited Employee Share Option Plan. At 31 March 1997 no options
had been exercised.
OPTIONS
On 27 March 1997, the Company issued 2,000,000 options to Michael Perrott,
the Managing Director and Chairman, at an exercise price of 70 cents each in
consideration of him entering into a 2 year service agreement as follows:
1,000,000 options exercisable on after 1 February 1998 and prior to 31
January 2003.
46
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
5. SHARE CAPITAL (CONTINUED)
1,000,000 options exercisable on or after 1 February 1999 and prior to 31
January 2003.
RIGHTS ISSUE
On 21 February 1997, the Company issued 17,554,439 shares at an issue price
of 50 cents pursuant to a prospectus dated 20 December 1996. The purpose of the
issue was to repay the short term debt facility taken out by the Company to
partially fund the Glindemann & Kitching Pty Ltd acquisition and to provide
further working capital to the Company.
6. INVESTMENTS IN ASSOCIATED COMPANIES EQUITY INFORMATION
Investments in associated companies are accounted for on a cost basis in the
nine months consolidated financial statements.
Information about the investments under the equity accounting method is set
out below:
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
----------- -----------
<S> <C> <C>
Share of associated companies' operating profit (loss) and extra ordinary items after income
tax............................................................................................ -- --
----- ---
Share of associated companies' profits (losses) not brought to account in the consolidated
accounts....................................................................................... -- --
----- ---
Share of associated companies' accumulated losses................................................ (5) --
Cost of investment............................................................................... 1,092 208
----- ---
Equity accounted amount of investment............................................................ 1,087 208
----- ---
----- ---
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED
INTEREST
----------------------------
CLASS OF 1997 1996
NAME PRINCIPAL ACTIVITIES SHARE % %
- ------------------------------------------------------ ----------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Equigold (Ghana) Ltd.................................. Exploration Ord 50 50
Equigold (Cote D'Ivoire) SA........................... Exploration Ord 42.5 --
</TABLE>
47
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
7. NOTES TO THE STATEMENTS OF CASH FLOWS
RECONCILIATION OF CASH
For the purpose of the Statements of Cash Flows, cash includes cash on hand
and at bank, net of outstanding bank overdrafts. Cash as at the end of the
financial period as shown in the Statements of Cash Flows are reconciled to the
related items in the balance sheets as follows:
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
--------- -----------
<S> <C> <C>
Cash........................................................................ 4,573 389
Bank overdraft.............................................................. (1,620) (738)
--------- -----
Totals...................................................................... 2,953 (349)
--------- -----
</TABLE>
8. EVENTS SUBSEQUENT TO 31 MARCH 1997
TAKEOVER
On 8 April 1997 the Company announced it had received a notice of a proposed
takeover from Layne Christensen Australia Pty Ltd, which is a fully owned
subsidiary of Layne Christensen Company of Mission Woods, Kansas, USA. The
takeover documents were posted to shareholders during May 1997. On 26 June 1997
the Company announced that the offer had gone unconditional with acceptances at
the date of these financial statements of 97% of the issued capital.
9. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP
Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP"). In
Australia financial statements are prepared in accordance with applicable
accounting standards issued by the Australian Accounting Standards Board, the
Australian Corporations Law, Schedule 5 to the Corporations Regulations and
other mandatory professional reporting requirements (Urgent Issues Consensus
Views) collectively referred to as "Australian GAAP." The principal differences
between Australian GAAP and US GAAP which are material to the preparation of the
consolidated financial statements of the Company are set out below in this note.
(A) MARKETABLE INVESTMENTS SECURITIES
Under Australian GAAP marketable equity securities held for trading purposes
are stated at the lower of aggregate cost or net realisable value. Marketable
equity securities held for investment are stated at cost or directors'
valuation.
Under US GAAP Statement of Financial Accounting Standard No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS 115"), requires
investments to be classified into three
48
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
9. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
categories and accounted for as follows: debt securities that the Company has
the positive intent and ability to hold to maturity are classified as
"held-to-maturity securities" and reported at amortised cost; debt and
marketable equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as "trading securities"
and reported at fair value, with unrealised gains and losses included in
earnings; and debt and marketable equity securities not classified as either
held-to-maturity securities or trading securities are classified as
"available-for-sale securities" and reported at fair value, with unrealised
gains and losses excluded from earnings and reported as a separate component of
shareholders' equity net of tax effect.
(B) INVESTMENTS IN ASSOCIATES
Under Australian GAAP investments in associates are initially recorded at
cost. Investments in associates may be revalued. Income from investments in
associates is recognised only to the extent of dividends received or receivable
from post-acquisition profits of the investee. The Company expensed a portion of
these costs in the period ending 31 March 1997.
Under US GAAP investments in associates are accounted for under the equity
method of accounting. The equity method of accounting requires the investor to
recognise its proportionate share of the associates' net profit or loss for the
period. Dividends received or receivable are accounted for as reductions in the
carrying value of the investor's investment.
(C) DEFERRED EXPENDITURE
SHARE ISSUE EXPENSES
Under Australian GAAP, costs of raising additional share capital are
capitalised and offset against the share premium reserve when the share issue is
finalised.
Under US GAAP a similar treatment is allowed.
INTERNAL COSTS OF ACQUISITIONS AND BUSINESS COMMENCEMENTS
Under Australian GAAP the Company capitalises certain internal costs
incurred in connection with certain business acquisitions and start up of
businesses. In the nine months ended 31 March 1997, the Company expensed a
portion of previously deferred start-up and business acquisition costs.
Under US GAAP the internal costs incurred in connection with certain
business acquisitions and business start up are expensed as incurred.
EXPLORATION EXPENDITURE
Under Australian GAAP, all exploration expenditure is capitalised to the
extent that it is expected to be recouped through successful exploitation of the
area or where exploration and evaluation activities have
49
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
9. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
not yet reached a stage which permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves and significant activities are
continuing.
Under US GAAP, exploration expenditure in the search for mineralisation
deposits is expensed as incurred. Once it is determined that mineral reserves
exist and are commercially recoverable future expenditure is capitalised as
development expenditure.
(D) ASSET REVALUATIONS
Under Australian GAAP non-current assets may be revalued both upwards and
downwards based on directors' valuations. An upwards revaluation is recorded by
a credit to the asset revaluation reserve as a component of shareholders' equity
and is not taken through the profit and loss account except where a previous
revaluation decrement has been recorded for that class of assets through the
profit and loss account. An impairment or downwards revaluation is taken through
the profit and loss account except where there is a revaluation reserve for that
particular class of assets, in which case the decrement may be debited to that
asset revaluation reserve, to the extent a credit exists, rather than the profit
and loss account.
The Company assesses the recoverability of non-current assets by comparing
the carrying value to the asset's undiscounted cash flow. To the extent that the
asset's carrying value exceeds its undiscounted cash flow, the asset is written
down to that amount.
US GAAP does not permit the upward revaluation of such assets. US GAAP
requires that an impairment of long-lived assets be recognised through the
profit and loss account. Under US GAAP SFAS 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," entities,
when assessing an asset for impairment, compare the carrying value of the asset
or group of assets to the relevant expected cash flow, undiscounted and without
interest. If the sum of the undiscounted cash flow is less than the asset
carrying value the asset must be written down to "fair value." One method of
determining an asset's fair value, in the absence of an active market, is its
discounted cash flow. Once impairment is recorded, subsequent recoveries through
the profit and loss account are not allowed until the asset is sold.
(E) INCOME TAXES
Under Australian GAAP, income taxes are accounted for in accordance with the
liability method which is equivalent in many respects to United States Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires deferred tax assets and liabilities to be recognised
for the estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. A valuation allowance is provided on deferred tax assets
to the extent it is not "more likely than not" that
50
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
9. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
such deferred tax assets will be realised. Under SFAS 109, "more likely than
not" is defined as a likelihood of more than 50 percent.
Under Australian GAAP, deferred tax assets related to temporary differences
are brought to account when they are "assured beyond a reasonable doubt" and net
operating losses pass a "virtually certain" threshold. The effect of a change in
tax rate is recorded in the period the government approves the budget which in
financial year 1995 proceeded the enactment date under US GAAP. Accordingly, the
effect of the increase in the Australian tax rate from 33% to 36% is recognised
for US GAAP purposes in fiscal 1996.
With respect to business combinations accounted for as purchases, under
Australian GAAP, differences in the bases of assets and liabilities as a result
of purchase price adjustments do not result in the creation of a deferred tax
asset or liability at the acquisition date. Under US GAAP, the differences
between the assigned values and tax bases of assets and liabilities acquired in
such business combinations require the recognition of deferred tax assets and
liabilities at the acquisition date.
(F) DIVIDENDS
Under Australian GAAP, dividends declared subsequent to year end are
provided (accrued) for in the financial statements at year end if the
declaration date is prior to the date the financial statements are signed. Under
US GAAP dividends are recorded in the period declared.
(G) STOCK BASED COMPENSATION
EMPLOYEE COMPENSATION
Under Australian GAAP, the issuance of employee stock options does not
result in compensation expense. Under US GAAP, entities may account for employee
stock compensation either in accordance with APB Opinion 25 "Accounting for
Stock Issued to Employees" or Statement of Financial Accounting Standard 123
"Accounting for Stock Based Compensation." APB 25 requires that entities record
compensation expense to the extent that the quoted market price of the
underlying shares at the defined measurement date is greater than the exercise
price to be paid by the employee.
Alternatively, FAS 123 specifics that compensation costs related to stock
based compensation plans shall be based on the estimated fair value of the stock
option as at the grant date, with the resulting compensation being recognised
over the employee vesting period. The fair value of employee stock options is
determined using option pricing models such as the binomial or Black Scholes
models. Presently the Company will be following APB 25 for US GAAP purposes.
Given stock options granted to date have had an exercise price equal to or
greater than the share trading price at date of grant. There is no impact on net
income or shareholders' equity.
51
<PAGE>
STANLEY MINING SERVICES LIMITED
NOTES TO AND FORMING PART OF THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
9. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
NON-EMPLOYEES STOCK OPTIONS
Under Australian GAAP, the issuance of stock options to non-employees with
an exercise price equal to the current market price at date of grant results in
no compensation.
Under US GAAP, the issuance of stock options to non-employees must be
accounted for under the fair value method prescribed in SFAS 123 "Accounting for
Stock-Based Compensation." The fair value of the options granted will be
recorded as expense over their service or vesting period. There have been no
non-employee stock options issued.
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
--------- ---------
<S> <C> <C>
Operating profit after income tax in accordance with Australian GAAP........................... 3,217 2,489
Adjustments:
Unrealised gains on trading securities..................................................... -- 45
Share of associates' net loss consisting of deferred exploration expenditure............... (442) (68)
Deferred internal costs of acquisition and business commencements.......................... 19 --
Depreciation relating to revalued assets................................................... 24 26
Gain on sale of revalued assets............................................................ -- 7
Change in tax rates........................................................................ -- (156)
Tax effect of US GAAP adjustments.......................................................... 159 16
--------- ---------
Operating profit after income tax--US GAAP..................................................... 2,977 2,359
--------- ---------
Shareholders' equity attributable to members of the parent entity:
Australian GAAP................................................................................ 35,167 15,572
Adjustments:
Unrealised gains on trading securities..................................................... -- 70
Unrealised gains on available-for-sales securities......................................... 1 5
Share of associates' net loss consisting of deferred exploration expenditure............... (641) (68)
Deferred exploration expenditure........................................................... (140) (140)
Deferred internal costs of acquisition and business commencements.......................... (130) --
Asset revaluation reserve.................................................................. (142) (3)
Dividend paid from asset revaluation reserve............................................... (188) (188)
Accumulated depreciation of revalued assets................................................ 126 95
Gain on sale of revalued asset............................................................. 7 7
Cumulative tax effect of US GAAP adjustments............................................... 281 75
--------- ---------
Shareholders' equity attributable to members of the parent entity--US GAAP..................... 34,341 15,425
--------- ---------
</TABLE>
52
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the members of Glindemann & Kitching Pty Ltd:
We have audited the accompanying balance sheet of Glindemann & Kitching Pty
Ltd as of June 30, 1996, and the related statement of profit, statement of
changes in shareholders' equity and statement of cash flows for the year ended
June 30, 1996, all expressed in Australian dollars. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Australia which do not differ in any significant respect from
auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of June 30,
1996 and the results of its operations and its cash flows for the year ended
June 30, 1996, in conformity with accounting principles generally accepted in
Australia.
Generally accepted accounting principles in Australia vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of United States generally accepted accounting
principles would have affected the results of operations for the year ended June
30, 1996 and shareholders' equity as of June 30, 1996, to the extent summarised
in Note 19 to the financial statements.
KPMG
CHARTERED ACCOUNTANTS
PERTH, WESTERN AUSTRALIA
Dated: June 17, 1997
53
<PAGE>
GLINDEMANN & KITCHING PTY LTD
STATEMENT OF PROFIT
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
NOTE A$'000
------ ---------
<S> <C> <C>
Sales revenue................................................................................... 22,755
Other revenue................................................................................... 294
---------
TOTAL OPERATING REVENUE......................................................................... 2 23,049
---------
Operating profit before abnormal item & income tax.............................................. 2(a) 3,612
Abnormal item................................................................................... 2(b) (982)
Operating profit before income tax.............................................................. 2,630
Income tax attributable to operating profit..................................................... 4 (964)
---------
OPERATING PROFIT AFTER TAX...................................................................... 1,666
---------
---------
</TABLE>
See the accompanying notes to and forming part of the financial statements.
54
<PAGE>
GLINDEMANN & KITCHING PTY LTD
BALANCE SHEET
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
NOTE A$'000
----------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash.......................................................................................... 1,963
Receivables................................................................................... 5 4,077
Inventories................................................................................... 6 420
Investments................................................................................... 7 932
Other......................................................................................... 8 118
---------
TOTAL CURRENT ASSETS............................................................................ 7,510
---------
NON-CURRENT ASSETS
Property, plant and equipment................................................................. 9 3,113
Other......................................................................................... 10 182
---------
TOTAL NON-CURRENT ASSETS........................................................................ 3,295
TOTAL ASSETS.................................................................................... 10,805
---------
---------
CURRENT LIABILITIES
Creditors and borrowings...................................................................... 11 4,244
Provisions.................................................................................... 12 1,263
---------
TOTAL CURRENT LIABILITIES....................................................................... 5,507
---------
TOTAL LIABILITIES............................................................................... 5,507
---------
---------
SHAREHOLDERS' EQUITY
Share capital................................................................................. 13 2
Reserves...................................................................................... 14 382
Retained profits.............................................................................. 4,914
---------
TOTAL SHAREHOLDERS' EQUITY...................................................................... 5,298
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................................... 10,805
---------
---------
</TABLE>
See the accompanying notes to and forming part of the financial statements.
55
<PAGE>
GLINDEMANN & KITCHING PTY LTD
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
ASSET CAPITAL
SHARE REVALUATION PROFITS RETAINED
CAPITAL RESERVE RESERVE PROFITS
----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at June 30, 1995.............................................. A$ 2 A$ 337 A$ 45 A$ 3,568
Dividend.............................................................. -- -- -- (320)
Net earnings.......................................................... -- -- -- 1,666
----- ----------- ----------- ----------
Balance at June 30, 1996.............................................. A$ 2 A$ 337 A$ 45 A$ 4,914
----- ----------- ----------- ----------
----- ----------- ----------- ----------
</TABLE>
See the accompanying notes to and forming part of the financial statements.
56
<PAGE>
GLINDEMANN & KITCHING PTY LTD
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
NOTE A$'000
------ ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations...................................................... 22,008
Cash payments in the course of operations...................................................... (19,551)
Dividends received............................................................................. 28
Interest and other items of a similar nature received.......................................... 167
Interest and other finance costs paid.......................................................... (158)
Income taxes paid.............................................................................. (1,908)
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................................................... 18(ii) 586
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchases of property, plant and equipment......................................... (826)
Payments for investments....................................................................... (309)
Proceeds from sale of investments.............................................................. 70
Proceeds from the sale of fixed assets......................................................... 29
---------
NET CASH USED IN INVESTING ACTIVITIES.......................................................... (1,036)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings........................................................................ (393)
Dividends paid................................................................................. (320)
---------
NET CASH USED IN FINANCING ACTIVITIES.......................................................... (713)
---------
NET DECREASE IN CASH HELD...................................................................... (1,163)
CASH AT THE BEGINNING OF THE FINANCIAL PERIOD.................................................. 1,863
---------
CASH AT THE END OF THE FINANCIAL PERIOD........................................................ 18(i) 700
---------
</TABLE>
See the accompanying notes to and forming part of the financial statements.
57
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted by the Company in the
preparation of these financial statements are:
(A) BASIS OF PREPARATION
The financial statements are a general purpose financial report which have
been drawn up in accordance with Accounting Standards, Urgent Issues Group
Consensus Views, the provisions of Schedule 5 to the Corporations Regulations
and the requirements the Corporations Law. They have been prepared on the basis
of historical costs and except where stated do not take into account changing
money values or current valuations of non-current assets. The accounting
policies have been consistently applied by the Company and except where there is
a change in accounting policy, are consistent with those of the previous year.
A reconciliation of the major differences between these accounts and those
applicable under generally accepted accounting principles in the United States
("US GAAP") is included in note 19.
(B) REVENUE RECOGNITION
SALES REVENUE
Sales revenue comprises revenue earned (net of returns, discounts and
allowances) from the provision of products or services to entities outside the
Company. Sales revenue is recognised when earned and the fee in respect of
services provided is receivable.
INTEREST INCOME
Interest income is recognised as it accrues.
ASSET SALES
The gross proceeds of asset sales are included as other revenue of the
Company. The profit or loss on disposal of assets is brought to account at the
date an unconditional contract of sale is signed.
OTHER REVENUE
Revenue recognition policies for investments are described in Note 1(e).
(C) INCOME TAX
The company adopts the liability method of tax effect accounting.
Income tax expense is calculated on operating profit adjusted for permanent
differences between taxable and accounting income. The tax effect of timing
differences which arise from items being brought to account in different periods
for income tax and accounting purposes, is carried forward in the balance sheet
as a future income tax benefit or a provision for deferred income tax.
Future income tax benefits are brought to account as realisation of the
asset is assured beyond reasonable doubt. Future income tax benefits relating to
tax losses are brought to account when their realisation is virtually certain.
58
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) NON-CURRENT ASSETS
The carrying amounts of all non-current assets are reviewed at least
annually to determine whether they are in excess of their recoverable amount. If
the carrying amount of a non-current asset exceeds the recoverable amount, the
asset is written down to the lower value.
In assessing recoverable amounts the relevant cash flows have not been
discounted to their present value, except where specifically stated.
(E) INVESTMENTS
OTHER COMPANIES
Investments in other companies are carried at cost. No recognition for
fluctuations in the market value of these investments is brought to account.
Dividends are brought to account as they are received.
(F) INVENTORIES
Drilling supplies and consumables held at the Company's store and workshop
at year end are valued at cost (calculated on the first-in first-out basis).
Once these drilling supplies and consumables are issued to the Company's drill
rigs, they are expensed to the profit and loss account.
(G) PROPERTY, PLANT AND EQUIPMENT
ACQUISITION
Items of property, plant and equipment are initially recorded at cost and
depreciated as outlined below.
The cost of property, plant and equipment constructed by the Company
includes the cost of materials and direct labour and an appropriate proportion
of fixed and variable overheads.
DEPRECIATION AND AMORTISATION
Property, plant and equipment, including buildings and leasehold property
but excluding freehold land, are depreciated/amortised over their estimated
useful lives.
Assets are depreciated or amortised from the date of first use.
(H) EMPLOYEE ENTITLEMENTS
WAGES, SALARIES, ANNUAL LEAVE AND SICK LEAVE
The provisions for employee entitlements to wages, salaries, annual leave
and sick leave represents the amount which the Company has a present obligation
to pay resulting from employees' services provided up to the balance date. The
provisions have been calculated at nominal amounts based on current wage and
salary rates and includes related on-costs.
59
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG SERVICE LEAVE
The liability for employee's entitlement to long service leave represents
the present value of the estimated future cash outflows to be made by the
employer resulting from employees' services provided up to the balance date.
Liabilities for employee entitlements which are not expected to be settled
within twelve months are discounted using the rates attaching to national
government securities at balance date, which most closely match the terms of
maturity of the related liabilities.
In determining the liability for employee entitlements, consideration has
been given to future increases in wage and salary rates, and the company's
experience with staff departures. Related on-costs have also been included in
the liability.
SUPERANNUATION
The Company contributes to a superannuation fund on behalf of employees in
accordance with the requirements of the Superannuation Guarantee Administration
Act 1992. The contributions are charged against income as they are made.
(I) EXPLORATION EXPENDITURE
The company expenses all exploration expenditure when incurred.
60
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
2. OPERATING PROFIT BEFORE INCOME TAX
(a) Operating profit has been arrived at after including:
<TABLE>
<CAPTION>
A$'000
-------
<S> <C>
Sales revenue............................................... 22,755
Interest received or due and receivable..................... 167
Dividends received.......................................... 28
Gross proceeds from the sale of non-current assets.......... 29
Gross proceeds from the sale of investments................. 70
-------
Total operating revenue..................................... 23,049
-------
-------
OPERATING EXPENSES
Interest paid or due and payable to:
Related party........................................... 158
Depreciation................................................ 713
Amounts set aside to provision for:
Employee entitlements................................. 28
SALES OF NON-CURRENT ASSETS
Profit on sales of property, plant and equipment............ 25
Loss on sales of investments................................ (1)
(b) Abnormal Item
Oil exploration expenditure............................... (982)
Income tax effect......................................... 354
-------
(628)
-------
-------
</TABLE>
3. DIVIDENDS
Dividends provided for or paid by the Company are:
<TABLE>
<CAPTION>
A$'000
-------
<S> <C>
A final class 'A' dividend of $320,000 franked to 100% was
declared on 21 February 1996................................ 320
-------
-------
</TABLE>
61
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
A$'000
-------
<S> <C>
</TABLE>
4. TAXATION
<TABLE>
<S> <C>
INCOME TAX EXPENSE
Prima facie income tax expense calculated at 36% on the
operating profit............................................ 947
Increase in income tax expense due to non tax deductible
items:
Depreciation of buildings................................. 4
Entertainment expenses.................................... 22
Decrease in income tax expense due to non tax assessable
items:
Dividends................................................. 9
-------
Income tax expense on operating profit...................... 964
-------
-------
Total income tax expense is made up of:
Current income tax provision.............................. 972
Future income tax benefit................................. (8)
-------
964
-------
-------
</TABLE>
5. RECEIVABLES
<TABLE>
<S> <C>
Trade debtors............................................... 3,946
Other debtors............................................... 131
-------
4,077
-------
-------
</TABLE>
6. INVENTORIES
<TABLE>
<S> <C>
Raw materials and stores--at cost........................... 172
Finished goods--at cost..................................... 248
-------
420
-------
-------
</TABLE>
7. INVESTMENTS
<TABLE>
<S> <C>
Shares in other corporations--at cost....................... 932
-------
-------
</TABLE>
Quoted market value of shares in other corporations $1,325,450.
The amount of capital gains tax that would be payable if the quoted shares
in other corporations were sold at balance date at the disclosed market value
should not exceed $141,750.
8. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
A$'000
-------
<S> <C>
Prepayments................................................. 118
-------
-------
</TABLE>
62
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
A$'000
-------
<S> <C>
</TABLE>
9. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<S> <C>
Freehold land--at directors' valuation 1988................. 207
Buildings
--at cost................................................. 84
--Accumulated depreciation................................ (5)
-------
79
--at directors' valuation 1988............................ 300
--Accumulated depreciation................................ (63)
-------
237
Total Land and Buildings.................................... 523
-------
-------
Plant and equipment
--at cost................................................. 5,189
--Accumulated depreciation................................ (2,669)
-------
2,520
-------
-------
Construction in progress.................................... 70
-------
-------
Total property, plant and equipment......................... 3,113
-------
-------
</TABLE>
The directors' valuation of freehold land and buildings were based on the
assessment of the current market value of freehold land and buildings and was
carried out at 30 June 1988.
10. OTHER NON-CURRENT ASSETS
<TABLE>
<S> <C>
Future income tax benefit................................................... 182
---------
---------
</TABLE>
11. CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
A$'000
---------
<S> <C>
Bank overdraft................................................................................. 1,263
Trade creditors and accruals................................................................... 872
Loan from shareholders......................................................................... 2,109
---------
4,244
---------
---------
</TABLE>
12. PROVISIONS
<TABLE>
<S> <C>
Employee entitlements....................................................... 505
Income tax.................................................................. 758
---------
1,263
---------
---------
</TABLE>
63
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
13. SHARE CAPITAL
<TABLE>
<S> <C>
AUTHORISED CAPITAL
1,000,000 shares of $1 each................................................. 1,000
---------
---------
ISSUED CAPITAL
1,500 Ordinary shares of $1 each............................................ 2
1 'A' Class share of $1..................................................... --
1 'B' Class share of $1..................................................... --
---------
2
---------
---------
</TABLE>
14. RESERVES
<TABLE>
<S> <C>
Fixed asset revaluation..................................................... 337
Capital profits............................................................. 45
---------
382
---------
---------
</TABLE>
15. SEGMENT INFORMATION
Glindemann & Kitching Pty Ltd operates in the drilling industry in Western
Australia.
16. RELATED PARTIES
DIRECTORS
The names of each person holding the position of director of Glindemann &
Kitching Pty Ltd during the financial year are R. W. Aird and W. Unger.
Details of directors' remuneration, superannuation and retirement payments
are set out in Note 16.
DIRECTORS' INCOME
The number of directors of the Company whose income, from the Company or
related bodies Corporate falls within the following bands.
<TABLE>
<CAPTION>
1996
---------
<S> <C>
$130,000-$139,999 2
A $ '000
Total income received, or due and receivable by all directors of the Company from
the Company or related bodies corporate.......................................... 278
</TABLE>
DIRECTORS' HOLDINGS OF SHARES
The directors hold 100% of the issued capital of the Company as follows:
64
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
16. RELATED PARTIES (CONTINUED)
ZELMAN PTY LTD (a company associated with Mr. Unger)
750 Ordinary shares
1 'B' Class share
R.W. AIRD (AS TRUSTEE FOR THE AIRD TRUST)
750 Ordinary shares
1 'A' Class share
<TABLE>
<CAPTION>
A $'000
---------
<S> <C>
LOANS FROM DIRECTORS
Zelman Pty Ltd................................................................................. 1,054
(a company associated with Mr. Unger)
R. W. Aird..................................................................................... 1,055
(as trustee for the Aird Trust)
---------
2,109
---------
---------
</TABLE>
The Company recognised $157,748 of interest expense in the year ended 30
June 1996 on the above loans.
17. EVENTS SUBSEQUENT TO BALANCE DATE
On 17 December 1996, Stanley Mining Services Limited acquired 51% of the
Company with effect from 1 October 1996. The remaining 49% will be acquired on 1
July 1997. As a result of the acquisition, Stanley Mining Services Limited
appointed three directors to the Company.
18. NOTES TO THE STATEMENT OF CASH FLOWS
(i) RECONCILIATION OF CASH
For the purpose of the Statement of Cash Flows, cash includes cash on hand
and at bank net of all outstanding bank overdrafts. Cash as at the end of the
financial period as shown in the Statement of Cash Flows is reconciled to the
related items in the balance sheet as follows:
<TABLE>
<S> <C>
Cash........................................................................ 1,963
Bank overdraft.............................................................. (1,263)
---------
700
---------
---------
</TABLE>
65
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
18. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)
(ii) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
A $'000
---------
<S> <C>
Operating profit after income tax.................................................... 1,666
LESS ITEM CLASSIFIED AS INVESTING ACTIVITY:
Profit on sale of non-current assets................................................. (24)
ADD NON-CASH ITEMS
Depreciation......................................................................... 713
---------
Net cash provided by operating activities before changes in assets and liabilities... 2,355
Changes in assets and liabilities:
Increase in prepayments.............................................................. (118)
Increase in receivables.............................................................. (747)
Decrease in inventories.............................................................. 98
Increase in deferred tax benefit..................................................... (8)
Decrease in trade creditors and accruals............................................. (83)
Decrease in income tax payable....................................................... (936)
Increase in provisions for employee entitlements..................................... 25
---------
Net cash provided by operating activities............................................ 586
---------
---------
</TABLE>
19. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP
Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP"). In
Australia statutory financial statements are prepared in accordance with
applicable accounting standards issued by the Australian Accounting Standards
Board, the Australian Corporations Law, Schedule 5 to the Corporations
Regulations and other mandatory professional reporting requirements (Urgent
Issues Consensus Views) collectively referred to as "Australian GAAP". The
principle differences between Australian GAAP and US GAAP which are material to
the preparation of the financial statements of the Company are set out below in
this note.
(A) MARKETABLE INVESTMENT SECURITIES
Under Australian GAAP marketable equity securities available for sale are
stated at cost.
Under US GAAP Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"),
requires investments to be classified into three categories and accounted for as
follows: debt securities that the Company has the positive intent and ability to
hold to maturity are classified as "held-to-maturity securities" and reported at
amortised costs: debt and marketable equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
"trading securities" and reported at fair value, with unrealised gains and
losses included in earnings: and debt and marketable equity securities not
classified as either held-to-maturity securities or trading securities are
classified as "available-for-sale securities" and reported at fair value,
66
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
19. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
with unrealised gains and losses excluded from earnings and reported as a
separate component of shareholders' equity, net of tax.
(B) ASSET REVALUATIONS
Under Australian GAAP non-current assets may be revalued both upwards and
downwards based on directors' valuations. An upwards revaluation is recorded by
a credit to the asset revaluation reserve as a component of shareholders' equity
and is not taken through the profit and loss account except where a previous
revaluation decrement has been recorded for that class of assets through the
profit and loss account. An impairment or downwards revaluation is taken through
the profit and loss account except where there is a revaluation reserve for that
particular class of assets, in which case the decrement may be debited to that
asset revaluation reserve, to the extent a credit exists, rather than the profit
and loss account.
The Company assesses the recoverability of non-current assets by comparing
the carrying value to the asset's undiscounted cash flow. To the extent that the
asset carrying value exceeds its undiscounted cash flow the asset is written
down to that amount.
US GAAP does not permit the upward revaluation of such assets. US GAAP
requires that an impairment of long-lived assets be recognised through the
profit and loss account. Under US GAAP SFAS 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," entities,
when assessing an asset for impairment, compare the carrying value of the asset
or group of assets to the relevant expected cash flow, undiscounted and without
interest. If the sum of the undiscounted cash flow is less than the asset
carrying value the asset must be written down to "fair value." One method of
determining an asset's fair value, in the absence of an active market, is its
discounted cash flow. Once impairment is recorded, subsequent recoveries through
the profit and loss account are not allowed until the asset is sold.
(C) INCOME TAXES
Under Australian GAAP, income taxes are accounted for in accordance with the
liability method which is equivalent in many aspects to United States Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires deferred tax assets and liabilities to be recognised for
the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. A valuation allowance is provided on deferred tax assets
to the extent it is not "more likely than not" that such deferred tax assets
will be realised. Under SFAS 109, "more likely than not" is defined as a
likelihood of more than 50 percent.
Under Australian GAAP, deferred tax assets related to temporary differences
are brought to account when they are "assured beyond a reasonable doubt" and net
operating losses pass a "virtually certain" threshold. The effect of a change in
the tax rate is recorded in the period the government approves the budget which
in fiscal year 1995 preceded the enactment date under US GAAP. Accordingly, the
effect of
67
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1996 (CONTINUED)
19. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
the increase in the Australian tax rate from 33 percent to 36 percent is
recognised for US GAAP in the current year.
With respect to business combinations accounted for as purchases, under
Australian GAAP, differences in the bases of assets and liabilities as a result
of purchase price adjustments do not result in the creation of a deferred tax
asset or liability at the acquisition date. Under US GAAP, the differences
between the assigned values and tax bases of assets and liabilities acquired in
such business combinations require the recognition of deferred tax assets and
liabilities at the acquisition date.
(D) CAPITAL PROFITS RESERVE
Under Australian GAAP, the company transfers profits on sale of revalued
assets out of the asset revaluation reserve to the capital profits reserve.
Under US GAAP the amount shown in capital profits reserve would have been
reflected in the Statement of Profit in the year the fixed asset was sold and be
included in Retained Earnings. This adjustment has no net impact on
shareholders' equity.
(E) PROFIT AND LOSS ACCOUNT
Under Australian GAAP, the Company has disclosed certain items as "abnormal"
in the statement of profit in the June 1996 accounts, There is no "abnormal
item" category in a US GAAP statement of profit such that these items would be
included in operating income.
<TABLE>
<CAPTION>
A $'000
---------
<S> <C>
Operating profit after income tax in accordance with Australian GAAP.......................... 1,666
Adjustments:
Depreciation relating to revalued assets.................................................... 6
Change in tax rates......................................................................... (14)
---------
Net profit--US GAAP........................................................................... 1,658
---------
<CAPTION>
A $'000
---------
<S> <C>
Shareholders' equity in accordance with Australian GAAP....................................... 5,298
Adjustments:
Unrealised gains on available-for-sale securities........................................... 393
Accumulated depreciation of revalued assets................................................. 48
Asset revaluation reserve................................................................... (337)
---------
Shareholders' equity--US GAAP................................................................. 5,402
---------
</TABLE>
68
<PAGE>
GLINDEMANN & KITCHING PTY LTD
UNAUDITED STATEMENTS OF PROFIT
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE A$'000 A$'000
------ --------- ---------
<S> <C> <C> <C>
Sales revenue......................................................................... 19,555 16,436
Other revenue......................................................................... 1,531 262
--------- ---------
TOTAL OPERATING REVENUE............................................................... 21,086 16,698
--------- ---------
OPERATING PROFIT BEFORE INCOME TAX.................................................... 3 3,671 2,371
Income tax attributable to operating profit........................................... 1,459 873
--------- ---------
OPERATING PROFIT AFTER INCOME TAX..................................................... 2,212 1,498
Profit on abnormal items.............................................................. 4 943 --
Income tax attributable to profit on abnormal items................................... 337 --
--------- ---------
606 --
OPERATING PROFIT AND ABNORMAL ITEMS AFTER INCOME TAX.................................. 2,818 1,498
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited financial statements.
69
<PAGE>
GLINDEMANN & KITCHING PTY LTD
UNAUDITED BALANCE SHEETS
AS OF MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE A$'000 A$'000
------ --------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash.................................................................................. 1,957 2,764
Receivables........................................................................... 6,761 3,048
Inventories........................................................................... 1,605 732
--------- ---------
TOTAL CURRENT ASSETS.................................................................. 10,323 6,544
--------- ---------
NON-CURRENT ASSETS
Investments........................................................................... 224 917
Property, plant and equipment......................................................... 9,176 3,204
Other................................................................................. 287 165
--------- ---------
TOTAL NON-CURRENT ASSETS.............................................................. 9,687 4,286
--------- ---------
TOTAL ASSETS.......................................................................... 20,010 10,830
--------- ---------
CURRENT LIABILITIES
Accounts payable...................................................................... 2,310 4,341
Provisions............................................................................ 2,199 1,359
--------- ---------
TOTAL CURRENT LIABILITIES............................................................. 4,509 5,700
--------- ---------
NON-CURRENT LIABILITIES
Provisons............................................................................. 181 --
--------- ---------
TOTAL NON-CURRENT LIABILITIES......................................................... 181 --
--------- ---------
TOTAL LIABILITIES..................................................................... 4,690 5,700
--------- ---------
SHAREHOLDERS' EQUITY
Share capital......................................................................... 5 3 2
Reserves.............................................................................. 13,642 382
Retained profits...................................................................... 1,675 4,746
--------- ---------
TOTAL SHAREHOLDERS' EQUITY............................................................ 15,320 5,130
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................ 20,010 10,830
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited financial statements.
70
<PAGE>
GLINDEMANN & KITCHING PTY LTD
UNAUDITED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE A$'000 A$'000
------ --------- -----------
<S> <C> <C> <C>
AUTHORISED CAPITAL
Ordinary shares of $1 each............................................................. 1,000 1,000
--------- -----
Opening balance........................................................................ 2 2
Additional shares issued............................................................... 1 --
--------- -----
Total share capital.................................................................... 3 2
--------- -----
RETAINED PROFITS
Retained profits at the beginning of the period as stated.............................. 4,914 3,568
Dividend provided for or paid.......................................................... 6 (6,057) (320)
Operating profit and abnormal items after income tax................................... 2,818 1,498
--------- -----
Retained profits at the end of the period as stated.................................... 1,675 4,746
--------- -----
RESERVES
SHARE PREMIUM RESERVE
Opening balance........................................................................ -- --
Premium on additional shares issued.................................................... 6,600 --
--------- -----
Closing balance........................................................................ 6,600 --
--------- -----
ASSET REVALUATION RESERVE
Opening balance........................................................................ 337 337
Revaluation of property, plant and equipment........................................... 6,660 --
--------- -----
Closing balance........................................................................ 6,997 337
--------- -----
CAPITAL PROFITS RESERVE
Opening balance........................................................................ 45 45
--------- -----
Closing balance........................................................................ 45 45
--------- -----
TOTAL SHAREHOLDERS' EQUITY............................................................. 15,320 5,130
--------- -----
</TABLE>
See the accompanying notes to and forming part
of the unaudited financial statements.
71
<PAGE>
GLINDEMANN & KITCHING PTY LTD
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE A$'000 A$'000
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations........................................... 19,434 16,720
Cash payments in the course of operations........................................... (14,350) (13,738)
Income taxes paid................................................................... (1,001) (1,694)
Interest and other items of a similar nature received............................... 145 141
Interest and other finance costs paid............................................... (67) (122)
Dividends received.................................................................. 14 26
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................... 7(b) 4,175 1,333
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of plant and equipment............................................. -- 26
Payments for property, plant and equipment.......................................... (796) (730)
Payment for investments............................................................. (224) (280)
Proceeds from sale of investments................................................... 1,372 69
Loans to shareholders............................................................... (2,563) --
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES................................. (2,211) (915)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares....................................................... 6,601 --
Repayment of borrowing.............................................................. (2,109) --
Dividends paid...................................................................... (6,057) (320)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES............................................... (1,565) (320)
--------- ---------
NET INCREASE IN CASH HELD........................................................... 399 98
CASH AT THE BEGINNING OF THE FINANCIAL PERIOD....................................... 700 1,864
--------- ---------
CASH AT THE END OF THE FINANCIAL PERIOD............................................. 7(a) 1,099 1,962
--------- ---------
</TABLE>
See the accompanying notes to and forming part
of the unaudited financial statements.
72
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The general purpose nine months financial statements have been prepared in
accordance with the requirements of the Corporations Law on the basis of
Accounting Standard 1029 and other mandatory professional reporting requirements
(Urgent Issues Group Consensus Views) with the exception of disclosures of the
dividend franking account and earnings per share. It is recommended that the
nine months financial statements and report be read in conjunction with the 30
June 1996 Annual Financial Statements and Reports and any public announcements
by Glindemann & Kitching Pty Ltd during the nine months in accordance with
continuous disclosure obligations arising under the Corporations Law.
The accounting policies have been consistently applied by the Company and
are consistent with those of the previous financial statements except as
detailed in note 2.
The carrying amount of non-current assets are reviewed to determine whether
they are in excess of their recoverable amount at the end of the nine months. If
the carrying amount of a non-current asset exceeds the recoverable amount, the
asset is written down to the lower amount. In assessing recoverable amounts the
relevant cash flows have not been discounted to their present value.
For purpose of preparing the nine months financial statements, the nine
months has been treated as a discrete reporting period.
A reconciliation of the major differences between these accounts and those
applicable under generally accepted accounting principles in the United States
("US GAAP") is included in note 8.
2. CHANGE IN ACCOUNTING POLICY
(A) INVENTORIES
The Company adopted a policy from 1 January 1997, of valuing drilling
consumables at the lower of cost and net realisable value.
Previously the Company expensed consumables as incurred.
The Directors adopted the policy to ensure consumables were treated
consistently throughout the Stanley Mining Services Limited Economic Entity.
The financial effect of the change in policy is an increase in inventories
of $501,714 and an increase in profit after taxation of $322,097.
3. OPERATING PROFIT BEFORE INCOME TAX
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
----------- -----------
<S> <C> <C>
Operating profit before income tax has been arrived at after including:
Interest received or due and receivable...................................................... 145 141
Interest paid or due and payable (including lease finance charges)........................... 67 122
Depreciation including all forms of amortisation............................................. 1,001 521
Profit/Loss on sale of non-current assets.................................................... 13 (10)
</TABLE>
73
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
4. ABNORMAL ITEMS
Profit on sale of securities................................................................. 441 --
<S> <C> <C>
Applicable tax effect........................................................................ (156) --
Inventory brought to account................................................................. 502 --
Applicable tax effect........................................................................ (181) --
----- -----
606 --
----- -----
<CAPTION>
5. SHARE CAPITAL
<S> <C> <C>
Authorised capital 1,000,000 shares of $1 each............................................... 1,000 1,000
----- -----
Issued capital 3,065 (1996: 1,502) ordinary shares of $1 each................................ 3 2
----- -----
Total........................................................................................ 3 2
----- -----
<CAPTION>
6. DIVIDENDS
<S> <C> <C>
Glindemann & Kitching Pty Ltd paid a final ordinary
dividend of $4,032 per share, franked to 100%, with
Class C (36%) franking credits on 30 September
1996....................................................................................... 6,057 --
----- -----
----- -----
A final Class "A" dividend of $320,000 franked to 100% was declared on 21 February 1996...... -- 320
----- -----
----- -----
</TABLE>
7. NOTES TO THE STATEMENT OF CASH FLOWS
(A) RECONCILIATION OF CASH
For the purpose of the Statements of Cash Flows, cash includes cash on hand
and at bank, net of outstanding bank overdrafts. Cash as at the end of the
period as shown in the Statements of Cash Flows is reconciled to the related
items in the balance sheet as follows:
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
----------- -----------
<S> <C> <C>
Cash......................................................................... 1,957 2,764
Bank overdraft............................................................... (858) (802)
----- -----
Total........................................................................ 1,099 1,962
----- -----
</TABLE>
74
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996 (CONTINUED)
7. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)
(B) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
A$'000 A$'000
----------- -----------
<S> <C> <C>
Operating profit after income tax............................................ 2,818 1,498
Less item classified as investing activity:
Profit on sale of non-current assets......................................... (428) (23)
Add non-cash items:
Depreciation................................................................. 1,001 521
----- -----
Net cash provided by operating activities before changes in assets and
liabilities................................................................ 3,391 1,996
Changes in assets and liabilities
Decrease in prepayments...................................................... 118 --
Increase (decrease) in receivables........................................... (121) 284
Increase in inventories...................................................... (782) (214)
Decrease in deferred tax benefit............................................. 76 9
Increase in trade creditors and accruals..................................... 580 80
Increase (decrease) in income tax payable.................................... 539 (831)
Increase in provisions....................................................... 374 9
----- -----
Net cash provided by operating activities.................................... 4,175 1,333
----- -----
----- -----
</TABLE>
8. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP
Financial statements in the United States are prepared in accordance with US
GAAP. In Australia statutory financial statements are prepared in accordance
with applicable accounting standards issued by the Australian Accounting
Standards Board, the Australian Corporations Law, Schedule 5 to the Corporations
Regulations and other mandatory professional reporting requirements (Urgent
Issues Consensus Views) collectively referred to as "Australian GAAP." The
principal differences between Australian GAAP and US GAAP which are material to
the preparation of the financial statements of the Company are set out below in
this note.
(A) MARKETABLE INVESTMENT SECURITIES
Under Australian GAAP, marketable equity securities available for sale are
stated at cost.
Under US GAAP, Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115")
requires investments to be classified into three categories and accounted for as
follows: debt securities that the Company has the positive intent and ability to
hold to maturity are classified as "held-to-maturity securities" and reported at
amortized cost; debt and
75
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996 (CONTINUED)
8. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
marketable equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as "trading securities"
and reported at fair value, with unrealised gains and losses included in
earnings; and debt and marketable equity securities not classified as either
held-to-maturity securities or trading securities are classified as
"available-for-sale securities" and reported at fair value, with unrealised
gains and losses excluded from earnings and reported as a separate component of
shareholders' equity, net of tax.
(B) ASSET REVALUATIONS
Under Australian GAAP non-current assets may be revalued both upwards and
downwards based on directors' valuations. An upwards revaluation is recorded by
a credit to the asset revaluation reserve as a component of shareholders' equity
and is not taken through the profit and loss account except where a previous
revaluation decrement has been recorded for that class of assets through the
profit and loss account. An impairment or downwards revaluation is taken through
the profit and loss account except where there is a revaluation reserve for that
particular class of assets, in which case the decrement may be debited to that
asset revaluation reserve, to the extent a credit exists, rather than the profit
and loss account.
The Company assesses the recoverability of non-current assets by comparing
the carrying value to the asset's undiscounted cash flow. To the extent that the
asset carrying value exceeds its undiscounted cash flow the asset is written
down to that amount.
US GAAP does not permit the upward revaluation of such assets. US GAAP
requires that an impairment of long-lived assets be recognised through the
profit and loss account. Under US GAAP SFAS 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," entities,
when assessing an asset for impairment, compare the carrying value of the asset
or group of assets to the relevant expected cash flow, undiscounted and without
interest. If the sum of the undiscounted cash flow is less than the asset
carrying value the asset must be written down to "fair value." One method of
determining an asset's fair value, in the absence of an active market, is its
discounted cash flow. Once impairment is recorded, subsequent recoveries through
the profit and loss account are not allowed until the asset is sold.
(C) INCOME TAXES
Under Australian GAAP, income taxes are accounted for in accordance with the
liability method which is equivalent in many aspects to United States Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires deferred tax assets and liabilities to be recognised for
the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. A valuation allowance is provided on deferred tax assets
to the extent it is not "more likely than not" that such deferred tax assets
will be realised. Under SFAS 109, "more likely than not" is defined as a
likelihood of more than 50 percent.
76
<PAGE>
GLINDEMANN & KITCHING PTY LTD
NOTES TO AND FORMING PART OF THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
MARCH 31, 1997 AND 1996 (CONTINUED)
8. RECONCILIATION FROM AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Under Australian GAAP, deferred tax assets related to temporary differences
are brought to account when they are "assured beyond a reasonable doubt" and net
operating losses pass a "virtually certain" threshold.
With respect to business combinations accounted for as purchases, under
Australian GAAP, differences in the bases of assets and liabilities as a result
of purchase price adjustments do not result in the creation of a deferred tax
asset or liability at the acquisition date. Under US GAAP, the differences
between the assigned values and tax bases of assets and liabilities acquired in
such business combinations require the recognition of deferred tax assets and
liabilities at the acquisition date.
(D) CAPITAL PROFITS RESERVE
Under Australian GAAP, the Company transfers profits on sale of revalued
assets out of the asset revaluation reserve to the capital profits reserve.
Under US GAAP the amount shown in capital profits reserve would have been
reflected in the Statement of Profit in the half-year the fixed asset was sold
and be included in Retained Earnings. This adjustment has no net impact on
shareholders' equity.
(E) PROFIT AND LOSS ACCOUNT
Under Australian GAAP the Company has disclosed certain items as "abnormal"
in the Statement of Profit in the March 1997 Accounts. There is no "abnormal
item" category in a US GAAP Statement of Profit such that these items would be
included in operating income.
<TABLE>
<CAPTION>
1997 1996
A $'000 A $'000
--------- ---------
<S> <C> <C>
Operating profit after income tax in accordance with Australian GAAP....... 2,818 1,498
Adjustments:
Depreciation relating to revalued assets................................... 340 4
Change in tax rates........................................................ -- (14)
--------- ---------
Net profit--US GAAP........................................................ 3,158 1,488
--------- ---------
Shareholders' equity in accordance with Australian GAAP.................... 15,320 5,130
Adjustments:
Unrealised profit on available-for-sale securities......................... 1 157
Accumulated depreciation of revalued assets................................ 403 47
Asset revaluation reserve.................................................. (6,997) (337)
--------- ---------
Shareholders' equity--US GAAP.............................................. 8,727 4,997
--------- ---------
</TABLE>
77
<PAGE>
(b) Proforma financial and other information.
Unaudited Pro Forma Consolidated Statements of Income for the Three
Months Ended April 30, 1997 and the Year Ended January 31, 1997, and
Uaudited Pro Forma Consolidated Balance Sheet as of April 30, 1997.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following sets forth the Unaudited Pro Forma Consolidated Statements
of Income for the three months ended April 30, 1997 and the fiscal year ended
January 31, 1997 and the Unaudited Pro Forma Consolidated Balance Sheet as of
April 30, 1997 which were prepared to reflect the acquisition of Stanley
(including 100% of G&K) under the purchase method of accounting. The fiscal
year end of both Stanley and G&K is June 30. The columns designated "Pro
Forma for G&K Acquisition" adjust the historical consolidated financial
statements of Stanley to reflect the acquisition of 100% of G&K as if it had
occurred on February 1, 1996 (in the case of the Unaudited Pro Forma
Consolidated Statements of Income) and on April 30, 1997 (in the case of the
Unaudited Pro Forma Consolidated Balance Sheet). The columns designated "Pro
Forma for Stanley Acquisition" adjust the historical consolidated financial
statements of the Company to reflect the acquisition of Stanley as if it had
occurred on February 1, 1996 (in the case of the Unaudited Pro Forma
Consolidated Statements of Income) and on April 30, 1997 (in the case of the
Unaudited Pro Forma Consolidated Balance Sheet). The tender offer was
consummated on July 25, 1997. G&K's repurchase of the remaining 49% of its
common stock is expected to be completed by September 30, 1997.
The Unaudited Pro Forma Consolidated Financial Statements of the Company do
not purport to present the financial position or results of operations of the
Company had the transactions assumed herein occurred on the dates indicated, nor
are they necessarily indicative of the results of operations which may be
expected to occur in the future.
The Unaudited Pro Forma Consolidated Financial Statements are based upon,
and should be read in conjunction with, the Consolidated Financial Statements
of Stanley and Notes thereto, as well as the Financial Statements and Notes
thereto of G&K, included elsewhere herein. The Stanley and G&K financial
information is derived from unaudited financial statements and notes thereto
(including US GAAP reconciliation adjustments) provided to the Company. The
Company cannot predict whether the consummation of the acquisition of Stanley
and G&K will conform to the assumptions used in the preparation of the
Unaudited Pro Forma Consolidated Financial Statements. In addition,
management has made a preliminary allocation of purchase price to the assets
and liabilities of Stanley and G&K, based on information currently available.
Management intends to obtain appraisals and other information which will be
used to complete the ultimate allocation of the purchase price. The final
allocation of the purchase price may be substantially different than the
preliminary allocation.
78
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED APRIL 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA FOR STANLEY ACQUISITION
-------------------------------------------------
PRO FORMA FOR G&K
LAYNE ACQUISITION
CHRISTENSEN STANLEY G&K -----------------------
HISTORICAL(1) HISTORICAL(2) HISTORICAL(2) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Service and product
revenues............... $ 57,750 $13,618 $ 5,137 $ (5,137)(3) $13,618 $ 71,368
Other revenues........... 1,673 (16) 16(3) 1,673 $ (1,673)(7)
------------- ------------- ------------- ----------- --------- ----------- ---------
Total revenues........... 57,750 15,291 5,121 (5,121) 15,291 (1,673) 71,368
Cost of revenues......... 42,145 9,780(7) 51,925
Operating costs.......... 12,665 4,083 (4,083)(3) 12,665 (12,665)(7)
------------- ------------- ------------- ----------- --------- ----------- ---------
Gross profit............. 15,605 2,626 1,038 (1,038) 2,626 1,212 19,443
Selling, general and
administrative
expenses............... 10,327 (100)(8) 11,513
91(9)
1,195(7)
Amortization expense..... 3(4) 3 249(4) 282
30(10)
Depreciation............. 2,832 1,123 195 (195)(3) 1,123 3,955
------------- ------------- ------------- ----------- --------- ----------- ---------
Operating income......... 2,446 1,503 843 (846) 1,500 (253) 3,693
Other income(expense):
Equity in earnings of
foreign affiliates... 820 820
Interest............... (614) (89) (4) 4(3) (208) (957)(11) (1,779 )
(119)(5)
Other income, net...... 62 (3) 392 (392)(3) (3) (17)(7) 42
------------- ------------- ------------- ----------- --------- ----------- ---------
Income before income
taxes.................. 2,714 1,411 1,231 (1,353) 1,289 (1,227) 2,776
Income tax expense....... 1,031 662 448 (448)(3) 616 (466)(6) 1,181
(46)(6)
Minority interest........ 595 (595)(3)
------------- ------------- ------------- ----------- --------- ----------- ---------
Net income............... $ 1,683 $ 154 $ 783 $ (264) $ 673 $ (761) $ 1,595
------------- ------------- ------------- ----------- --------- ----------- ---------
------------- ------------- ------------- ----------- --------- ----------- ---------
Net income per common
and dilutive equivalent
share.................. $ 0.18 $ 0.17
------------- ---------
------------- ---------
Weighted average number
of common and dilutive
equivalent shares
outstanding............ 9,234,000 118,907(12) 9,352,907
------------- ---------
------------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income
79
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED APRIL 30, 1997
(1) The column designated "Layne Christensen Historical" reflects the
consolidated results of operations of the Company for the three months ended
April 30, 1997.
(2) The column designated "Stanley Historical" reflects the results of
operations of Stanley for the three months ended March 31, 1997 (in US GAAP)
including the results of operations of G&K for the three months ended March
31, 1997. The column designated "G&K Historical" reflects the results of
operations of G&K for the three months ended March 31, 1997 (in US GAAP).
The Unaudited Pro Forma Consolidated Statement of Income assumes a
conversion rate of $.7802 representing the average monthly conversion rate
for the three months ended March 31, 1997.
(3) Represents the elimination of the operating results of G&K for the three
months ended March 31, 1997 (already included in Stanley's historical
results of operations), and related minority interest.
(4) Represents three months of amortization of goodwill based on a period of 25
years. See Notes 3 and 4 to the Unaudited Pro Forma Consolidated Balance
Sheet.
(5) Represents three months of interest expense at an assumed rate of 7.5%
(which represents an estimate of the variable rate under the New Credit
Agreement) on net borrowings of $6,324,000 undertaken for G&K's obligation
to repurchase the remaining 49% of the outstanding capital stock of G&K.
(6) Tax effect at an assumed statutory rate of 38% on income before income
taxes.
(7) Represents a reclassification of Stanley and G&K revenues and expenses to
conform with the Company's classifications for financial reporting purposes.
Gross profit in the Stanley Historical and G&K Historical columns would not
be reflective of gross profit determined under US GAAP as neither Stanley
nor G&K classifies cost of revenues separately from operating costs.
Management has used an Australian GAAP to US GAAP reconciliation as provided
in unaudited historical financial statements of Stanley and G&K and other
information to determine reclassifications and assumed selling, general and
administrative expenses for Stanley and G&K to be approximately 10% of
service revenues prior to Australian GAAP to US GAAP adjustments.
(8) Represents cost reductions identified as a result of the acquisition of
Stanley, including the elimination of directors' fees, Australian public
filing fees and expenses and printing costs resulting from Stanley no
longer being publicly traded in Australia.
(9) Represents compensation expense associated with options granted to Mr.
Stanley under his employment agreement. The expense is based upon (i) an
exercise price of $16.50 per share, (ii) the closing price of $21.75 for the
Common Stock on June 25, 1997 (the effective date of the option grant) and
(iii) the issuance of options (with a three year vesting period) to purchase
206,897 shares of Common Stock.
(10) Represents three months of amortization of deferred financing costs related
to the New Credit Agreement based on a period of five years.
(11) Represents three months of interest expense at an assumed interest rate of
7.5% (which represents an estimate of the variable rate on the New Credit
Agreement) on net borrowings undertaken for the Stanley tender offer and the
repayment of borrowings from the proceeds of the issuance of Common Stock to
Mr. Stanley as follows:
<TABLE>
<S> <C>
Interest expense on borrowings of $52,516,000 for the tender offer...................................... ($ 985,000)
Reduction in interest expense attributed to receipt of proceeds from purchase of Common Stock
($1,500,000) by Mr. Stanley........................................................................... 28,000
----------
Pro forma adjustment to interest expense................................................................ ($ 957,000)
----------
----------
</TABLE>
(12) Reflects the number of shares of Common Stock purchased by Mr. Stanley
(68,966) in connection with the acquisition of Stanley as if such shares
were outstanding for the entire period and options to purchase 206,897
shares of Common Stock granted to Mr. Stanley, as calculated under the
treasury stock method.
80
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JANUARY 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA FOR STANLEY ACQUISITION
-------------------------------------------------
PRO FORMA FOR G&K
LAYNE ACQUISITION
CHRISTENSEN STANLEY G&K -----------------------
HISTORICAL(1) HISTORICAL(2) HISTORICAL(2) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Service and product
revenues................ $ 222,853 $41,013 $19,494 $ (5,290)(3) $55,217 $278,070
Other revenues........... 1,977 1,348 3,325 $ (3,325)(7)
------------- ------------- ------------- ----------- --------- ----------- ---------
Total revenues........... 222,853 42,990 20,842 (5,290) 58,542 (3,325) 278,070
Cost of revenues......... 161,602 39,329(7) 200,931
Operating costs.......... 35,528 16,333 (3,779)(3) 48,082 (48,082)(7)
------------- ------------- ------------- ----------- --------- ----------- ---------
Gross profit............. 61,251 7,462 4,509 (1,511) 10,460 5,428 77,139
Selling, general and
administrative
expenses................ 38,956 (400)(8) 44,708
362(9)
5,790(7)
Amortization expense..... 94(4) 94 997(10) 1,211
120(11)
Depreciation............. 10,974 3,130 609 (353)(3) 3,386 14,360
------------- ------------- ------------- ----------- --------- ----------- ---------
Operating income......... 11,321 4,332 3,900 (1,252) 6,980 (1,441) 16,860
Other income(expense):
Equity in earnings of
foreign affiliates... 3,895 3,895
Interest............... (2,447) (304) (140) 22(3) (1,102) (3,826)(12) (7,375 )
(680)(5)
Other income, net...... 161 (446) (446) 362(7) 77
------------- ------------- ------------- ----------- --------- ----------- ---------
Income before income
taxes................... 12,930 4,028 3,314 (1,910) 5,432 (4,905) 13,457
Income tax expense....... 4,913 1,499 1,158 (413)(3) 1,950 (1,864)(6) 4,999
(294)(6)
Minority interest........ 356 (356)(3)
------------- ------------- ------------- ----------- --------- ----------- ---------
Net income............... $ 8,017 $ 2,173 $ 2,156 $ (847) $ 3,482 $ (3,041) $ 8,458
------------- ------------- ------------- ----------- --------- ----------- ---------
------------- ------------- ------------- ----------- --------- ----------- ---------
Net income per common
and dilutive equivalent
share................... $ 0.88 $ 0.91
------------- ---------
------------- ---------
Weighted average number
of common and dilutive
equivalent shares
outstanding............. 9,146,000 118,907(13) 9,264,907
------------- ---------
------------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income
81
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JANUARY 31, 1997
(1) The column designated "Layne Christensen Historical" reflects the
consolidated results of operations of the Company for the fiscal year ended
January 31, 1997.
(2) The column designated "Stanley Historical" reflects the results of
operations of Stanley for the twelve months ended December 31, 1996 (in US
GAAP) including the results of operations of G&K for the three months ended
December 31, 1996. The column designated "G&K Historical" reflects the
results of operations of G&K for the twelve months ended December 31, 1996
(in US GAAP). The Unaudited Pro Forma Consolidated Statement of Income
assumes a conversion rate of $.7806 representing the average monthly
conversion rate for the year ended December 31, 1996.
(3) Represents the elimination of the operating results of G&K for the three
months ended December 31, 1996 (already included in Stanley's historical
results of operations), and related minority interest.
(4) Represents amortization of goodwill associated with the acquisition of G&K
by Stanley based on a period of 25 years. The goodwill consists of:
<TABLE>
<S> <C>
Initial 51% purchase of G&K by Stanley............................................. $ 5,245,000
51% of the cost basis of net assets of G&K at October 1, 1996...................... (2,540,000)
-------------
Excess purchase price allocated to goodwill........................................ 2,705,000
-------------
Estimated purchase price of the 49% minority interest of G&K....................... 6,324,000
Minority interest in G&K recorded by Stanley as of March 31, 1997.................. (5,999,000)
-------------
Excess purchase price allocated to goodwill........................................ 325,000
-------------
Total excess purchase price allocated to goodwill.................................. $ 3,030,000
-------------
-------------
</TABLE>
The adjustment to amortization expense represents the amortization of
the $2,705,000 of goodwill related to the initial purchase of 51% of
G&K for the period from January 1, 1996 through September 30, 1996
(the period prior to the effective date of the purchase) and the
amortization of $325,000 of goodwill related to the purchase of the
remaining 49% of G&K for the entire year.
(5) Represents interest expense at an assumed rate of 7.5% (which represents an
estimate of the variable rate under the New Credit Agreement) on net
borrowings undertaken for G&K's obligation to repurchase the remaining 49%
of the outstanding capital stock of G&K and interest for the period from
January 1, 1996 through September 30, 1996 related to Stanley's initial
acquisition of 51% of G&K:
<TABLE>
<S> <C>
Interest expense on borrowings of $6,324,000 for the 49% minority interest in G&K..... $ (474,000)
Interest expense on borrowings of $3,656,000 relating to Stanley's initial acquisition
of 51% of G&K....................................................................... (206,000)
----------
Adjustment to interest expense........................................................ $ (680,000)
----------
----------
</TABLE>
(6) Tax effect at an assumed statutory rate of 38% on income before taxes.
(7) Represents a reclassification of Stanley and G&K revenues and expenses to
conform with the Company's classifications for financial reporting purposes.
Gross profit in the Stanley Historical and G&K Historical columns would not
be reflective of gross profit determined under US GAAP as neither Stanley
nor G&K classifies cost of revenues separately from operating costs.
Management has used an Australian GAAP to US GAAP reconciliation as provided
in unaudited historical financial statements of Stanley and G&K and other
information to determine reclassifications and assumed selling, general and
administrative expenses for Stanley and G&K to be approximately 10% of
service revenues prior to Australian GAAP to US GAAP adjustments.
(8) Represents cost reductions identified as a result of the acquisition of
Stanley, including the elimination of directors' fees, Australian public
filing fees and expenses and printing costs resulting from Stanley no
longer being publicly traded in Australia.
(9) Represents compensation expense associated with options granted to Mr.
Stanley under his employment agreement. The expense is based upon (i) an
exercise price of $16.50 per share, (ii) the closing price of $21.75 for the
Common Stock on June 25, 1997 (the effective date of the option grant) and
(iii) the issuance of options (with a three year vesting period) to purchase
206,897 shares of Common Stock.
82
<PAGE>
(10) Represents amortization of goodwill based on a period of 25 years. See Note
4 to the Unaudited Pro Forma Consolidated Balance Sheet.
(11) Represents amortization of deferred financing costs related to the New
Credit Agreement based on a period of five years.
(12) Represents interest expense on net borrowings at an assumed interest rate
of 7.5% (which represents an estimate of the variable rate under the New
Credit Agreement) undertaken for the Stanley tender offer and the repayment
of borrowings from the proceeds of the issuance of Common Stock to Mr.
Stanley as follows:
<TABLE>
<S> <C>
Interest expense on borrowings of $52,516,000 for the tender offer................. $ (3,939,000)
Reduction in interest expense attributed to receipt of proceeds from purchase of
Common Stock ($1,500,000) by Mr. Stanley.......................................... 113,000
-------------
Pro forma adjustment to interest expense........................................... $ (3,826,000)
-------------
-------------
</TABLE>
(13) Reflects the number of shares of Common Stock purchased by Mr. Stanley
(68,966) in connection with the acquisition of Stanley as if such shares
were outstanding for the entire year and options to purchase 206,897 shares
of Common Stock granted to Mr. Stanley, as calculated under the treasury
stock method.
83
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR STANLEY
ACQUISITION
--------------------------------------------------
LAYNE PRO FORMA FOR G&K
CHRISTENSEN STANLEY ACQUISITION
HISTORICAL HISTORICAL ------------------------
(1) (2) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents............. $ 1,218 $ 3,594 $ 3,594 $ 4,812
Customer receivables, net............. 50,734 11,167 11,167 61,901
Inventories........................... 19,024 6,354 6,354 25,378
Other current assets.................. 7,698 657 657 8,355
------------- ------------- ----------- ----------- ----------- -----------
Total current assets................ 78,674 21,772 21,772 100,446
------------- ------------- ----------- ----------- ----------- -----------
Property and equipment, net........... 54,398 21,962 21,962 76,360
Intangible assets..................... 553 $ 325(3) 325 24,924(4) 25,802
Investments in foreign affiliates..... 17,660 428 428 18,088
Other assets.......................... 1,556 1,162 1,162 600(5) 3,318
------------- ------------- ----------- ----------- ----------- -----------
$ 152,841 $ 45,324 $ 325 $ 45,649 $ 25,524 $ 224,014
------------- ------------- ----------- ----------- ----------- -----------
------------- ------------- ----------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable...................... $ 12,614 $ 4,401 $ 4,401 $ 17,015
Accrued liabilities................... 28,371 1,996 1,996 30,367
Current maturities of long-term
debt................................ 117 1,273 1,273 1,390
------------- ------------- ----------- ----------- ----------- -----------
Total current liabilities........... 41,102 7,670 7,670 48,772
------------- ------------- ----------- ----------- ----------- -----------
Long-term debt........................ 35,783 998 $ 6,324(3) 7,322 $ 52,516(6) 94,121
(1,500)(7)
Other noncurrent liabilities.......... 11,456 3,665 3,665 15,121
Minority interests.................... 5,999 (5,999)(3)
------------- ------------- ----------- ----------- ----------- -----------
Total liabilities................... 88,341 18,332 325 18,657 51,016 158,014
------------- ------------- ----------- ----------- ----------- -----------
Common stock.......................... 89 11,039 11,039 (11,039)(4) 90
1(7)
Capital in excess of par value........ 39,407 10,798 10,798 (10,798)(4) 40,906
1,499(7)
Retained earnings..................... 25,870 5,155 5,155 (5,155)(4) 25,870
Other................................. (866) (866)
------------- ------------- ----------- ----------- ----------- -----------
Total stockholders' equity.......... 64,500 26,992 26,992 (25,492) 66,000
------------- ------------- ----------- ----------- ----------- -----------
$ 152,841 $ 45,324 $ 325 $ 45,649 $ 25,524 $ 224,014
------------- ------------- ----------- ----------- ----------- -----------
------------- ------------- ----------- ----------- ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
84
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) The column designated "Layne Christensen Historical" reflects the
consolidated balance sheet of the Company as of April 30, 1997.
(2) The "Stanley Historical" column reflects the consolidated balance sheet of
Stanley as of March 31, 1997. The Unaudited Pro Forma Consolidated Balance
Sheet assumes a conversion rate of $.7860 representing the conversion rate
at March 31, 1997.
(3) Represents the recording of goodwill resulting from G&K's obligation to
repurchase the remaining 49% of the outstanding capital stock of G&K.
Management currently estimates that the excess purchase price over
historical cost of the acquisition of 49% G&K will be allocated to goodwill
based on a preliminary review of the G&K financial statements.
<TABLE>
<S> <C>
Estimated purchase price of remaining 49% minority interest in G&K (borrowings)............... $6,324,000
Minority interest in G&K recorded by Stanley as of March 31, 1997............................. (5,999,000)
---------
Excess purchase price......................................................................... $ 325,000
---------
---------
</TABLE>
(4) Represents the recording of goodwill resulting from the tender offer to
purchase Stanley. Management currently estimates that the excess purchase
price over historical cost of the net assets acquired will be allocated to
goodwill based on a preliminary review of the Stanley financial statements.
<TABLE>
<S> <C>
Estimated purchase price..................................................................... $51,666,000
Acquisition costs............................................................................ 250,000
Historical cost basis of net assets of Stanley as of March 31, 1997.......................... (26,992,000)
----------
Excess purchase price........................................................................ $24,924,000
----------
----------
</TABLE>
(5) Represents estimated deferred financing costs incurred in connection with
the New Credit Agreement.
(6) Represents borrowings of $52,516,000 under the New Credit Agreement to
finance the $51,666,000 Stanley purchase price and $850,000 of estimated
fees and expenses related to the acquisition of Stanley and the New Credit
Agreement. The Company has entered into a foreign currency collar pursuant
to which the Company has fixed the exchange rate for the purchase of
Australian dollars to finance the purchase of Stanley within a range of
$.7515 to $.7615. For purposes of the pro forma purchase price calculation,
the Company has assumed a conversion rate of $.7615.
(7) Represents the purchase of $1,500,000 of Common Stock (68,966 shares) by Mr.
Stanley and the application of the proceeds from such purchase to repay
borrowings under the New Credit Agreement.
85
<PAGE>
(c) Exhibits. The following exhibits are filed with this report:
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1 Offer by Layne Christensen Australia Pty Limited to Acquire All of Your
Fully Paid Ordinary Shares in Stanley Mining Services Limited.
2.2 Part A Statement Relating to Proposed Offers by Layne Christensen Australia
Pty Limited for All Fully Paid Shares in Stanley Mining Services Limited. **
2.3 Stanley Mining Services Limited Part B Statement in Relation to the
Takeover Offers by Layne Christensen Australia Pty Ltd. **
23.1 Consent of KPMG.
99 Press Release of the Registrant, issued July 29, 1997.
</TABLE>
-------------
** Omits certain attachments. The Company will furnish supplementally a
copy of any omitted attachments to the Commission upon request.
86
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAYNE CHRISTENSEN COMPANY
By: /s/ Kent B. Magill
--------------------------------
Kent B. Magill
Vice President, General Counsel
and Secretary
Dated: August 6, 1997
87
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1 Offer by Layne Christensen Australia Pty Limited to Acquire All of Your
Fully Paid Ordinary Shares in Stanley Mining Services Limited.
2.2 Part A Statement Relating to Proposed Offers by Layne Christensen Australia
Pty Limited for All Fully Paid Shares in Stanley Mining Services Limited. **
2.3 Stanley Mining Services Limited Part B Statement in Relation to the
Takeover Offers by Layne Christensen Australia Pty Ltd. **
23.1 Consent of KPMG.
99 Press Release of the Registrant, issued July 29, 1997.
</TABLE>
-------------
** Omits certain attachments. The Company will furnish supplementally a
copy of any omitted attachments to the Commission upon request.
<PAGE>
THIS IS AN IMPORTANT DOCUMENT
IF YOU ARE IN ANY DOUBT ABOUT THE ACTION
TO BE TAKEN, YOU SHOULD CONSULT YOUR
STOCKBROKER, BANK MANAGER, SOLICITOR,
ACCOUNTANT OR OTHER PROFESSIONAL
ADVISER IMMEDIATELY.
OFFER
BY
LAYNE CHRISTENSEN AUSTRALIA
PTY LIMITED
(ACN 078 167 610)
to acquire all of your fully paid ordinary shares in
STANLEY MINING SERVICES LIMITED
(ACN 009 117 533)
for 90 cents per share
<PAGE>
OFFER
BY
LAYNE CHRISTENSEN AUSTRALIA PTY LIMITED
TO ACQUIRE ALL OF YOUR FULLY PAID ORDINARY SHARES
IN
STANLEY MINING SERVICES LIMITED
1. LAYNE AUSTRIALIA'S OFFER
1.1 Layne Australia offers to acquire all of Your Shares on the terms and
conditions of this Offer.
1.2 If you accept this Offer, Layne Australia will be entitled to receive
all Rights attaching to Your Shares other than the right to receive
the Special Dividend, the rights to which you will retain.
2. CONSIDERATION
The consideration Layne Australia offers you is 90 cents cash for each of Your
Shares.
3. OFFER PERIOD
Unless withdrawn in accordance with the Law, it is intended that this
Offer will remain open for acceptance for a period commencing on the date of
this Offer and ending at 5 pm on 23 June 1997 subject to Layne Australia's
right to extend such period in accordance with section 656 of the law.
4. WHO MAY ACCEPT
4.1 This Offer is made to you as the holder of Stanley Shares which are
registered or entitled to be registered in your name in the register
of members of Stanley on the date this Offer is sent or at any time
prior to the end of the Offer Period. If at any time during the Offer
Period, another person is, or is entitled to be, registered as a
holder of some or all of Your Shares ("the Transferred Shares"), then
in accordance with section 649 of the Law:
(a) an offer corresponding to this Offer is deemed to have been made
to that person in respect of the Transferred Shares of which that
person is, or is entitled to be, so registered as a holder;
2
<PAGE>
(b) an offer corresponding to this Offer is deemed to have been made
to you in respect of the remainder (if any) of the Stanley Shares
other than the Transferred Shares registered in your name on the
date this Offer is sent, or at any time prior to the end of the
Offer Period; and
(c) this original Offer is deemed to have been withdrawn.
4.2 If:
(a) at any time during the Offer Period and prior to acceptance of
this Offer, Your Shares consist of two or more Distinct Portions
(for example, if you hold Your Shares as trustee for 2 or more
persons); and
(b) you give to Layne Australia a notice which:
(i) if it relates to Your Shares in a CHESS Holding, is in an
electronic form approved by the SCH Business Rules; or
(ii) if it relates to Your Shares which are certificated or
uncertificated but not in a CHESS Holding, is in writing,
stating that Your Shares consist of Distinct Portions and
specifying the number of Your Shares in each Distinct Portion for
which you wish to accept this Offer;
this Offer will be deemed to consist of separate Offers made to you in
relation to the respective Distinct Portions of Your Shares.
5. HOW TO ACCEPT
5.1 This Offer may only be accepted in respect of all of Your Shares.
Subject to clause 4, it may not be accepted in relation to only some
of Your Shares.
5.2 You may accept this Offer in respect of all of Your Shares at any time
during the Offer Period.
5.3 To accept this Offer in respect of Your Shares which are certificated
or are uncertificated but not in a CHESS Holding, you should complete
and sign the Acceptance Form in accordance with the instructions on it
and then post the Acceptance Form to:
National Registry Services (WA) Pty Ltd
GPO Box U1936
Perth, Western Australia, 6845
or hand deliver the Acceptance Form to:
3
<PAGE>
National Registry Services (WA) Pty Ltd.
Level 17, Central Park
152-158 St. George's Terrace
Perth, Western Australia, 6000
so that it is received before the expiry of the Offer Period.
5.4 To accept this Offer in respect of Your Shares which are
uncertificated and which are in a CHESS Holding, you must do so in
accordance with the SCH Business Rules and, specifically:
(a) if you are a Broker or Non-Broker Participant (as defined in the
SCH Business Rules), you should initiate acceptance of this Offer
in accordance with the SCH Business Rules before the expiry of
the Offer Period; or
(b) otherwise, you should instruct your Controlling Participant (this
will normally be the stockbroker who purchased your Stanley
Shares for you) to initiate acceptance of this Offer in
accordance with the SCH Business Rules before the expiry of the
Offer Period.
5.5 When accepting this Offer for Your Shares which are certificated, you
must also provide all certificates relating to Your Shares, or fulfill
all the requirements of Layne Australia and Stanley if you are unable
to provide the certificates, to enable the registration of Layne
Australia as a bona fide purchaser of Your Shares for value and
without notice of any defect in your title to Your Shares.
5.6 Subject to clause 5.4, acceptance of the Offer will not be complete
until the completed Acceptance Form has been received at the address
set out in clause 5.3 and the requirements of clauses 5.3 and 5.5 have
been complied with. However:
(a) Layne Australia may in its sole discretion treat the receipt by
it of the Acceptance Form without some or all of the relevant
certificate(s) for Your Shares which are certificated or other
documents as a valid acceptance; and
(b) where the requirements of clauses 5.3 and 5.5 have been complied
with in respect of some but not all of Your Shares, Layne
Australia may in its sole discretion deem your acceptance of this
Offer complete in respect of those Stanley Shares for which the
requirements have been complied with but not in respect of the
remainder.
6. EFFECT OF ACCEPTANCE
6.1 By initiating acceptance of this Offer in respect of Your Shares
through CHESS or signing and returning an Acceptance Form to Layne
Australia in accordance with clause 5 above, you will be deemed to
have:
4
<PAGE>
(a) irrevocably accepted this Offer in accordance with its terms in
respect of all Your Shares;
(b) subject to this Offer being declared free of the conditions set
out in clause 7 below or such conditions being fulfilled,
transferred Your Shares to Layne Australia for the consideration
in this Offer;
(c) represented and warranted to and agreed with Layne Australia
that:
(i) on the date of registration of the transfer of Your
Shares to Layne Australia, Your Shares will be fully paid
up and free from all mortgages, charges, liens and other
encumbrances (whether legal or equitable) of any kind;
(ii) you have full right, power and authority to sell and
transfer all of Your Shares to Layne Australia in
accordance with the terms and conditions of this Offer;
(iii) Layne Australia ill be entitled to receive all
dividends, distributions and other Rights (except the
Special Dividend) accruing to Your Shares at the time of
and following the Statement Lodgment Date;
(iv) if for any reason Layne Australia does not receive any
dividends, distributions of other Rights to which it is
entitled under paragraph (iii) above, Layne Australia
will be entitled to reduce the amount of cash
consideration to which you would otherwise be entitled in
accordance with this Offer by the amount or value of such
dividends, distributions or other Rights; and
(v) if for any reason, Layne Australia does not receive any
certificate(s) for Your Shares (except for any of Your
Shares which are held in uncertificated form) then you
must promptly deliver to Layne Australia the relevant
certificate(s) and/or other documents, or acceptable
evidence of loss or destruction and an acceptable
indemnity in relation to those certificates and/or other
documents;
(d) authorized Layne Australia (by its officers, servants or
agents) to complete on the Acceptance Form correct details of
Your Shares, fill in any blanks remaining on the Acceptance
Form and rectify any error in or omission from the Acceptance
Form;
(e) if you signed the Acceptance Form in respect of Your Shares
which are uncertificated and which are in a CHESS Holding,
authorized Layne Australia (or any of its officers, servants or
agents) to instruct your Controlling Participant to initiate
acceptance of the Offer in respect of
5
<PAGE>
those Stanley Shares in accordance with the SCH Business Rules
and take all other steps necessary under the SCH Business Rules
to accept the Offer in respect of Your Shares;
(f) irrevocably appointed each director of Layne Australia from
time to time, as your attorney for you and on your behalf to:
(i) requisition and/or convene (or join in requisitioning and/or
convening) general meetings of Stanley in accordance with
the Articles of Association of Stanley or sections 246 or
247 of the Law;
(ii) consent to any such meetings being held on short notice;
(iii) attend and vote in respect of Your Shares at any and all
general meetings of Stanley;
(iv) request Stanley, prior to registering the transfer of Your
Shares, to transmit Your Shares to such registers maintained
by or on behalf of Stanley as Layne Australia may specify;
and
(v) execute all forms, notices, instruments (including an
instrument appointing a director of Layne Australia as a
proxy in respect of any or all of Your Shares and any
application to Stanley for a replacement certificate in
respect of any certificate which has been lost or destroyed)
and resolutions relating to Your Shares and generally to
exercise all powers and rights which you may have as the
holder of those shares,
and to have agreed that in exercising the powers conferred by
that power of attorney any such director will be entitled to act
in the interests of Layne Australia as the beneficial owner and
intended registered holder of Your Shares, provided that the
appointment will operate only if the contract resulting from the
acceptance of this Offer is or becomes unconditional; and
(g) irrevocably authorized and directed Stanley to pay to Layne
Australia or to account to Layne Australia for all dividends,
distributions and other Rights (except the Special Dividend) in
respect of Your Shares, subject however to any such dividends,
distributions or other Rights received by Layne Australia being
accounted for by Layne Australia to you in the event that this
Offer is withdrawn or the contract formed by your acceptance of
this Offer is rendered void pursuant to clause 7.
6
<PAGE>
7. CONDITIONS OF THIS OFFER
7.1 Subject to clause 7.3, this Offer and any contract that results from
the acceptance of this Offer are each conditional upon:
(a) Layne Australia becoming entitled to not less than 90% of the
Stanley Shares by the expiry of the Offer Period;
(b) Layne Australia receiving acceptances before the expiry of the
Offer Period in respect of all offers it makes during the Offer
Period, substantially in the form of Annexure A to this Offer
(except that the consideration specified in the offers may be
increased by Layne Australia), to the holders of options to
subscribe for Stanley Shares;
(c) the Treasurer of the Commonwealth of Australia ("Treasurer")
consenting unconditionally to or stating prior to the end of the
Offer Period that he has no objection under the Commonwealth
Government's foreign investment policy to the purchase by Layne
Australia of all Stanley Shares and the cancellation of all
options to subscribe for unissued Stanley Shares in accordance
with the Offers or the Treasurer ceases to be entitled to make an
order under the Foreign Acquisitions and Takeovers Act 1975 in
respect of that purchase;
(d) none of the following occurrences happening during the period
commencing on the Statement Lodgment Date and ending on the
expiry of the Offer Period:
(i) any one or more of the provisions of the constituent
documents of Stanley or of a subsidiary of Stanley being
altered in any of the ways mentioned in subsection 193(1)
of the Law;
(ii) Stanley or a subsidiary of Stanley resolving to reduce
its share capital in any way;
(iii) Stanley or a subsidiary of Stanley:
(A) entering into a buy-back agreement; or
(B) resolving to approve the terms of a buy-back agreement
under subsections 206D(1) or 206E(1) of the Law;
other than in relation to a buy back of shares in Glindemann
& Kitching Pty Ltd which is or will be substantially in the
manner described in the prospectus issued by Stanley and
dated 20 December 1996;
7
<PAGE>
(iv) Stanley or a subsidiary of Stanley making an allotment
of, or granting an option to subscribe for, any of its
shares (of any class), or agreeing to make such an
allotment or grant such an option, or declaring or
paying a dividend in circumstances where shares may be
allotted or issued pursuant to Stanley's Dividend
Reinvestment Plan;
(v) Stanley declaring or paying a dividend other than the
Special Dividend;
(vi) Stanley or a subsidiary of Stanley issuing, or agreeing
to issue, convertible notes;
(vii) Stanley or a subsidiary of Stanley disposing, or
agreeing to dispose, of the whole, or a substantial
part, of its business or property;
(viii) Stanley or a subsidiary of Stanley charging, or agreeing
to charge, the whole, or a substantial part, of its
business or property;
(ix) Stanley or a subsidiary of Stanley resolving that it be
wound up;
(x) the appointment of a provisional liquidator of Stanley
or of a subsidiary of Stanley;
(xi) the making of an order by a court for the winding up of
Stanley or of a subsidiary of Stanley;
(xii) an administrator of Stanley, or of a subsidiary of
Stanley, being appointed under sections 436A, 436B or
436C of the Law;
(xiii) Stanley or a subsidiary of Stanley executing a deed of
company arrangement; or
(xiv) the appointment of a receiver, or a receiver and
manager, in relation to the whole, or a substantial
part, of the property of Stanley or of a subsidiary of
Stanley; and
(e) none of the following occurring during the period commencing on
the Statement Lodgment Date and ending on the expiry of the Offer
Period:
(i) Stanley or a subsidiary of Stanley purchasing or
otherwise acquiring or agreeing or offering to purchase
or otherwise acquire or taking a right or option to
acquire any right, title or interest in or to any
property, assets or rights, otherwise than in the
ordinary course of business;
8
<PAGE>
(ii) Stanley or a subsidiary of Stanley selling or otherwise
disposing of or agreeing or offering to sell or
otherwise dispose of or giving a right or option to sell
any right, title or interest in or to any property,
assets or rights, otherwise than in the ordinary course
of business;
(iii) Stanley or a subsidiary of Stanley entering into or
agreeing to enter into or incurring, varying or
canceling any material contract, commitment or
contingent liability, otherwise than in the ordinary
course of business;
(iv) a material adverse change occurring or being threatened
or announced in the structure, business, financial or
trading position, profitability or prospects of Stanley
or the group of companies comprising Stanley and its
subsidiaries taken as a whole; or
(v) Bank of America National Trust and Savings Association
("Bank of America") or any of its related or affiliated
corporations, notifying Layne Christensen Company that
all or a substantial part of the US$125 million credit
facility the subject of a letter from Bank of America
dated 2 April 1997 will not be made available to Layne
Christensen Company or Layne Australia for any reason,
other than due to an event that was within the sole
control of Layne Australia or of any of its associates;
and
(f) a director or the chief financial officer of Stanley giving
notice to Layne Australia before the end of the Offer Period that
each of the following is correct at the date of the notice, and
is expected to be correct at the end of the Offer Period:
(i) Stanley's consolidated shareholders' equity, determined
in accordance with the accounting principles that were
used in preparing Stanley's audited financial statements
for the year ended 30 June, 1996, is at least $30
million; and
(ii) Stanley's Dividend Reinvestment Plan has been suspended
in accordance with its terms such that no shares will be
allotted or issued pursuant to that plan in connection
with the Special Dividend.
7.2 Subject to the Law, the conditions in clause 7.1 (other than the
condition in clause 7.1(c)) are conditions subsequent and a breach or
non-fulfillment of any of those conditions will not prevent a contract
arising from acceptance of this Offer. Those conditions will not
merge on completion of any contract arising from acceptance of this
Offer and may only be relied upon by Layne Australia. The condition
in clause 7.1(c) is a condition precedent, and any contract arising
from
9
<PAGE>
acceptance of this Offer will not become binding unless and until that
condition is fulfilled.
7.3 It is a term of this Offer that Layne Australia may, subject to and in
accordance with the Law, declare this Offer and all other Offers made
under the Takeover Scheme and all contracts formed by acceptance of
such Offers, to be free from the conditions (or any one or more of
them or any part of any of them) set out in clause 7.1, other than the
condition in clause 7.1(c). Any declaration made under this clause
7.3 must be made by Layne Australia not less than 7 days before the
end of the Offer Period, and a notice in that respect must be
published in accordance with the requirements of section 663 of the
Law.
7.4 If at the time immediately after the end of the Offer Period in
respect of any condition in clause 7.1:
(a) Layne Australia has not declared this Offer and all other Offers
made by Layne Australia under the Takeover Scheme to be free from
that condition;
(b) the Offers have not become free of that condition by virtue of
the operation of subsection 664(2) of the Law; or
(c) that condition has not been fulfilled;
all contracts resulting from the acceptance of Offers and all Offers
that have been accepted and from whose acceptance binding contracts
have not yet resulted, are void. In that event Layne Australia will,
if you have accepted this Offer, return any Acceptance Form and other
documents forwarded by you, to your address as shown in the Acceptance
Form.
8. PAYMENT
8.1 If you validly accept (or are treated by Layne Australia pursuant to
clause 5.6 as having validly accepted) this Offer and:
(a) all of the conditions set out in clause 7.1 have been fulfilled;
or
(b) Layne Australia has declared the Offers constituting the Takeover
Scheme to be free from those conditions to the extent that they
have not been fulfilled,
Layne Australia will pay the consideration payable to you by cheque in
Australian dollars sent to you at your risk by pre-paid ordinary mail,
or, in the case of overseas shareholders by pre-paid airmail, to your
address shown on the Acceptance Form within 30 days after the Offer is
accepted by you or the Offer or the contract resulting from acceptance
of the Offer becomes unconditional,
10
<PAGE>
whichever is the later, but in any event not later than 21 days after
the end of the Offer Period.
9. WITHDRAWAL
Subject to compliance with section 653 of the Law and any conditions imposed
pursuant to that section, Layne Australia may withdraw this Offer.
10. VARIATION OF THE OFFER
Layne Australia may at any time, and from time to time, vary this Offer in
accordance with sections 654 to 661 of the Law.
11. ADDITIONAL INFORMATION
11.1 According to documents lodged by Stanley with Australian Stock
Exchange Limited, as at the date of this Offer the total number of
Stanley Shares on issue is 70,219,325.
11.2 Immediately before this Offer was sent, Layne Australia was entitled
to none of the Stanley Shares on issue at that date.
11.3 The date of publication of the notice referred to in subsection 663(4)
of the Law is 13 June 1997, subject to variation in accordance with
section 663(5) of the Law if the Offer Period is extended.
11.4 All stamp duty payable on transfers of Stanley Shares in respect of
which Offers are accepted will be paid by Layne Australia.
11.5 This Offer is accompanied by a copy of the Part A Statement.
12. NOTICES
12.1 Any notice, nomination or other communication to be given by Layne
Australia to you under this Offer will be deemed to be duly given if
it is in writing and is signed or purports to be signed (whether in
manuscript, printed or reproduced in any form) on behalf of Layne
Australia by any of its directors or secretaries and is delivered to
or sent by post in a pre-paid envelope to your address as recorded on
the register of members of Stanley.
12.2 Any notice or other communication given by you to Layne Australia in
connection with this Offer will be deemed to be duly given if it is in
writing and is sent by post to Layne Australia at the following
address
11
<PAGE>
c/o Baker & McKenzie
Level 26
AMP Centre
50 Bridge Street
SYDNEY NSW 2000
Attention: Steven Glanz
13. INTERPRETATION
13.1 In this Offer:
"Acceptance Form" means the form of acceptance and transfer enclosed with this
Offer;
"CHESS" means the Clearing House Electronic Subregister System operated by SCH;
"CHESS Holding" means a holding of Stanley Shares on the CHESS subregister of
Stanley;
"Commission" means the Australian Securities Commission;
"Controlling Participant" means the Broker or Non-Broker Participant designated
as the controlling participant for Stanley Shares in accordance with the SCH
Business Rules;
"Distinct Portions" has the meaning attributed to that phrase in the Law in
respect of Stanley Shares;
"Law" means the Corporations Law;
"Layne Australia" means Layne Christensen Australia Pty Limited ACN 078 167 610
of Level 26, 50 Bridge Street, Sydney NSW;
"Offer" means the offer contained in this document (or if the context so
requires, this document itself) and "Offers" means all like offers sent to
holders of Stanley Shares (or persons entitled to receive such Offers);
"Offer Period" means the period, referred to in clause 3, during which this
Offer remains open for acceptance;
"Part A Statement" means the Part A Statement registered in relation to the
Takeover Scheme (a copy of which accompanies this Offer);
"Rights" means all accretions and rights accrued or accruing directly or
indirectly to the Stanley Shares at the time of and following the Statement
Lodgment Date including, without limitation, all rights to receive dividends and
to receive, convert to or subscribe for Stanley Shares (whether under a dividend
reinvestment plan, option or otherwise) stock units, notes, options or other
marketable securities, whether declared paid or issued by Stanley or otherwise,
but does not include the Special Dividend;
12
<PAGE>
"SCH" means the Securities Clearing House approved under the Law;
"SCH Business Rules" means the business rules of SCH from time to time;
"Special Dividend" means the dividend of 5 cents per Stanley Share which was
declared on 29 April 1997;
"Stanley" means Stanley Mining Services Limited ACN 009 117 533 of C/-Nissen,
Kestel & Hartford, Suite 4, 1st Floor, South Mill Centre, 9 Bowman Street, South
Perth, WA;
"Stanley Shares" means the fully paid ordinary shares of $0.20 each in Stanley
on issue at the date the Offers are sent;
"Statement Lodgment Date" means the date upon which the Part A Statement is
lodged for registration with the Commission;
"Takeover Scheme" means the takeover scheme constituted by the Offers for
Stanley Shares;
"Your Shares" means, subject to clause 4, the Stanley Shares in respect of which
you are registered or entitled to be registered as holder in the register of
members of Stanley; and
unless the context otherwise requires, other words and phrases used in this
Offer have the same meaning as attributed to them by the Law or the SCH Business
Rules, as the case may be.
13.2 Headings are for ease of reference only and do not affect the
interpretation of this Offer.
13.3 References to clauses are references to clauses in this Offer.
13.4 The singular includes the plural and the plural includes the singular.
A reference to a person includes a reference to a corporation.
13.5 Unless otherwise indicated, a reference to "dollars" or "$" means the
lawful currency of the Commonwealth of Australia.
13.6 References to any law are references to that law as amended,
consolidated, supplemented or replaced from time to time.
13.7 References to time are references to Sydney time.
DATED 20 May 1997
SIGNED for and on behalf of )
Layne Christensen Australia )
Pty Limited ) ______________________________
Director
13
<PAGE>
Annexure A
Offer by Layne Christensen Australia Pty Limited ACN 078 167 610 ("Layne
Australia")
To: [Name of option holder]
Offer
1. Layne Australia offers to pay you the price specified in clause 2 for each
option granted to you under the Stanley Mining Services Limited Employee
Share Option Plan ("Options") in consideration for the surrender to Stanley
Mining Services Limited ("Stanley") of those Options and for your agreeing
to enter into any further agreement with or execute any document in favour
of Stanley to extinguish all of your rights in connection with the Options.
2. The price which Layne Australia offers in relation to each Option is the
difference between 95 cents and the exercise price of the Option. If Layne
Australia increases the cash price offered for each share in Stanley under
its takeover offers for all of those shares dated 20 May 1997 ("Share
Offers"), then the price to be paid by Layne Australia for each of the
Options will be increased by the same amount.
3. This offer expires at the end of the Offer Period (as defined in the Share
Offers).
Acceptance
4. This offer may be accepted by signing this document in the place indicated
and returning it to Layne Australia together with the certificates for the
Options (if any). Once received, your acceptance will be irrevocable.
5. This offer may only be accepted in respect of all your Options.
Condition subsequent
6. This offer is conditional upon the Share Offers becoming unconditional, due
to the conditions to which they are subject being either satisfied or
waived by Layne Australia.
7. The condition in clause 6 is a condition subsequent, and a breach or
non-fulfillment of the condition will not prevent a contract arising from
acceptance of this offer. If at the end of the Offer Period (as defined in
the Share Offers) the condition has not been fulfilled then the contract
arising from acceptance of this offer will be void.
14
<PAGE>
Payment
8. The offer price for the surrender of your Options will be paid by Layne
within 14 days after you accept this offer or the condition in clause 6 is
satisfied, whichever happens later.
Enforceability
9. If you accept this offer, then your agreement to surrender the Options is
for the benefit of both Layne Australia and Stanley, and may be enforced by
either of them.
10. Your acceptance of this Offer will, subject to the satisfaction of the
condition in clause 6, irrevocably constitute Layne Australia your attorney
to execute on your behalf and in your name any document considered
reasonably necessary by Layne Australia to effect the extinguishment,
surrender or cancellation of the Options and all of your rights in
connection with the Options.
Dated: [ ] 1997
I accept this offer
_____________________________________________
Signature of Option holder
15
<PAGE>
A copy of this Part A statement has been registered by the
Australian Securities Commission ("Commission") on
1997. Neither the Commission nor any of its
officers takes any responsibility as to contents of this statement.
PART A STATEMENT RELATING TO
PROPOSED OFFERS
BY
LAYNE CHRISTENSEN
AUSTRALIA PTY LIMITED
ACN 078 167 610
FOR ALL FULLY PAID SHARES IN
STANLEY MINING SERVICES LIMITED
ACN 009 117 553
<PAGE>
1. Interpretation
In this Statement:
(a) "Law" means the Corporations Law.
(b) "Layne Australia" means Layne Christensen Australia Pty
Limited, ACN 078 167 610 a company incorporated in New
South Wales having its registered office at Level 26,
50 Bridge Street, Sydney, NSW;
(c) "Offers" means the proposed offers by Layne Australia
for Stanley Shares to which this Statement relates;
(d) "Stanley" means Stanley Mining Services Limited ACN 009
117 533, a company incorporated in Western Australia,
having its registered office at C/-Nissen, Kestel &
Harford, Suite 4, 1st Floor, South Mill Centre, 9
Bowman Street, South Perth, Western Australia;
(e) "Stanley Shares" means the fully paid ordinary shares
of 20 cents each in Stanley on issue at the date the
Offers are sent; and
(f) Words and phrases which have meanings given to them for
the purposes of Chapter 6 of the Law or in the document
by which the Offers are made bear those meanings in
this Statement.
2. Offers
2.1 Layne Australia proposes to dispatch Offers
constituting a Takeover Scheme to acquire all of the
Stanley Shares for a consideration of 90 cents cash for
each Stanley Share. Stanley shareholders may accept
the Offers only in respect of all of their Stanley
Shares.
2.2 Stanley shareholders who accept Layne Australia's Offer
will retain their entitlement to receive the dividend
of 5 cents per Stanley Share that was declared by
Stanley on 29 April 1997. However, if an Offer is
accepted then Layne Australia will become entitled to
all other accretions and rights accrued or accruing
directly or indirectly to the Stanley Shares to which
the acceptance relates on and after the date on which
this Statement was lodged with the Commission,
including, without limitation, all rights to receive
dividends and to receive, convert to or subscribe for
Stanley Shares (whether under a dividend reinvestment
plan, option or otherwise), stock units, notes, options
or other marketable securities, whether declared paid
or issued by Stanley or otherwise.
2.3 Full particulars of the Offers which Layne Australia
proposes to make are contained in the copy of one of
the proposed Offers which accompanies this Part A
Statement, except that the following details will be
inserted in the relevant places in the Offers before
they are sent:
(a) the date of the Offers;
(b) the date until which the Offers will remain open unless extended
or withdrawn;
(c) the date upon which the notice under sub-section 663(4) of the
Law is to be published; and
<PAGE>
(d) the number of Stanley Shares to which Layne Australia is entitled
immediately before the Offers are sent.
3. Intended Offer Period
The Offers are intended to remain open for acceptance for a
period commencing on the date of the Offers and ending on the
date which is one month after the date of the Offers, unless
extended in accordance with their terms or withdrawn in
accordance with the Law.
4. Directors of Layne Australia
The names, occupations and addresses of all of the directors of
Layne Australia at the date of this Statement are:
Andrew Bernard Schmitt, Executive 310 West 49th Street
(President and Chief Executive Officer, Kansas City, Missouri,USA
Layne Christensen Company)
Eric Russell Despain Executive (Senior 2675 Field Point
Circle Vice President, Layne Christensen Sandy Utah, USA
Company)
Peter Donald Bunting, Chartered 21 Days Crescent
Accountant Blackheath, New South Wales
5. Principal activities of Layne Australia and Layne Group
5.1 Layne Australia was established for the purpose of
making the Offers and currently has no other business.
5.2 Layne Australia is part of a group of companies, the
ultimate parent of which is Layne Christensen Company
("LCC"). LCC is a company incorporated in the state of
Delaware in the United States, and its shares are
traded on the NASDAQ National Market System.
The principal activities of LCC and its subsidiaries are:
(a) locating underground water resources and drilling and
developing wells for customers in a variety of industries;
(b) providing well and pump repair and maintenance services, and well
rehabilitation services, to customers in a variety of industries;
(c) providing soil sampling and exploration drilling services to
customers in the minerals exploration industry;
(d) providing a range of environmental services to customers such as
assessment, monitoring and enhancement of the quality of water
supplies; and
(e) manufacturing and marketing a range of equipment used by drilling
contractors involved in mineral and energy exploration, mine
development and soils and environmental testing.
<PAGE>
6. Layne Australia's entitlement to Stanley Shares
6.1 Layne Australia is not entitled at the date of this Statement to any
Stanley Shares.
6.2 Layne Australia is not entitled at the date of this Statement to any
other marketable securities of Stanley.
7. Transactions in Stanley by Layne Australia or its associates during
previous 4 months and transactions in Layne Australia
7.1 During the 4 months immediately preceding the date on which this
Statement is lodged for registration with the Commission there were
no acquisitions or disposals of Stanley Shares by Layne Australia or
any associate of Layne Australia.
7.2 The only acquisitions or disposals of shares in Layne Australia made
by Layne Australia or its associates during the 4 months immediately
preceding the date on which this statement is lodged for registration
with the Commission were the following:
<TABLE>
<S> <C> <C> <C>
Date Person to whom issued Number of fully paid Issue price per share
ordinary shares of $1
each
29 April 1997 Layne Christensen Company 2 $1.00
</TABLE>
The subscriber shares in Layne Australia, held by the incorporators of
Layne Australia, were redeemed on 29 April 1997.
7.3 Layne Christensen Company ("LCC") is currently in the process of
incorporating a new subsidiary in Belgium, to be called Layne
Christensen Belgium SA ("Layne Belgium"). Upon Layne Belgium's
incorporation, LCC intends transferring its shares in Layne Australia
to Layne Belgium for a consideration of $2.00.
8. Proposed terms for cancellation of options.
8.1 Stanley currently has on issue the following non-transferable options
to subscribe for ordinary shares in Stanley:
Name of option holder Number of options Exercise price per option
David Noort 500,000 63 cents
David Harper 300,000 63 cents
Gary Savage 300,000 63 cents
Brian Birmingham 250,000 63 cents
Tony Grizaard 200,000 63 cents
Colin Roberts 100,000 63 cents
Gregory Finch 100,000 63 cents
Graham Fisher 150,000 63 cents
Brian Rudd 100,000 63 cents
Michael Perrott 2,000,000 70 cents
<PAGE>
8.2 Layne Australia proposes, during the Offer Period, to make offers to
each option holder substantially in the form of Annexure A to the copy
of the proposed Offer which accompanies this Part A Statement.
8.3 Stanley has agreed to grant David Noort a further 500,000 options in
February 1998. The exercise price for these options is not specified
in the agreement. Layne Australia intends to negotiate with Mr. Noort
during the Offer Period to secure his agreement to the cancellation of
his right to receive these options. In exchange, Layne Australia will
offer to procure Layne Christensen Company ("LCC") to issue to
Mr. Noort options to purchase shares of common stock in LCC on terms
and conditions, and at an exercise price, which are similar to options
previously offered to employees of LCC who have a seniority and
experience comparable with Mr. Noort.
9. No pre-emption clause
As far as Layne Australia is aware the constituent documents of
Stanley are its Memorandum and Articles of Association. They
contain no restriction on the right to transfer Stanley Shares
that has the effect of requiring the holders of Stanley Shares,
before transferring them, to offer them for purchase to the
members of Stanley or to any other person.
10. How cash consideration to be provided
The consideration for the acquisition of Stanley Shares to which
the Offers relate will be 90 cents cash per Stanley Share. In
addition, a total of $1,140,000 will be offered to option holders
for the cancellation of all of their options. The maximum cash
amount that would be required if all the Offers in relation to
Stanley Shares and options were accepted is $64,337,392.50.
Layne's parent company, LCC, has been offered a US $125 million
(approximately A$161 million at exchange rates applying at the
date of this Statement) credit facility ("Facility") by Bank of
America National Trust and Savings Association ("Bank of
America"). LCC will ensure that Layne Australia is able to
borrow funds under the Facility to enable it to meet its
obligations in relation to the Stanley Shares and options,
subject to the satisfaction of the conditions precedent referred
to below.
Although Bank of America has entered into a commitment to provide
the facility, it has informed LCC that it intends to assemble a
syndicate of lenders to provide a portion of the Facility. The
syndicate will be arranged by BancAmerica Securities, Inc.
("BASI"), an affiliated company of Bank of America. LCC is not
aware of the identity of any of the proposed members of the
syndicate, nor is it aware of the portion of the Facility which
Bank of America proposes to syndicate.
The availability of funds under the Facility will be subject to a
number of conditions precedent, namely:
(a) the negotiation and execution of a definitive credit agreement and
other related documentation satisfactory to Bank of America and the
other syndicated lenders;
(b) there being no material adverse change (in the reasonable opinion of
BASI and Bank of America) in the financial condition, business,
operations, properties or prospects of LCC
<PAGE>
and its consolidated subsidiaries from the date of its audited
financial statements as at 31 January 1997;
(c) the non-occurrence of any material adverse change in loan syndication
or capital market conditions after 2 April 1997, generally, which in
the reasonable opinion of BASI would affect its syndication efforts in
respect of any portion of the Facility;
(d) until the earlier of 30 September 1997 or notification by BASI of the
completion of the syndication of the Facility, there being no
competing offering, placement or arrangement of any debt securities or
bank financing by or on behalf of LCC; and
(e) other conditions precedent which will be contained in the definitive
agreements relating to the Facility. Bank of America has informed LCC
that these conditions will include:
(i) the acquisition of (or the right to acquire) all Stanley
Shares on terms and conditions acceptable to Bank of America
and the syndicated lenders of the Facility;
(ii) all necessary corporate authorisations being obtained;
(iii) receipt by Bank of America of satisfactory documentation
regarding the takeover offer and Layne Australia's obligation
to pay the purchase consideration;
(iv) all representations and warranties made by LCC in connection
with the Facility documents being true and complete; and
(v) cancellation of LCC's existing credit agreement with Bank of
America.
Layne Australia has no reason to believe that the conditions
precedent to the availability of funds under the Facility will
not be satisfied or waived by the time Layne Australia becomes
liable to pay the consideration for the purchase of Stanley
Shares or surrender of options.
Bank of America's commitment to provide the Facility will expire
on 30 September 1997 if the Facility has not been drawn down by
that date.
11. No benefits to officers of Stanley
Except as otherwise disclosed in this Statement, Layne Australia
does not propose in connection with the Offers that:
(a) a benefit (being a prescribed benefit for the purposes of the
Law) other than an excluded benefit within the meaning of the
Law will or may be given to a person in connection with the
retirement of a person from an office that, in relation to
Stanley, is a prescribed office for the purpose of the Law; and
(b) a benefit (being a prescribed benefit for the purpose of the Law)
will or may be given to a person, who in relation to Stanley
would be a prescribed person for the purpose of the Law, in
connections with the transfer of the whole or any part of the
undertaking or property of Stanley.
<PAGE>
12. Agreement between Layne Australia and the Directors of Stanley
There is no agreement between Layne Australia, or any of its
associates, and any of the directors of Stanley in connection
with, or conditional upon, the outcome of the Takeover Scheme
except for an agreement dated 7 April 1997 between Layne
Christensen Company ("LCC") and Mr. Ross Stanley, a director of
Stanley, under which:
(a) LCC will cause Stanley to terminate Mr. Stanley's current employment
with Stanley, and to re-employ him on the terms of the agreement.
(b) Mr. Stanley's terms and conditions for employment will broadly remain
the same as those he currently enjoys, except that the new employment
will have a three year term subject to specified rights of early
termination.
(c) Mr. Stanley will have an obligation not to compete with Stanley for a
period of up to three years following the termination of his
employment.
(d) Mr. Stanley will be required to subscribe for US$1,500,000 worth or
shares of LCC's common stock at the prevailing market price at the
time of the subscription. The shares will be issued subject to a
restriction on the transfer of the shares for a period of three
years; and
(e) Mr. Stanley will be granted free options by LCC to subscribe for
shares of LCC's common stock at an exercise price equal to the closing
market price for LCC's common stock on the trading day immediately
before the public announcement of Layne Australia's proposed takeover
for the Stanley Shares. The number of shares that may be acquired on
exercise of the options will be three times the number of shares
subscribed for in accordance with paragraph (d) above. Two thirds of
the options will become exercisable after a further year. The options
will be non-transferable and will expire 10 years after their date of
issue if not exercised.
The rights and obligations of Layne Australia and Mr. Stanley under the
agreement are conditional upon each of the conditions to which the Offers
are subject being either satisfied or waived by Layne Australia by the end
of the Offer Period. However, there is no obligation on Mr. Stanley to
accept, or to cause any third party to accept, Layne Australia's Offer.
13. Change in financial position of Stanley
So far as is known to Layne Australia the only changes in the financial
position of Stanley since 30 June 1996 (being the date of the last balance
sheet laid before Stanley in general meeting on 15 November 1996) are as
announced to Australian Stock Exchange Limited (ASX).
In summary, the announcements were:
(a) Allotment of Stanley Shares -- 3 July 1996
Stanley announced that it had allotted 7.22 million Stanley Shares
(part of the 11,666,667 shares authorised at the general meeting of
28 June 1996) at 60 cents per share.
(b) Allotment of Stanley Shares -- 8 July 1996
<PAGE>
Stanley announced that it had allotted a further 280,000 Stanley
Shares as part of the 11,666,667 shares authorised at the general
meeting of 28 June 1996.
(c) Allotment of Stanley Shares -- 16 July 1996
Stanley announced that it had allotted 4,166,667 Stanley Shares. This
allotment finalized the allotment of 11,666,667 Stanley Shares
authorised at the general meeting of 28 June 1996. The shares were
issued at 60 cents per share, as part of a placement to raise
additional working capital.
(d) Granting of exploration licenses in Cote d'Ivoire -- 17 September 1996
Stanley announced that Equigold (Cote d'Ivoire) SA, an Ivory Coast
registered company owned 42.5% by Stanley, had been granted two
exploration licenses covering 2,000 km in Ivory Coast, Western Africa.
The consideration paid by the company in relation to the granting of
the licenses was US$150,000.
(e) Agreement to acquire Glindemann & Kitching Pty Ltd -- 3 October 1996
Stanley announced it had entered into a Heads of Agreement to acquire
mining services company Glindemann & Kitching Pty Ltd ("G&K"). The
acquisition will be implemented in a two stage process, involving an
initial subscription by Stanley of 51% of the expanded issued capital
of G&K for $6.5 million. The remaining 49% shareholding will be
acquired in two years time at a purchase price based on a Price
Earnings Multiple of five times the average annual after tax profits
of G&K during the two year period. The acquisition was subject to
satisfactory due diligence by Stanley. A copy of the announcement is
attached as Annexure 1.
(f) Quarterly report: Activities September quarter 1996 -- 29 October
1996
Exploration results for the September quarter 1996 are set out in the
quarterly report, a copy of which is attached as Annexure 2.
(g) Completion of due diligence and amended terms for acquisition --
4 November 1996
Stanley announced that it has successfully completed its due diligence
review of G&K and would proceed to finalise the acquisition subject
to completion of satisfactory legal documentation. The terms of
acquisition with the vendors of G&K had also been amended. The
acquisition of the final 49% of G&K will be brought forward to 1 July
1997. A copy of the announcement is attached as Annexure 3.
(h) Additions to the official list -- 5 November 1996
Stanley announced that 2,050.799 Stanley Shares were issued at
65 cents per share were issued pursuant to Stanley's dividend
reinvestment plan and quoted for trading on Australian Stock Exchange
Limited.
(i) Chairman's address to annual general meeting -- 15 November 1996
The Chairman stated that trading continued to be in line with
expectations and all divisions were performing in accordance with
budget. Utilisation of all drilling rights continued to be high, and
there was a high likelihood ofcontinuing demand for Stanley's
services.
<PAGE>
(j) One for three renounceable rights issue -- 25 November 1996
Stanley announced that up to approximately 17.5 million Stanley Shares
would be issued under a one for three rights issue at 50 cents per
share. Funds raised will be used to fund the acquisition of G&K.
The issue will be underwritten by Paterson Ord Minnett Ltd.
(k) Acquisition completed -- 17 December 1996
Stanley announced that the transaction to acquire 51% of G&K
had been completed.
(l) Allotment of Stanley Shares -- 17 December 1996
Stanley announced that it had allotted 2.858 million Stanley Shares at
an issue price of 70 cents per share for cash for the purposes of the
acquisition of 51% OF G&K.
(m) Prospectus for renounceable rights issue -- 20 December 1996
Stanley announced that up to 17,554,962 Stanley Shares would be
issued at 50 cents per share under a one for three rights issue.
Funds raised will be used to fund the acquisition of G&K and for
continued growth of the company.
The Chairman of Stanley stated, in connection with the issue, that:
* the mining services industry continues to be a significant growth
industry, and Stanley is one of the leading companies in the
industry,
* demand for the company's services continues to be very strong,
* the acquisition of G&K provides the company with additional profit
in Australia which enhances its ability to pay fully franked
dividends.
* Stanley's dividend policy remains unchanged at 50% of after tax
profits, and
* the acquisition of G&K also provides an opportunity to rationalise
the company's operations in Kalgoorlie and Perth.
The prospectus also sets out details of the application of the
funds to be raised by the issue, the effect of the issue on
Stanley's balance sheet, and a forecast of consolidated operating
profit after tax for the year ended 30 June 1997 of $4,954,000.
Copies of relevant extracts from the prospectus are attached as
Annexure 4.
(n) Quarterly report -- Activities for December quarter -- 30 January 1997
Exploration results for the quarter ended 31 December 1996 are set out
in the quarterly report, a copy of which is attached as Annexure 5.
(o) Directorate -- 17 February 1997
Stanley announced that Mr. Michael Perrott had been appointed
executive chairman of Stanley. In consideration of Mr. Perrott
entering into a service agreement with the company for a two year
period, Stanley's directors resolved to issue 2 million options to
Mr. Perrott or his nominee on the following terms:
<PAGE>
(i) exercise price of 70 cents;
(ii) 1 million options exercisable on or after 1 February 1998
and prior to 31 January 2003; and
(iii) 1 million options exercisable on or after 1 February 1999
and prior to 31 January 2003.
The issue of these options is subject to the approval of shareholders
in general meeting.
Ross Stanley will commence activities as Executive Director
International Operations.
David Noort was appointed General Manager responsible for all company
matters. The board of directors resolved to allot Mr. Noort 500,000
options under the Stanley Mining Services Limited Employee Share
Option Plan, and a further 1,500,000 options will be allotted under
that plan to other key staff members.
(p) Audited half yearly report for the half year ended 31 December 1996 -
14 March 1997
Stanley announced that revenue was up 46.9% to $29,782,000, operating
profit before abnormal items and tax was up 10.6% to $3,543,000,
operating profit after tax but before outside equity interests was up
10.9% to $2,339,000, and operating profit and extraordinary items
after tax attributable to members of Stanley was down 10.7% to
$1,885,000. A copy of the report is attached as Annexure 6.
(q) Response to Stock Exchange enquiry -- 3 April 1997
Stanley announced that management and other initiatives had not had
the expected effect of redressing the adverse profit performance
that was disclosed in the company's Half Yearly Report for the
period to 31 December 1996. Stanley advised that, based on current
trading information, it was likely that the company would not meet
the profit forecast contained in its prospectus dated 20 December
1996, and that the profit performance for the full year ended 30 June
1997 was likely to be approximately 20% less than that disclosed in
the prospectus.
(r) Dividend declaration -- 29 April 1997
Stanley announced that the fully franked dividend of 5 cents per
Stanley Share had been declared. The record date for the dividend
will be 13 May 1997. The payment of and payment date for the
dividend are subject to a number of conditions. A copy of the
announcement is attached as Annexure 7.
(s) Quarterly report -- Activities for March quarter 1997 --
29 April 1997
Exploration results for the quarter ended 31 March 1997 are set out in
the quarterly report, a copy of which is attached as Annexure 8.
14. Agreements relating to transfer of Stanley Shares by Layne Australia
<PAGE>
There is no present agreement, arrangement or understanding whereby any
Stanley Shares acquired by Layne Australia pursuant to the Offers will or
may be transferred to any other person, except that Bank of America will
be granted rights over the Stanley Shares to be purchased by Layne
Australia for the purpose of securing repayment of the credit facility
described in clause 10, and in the exercise of those security rights Bank
of America may require Layne Australia to sell the Stanley Shares which it
holds.
15. No escalation agreement
There is no agreement, arrangement or understanding for the
acquisition of Stanley Shares by Layne Australia or by a person
associated with Layne Australia (within the meaning of Section 609 of
the Law) being an agreement, arrangement or understanding under which
the person or either or any of the persons from whom Stanley Shares have
been or are to be acquired or an associate of that person or of either
or any of those persons may, at any time after an Offer is sent, become
entitled to any benefit, whether by way of receiving an increased price
for those Stanley Shares or by payment of cash or otherwise, that is
related to, dependent upon, or calculated in any way by reference to the
consideration payable for Stanley Shares acquired after the agreement,
arrangement or understanding was entered into.
16. Layne Australia's present intentions about business, assets and
employees of Stanley
Subject to the matter specifically set out below and in clause 12 above,
Layne Australia presently:
(a) intends to continue the business of Stanley;
(b) does not intend to make any major changes to the business of Stanley,
including the deployment of the fixed assets of Stanley; and
(c) does not intend to change the employment of the present employees of
Stanley.
In the event that Layne Australia receives sufficient acceptances
and its Offers become unconditional, it is the present intention of
Layne Australia that the board of directors of Stanley should be
reconstituted such that a majority of the board of Stanley (including
the Chairman) would comprise nominees of Layne Australia. Layne
Australia expects that it will be necessary to seek the removal of most
of the current board in order to achieve this outcome.
Subject to the following paragraph, Layne Australia intends to
continue the business of Stanley in substantially the same manner as it
is currently conducted. However, if Layne Australia gains control of
Stanley then it will examine the exploration and mining activities which
Stanley currently carries on in West Africa with a view to determining
whether those activities are complementary to Stanley's core activities.
If they are determined to be non-core activities, then Layne Australia
will consider disposing of Stanley's interest in those activities on
appropriate terms and conditions.
If Layne Australia is able to proceed to compulsory acquisition in
accordance with Section 701 of the Law and acquires 100% of the Stanley
Shares, it will consider reorganising the business and operations of
Stanley. The reorganisation may be implemented by transferring the
assets and, if applicable, novating the liabilities of the group of
companies comprising Stanley and its subsidiaries ("Stanley Group")
amongst the group of companies comprising Layne Australia and its
subsidiaries. The transfer may be achieved by voluntary liquidation of
one or more Stanley Group companies. Although the employment of some
employees of Stanley Group companies may be transferred to another
company in the group, Layne Australia does not intend to make any
Stanley Group employees redundant or adversely affect their terms and
conditions of employment.
<PAGE>
Layne Australia has not yet made any firm decision as to whether
this or any other kind of reorganisation will b undertaken. Its
decision whether to do so will be influenced by further professional
advice regarding the business, financial, legal, stamp duty and tax
consequences of any reorganisation.
In the event that it becomes entitled to do so under the Law, Layne
Australia intends to proceed to compulsory acquisition of all Stanley
Shares under section 701 of the Law. In these circumstances, Layne
Australia will also seek to have Stanley delisted from the Official List
of Australian Stock Exchange Limited.
17. Other material information
Layne Australia obtained a letter from the Commission on 27 March
1997 indicating that the arrangement with Mr. Stanley described in
clause 12 above would not, in the Commission's view, infringe section
698 of the Law, and advising that the Commission will take no
enforcement action in relation to section 698 with respect to the
arrangement.
Layne Australia also obtained from the Commission on 30 April 1997
relief from section 698 of the Law to enable it to make the offers in
relation to the options referred to in clause 8, and relief from section
637(1)(a) and 657(1)(a) of the Law to allow this Statement and any
notice of variation of the Offers to be signed on behalf of a director
of Layne Australia by an agent authorised in writing.
Layne Australia understands that Stanley is currently involved in
discussions with Australian Stock Exchange Limited with a view to
amending the record date for the dividend that was declared on 29 April
(see clause 13(r) above) to a date with is 9 business days after the
date upon which Layne Australia declares its Offers to be free of
conditions or the Offers lapse, whichever is the earlier. If this or
any similar variation to the terms of payment of the dividend is made by
Stanley, then it is the intention of Layne Australia to postpone (to the
extent that it is entitled to do so under the Law) its registrations as
the holder of Stanley Shares for which acceptances have been received
until such time as the revised record date for the dividend has passed.
Except as contained elsewhere in this Statement, there is no other
information material to the making of a decision by a holder of Stanley
Shares whether or not to accept the Offers being information that is
known to Layne Australia and which has not previously been disclosed to
holders of Stanley Shares.
DATED 31 April 1997
SIGNED by Peter Donald Bunting, a director of Layne Australia on
his own behalf and on behalf of Andrew Bernard Schmitt, authorised to
sign this Statement pursuant to a resolution passed by the directors of
Layne Australia on 30 April 1997.
/s/ Peter Donald Bunting /s/ Peter Donald Bunting
--------------------------- --------------------------
Director Director (by duly authorized Agent)
<PAGE>
Exhibit 2-3
STANLEY MINING SERVICES LIMITED
(ACN 009 117 533)
PART B STATEMENT
in relation to the Takeover Offers
by Layne Christensen Australia Pty Ltd (ACN 078 167 610)
a wholly owned subsidiary of Layne Christensen Company
to acquire your Stanley Shares
YOUR DIRECTORS RECOMMEND
THAT YOU ACCEPT THE TAKEOVER OFFERS BY
LAYNE CHRISTENSEN AUSTRALIA PTY LTD
IN THE ABSENCE OF A HIGHER OFFER
Legal Advisers Financial Advisers
Huston Partners Troika Securities Pty Ltd.
This is an important document and requires your immediate attention. If you
are in any doubt as to the action you should take, please consult your legal,
financial or other professional adviser immediately.
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
SECTION PAGE
1. CHAIRMAN'S LETTER TO SHAREHOLDERS 2-3
2. DIRECTORS' RECOMMENDATIONS 4-5
3. STATUTORY INFORMATION 6-14
4. ANNEXURE "A" 15-17
5. ANNEXURE "B" 18-20
ENQUIRIES
If you have any questions regarding the Takeover Offer by Layne Christensen
Australia Pty Ltd., please contact:
Stanley Mining Services Limited
Telephone: (618) 9248 5022
Facsimile: (618) 9248 5044
<PAGE>
SECTION 1.--CHAIRMAN'S LETTER TO SHAREHOLDERS
9 May 1997
Dear Shareholder:
TAKEOVER OFFER BY LAYNE CHRISTENSEN AUSTRALIA PTY LTD FOR YOUR SHARES
This document is very important and should be read carefully. It contains
the Part B Statement by Stanley Mining Services Limited in response to the
Takeover Offer by Layne Christensen Australia Pty Ltd to purchase your Shares in
Stanley Mining Services Limited.
Your Directors unanimously recommend you accept this Takeover Offer in the
absence of a higher offer and advise that they intend to accept the Takeover
Offer in relation to their Shares.
TERMS OF THE OFFER AND SPECIAL DIVIDEND DECLARATION
Under the terms of the Takeover Offer, Shareholders will receive a cash
payment of 90 cents for each Share held by them in Stanley Mining Services
Limited, and will be entitled to receive a Special Dividend of 5 cents per Share
fully franked.
The Takeover Offer by Layne Christensen Australia Pty Ltd is subject to
various conditions, which are set out in the Part A Statement. Three of the main
conditions are:
1. approval of the Foreign Investment Review Board;
2. receipt of 90% acceptances; and
3. receipt of 100% acceptances by Optionholders.
On 29 April 1997, Stanley Mining Services Limited declared a Special
Dividend of 5 cents per share fully franked at the 36% tax rate. The Record Date
for the Special Dividend is 9 Business Days after either:
1. the Takeover Offer becomes unconditional (because the conditions have been
satisfied or waived); or
2. the Takeover Offer lapses (because the conditions have not been satisfied or
waived during the Offer Period);
whichever is the first to occur. Shareholders who are the registered holders
of Shares on or before the Record Date and who accept the Takeover Offer
will still receive the Special Dividend.
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
STANLEY MINING SERVICES LIMITED
The Company has experienced rapid growth since its listing on the
Australian Stock Exchange two years ago with an increase in its market
capitalisation from that at listing of $14.8 million to a current value of
$63 million plus the aggregate value of the Special Dividend of $3.5 million.
This has been a pleasing result achieved in a period of just over two years.
The Company has undertaken two major fundraisings over the past 12 months
which on each occasion required the Directors to carry out an assessment of the
value of the Company especially in comparison to its industry competitors. This
information has been useful in helping your Directors assess the current value
of the Company including the value relative to other competitors within the
mining services sector. Your Directors believe that this has provided them with
sufficient up to date information to enable them to make the unanimous decision
to recommend acceptance of the Takeover offer which they have made in this Part
B Statement.
WHY YOU SHOULD ACCEPT THE TAKEOVER OFFER
The Directors believe the Takeover Offer is attractive to Shareholders for
the following reasons:
1. The Takeover Offer is worth a total of 95 cents per Share (including the
Special Dividend) plus the additional value of franking credits attached
to the Special Dividend.
2. The cash offer gives Shareholders certainty as to the value of the
consideration being received.
3. The total value offered of 95 cents (including the Special Dividend)
represents a significant 36% premium to the price of Stanley Shares on 2
April 1997, being three trading days prior to the announcement of the bid by
Layne Christensen Australia Pty Ltd on 8 April 1997.
4. The total value offered of 95 cents (including the Special Dividend)
represents a price earnings multiple estimated at 13 times after tax
earnings per Share for the 1996/1997 financial year.
Nevertheless your Directors urge you to read this Part B Statement
carefully, before deciding whether to accept the Layne Christensen Company
Takeover Offer.
3
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
Shareholders are referred to the Part A Statement and Offer Document issued
by Layne Christensen Australia Pty Ltd which sets out the date on which the
Offer Period closes (unless extended). If you wish to follow the Directors
Recommendation and accept the Takeover Offer then you should complete the
Acceptance Form accompanying the Offer Document and return it to the address
shown on that form as soon as possible and certainly no later than the close of
the Offer Period.
Yours faithfully
/s/ Michael Perrott
MICHAEL PERROTT
EXECUTIVE CHAIRMAN
4
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
SECTION 2.--DIRECTORS' RECOMMENDATIONS
1. Your Choice as a Stanley Shareholder
As a Shareholder in Stanley Mining Services Limited, fundamentally you have
three choices as to the course of action which you can adopt in response to the
Layne Christensen Company Takeover Offer namely:
(1) You can accept the Takeover Offer in which case you will receive 90
cents for each of your Stanley Shares. You will also be entitled to receive
the Special Dividend announced by Stanley Mining Services Limited on 29
April 1997 of 5 cents per Share fully franked; or
(2) You can sell your Shares on the stock market in which case you will
receive the market price of Stanley Shares on the Australian Stock Exchange
at the time your Shares are sold. You will not receive the consideration
being offered under the Takeover Offer. If the Takeover Offer is increased,
you will not share in any increased consideration. If you are not the
registered holder of Shares at the Record Date you will not receive the
Special Dividend of 5 cents per Share fully franked; or
(3) You can retain your Stanley Shares and you will retain your
entitlement to receive payment of the Special Dividend of 5 cents per Share
fully franked. If the Takeover Offer reaches the compulsory acquisition
threshold. Layne Christensen Australia may elect to compulsorily acquire
your Shares under the provisions of the Corporations Law. You will then
receive the cash consideration for the Takeover Offer.
2. Directors Recommendations to Shareholders
Each of the Directors recommends THAT IN THE ABSENCE OF A HIGHER OFFER YOU
ACCEPT THE TAKEOVER OFFERS BY LAYNE CHRISTENSEN AUSTRALIA for your Shares in
Stanley Mining Services Limited. The reasons for this recommendation are as
follows:
(1) The cash consideration offered by Layne Christensen Australia is 90
cents for each Stanley Share. In addition, Shareholders who are the
registered holders of Shares on the Record Date will be entitled to receive
the Special Dividend of 5 cents per Share fully franked.
(2) On 29 April 1997, Stanley Mining Services Limited declared a dividend of 5
cents per Share, fully franked at the 36% tax rate. The terms of the Special
Dividend are set out in the two announcements made by the Company on 29
April
5
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
1997 and 1 May 1997. A copy of each of these announcements is annexed
to this Part B Statement as Annexure "A" and Annexure "B" respectively.
(3) The Takeover Offer thus provides Shareholders with a total value of 95 cents
per Share plus the additional value of franking credits attached to the
Special Dividend. If full value is attributed to the franking credits
attached to the Special Dividend, the value of the Takeover Offer would
be 97.8 cents per Share.
(4) The total value offered of 95 cents (including the Special Dividend)
represents a significant 36% premium above the price of Stanley Shares as
traded on the Australian Stock Exchange on 2 April 1997 being three trading
days prior to the announcement of the Takeover Offer by Layne Christensen
Australia.
(5) The total value offered of 95 cents (including the Special Dividend)
represents a premium of 40% above the weighted average price of
Stanley Shares on the Australian Stock Exchange over the period of 3 months
immediately preceding the Takeover Offer by Layne Christensen Australia.
(6) The total value of the Takeover Offer represents a price earnings multiple
of 13 times Stanley Mining Services Limited forecast 1996/1997 after tax
earnings per Share.
(7) The cash consideration provides Shareholders with certainty as to the value
of their Shares.
(8) For all of the reasons set out above, the Directors are of the opinion
that the Takeover Offer represents good value to Stanley Shareholders
for their Shares.
COMPARISON OF THE TAKEOVER OFFER
WITH HISTORICAL STANLEY SHARE PRICE
[GRAPH SHOWING PER SHARE PRICE MARCH 1995 - 1997]
3. Directors Recommendations to Optionholders
The Directors recommend that Optionholders accept the offers made to
Optionholders for the same reasons as those set out at paragraph 2 above.
6
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
SECTION 3.--STATUTORY INFORMATION
This Part B Statement is made by Stanley Mining Services Limited pursuant to
Sections 647(1) and Part B of Section 750 of the Corporations Law in response to
the Part A Statement of Layne Christensen Australia dated 30 April 1997 and
served on Stanley Mining Services Limited on 5 May 1997.
1. Definitions and Interpretation
In this Part B Statement unless the context otherwise requires, the
following words and expressions have the following meanings:
(1) "$" means Australian Dollars unless specified otherwise;
(2) "Annexure" means an annexure to this Part B Statement;
(3) "Associate" has the same meaning as that contained in Division 2 of
Part 1.2 of the Corporations Law;
(4) "Australian Securities Commission" means Australian Securities
Commission as established under Section 7 of the Australian
Securities Commission Act 1990;
(5) "Australian Stock Exchange" means Australian Stock Exchange Limited
(ACN 008 624 691);
(6) "Business Day" means a day when the Australian Stock Exchange is
open for business in Perth, Western Australia;
(7) "Company" or "Stanley Mining Services Limited" means Stanley Mining
Services Limited (ACN 009 117 533) of 28-32 Irvine Drive, Malaga in
Western Australia and where appropriate includes its subsidiaries;
(8) "Corporations Law" means the Corporations Law of Western Australia
as referred to in Part 3 of the Corporations (Western Australia)
Act;
(9) "Directors" or "Stanley Directors" means the Directors of Stanley
Mining Services Limited from time to time;
(10) "Employee Options" means the options issued under the Company's
Employee Share Option Plan;
(11) "Glindemann & Kitching" means Glindemann & Kitching Pty Ltd. (ACN
003 204 448) of 7 Iraking Avenue, Moorebank in New South Wales;
7
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
(12) "Layne Christensen Company" means Layne Christensen Company of 1900
Shawnee Mission Parkway, Mission Woods, Kansas 66205 in the United
States of America;
(13) "Layne Christensen Australia" means Layne Christensen Australia Pty
Ltd. (ACN 078 167 610) of Level 26, 50 Bridge Street, Sydney in
New South Wales, a wholly owned subsidiary of Layne Christensen
Company;
(14) "MDP Options" means the options issued to Michael Delaney Perrott
on 27 March 1997 as approved b Stanley Shareholders on 27 March
1997;
(15) "Offer Period" means the term of the Takeover Offer and any
extension thereof;
(16) "Option" means an Employee Option and an MDP Option or any of them;
(17) "Optionholder" means the registered holder of an Option in the
Company;
(18) "Part A Statement" means the Part A Statement of Layne Christensen
Australia dated 30 April 1997 served on Stanley Mining Services
Limited on 5 May 1997;
(19) "Part B Statement" means this Part B Statement and includes any
Annexure;
(20) "Section" means a section of this Part B Statement;
(21) "Share" or "Stanley Share" means fully paid ordinary share with a
par value of 20 cents in the capital of Stanley Mining Services
Limited;
(22) "Shareholder" or "Stanley Shareholder" means the registered holder
of a Share in the Company.
(23) "Special Dividend" means the 5 cent per Share fully franked
dividend declared by the Company in its announcement to the
Australian Stock Exchange on 29 April 1997 and amended by the
announcement made on 1 May 1997 copies of which are contained in
Annexures "A" and "B" to this Part B Statement;
(24) "Takeover Offer/s" means the takeover offers made by Layne
Christensen Australia to acquire Shares from the Stanley
Shareholders pursuant to the Part A Statement;
(25) in this Part B Statement unless the context otherwise requires the
following rules of interpretation apply:
(a) the singular includes the plural and vice versa;
(b) the use of any gender includes each gender;
8
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
(c) any reference to a person includes a corporation;
(d) references to Sections or pages by number are references to the
numbered Sections and pages of this Part B Statement;
(e) references to legislation are references to that legislation as
amended from time to time; and
(f) the headings and sub-headings of this Part B Statement do not
affect the construction of the substantive provisions.
2. Lodgement with Australian Securities Commission
A copy of this Part B Statement has been lodged with the Australian
Securities Commission. Neither the Australian Securities Commission nor its
officers take any responsibility for the contents of this Part B Statement.
3. Directors of Stanley Mining Services Limited
At the date of this Part B Statement the Directors of Stanley Mining
Services are as follows:
(1) Michael Delaney Perrott;
(2) Ross Frances Stanley;
(3) Nick Giorgetta;
(4) Peter Ernest Huston;
(5) Terence Ross Kestel; and
(6) Walter Unger.
4. Recommendations of the Directors of Stanley Mining Services Limited
Each of the Directors of Stanley Mining Services Limited desires to make and
considers himself justified in making a recommendation in relation to the
Takeover Offer.
Each of the Directors recommends that Shareholders accept the Takeover
Offer. The reasons for the recommendations are set out in Section 2 of this Part
B Statement.
5. Directors' Entitlement to Marketable Securities of Stanley Mining
Services Limited
9
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
The number, description and amount of marketable securities of Stanley
Mining Services Limited to which each Director of Stanley Mining Services
Limited is entitled are set out in the following table:
<TABLE>
<CAPTION>
REGISTERED NUMBER OF NUMBER OF
NAME OF DIRECTOR HOLDER SHARES OPTIONS
- ------------------------- ------------------- ----------- ----------
<S> <C> <C> <C>
Michael Delaney Perrott Contours Pty Ltd. 1,209,472 2,000,000
(ACN 009 002 975) MDP Options
Michael Perrott 7,338
Rhonda Perrott 7,338
- -------------------------------------------------------------------------------
Ross Francis Stanley Tazga Pty Ltd. 19,128,509 Nil
(ACN 008 952 681)
Ross Stanley 712,411
Sierra Bay Pty Ltd. 30,000
(ACN 009 420 455)
- -------------------------------------------------------------------------------
Nick Giorgetta Rollason Pty Ltd. 417,378 Nil
(ACN 009 178 858)
- -------------------------------------------------------------------------------
Peter Ernest Huston Mandalup 455,018 Nil
Investments Pty Ltd.
(ACN 009 212 855)
Peter Huston 7,338
Joanne Huston 7,338
- -------------------------------------------------------------------------------
Terence Ross Kestel Aralad Management 109,296 Nil
Pty Ltd.
(ACN 008 890 113)
- -------------------------------------------------------------------------------
Walter Unger Zeiman Pty Ltd. 1,905,333 Nil
(ACN 009 211 607)
</TABLE>
- - Contours Pty Ltd.--Mr. Perrott has power to vote in respect of not less than
20% of the voting shares in Contours Pty Ltd. and is deemed by virtue of
Division 5 of Part 1.2 of the Corporations Law to have a relevant interest in
(and therefore to be entitled to) the Stanley Shares held by Contours Pty Ltd.
- - Rhonda Perrott--Mr. Perrott is deemed to have a relevant interest in (and
therefore is deemed to be entitled to) the Stanley Shares held by his wife
Rhonda Perrott.
- - Mandalup Investments Pty Ltd.-- Mr. Huston has power to vote in respect of
not less than 20% of the voting shares in Mandalup Investments Pty Ltd. and
is deemed by virtue of Division 5 of Part 1.2 of the Corporations Law to have
a relevant interest
10
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
in (and therefore to be entitled to) the Stanley Shares held by Mandalup
Investments Pty Ltd.
- - Joanne Huston--Mr. Huston is deemed to have a relevant interest in (and
therefore is deemed to be entitled to) the Stanley Shares held by his wife
Joanne Huston.
- - Tazga Pty Ltd.--Mr. Stanley has power to vote in respect of not less than 20%
of the voting shares in Tazga Pty Ltd. and is deemed by virtue of Division 5
of Part 1.2 of the Corporations Law to have a relevant interest in (and
therefore to be entitled to) the Stanley Shares held by Tazga Pty Ltd.
- - Sierra Bay Pty Ltd.--Mr. Stanley has power to vote in respect of not less
than 20% of the voting shares in Rollason Pty Ltd. and is deemed by virtue of
Division 5 of Part 1.2 of the Corporations Law to have a relevant interest in
(and therefore to be entitled to) the Stanley Shares held by Rollason Pty Ltd.
- - Rollason Pty Ltd.--Mr. Giorgetta has power to vote in respect of not less
than 20% of the voting shares in Rollason Pty Ltd. and is deemed by virtue of
Division 5 of Part 1.2 of the Corporations Law to have a relevant interest in
(and therefore to be entitled to) the Stanley Shares held by Rollason Pty Ltd.
- - Aralad Management Pty Ltd.--Mr. Kestel has power to vote in respect of not
less than 20% of the voting shares in Aralad Management Pty Ltd. and is
deemed by virtue of Division 5 of Part 1.2 of the Corporations Law to have a
relevant interest in (and therefore to be entitled to) the Stanley Shares
held by Aralad Management Pty Ltd.
- - Zelman Pty Ltd.--Mr. Unger has power to vote in respect of not less than 20%
of the voting shares in Zelman Pty Ltd. and is deemed by virtue of Division 5
of Part 1.2 of the Corporations Law to have a relevant interest in (and
therefore to be entitled to) the Stanley Shares held by Zelman Pty Ltd.
6. Intentions of the Directors of Stanley Mining Services Limited
The Directors of Stanley Mining Services Limited are required to state
whether they intend to accept or not accept the Takeover Offer by Layne
Christensen Australia in respect of Shares and/or Options held by them or on
their behalf or whether they have not decided whether to accept the Takeover
Offer.
Each Director of Stanley Mining Services Limited intends to accept the
Takeover Offer by Layne Christensen Australia.
11
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
7. Authorisation of Part B Statement
No Director of Stanley Mining Services Limited voted against the resolution
authorising this Part B Statement.
8. Directors' Entitlement to Marketable Securities of Layne Christensen
Australia
At the date of this Part B Statement, no Director of Stanley Mining Services
Limited is entitled to any Shares in or other marketable securities of Layne
Christensen Australia or Layne Christensen Company.
9. Dealings in shares in Layne Christensen Australia by Stanley Mining
Services Limited or Associates of Stanley Mining Services Limited
There have been no acquisitions or disposals of Shares in Layne Christensen
Australia by Stanley Mining Service Limited or by an Associate of Stanley Mining
Services Limited during the four months ending on the day immediately before the
Part A Statement was served on Stanley Mining Services Limited.
10. Dealings in Shares in Stanley Mining Services Limited by Associates of
Stanley Mining Services Limited
There have been no acquisitions or disposals of Shares in Stanley Mining
Services Limited by an Associate of Stanley Mining Services Limited during the
four months ending on the day before the Part A Statement was served on Stanley
Mining Services Limited except as set out in the following table:
<TABLE>
<CAPTION>
NAME DATE BUY/SELL NUMBER PRICE TRANSACTION
- --------------------------------- --------- ------------- ---------- ----------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Contours Pty Ltd. 21/02/97 Buy 302,368 0.50 rights issue*
Michael Perrott 21/02/97 Buy 1,834 0.50 rights issue*
Rhonda Perrott 21/02/97 Buy 1,834 0.50 rights issue*
Tazga Pty Ltd. 18/03/97 Buy 7,777,831 0.61 purchase from Ross Stanley
Ross Stanley 18/03/97 Sold 7,777,831 0.61 sale to Tazga Pty Ltd.
</TABLE>
12
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME DATE BUY/SELL NUMBER PRICE TRANSACTION
- --------------------------------- --------- ------------- ---------- ----------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Sierra Bay Pty Ltd. 09/01/97 Buy 20,000 on market on market on market on
14/02/97 Sold 8,292 market on market on market on
17/02/97 Sold 91,708 market on market on market on
24/02/97 Sold 82,830 market on market on market on
25/02/97 Sold 43,767 market
26/02/97 Buy 2,706
03/03/97 Buy 97,294
19/03/97 Buy 18,666
20/03/97 Buy 31,334
20/03/97 Buy 63,333
21/03/97 Buy 36,667
25/03/97 Buy 6,500
21/04/97 Sold 256,500
Rollason Pty Ltd. 3-7/2/97 Sold 500,000 0.66 on market
21/02/97 Buy 229,344 0.50 rights issue*
Mandalup Investments Pty Ltd. 21/02/97 Buy 113,754 0.50 rights issue*
Peter Huston 21/02/97 Buy 1,834 0.50 rights issue*
Joanne Huston 21/02/97 Buy 1,834 0.50 rights issue*
Aralad Management Pty. Ltd. 21/02/97 Buy 27,323 0.50 rights issue*
Zeiman Pty Ltd. 21/02/97 Buy 476,333 0.50 rights issue*
</TABLE>
- - 1:3 Rights issue by way of Prospectus dated 20 December 1996.
- - Contours Pty Ltd.--is a company which is associated with Michael Perrott as
referred to in paragraph 5 of this Part B Statement.
- - Tazga Pty Ltd.--is a company which is associated with Ross Stanley as
referred to in paragraph 5 of this Part B Statement.
- - Sierra Bay Pty Ltd.--is a company which is associated with Ross Stanley as
referenced to in paragraph 5 of this Part B Statement.
- - Rollason Pty Ltd.--is a company which is associated with Nick Giorgetta as
referred to in paragraph 5 of this Part B Statement.
13
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
- - Mandalup Investments Pty Ltd.--is a company which is associated
with Peter Huston as referred to in paragraph 5 of this Part B Statement.
- - Aralad Management Pty Ltd.--is a company which is associated with Ross Kestel
as referred to in paragraph 5 of this Part B Statement.
- - Zeiman Pty Ltd.--is a company which is associated with Walter Unger as
referred to in paragraph 5 of this Part B Statement.
11. Prescribed Benefits to Officers of Stanley Mining Services Limited
(1) No prescribed benefit (not being an excluded benefit) will or may be
given to a person in connection with the retirement of a person from a
prescribed office in relation to Stanley Mining Services Limited.
(2) No prescribed benefit will or may be given to a prescribed person in
connection with the transfer of the whole or any part of the undertaking or
property of Stanley Mining Services Limited.
12. Agreements with Directors of Stanley Mining Services Limited
There is no agreement or arrangement made between any Stanley Director
and any other person in connection with or conditional upon the outcome of
the Takeover Offer except that on 7 April 1997 Mr. Ross Stanley entered into
an agreement with Layne Christensen Company which is conditional upon each of
the conditions to which the Takeover Offers are subject being either
satisfied or waived by Layne Christensen Australia by the end of the Offer
Period. The terms and conditions of the agreement are summarised as follows:
(1) Layne Christensen Company will cause Stanley Mining Services Limited
to terminate Mr. Stanley's current employment with Stanley Mining Services
Limited, and to re-employ him on the terms of the agreement;
(2) Mr. Stanley's terms and conditions of employment will broadly remain
the same as those he currently enjoys, except that the new employment will
have a three year term subject to specified rights of early termination;
(3) Mr. Stanley will have an obligation not to compete with Stanley
Mining Services Limited for a period of up to three years following the
termination of his employment;
(4) Mr. Stanley will be required to subscribe for US$1,500,000 worth of
shares of Layne Christensen Company's common stock at the prevailing market
price at the time of subscription. The shares will be issued subject to a
restriction on the transfer of the shares for a period of three years; and
14
<PAGE>
STANLEY MINING SERVICES LIMITED
- ------------------------------------------------------------------------------
(5) Mr. Stanley will be granted free options by Layne Christensen
Company to subscribe for shares of Layne Christensen Company's common stock
at an exercise price equal to the closing market price for Layne Christensen
Company's common stock on the trading day immediately before the public
announcement of Layne Christensen Australia's proposed takeover for the
Stanley Shares. The number of shares that may be acquired on exercise of the
options will be three times the number of shares subscribed for in accordance
with paragraph 12(4) above. Two thirds of the options will become exercisable
two years after their date of grant, with the remaining third becoming
exercisable after a further year. The options will be non-transferable and
will expire 10 years after their date of issue if not exercised.
There is no obligation on Mr. Stanley to accept, or to cause any third
party to accept, Layne Christensen Australia's Takeover Offer.
13. Interests of Directors of Stanley Mining Services Limited in any
contract with Layne Christensen Australia
None of the Stanley Directors has any interest in any contract entered into
by Layne Christensen Australia as referred to in paragraph 12 above.
14. Material Changes in the Financial Position of Stanley Mining Services
Limited
To the knowledge of the Stanley Directors, the financial position of
Stanley Mining Services Limited has not materially changed since 30 June 1996
(the date of the last balance sheet laid before the members of Stanley Mining
Services Limited in general meeting on 15 November 1996 or despatched to
Shareholders in accordance with Section 315 of the Corporations Law) other
than as follows:
(1) as set forth in the Part A Statement;
(2) the Company has at the date of this Part B Statement repaid all debts
to the Bank of New Zealand Limited or is not drawing on any facilities
provided by that Bank other than:
(a) currency hedging loans of approximately US$1,000,000; and
(b) Swedish Kroner Bill Commitment of approximately AUD$390,000;
(3) on 30 September 1997 Glindemann & Kitching must complete the buy-back
of the remaining 49% minority shareholding in Glindemann & Kitching for
cash at a cost estimated by the Directors of Stanley Mining Services
Limited at the date of this Part B Statement of approximately $8,100,000.
15
<PAGE>
STANLEY MINING SERVICES LIMITED
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15. Other Information Relevant to the making of decision by a Stanley
Shareholder
There is no other information material to the making of a decision by an
offeree whether or not to accept the Takeover Offer (being information that
is known to the Directors of Stanley Mining Services Limited that has not
been previously disclosed by Stanley Shareholders) except as follows:
(1) on 3 April 1997 Stanley Mining Services Limited announced via the
Australian Stock Exchange that management and other initiatives had not had
the expected effected of redressing the adverse profit performance that was
disclosed in the Company's Half Yearly Report for the period to 31 December
1996. Stanley Mining Services Limited advised that, based on current trading
information, it was likely that the Company would not meet the profit
forecast contained in its prospectus dated 20 December 1996, and that the
profit performance for the full year ended 30 June 1997 was likely to be
approximately 20% less than that disclosed in the prospectus;
(2) the Special Dividend of 5 cents per Share fully franked announced by
the Company via the Australian Stock Exchange on 29 April 1997 and amended by
the announcement made on 1 May 1997 copies of which are contained in Annexure
"A" and "B" of this Part B Statement; and
(3) under the terms of the acquisition of Glindemann & Kitching the 49%
minority shareholders of that company retain their entitlement to receive a
49% share of any dividend declared by Glinderman & Kitching for the financial
year ending 30 June 1997.
Signed for and on behalf of Stanley Mining Services Limited by two Directors
of Stanley Mining Services Limited authorised to do so pursuant to a resolution
of the Directors dated 6 May 1997.
DATED: 9 May 1997
/s/ Michael Delaney Perrott /s/ Terrence Ross Kestel
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16
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stanley Mining Services Limited and
Glindemann & Kitching Pty Ltd:
We consent to the incorporation by reference in the registration statements
(Nos. 33-54064, 33-54066, 33-54096, 33-57746, 33-57748, 33-86654 and
33-20801) on Form S-8 of Layne Christensen Company of our report dated 17
June, 1997 with respect to the consolidated financial statements of Stanley
Mining Services Limited and its controlled entities ("Stanley") as of June
30, 1996 and 1995 and for each of the years in the two-year period ended June
30, 1996 and with respect to the financial statements of Glindemann &
Kitching Pty Ltd ("G&K") as of and for the year ended June 30, 1996, which
reports appear in the Form 8-K of Layne Christensen Company dated 7 August,
1997.
Our reports dated 17 June, 1997 contain explanatory paragraphs that state
that accounting principles generally accepted in Australia vary in certain
significant respects from accounting principles in the United States. The
application of United States generally accepted accounting principles would
have affected results of operations for the years ended June 30, 1996 and
1995 and shareholders' equity as of June 30, 1996 and 1995, to the extent
summarized in Note 33 to the consolidated financial statements of Stanley and
the results of operations for the years ended June 30, 1996 and shareholders'
equity as of June 30, 1996, to the extent summarized Note 18 to the financial
statements of G&K.
KPMG
Perth, Western Australia
August 7, 1997
<PAGE>
Exhibit 99
Contact: Layne Christensen Company
Jerry W. Fanska, CFO
(913) 677-6858
MISSION WOODS, KS--July 29, 1997--Layne Christensen Company (NASDAQ/NMS:
LAYN) announced today the completion of its previously announced tender offer
for all of the outstanding capital stock of Stanley Mining Services Limited
("Stanley"), a publicly traded Australian company. As of July 7,1997, the
close of the tender offer period, 98% of the Stanley shares had been
tendered. Layne Christensen Company has commenced the appropriate procedures
to purchase the remaining Stanley shares at the tender offer share price
which will result in Stanley becoming 100% owned by the Company.
The purchase price of the cash tender offer is approximately $51,666,000.
The transaction is being financed through a $100,000,000 reducing revolving
credit facility which will also be used to refinance the Company's existing
indebtedness and for other general corporate purposes. Stanley is a leading
mineral exploration drilling company whose primary areas of activity are
Australia and West Africa.
Andrew B. Schmitt, President and CEO of Layne Christensen stated, "Stanley
provides us the means to accelerate the expansion of our international
mineral exploration products and service business as we look to capitalize on
the many opportunities the acquisition presents."
Layne Christensen Company is a provider of water well drilling, well and pump
repair and maintenance, mineral exploration drilling and environmental
drilling services. The Company also manufactures and markets a wide range of
equipment used by drilling contractors.
