James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Corporate Update (December 2005)
33 slides from James Hardie Industries's corporate update, Dec 1, 2005
Slide 1: Long-term funding of personal injury claims against former subsidiary companies
@ James Hardie SL James Hardie Long-term funding of personal injury claims against former subsidiary companies 1 December 2005
Slide 2: Overview
@ James Hardie || SIT Overview = Background « Final Funding Agreement # Impact on James Hardie « Other Matters # Conditions « Next Steps
Slide 3: Background
| i i . @ James Hardie Background =» Special Commission of Inquiry into Establishment of Medical Research and Compensation Foundation (MRCF) reported 21 September 2004 » Establishment of MRCF legally effective * No legal liability for MRCF funding shortfall « Did not restructure or move to Netherlan
Slide 4: Consistent with Heads of Agreement
@ James Hardie Final Funding Agreement = Consistent with Heads of Agreement = Funding arrangement intended to allow James Hardie to remain profitable, financially strong and able to fund growth » Funding arrangement intended to allow payments to be made by Special Purpose Fund (SPF) in respect of al
Slide 5: Key Elements
@ James Hardie Final Funding Agreement Key Elements * Establishment of a SPF « Initial funding of SPF by James Hardie of A$154m based on KPMG Actuaries report at 30 June 2005 » James Hardie to make annual payments to SPF » Annual payment by James Hardie to SPF based on annual actuarial assessments *
Slide 6: Structure
il @) James Hardie I) Final Funding Agreement Structure ae Special Purpose Fund JHINV I Guarantee Amaca P/L (including ABN 60 P/L Baryulgil) Performing Subsidiary Amaba P/L
Slide 7: Structure cont...
@ James Hardie Structure cont... » Majority of SPF Board appointed by James Hardie » SPF, Amaca, Amaba, ABN 60 accounted for as James Hardie subsidiaries in consolidated accounts in accordance with US GAAP » NSW Government will introduce legislation to support the structure and to continue external
Slide 8: Actuarial Data
@ James Hardie Final Funding Agreement Actuarial Data « Annual contribution to SPF based on annual actuarial assessments as at 31 March « Initial funding based on KPMG Actuaries 30 June 2005 report
Slide 9: Initial Payment
@ James Hardie Final Funding Agreement Initial Payment » Discounted central estimate for claims (gross) in 1 year and 9 month period ending 31 March 2007 * Discounted central estimate for claims (gross) for YE 31 March 2008 » Estimated operating expenses of SPF for 9 months ended 31 March 2006 = Pay
Slide 10: Ongoing Annual Payments
@ James Hardie i CIAO Final Funding Agreement Ongoing Annual Payments « A 2 year rolling buffer to be established plus annual contribution « Buffer and 3 year payment process to re-occur at start of each year = Revised actuarial assessment undertaken at 31 March each year (payments due 1 July each y
Slide 11: Annual Funding Cap
@ James Hardie Final Funding Agreement Annual Funding Cap » Expressed as a % of JHINV net operating cashflow = Defined as: operating cashflow after tax, interest and changes in working capital and JHINV asbestos payments, but before capital expenditure and dividends « Not less than 65c in each $1 of
Slide 12: Annual Funding Cap "Step-Down"
@ James Hardie IN Final Funding Agreement Annual Funding Cap “Step-Down” = Takes account of actual level of claims and JHINV’s operational performance » Maximum cap of 35% and minimum cap of 10% » Cap can reduce in 5% increments — but no reduction before YE 31 March 2012 = Step-down permitted if pre
Slide 13: Funding Term Cap
@ James Hardie Final Funding Agreement Funding Term Cap = A final payment can be made at 2045 — subject to NSW Government approval = lf parties unable to agree final payment, term will extend a further 10 years — then agreement on final payment sought again = In absence of any agreement on final pay
Slide 14: Releases from Civil Liability
@ James Hardie Final Funding Agreement Releases from Civil Liability * Provided to all parties to Heads of Agreement = NSW Government will introduce legislation to provide releases to members of James Hardie Group, its directors, officers, employees and advisers to ensure civil liability is limited
Slide 15: Restrictions on Certain Transactions/Distributions
ee James Hardie Restrictions on Certain Transactions/Distributions Corporate transactions, distributions and capital management activity are allowable, but James Hardie must not cease to satisfy obligations under the deed Key exemptions: Arms length dealings Distributions no more than 15% of capital
Slide 16: Intercreditor Deed
@ James Hardie Final Funding Agreement Intercreditor Deed = Governs the arrangements between JHINV, lenders, the SPF and the NSW Government on an ongoing basis « Ensures JHINV lenders are paid in full before amounts are paid to the SPF in an insolvency of JHINV — critical to enable James Hardie to r
Slide 17: Wind Up or Reconstruction Events
@ James Hardie Final Funding Agreement Wind Up or Reconstruction Events # SPF has right to participate as a creditor where JHINV is being wound up or reconstructed (eg. Chapter 11 of US Bankruptcy Code) « SPF will vote in favour of a reconstruction which maintains its rights under the agreement « Ag
Slide 18: No Adverse Legislation
@ James Hardie Final Funding Agreement No Adverse Legislation = NSW Government will not undertake any adverse legislative or regulatory action directed at any member of JHINV Group on asbestos-related matters = |f Federal or other state governments take equivalent action, “set off’ arrangements appl
Slide 19: Education Program and Medical Research
@ James Hardie Final Funding Agreement Education Program and Medical Research « James Hardie will contribute A$75k pa for 10 years to an asbestos education program in Australia focused on home renovators = Contributions to be sought from other parties including other governments, insurers and other
Slide 20: Impact on James Hardie: KPMG Claims Profile
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Slide 21: Impact on James Hardie: Initial Payment
: 7 @ James Hardie II: Impact on James Hardie Initial Payment A$m Discounted Central Estimate Valuation for two years nine months to 219 31/3/2008 (Gross claims) Buffer 135 Year 3 discounted payment 84 Estimated SPF operating expenses in 9 months to 31 March 2006 7 Estimated assets to be contributed
Slide 22: Expected Payments to SPF
ee James Hardie Expected Payments to SPF ASm 180 160 few 140 120 100 JHINV payments SPF Net Claims Payment Profile (assumes NSW cost savings) Assumes net operating cashflow of James Hardie is sufficient to ensure cashflow cap does not operate 22
Slide 23: Annual contribution and cashflow cap
ee James Hardie 35% 18% \e) & 2a * © Med wey Vv oe oo ed oO Sv De Me SO Oo a7 S Ss S A! wy a “ 7 LY Vv Ly a $ vol FLL KKM KM KK KML CPF KS KM S Year ending 31 March : son Annual Gash Flow Cap Note: Annual contribution is lesser of payment based on annua! actuarial assessment and annual cashflow cap
Slide 24: Expected Net Assets of SPF
ee ih | James Hardie (NN Impact on James Hardie Expected Net Assets of SPF Net Assets (A$m) 300 260 + 200 ree Asset "buffer" 100 ' | i i } | / / i : ’ j i 150 j / } / / / ; | | ’ | | i : SPF Net Assets += SPF Net Claims Payment Profile (assumes NSW cost savings) __ (Year end 31 March | Note: Assumes
Slide 25: Impact on James Hardie: Accounting
li | James Hardie ee IMT Impact on James Hardie Accounting « Take-up of liability provision when FAS 5 “probable and estimable” definitions satisfied « Tested against events and circumstances prevailing at a balance date « Accounting treatment: » Based on KPMG Actuaries undiscounted Central Estimate
Slide 26: Taxation
@ James Hardie Taxation = Tax deductibility of payments by James Hardie to SPF and tax exempt status of SPF has been assumed = Tax deductibility agreed by all parties to Heads of Agreement (NSW Government, ACTU, UnionsNSW and Bernie Banton representing asbestos diseases groups) # Application for tax
Slide 27: Expected KPMG Actuaries estimate at June 2005
* Expected KPMG Actuaries estimate at 30 June 2005 A$1,798.8m - based on 31 March 2005 estimate (allowing for A$107.6m increase from reduced discount rates) « Reduced by A$230.4m to A$1,568.4m at 30 June 2005: » A$107.5m reduction in projected future claim numbers A$26.3m reduction in assumed averag
Slide 28: Other Matters — Updated Actuarial Report
@ James Hardie Other Matters — Updated Actuarial Report NSW Government Review of Legal Costs = KPMG Actuaries’ analysis of estimated liability includes A$83.3m for estimated legal cost savings in NSW only « Further reduction of A$55.1m if cost savings applied nationally — but not in KPMG Actuaries’
Slide 29: Other Matters — Actuarial Estimates Comparison
@ James Hardie a Other Matters — Updated Actuarial Report Actuarial Estimates Comparison A$ billions 30 June 31 March | 30 June 2004 2005 2005 Central Estimate — Discounted 1.536 1.685 1.568! Central Estimate — Undiscounted 3.586 3.604 3.131! Range — Undiscounted 2.0-5.7 2.0-5.9 | 1.5-5.5' Note: all
Slide 30: Conditions
@ James Hardie Conditions The Final Funding Agreement is subject to: = NSW Government legislative change to facilitate implementation of agreement = Tax deductibility of payments to SPF and tax exempt status of SPF * Receipt of an independent expert's report confirming the proposal is in best intere
Slide 31: Next Steps
Ih @ James Hardie Next Steps * Confirm tax deductibility of payments to SPF and its tax exempt status * provide final documentation to ATO for ruling ® discussions with Federal Treasury continuing * Complete Explanatory Memorandum (EM) including Independent Expert’s report % Send EM to JHINV shareho
Slide 32: Forward-looking statements
a WG ete @) James Hardie Ea / i) i ll i This Management Presentation contains forward-looking statemenis. We may from time to time make forward-looking statements in our periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in our ann
Slide 33: Long-term funding of personal injury claims against former subsidiary companies
@ James Hardie SL James Hardie Long-term funding of personal injury claims against former subsidiary companies
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