James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Corporate Update (December 2005)
32 slides from James Hardie Industries's corporate update, Dec 2, 2005
Slide 1: Long-term funding of personal injury claims against former subsidiary companies
Long-term funding of personal injury claims against former subsidiary companies 1 December 2005 Exhibit 99.1
Slide 2: Overview
Overview Background Final Funding Agreement Impact on James Hardie Other Matters Conditions Next Steps
Slide 3: Background
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 Netherlands to avoid liability for asbest
Slide 4: Consistent with Heads of Agreement
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 all existing and future
Slide 5: Key Elements
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 A rolling two year buffe
Slide 6: Structure
Final Funding Agreement Structure Amaba P/L Performing Subsidiary Special Purpose Fund Amaca P/L (including Baryulgil) ABN 60 P/L JHINV Guarantee Max. 35% prior year net operating cashflow
Slide 7: Structure cont...
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 administration of Ama
Slide 8: Actuarial Data
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
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 Payment amount reduced to
Slide 10: Ongoing Annual Payments
Final Funding Agreement Ongoing Annual Payments A 2 year rolling buffer to be established plus annual contribution Buffer and 3rd 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 year) SPF expected to have
Slide 11: Annual Funding Cap "Step-Down"
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 previous 4 year payment avera
Slide 12: Funding Term Cap
Final Funding Agreement Funding Term Cap A final payment can be made at 2045 - subject to NSW Government approval If 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 payment, agreement conti
Slide 13: Releases from Civil Liability
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 to the arrangements
Slide 14: Restrictions on Certain Transactions/Distributions
Final Funding Agreement 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
Slide 15: Intercreditor Deed
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 raise debt optimise capital structure Interc
Slide 16: Wind Up or Reconstruction Events
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 Agreement provides a me
Slide 17: No Adverse Legislation
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 If Federal or other state governments take equivalent action, "set off" arrangements apply against JHINV fun
Slide 18: Education Program and Medical Research
Final Funding Agreement Education Program and Medical Research James Hardie will contribute A$75k pa for 10 years to an asbestos education program in Australia focused on home renovators Contributions to be sought from other parties including other governments, insurers and other companies with asbe
Slide 19: Impact on James Hardie: KPMG Claims Profile
Impact on James Hardie KPMG Claims Profile Note: The figures presented above are on an undiscounted basis and assumes NSW cost savings. The first payment is a 9 month payment (all others are annual).
Slide 20: Impact on James Hardie: Initial Payment
Impact on James Hardie Initial Payment A$m Discounted Central Estimate Valuation for two years nine months to 31/3/2008 (Gross claims) 219 Buffer 135 Year 3 discounted payment 84 Estimated SPF operating expenses in 9 months to 31 March 2006 7 Estimated assets to be contributed by the MRCF as at 30 J
Slide 21: Impact on James Hardie: Expected Payments to SPF
Impact on James Hardie Expected Payments to SPF Assumes net operating cashflow of James Hardie is sufficient to ensure cashflow cap does not operate
Slide 22: Impact on James Hardie: Annual Cashflow Caps - Best Case Scenario
Impact on James Hardie Annual Cashflow Caps - Best Case Scenario Note: Annual contribution is lesser of payment based on annual actuarial assessment and annual cashflow cap
Slide 23: Impact on James Hardie: Expected Net Assets of SPF
Impact on James Hardie Expected Net Assets of SPF Note: Assumes JHINV contribution is always below annual cashflow cap.
Slide 24: Impact on James Hardie: Accounting
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 Calculated for entire term (thro
Slide 25: Impact on James Hardie: Taxation
Impact on 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 t
Slide 26: Other Matters - Updated Actuarial Report
Other Matters - Updated Actuarial Report 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
Slide 27: NSW Government Review of Legal Costs
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$55.1m if cost savings applied nationally - but not in KPMG Actuaries' estimate Further review of legal costs in NSW expected 2006
Slide 28: Actuarial Estimates Comparison
Other Matters - Updated Actuarial Report Actuarial Estimates Comparison A$ billions 30 June 2004 31 March 2005 30 June 2005 Central Estimate - Discounted 1.536 1.685 1.5681 Central Estimate - Undiscounted 3.586 3.604 3.1311 Range - Undiscounted 2.0 - 5.7 2.0 - 5.9 1.5 - 5.51 Note: all amounts above
Slide 29: Conditions
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 interests of JHINV JHINV Bo
Slide 30: Next Steps
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 shareholders - commencement of EGM
Slide 31: Disclaimer
Disclaimer This Management Presentation contains forward-looking statements. 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 annual reports to shareholders,
Slide 32: Long-term funding of personal injury claims against former subsidiary companies
Long-term funding of personal injury claims against former subsidiary companies
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