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This excerpt taken from the ICI 20-F filed Mar 31, 2006. ITEM 8 – FINANCIAL INFORMATION
See Item 18 “Financial Statements” of this Annual Report on Form 20-F for a full list of financial statements included as part of this report. Export Sales. The total amount of export sales from the United Kingdom and the total amount of export sales from the United Kingdom as a percentage of total sales by ICI companies located in the United Kingdom is set out below:
Subsidiary Undertakings. The maximum contingent liability for the Company, mainly on guarantees of borrowings by subsidiaries, was £1,203m (2004 £1,123m). In particular, the Company has fully and unconditionally guaranteed the debt securities of its wholly owned subsidiary ICI Wilmington, Inc. From time to time, the Company, in the ordinary course of business, also provides guarantees to its wholly owned subsidiaries. Legal or Arbitration Proceedings. Certain companies in the Group are the subject of various claims and proceedings which, if successfully asserted against them, could have an adverse effect on the Group’s results of operations, cash flow and financial condition. The Glidden Company (“Glidden”), a wholly owned subsidiary of ICI, is a defendant, along with former producers of lead pigment and former producers of lead pigment based paint, as well as other lead product manufacturers and their trade associations, in a number of law suits in the United States. These law suits seek damages for alleged personal injury caused by lead pigment based paint or the costs of removing lead pigment based paint. An alleged predecessor of Glidden manufactured lead pigments until the 1950s and lead pigment based consumer paint until the 1960s. Glidden is currently a defendant in three active suits (The City of New York v. Lead Industries Association, Inc, et al. (1989), Smith v. Lead Industries Association, Inc, et al. (1999) and Hurkmans v. Salczenco, et al. (2005)) and is also named in one unserved case. Glidden continues to believe that it has strong defences to all of the pending cases, has denied all liability and will continue to defend all such actions. In 1986, a subsidiary of ICI purchased a newly formed company, now Glidden, from a predecessor of Millennium Holdings LLC (“the Seller”), now a subsidiary of Lyondell Chemical Company. Under the sale agreement, the Seller agreed to indemnify Glidden against certain claims relating to certain pre-completion liabilities, and Glidden also gave certain indemnities to the Seller. Whilst Glidden did not acquire any assets or liabilities for the manufacture or sale of lead pigments, the Seller, however, has previously asserted that it is entitled to indemnification under the sale agreement for certain liabilities it may have relating to lead pigment and/or lead pigment based paint litigation. Glidden, which has assumed all of the purchaser’s rights and obligations under the sale agreement, believes that it has no such obligation to indemnify the Seller. The above indemnity claims have not been ruled on by any court. 31 In July 2004, ICI received a request for information from the European Commission relating to alleged cartel activity in the European Methacrylates market. In ICI’s case, the allegations concern a period starting in 1995 and ending when it sold its Acrylics business in 1999. During 2005, the Commission issued a statement of objections, alleging that ICI’s former Acrylics business was involved in breaches of European competition law and, during the fourth quarter, ICI provided a written response to the Commission and attended an oral hearing. ICI's policy is to conduct its business in full compliance with the applicable competition laws. ICI will continue to assist the European Commission with this matter. Their decision is expected in 2006. During January and February 2006, a number of purported class action lawsuits were filed, currently in the US District Court for the Eastern District of Pennsylvania and the US District Court for the District of New Jersey, on behalf of purchasers of methyl methacrylate who claim to have suffered anti-trust injury as a result of alleged cartel activity referred to in the paragraph above. Along with other parties, ICI has been named as a defendant. With respect to each of the claims and proceedings described in the four paragraphs above, ICI is unable to make estimates within a reasonable range of outcomes of the loss to which the claims or proceedings may give rise. Disclosure of the amount sought by claimants and plaintiffs (where known) is not considered meaningful with respect to these claims and proceedings, however, an unfavourable outcome of one or more of these matters could have a material effect on the Group’s results of operations, cash flow or financial position. The Group is also subject to various other claims or legal proceedings, principally in the United Kingdom and United States, including the following: In May 2003, the Kanagawa City Health and Medical Bureau in Japan required Quest Japan to recall flavours containing an ingredient known as WS3. The Japanese health authorities acknowledged that WS3 posed no risk to human health, but nevertheless argued that technically it was not approved for use in Japan. Quest has settled its dispute, without admission of liability, with two of the affected customers. It remains possible that the third affected customer may commence proceedings seeking to recover alleged damages. From the early 1970s until 1999 ICI Americas Inc (“ICIA”), a subsidiary, operated and maintained, on behalf of the US Army, two manufacturing facilities. Employees at each facility were employed by ICIA and were members of ICIA pension schemes. The US Army reimbursed to ICIA the cost of contributions to each pension scheme. Upon termination of the contract in 1999 each of the schemes carried a surplus. In September 2004 the US Army Contracting Officer issued a final determination holding that termination of the contract triggered a refund to the US Government of an amount equal to the value of the 1999 pension surplus. ICIA is appealing the final determination to the Armed Services Board of Contract Appeals. Following ICI’s trading statement on March 25, 2003, three purported class action lawsuits were filed in the US Federal District Court for the Southern District of New York on behalf of ICI shareholders who purchased ICI ADRs and Ordinary Shares between August 2002 and March 2003. The lawsuits, which have now been consolidated into a single action, allege that prior to the trading statement ICI failed to disclose properly the extent of customer service problems at Quest following the implementation of new enterprise resource planning systems in 2002. In September 2004 the court dismissed a number of the plaintiffs’ claims. ICI continues to contest the remaining claims. On April 30, 2004 ICI sold its Quest Food Ingredients Business to Kerry Group PLC (“Kerry”) for $440 million. Kerry has raised a number of issues regarding potential claims under the sale and purchase agreement. No proceedings have been commenced. The Directors do not believe that the outcome of the matters described in the four paragraphs above will have a material effect on the Group’s financial position. 32 The ultimate outcome of the matters described above is subject to many uncertainties, including future events and the uncertainties inherent in litigation. The Group has made provision in its financial statements for such matters to the extent that losses are presently considered probable and estimable. However, these matters involve substantial sums, and an unfavourable outcome of one or more of these matters could have a material effect on the Group’s results of operations, cash flow or financial position. Policy on Dividend Distributions. The Company’s dividend policy links growth in profit with growth in dividends and, at the same time, seeks to ensure that sufficient funds are available to the Group for investment in future profitable growth. The Board continues to believe that this approach is appropriate, and therefore confirms that, following the introduction of IFRS, ICI’s continued intent will be to grow dividends at about the same rate as the growth in net profit before special items attributable to equity holders of the parent.
33 This excerpt taken from the ICI 20-F filed Apr 1, 2005. ITEM 8 – FINANCIAL INFORMATION A. Consolidated Statements and Other Financial Information. See Item 18 “Financial Statements” of this Annual Report on Form 20-F for a full list of financial statements included as part of this report. Export Sales. The total amount of export sales from the United Kingdom and the total amount of export sales from the United Kingdom as a percentage of total sales by ICI companies located in the United Kingdom is set out below:
36 Subsidiary Undertakings. The information set forth in the last two sentences of the first paragraph (beginning “In particular, the Company has fully and unconditionally guaranteed the debt securities . . .”) under the heading “Notes relating to the accounts – Note 39 – Commitments and contingent liabilities”, which appears on page 107 under Item 18 “Financial Statements” of this Annual Report on Form 20-F, is incorporated herein by reference. Legal or Arbitration Proceedings. Certain companies in the Group are defendants in various lawsuits. These lawsuits concern issues such as alleged product liability and contract disputes. The Glidden Company, or Glidden, a wholly owned subsidiary of ICI, is a defendant, along with former lead paint and pigment producers as well as other lead product manufacturers and their trade associations, in a number of law suits in the United States. These suits seek damages for alleged personal injury caused by lead-based paint or the costs of removing lead-based paint. An alleged predecessor of Glidden manufactured lead pigments until the 1950s and lead-based consumer paint until the 1960s. Glidden is currently a defendant in four active suits and is also named in three unserved cases. Glidden continues to believe that it has strong defences to all of the pending cases and has denied all liability and will continue to defend all actions. Following ICI’s trading statement on March 25, 2003, three purported class action lawsuits were filed in the US Federal District Court for the Southern District of New York on behalf of ICI shareholders who purchased ICI ADRs and Ordinary Shares between August 2002 and March 2003. The lawsuits, which have now been consolidated into a single action, allege that prior to the trading statement ICI failed to disclose properly the extent of customer service problems at Quest following the implementation of new enterprise resource planning systems in 2002. In September 2004, the court dismissed a number of the plaintiffs’ claims. ICI continues to contest the remaining claims. In July 2004, ICI received a request for information covering the period 1990 to 2003 in connection with a European Commission investigation into alleged cartel activity in the European Methacrylates market. The request concerns ICI’s former Acrylics business which was sold in November 1999. ICI’s policy is to co-operate with the Commission as fully as it can. With respect to each of the proceedings described above, ICI is unable to make estimates within a reasonable range of outcomes of the loss to which the proceedings may give rise. Disclosure of the amount sought by plaintiffs (where known) is not considered meaningful with respect to these proceedings. The Group is also involved in various other legal proceedings, principally in the United Kingdom and United States, including the following: In May 2003, the Kanagawa City Health and Medical Bureau in Japan required Quest Japan to recall flavours containing an ingredient known as WS3. The Japanese health authorities acknowledged that WS3 posed no risk to human health, but nevertheless argued that technically it was not approved for use in Japan. Three customers were affected by the recall, including Coca Cola (Japan) Company Limited. On August 8, 2003, the Coca Cola Company and Coca Cola (Japan) Company Limited filed a lawsuit in the state court of Fulton County, Georgia USA seeking damages to be determined at trial for costs allegedly arising from their recall. In December 2004, Quest, without admission of liability, settled the dispute with the Coca Cola Company and Coca Cola (Japan) Company Limited. Quest has also settled its dispute with one of the other affected customers. It remains possible that the third affected customer may seek to recover alleged damages. From the early 1970s until 1999, ICI Americas Inc, or ICIA, a subsidiary, operated and maintained, on behalf of the US Army, two manufacturing facilities. Employees at each facility were employed by ICIA and were members of the ICIA pension schemes. The US Army reimbursed to ICIA the cost of contributions to each pension scheme. Upon termination of the contract in 1999, each of the schemes carried a surplus. In September 2004, the US Army Contracting Officer issued a final determination holding that termination of the contract triggered a refund to the US Government of an amount equal to the value of the 1999 pension surplus. ICIA is appealing the final determination to the Armed Service Board of Contract Appeals. 37 The Directors do not believe that the outcome of these other proceedings will have a material effect on the Group’s financial position. The ultimate outcome of the matters described above is subject to many uncertainties, including future events and the uncertainties inherent in litigation. The Group has made provision in its financial statements for such matters to the extent losses are presently considered probable and estimable. However, these matters involve substantial sums, and an unfavourable outcome of one or more of these matters could have a material effect on the Group’s results of operations, liquidity or financial position. Policy on Dividend Distributions. The Group’s dividend policy is that dividends should represent about one third of net profit before exceptional items and goodwill amortisation.
On November 23, 2004, the Company agreed to sell the US, Canadian and European Vinamul Polymers business of National Starch and Chemical Company to Celanese for US$208m (£111m) in cash. Net proceeds after tax and other costs are expected to be approximately US$157m (£84m), and have been used to reduce indebtedness. The sale was completed on February 4, 2005. For the year ended December 31, 2003, the US, Canadian and European Vinamul Polymers business had sales external to ICI of £146m, operating profit before exceptional items of £11m and, at December 31, 2003, had net operating assets of £95m. The transaction is expected to give rise to a profit after tax of about £5m excluding attribution of goodwill previously written off £140m and will be accounted for as an exceptional item. On March 9, 2005, the Company cancelled $300m of its $685m undrawn, committed borrowing facility. As a concequence the total of undrawn, committed borrowing facilties available to the Group reduced from $1,385m to $1,085m as of that date. | EXCERPTS ON THIS PAGE:
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