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Notes to the Financial Statements

  CONSOLIDATED  PARENT ENTITY 
THOUSANDS OF DOLLARS 2008  2007 2008  2007

26. Notes to the cash flow statementS

(a) Reconciliation of cash and cash equivalents

For the purposes of the cash flow statements, cash and cash equivalents includes:

 
       
Cash at bank 31,703   14,019 244
Total cash and cash equivalents  31,703   14,019 244

(b) Reconciliation of net profit to net operating cash flows

 
       
Net profit 33,181   648,816 185,286   230,885
Adjustments for:        
      Divestment expenses of non-current assets 27,798   16,999
      Finance charges on finance leases 2,019   796
      Interest paid capitalised (19,541)  (3,684)
      Fair value adjustment on financial instruments 479   290 479   290
      Depreciation of property, plant and equipment 168,394   160,163
      Amortisation of intangibles 8,575   6,568
      Write-down of inventory to net realisable value 64,863  
      Treasury stock movements net of expense 1,586   (1,392) 1,586   (1,392)
      Share of associates' and joint ventures' net profit (726)  (3,313)
Movements in assets and liabilities:        
      (Increase)/decrease in receivables 317,221   (320,025) (156,894)  (90,971)
      (Increase)/decrease in inventories 443,809   (447,182)
      (Increase)/decrease in other current assets 18,826   3,567 (648)  278
      Increase/(decrease) in payables (476,459)  398,452 368,261   581
      Increase/(decrease) in current tax liabilities (211,859)  116,350 (211,991)  116,742
      Increase in deferred tax liability/asset 15,812   2,088 217   87
      (Decrease)/increase in provisions (13,768)  16,903 (243) 
Net operating cash inflows  380,210   595,396   186,053   256,500  

27. Acquisitions

2008
(a) Cocks Petroleum Pty Limited

On 13 October 2008, the Group acquired 100% of Cocks Petroleum Pty Limited and the units in the Eden Equity Trust, of which Cocks Petroleum Pty Limited is the Trustee. Cocks Petroleum Pty Limited was purchased for an acquisition cost of $0, plus incidental acquisition costs of $33,000. The company distributes petroleum. In the two and a half months to 31 December 2008, the subsidiary contributed net profit of $nil to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2008, the Group estimates that gross sales revenue would have been $41,071,000 and net profit would have been $564,000.

The acquisition had the following effect on the Group’s assets and liabilities:

Thousands of dollars Original
values
Fair value
adjustments
Recognised
values
Cash and cash equivalents 351 351
Receivables 3,319 3,319
Inventories 649 649
Other current assets 16 16
Land 2,965 2,965
Property, plant and equipment 484 484
Other non-current assets 148 148
Goodwill 514 (514)
Payables (3,381) (3,381)
Bank bills (4,450) (4,450)
Net identifiable assets and liabilities 615 (514) 101
       
Discount on acquisition     (68)
Consideration paid, satisfied in cash     33
       
Cash acquired     (351)
Net cash inflow     318

Goodwill within Cocks Petroleum Pty Limited was unable to be recognised as a separate intangible asset under AASB 3.

The recognised values are based on the pre-acquisition carrying amounts and represent the fair value recorded on acquisition.

A discount on acquisition of the business of Cocks Petroleum Pty Limited has arisen as there is an excess in the net fair values of identifiable assets and liabilities.

(b) South Coast Retail Pty Limited

On 13 October 2008, Cocks Petroleum Pty Limited, a subsidiary of the Group, acquired the assets and liabilities of South Coast Retail Pty Limited for nil value, plus incidental acquisition costs of $39,000. The business operates retail service stations. In the two and a half months to 31 December 2008, the business contributed net profit of $31,958 to the subsidiary’s (Cocks Petroleum Pty Limited) net profit for the year. If the acquisition had occurred on 1 January 2008, the Group estimates that gross sales revenue would have been $12,678,000 greater and net profit would have been $153,600 greater.

The acquisition had the following effect on the Group’s assets and liabilities:

Thousands of dollars Original
values
Fair value
adjustments
Recognised
values
Cash and cash equivalents (35) (35)
Receivables 337 337
Inventories 605 605
Other current assets 2 2
Property, plant and equipment 139 139
Goodwill 265 (265)
Payables (1,464) (1,464)
Other non-current liabilities (110) (110)
Net identifiable assets and liabilities (261) (265) (526)
       
Goodwill on acquisition     565
Consideration paid, satisfied in cash     39
       
Cash acquired     35
Net cash outflow     (74)

Goodwill within South Coast Retail Pty Limited was unable to be recognised as a separate intangible asset under AASB 3.

The recognised values are based on the pre-acquisition carrying amounts and represent the fair value recorded on acquisition.

Goodwill on acquisition of the business of South Coast Retail Pty Limited has arisen because of future business synergies that did not meet the criteria for recognition as a separately identifiable intangible asset at the date of acquisition.

(c) Malcolm Slater Pty Limited

On 15 December 2008, the Group acquired the assets and hire purchase liabilities of Malcolm Slater Pty Limited for an acquisition cost of $1,300,000. The company distributes petroleum. In the half month to 31 December 2008, the subsidiary contributed net profit of $14,860 to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2008, the Group estimates that gross sales revenue would have been $21,016,000 greater and net profit would have been $339,000 greater.

The acquisition had the following effect on the Group’s assets and liabilities:

Thousands of dollars Original
values
Fair value
adjustments
Recognised
values
Property, plant and equipment 1,281 1,281
Hire purchase liabilities (529) (529)
Net identifiable assets and liabilities 752 752
       
Goodwill on acquisition     548
Consideration paid, satisfied in cash     1,300
       
Net cash outflow     (1,300)

The recognised values are based on the pre-acquisition carrying amounts and represent the fair value recorded on acquisition.

Goodwill has arisen on acquisition of the business assets and hire purchase liabilities of Malcolm Slater Pty Limited because of future business synergies that did not meet the criteria for recognition as a separately identifiable intangible asset at the date of acquisition.

(d) Wonfair Pty Limited

On 15 December 2008, the Group acquired the assets and hire purchase liabilities of Wonfair Pty Limited for an acquisition cost of $400,000. The company distributes petroleum. In the half month to 31 December 2008, the subsidiary contributed net profit of $1,607 to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2008, the Group estimates that gross sales revenue would have been $21,674,000 greater and net profit would have been $33,660 greater.

The acquisition had the following effect on the Group’s assets and liabilities:

Thousands of dollars Original
values
Fair value
adjustments
Recognised
values
Property, plant and equipment 407 407
Hire purchase liabilities (203) (203)
Net identifiable assets and liabilities 204 204
       
Goodwill on acquisition     196
Consideration paid, satisfied in cash     400
       
Net cash outflow     (400)

The recognised values are based on the pre-acquisition carrying amounts and represent the fair value recorded on acquisition.

Goodwill has arisen on acquisition of the business assets and hire purchase liabilities of Wonfair Pty Limited because of future business synergies that did not meet the criteria for recognition as a separately identifiable intangible asset at the date of acquisition.

2007
(e) Northern Marketing Management Pty Ltd and Northern Marketing Partnership

On 1 July 2007, the Group acquired the remaining 62.5% of Northern Marketing Management Pty Ltd and Northern Marketing Partnership for $14.7 million satisfied in cash. The company distributes petroleum. In the six months to 31 December 2007, the subsidiary contributed net profit of $1.3 million to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2007, the Group estimates that gross sales revenue would have been $220 million greater and net profit would have been $2.4 million greater.

The acquisition had the following effect on the Group’s assets and liabilities:

Thousands of dollars Original
values
Fair value
adjustments
Recognised
values
Cash and cash equivalents 3,026 3,026
Receivables 8,842 8,842
Inventories 4,389 4,389
Other current assets 262 262
Property, plant and equipment 8,984 4,968 13,952
Other non-current assets 5,035 5,035
Goodwill 8,281 (8,281)
Payables (28,535) (28,535)
Net identifiable assets and liabilities 10,284 (3,313) 6,971
       
Net assets acquired - remaining interest     5,564
Goodwill on acquisition     9,209
Consideration paid, satisfied in cash     14,773
       
Cash acquired     3,026
Net cash outflow     (11,747)

Goodwill within Northern Marketing Pty Ltd was unable to be recognised as a separate intangible asset under AASB 138.

The recognised values are based on the pre-acquisition carrying amounts and represent the fair value recorded on acquisition.

Goodwill has arisen on acquisition of the business of Northern Marketing Management Pty Ltd because of future business synergies that did not meet the criteria for recognition as a separately identifiable intangible asset at the date of acquisition.

  CONSOLIDATED  PARENT ENTITY 
Thousands of dollars 2008  2007 2008  2007

28. Financing arrangements

The Caltex Australia Group has access to the following lines of credit:

 
       
Total facilities available:        
      Bank overdrafts 30,000   30,000
      Bank loans and capital markets 1,505,562   1,156,042 1,505,562   1,156,042
  1,535,562   1,186,042 1,505,562   1,156,042
         
Facilities utilised at balance date:        
      Bank overdrafts 21,165   43,000
      Bank loans and capital markets 855,562  556,042 855,562  556,042
  876,727   599,042 855,562  556,042
         
Facilities not utilised at balance date:        
      Bank overdrafts 8,835  (13,000)
      Bank loans and capital markets 650,000   600,000 650,000  600,000
  658,835   587,000 650,000   600,000

These facilities are unsecured and have an average maturity of 2.7 years (2007: 2.1 years).

29. Related party information

(a) Key management personnel

The key management personnel (KMP) of the Caltex Australia Group during 2008 and 2007 were:

(i) Directors of Caltex Australia Limited during 2008 and 2007:
Current directors

Ms Elizabeth Bryan, Chairman
Mr Desmond King, Managing Director & CEO
Mr Trevor Bourne, Non-Executive Director
Mr Brant Fish, Non-Executive Director
Ms Colleen Jones-Cervantes, Non-Executive Director (appointed 1 June 2008; previously an Alternate Director until 31 May 2008)
Mr Greig Gailey, Non-Executive Director (appointed 11 December 2007)
Mr John Thorn, Non-Executive Director

Previous directors

Mr Richard (Dick) Warburton, Non-Executive Director (retired 24 April 2008)

Alternate directors

Mr Peter Wissel, Alternate Director (appointed 1 June 2008; previously a Non-Executive Director until 31 May 2008)

(ii) Business managers

Richard Beattie, Group Manager – Policy, Public and Government Affairs (resigned 4 July 2008)
Andrew Brewer, Acting Group Manager – Strategy and Planning (seconded to Chevron on 1 April 2008)
Mark Burrowes, General Manager – Marketing (resigned 13 April 2007)
Helen Conway, General Manager – Office of the CEO, Company Secretary and General Counsel (appointed 4 July 2008) formerly
Company Secretary and General Counsel (to 3 July 2008)
Simon Hepworth, Chief Financial Officer
Kenneth James, Acting General Manager – Supply and Distribution (appointed 3 November 2008)
Mike McMenamin, Group Manager – Strategy, Planning & Development (appointed 1 April 2008), formerly Acting General Manager – Marketing (to 31 March 2008)
Alex Strang, General Manager – Supply and Distribution (passed away 17 December 2008)
Andy Walz, General Manager – Marketing (appointed 1 April 2008)
Brian Waywell, General Manager – Refining (resigned 30 November 2008)
Peter Wilkinson, Group Manager – Operational Excellence and Risk
Simon Willshire, Group Manager – Human Resources

(b) Key management personnel compensation

  CONSOLIDATED  PARENT ENTITY 
  2008  2007 2008  2007
Short-term benefits 8,628,906   6,978,306 8,628,906   6,978,306
Other long-term benefits 1,411,536   170,922 1,411,536   170,922
Post-employment benefits 668,177  662,850 668,177   662,850
Termination benefits 317,833   317,833
Share based payments 1,063,153   1,376,263 1,063,153   1,376,263
  11,771,772   9,506,174 11,771,772  9,506,174

Information regarding individuals' and executives' compensation and some equity instruments disclosures is provided in the Remuneration Report.

(c) Shareholdings of key management personnel

The movement during the reporting period in the number of shares of Caltex Australia Limited held, directly, indirectly or beneficially, by each key management personnel, including their personally related entities, is as follows:

  Held at
31 Dec 2007
Purchased Vested Sold Held at
31 Dec 2008
Directors           
Elizabeth Bryan 5,000 4,238 9,238
Richard Warburton (retired) 13,519 13,519
Desmond King 1,000 1,000
John Thorn 1,510 1,510
Peter Wissel 1,000 1,000
Trevor Bourne 4,407 988 5,395
Brant Fish
Greig Gailey
Colleen Jones-Cervantes
           
Senior executives           
Richard Beattie 9,441 15,105 24,546
Andrew Brewer 8,983 3,782 12,765
Helen Conway 40,176 10,697 50,873
Simon Hepworth 9,618 13,357 22,975
Kenneth James 2,526 2,200 (1,974) 2,752
Mike McMenamin 5,221 5,838 11,059
Alex Strang(i) 80,799 44,013 (51,732) 73,080
Andy Walz
Brian Waywell
Peter Wilkinson 2,371 3,682 6,053
Simon Willshire 914 1,233 2,691 4,838
  1. Mr Strang passed away on 17 December 2008. The above share balance was held by his estate at 31 December 2008

(d) Other key management personnel transactions

No key management personnel had entered into a material contract, loan or other transaction with any entity in the Caltex Australia Group during the year ended 31 December 2008 (2007: nil).

During 2008, Mr Thorn was a director of Caltex Australia Limited and National Australia Bank Limited. The banking relationship with National Australia Bank Limited has been in place for many years and facilities are on normal commercial terms.

During 2008, Elizabeth Bryan was a director of Caltex Australia Limited and was a director of Westpac Banking Corporation. The banking relationship with Westpac Banking Corporation has been in place for many years and facilities are on normal commercial terms. She was previously a director of Ridley Corporation Limited (September 2001 to October 2007). Transactions with Ridley Corporation Limited and its subsidiaries were on normal commercial terms.

During 2008, Mr Bourne was a director of Caltex Australia Limited and a director of Hastie Group Limited and Origin Energy Limited. He was previously a director of Coates Hire Limited (February 2004 to January 2008). Transactions with these companies and their subsidiaries were on normal commercial terms. All services have been provided on arm’s length terms.

(e) Controlled entities

Details of dividends and interest received or receivable from controlled entities are set out in note 2.

The amounts receivable by and payable to Caltex Australia Limited and its controlled entities are included in note 7. Details of controlled entities are set out in note 23.

(f) Other related entities

Chevron Global Energy Inc. holds a 50% interest in Caltex Australia Limited. Transactions with the Chevron Group are summarised below.

The Caltex Australia Group paid $2,563,310 (2007: $2,561,044) to the Chevron Group for technical service fees. The Caltex Australia Group received $4,086,040 (2007: $5,315,214) for technical service fees from the Chevron Group. These fees are in the ordinary course of business and on normal commercial terms and conditions.

The Caltex Australia Group paid $2,408,368 (2007: $2,463,000) to the Chevron Group, including Heddington Insurance Limited, for insurance coverage. Dealings with Heddington Insurance Limited are in the ordinary course of business and on normal commercial terms and conditions.

The Caltex Australia Group purchased crude, other refinery feedstocks and petroleum products from the Chevron Group of $5,896,880,182 (2007: $5,371,060,806). The Caltex Australia Group sold crude, other refinery feedstocks and petroleum products to the Chevron Group of $780,669,510 (2007: $670,302,170). These purchases and sales are in the ordinary course of business and on normal commercial terms and conditions.

Certain payments are made to the Chevron Group in respect of the secondment of Desmond King, Andy Walz and Brian Waywell. Details of these payments are shown in the Directors’ Report.

In addition to the above, the Chevron Group seconded one executive (2007: one executive) primarily to provide specialist expertise in refineries. The cost borne by Caltex Australia was $801,978 (2007: $400,000). This cost includes salary and bonuses, allowances including relocation, and indirect payroll related expenses.

Caltex Australia seconded seven employees to various roles within the Chevron Group during 2008. The Chevron Group paid the salary and bonuses, allowances including relocation, and indirect payroll related expenses of these Caltex employees.

Amounts receivable from and payable to other related entities are set out in notes 7 and 13 respectively.

(g) Associates

The Caltex Australia Group sold petroleum products to associates totalling $267,207,908 (2007: $310,114,327). The Caltex Australia Group received income from associates for rental income of $631,432 (2007: $863,847).

Details of associates are set out in note 24. Amounts receivable from associates are set out in note 7. Dividend and disbursement income from associates is $755,000 (2007: $2,392,800).

Caltex has interests in associates primarily for the marketing, sale and distribution of fuel products. Details of Caltex’s interest are in note 24.

(h) Joint ventures

The Caltex Australia Group sold petroleum products to joint ventures totalling $81,785,624 (2007: $53,466,522). The Caltex Australia Group received income from joint ventures for service fees, site fees, operating leases and licence fees of $12,796,755 (2007: $7,824,144).

The Caltex Australia Group purchased petroleum products from joint ventures of $140,945,420 (2007: $122,490,196). The Caltex Australia Group paid service fee income to joint ventures of $130,000 (2007: $130,000). Dividend and disbursement income from joint ventures is $269,110 (2007: $1,221,830).

Caltex has interests in joint ventures primarily for the marketing, sale and distribution of fuel products. Details of Caltex’s interest are in note 25.

(i) Executive share plan

Up to 1 January 2007, senior executives may receive shares under Caltex Australia Limited’s Long-Term Incentive Plan, based on the achievement of specific targets related to the performance of the Caltex Australia Group (including return on capital employed and total shareholder return). The terms and conditions of this plan were approved by shareholders at the Annual General Meeting held in April 1999.

Executives in the Long-Term Incentive Plan for 2006 are entitled to receive shares in three equal instalments as their shares vest, although dividend and voting entitlements vest immediately. Shares are included as part of bonuses upon vesting. Details of the Long-Term Incentive Plan are included in the Remuneration Report.

The fair value of services received in return for shares granted are measured by reference to the market price of shares on the grant date.

Summary of share movements in the plan:

OPENING
BALANCE
 
ISSUED TO PLAN  DISTRIBUTION DURING THE YEAR  CLOSING BALANCE 
Number
of shares
Grant
date
Number
of shares
Weighted average
fair value
per share
($)
Distribution
date
Number
of shares
Weighted average
fair value
per share
($)
Number
of shares
Weighted average
fair value
aggregate
($)
2008                 
154,566     2 January 2008 (61,361) 17.99 84,854 610,100
          4 July 2008 (2,679)      
          18 December 2008 (5,672)      
154,566       (69,712)   84,854 610,100
                 
2007                 
239,590   26 February–
 
79,138 22.57   2 January 2007 (149,566) 23.02 154,566 2,993,943
    2 March 2006     26 February 2007 (2,263)      
          17 April 2007 (5,479)      
          23 April 2007 (6,854)      
239,590   79,138     (164,162)   154,566 2,993,943

Since 1 January 2007, senior executives may receive shares under Caltex Australia Limited’s Equity Incentive Plan, based on the achievement of specific targets related to the performance of the Caltex Australia Group (including return on capital employed and total shareholder return).

Executives in the Caltex Equity Incentive Plan for 2008 are entitled to receive shares in three equal instalments as their shares vest, although dividend and voting entitlements vest immediately. Shares are included as part of bonuses upon vesting. Details of the Caltex Equity Incentive Plan are included in the Remuneration Report.

The fair value of services received in return for shares granted are measured by reference to the market price of shares on the grant date.

Summary of share movements in the plan:

OPENING
BALANCE
 
ISSUED TO PLAN  DISTRIBUTION DURING THE YEAR  CLOSING BALANCE 
Number
of shares
Grant
date
Number
of shares
Weighted average
fair value
per share
($)
Distribution
date
Number
of shares
Weighted average
fair value
per share
($)
Number
of shares
Weighted average
fair value
aggregate
($)
2008                 
28,431   7 April 2008 78,040 13.81   7 April 2008 (26,012) 12.48 53,410 384,018
          23 April 2008 (2,231)      
          27 April 2008 (14,214)      
          4 July 2008 (3,014)      
          18 December 2008 (7,590)      
28,431   78,040     (53,061)   53,410 384,018
                 
2007               
                 
  27 April 2007 42,645 24.29   27 April 2007 (14,214) 24.29 28,431 550,708
  42,645     (14,214)   28,431 550,708

Since 1 January 2007, senior executives may receive performance rights under Caltex Australia Limited’s Equity Incentive Plan, based on the achievement of specific targets related to the performance of the Caltex Australia Group (including return on capital employed and total shareholder return).

Details of the Caltex Equity Incentive Plan are included in the Remuneration Report.

Summary of performance rights in the plan:

OPENING BALANCE  ISSUED TO PLAN  DISTRIBUTION DURING THE YEAR  LAPSED DURING THE YEAR  CLOSING BALANCE 
NUMBER OF PERFORMANCE RIGHTS   START  DATE  NUMBER OF PERFORMANCE RIGHTS  FAIR VALUE OF PERFORMANCE RIGHTS ($)   DISTRIBUTION DATE  NUMBER OF PERFORMANCE RIGHTS  WEIGHTED AVERAGE FAIR VALUE PER SHARE ($)  LAPSED DATE  NUMBER OF PERFORMANCE RIGHTS  WEIGHTED AVERAGE FAIR VALUE PER SHARE ($)   NUMBER OF  PERFORMANCE  RIGHTS  FAIR VALUE AGGREGATE ($) 
2008                       
37,120 1 Jan 2008 55,475 10.41  23 April 2008 (2,530) 9.30  28 Oct 2008 (6,820) 0.00 76,850 800,008
35,890 1 Jan 2008 55,475 10.76  4 July 2008 (3,400)    18 Dec 2008 (7,514)   75,910 816,792
         18 Dec 2008 (10,936)            
73,010   110,950     (16,866)     (14,334)   152,760 1,616,800
                       
2007                       
1 Jan 2007 37,120 12.49 37,120 463,629
1 Jan 2007 35,890 12.91 35,890 463,340
  73,010           73,010 926,969

The performance criteria for the performance rights start on 1 January of each of the relevant years, while the issue date follows shortly thereafter. All performance rights may be exercised three years after the grant date and expire 10 years after the grant date.

  CONSOLIDATED 
THOUSANDS OF DOLLARS 2008  2007
Executive share plan expense 2,705  1,459
 
  2008  2007

30. Net tangible assets per share

 
Net tangible assets per share (dollars) 9.29   10.14

Net tangible assets are net assets attributable to members of Caltex less intangible assets. The weighted average number of ordinary shares used in the calculation of net tangible assets per share was 270 million (2007: 270 million).

31. Segment reporting

The Caltex Australia Group operates as a vertically integrated refiner and marketer of petroleum products.

The Caltex Australia Group operates within one geographic region – Australia.