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The following is an excerpt from a 20-F SEC Filing, filed by HANSON PLC on 3/11/2003.
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HANSON BUILDING MATERIALS LTD - 20-F - 20030311 - COMPANY_INFORMATION

Item 4 INFORMATION ON THE COMPANY

 

Item 4A History and Development of the Company

 

Hanson PLC, a public limited company incorporated on November 8, 1950 in England and Wales, is a leading building materials company with operations principally in North America, the United Kingdom, continental Europe, Australia and Asia Pacific. The registered office and principal place of business of Hanson are located at 1 Grosvenor Place, London SW1X 7JH, England, and its telephone number is + 44 (0)20 7245 1245. The Ordinary Shares of Hanson are listed on the Official List of the UK Financial Services Authority and admitted to trading on the London Stock Exchange; the American Depositary Shares (“ADSs”) of Hanson (each ADS representing five Ordinary Shares) are listed on the New York Stock Exchange (the “NYSE”); and the CHESS Depositary Interests (“CDIs”) of Hanson (each CDI representing one Ordinary Share) are listed on the Australian Stock Exchange (the “ASX”). The ADSs are evidenced by American Depositary Receipts issued by Citibank, N.A. at ADR Department, Shareholder Services, PO Box 2502, Jersey City, New Jersey, 07303-2502, USA. Hanson Building Materials America, Inc., whose office is at 1333 Campus Parkway, Monmouth Shores Corporate Park, Neptune, New Jersey, 07752, USA, is Hanson’s agent in the United States with respect to the ADRs and Ordinary Shares.

 

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Hanson’s principal operating businesses are grouped under:

 

Hanson Building Materials America, Inc. (“HBMA”), a leading producer of aggregates, ready-mixed and other concrete products, clay bricks and roof tiles in North America, principally the United States.

 

Hanson Building Materials Europe (“HBME”), a leading producer of aggregates, ready-mixed and other concrete products, asphalt and clay bricks in the United Kingdom, with a variety of aggregates, ready-mixed concrete and asphalt operations in Spain, Germany, the Czech Republic, the Netherlands, Belgium and Israel, as well as material joint venture interests in the United Kingdom in aggregates. This business group was formed at the beginning of fiscal 2002 when Hanson Quarry Products Europe and Hanson Bricks Europe, previously two separate divisions, were united in a single division.

 

Hanson Australia, a leading producer of aggregates and ready-mixed concrete in Australia, with material joint venture interests in cement and asphalt production and laying.

 

Hanson Pacific, a leading producer of a variety of aggregates, ready-mixed concrete and asphalt products in Malaysia, Hong Kong, Singapore, Thailand, China and Indonesia.

 

Hanson has pursued a strategy to become a focused heavy building materials company. The Company has divested a number of non-core businesses, and pursued a programme of greater capital investment and selective acquisitions to strengthen, develop and broaden the geographical spread of its aggregates, ready-mixed and other concrete products and clay brick activities. The fundamentals of Hanson’s strategy, which is reviewed annually by the board of Hanson, remain unchanged. Hanson will continue to focus on its core products of aggregates, ready-mixed concrete, concrete products and bricks; invest further capital to reduce operating costs and increase efficiency; make disciplined bolt-on acquisitions in markets with good demographics and structure; enhance its long-term mineral reserves; and improve or dispose of underperforming assets.

 

Hanson’s long-term strategy is to continue to grow its well-established positions in North America and the United Kingdom, while developing a larger presence in other international markets with strong long-term growth prospects. In pursuance of this strategy during fiscal 2000, Hanson acquired Pioneer International Ltd (“Pioneer”), an Australian based international heavy building materials company with operations in 17 countries, for approximately Australian $2,997 million in cash and 82.4 million Ordinary Shares, valuing the transaction at £1,543 million.

 

General Development of the Business

 

Over a period of 30 years Hanson had grown into a diversified industrial management company with fiscal 1996 turnover of approximately £12.5 billion and trading profits of approximately £1.5 billion. In December 1995 and January 1996, the board of directors of Hanson, following an evaluation of the Company’s overall performance, determined to undertake a major disposal programme to raise cash and effect the demergers as described below (collectively the “Demergers”).

 

On October 1, 1996, Hanson demerged its chemicals businesses through the payment of a dividend pro rata to its shareholders consisting of all the then outstanding shares of Millennium Chemicals Inc. (“Millennium”), a NYSE listed company.

 

On October 1, 1996, Hanson also demerged its tobacco business through the payment of a dividend pro rata to its shareholders consisting of all the then outstanding shares of Imperial Tobacco Group PLC (“Imperial”), a London Stock Exchange listed company.

 

On February 24, 1997, Hanson demerged its energy businesses, consisting of Eastern Group PLC (“Eastern”), the Australian coal interests of Peabody Holding Company Inc. (“Peabody”) and certain of Peabody’s US operations, through the payment of a dividend pro rata to its shareholders consisting of all the then outstanding shares of The Energy Group plc (“Energy”), a company that was listed on both the London Stock Exchange and the NYSE. On March 7, 1997 Energy acquired the remaining US operations of Peabody from Hanson. Energy was acquired by TXU Corp. in 1998.

 

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Each of Millennium, Imperial and Energy agreed to indemnify Hanson against (inter alia) the past, present and future obligations and liabilities of the businesses transferred to it on its respective demerger while Hanson agreed to indemnify each of Millennium, Imperial and Energy against (inter alia) the past, present and future obligations of all other businesses owned or previously owned by Hanson (including the businesses transferred to the other demerged companies). In November 2002, TXU Corp. announced that several of TXU Corp.’s UK subsidiaries had been placed under the administrative process in the United Kingdom (similar to bankruptcy proceedings in the United States). On December 30, 2002, Energy (now known as Energy Holdings (No 3) Limited) was put into liquidation due to its insolvency. Energy will therefore be unable to fulfil its indemnification obligations to Hanson if it were required to do so. Hanson is, however, not aware of any claim against it or its subsidiaries that would give rise to an indemnity obligation on the part of Energy.

 

On February 24, 1997, immediately following the demerger of Energy, Hanson effected a consolidation (reverse stock split) of all its then existing ordinary shares of 25p each by consolidating eight of such shares into one Ordinary Share, with every eight then existing Hanson ADSs, representing 40 Hanson ordinary shares of 25p each, being consolidated into one Hanson ADS, representing five Ordinary Shares.

 

Post Demerger Disposals

 

Since the demerger of Energy, Hanson has pursued a strategy of focusing on its building materials businesses and disposing of the remaining non-core activities and investments.

 

During 1997, Hanson sold Hanson Electrical, a UK market leader in domestic circuit protection, wiring accessories and other electrical installation products, to Cinven for £131.8 million in April, its 32% holding in Koppers Industries, Inc., a manufacturer of coke and chemicals, for $51.4 million in October, and Hanson Bank Ltd to Ansbacher (Guernsey) Ltd for £6.4 million in December.

 

During 1998, Hanson’s Melody radio business was sold to Emap Radio Ltd for £25.4 million in February. This was followed by the sale in March of Grove Worldwide, a manufacturer of mobile hydraulic lift cranes, to Keystone, Inc. for $595 million. Also in March, Hanson completed the disposal of a portfolio of real estate properties for a consideration of £24.7 million in cash and the assumption of leasehold obligations by the purchaser, O & H Holdings Ltd. During April, Hanson sold its US industrial construction business to Skanska (U.S.A.), Inc. for $51.2 million and its US road paving business to Colas, Inc. for $90.3 million. In October, Air Hanson Ltd was sold to Lynton Group Ltd.

 

In March 1999, Hanson announced the sale of its 23.8% investment in Westralian Sands Ltd, a mineral sands company listed on the ASX, for aggregate net cash proceeds of Australian $224.3 million (£87 million).

 

During 2000, Hanson completed in March the sale of a 19.95% interest in Goldfields Ltd, a gold mining company listed on the ASX, for a consideration of approximately Australian $41 million (£15.8 million), leaving Hanson with an approximate 8% interest in that company, which was itself sold later during the year for an aggregate consideration of Australian $19.5 million (£7.6 million). In October, the gas meter operations of the UGI group were sold for £6.1 million to a subsidiary of Invensys plc. In December, Hanson announced the sale of its waste disposal business to Waste Recycling Group plc for £185 million in cash. Completion of that transaction took place on January 31, 2001.

 

In addition to the above disposals of non-core activities, in the second half of fiscal 2000, in accordance with the requirements of the Office of Fair Trading in the United Kingdom as a condition to its approval of the Pioneer acquisition, Hanson was required to dispose of two aggregates quarries, 25 ready-mixed concrete plants and three asphalt plants in the United Kingdom which were sold in separate transactions to the Tarmac group, RMC Group plc and Brinklow Quarry Ltd for an aggregate consideration of £15.4 million. Also in June 2000, Hanson’s Acme Materials and Construction Company, an integrated producer and supplier of aggregates, asphalt, ready-mixed concrete and road construction services located in eastern Washington and western Idaho in the United States, was sold to a subsidiary of CRH Group plc for $36.6 million.

 

During 2001, Hanson disposed of a number of under-performing operations contained within its building materials business, including its aggregates operations in Utah and Las Vegas in the United States for sale proceeds of $24.9 million and $19.6 million respectively; its roof tile business in Australia for Australian $16 million (£6.4 million); and various ready-mixed concrete plants in Spain and Germany.

 

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During 2002, Hanson announced in February that it had agreed to sell its Continental European brick operations located in the Netherlands, Belgium, Germany, France and Poland to Wienerberger AG for £39.3 million, subject to the receipt of appropriate regulatory approvals. Completion of the transaction took place on April 22, 2002. Hanson also sold for an aggregate consideration of over £3 million its ready-mixed concrete operations in the Philippines in March and its Texas haulage business, Aggregate Haulers, in April. In December 2002, Hanson announced the sale of its 50% interest in North Texas Cement Company for a consideration of $125.4 million, which then closed in January 2003. Also at the end of fiscal 2002, Hanson and its joint venture partner entered into a contract for the sale of their ready-mixed concrete plants in India, which completed in February 2003. In fiscal 2002, Hanson and CSR Ltd announced their intention to merge their interests in Australian Cement Holdings with Queensland Cement Ltd (a subsidiary of Holcim Ltd), with each of Hanson and CSR Ltd to receive a 25% interest in the merged entity. The arrangement is subject to formal contracts and additional due diligence.

 

Post Demerger Acquisitions

 

Since the demerger of Energy, Hanson has not only acquired Pioneer, but also made a significant number of bolt-on acquisitions to Hanson’s existing building materials businesses have been made, which are listed below.

 

Acquisitions since the demerger of Energy in February 1997

 

Calendar Year


  

Geographical

Region


    

1997

  

US

  

Concrete Pipe and Products Company for $128 million

    

UK

  

Walkers Ready Mix Concrete Ltd for £0.3 million

    

UK

  

Rossington Aggregates Ltd for £2.1 million

    

UK

  

Assets of Brevmoor Wharf for £6.2 million

    

UK

  

Investment in 49.99% of Midland Quarry Products Ltd for £15 million

1998

  

US

  

H.G. Fenton Material Company for $87.5 million

    

US

  

Becker Minerals Inc. for $80.5 million

    

US

  

Condux Corporation for $68.8 million

    

US

  

Nelson Holding Company for $37.6 million

    

US

  

50% of Gifford-Hill-American Holdings, Inc. not already owned for $24.2 million

    

UK

  

Pinden Ltd for £6.4 million

    

UK

  

Seagoe Concrete Ltd for £3.5 million

    

UK

  

Assets of T&G Concrete, Stockton Premix, Greenwaste Services and Acorn Premix for an aggregate consideration of £2.2 million

1999

  

Canada

  

Locpipe Inc. for $11 million

    

Canada/US

  

Jannock Brick group for £177.1 million

    

US

  

Greenwood quarry for $3.7 million

    

US

  

Tidewater Sand and Gravel, Inc. for $44.1 million

    

US

  

Opelika quarry for $7.9 million

    

US

  

United Spancrete Products Corporation for $12.3 million

    

US

  

Gainesville Limestone Products, Georgia and Conners Crushed Stone, Texas for an aggregate consideration of $10.5 million

    

US

  

B.R. DeWitt and Superior Products Company for an aggregate consideration of $71.3 million

    

US

  

Olin Jones Sand Co., Jones Sand Co. and Brewer Sand Co., Inc. for an aggregate consideration of $55.2 million

    

UK

  

FC Precast Concrete Ltd for £3.4 million

    

UK

  

50% of Coln Gravel Ltd not already owned for £1.4 million

    

UK

  

Albion Concrete Ltd for £1.2 million

    

UK

  

Brindister, Gamble Waste, Ashridge Concrete and Garrick quarries, ready-mixed and recycling operations for an aggregate consideration of £4 million

    

Germany

  

75% of the issued capital of RENA GmbH for £6.7 million

    

Holland/ Germany

  

Boral group for £44.7 million

 

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Malaysia

  

Tanah Raya group for £16.8 million

    

Malaysia

  

Guthrie quarry for £5.7 million

    

Singapore

  

Highway International Pte Ltd for £9.1 million

    

Singapore

  

Rite-Mix Pte Ltd for £6.1 million

    

Singapore

  

Concrete Innovators Co. Ltd for £2.7 million

    

Philippines/Malaysia

  

Other minor acquisitions £1.7 million

2000

  

US

  

Joelson Taylor Concrete Products, Cincinnati Concrete Pipes and Milan Concrete Products for an aggregate consideration of $135.9 million

    

US

  

Tufco Ready Mix and Aggrock Quarries Inc. for an aggregate consideration of $18.9 million

    

US

  

Pacific International Pipe Enterprises, Inc. for $30 million

    

US

  

Rogers Group Inc. asset swap valued at $35 million

    

US

  

Davon, Inc. for $100 million

    

UK

  

Birchwood Concrete Products Ltd and Birchwood Omnia (Birchwood) Ltd for £8.5 million

    

UK

  

Selected former Tarmac group aggregates assets for £33.5 million

    

Poland

  

Boral Polska for £13.6 million

    

Germany

  

ROBA Baustoff GmbH for £4.8 million

    

Singapore

  

Megastone for £0.9 million

    

Australia

  

Pioneer for £1,543 million

2001

  

Canada

  

Centennial Pipe and Products, Inc. for £41.1 million

    

Mexico

  

50% interest in Piedras y Arenas Baja S de RL de CV for £17.3 million

    

UK

  

Recycling and demolition business of John Mould for £6.7 million

    

UK

  

51% interest in Thermaliner Insulation Systems Ltd for £3.4 million

    

Spain

  

Gabezo Gordo quarrying assets in Murcia for £5.2 million

    

Malaysia

  

50% interest in the aggregates and asphalt joint venture with the Sunway Holdings group not already owned for £36.7 million

2002

  

US

  

Oregon concrete pipe and related assets for $7.7 million

    

US

  

Choctaw Inc. for a total of $137.4 million

    

US

  

Asphalt batch plant in New York for $3.5 million

    

UK

  

Small Lots (Mix-It) Limited and the business of Marshalls Flooring and Red Bank Manufacturing Company for an aggregate consideration of £28.1 million

    

Spain

  

Four aggregates and sand and gravel quarries for £19 million

    

Czech Republic

  

Lafarge Kamenivo s.r.o. for £2.4 million

    

Malaysia

  

50% interest in the ready-mixed joint venture with an associate of the Sunway Holdings group not already owned for £2.1 million

 

A number of these acquisitions are described in more detail under Item 4B “Business Overview” of this Annual Report and the material acquisitions made in fiscal 2001 and fiscal 2002 are also referred to under Item 5A “Operating Results” of this Annual Report.

 

Although acquisitions have played a significant part in the growth of the Company since the final demerger in February 1997, significant capital expenditures have also been made in both new and replacement plant and equipment with an aggregate cost of over £850 million during the period to December 31, 2002. Over half of this sum has been spent in North America. Capital expenditures have been financed out of group cash flow and existing bank and other credit facilities.

 

 

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Item 4B Business Overview

 

The following table shows, for each of Hanson’s last three fiscal years, profit on ordinary activities (before taxation and exceptional items) and turnover (net of inter-company transactions, which were not material) attributable to each of its principal continuing and other business segments and each geographical region, together with similar information regarding Hanson’s discontinued operations.

 

    

Year ended December 31,


    

2001

Profit Turnover


  

2000

Profit Turnover


  

2002

Profit Turnover


    

(Pounds Sterling – Millions)

Hanson Building Materials America

                                   

Aggregates

  

135.7

 

  

1,154.7

  

175.6

 

  

1,285.3

  

153.8

 

  

953.2

Pipe and Products

  

92.5

 

  

436.1

  

97.2

 

  

418.3

  

73.8

 

  

336.4

Brick and Tile

  

33.9

 

  

233.4

  

32.6

 

  

241.2

  

29.8

 

  

197.8

    

  
  

  
  

  
    

262.1

 

  

1,824.2

  

305.4

 

  

1,944.8

  

257.4

 

  

1,487.4

Hanson Building Materials Europe

                                   

European Aggregates

  

109.1

 

  

1,184.2

  

101.5

 

  

1,128.1

  

84.2

 

  

900.5

UK Building Products

  

36.3

 

  

267.6

  

30.9

 

  

243.2

  

34.8

 

  

217.8

    

  
  

  
  

  
    

145.4

 

  

1,451.8

  

132.4

 

  

1,371.3

  

119.0

 

  

1,118.3

Hanson Australia

  

24.7

 

  

442.3

  

4.6

 

  

379.7

  

16.5

 

  

286.3

Hanson Pacific

  

4.4

 

  

235.4

  

10.8

 

  

267.7

  

8.7

 

  

191.5

    

  
  

  
  

  
    

436.6

 

  

3,953.7

  

453.2

 

  

3,963.5

  

401.6

 

  

3,083.5

Property and other income

  

11.6

 

  

—  

  

20.6

 

  

—  

  

9.1

 

  

—  

Central expenses

  

(18.0

)

  

—  

  

(17.5

)

  

—  

  

(18.1

)

  

—  

Discontinued operations

  

3.1

 

  

46.8

  

7.2

 

  

215.9

  

24.7

 

  

333.5

    

  
  

  
  

  
    

433.3

 

  

4,000.5

  

463.5

 

  

4,179.4

  

417.3

 

  

3,417.0

Operating exceptional items

                                   

Goodwill impaired previously written off to reserves

  

—  

 

  

—  

  

(88.8

)

  

—  

  

—  

 

  

—  

Other exceptional items

  

(87.6

)

  

—  

  

(102.5

)

  

—  

  

(22.7

)

  

—  

    

  
  

  
  

  
    

345.7

 

  

4,000.5

  

272.2

 

  

4,179.4

  

394.6

 

  

3,417.0

           
         
         

Non operation exceptional items

  

11.0

 

       

115.7

 

       

11.3

 

    

Net interest (expense)

  

(83.0

)

       

(112.5

)

       

(98.7

)

    
    

       

       

    

Pre-tax profit

  

273.7

 

       

275.4

 

       

307.2

 

    
    

       

       

    

 

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By Geographical Region (a)

 

    

Year ended December 31,


    

2002

Profit Turnover


  

2001

Profit Turnover


  

2000

Profit Turnover


    

(Pounds Sterling–Millions)

United Kingdom

  

117.0

 

  

1,148.3

  

116.7

 

  

1,059.1

  

99.1

 

  

899.8

Continental Europe

  

19.5

 

  

303.5

  

19.2

 

  

312.2

  

5.6

 

  

218.5

North America

  

262.6

 

  

1,824.2

  

305.0

 

  

1,944.8

  

262.7

 

  

1,487.4

Australia

  

26.7

 

  

442.3

  

4.6

 

  

379.7

  

16.5

 

  

286.3

Asia

  

4.4

 

  

235.4

  

10.8

 

  

267.7

  

8.7

 

  

191.5

Discontinued

  

3.1

 

  

46.8

  

7.2

 

  

215.9

  

24.7

 

  

333.5

Operating exceptional items

  

(87.6

)

  

—  

  

(191.3

)

  

—  

  

(22.7

)

  

—  

    

  
  

  
  

  

Operating profit and turnover

  

345.7

 

  

4,000.5

  

272.2

 

  

4,179.4

  

394.6

 

  

3,417.0

    

  
  

  
  

  

 

(a)   The analysis of turnover shows the geographical segments from which products are supplied. This also represents the analysis of turnover by geographical destination. The analysis of profit is stated after including property, other income and central expenses.

 

Hanson Building Materials America, Inc. (“HBMA”)

 

HBMA has a broad presence across North America, operating in 27 states of the United States, as well as within Mexico and the Canadian provinces of Ontario and Quebec. In the United States, HBMA one of the largest producer of construction aggregates, ready-mixed concrete, concrete pipes and precast products, and clay bricks. In total, HBMA operates approximately 200 aggregates quarries, 144 ready-mixed concrete operations and 34 asphalt plants. HBMA has a substantial presence in aggregates in a number of key areas such as Dallas-Fort Worth, San Diego County, the San Francisco Bay area (including bay-dredged aggregates) and in parts of Arizona, North and South Carolina, New York, Pennsylvania and certain mid-western states. HBMA also owns the Permanente cement plant in northern California. In addition to the above, HBMA has approximately 26 recycling/landfill operations.

 

HBMA is organised into five operating groups, Hanson Aggregates East, Hanson Aggregates Central, Hanson Aggregates West, Hanson Pipe and Products and Hanson Brick and Tile. Through its aggregates divisions, HBMA controls, by ownership or long-term lease, over eight billion tons of aggregates reserves. Customers are primarily from the public and private works sectors of the construction and building materials industry, while a portion of the output is consumed internally in the production of down-stream products such as ready-mixed concrete and asphalt. As at December 31, 2002, HBMA (including joint ventures and associates), employed approximately 12,000 people, of whom approximately 11,000 were engaged in manufacturing and operating activities, while the balance were engaged in sales, distribution, corporate and administrative activities. Approximately 3,000 of these employees were salaried and approximately 9,000 were hourly paid.

 

Hanson Aggregates East, headquartered in Morrisville, North Carolina, operates in 11 states and in fiscal 2002 produced over 74 million tons of aggregates, over two million tons of asphalt and over 600,000 cubic yards of ready-mixed concrete.

 

Hanson Aggregates Central, headquartered in Dallas, Texas, operates in six states and in fiscal 2002 produced over 34 million tons of aggregates and over six million cubic yards of ready-mixed concrete. At the end of fiscal 2002, HBMA entered into an agreement to sell its 50% interest in North Texas Cement Company, which was part of the Hanson Aggregates Central division, to its joint venture partner for $125 million. The sale completed in the early part of fiscal 2003.

 

Hanson Aggregates West, headquartered in San Ramon, California, operates in two states and in fiscal 2002 produced over 25 million tons of aggregates, over one million tons of asphalt and over three million cubic yards of ready-mixed concrete. Within Hanson Aggregates West are the Permanente cement plant, the largest cement producer in northern California producing over one million tons of cement, and cement distribution facilities in Guam and Saipan. Late in fiscal 2001, Hanson entered into a joint venture with Grupo Amaya Curicel, S.A. de C.V. to produce aggregates in Ensenada, Mexico and to export these aggregates to California.

 

 

 

 

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Hanson Pipe and Products, headquartered in Dallas, Texas, is one of the largest producers of concrete products (including concrete pipes and precast concrete products) in the United States. It now has 93 production facilities in North America and sold over 3.5 million tons of concrete products in fiscal 2002. At the end of fiscal 2001, Centennial Pipe and Products, Inc., which manufactures concrete pipes and manholes from three plants in Ontario, Canada, was acquired for Canadian $94.5 million (£41.1 million), including Canadian $6 million in cash. In April 2002, the division’s interests in the north western United States were expanded with the acquisition of a pipe plant in Oregon from CSR Ltd for $7.7 million. In May 2002, Pipe and Products acquired Choctaw Inc., the leading manufacturer of concrete pipe and related drainage products in the southern United States, with 17 production facilities serving Alabama, Arkansas, Louisiana, Mississippi and Tennessee.

 

On May 14, 1999, HBMA completed the acquisition of the North American brick group of Jannock Ltd (“Jannock”), free of debt, for Canadian $413 million (£177.1 million). Jannock constitutes the fifth of HBMA’s operating groups, Hanson Brick and Tile. HBMA is one of the largest producers of clay bricks in North America. From a total of 22 factories in Ontario and Quebec in Canada and in the Carolinas, Texas, Michigan and Kentucky in the United States over 1.3 billion bricks were sold in fiscal 2002. HBMA controls, by ownership or long-term lease, over 137 million tons of clay and shale reserves, which at current production represents around 50 years’ supply. Through the acquisition of Pioneer, Hanson acquired six roof tile plants in Florida, California and Arizona, which now form part of this division.

 

Hanson Building Materials Europe (“HBME”)

 

HBME was formed in January 2002 when Hanson Quarry Products Europe and Hanson Bricks Europe were united into one entity forming the European Aggregates division and, with effect from August 2002, a new UK Building Products division consisting of the UK brick and concrete product operations.

 

Throughout Europe (including Israel), the European Aggregates division of HBME now has just under 150 aggregates quarries and over 350 ready-mixed concrete plants, as well as over 50 asphalt plants, of which approximately 110 quarries, approximately 250 ready-mixed concrete plants and the majority of the asphalt plants are located in the United Kingdom. Supplementing its aggregates quarries is HBME’s marine fleet of 11 owned dredgers, which, together with its 50% stake in United Marine Holdings Ltd, a company operating four dredgers and which became part of HBME through the acquisition of Pioneer, gives HBME an interest in 35 wharves, of which 27 are in the United Kingdom and the majority of the remainder in Belgium. Through its wharves and a network of over 20 depots in the United Kingdom, HBME is able to supply areas of greatest demand and where local aggregates are not readily available. Major customers include civil engineering contractors, steel producers and the agricultural industry. HBME’s ability to serve its markets is enhanced by its strong reserve position.

 

HBME employs over 8,000 people, of whom approximately 7,200 are in the United Kingdom and of whom approximately 50% are salaried and 50% are hourly paid (who are represented by unions, principally the Transport & General Workers Union and the General Municipal and Boilermakers Union).

 

HBME is the United Kingdom’s largest producers of aggregates, ready-mixed concrete, concrete pipes and concrete blocks and the UK market leader in sea-dredged aggregates. With the acquisition of Pioneer, HBME not only increased the size of its operations in the United Kingdom, the Netherlands and Germany, but also acquired operations in several new territories, including a leading position in aggregates in Spain and the number two aggregates producer in Israel, as well as operations in the Czech Republic. During fiscal 2000, HBME also acquired 12 aggregates quarries from the Tarmac group which strengthened its position in the north of England and Wales. The Spanish business was expanded with the acquisition of aggregates quarrying assets near Murcia and Alicante for £5.2 million in fiscal 2001 and again in fiscal 2002 with the acquisition of two limestone quarries near Madrid and two sand and gravel operations near Valladolid for an aggregate sum of £19 million. The Czech Republic business was also expanded in fiscal 2002 with the acquisition of an additional two quarries for £2.4 million. In addition, HBME significantly increased its bagged aggregates operations in July 2002 with the acquisition of Small Lots (Mix-It) Limited. HBME is also a partner in a number of joint venture companies in the United Kingdom, the most significant of which are with the Tarmac group through Midland Quarry Products Ltd and United Marine Holdings Ltd.

 

In fiscal 2002, the European Aggregates division produced over 65 million tonnes of aggregates, five million tonnes of asphalt and over 12 million cubic metres of ready-mixed concrete. Under a quarter of HBME’s aggregates production is processed further into ready-mixed concrete (produced in the United Kingdom under the name Premix ñ ), asphalt and precast concrete products. HBME also produces an extensive range of specialised products including silica sand for glass making, rock armour stone for sea defence work, burnt lime for the steel industry as well as agricultural lime and natural stone masonry.

 

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Hanson Recycling, a UK division of HBME set up in 1998 to specialise in sourcing and supplying recycled construction aggregates and not included in the sale of HBME’s waste management operation to Waste Recycling Group plc for £185 million in cash on January 31, 2001, continued its expansion during fiscal 2001 with the acquisition in April of the John Mould recycling and demolition business for £6.7 million. Hanson Recycling now has an interest in 11 recycling plants. During fiscal 2002 the activities of the Hanson Recycling division were integrated into the European Aggregates division.

 

As well as being a materials producer, HBME, through Hanson Construction Projects, is also a specialist road surfacing contractor, being supplied from HBME’s aggregates quarries and asphalt plants, for the construction of the road network in the United Kingdom.

 

The UK Building Products division was formed in August 2002 by combining HBME’s UK bricks and concrete products businesses, following completion of the sale on April 22, 2002 of the Continental European brick business to Wienerberger AG for a cash consideration of Euro 64.5 million (£39.3 million). The Continental European brick business consisted of 24 brick manufacturing plants in northern Europe, of which the majority were in the Netherlands and Belgium, with the remainder in Germany, Poland and France.

 

UK Building Products’ brick operation is the second largest producer of clay bricks in the United Kingdom. It operates from 15 factories and has the capacity to produce over one billion bricks per annum. UK Building Products markets four brands: London, Kempston, Butterley and Desimpel, and the product range represents over 150 different types of brick. In the United Kingdom, bricks are classified into two categories, fletton and non-fletton, depending on the raw material used in their manufacture. UK Building Products is the only manufacturer of fletton bricks, which are made by the press moulding of high fuel content Oxford clay. Fletton bricks are sold under the London brand, which is aimed principally at the refurbishment and improvement market. At current rates of production, UK Building Products’ fletton clay reserves equate to approximately 50 years’ production. The Kempston brand consists of a range of extruded bricks produced at a number of factories and is targeted at the housing and specification markets. The Butterley brand uses a wide variety of raw materials and processes and provides a large range of facing bricks, pavers and specials for housing and architectural specification work. At current rates of production, UK Building Products’ non-fletton reserves equate to approximately 35 years’ production. As part of the arrangements for the sale of the Continental European brick operations, a long term supply agreement has been agreed with Wienerberger AG for the supply of Desimpel bricks to UK Building Products. The Desimpel brand consists of top quality bricks (including soft-mud bricks) manufactured in Belgium, the Netherlands and France and imported into the United Kingdom at strategic locations. This has widened the choice of bricks available in the United Kingdom and has opened up a valuable niche market.

 

UK Building Products expanded its own UK soft-mud brick capacity in fiscal 2002 with the acquisition of a factory in the Midlands from Red Bank Manufacturing Company that produces 17 million bricks per annum and has the capacity to increase output.

 

From 21 factories throughout the United Kingdom, UK Building Products’ concrete products operations supply concrete pipes, manholes, concrete blocks and ancillary products. During fiscal 2000, Hanson UK Building Products expanded its product range into concrete flooring products with its acquisition of Birchwood Concrete Products and Birchwood Omnia, and further strengthened its position in this market with the acquisition of Marshalls Flooring in fiscal 2002.

 

Hanson Australia

 

With the acquisition of Pioneer, Hanson became a leading supplier of construction materials in Australia focused on ready-mixed concrete (over 220 plants) and aggregates (45 quarries). Hanson Australia (trading as Pioneer) has national coverage in Australia with a presence in every metropolitan and major regional centre. During fiscal 2002, Hanson Australia’s operations produced over 18 million tonnes of aggregates and almost five million cubic metres of ready-mixed concrete. Hanson Australia sold its roof tiles business in November 2001 to Bristile for Australian $16 million (£6.4 million), leaving Hanson Australia with a small remaining masonry products business in Queensland, as well as a small landfill business operating in Victoria and, through a joint venture, in Western Australia.

 

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Hanson Australia’s major interests outside ready-mixed concrete and aggregates quarries include its 50% share in various joint venture companies, the three most significant of which are Australian Cement Holdings Pty Ltd (“ACH”), jointly owned with CSR Ltd, which operates cement plants in New South Wales and Tasmania capable of producing over 1.2 million tonnes of cement annually; Pioneer Road Services Pty Ltd, jointly owned with Shell, a national asphalt and contracting business capable of producing over 1.2 million tonnes of asphalt annually; and Metromix Pty Ltd, a ready-mixed joint venture with CSR Ltd, with eight ready-mixed concrete plants. Including employees in joint venture arrangements and associates Hanson Australia employs over 3,800 people across Australia.

 

In November 2002, Hanson and CSR Ltd announced their intention to merge their interest in ACH with Queensland Cement Ltd (“QCL”), a wholly owned subsidiary of Holcim Ltd, to create the leading cement manufacturer in Australia with over 3 million tonnes of capacity. Each of Hanson and CSR Ltd will have a 25% interest and Holcim Ltd, a 50% interest, in the joint venture. The arrangement is subject to formal contracts, and additional due diligence.

 

Hanson Pacific

 

As part of its strategy to diversify its geographical presence, Hanson, during fiscal 1999, acquired through various transactions six aggregates quarries, six ready-mixed concrete plants and three asphalt plants in Malaysia and concrete products, ready-mixed concrete and asphalt businesses in Singapore.

 

The Pioneer acquisition provided a significant increase in scale and spread for Hanson Pacific. Hanson Pacific now has operations in six countries in Asia, covering China, Hong Kong, Malaysia, Singapore, Indonesia and Thailand, with one of the leading positions in aggregates and ready-mixed concrete in Hong Kong and Malaysia and in asphalt in Malaysia and Singapore constituting the major part of the Hanson Pacific division. In fiscal 2002 Hanson Pacific produced almost 17 million tonnes of aggregates, over three million tonnes of asphalt and over 5.5 million cubic metres of ready-mixed concrete. At the end of fiscal 2002, Hanson Pacific had entered into an agreement to sell its 50% interest in its small ready-mix concrete joint venture in India. The sale completed in February 2003.

 

In Hong Kong and China, Hanson Pacific operates four aggregates quarries and 12 ready-mixed concrete plants, employing approximately 670 people. In Singapore, Hanson Pacific operates five ready-mixed concrete plants, two asphalt plants and one concrete products plant and employs over 250 people. In Malaysia, following the acquisition by Hanson Pacific in April 2001 of the 50% of the aggregates and asphalt joint venture with the Sunway Holdings group which it did not previously own for £36.7 million, Hanson Pacific operates 20 quarries and 19 asphalt plants. Hanson Pacific also had a 50% interest in a ready-mixed concrete joint venture arrangement in Malaysia with an associated company of the Sunway Holdings group. In May 2002, Hanson entered into an agreement to acquire the 50% interest in the ready-mixed concrete joint venture not already owned by it for a sum of £2.1 million, and completion of the agreement took place in August 2002. Hanson Pacific now owns 59 ready-mixed concrete plants throughout Malaysia. Hanson Pacific employs over 1,500 people in Malaysia. With four aggregates quarries and over 30 ready-mixed concrete plants in the remaining countries in this division, Hanson Pacific employs over 1,400 people.

 

Discontinued Operations

 

The completion of the sale of the Continental European brick operations took place in April 2002 for £39.3 million. During fiscal 2002, HBMA also disposed of Aggregate Haulers for £3.3 million in April, an asphalt batch plant in New York in September for £2.4 million and a ready-mixed concrete and aggregates operation in Minnesota in December for £4.0 million. The Company’s 50% interest in North Texas Cement Company was sold for £78.8 million on January 3, 2003.

 

The completion of the £185.0 million sale of the waste management division of HBME took place in January 2001. In fiscal 2001, waste management contributed turnover of £6.8 million and operating profit of £0.6 million. In fiscal 2000, waste management contributed turnover of £74.7 million and operating profit of £13.0 million. In May 2001, HBMA sold its quarrying operations in Utah for £17.3 million. In fiscal 2000 these operations contributed turnover and operating profit of £16.3 million and £0.8 million respectively. In September 2001, HBMA sold its quarrying operations in Las Vegas for £13.6 million. In fiscal 2000, these operations contributed turnover of £42.9 million and an operating loss of £1.8 million. Other operations, which includes the investment in Pioneer Roof Tiles, were sold for an aggregate consideration of £10.7 million in fiscal 2001. These operations contributed turnover of £17.2 million and operating profit of £0.7 million in fiscal 2000.

 

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Joint Ventures and Associates

 

At the end of fiscal 2002, Hanson had interests in a number of privately held companies, the principal ones being Midland Quarry Products Ltd (“Midland Quarry Products”) and United Marine Holdings Ltd (“UMH”) in the United Kingdom; Campbell Concrete & Materials LP (“Campbell”) and Piedras y Arenas Baja S. de R.L. de C.V. (“PAB”) in North America; and Australian Cement Holdings Pty Ltd (“ACH”), Pioneer Road Services Pty Ltd (“Pioneer Road Services”) and Metromix Pty Ltd (“Metromix”) in Australia. A brief description of each of these companies is set out below.

 

Midland Quarry Products

 

Midland Quarry Products, a UK company in which Hanson held a 49.99% interest at December 31, 2002, is a joint venture arrangement with the Tarmac group. In December 1996, HQPE and Tarmac Quarry Products Ltd merged their respective hardstone quarrying and asphalt manufacturing operations in the English midlands, creating a significant business in this area. Three Hanson representatives currently serve on Midland Quarry Products’ six member board of directors.

 

UMH

 

UMH, a UK company in which Hanson holds a 50% interest at December 31, 2002, is a joint venture with the Tarmac group, which operates four dredgers and a number of wharves either directly or through joint ventures, selling sand and gravel predominantly to the UK market. Three Hanson representatives currently sit on the six member board of directors.

 

Campbell

 

Campbell is a 50% partnership based in Texas with Constar Inc., a Heidelberger Zement AG company. Its principal activity is the manufacture and distribution of ready-mixed concrete from 24 facilities in Texas. Additionally, it operates 12 stabilised base plants in the Houston market and produces sand and gravel from two quarries in that market. Two Hanson representatives currently sit on the four member management board.

 

PAB

 

Hanson holds a 50% interest, with Grupo Amaya Curiel, S.A. de C.V. holding the other 50% interest, in three equivalent joint venture companies based in Ensenada, Mexico. Collectively, these joint venture companies produce sand and crushed stone near Ensenada, Mexico for export by marine barges to ports in southern California. Hanson subsidiaries in San Diego and Los Angeles, California are their principal customers. Two Hanson representatives currently serve on the four member boards of each company.

 

ACH

 

ACH, an Australian incorporated company, is a 50% joint venture with CSR Ltd which manufactures and distributes cement and related products. It operates from six sites in New South Wales, Victoria and Tasmania in Australia. Hanson has two representatives on the four member board of directors. In fiscal 2002, Hanson and CSR Ltd announced their intention to merge their interest in ACH with Queensland Cement Ltd, a wholly owned subsidiary of Holcim Ltd, with each of Hanson and CSR Ltd retaining a 25% interest in the merged entity.

 

Pioneer Road Services

 

Pioneer Road Services is a 50% joint venture with a subsidiary of the Shell group in asphalt production and laying, with 34 production sites based in Australia, Hong Kong, Shanghai and Papua New Guinea. Hanson has two representatives on the four member board of directors.

 

Metromix

 

Metromix is a 50% ready-mixed joint venture with CSR Ltd based in New South Wales, Australia, with eight production sites. Hanson has two representatives on the four member board of directors.

 

Seasonality

 

Seasonality is a significant factor affecting all of Hanson’s operations. In Hanson’s major markets in the United States, the United Kingdom and northern continental Europe, activity is very much concentrated during the period between March and November, while the winter in Australia and the rainy season and Chinese New Year in Asia Pacific cause a material slow-down in operations during these periods. Unusual weather patterns, in particular heavy and sustained rainfall, during peak construction periods can cause significant delays and have an adverse impact on Hanson’s businesses.

 

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Sources and Availability of Raw Materials

 

Except as otherwise specifically identified above, Hanson generally owns or leases the real estate on which the raw materials, namely aggregates and clay reserves, essential to its main businesses are found, although in the case of the marine businesses of HBME and HBMA, it operates under licences from the relevant national and local authorities.

 

Hanson is also a significant purchaser of certain important materials such as cement, bitumen, gas, fuel and other energy supplies, the cost of which can fluctuate by material amounts and consequently have an adverse impact on Hanson’s businesses. Hanson is not generally dependent on any one source for the supply of these products, other than in certain jurisdictions with regard to the supply of gas and electricity. Competitive markets generally exist in the jurisdiction in which Hanson operates for the supply of cement, bitumen and fuel. In fiscal 2002, percentage price changes in the cement market ranged from a decrease of 12.8% in Asia to an increase of 7.5% in Australia. Bitumen prices are affected by general oil price changes which in fiscal 2002 rose across Hanson’s operations, ranging from 10% in Europe to 19.6% in Asia.

 

Sales and Marketing

 

Although sales and marketing activities are more important in connection with Hanson’s brick business in both the United States and the United Kingdom, where branding of the product is a factor, in general the nature of the group’s major products, i.e. rock, sand, gravel and concrete, and the cost of transportation mean that marketing and selling is conducted on a more localised basis, with an emphasis on service and delivery. Sales and marketing costs tend to be relatively low in relation to the overall delivered price of Hanson’s products.

 

Governmental Regulation (including Environmental)

 

Many products produced by Hanson’s operating units are subject to government regulation in various jurisdictions regarding their production and sale. Hanson believes that its operating units have taken, and continue to take, measures to comply with applicable laws and government regulations in the jurisdictions in which they operate so that the risk of sanctions does not represent a material threat to any of the operating units individually or to Hanson as a whole. Hanson also believes that compliance with these regulations does not substantially affect the ability of its subsidiaries to compete with similarly situated companies.

 

In addition to the regulatory framework described above, Hanson’s operating units are subject to extensive regulation by national, state and local agencies concerning such matters as zoning, environmental and health and safety compliance. In addition, numerous governmental permits and approvals are required for Hanson’s operations. Hanson believes that its operating units are currently operating in substantial compliance with, or under approved variances from, various national, state and local regulations. Hanson does not believe that such compliance will materially adversely affect its business or results of operations. In the past, Hanson’s subsidiaries have made significant capital and maintenance expenditures to comply with zoning, water, air and solid and hazardous waste regulations and these subsidiaries may be required to do so in the future. From time to time, various agencies may serve cease and desist orders or notices of violation on an operating unit or deny its applications for certain licences or permits, in each case alleging that the practices of the operating unit are not consistent with the regulations or ordinances. In some cases, the relevant operating unit may seek to meet with the agency to determine mutually acceptable methods of modifying or eliminating the practice in question. Hanson believes that its operating units should be able to achieve compliance with the applicable regulations and ordinances in a manner which should not have a material adverse effect on its business, financial condition or results of operations.

 

Approximately 95 present and former US operating sites, or portions thereof, currently or previously owned and/or leased by current or former companies acquired by Hanson (responsibility for which remains with a member of the Hanson group) are the subject of claims, investigations, monitoring or remediation under the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the federal Resource Conservation and Recovery Act or comparable state statutes or agreements with third parties. These proceedings are in various stages ranging from initial inquiries to active settlement negotiations to implementation of response actions. In addition, a number of present and former Hanson operating units (responsibility for which remains with a member of the Hanson group) have been named as Potentially Responsible Parties (“PRPs”) at approximately 40 off-site landfills under CERCLA or comparable state statutes. In each of these matters the Hanson operating unit is working with the governmental agencies involved and other PRPs to address environmental claims in a responsible and appropriate manner. A substantial majority of these operating and landfill sites are covered by the environmental insurance policy referred to in Item 10C “Material Contracts” of this Annual Report.

 

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Hanson does not believe that any of the proceedings relating to operating sites and off-site landfills not covered by the environmental insurance policy will materially adversely affect its business, financial condition or results of operations. At December 31, 2002, Hanson had accrued £177.2 million for environmental obligations, including legal and other costs, at such sites as are not covered by the above-mentioned environmental insurance policy. Costs associated with environmental assessments and remediation efforts are accrued when determined to represent a probable loss and to be capable of being reasonably estimated. There can be no assurance that the ultimate resolution of these matters will not differ materially from Hanson’s estimates.

 

Hanson cannot predict whether future developments in laws and regulations concerning environmental and health and safety protection will affect its earnings or cash flow in a materially adverse manner or whether its operating units will be successful in meeting future demands of regulatory agencies in a manner which will not materially adversely affect Hanson’s business, financial condition or results of operations.

 

For other legal proceedings against Hanson, see “Legal Proceedings” in Item 8A “Consolidated Statements and Other Financial Information” of this Annual Report.

 

Patents and Trademarks

 

Hanson’s operating units have various United States and foreign patents, registered trademarks, trade names and trade secrets and applications for, or licences in respect of, the same that relate to various businesses. Hanson believes that certain of these intellectual property rights are of material importance to the businesses to which they relate. Hanson believes that the material patents, trademarks, trade names and trade secrets of its operating subsidiaries and divisions are adequately protected and that the expiration of patents and patent licences will not have a material adverse effect upon Hanson’s business, financial condition or results of operations.

 

Item 4C Organisational Structure

 

Hanson is the holding company of the Hanson group of companies. Its significant subsidiaries are set out below (each listed subsidiary being a wholly owned subsidiary of the Hanson group):

 

 

Company


    

Country of incorporation or residence


 

Field of activity


Hanson Quarry Products Europe Ltd

    

The Ridge

Chipping Sodbury

Bristol BS17 6AY

UK

 

Supply of aggregates and

other materials and services

to the construction industry

Aylett Corporation

    

PO Box 280

Hirzel House

 

Investment

      

Smith Street

   
      

St. Peter Port, Guernsey

   
      

Channel Islands GY1 4LS

   

Harshaw Incorporated

    

PO Box 280

Hirzel House

Smith Street

St. Peter Port, Guernsey

Channel Islands GY1 4LS

 

Investment

Hanson Pipe and Products, Inc.

    

2900 Terminal Avenue

Richmond, Virginia 23234

USA

 

Concrete pipe and

products producer

Hanson Aggregates Southeast, Inc.

    

100 Crescent Centre Parkway

Crescent Centre Suite 1240

Tucker, Georgia 30084

USA

 

Aggregates producer

 

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Item 4D Property, Plants and Equipment

 

As of December 31, 2002, Hanson’s operating units owned 1,041 plants and other properties, of which 303 were located in the United Kingdom, 36 were located in continental Europe, 427 were located in North America, 267 were located in Australia and eight were located in Asia. The remaining properties of Hanson’s operating units throughout the world, including other manufacturing facilities, warehouses, stores and offices, were leased. None of the individual properties is considered to have a value that is significant in relation to Hanson’s assets as a whole. For a description of certain environmental issues that may affect Hanson’s utilisation of its assets, see “Governmental Regulation (including Environmental)” under Item 4B “Business Overview” of this Annual Report.

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