Argus Corporation Limited: Status Update Report.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Argus Corporation Argus Corporation, based in Toronto, Ontario, is an investment and holding company founded in 1945 by its President E. P. Taylor with minority partners Colonel W. Eric Phillips and Wallace McCutcheon and other investors. Limited ("Argus") (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :AR.PR.A)(TSX:AR.PR.D)(TSX:AR.PR.B) today provided a status update of developments since its last Status Update Report was filed on February 18, 2005. Argus provides updates on its affairs on at least a bi-weekly basis (each a "Report"), normally every second Friday. These Reports are to continue until Argus is able to meet its public filing obligations. They are made in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with certain guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. of the Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. (the "OSC O.S.C. n. short for Order to Show Cause. (See: Order to Show Cause) "). A Management and Insider Cease Trade Order was issued by the OSC with respect to the management and insiders of Argus on June 3, 2004 (the "Order"). The Reports that have been filed since then, including certain alternative financial reporting, are available to review at www.sedar.com. The Order was issued as Argus did not file its financial statements and related information when required, dating back to those required for the First Quarter of 2004. Argus was unable to prepare and file this information as it is required to consolidate its financial statements with those of Hollinger Inc. ("Hollinger") which were not available. Hollinger in turn was unable to prepare and file its financial statements as the financial statements of Hollinger International Inc. ("International") were not available. Argus owns or controls 61.8% of the Retractable re·tract v. re·tract·ed, re·tract·ing, re·tracts v.tr. 1. To take back; disavow: refused to retract the statement. 2. Common Shares (the "Common Shares") of Hollinger. Hollinger in turn owns 66.8% of the voting shares Voting Shares Shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors. Notes: Different classes of shares, such as preferred stock, sometimes don't allow for voting rights. and 17.4% of the equity of International. As the Common Shares of Hollinger held by Argus are its only significant asset, developments of Hollinger and International are material to Argus. Accordingly, certain financial information and an update as to the preparation and filing of financial statements and other related matters by Argus and its subsidiary Hollinger and, in turn, International is included in this Report. Hollinger and International are each also subject to Management and Insider Cease Trade Orders issued on June 1, 2004 for their failure to file financial statements and related reports when required. Proposed Privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned of Hollinger Shareholders Meeting Status On February 15, 2005, Hollinger announced that it would provide notice of a proposed special meeting of shareholders to be held on March 31, 2005 to consider the proposed share consolidation going private transaction involving Hollinger that had been announced on October 28, 2004. Hollinger announced that it took that step on February 15, 2005 solely to preserve the ability for it to convene CONVENE, civil law. This is a technical term, signifying to bring an action. a special meeting of shareholders to approve the proposed transaction on March 31, 2005 from a consideration of notice requirements. Hollinger is currently reviewing these matters. The Motion The Independent Directors of Hollinger (the "Independent Directors") and Hollinger have brought a Motion seeking advice and directions whether in all circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or the proposed privatization transaction should be put to a vote of minority public shareholders of Hollinger before the Report of Ernst & Young Inc. (the "Inspector") is made available (the "Motion"). The Inspector is presently conducting an inspection of Hollinger's related party transactions (the "Inspection"). Certain additional relief has been requested by the Independent Directors in the Motion including Orders approving (i) a payment of Cdn. $10,000,000 to an indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. fund of Hollinger to cover any costs associated with potential litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. against them, (ii) a payment of $500,000 to an indemnity fund of Hollinger to indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which two Hollinger financial executives, and (iii) the retention of the Independent Directors involving some compensation without particulars being provided. The Motion is to be heard before the Honourable honourable or US honorable Adjective 1. principled 2. worthy of respect or esteem honourably adv Honourable Adjective Justice Colin L. Campbell of the Superior Court of Ontario (the "Court") on Monday, March 7, 2005. Argus is seeking the leave of the Court to have the right to comment on the Motion as it has been previously granted the right with respect to the Inspection proceedings. Notices of Motion for leave to intervene intervene v. to obtain the court's permission to enter into a lawsuit which has already started between other parties and to file a complaint stating the basis for a claim in the existing lawsuit. and make submissions with respect to the Motion have also been received from Lawrence & Company, Inc. and Kenneth R. McLaren of Vancouver, British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography . Proposed Privatization Transaction The proposed going private transaction is to be structured as a share consolidation and retirement of Hollinger shares held by parties other than Argus and The Ravelston Corporation Limited Ravelston Corporation Limited is a Canadian holding company that was largely controlled by Conrad Black and business partner David Radler. It held shares in Black's other holding companies, such as Hollinger International, now known as Sun-Times Media Group. ("Ravelston") directly and indirectly. Ravelston has agreed to support the proposed privatization on the basis that (i) holders of Common Shares (other than Ravelston and certain of its affiliated entities including Argus) would receive Cdn. $7.25 in cash for each Common Share held by them, and (ii) holders of Series II Preference Shares of Hollinger (each a "Series II Share") would receive 0.46 of a share of Class A Common Stock of International for each Series II Share held by them. Position of Argus Argus intends to determine its position with respect to the proposed privatization when it receives further terms and sufficient information such as would be contained in a Proxy Circular with respect to any meeting of shareholders of Hollinger. It is contemplated that Argus would hold a greater percentage of the Common Shares of Hollinger following the proposed going private transaction. Hollinger would be a private company without the public company liquidity that currently exists. Current Status of Financial Reporting Hollinger's Current Financial Reporting Hollinger today released financial information in the form of an unaudited consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as at September 30, 2004, together with notes, prepared on an alternative basis (the "Hollinger Alternative Financial Information"). The Hollinger Alternative Financial Information includes the accounts of Hollinger and those wholly-owned subsidiaries which carry out head office functions and which do not represent investments. Investments in other companies and subsidiaries such as International are not consolidated but rather are carried as investments and are accounted for at their market value. The Hollinger Alternative Financial Information was prepared by management of Hollinger. It was not audited or reviewed by Zeifman and Company LLP LLP - Lower Layer Protocol , Hollinger's auditors AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together . Hollinger has been unable to file its statutory financial statements as at and for the year ended December 31, 2003 and the first three quarters of 2004 as a result of a series of difficulties Hollinger has experienced, including Hollinger's loss of control of Hollinger in or about November, 2003 and continued insufficient co-operation by International and its auditors. The financial statements that Hollinger released may be reviewed online at www.sedar.com. International's Current Financial Reporting International has filed its audited financial statements for the fiscal year ended December 31, 2003 with a Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. with the U.S. Securities and Exchange Commission (the "SEC") and with an Annual Information Form with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . International has not yet filed statements for the first three Quarters of 2004 or for the year ended December 31, 2004. Hollinger's Current Financial Reporting Hollinger has been unable to prepare and file its audited financial statements for 2003 and its related Management's Discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial ("MD&A") as generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") require the consolidation of Hollinger's operations to the date of Hollinger's loss of control of International, and Hollinger has not yet been able to arrange for International's cooperation to facilitate such consolidation. Hollinger has therefore also been unable to prepare its statements for the first three Quarters of 2004 and the related MD&As other than the Hollinger Alternative Financial Information that it filed today. Argus' Current Financial Reporting Argus filed its 2003 audited financial statements on a market valuation basis as it had done historically which was then in compliance with GAAP. However, Argus is now required to consolidate its financial statements with those of Hollinger for fiscal periods beginning after January 1, 2004 due to a change in GAAP. As a result of the change in accounting policy and as Hollinger has not prepared its financial statements for each of the first three Quarters of 2004, Argus has been unable to prepare financial statements in compliance with GAAP for each of those Quarters. Argus has instead provided its Reports pursuant to the Order. Argus has filed financial statements for the first three Quarters of 2004 that were presented as alternative financial information. These statements were appended to its Reports dated August 19 and November 12, 2004 and may be reviewed online at www.sedar.com. Future Financial Reporting Each of International, Hollinger and Argus need to prepare and file their financial statements as required by GAAP and related MD&As in order to normalize normalize to convert a set of data by, for example, converting them to logarithms or reciprocals so that their previous non-normal distribution is converted to a normal one. its financial reporting and to have its respective Management and Insider Cease Trade Order lifted. International's Future Financial Reporting International has stated that it intends to file its financial statements for the first three Quarters in 2004 with the SEC within two months and that it will be working expeditiously ex·pe·di·tious adj. Acting or done with speed and efficiency. See Synonyms at fast1. ex to file Form 10-K with its financial statements for the fiscal year ended December 31, 2004 (the "2004 10-K"). International stated that its 2004 Form 10-K is due to be filed with the SEC on March 16, 2005 but that it intended to file a request with the SEC for a fifteen-day extension to March 31, 2005. International noted, however that it may not be able to complete and file its 2004 10-K by March 31, 2005 due to the anticipated work involved in the audit. International announced that appropriate filings with respect to these financial statements would be made on Forms 10-K, 10-Q and 8-K with the U.S. Securities and Exchange Commission (the "SEC") and in Canada. Hollinger's Future Financial Reporting Hollinger and International continue to negotiate with respect to arrangements that would permit Hollinger to complete and file its financial statements for the year ended December 31, 2003 and the first three Quarters of 2004. Argus' Future Financial Reporting Argus will be unable to prepare financial statements consolidated with those of Hollinger and bring its financial reporting up to date until Hollinger has prepared its financial statements. Argus is however unable to determine when it may complete its financial statements consolidated with those of Hollinger. Argus' intention is to prepare consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge with those of Hollinger as soon as practicable practicable adj. when something can be done or performed. after Hollinger files its statements. Argus anticipates next filing such alternative financial information for the fiscal year ended December 31, 2004. Argus further contemplates that it will need to continue to file alternative financial information for current and upcoming financial periods that do not consolidate Hollinger. Financial Position of Argus Argus had Cdn. $131,068 of cash as of the close of business on March 4, 2005. Argus indirectly owns 21,596,387 Common Shares of Hollinger with a market value at the close of trading on March 4, 2005 on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. of Cdn. $6.35 per share or an aggregate of Cdn. $137,137,057. The market value of its shareholdings is subject to the minority interest of Ravelston, the parent of Argus. The amount of that minority interest was stated to be Cdn. $20,585,670 at September 30, 2004. The market value of the shareholdings is also subject to future income taxes on unrealized net capital gains. That amount was stated to be Cdn. $14,793,176 at September 30, 2004. At that date, the value of Argus' investment in Common Shares of Hollinger was Cdn. $86,385,548. Ravelston holds all of the Common Shares and Class C Preference Shares of Argus and 2,900 of Argus' 55,893 issued Class A Preference Shares $2.60 Series. Argus is indebted in·debt·ed adj. Morally, socially, or legally obligated to another; beholden. [Middle English endetted, from Old French endette, past participle of endetter, to oblige to Ravelston in the amount of Cdn. $251,703 in respect of a loan provided by Ravelston to permit Argus to pay dividends on its Class A and Class B Preference Shares. The loan was made on January 31, 2005 pursuant to a promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. . It bears no interest and is due to be repaid on February 28, 2006. Dividends Argus intends to make efforts to ensure that it will be able to pay its next scheduled regular quarterly dividends on its Class A and Class B Preference Shares on May 1, 2005 which are currently estimated to be Cdn. $251,703. Argus presently requires additional funds to be able to pay the May 1, 2005 and future dividends on an uninterrupted basis. Hollinger's Financial Position Cash Hollinger announced on February 21, 2005 that it and its subsidiaries (excluding International and its subsidiaries) had approximately US $42.6million of cash or cash equivalents at the close of business on February 18, 2005. Certain of these funds are subject to an escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. arrangement with the SEC. Hollinger also had at that date approximately US $10.5 million of cash that was deposited as collateral for its borrowings. It earlier reported that it was entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to apply this amount towards future interest payments on certain secured borrowings. On February 10, 2005, Hollinger directed that US $5,021,250 of that cash be paid towards the payment of interest due on March 1, 2005 on its outstanding US $78 million of Senior Notes. Interest on Hollinger's US $15 million principal amount of outstanding 11.875% Second Priority Secured Notes due 2011 (the "Second Priority Notes") which was also due on March 1, 2005 was to be paid from the company's cash resources. Shareholdings Hollinger announced on February 21, 2005 that it continued to directly or indirectly hold 782,923 shares of Class A Common Stock and 14,990,000 shares of Class B Common Stock of International as of February 18, 2005. Based on the closing price of the Class A Common Stock of International on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (the "NYSE NYSE See: New York Stock Exchange ") at the close of business on March 4, 2005 of US $11.50 and the number of shares of Class A Common Stock and Class B Common Stock of International owned by Hollinger at February 18, 2005, the market value of Hollinger's direct and indirect holdings in International is US $ 181,388,615. Security Given All of Hollinger's interest in the shares of Class A Common Stock of International is being held in escrow with a licensed trust company in support of future retractions of its Series II Shares. All of Hollinger's interest in the shares of Class B Common Stock of International is pledged as security in connection with US $78 million of Senior Secured Notes and US $15 million of Second Priority Notes issued by it. Current Excess of Collateral to Certain Security On February 21, 2005, Hollinger announced that, on the basis of the closing price of the Class A Common Stock of International on the NYSE on February 18, 2005 of US $14.10 per share and its cash position at February 18, 2005, it then had in excess of US $180.9 million aggregate collateral securing the US $78 million principal amount of the Senior Secured Notes and the US $15 million principal amount of the Second Priority Notes that were outstanding. Future Dividends Hollinger was to receive US $47,318,769 on account of a special dividend that International declared on January 27, 2005. The special dividend of US $3.00 per share was to be paid on March 1, 2005 by International on its Class A Common Stock and Class B Common Stock to the holders of record on February 14, 2005. Inspection of Hollinger The Inspector is to inform the Court in the first week of March of a date by the end of March by which it is to present to the Court its priorities for the Inspection. Hollinger announced on February 7, 2005 that its costs of the Inspection (including those of the Inspector and legal counsel for the Inspector and Hollinger) was then in excess of Cdn. $4.25 million. Argus is a related party for purposes of the Inspection as it owns approximately 61.8 percent of the Common Shares of Hollinger. Argus has cooperated with the Inspector in connection with the Inspection and has provided access to its documents and records to the Inspector. Litigation Developments Ravelston's Motion for Leave to appeal the earlier dismissal of its Anti-Suit Motion with respect to the claims of International was dismissed on February 28, 2005 by the Honourable Justice Power of the Ontario Divisional Court. Other International Developments For additional information on developments respecting International, reference can be made to its online public filings at either www.hollingerinternational.com or http://www.sec.gov/edgar.shtml. Other Hollinger Developments For additional information on developments respecting Hollinger, including a more-detailed review of the terms of the proposed share consolidation and privatization, reference can be made to its public filings online at www.hollingerinc.com, www.hollinger.com or www.sedar.com. There has been no other material change from the information contained in the Status Update Report of Argus issued on February 18, 2005. ARGUS CORPORATION LIMITED (TSX:AR.PR.A) (TSX:AR.PR.D) (TSX:AR.PR.B) |
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