BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 OPERATING ACTIVITIES Profit before tax 501,042 609,355 238,303 297,958 Add : Interest expense 267,125 275,304 183,934 213,864 Currency swap cost 138,468 63,859 127,699 - Less : Share of profits less losses in subsidiary and associated companies (58,671) (2,034) (149,019) (233,991) Interest income (101,986) (83,532) (166,874) (54,036) Profit before investment/finance income and expense 745,978 862,952 234,043 223,795 Allowance for doubtful accounts 3,875 38,638 2,161 30,157 Depreciation and amortization 550,721 552,356 86,205 94,090 Provision for loss on loan to related parties - - 9,000 - Provision against diminution in value of assets 17,000 - - - Deferred charges written off 6,260 9,885 - - Book value of property, plant and equipment written off 1,967 1,190 1,125 8 Gain on disposal of property, plant and equipment (6,069) (675) (2,688) (735) Loss (gain) on disposal of investments 607 (68) 607 (68) Provision for staff retirement benefits 52,377 10,000 29,288 10,000 (Gain) loss on conversion of foreign currency borrowings (141,806) 161,029 (96,945) 84,763 (INCREASE) DECREASE IN WORKING CAPITAL Accounts receivable 54,008 (266,018) 203,975 (29,551) Inventories 121,518 (114,849) 189,213 (27,432) Other current assets (9,858) (48,347) (12,933) (34,654) Loans to other companies 1,350 1,350 - - Other assets 1,950 (7,275) (9) (97) Accounts and notes payable (209,421) 281,992 (215,108) 53,289 Accounts payable - related parties - - (91,478) (40,737) Accrued expenses 154,402 80,238 2,384 (57,602) Other current liabilities (67,636) 8,159 6,629 (14,011) Loans from directors and employees (259) 958 384 959 Long-term lease deferred income (4,207) (1,407) (4,207) (1,407) Staff reitrement benefits (29,195) - (21,425) - Other liabilities 16,620 (762) 16,620 (762) Net cash inflow from operating activities 1,260,182 1,569,346 336,841 290,005 INCOME TAX PAID (75,896) (327,028) (24,562) (68,331) See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 INVESTING ACTIVITIES Purchases of short-term investments - (2,031) - (2,031) Loans and advances to related parties (161,577) (167,664) (444,724) (12,829) Purchases of investments in related parties (net of cash and cash equivalents acquired) (1,667,732) (373,730) (1,365,001) (416,614) Purchases of investments in other companies (22,500) (42,210) (22,500) (42,210) Purchases of property, plant and equipment (726,668) (436,584) (57,567) (53,274) Deferred charges paid (7,099) (27,337) - - Disposal of short-term investments - 266 - 266 Disposal of investments in related parties (net of cash and cash equivalents disposed) 4,920 - 4,920 4,500 Disposals of investments in other companies 1,896 - 1,896 - Disposal of property, plant and equipment 7,251 3,711 3,179 1,347 Interest received 94,576 121,015 159,545 54,100 Divedend received 6,745 1,230 67,449 237,927 Net cash outflow from investing activities (2,470,188) (923,334) (1,652,803) (228,818) FINANCING ACTIVITIES Net (decrease) increase in borrowings (1,626,667) 71,792 (1,712,016) 344,109 Gain on currency hedging contracts received 339,750 - 322,040 - Currency swap cost paid (82,734) (16,080) (71,022) - Interest paid (256,240) (293,001) (182,944) (233,302) Deferred financing charges paid (2,669) (3,902) (2,669) (3,902) Proceeds from increase in share capital 4,028,424 - 4,028,424 - Issue of shares to minority interests 15,000 - - - Dividend paid (105,394) (219,450) (105,394) (219,450) Dividend paid to minority interests (23,787) (117,963) - - Net cash inflow (outflow) from financing activities 2,285,683 (578,604) 2,276,419 (112,545) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 999,781 (259,620) 935,895 (119,689) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 240,446 407,157 205,243 187,006 EXCHANGE TRASLATION (6,111) (1,481) - - CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 3) 1,234,116 146,056 1,141,138 67,317 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION Since the middle of 1997, certain Asia Pacific countries, including Thailand, have been experiencing economic difficulties relating to currency devaluation and slowdown in growth. The Thai government has sought assistance from the International Monetary Fund to alleviate the economic crisis and improve the economy over time. The financial statements for the period ended September 30, 1998 reflect an assessment of the possible impact of this economic situation on the financial position of the Company. The ultimate effect on the group's financial position of these uncertainties cannot, however, presently be determined. NOTE 2 - BASIS OF CONSOLIDATION The Group comprises Berli Jucker Public Company Limited and its subsidiaries. Basis of Presenting the Consolidated Financial Statements The accompanying consolidated financial statements of Berli Jucker Public Company Limited and its subsidiaries have been prepared in accordance with generally accepted accounting principles and in compliance with the Commerce Ministerial Regulation No. 7 (B.E. 2539) dated October 25, 1996 issued under The Public Company Act B.E. 2535. Principles of Consolidation The accompanying consolidated financial statements for the nine-month periods ended September 30, 1998 and 1997 include the accounts of the Company, and its five wholly owned and fourteen majority-owned subsidiaries in 1998 and its five wholly owned and thirteen majority-owned subsidiaries in 1997. Significant intercompany transactions and accounts are eliminated from the consolidated financial statements. Companies in which the Group has shareholdings of between 20% and 50% are classified as associated companies. The equity method of accounting is adopted for associated companies so as to reflect the Groups share of its profits less losses and net assets in these companies in the financial statements. Investments of less than 20% in other companies are accounted for on the cost method under which dividends declared during the year are included in the consolidated statements of income. Profits or losses on sale of investments are determined by the specific identification method. The assets of acquired subsidiaries and associates are accounted for at their fair value on the date of acquisition. The difference between these fair values and the original cost of the assets is dealt with under property, plant and equipment for subsidiaries and as part of the equity investment in associates for associated companies. The excess of acquisition costs over the fair value of the net assets of subsidiary and associated companies at their date of acquisition is eliminated against retained earnings. NOTE 3 - BASIS FOR PREPARATION OF THE STATEMENTS OF CASH FLOWS Cash and Cash Equivalents Cash and cash equivalents shown in the statements of cash flows as at September 30, consisted of the following: (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 Cash on hand and at banks 1,276,373 162,957 1,160,390 48,315 Deposits with financial institutions - 40,529 - 40,529 Bank overdrafts (42,257) (57,430) (19,252) (21,527) Cash and Cash Equivalents 1,234,116 146,056 1,141,138 67,317 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounts Receivable Accounts receivable are shown net of allowance for doubtful accounts which is an estimate of those amounts which may prove to be uncollectible based on historical collection experience and a review of the current status of the receivables outstanding at the balance sheet date. Lease Receivable from a Related Party The lease receivable from a related party is carried in the balance sheets at the total of the minimum lease payments due under this lease less unearned interest attributable to future periods. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined on the first-in, first-out basis or average cost basis. Investments in Related Parties and Other Companies In accordance with the regulations of the Stock Exchange of Thailand, investments in subsidiary and associated companies are accounted for on the equity basis so as to incorporate the company's share of its profits less losses and net assets in these companies in the financial statements. The excess of acquisition costs over the fair value of the net assets of subsidiary and associated companies at their date of acquisition is eliminated against retained earnings. Investments of less than 20% in other companies are accounted for on the cost method under which dividends declared during the year are included in the statements of income. Profits or losses on sales of investments are determined by the specific identification method. Property, Plant and Equipment Property, plant and equipment are stated at cost net of accumulated depreciation and amortization. Depreciation and amortization are computed by the straight-line method at the rates of 3-5% for buildings and construction and 10-20% for land improvements and equipment. Leaseholdings are amortized at the rate of 10% or over the related lease terms, whichever is shorter. Deferred Income Tax The Company accounts for deferred income tax by including the income tax effects of all revenues and expenses recorded in the calculation of net income for the year, regardless of when they are recognized for tax purposes. The tax effects of timing differences are reported as deferred income tax in the balance sheets. Long-term Lease Deferred Income Long-term lease premiums received in advance are booked as deferred income and are dealt with under other liabilities in the balance sheets. Income is recognized on a straight-line basis over the duration of the lease. Income recognizable within one year is dealt with as part of other current liabilities. Retirement Benefits The Company and its affiliated companies operate various defined contribution and defined benefit retirement plans for employees. Provisions for the obligations of the Company and its affiliated companies under defined benefit plans are established by reference to expected final employee benefits, length of employee service and staff turnover rates. Revenue Recognition Revenue from sale of goods is recognized at the date of delivery to customers, while revenue from work on contracts is recognized in proportion to work completed and billed. Unbilled costs of work on contracts in process are included inventories. Revenue from long-term installment sales is recognized in the period of sale while interest on installment contracts is recognized as revenue on the basis of installments due during the year. Unearned interest on installment contracts is deducted from accounts receivable in the financial statements. Foreign Currency Accounts Foreign currency transactions during the period are translated into Baht at the rates of exchange prevailing on the relevant transaction dates. Assets and liabilities denominated in foreign currencies at the end of the period are translated into Baht at the rates of exchange prevailing at the balance sheet date or at the relevant forward contract rates. Gain or loss on translation is included in the statements of income. Foreign currency financial statements are translated for the purpose of consolidation using the following rates: a. Assets and liabilities are translated at the rates of exchange prevailing on the balance sheet date. b. Revenues and expenses are translated at average rate. c. Items in the statements of retained earnings and shareholders' equity are translated at the rates prevailing on the dates of the transactions. Translation adjustments in respect of foreign currency financial statements are reported as a separate component of equity. Flotation of the Baht All foreign exchange gains and losses associated with the flotation of the Baht are dealt with in the statements of income. Net exchange gains and losses are disclosed on the face of the statements of income as they are deemed exceptional. Earnings Per Share Earnings per share are computed by dividing net income for the period by the weighted average number of shares outstanding during the period. (More)