BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Amounts in Baht) Consolidated Company 1997 1996 1997 1996 INCOME TAX PAID (348,569,803) (359,883,886) (77,185,915) (84,846,687) INVESTING ACTIVITIES Purchases of short-term investments (2,031,457) (18,610,950) (2,031,457) (18,610,950) Loans and advances from (to) related parties (201,779,946) (10,905,123) (92,699,839) 1,898,174 Purchases of investments in related parties (net of cash and cash equivalents acquired) (426,286,678) - (633,224,268) (128,915,001) Purchases of investments in other companies (57,210,000) (1,515,001) (57,210,000) - Purchases of property, plant and equipment (885,204,621) (516,138,374) (70,536,594) (77,002,067) Deferred charges paid (8,576,779) (17,512,298) - - Disposal of short-term investments 266,163 523,868 266,163 523,868 Disposal of investments in related parties - - 168,300,000 26,584,335 Disposal of property, plant and equipment 6,396,406 33,543,427 2,459,330 5,009,233 Interest received 124,626,344 20,601,050 79,632,400 63,813,950 Dividend received 3,315,000 4,114,200 237,926,803 254,106,331 Net cash (outflow) inflow from investing activities (1,446,485,568) (505,899,201) (367,117,462) 127,407,873 FINANCING ACTIVITIES Net decrease in borrowings (389,215,693) (438,489,328) (297,412,182) (949,404) Gain on currency swap contracts received 800,454,550 35,848,882 800,454,550 35,848,882 Currency swap cost paid (59,328,644) (2,410,973) - - Interest paid (411,311,683) (278,168,061) (334,880,774) (184,877,632) Deferred financing charges paid (3,908,188) (707,808) (3,908,188) (707,808) Issue of shares to minority interests - 25,250,000 - - Dividend paid (219,450,000) (207,900,000) (219,450,000) (207,900,000) Dividend paid to minority interests (117,963,197) (150,173,769) - - Net cash (outflow) inflow from financing activities (400,722,855) (1,016,751,057) (55,196,594) (358,585,962) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (160,485,113) 235,802,040 18,236,231 209,016,348 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 3) 407,157,357 171,355,317 187,006,803 (22,009,545) EXCHANGE TRANSLATION (6,225,553) - - - CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 3) 240,446,691 407,157,357 205,243,034 187,006,803 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AN D SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 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 reflect the assessment of the possible impact of this economic situation on the financial position of the Company. In addition, the ultimate effect on the groups financial position of these uncertainties cannot 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 years ended December 31, 1997 and 1996 include the accounts of the Company, and its five wholly owned and thirteen majority-owned subsidiaries in 1997 and its five wholly owned and eleven majority-owned subsidiaries in 1996. 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 December 31, consisted of the following: (Amounts in Baht) Consolidated Company 1997 1996 1997 1996 Cash on hand and at banks 186,963,864 191,442,287 78,661,956 146,262,372 Deposits with financial institutions 131,121,777 273,072,916 130,000,000 50,000,000 Bank overdrafts (77,638,950) (57,357,846) (3,418,922) (9,255,569) Cash and Cash Equivalents 240,446,691 407,157,357 205,243,034 187,006,803 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 companys 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. Porfits 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 in 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 year 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 year 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 year by the weighted average number of shares outstanding during the year. NOTE 5 - TRANSACTIONS WITH RELATED PARTIES Significant transactions arising in the course of ordinary business between the Company and related parties during 1997 and 1996 were as follows: (Amounts in Baht) Consolidated Company 1997 1996 1997 1996 Sales of goods by the Company to related parties - - 29,919,129 - Purchases of goods by the Company from related parties - - 2,660,345,521 2,800,652,325 Dividend income received from related parties 1,230,000 670,200 237,926,803 254,106,331 Interest income received from related parties 868,579 651,769 51,001,948 53,313,220 Other income received from related parties - - 27,594,148 - Interest expense paid to related parties 355,143 - 2,282,715 617,789 At December 31, 1997 and 1996 the outstanding balances with related parties were as follows: (Amounts in Baht) Consolidated Company 1997 1996 1997 1996 Accounts receivable - related parties - - 14,395,751 3,392,467 Short-term loans and advances to related parties 228,063,464 18,706,873 502,588,540 285,913,071 Lease receivable from a related party - current portion - - 36,000,000 123,500,000 - non-current portion - - 67,500,000 103,500,000 Accounts payable - related parties - - 415,140,860 390,484,719 Short-term loans and advances from related parties 12,534,125 2,500 8,640,664 8,165,034 The lease receivables from a related party represent amounts outstanding under a five year finance lease for machinery and equipment entered into with Cellox Paper Co., Ltd. in November 1995. The lease carries interest at 12% per annum. NOTE 6 - ACCOUNTS RECEIVABLE Accounts receivable as at December 31, consisted of the following: (Amounts in Baht) Consolidated Company 1997 1996 1997 1996 Accounts receivable - trade 2,675,147,487 2,295,658,240 1,624,400,763 1,618,333,600 Installment receivables 375,385,557 462,507,746 375,385,557 462,507,746 Less : Unearned interest on installment contracts (54,163,428) (68,471,230) (54,163,428) (68,471,230) 2,996,369,616 2,689,694,756 1,945,622,892 2,012,370,116 Less : Allowance for doubtful accounts (164,627,730) (124,551,790) (142,430,324) (111,194,301) Total 2,831,741,886 2,565,142,966 1,803,192,568 1,901,175,815 NOTE 7 - INVENTORIES Inventories as at December 31, consisted of the following: (Amounts in Baht) Consolidated Company 1997 1996 1997 1996 Finished products 1,007,163,095 952,882,489 948,400,994 916,058,357 Work in process 90,047,058 60,459,237 - - Raw materials and packing materials 462,017,039 382,029,147 795,968 388,314 Assemblies and spare parts 126,211,027 137,655,837 3,209,728 2,200,839 Other materials 35,304,670 26,863,243 - - Merchandise in transit 112,935,059 95,822,620 62,064,375 52,547,222 Total 1,833,677,948 1,655,712,573 1,014,471,065 971,194,732 NOTE 8 - INVESTMENTS IN RELATED PARTIES AND OTHER COMPANIES Investments in related parties and other companies as at December 31, consisted of the following: (Amounts in Baht) Group- Consolidated Company Type of Business Shareholding 1997 1996 1997 1996 Subsidiary Companies Berli Jucker (Myanmar) Ltd. Import & export 100.00% - - - 2,879,313 Montana Co., Ltd. Sales of cosmetics 100.00% - - 3,414,010 3,199,536 and machinery Polipharm Co., Ltd. Manufacture of 100.00% - - 67,697,507 60,986,717 pharmaceuticals (Amounts in Baht) Group- Consolidated Company Type of Business Shareholding 1997 1996 1997 1996 Siam Snack Co., Ltd Manufacture of 100.00% - - 192,688,198 181,630,009 snack foods Cosma Ltd. Sales of cosmetics 100.00% - - 195,025 191,508 (a subsidiary holds 98.00%) Rubia Industries Ltd. Manufacture of soap, 99.70% - - 151,981,958 183,892,939 cosmetics & confectionery Ganong Ltd. Manufacture 99.70% in 1997 - 4,990,914 - - of candy (a subsidiary holds 100.00%) and 49.85% in 1996 Tropicwood Co., Ltd. Dormant 98.30% - - 4,458,736 20,166,883 Thai Flourspar & Minerals Manufacture of 95.00% - - 21,158,727 21,976,016 Co., Ltd. calcium carbonate Cellox Paper Co., Ltd. Manufacture of 72.35% in 1997 - - 576,738,478 370,406,668 paper products and 54.62% in 1996 Thai-Scandic Steel Co., Ltd. Manufacture of 71.04 % of ordinary - - - 9,264,627 galvanized steel shares in 1997 structures (a subsidiary holds 75.00 %) and 75.00% in 1996 and 100.00% of - - 130,000,000 130,000,000 preference shares Thai Glass Industries PCL. Manufacture of 65.56% in 1997 - - 1,951,237,964 1,844,188,056 (Market value glass containers and 60.02% Baht 1,419.09 million at in 1996 December 31, 1997 and Baht 3,090.01 million at December 31, 1996) Thai Klinipro Co., Ltd. Manufacture of 51.00% - - 37,065,337 30,752,407 surgical gowns Berli Prospack Co., Ltd. Manufacture of 50.00% in 1997 - - 74,226,481 - plastic containers Associated Companies BJC Marine Resources Dormant 50.00% 16,789,660 17,720,360 16,789,660 17,720,360 Development Co., Ltd. Thai-Swiss Metal Works Dormant 50.00% 300 300 300 300 Co., Ltd. ADAT Sales (Thailand) Ltd. Travel 48.32% 3,375,200 4,364,607 - - (a subsidiary holds 49.00%) Thai-Pacific Foods Ltd. Dormant 47.33% - - - - (Amounts in Baht) Group- Consolidated Company Type of Business Shareholding 1997 1996 1997 1996 Bell International Surveying 41.00% 7,263,767 8,726,501 7,263,767 8,726,501 Surveyors & Adjusters Ltd. BJT Water Co., Ltd. Consultancy and 35.00% 14,385,186 13,690,504 14,385,186 13,690,504 management service for water and waste water systems Beston Food (Shanghai) Manufacture of 34.00% in 1997 37,336,004 - 37,336,004 - Co., Ltd. snack foods Siemens Limited Electrical engineering, 25.50% 26,966,391 32,370,606 26,966,391 32,370,606 telecommunications and mass transportation Pacific Leisure Travel 23.67% 2,605,152 2,971,437 - - (Thailand) Ltd. (a subsidiary holds 24.00%) O-I Pacific (Machinery and Sales of machinery 19.67% in 1997 - 679,683 - - Distribution) Ltd. for glass container factory and 18.01% in 1996 (a subsidiary holds 30.00%) Total Investments in Related Parties 108,721,660 85,514,912 3,313,603,729 2,932,042,950 Other Companies Siam Industrial Products Ltd. Import 20.00% 50,000 50,000 - - (25.00% paid up) (a subsidiary holds 20.00%) J.N.P.A. Co., Ltd. Property holding 17.24% 53,778,970 52,068,970 53,778,970 52,068,970 Pathum Thani Water Co., Ltd. Clean water supply 15.00% 123,000,000 67,500,000 123,000,000 67,500,000 Siam Cement Myanmar Cement distributor15.00% 836,609 836,609 836,609 836,609 Trading Ltd. Ethoxylates Manufacturing Manufacture of 5.00% 1,896,187 1,896,187 1,896,187 1,896,187 Pte. Ltd. chemical products Thaiviet Invexim Co., Ltd. Import & export 1.00% 100,000 100,000 100,000 100,000 Total Investments in Other Companies 179,661,766 122,451,766 179,611,766 122,401,766 The recording of investments in subsidiary and associated companies by using the equity basis in the financial statements for the years ended December 31, 1997 and 1996 is based on financial information obtained from audited financial statements and from management, which had not been audited or reviewed by the auditors in accordance with standards established by The Institute of Certified Accountants and Auditors of Thailand. (More)