BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Amounts in Baht) Consolidated Company 1998 1997 1998 1997 Unappropriated retained earnings Beginning balance 2,021,021,426 2,074,943,418 2,081,710,107 2,135,632,099 Less: Adjustments to opening balance of retained earnings provision for staff retirement benefits for prior years (Note 20) - (114,628,106) - (114,628,106) Retained earnings after adjustments 2,021,021,426 1,960,315,312 2,081,710,107 2,021,003,993 Less appropriations of earnings: Legal reserve (835,473) - - - Dividend for 1997 and 1996 (57,750,000) (161,700,000) (57,750,000) (161,700,000) Cost of investment in excess of net assets of subsidiary and associated companies eliminated against retained earnings (292,681,299) (104,304,224) (292,681,299) (104,304,224) Net income for the year 414,815,361 384,460,338 414,815,361 384,460,338 Less: Dividend for 1998 and 1997 (47,643,750) (57,750,000) (47,643,750) (57,750,000) Unappropriated retained earnings at end of year 2,036,926,265 2,021,021,426 2,098,450,419 2,081,710,107 Appropriated retained earnings Legal reserve 116,873,210 116,037,737 57,750,000 57,750,000 Reserve for business expansion 87,400,944 87,400,944 85,000,000 85,000,000 Appropriated retained earnings at end of year 204,274,154 203,438,681 142,750,000 142,750,000 Retained earnings at end of year 2,241,200,419 2,224,460,107 2,241,200,419 2,224,460,107 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Amounts in Baht) Consolidated Company 1998 1997 1998 1997 OPERATING ACTIVITIES Profit before tax 719,035,342 775,065,915 446,672,486 379,279,045 Add : Interest expense 336,561,402 386,674,095 228,297,144 305,415,828 Currency swap cost 182,445,083 61,150,359 169,758,205 9,101,690 Less : Share of profits less losses in subsidiary and associated companies (48,871,529) 6,051,632 (207,966,809) (291,315,314) Interest income (126,389,233) (94,542,330) (214,421,535) (79,637,332) Profit before investment/finance income and expense 1,062,781,065 1,134,399,671 422,339,491 322,843,917 Allowance for doubtful accounts 17,004,776 40,075,940 8,193,000 31,236,023 Depreciation and amortization (Note 9) 717,077,780 740,997,720 116,272,085 123,204,933 Provision for loss on diminution in value of assets 17,000,000 - - - Deferred charges written off 19,639,871 14,521,553 - - Book value of property, plant and equipment written off 4,206,319 1,381,495 2,390,824 8,348 Gain on disposal of property, plant and equipment (6,651,477) (2,757,116) (3,240,353) (1,484,450) (Gain) loss on disposal of investments (59,273,351) (67,675) 688,070 (67,675) Provision for staff retirement benefits 104,799,910 18,073,303 50,931,468 9,942,826 (Gain) loss on conversion of foreign currency borrowings (130,128,139) 87,555,697 (97,166,242) 61,888,740 (INCREASE) DECREASE IN WORKING CAPITAL Accounts receivable (33,682,003) (285,882,743) 173,583,897 66,747,224 Inventories 430,090,019 (130,723,961) 492,127,653 (43,276,333) Other current assets 42,667,592 (31,547,333) (16,609,700) (27,672,997) Loans to other companies 4,300,000 1,800,000 - - Other assets 642,635 7,286,456 (9,200) (95,000) Accounts and notes payable (188,602,571) 556,293,572 (159,567,022) 87,249,944 Accounts payable - related parties - - (219,109,170) 24,656,141 Accrued expenses (73,649,146) (132,100,465) (66,463,327) (152,026,318) Other current liabilities (50,040,256) 17,986,365 (6,940,138) 16,578,542 Loans from directors and employees (2,146,316) 1,556,441 142,021 1,558,145 Long-term lease deferred income (5,609,333) (2,809,334) (5,609,333) (2,809,334) Staff retirement benefits (72,924,592) - (59,351,591) - Other liabilities 34,869,040 (746,473) 34,455,090 (746,474) Net cash inflow from operating activities 1,832,371,823 2,035,293,113 667,057,523 517,736,202 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Amounts in Baht) Consolidated Company 1998 1997 1998 1997 INCOME TAX PAID (97,008,693) (348,569,803) (30,465,081) (77,185,915) INVESTING ACTIVITIES Purchases of short-term investments - (2,031,457) - (2,031,457) Loans and advances to related parties (150,528,962) (201,779,946) (272,843,616) (92,699,839) Purchases of investments in related parties (net of cash and cash equivalents acquired) (1,677,690,475) (426,286,678) (1,785,559,056) (633,224,268) Purchases of investments in other companies (23,350,000) (57,210,000) (23,350,000) (57,210,000) Purchases of property, plant and equipment (933,486,976) (885,204,621) (78,822,039) (70,536,594) Deferred charges paid (7,099,592) (8,576,779) - - Disposal of short-term investments - 266,163 - 266,163 Disposal of investments in related parties 144,801,421 - 103,560,000 168,300,000 (net of cash and cash equivalents disposed) Dispoal of investments in other companies 1,896,187 - 1,896,187 - Disposal of property, plant and equipment 27,227,759 6,396,406 7,548,201 2,459,330 Interest received 113,461,093 124,626,344 202,370,282 79,632,400 Dividend received 7,332,918 3,315,000 67,448,513 237,926,803 Net cash outflow from investing activities (2,497,436,627) (1,446,485,568) (1,777,751,528) (367,117,462) FINANCING ACTIVITIES Net decrease in borrowings (1,529,616,965) (389,215,693) (1,712,016,000) (297,412,182) Gain on currency swap contracts received 288,052,284 800,454,550 312,909,000 800,454,550 Currency swap cost paid (405,166,362) (59,328,644) (166,322,628) - Interest paid (180,573,859) (411,311,683) (231,718,500) (334,880,774) Deferred financing charges paid (2,668,867) (3,908,188) (2,668,867) (3,908,188) Proceeds from increase in share capital 4,028,424,392 - 4,028,424,392 - Issue of shares to minority interests 44,400,000 - - - Dividend paid (105,393,750) (219,450,000) (105,393,750) (219,450,000) Dividend paid to minority interests (23,787,403) (117,963,197) - - Net cash inflow (outflow) from financing activities 2,113,669,470 (400,722,855) 2,123,213,647 (55,196,594) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,351,595,973 (160,485,113) 982,054,561 18,236,231 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 3) 240,446,691 407,157,357 205,243,034 187,006,803 EXCHANGE TRANSLATION (478,436) (6,225,553) - - CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 3) 1,591,564,228 240,446,691 1,187,297,595 205,243,034 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION Certain Asia Pacific countries, including Thailand, have experienced economic difficulties since 1997. The accompanying consolidated financial statements and the separate financial statements reflect the assessment, as at December 31, 1998 and 1997, of the possible impact of this economic situation on the financial position of Berli Jucker Public Company Limited ("The Company") and its subsidiaries. In addition, the ultimate effect on the group's financial position of these uncertainties cannot presently be determined. The accompanying consolidated and the Company only financial statements have been prepared in accordance with generally accepted accounting principles practiced in Thailand 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. NOTE 2 - BASIS OF CONSOLIDATION The Group comprises Berli Jucker Public Company Limited and its subsidiaries. Principles of Consolidation The accompanying consolidated financial statements for the years ended December 31, 1998 and 1997 include the accounts of the Company, and its six 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 Group's 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 1998 1997 1998 1997 Cash on hand and at banks 1,672,714,714 186,963,864 1,194,586,575 78,661,956 Deposits with financial institutions - 131,121,777 - 130,000,000 Bank overdrafts (81,150,486) (77,638,950) (7,288,980) (3,418,922) Cash and Cash Equivalents 1,591,564,228 240,446,691 1,187,297,595 205,243,034 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. 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 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. (More)