BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 OPERATING ACTIVITIES Profit before tax 273,273 202,733 201,177 92,439 Add : Interest expense 68,635 89,075 43,343 64,665 Currency swap cost 32,910 42,164 32,239 37,997 Less : Share of profits less losses in subsidiary and associated companies (4,135) (57,300) (123,674) (170,732) Interest income (23,452) (11,729) (39,741) (26,556) Profit before investment/finance income and expense 347,231 264,943 113,344 (2,187) Allowance for doubtful accounts 3,905 7,517 3,922 5,450 Depreciation and amortization 165,433 180,986 29,961 28,320 Deferred charges written off 1,634 2,613 - - Book value of property, plant and equipment written off 235 54 14 - Gain on disposal of property, plant and equipment (1,753) (590) (1,369) (384) Provision for staff retirement benefits 11,478 5,319 5,994 2,500 Loss (gain) on conversion of foreign currency borrowings 27 (49,169) 78 (728) (INCREASE) DECREASE IN WORKING CAPITAL Accounts receivable (249,560) (35,505) 56,216 (21,641) Inventories (60,285) (63,877) (32,948) (24,293) Other current assets 14,393 (59,180) (4,068) (10,250) Loans to other companies - 450 - - Other assets (219) (2,447) 9 - Accounts and notes payable 120,673 110,707 118,864 70,513 Accounts payable - related parties - - 143,249 79,807 Accrued expenses 115,100 51,627 36,470 (260) Other current liabilities (21,206) 76,257 (36,123) 43,904 Loans from directors and employees (849) (271) (863) (258) Long-term lease deferred income (1,402) (1,402) (1,402) (1,402) Staff reitrement benefits (42,804) (27,236) (29,291) (19,677) Other liabilities (10,427) (1,027) (10,212) (1,027) Net cash inflow from operating activities 391,604 459,769 391,845 148,387 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 INCOME TAX PAID (86,546) (12,561) (5,695) (7,167) INVESTING ACTIVITIES Loans and advances (to) from related parties (3,666) (339,839) 24,549 (140,397) Purchases of short-term investments (20) - (20) - Purchases of investments in related parties (net of cash and cash equivalents acquired) (3,621) (13,692) (203,621) (13,692) Purchases of investments in other companies - (22,500) - (22,500) Purchases of property, plant and equipment (37,376) (328,904) (22,597) (7,232) Deferred charges paid (4,954) (1,819) - - Disposal of investments in other companies - 1,896 - 1,896 Disposal of property, plant and equipment 5,318 713 1,510 506 Interest received 13,198 8,785 29,364 23,702 Net cash outflow from investing activities (31,121) (695,360) (170,815) (157,717) FINANCING ACTIVITIES Net decrease in borrowings (10,121) (65,196) - (285,336) Gain on currency swap contracts received 3,469 373,283 2,559 363,659 Currency swap cost paid (665) (4,534) - - Interest paid (74,531) (52,610) (43,816) (46,554) Deferred financing charges paid - (2,379) - (2,379) Net cash (outflow) inflow from financing activities (81,848) 248,564 (41,257) 29,390 NET INCREASE IN CASH AND CASH EQUIVALENTS 192,089 412 174,078 12,893 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,591,564 240,446 1,187,298 205,243 CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 3) 1,783,653 240,858 1,361,376 218,136 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 AND 1998 (UNAUDITED) 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 March 31, 1999 and 1998, 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 three-month periods ended March 31, 1999 and 1998 include the accounts of the Company, and its six wholly owned and fourteen majority-owned subsidiaries in 1999 and its five wholly owned and thirteen majority-owned subsidiaries in 1998. 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 March 31, consisted of the following: (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 Cash on hand and at banks 1,856,967 183,780 1,377,318 84,150 Deposits with financial institutions - 170,712 - 170,000 Bank overdrafts (73,314) (113,634) (15,942) (36,014) Cash and Cash Equivalents 1,783,653 240,858 1,361,376 218,136 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 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 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. Basic Earnings Per Share Basic earnings per share are computed by dividing net income for the period by the weighted average number of shares outstanding during the period. NOTE 5 - TRANSACTIONS WITH RELATED PARTIES Significant transactions arising in the course of ordinary business between the Company and related parties during 1999 and 1998 were as follows: (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 Transactions with subsidiary companies (Eliminated in consolidated financial statements) Sales of goods - - - 6,923 Purchases of goods - - 573,006 689,261 Interest income - - 22,687 17,864 Interest expense - - 159 89 Transactions with associated companies Interest income 215 121 215 121 Interest expense - 284 - 284 Business transactions between the Company and related parties are conducted during the ordinary course of business; the price of goods sold is based upon normal profit margins over the cost of the related goods and services and interest rates are based on the Company's cost of borrowing and market rates. At March 31, 1999 and 1998 the outstanding balances with related parties were as follows: (Amounts in Thousands of Baht) Consolidated. Company 1999 1998 1999 1998 Accounts receivable - related parties Subsidiary Companies Ganong Ltd - - 1 - Berli Jucker (Myanmar) Ltd. - - 4,323 - Polipharm Co., Ltd. - - 7,463 6,604 Siam Snack Co., Ltd. - - 5,311 - Thai-Scandic Steel Co, Ltd. - - 13 14 Thai Glass Industries PCL. - - 29,672 3,106 Cellox Paper Co., Ltd. - - 9 - Total - - 47,708 9,724 Accounts payable - related parties Subsidiary Companies Polipharm Co., Ltd. - - 2,134 242 Siam Snack Co., Ltd. - - 98,788 60,148 Rubia Industries Ltd. - - 93,259 69,978 Thai Glass Industries PCL. - - 142,572 237,486 Thai Flourspar & Minerals Co., Ltd. - - 2,528 3,504 Cellox Paper Co., Ltd. - - - 123,590 Total - - 339,281 494,948 (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 Lease receivable from a related party - current portion - - 36,000 36,000 - non-current portion - - 22,500 58,500 The lease receivable from a related party represents 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. (More)