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FINANCIAL STATEMENTS AND ACCOUNTANTS' REVIEW REPORT CH. KARNCHANG PUBLIC CO., LTD, SUBSIDIARIES AND JOINT VENTURES THIRD QUARTER ENDED SEPTEMBER 30, 1999 AND 1998 Accountants Review Report To the Shareholders of CH. Karnchang Public Co., Ltd. We have made a review of the consolidated balance sheets of CH. Karnchang Public Company Limited, subsidiaries and joint ventures as at September 30, 1999 and 1998, the related consolidated statements of income and consolidated statements of cash flows for the three-month and nine-month periods, consolidated statements of retained earnings and statements of changes in shareholders equity for the nine-month periods then ended and the financial statements of CH. Karnchang Public Co.,Ltd. for the same periods then ended in accordance with standards established by the Institute of Certified Accountants and Auditors of Thailand. A review of interim financial information principally consists of obtaining an understanding of the systems for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements takes as a whole. Accordingly, we do not express such an opinion. As discussed in Notes 2 and 6 to the financial statements, the parent company has accounts receivable from the related joint venture, which are overdue over 1 year in the approximate amount of Baht 555.6 million. The company did not record the allowance for doubtful account for the said amount because the company expected to be paid in the future. If the company does not receive the payment, profit for period ended September 30, 1999 and asset should be decreased by the same amount. As discussed in Note 6 to the financial statements. The joint venture which the company has 59.99% of profit sharing has an account receivable from additional construction work in the approximate amount of Baht 101.8 million which the payment is during the negotiation with account receivable. The said construction work was completed in 1998. The joint venture had recorded the allowance for doubtful account in the amount of Baht 5.1 million. The joint venture should set up allowance for doubtful account for the total uncollectable amount. Based on our review, except for the effects to the financial statements of matters described in the third and the forth paragraphs, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We draw attention to the following notes to financial statements as follows: As discussed in Note 13 to the financial statements. Deferred expenses of one subsidiary company in the approximate amount of Baht 112.7 million included in the consolidated financial statements, which included in accounts receivable from subsidiary companies in the companys financial statements in the approximate amount of Baht 103.6 million. The deferred expenses are incurred from the bidding of MRTA concession project. If the company is not success on this concession, the said amount has to be written off. As discussed in Note 1 to the financial statements. The operations of CH. Karnchang Public Company Limited, subsidiaries and joint ventures have been affected and will continue to be affected for the foreseeable future by the economic condition in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on the financial statements can not presently be determined. Supot Singhasaneh Certified Public Accountant Registrative number 2826 KPMG Audit (Thailand) Limited Bangkok, November 2, 1999 The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Thailand. The standards, procedures and practices to review such financial statements are those generally accepted and applied in Thailand. CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES BALANCE SHEETS AS AT SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Amounts : Thousand Baht Consolidated CH. Karnchang Public Co., Ltd. ASSETS 1999 1998 1999 1998 CURRENT ASSETS Cash on hand and at banks 4,295,279 5,062,982 1,718,072 1,712,630 Short - term investments 302,938 602,897 596 240,543 Investment in marketable securities 4,276 6,752 4,276 6,752 Accounts receivable - net 1,437,925 2,143,716 1,072,451 1,268,266 Accounts receivable and loan to subsidiary, related companies and joint ventures 596,595 638,135 860,352 871,346 Construction contract in progress 3,906,462 3,631,589 4,110 373,569 Inventories,supplies for construction and construction in progress 63,676 191,567 7,618 24,969 Advance payment to subcontractors 98,049 247,608 39,819 58,022 Other current assets 486,689 570,971 101,114 126,987 Total Current Assets 11,191,889 13,096,217 3,808,408 4,683,084 Notes receivable-finance companies - 147,821 - - Investments in subsidiary companies and joint ventures - - 1,470,522 1,487,237 Investments in related and other companies 2,166,990 2,592,277 1,988,745 2,450,181 Property, plant and equipment-net 1,591,608 2,179,889 429,816 467,843 Investment on land 202,668 326,018 174,600 282,947 Other assets 579,061 768,064 173,932 108,401 Total Assets 15,732,216 19,110,286 8,046,023 9,479,693 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES BALANCE SHEETS AS AT SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Amounts : Thousand Baht Consolidated CH. Karnchang Public Co., Ltd. LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 1999 1998 CURRENT LIABILITIES Bank overdrafts and loans from banks 3,300,622 3,434,845 1,073,996 1,424,346 Notes payable - finance companies 200,000 300,000 200,000 300,000 Accounts and notes payable 1,099,026 2,127,314 708,811 1,109,084 Current portion of long-term liabilities 4,594,077 3,740,727 - 898,363 Accounts payable and loans from related companies and joint ventures 1,274,015 1,501,959 8,552 41,712 Advance received from contractor and deferred construction revenue 1,288,755 1,595,450 232,138 214,158 Retentions for construction 214,744 145,495 93,069 73,414 Accrued interest expense 47,341 33,211 15,078 29,667 Accrued output tax 132,346 202,544 96,726 131,736 Other current liabilities 113,452 213,578 23,110 41,287 Total Current Liabilities 12,264,378 13,295,123 2,451,480 4,263,767 Liabilities under discounted notes receivable - 1,089,770 - - Long-term loans 125,870 185,890 100,000 - Other liabilities - - 2,345,371 852,666 Total Liabilities 12,390,248 14,570,783 4,896,851 5,116,433 MINORITY INTEREST IN SUBSIDIARY COMPANIES 174,168 176,243 - - SHAREHOLDERS' EQUITY Share capital Authorized 105,000,000 ordinary shares, Baht 10 par value 1,050,000 1,050,000 1,050,000 1,050,000 Issued and fully paid 105,000,000 ordinary shares, Baht 10 par value 1,050,000 1,050,000 1,050,000 1,050,000 Premium on share 2,436,000 2,436,000 2,436,000 2,436,000 Retained earnings (Deficit) Appropriated to legal reserve 88,442 78,047 82,942 72,547 Unappropriated (198,491) 799,213 (192,991) 804,713 Unrealized loss on change in investment value (208,151) - (226,779) - Total Shareholders' Equity 3,167,800 4,363,260 3,149,172 4,363,260 Total Liabilities and Shareholders' Equity 15,732,216 19,110,286 8,046,023 9,479,693 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF INCOME FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. Amounts : Thousand Baht 1999 1998 1999 1998 Except net profit (loss) per share REVENUES Construction activities income 1,394,656 3,896,902 534,854 957,870 Sale of construction material 11,701 123,556 134,390 178,095 Management income 16,274 17,478 22,961 39,283 Rental income 8,929 9,127 26,531 20,171 Transportation income 8,846 12,644 9,619 12,955 Interest income 18,683 51,901 8,205 17,582 Gain (loss) from sale of investment - 820 - 820 Gain (loss) on exchange rate (77,865) 34,594 (377) - Share of net profit (loss) by equity method - - (1,072,315) 131,970 Other incomes 14,100 20,679 7,559 11,865 Total Revenues 1,395,324 4,167,701 (328,573) 1,370,611 EXPENSES Cost of construction activities and sale construction material 1,797,624 3,391,083 587,481 942,891 Administrative expenses 394,946 117,387 72,936 45,863 Interest expenses 198,410 314,271 51,244 118,548 Directors' remuneration - 6,722 - 6,722 Other expenses 23,994 53,172 25,946 53,040 Total Expenses 2,414,974 3,882,635 737,607 1,167,064 Profit (loss) before income tax (1,019,650) 285,066 (1,066,180) 203,547 Income tax 51,722 69,345 5,324 - Net profit (loss) from operation (1,071,372) 215,721 (1,071,504) 203,547 (Less) Minority interest in net profit (132) (12,174) - - Net profit (loss) (1,071,504) 203,547 (1,071,504) 203,547 Net profit (loss) per share (Baht) (Note 4 ) (10.20) 1.94 (10.20) 1.94 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF INCOME FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. Amounts : Thousand Baht 1999 1998 1999 1998 Except net profit(loss) per share REVENUES Construction activities income 6,679,087 10,332,035 1,898,776 2,579,215 Sale of construction material 164,569 347,001 470,978 514,489 Management income 51,683 63,998 71,033 117,346 Rental income 32,094 58,376 56,386 93,286 Transportation income 33,284 40,674 35,451 41,452 Interest income 120,852 222,224 57,660 64,070 Gain from sale of investment 654 10,859 654 10,859 Gain on exchange rate 32,390 295,665 - - Share of net profit (loss) by equity method - - (1,075,053) 234,362 Other incomes 29,955 57,749 31,125 28,834 Total Revenues 7,144,568 11,428,581 1,547,010 3,683,913 EXPENSES Cost of construction activities and sale construction material 6,509,273 9,484,705 2,015,381 2,834,389 Administrative expenses 679,742 529,120 199,644 229,464 Interest expenses 651,394 872,248 188,683 324,713 Directors' remuneration 5,900 6,722 5,900 6,722 Other expenses 136,697 112,193 112,409 109,918 Total Expenses 7,983,006 11,004,988 2,522,017 3,505,206 Profit (loss) before income tax (838,438) 423,593 (975,007) 178,707 Income tax 160,635 209,832 41,503 - Net profit (loss) from operation (999,073) 213,761 (1,016,510) 178,707 (Less) Minority interest in net profit (17,437) (35,054) - - Net profit (loss) (1,016,510) 178,707 (1,016,510) 178,707 Net profit (loss) per share (Baht) (Note 4 ) (9.68) 1.70 (9.68) 1.70 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. Amounts : Thousand Baht 1999 1998 1999 1998 ORDINARY SHARE CAPITAL Beginning balance 1,050,000 1,050,000 1,050,000 1,050,000 Increase during period - - - - - - Decrease during period - - - - - - Ending balance 1,050,000 1,050,000 1,050,000 1,050,000 PREMIUM ON SHARE CAPITAL Beginning balance 2,436,000 2,436,000 2,436,000 2,436,000 Increase during period - - - - - - - Decrease during period - - - - - - - Ending balance 2,436,000 2,436,000 2,436,000 2,436,000 APPROPRIATED RETAINED EARNINGS (DEFICIT) Beginning balance 88,442 78,047 82,942 72,547 Increase during period - - - - - - - Decrease during period - - - - - - - Ending balance 88,442 78,047 82,942 72,547 UNAPPROPRIATED RETAINED EARNINGS (DEFICIT) Beginning balance 818,019 620,506 823,519 626,006 Increase during period - Net profit (loss) (1,016,510) 178,707 (1,016,510) 178,707 Decrease during period - Transfer to legal reserve - - - - - - - - Payment of dividend - - - - - - - Ending balance (198,491) 799,213 (192,991) 804,713 UNREALIZED GAIN (LOSS) ON CHANGE IN INVESTMENT VALUE Beginning balance - - - - - - - Increase during period (208,151) 398,585 (226,779) 398,585 Decrease during period - - (398,585) - - - (398,585) Ending balance (208,151) - (226,779) - Total Shareholders' Equity 3,167,800 4,363,260 3,149,172 4,363,260 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF RETAINED EARNING FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. Amounts : Thousand Baht 1999 1998 1999 1998 Unappropriated retained earnings Retained earnings at beginning of the year 818,019 620,506 823,519 626,006 Less Appropriated net profit of prior year Dividend - - - - Net profit (loss) of the period (1,016,510) 178,707 (1,016,510) 178,707 Less legal reserve - - - - Unappropriated retained earnings (deficit) at end of the period (198,491) 799,213 (192,991) 804,713 Appropriated retained earnings 88,442 78,047 82,942 72,547 legal reserve - - - - Total appropriated retained earnings 88,442 78,047 82,942 72,547 Total retained earnings (deficit) (110,049) 877,260 (110,049) 877,260 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. Amounts : Thousand Baht 1999 1998 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net profit (loss) (1,071,504) 203,547 (1,071,504) 203,547 Adjustments to reconcile net profit (loss) by net cash provided by (used in) operating activities Depreciation and amortization 182,556 188,219 31,006 35,079 Amortization deferred expense 132,438 110,869 1,702 2,964 Write off prepaid withholding tax - 3,956 - 1,587 Allowance for doubtful accounts - - - - Increase (Decrease) in allowance for decline in value of marketable securities 186 (133) 186 (133) Gain from sale of equipment (621) (21) (16) (32) Loss (Gain) from unrealized exchange rate 293,415 (10,838) 6,419 - Gain from sale of investment in marketable securities - (820) - (820) Share of net profit (loss) by equity method - - 1,072,315 (131,970) Change in Net Assets and Liabilities Decrease in accounts receivable 261,713 481,318 99,056 612,315 Decrease (Increase) in accounts receivable and loan to related companies and joint ventures 50,429 (47,799) 40,019 322,554 Decrease (Increase) in construction contract in progress 141,682 (933,906) 45,434 (267,977) Decrease (Increase) in supplies for construction and construction in progress 31,995 42,573 (4,249) 19,721 Decrease in advance payments to subcontractors 46,207 107,881 13,305 18,729 Decrease (Increase) in other current assets (24,971) (73,413) (23,483) 3,208 Decrease (Increase) in other assets (72,313) (197,730) (76) 393 Decrease in accounts and notes payable (145,257) (178,055) (43,534) (82,217) Increase (Decrease) in accounts payable and loan from related companies (169,931) 450,037 (40,953) 38,094 Increase (Decrease) in advance received from employer and deferred construction revenue (67,238) (327,850) 78,814 (176,118) Decrease in other current liabilities (55,929) (44,099) (56,884) (64,845) Increase in minority interest in subsidiaries 133 12,174 - - Net Cash Provided by (Used in) Operating Activities (467,010) (214,090) 147,557 534,079 See notes to financial statements (more)