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FINANCIAL STATEMENTS AND ACCOUNTANTS REVIEW REPORT CH. KARNCHANG PUBLIC CO., LTD, SUBSIDIARIES AND JOINT VENTURES FIRST QUARTER ENDED MARCH 31, 1998 AND 1997 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 of March 31, 1998 and 1997, and the related consolidated statements of income and retained earnings, statement of changes in shareholdersequity and consolidated statements of cash flows for the three-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 taken as a whole. Accordingly, we do not express such an opinion. We draw attention to Note 1 to the financial statements. The operations of CH. Karnchang Public Company Limited, subsidiaries and joint ventures as from the period ended March 31, 1998 have been affected and will continue to be affected for the foreseeable future by the economic conditions 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. In 1997, the Company had changed its accounting method for the preparation of the consolidated financial statements for the joint ventures from the same method used with subsidiaries and associated companies, to be proportionated method for all joint ventures which the company had joint control, the previous years financial statements had been adjusted to the same basis to enable comparison of the financial statements. Based on our review, 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. Supot Singhasaneh Certified Public Accountant Peat Marwick Suthee Limited Bangkok, May 4, 1998 CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES BALANCE SHEETS AS AT MARCH 31, 1998 AND 1997 (UNAUDITED) (Amounts : Thousand Baht) Consolidated CH. Karnchang Public Co., Ltd. ASSETS 1998 1997 1998 1997 CURRENT ASSETS Cash in hand and at banks 4,240,724 3,042,089 846,769 1,293,881 Notes receivable - finance companies 124,666 171,769 - - Investment in marketable securities 8,802 8,895 8,802 8,895 Accounts receivable - net 2,599,376 1,596,441 1,487,005 1,224,310 Accounts receivable and loan to subsidiary, related companies and joint ventures 489,916 304,717 1,005,339 905,905 Construction contract in progress 3,275,061 3,758,568 312,053 1,016,386 Supplies for construction and construction in progress 174,228 120,807 69,691 57,409 Advance payment to subcontractors 385,246 172,009 82,923 95,279 Other current assets 519,677 666,196 103,889 186,447 Total Current Assets 11,817,696 9,841,491 3,916,471 4,788,512 Notes receivable-finance companies 147,822 - - - Investments in subsidiary companies and joint ventures - - 1,411,262 1,042,572 Investments in associated, related and other companies 2,839,475 2,691,111 2,699,036 2,538,258 Property, plant and equipment-net 2,504,117 2,236,277 531,668 598,257 Land for construction-net 326,018 326,018 282,947 282,947 Other assets 628,158 479,386 146,097 112,553 Total Assets 18,263,286 15,574,283 8,987,481 9,363,099 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES BALANCE SHEETS AS AT MARCH 31, 1998 AND 1997 (UNAUDITED) (Amounts : Thousand Baht) Consolidated CH. Karnchang Public Co., Ltd. LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 1998 1997 CURRENT LIABILITIES Bank overdrafts and loans from banks 3,035,659 2,424,252 1,144,411 1,284,734 Notes payable - finance companies 460,000 996,578 460,000 966,578 Accounts and notes payable 2,057,877 1,255,265 836,381 394,787 Current portion of long-term liabilities 2,796,820 2,335,453 256,675 253,822 Accounts payable and loans from related companies 939,704 364,446 27,216 3,394 Advance received from contractor and deferred construction revenue 1,697,017 1,112,242 265,532 206,054 Retentions for construction 139,177 75,980 46,299 16,928 Accrued interest expense 65,827 55,400 39,668 49,949 Other current liabilities 428,575 383,458 174,430 222,801 Total Current Liabilities 11,620,656 9,003,074 3,250,612 3,399,047 Liabilities under discounted notes receivable 513,139 133,514 - - Long-term loans 1,253,401 1,391,754 770,025 1,015,289 Other liabilities - - 238,334 24,499 Total Liabilities 13,387,196 10,528,342 4,258,971 4,438,835 MINORITY INTEREST IN SUBSIDIARY COMPANIES 147,580 121,677 - - 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 Appropriated to legal reserve 78,047 78,047 72,547 72,547 Unappropriated 1,164,463 1,360,217 1,169,963 1,365,717 Total Shareholders' Equity 4,728,510 4,924,264 4,728,510 4,924,264 Total Liabilities and Shareholders' Equity 18,263,286 15,574,283 8,987,481 9,363,099 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. (Amounts : Thousand Baht) 1998 1997 1998 1997 REVENUES Construction activities income 3,253,222 2,318,797 659,826 679,228 Management income 22,941 28,281 37,752 33,530 Rental income 17,373 22,547 40,969 35,072 Transportation income 16,741 38,201 17,069 57,772 Interest income 44,906 18,335 13,618 6,383 Gain from sale of investment 68,099 - 68,099 - Gain on exchange rate 476,731 1,938 - - Share of net profit by equity method - - 617,320 141,996 Other incomes 50,748 51,487 38,331 21,683 Total Revenues 3,950,761 2,479,586 1,492,984 975,664 EXPENSES Cost of construction activities 2,782,419 1,857,775 714,345 602,896 Administrative expenses 248,628 226,465 133,124 122,037 Interest expenses 265,053 159,250 101,558 69,085 Income tax 104,112 74,173 - 16,094 Total Expenses 3,400,212 2,317,663 949,027 810,112 Net profit from operation 550,549 161,923 543,957 165,552 Add (less) minority interest in subsidiary companies (6,592) 3,629 - - Net profit 543,957 165,552 543,957 165,552 Unappropriated retained earnings at beginning of the period 620,506 1,194,665 626,006 1,200,165 Unappropriated retained earnings at end of the period 1,164,463 1,360,217 1,169,963 1,365,717 Earnings per share (Baht)(Note 4) 5.18 1.58 5.18 1.58 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. (Amounts : Thousand Baht) 1998 1997 1998 1997 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 Beginning balance 78,047 78,047 72,547 72,547 Increase during period - - - - Decrease during period - - - - Ending balance 78,047 78,047 72,547 72,547 UNAPPROPRIATED RETAINED EARNINGS Beginning balance 620,506 1,194,665 626,006 1,200,165 Increase during period - Net profit 543,957 165,552 543,957 165,552 Decrease during period - Transfer to legal reserve - - - - - Payment of dividend - - - - Ending balance 1,164,463 1,360,217 1,169,963 1,365,717 Total Shareholders' Equity 4,728,510 4,924,264 4,728,510 4,924,264 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) Consolidated CH. Karnchang Public Co., Ltd. (Amounts : Thousand Baht) 1998 1997 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net profit 543,957 165,552 543,957 165,552 Adjustments to reconcile net profit by net cash provided by (used in) operating activities Depreciation and amortization 174,309 145,942 35,582 32,845 Amortization deferred expense 80,823 114,361 2,963 11,845 Write off prepaid withholding tax 1,546 180 1,546 180 Allowance for decline in value of marketable securities (2,263) 1,798 (2,263) 1,798 Loss (Gain) from sale of equipment (1,550) 2,504 (1,741) 19 Loss (Gain) from exchange rate (383,781) 1,243 (3,282) 2,973 Gain from sale of invesment (68,099) - (68,099) - Loss from devaluation of investment - 4,125 - - Share of net profit by equity method - - (617,320) (141,996) Change in Net Assets and Liabilities Increase in accounts receivable (274,213) (518,235) (59,835) (405,441) Decrease (Increase) in accounts receivable and loan to related companies and joint ventures (178,754) 10,481 (205,672) (220,400) Decrease (Increase) in construction contract in progress (792,204) (904,425) 118,771 68,545 Decrease (Increase) in supplies for construction 23,152 (25,095) (5,685) (1,386) Decrease (Increase) in advance payments to subcontractor 35,477 3,872 5,691 (60,668) Decrease (Increase) in other current assets 42,971 (234,372) 77,114 (127,608) Increase in other assets (221,788) (139,296) (82,855) (53,985) Increase in accounts and notes payable 131,195 580,480 301,609 11,363 Increase (Decrease) in accounts payable and loan from related companies 114,954 (125,237) 7,506 1,129 Increase (Decrease) in advance received from contractor and deferred construction revenue 127,116 (110,887) (101,117) (27,652) Increase(Decrease) in other current liabilities 36 53,487 (89,822) 32,284 Increase (Decrease) in minority interest in subsidiaries 6,592 (3,629) - - Net Cash used in Operating Activities (640,524) (977,151) (142,952) (710,603) See notes to financial statements Consolidated CH. Karnchang Public Co., Ltd. (Amounts : Thousand Baht) 1998 1997 1998 1997 CASH FLOWS FROM INVESTING ACTIVITIES Profit sharing from joint ventures - - 28,400 - Sale of investments 168,990 35 168,990 35 Purchases of land and fixed assets (97,913) (285,134) (3,420) (56,379) Sale of fixed assets 9,805 20,444 13,518 39 Decrease (Increase) in notes receivable - finance companies (87,460) 202,418 - 80,040 Increase in investment in subsidiaries, associated, related, other companies and joint ventures (46,511) - (46,511) - Net Cash Provided by (used in) Investing Activities (53,089) (62,237) 160,977 23,735 CASH FLOWS FROM FINANCING ACTIVITIES Increase(Decrease) in long-term loans (138,837) 222,550 (128,338) - Increase in bank overdrafts and loans from banks 228,046 759,788 136,597 833,878 Increase (Decrease) in notes payable - finance companies (40,000) 181,578 (40,000) 166,578 Increase in liabilities under discounted notes receivable 748,618 363,016 - - Net Cash Provided by (used in) Financing Activities 797,827 1,526,932 (31,741) 1,000,456 Effect from exchange rate in cash and cash at banks (24,670) - - - NET INCREASE (DECREASE) IN CASH IN HAND AND AT BANKS 79,544 487,544 (13,716) 313,588 Cash and cash at banks-beginning balance before minus commitments 4,161,180 2,554,545 860,485 980,293 Cash and cash at banks-ending balance before minus commitments 4,240,724 3,042,089 846,769 1,293,881 Less commitments (105,568) (5,000) - - Cash and Cash at banks-ending balance after minus commitments 4,135,156 3,037,089 846,769 1,293,881 SUPPLEMENT DISCLOSURES OF CASH FLOWS INFORMATION Interest expenses 386,512 98,874 149,922 37,167 Income taxes and withholding taxes 69,991 24,354 15,648 8,091 See notes to financial statements CH. KARNCHANG PUBLIC CO., LTD, SUBSIDIARIES AND JOINT VENTURES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 AND 1997 (UNAUDITED) NOTE 1 - ECONOMIC ENVIRONMENT AND BASIC OF PRESENTATION Since the second half of 1997 until the present certain Asia Pacific countries, including Thailand, are experiencing economy difficulties relating to currency devaluation and slowdown in growth. Accordingly, the Thai government sought assistance from the International Monetary Fund to alleviate the economic crisis and improve the economy over time. The financial statements for the three-month periods ended March 31, 1998 reflect the assessment of the possible impact of this economic situation on the financial position of CH. Karnchang Public Co., Ltd., subsidiaries and joint ventures. The ultimate effect on the entitys financial position of these uncertainties can not presently be determined. NOTE 2 - TRANSACTIONS WITH RELATED COMPANIES The company has had significant transactions with its related companies. The financial statements reflect the effects of these transactions on the normal business basis agreed upon by the companies concerned. The transactions with its related companies have included transactions with companys joint ventures where by there will be no settlement until the end of the project. Financial statements for the three-month period ended March 31 include the following transactions between related companies as follows: Amounts : Thousand Baht Consolidated CH. Karnchang Public Co.,Ltd. Balance Sheet 1998 1997 1998 1997 Accounts receivable and construction contract in progress 612,679 1,089,153 1,412,321 783,080 Accounts receivable and loans 489,916 304,717 1,005,339 905,905 Advances to subcontractors 88,640 183,674 - - Accrued income and other current assets 7,273 12,407 26,064 - Investments 2,677,155 2,515,816 3,947,978 3,417,910 Accounts payable 893,785 291,966 1,488 16,001 Other payables and loans 939,704 364,446 27,216 3,394 Advances received from contractor and deferred construction revenues 46,602 955,807 2,894 - Retentions and other current liabilities 8,462 99,577 - - Other liabilities - - 238,334 24,499 Amounts : Thousand Baht Consolidated CH. Karnchang Public Co., Ltd. 1998 1997 1998 1997 Income Statements Construction activities income 1,521,262 1,131,838 508,618 318,013 Management income - - 37,002 17,439 Interest income 204 - 6,145 242 Share of net profit by equity method - - 617,320 141,996 Other incomes 16,521 23,042 32,800 50,626 Dividend income and profit sharing - - 28,400 - Cost of construction 291,740 240,815 45,722 5,810 Administrative expenses 99,212 12,440 259 39 (More)