NOTES TO THE FINANCIAL STATEMENTS FOR THE QUARTERS 1/99
PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED AND EQUITY METHOD INTERIM FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
1. ECONOMIC TURMOIL IN THE ASIA-PACIFIC REGION AND GOING CONCERN OF THE
COMPANY
Many Asia-Pacific countries, including Thailand, are experiencing severe
economic difficulties relating to currency devaluations, volatile stock
markets, and slowdown on growth. The country s unstable economy has
significantly affected, and may continue to affect the operations of the
Company.
The Company restructured its long-term debt and capital by entering into
the Override and Supplementary Agreement dated October 7, 1998 with its
lenders and other parties. The agreements provided for amendments of the
repayment terms. The Company was able to obtain an extension of the
repayment term from short-term to long-term and the repayments are divided
into two parts. Tranche A repayment will be paid from the sales of the
increased capital to Western Metals Limited. The remainder or Tranche B
repayment will be paid from operating income of the Company over the
period 3.5 years.
On February 24, 1999 Western Metals Limited rescinded its subscription in
accordance with the Override and Supplementary agreement which it was to
have acquired another 75.1 million shares for Baht 1,051 million. Western
Metals Limited cited delay in granting of mining lease applications
covering extension to the known orebody at the Mae Sod mine as affecting
its investment in the Company which cause the Company has not complied
with Tranche A principal repayment share. The Company is currently
negotiating the Tranche A repayment with the lenders. The Company sent the
letter dated April 9, 1999 to notify to the lenders that the Company will
maintain interest payment for Tranche A and B and Tranche B principal
repayment in accordance with the terms specified in the Override and
Supplementary Agreement (see Note 10).
2. BASIS FOR PRESENTATION OF THE INTERIM FINANCIAL STATEMENTS
2.1 The consolidated and equity method interim financial statements for
the quarters ended March 31, 1999 and 1998 are unaudited. However, in the
opinion of the Company, all adjustments necessary for a fair presentation,
have been reflected therein.
The consolidated and equity method interim financial statements have been
prepared in accordance with the Regulation of SET dated February 3, 1998
regarding the bases, conditions and procedures for preparation and
submission of financial statements and reports for the financial position
and result of operations of the listed companies (No.1) B.E.2541 (1998).
International Accounting Standard (IAS) No. 34 Interim financial
statements has not been adopted by the Company.
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Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting
principles, which is not required for interim reporting purposes, has been
omitted. In addition, the consolidated and equity method interim financial
statements should be read in conjunction with the consolidated and equity
method financial statements and notes thereto included in the audited
financial statements for the year ended December 31, 1998.
Certain reclassifications have been made in the consolidated and equity
method interim financial statements for the quarter ended March 31, 1998
to conform to the classifications used in the consolidated and equity
method interim financial statements for the quarter ended March 31, 1999.
2.2 In accordance with SET guidelines, the consolidated interim financial
statements recognized the full amount of the Companys equity in a
subsidiarys losses (excluding the minority interest to the extent that
they do not exceed the minority shareholders equity), that exceeds the
Companys investment in such subsidiary.
Under the equity method presentation of interim financial statements, the
Companys equity in the undistributed losses of a subsidiary that incurs a
capital deficiency, is generally recognized only to the extent of the
amount of the investment in such subsidiary. In the case where the Company
has receivables from, loans to and/or guarantee commitment for such
subsidiary, such share in the loss that exceeds the Companys investment
and loss that exceeds minority shareholders equity are shown as a
reduction to the receivables from and/or loans to subsidiary.
From the quarter ended March 31, 1999, the Company has not recognized the
Companys equity in further losses incurred by Padaeng Poongsan Metals Co.,
Ltd. in the equity method. The Company has already recognized the Companys
equity in the entire amount of losses incurred by such company by reducing
an investment in, providing the full amount of an allowance for doubtful
debts for receivables and loans and recording liabilities from guarantee
commitment for such subsidiary as at December 31, 1998.
2.3 The consolidated interim financial statements are the consolidation of
the accounts of Company and subsidiaries as follows:
% of
Shareholding
1999 1998
Padaeng Properties Co., Ltd. 100.00 100.00
Puthep Co., Ltd. 100.00 100.00
Padaeng Poongsan Metals Co., Ltd. 61.98 61.98
Padaeng International Mining Co., Ltd. 100.00 100.00
Sila Enterprise Co., Ltd. 55.00 55.00
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The consolidated interim financial statement for the quarter ended March
31, 1999 do not include accounting transactions of Pakham Exploration and
Mining Limited, in which investment held by Puthep Co., Ltd. and Puthep Co.
, Ltd. transferred all its shares in Pakham Exploration and Mining Limited
to a joint venture company in accordance with an agreement dated November
20, 1998. Such financial statements do not include accounting transactions
of Patong Exploration and Mining Limited because such subsidiary
registered to wind up on March 16, 1999.
2.4 The equity method interim financial statements ended March 31, 1999,
do not include the Companys equity in the undistributed gains (losses) of
Padaeng Siam Industry Co., Ltd. because such associated company has
registered to wind up on January 8, 1999. The Company does not change
accounting method of investment in such associated company due to the
related amount is not material.
2.5 The equity method interim financial statements for the quarter ended
March 31, 1999 do not include the Companys equity in undistributed gains
(losses) of Pakham Exploration and Mining Limited, in which investment
held by Puthep Co., Ltd. and transferred all its shares in Pakham
Exploration and Mining Limited to a joint venture company in accordance
with an agreement which dated on November 20, 1998.
2.6 The Company has immediately changed accounting method of investment in
Patong Exploration and Mining Limited from equity method to be cost method
since March 16, 1999 because such subsidiary registered to wind up on such
date.
3. ACCOUNITNG POLICY
The same accounting policies are followed in these interim financial
statements as compared with the most recent financial statements except
discussed below:
A change in accounting policy for investments.
For the quarter ended March 31, 1999 investments in security are accounted
for according to Accounting Standard No. 40 Accounting for investments in
debt and equity securities which stipulates the classification, valuation
and recognition of gain or loss on the change in carrying value of
investment as follows:
- Securities for trading and available for sale are stated at fair value.
Gain or loss on the change in fair value is recognized in the statement of
income for security for trading and presented as an item in shareholders
equity for security available for sale.
- Securities for general investment are stated at cost.
In case impairment in value of investment has occurred, the resultant loss
for all classification of investment is recognized in the statement of
income.
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In prior years, the investments in security are accounted for inaccordance
with Accounting Standard No. 12 Accounting for marketable securities and
No. 17 Accounting for investments. Such investments are stated at the
lower of aggregate of cost or aggregate market value. The resultant loss
is recognized in the statement of income for short-term investments. In
case of long-term investments, the resultant loss is shown as a deduction
from the shareholders equity in the balance sheet and as an expense in the
statements of income where a permanent decline in market value is deemed
to have occurred.
4. DEPOSTS AT BANKS USED AS COLLATERAL
As at March 31, 1999, deposits at banks of a subsidiary amounting to Baht
11,554,589 are used as collateral against sales of blank coins with a
Government Agency and used as collateral against other debt repayments.
As at March 31, 1998, deposits at banks of a subsidiary amounting to Baht
3,554,589 are used as collateral against an agreement to purchase and sell
blank coins with a Government Agency.
5. SUPPLEMENTAL DISCLOSURE FOR CASH FLOWS
5.1 Cash paid for the quarters ended March 31, 1999 and 1998:
CONSOLIDATED THE COMPANY
1999 1998 1999 1998
Baht Baht Baht Baht
Cash paid for tax 27,452 158,777 12,032 36,427
Cash paid for interest 92,496,530 196,532,482 87,381,287 174,604,624
5.2 Cash and cash equivalents consist of cash in hand and at banks and
deposits at financial institutions which are promissory notes with
original maturities of 3 months or less.
5.3 Non-cash items are as follows:
- As at March 31, 1999, the provision for decline in a security available
for sale is shown as a deduction from shareholders equity as per
consolidated and equity method interim financial statements. For the
quarter ended March 31, 1999 the provision was increased by Baht 7,544,226.
- For the quarter ended March 31, 1999, an account receivable has made a
payment to settle balance of Baht 7.88 million by transferring inventories
of Baht 7.17 million and value added tax of Baht 0.71 million.
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- For the quarter ended March 31, 1999, the Company has entered into hire-
purchase agreement with a company resulting in assets increase by Baht
7.15 million. Deferred interest from hire purchase is Baht 1.66 million.
The liabilities increase by Baht 3.67 million for current portion and Baht
5.14 million for non-current portion.
- A subsidiary company has reclassified certain fixed assets to be assets
held for resale as per the consolidated interim financial statements for
the quarter ended March 31, 1999, amounting to Baht 123.50 million (see
Note 17).
6. CURRENT ASSETS - RECEIVABLES
CONSOLIDATED THE COMPANY
1999 1998 1999 1998
Baht Baht Baht Baht
Trade debtors 279,330,540 410,990,340 268,043,848 302,334,545
Less: provision for doubtful debt (40,046,805) (63,778,783) (35,137,642) (25,355,585)
239,283,735 347,211,557 232,906,206 276,978,960
As at March 31, 1999, the accounts receivable which have difficulties in
repayment and overdue more than three months are as follows:
Trade accounts and notes receivable - related companies:
CONSOLIDATED THE COMPANY
1999 1999
No Baht No Baht
More than 12 months - - 1 46,809,476
- 46,809,476
Less provision for doubtful debt (loss that
exceeds investment in a subsidiary) - (46,809,476)
- -
Trade accounts and notes receivable - other companies:
CONSOLIDATED THE COMPANY
1999 1999
No Baht No Baht
3 to 6 months 13 5,778,585 2 4,658,300
6 to 12 months 3 22,040,714 2 22,038,714
More than 12 months 17 16,582,115 1 10,859,210
44,401,414 37,556,224
Allowance for doubtful
trade accounts and notes
receivable 40,046,805 35,137,642
For the consolidated and equity method interim financial statement as at
March 31, 1998, the Company could not conveniently obtain the information
for comparison.
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