NSOLIDATED F/S Q2/1998

SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Share capital Preference shares Beginning balance 70,000 70,000 70,000 70,000 Increase during period - - - - Decrease during period - - - - Ending balance 70,000 70,000 70,000 70,000 Ordinary shares Beginning balance 230,000 230,000 230,000 230,000 Increase during period - - - - Decrease during period - - - - Ending balance 230,000 230,000 230,000 230,000 Paid-in capital Premium on ordinary share Beginning balance 486,000 486,000 486,000 486,000 Increase during period - - - - Decrease during period - - - - Ending balance 486,000 486,000 486,000 486,000 Surplus on revaluation Beginning balance 929,174 1,020,544 834,565 834,565 Increase during period - - - - Decrease during period - (91,370) - - Ending balance 929,174 929,174 834,565 834,565 Retained earnings Appropriated - legal reserve Beginning balance 56,163 56,142 48,565 48,565 Increase during period - 21 - - Decrease during period - - - - Ending balance 56,163 56,163 48,565 48,565 Unappropriated Beginning balance (2,264,928) 498,798 (2,257,330) 506,396 Increase during period 349,360 174,979 349,360 174,979 Decrease during period - - - - Ending balance (1,915,568) 673,777 (1,907,970) 681,375 Loss on non-current marketable securities Beginning balance (257,799) - (256,636) - Increase during period 110,151 - 110,151 - Decrease during period - - - - Ending balance (147,648) - (146,485) - Total Shareholders' Equity (Deficit) (291,879) 2,445,114 (385,325) 2,350,505 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF RETAINED EARNINGS (DEFICIT) FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Unappropriated retained earnings (deficit) Balance at the beginning of period (1,470,212) 589,149 (1,462,614) 596,747 Net income (loss) (445,356) 84,628 (445,356) 84,628 Total Unappropriated Retained Earnings (Deficit) (1,915,568) 673,777 (1,907,970) 681,375 Appropriated retained earnings Legal reserve 56,163 56,163 48,565 48,565 Total Retained Earnings (Deficit) (1,859,405) 729,940 (1,859,405) 729,940 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF RETAINED EARNINGS (DEFICIT) FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Unappropriated retained earnings (deficit) Balance at the beginning of period (2,264,928) 498,798 (2,257,330) 506,396 Net income 349,360 174,979 349,360 174,979 Total Unappropriated Retained Earnings (Deficit) (1,915,568) 673,777 (1,907,970) 681,375 Appropriated retained earnings Legal reserve 56,163 56,163 48,565 48,565 Total Retained Earnings (Deficit) (1,859,405) 729,940 (1,859,405) 729,940 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIOD AND SIX-MONTH PERIOD ENDED JUNE 30, 1998 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY Three-month Six-month Three-month Six-month CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Net income (loss) (445,356) 349,360 (445,356) 349,360 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities Doubtful accounts 12,929 12,929 9,749 9,749 Depreciation and deferred charges written off 27,549 54,549 23,726 46,700 Gain on sales of fixed assets (2,833) (3,965) (721) (976) Companies' share of (profit) loss from its investment in subsidiaries and associated companies 3,236 (24,497) 10,584 (36,390) Net unrealized gains from recovery in market for current - marketable securities (14,428) (35,480) (14,428) (35,480) Loss on sales of condominiums 17,803 17,803 17,803 17,803 Loss on disposal of fixed assets 242 886 242 886 Unrealized (gain) loss on exchange 335,163 (474,083) 313,200 (445,292) Loss on devaluation of fixed assets - 40,541 - - Loss on non-current marketable securities 9,544 10,000 9,544 10,000 Changes in operating assets and liabilities (Increase) decrease in operating assets Accounts receivable 33,185 500,899 5,980 468,540 Due from related companies 18,144 (72,648) 23,712 (68,535) Retentions receivable (43,579) (18,185) (43,493) (18,113) Inventories (9,212) (13,660) - - Other current assets (57,285) (125,882) (56,971) (122,814) Increase (decrease) in operating liabilities Accounts payable (74,308) (37,403) (32,270) (34,168) Liabilities under trust receipts (50,754) (16,604) (50,754) (16,604) Due to related companies (592) (9,975) (554) (16,458) Advance received on contracts (83,088) (143,674) (77,805) (111,270) Other current liabilities (89,448) (33,268) (92,368) (36,936) Allowance for consolidated financial statements - (31,931) - - Net Cash Provided by Operating Activities (413,088) (54,288) (400,180) (39,998) See notes to financial statements (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY Three-month Six-month Three-month Six-month CASH FLOWS PROVIDED BY INVESTING ACTIVITIES Increase in short-term investment (83) (258) (57) (232) Decrease in investments 26,000 60,351 26,000 26,000 Cash payment on purchase of fixed assets (14,950) (28,932) (9,725) (16,643) Cash from sale of fixed assets 3,543 3,340 834 1,234 Increase in condominiums (15,263) (15,263) (15,263) (15,263) Decrease in advance payments on condominiums 29,676 27,195 29,676 27,195 (Increase) decrease in other assets (4,531) 24,403 (1,993) (3,484) Net Cash Used in Investing Activities 24,392 70,836 29,472 18,807 CASH FLOW PROVIDED BY FINANCING ACTIVITIES Decrease in notes receivable - finance institutes 496,771 - 496,771 - Increase in loans and advances to directors and employees (12,991) (1,997) (14,075) (2,078) Increase (decrease) in short-term loans (56,539) (79,622) 105,359 103,359 (Increase) decrease in due from related companies 176,825 331,825 (17,184) 137,816 Increase in long-term loans - 30,000 - - Increase in other liabilities 43,577 8,933 43,577 43,283 Decrease in minority interests (555) (26,717) - - Net Cash Provided by Financing Activities 647,088 262,422 614,448 282,380 NET INCREASE IN CASH AND CASH EQUIVALENTS 258,392 278,970 243,740 261,189 CASH AND CASH EQUIVALENTS AS AT BEGINNING OF PERIOD (Note 6) (141,242) (161,820) (101,824) (119,273) CASH AND CASH EQUIVALENTS AS AT END OF PERIOD (Note 6) 117,150 117,150 141,916 141,916 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid during the period Interest expense 180,168 230,682 169,629 208,641 Income tax 30,271 70,820 30,270 70,811 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 (UNAUDITED) NOTE 1 - GOING CONCERN Since 1997, certain Asia Pacific countries, including Thailand, are experiencing economic 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 period and six-month period ended June 30, 1998 have been presented on a going concern basis which assumes that the Company will continue in operation. The validity of the assumption is dependent upon the Companys ability to meet its financial requirements and success of future operations. If the Company were unable to continue in operation, adjustments would have to be made to reduce the value of assets to their recoverable amounts, to provide for any additional liabilities that might arise and to consider the classification of these assets and liabilities. Due to the significant effect of currency devaluation, as mentioned above, and problems will the Companys liquidity, the Companys financial ratio is not in accordance with loan contract conditions. Accordingly, the lender has a right to call in debts immediately, although, the lender has not showed any intention to call in such debts. The Company has appointed a financial consultant to produce a financial restructuring plan. Whilst the management and the financial consultant are producing a financial restructuring plan, there is no guarantee for a success. Such planning may include the extension to repay loan principle for several years and to pay interest at a lower rate. NOTE 2 - BASIS OF CONSOLIDATION 2.1 Basis of Consolidated Financial Statements The consolidated financial statements of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries are prepared in accordance with generally accepted accounting principles and the regulations of the Stock Exchange of Thailand. The financial statements are presented in compliance with Commerce Ministerial Regulation No. 7 (B.E.2539) issued by the Ministry of Commerce under the Public Limited Company Act B.E. 2535. 2.2 Principles for Preparation of Consolidated Financial Statements The consolidated financial statements for the three-month periods and six-month periods ended June 30, 1998 and 1997 consist of the financial statements of Sino-Thai Engineering and Construction Public Company Limited and the financial statements of subsidiaries and subsidiaries of subsidiaries as follows: Percentage of shares holding Type of business 1998 1997 Subsidiaries held by the Company Sino-Thai Construction Services Company Limited 99.99 99.99 Equipment trading and rental, sandblasting and slipforming Sino-Thai Resources Development Public Company Limited 51.16 51.16 Tin dredging Subsidiaries of subsidiaries held indirectly (held by Sino-Thai Resources Development Public Company Limited) Siam Dimension Stone Company Limited 35.81 35.81 Processing of M arble The financial statements for the three-month periods and six- month periods ended June 30, 1998 and 1997 of Siam Dimension Stone Company Limited in which Sino-Thai Resources Development Public Company Limited holds 70% shares are included in consolidation as the parent company can exercise influence over such companys operating and financial policies. All significant intercompany transactions and accounts are eliminated in preparing the consolidated financial statements. 2.3 The Excess of Book Value Over Cost of Investment and the Excess of Cost Over Book Value of Investment The excess of book value over cost of investment at acquisition was fully amortized on that date and reflected in the consolidated retained earnings. The excess of cost over book value of investment at acquisition is amortized by the straight-line method over a period of 10 years. NOTE 3 - THE SUBSIDIARYS OPERATION The subsidiarys Board of Directors resolved to cease the tin mining operation since August 19, 1993 due to the continuous world tin market recession and tin ore price was lower than the production cost. The subsidiary has not set up provision for decline in value of assets relating to mining operation at the book value of approximately Baht 63.9 million as at June 30, 1997. The subsidiary entered into lease agreement for 2 limestone mining rights No. 27951/14713 and 27952/14724 at Tambon Lamphayaklang, Amphur Mouklek, Saraburi Province with Siam Dimension Stone Company Limited in order to operate the planned construction stone mining project. The subsidiary will be responsible for all of mining expenses when mining operation starts. The subsidiary had entered into an agreement with Thai Mineral Industry Consultants Company Limited to do the feasibility study of the construction stone mining project by which the geological study was already done. The 2 mining rights were classified as the class 1A basin according to the resolution passed by the Cabinet on February 21, 1995 which prohibits the stone mining operation. However, Siam Dimension Stone Company Limited can operate limestone mining until the expiration of the mining rights due to such company was granted mining rights before the Cabinet passed the resolution. Siam Dimension Stone Company Limited asked the Department of Mineral Resources for the permission to mine other construction stones according to the present mining rights for which permission was granted by the letter dated November 26, 1996 and also asked for the separation of the mining rights area from the class 1A basin area which is still under the consideration. NOTE 4 - RELATED PARTIES TRANSACTIONS The Company has significant transactions with its related companies. The financial statements reflect the effects of these transactions on the normal business operations. At June 30, the outstanding balances with its related companies are as follow: 4.1 Investment and loan to subsidiary, associated companies and other related companies as at June 30, are summarized as follows: Amounts in thousand Baht percentage of share holding CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 1998 1997 Subsidiaries (Equity method) Sino-Thai Construction Services Company Limited 99.99 99.99 - - - 140,763 Sino-Thai Resources Development Public Company Limited 51.16 51.16 - - 67,066 179,799 Loan to subsidiaries Sino-Thai Construction Services Company Limited - - 228,469 65,000 Sino-Thai Resources Development Public Company Limited - - 540 - - - 296,075 385,562 Amounts in thousand Baht percentage of share holding CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 1998 1997 Associated companies (Equity method) STP & I Public Company Limited 24 24 181,800 212,994 181,800 212,994 HTR Corporation Limited 47.60 31.72 277,416 185,413 277,416 185,413 DKK Sino-Thai Engineering Company Limited 35 35 31,661 23,300 31,661 23,300 CBI/ST Limited - 35.02 - 34,780 - 34,780 ACS Asia Limited 50 50 8,986 7,104 8,986 7,104 ACS Asia (1996) Company Limited 50 50 14,225 7,500 14,225 7,500 MMR Asia Company Limited 45.12 30 3,000 11,998 - 8,998 Thai Maintenance Contracting Company Limited 29.70 19 4,485 2,340 4,485 2,340 Less Allowance for decline in investment (8,986) - (8,986) - 512,587 485,429 509,587 482,429 Loan to Associated companies ACS Asia (1996) Company Limited 5,094 5,094 5,094 5,094 MMR Asia Company Limited 4,000 10,000 4,000 10,000 521,681 500,523 518,681 497,523 Other related companies (Cost method) Abico Land Co.,Ltd 15 15 30,000 30,000 30,000 30,000 Nithipat Leasing Co.,Ltd 15 15 129,568 129,568 97,168 97,168 National Insurance Co.,Ltd 10 10 30,000 30,000 30,000 30,000 National Life Insurance Co.,Ltd 10 10 50,000 50,000 50,000 50,000 Others 349,715 426,757 347,915 373,914 Less Allowance for decline in investment (178,568) (31,067) (178,568) (31,067) 410,715 635,258 376,515 550,015 (More)