F/S

FINANCIAL STATEMENTS AND AUDITORS' REPORT THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED DECEMBER 31, 1997 AND 1996 Auditors Report To the Shareholders of Thantawan Industry Public Company Limited: We have examined the balance sheets of Thantawan Industry Public Company Limited as at December 31, 1997 and 1996, and the related statements of income, changes in shareholders equity, retained earnings and cash flows for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Without qualifying our opinion, we draw attention to Note 1 to the financial statements. The operations of the Company 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 cannot presently be determined. In our opinion, the financial statements referred to above present fairly the financial position of Thantawan Industry Public Company Limited at December 31, 1997 and 1996, and the results of its operations, changes in shareholders equity, retained earnings, and cash flows for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. Nirand Lilamethwat Certified Public Accountant Peat Marwick Suthee Limited Bangkok, February 17, 1998 THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS AS AT DECEMBER 31, 1997 AND 1996 1997 1996 ASSETS Baht Baht CURRENT ASSETS Cash in hand and at banks 37,676,512.58 14,608,742.74 Short-term investments Notes receivable - financial institution - 1,800,000.00 Fixed deposits (Note 12) 8,151,178.42 1,000,000.00 Trade accounts and notes receivable 125,293,441.15 88,938,913.26 Less Allowance for doubtful accounts (3,068,214.59) (5,724,400.70) Trade accounts and notes receivable - net (Notes 4 and 5) 122,225,226.56 83,214,512.56 Inventories - net (Notes 4 and 6) 82,222,999.95 73,237,546.74 Other current assets Refundable value added tax 11,262,668.95 5,656,394.25 Subsidy for export tax 4,259,407.72 4,144,007.56 Others 3,928,848.90 2,877,501.11 Total Current Assets 269,726,843.08 186,538,704.96 INVESTMENTS (Notes 4 and 7) 8,305,430.14 246,512.50 PROPERTY, PLANT AND EQUIPMENT - Net (Notes 4, 8 and 12) 137,135,587.71 143,432,823.99 OTHER ASSETS Advance payments for assets acquisition (Notes 2 and 9) 20,500,000.00 - Deferred charges - net (Note 4) 4,207,255.57 5,369,577.15 Deposits 184,627.27 916,900.00 Total Assets 440,059,743.77 336,504,518.60 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS AS AT DECEMBER 31, 1997 AND 1996 1997 1996 LIABILITIES AND SHAREHOLDERS' EQUITY Baht Baht CURRENT LIABILITIES Bank overdraft and loans from financial institutions (Note 12) 39,622,838.13 20,145,151.98 Trade accounts payable (Note 2) 105,664,568.36 62,350,278.27 Other current liabilities Accrued expenses 15,966,559.37 15,758,858.21 Accrued income tax 13,216,109.79 - Others 3,706,678.80 965,972.15 Total Liabilities 178,176,754.45 99,220,260.61 SHAREHOLDERS' EQUITY Share capital Authorized share capital 10,000,000 shares, Baht 10 par value 100,000,000.00 100,000,000.00 Issued and paid-up share capital 8,000,000 shares 80,000,000.00 80,000,000.00 Paid-in capital Premium on share capital 136,800,000.00 136,800,000.00 Retained earnings Appropriated Legal reserve (Note 10) 6,024,212.07 5,650,613.78 Unappropriated 39,090,452.25 14,833,644.21 Unrealized loss on securities for investment (Note 4) (31,675.00) - Total Shareholders' Equity 261,882,989.32 237,284,257.99 Total Liabilities and Shareholders' Equity 440,059,743.77 336,504,518.60 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 Baht Baht REVENUES Sales (Note 4) 590,609,051.33 518,645,646.41 Other income Sales of scrap 11,180,921.45 8,730,183.59 Others 8,894,433.96 4,797,516.85 Total Revenues 610,684,406.74 532,173,346.85 EXPENSES Cost of sales (Note 2) 443,130,575.64 416,164,055.90 Selling and administrative expenses (Note 2) 117,279,302.24 100,510,452.24 Interest expense 3,506,126.76 2,527,106.36 Total Expenses 563,916,004.64 519,201,614.50 Income before income tax 46,768,402.10 12,971,732.35 Income tax expenses 14,137,995.77 5,499,766.65 Net income 32,630,406.33 7,471,965.70 Earnings per share (Note 4) 4.08 0.93 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 Baht Baht Share capital Ordinary shares Beginning balance 80,000,000.00 80,000,000.00 Additions - - Ending balance 80,000,000.00 80,000,000.00 Paid-in capital Premium on share capital Beginning balance 136,800,000.00 136,800,000.00 Additions - - Ending balance 136,800,000.00 136,800,000.00 Retained earnings Appropriated Legal reserve Beginning balance 5,650,613.78 4,881,445.92 Additions 373,598.29 769,167.86 Ending balance 6,024,212.07 5,650,613.78 Unappropriated Beginning balance 14,833,644.21 21,730,846.37 Additions 32,630,406.33 7,471,965.70 Deductions (8,373,598.29) (14,369,167.86) Ending balance 39,090,452.25 14,833,644.21 Unrealized loss on securities for investment Beginning balance - - Additions (31,675.00) - Ending balance (31,675.00) - Total Shareholders' Equity 261,882,989.32 237,284,257.99 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 Baht Baht Unappropriated retained earnings : Beginning balance 14,833,644.21 21,730,846.37 Less Appropriations of earnings for prior year (Note 10) Legal reserve (373,598.29) (769,167.86) Dividend (8,000,000.00) (13,600,000.00) Net income for the year 32,630,406.33 7,471,965.70 Total Unappropriated Retained Earnings 39,090,452.25 14,833,644.21 Appropriated retained earnings : Legal reserve 6,024,212.07 5,650,613.78 Total Retained Earnings 45,114,664.32 20,484,257.99 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 Baht Baht CASH FLOWS FROM OPERATING ACTIVITIES Net income 32,630,406.33 7,471,965.70 Add (less) Adjustments to reconcile net income to net cash Provided by operating activities Allowance for doubtful accounts (2,656,186.11) 4,411,631.75 Allowance for devalue of inventories 530,704.59 (248,850.70) Depreciation and amortization (Note 8) 25,672,237.50 23,060,751.57 Deferred charges written off 1,162,321.58 863,887.05 Net income from operations before changes of operating assets and liabilities 57,339,483.89 35,559,385.37 (INCREASE) DECREASE IN OPERATING ASSETS Accounts receivable (36,354,527.89) 3,102,295.02 Inventories (9,516,157.80) 24,860,861.42 Other current assets (14,273,022.65) 4,367,589.62 Other assets (19,767,727.27) - INCREASE (DECREASE) IN OPERATING LIABILITIES Accounts payable 43,314,290.09 (4,459,143.58) Accrued expenses 7,707,701.16 2,526,497.08 Accrued company income tax 13,216,109.79 (2,049,534.02) Other current liabilities 2,740,706.65 (1,177,008.02) Net Cash Provided by Operating Activities 44,406,855.97 62,730,942.89 CASH FLOWS FROM INVESTING ACTIVITIES Increase in investments (8,090,592.64) - Carrying value of vehichles and equipment disposed 776,871.60 7,068.42 Purchases of property, plant and equipment (20,151,872.82) (20,864,646.90) Net Cash Used in Investing Activities (27,465,593.86) (20,857,578.48) See notes to financial statements 1997 1996 Baht Baht CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in loans from financial institutions 15,583,091.94 (4,723,919.94) Payment of dividend (8,000,000.00) (13,600,000.00) Net Cash Provided by (Used in) Financing Activities 7,583,091.94 (18,323,919.94) NET INCREASE IN CASH AND CASH EQUIVALENTS 24,524,354.05 23,549,444.47 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 3) 15,485,190.82 (8,064,253.65) CASH AT BANK PLEDGED AS COLLATERAL AT BEGINNING OF YEAR (Notes 3 and 12) 1,000,000.00 1,000,000.00 CASH AT BANK PLEDGED AS COLLATERAL AT END OF YEAR (Notes 3 and 12) (1,000,000.00) (1,000,000.00) CASH AND CASH EQUIVALENTS AT END OR YEAR (Note 3) 40,009,544.87 15,485,190.82 SUPPLEMENTARY INFORMATION Cash payment during the year Interest expense 3,244,099.77 2,550,361.23 Income tax 921,885.98 8,263,026.95 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION In 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 reflect the assessment of the possible impact of this economic situation on the financial position of the Company. In addition, the ultimate effect on the entitys financial position of these uncertainties cannot presently be determined. The financial statements are prepared in compliance with Commerce Ministerial Regulation No. 7 (B.E. 2539) dated October 25, 1996. NOTE 2 - TRANSACTIONS WITH RELATED PARTIES The Company has significant transactions with related parties. The financial statements reflect the effect of these transactions on the basis determined by the companies concerned. Significant transactions occurred between the Company and related parties during 1997 and 1996 as follows: 1997 1996 Baht Baht Advance payments for assets acquisition paid to related parties 20,500,000.00 - Purchase made by the Company to related parties 4,391,555.73 - Rental and service expenses paid to related parties 3,478,439.09 3,489,824.41 At December 31, 1997 the outstanding balances with related parties are as follows: 1997 1996 Baht Baht Account payable - related parties 449,049.44 - NOTE 3 - BASIS FOR PREPARATION OF THE CASH FLOWS STATEMENTS Cash and Cash Equivalents Cash and cash equivalents shown in the cash flows statements as at December 31 consisted of the following: 1997 1996 Baht Baht Cash in hand and at banks 37,676,512.58 14,608,742.74 Add Notes receivable - financial institutions - 1,800,000.00 Fixed Deposit 8,151,178.42 1,000,000.00 Less Bank overdrafts (4,818,146.13) (923,551.92) Cash at bank pledged as collateral (1,000,000.00) (1,000,000.00) Cash and Cash Equivalents 40,009,544.87 15,485,190.82 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Trade Accounts Receivable Trade 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 existing receivables. Inventories Inventories are stated at the lower of cost or net realizable value determined on a average method. Investments Investments in listed securities are stated at the lower of aggregate cost or market. Allowance for reduction in market price due to temporary market fluctuations, if any, is treated as deduction from the shareholders equity. Investments in other securities and long-term note receivable-financial institution are stated at cost. Property, Plant and Equipment Property, plant and equipment are stated at cost net of accumulated depreciation. Depreciation and amortization are computed by the straight-line method at the rates of 5% for buildings and 10-20% for equipment. Deferred Charges Deferred charges represent development expenditures for new products in the amount of Baht 2.42 million and are amortized over a period of 5 years from the date revenues from sales of those products are first earned. In addition, deferred charges include expenditures incurred in obtaining a Stock Exchange of Thailand listing in the amount of Baht 6.42 million which will be amortized over a period of 5 years from the listing date. Revenues Recognition Revenues from sales of goods are recognized at the date of delivery to customers. Accounts in foreign Currencies Accounts in foreign currencies occurred during the year are translated into Baht at the rates of exchange prevailing on the date of the transactions. Accounts in foreign currencies at the end of the year are translated into Baht at the rates of exchange prevailing at that date. Gain or loss on translation is included in the statement of income. Earnings Per Share Earnings per share is computed by dividing net income for the year by the number of shares outstanding at the end of the year. NOTE 5 - ACCOUNTS RECEIVABLE Accounts receivable at December 31 consisted of: 1997 1996 Baht Baht Domestic accounts receivable 4,353,368.16 3,305,461.34 Foreign accounts receivable 120,797,029.70 85,431,961.33 Post - dated cheques 143,043.29 201,490.59 125,293,441.15 88,938,913.26 Less Allowance for doubtful accounts (3,068,214.59) (5,724,400.70) Accounts Receivable - net 122,225,226.56 83,214,512.56 NOTE 6 - INVENTORIES Inventories at December 31 consisted of: 1997 1996 Baht Baht Finished goods 19,678,753.62 16,146,745.74 Work in process 21,195,769.67 24,275,684.45 Raw materials 29,117,432.41 26,296,009.26 Supplies 6,932,806.91 8,093,542.59 Goods in transit 7,515,709.23 112,332.00 84,440,471.84 74,924,314.04 Less Allowance for devalue of inventories (2,217,471.89) (1,686,767.30) Inventories - net 82,222,999.95 73,237,546.74 NOTE 7 - INVESTMENTS At December 31, 1997 investments in the amount of Baht 8,305,430.14 included investments in note receivable in the amount of Baht 8,090,592.64 issued by the financial institution which has closed its business as its rehabilitation plan was not approved by the Financial Sector Restructuring Authority on December 8, 1997. The Company is in the process to exchange the note according to the project in accepting exchange of notes managed by Krung Thai Bank Public Company Limited. NOTE 8 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31 consisted of: 1997 1996 Baht Baht Land and improvements 16,177,999.50 16,177,999.50 Buildings and improvements 46,518,772.53 38,416,123.31 Machinery and equipment 171,028,461.28 146,755,695.32 Tools and equipment 14,655,827.76 12,921,125.78 Office furniture, fixtures and equipment 5,833,220.85 5,560,630.39 Vehicles 11,383,145.10 13,210,645.10 Construction in progress 3,291,344.36 25,077,435.61 268,888,771.38 258,119,655.01 Less Accumulated depreciation and amortization (131,753,183.67) (114,686,831.02) Property, plant and equipment-net 137,135,587.71 143,432,823.99 Depreciation and amortization in the amounts of Baht 25,672,237.50 in 1997 and Baht 23,060,751.57 in 1996 were included under cost of sales and selling and administrative expenses. NOTE 9 - ADVANCE PAYMENTS FOR ASSETS ACQUISITION At December 31, 1997 advance payments for assets acquisition represent advance payments according to the agreement to purchase land and building with a related company on December 29, 1997 at a price of Baht 41 million. The Company paid 50% of the price in the amount of Baht 20.5 million on date of signing of the agreement by issuing note receivable in the amount of Baht 20,232,717.81 issued by a financial institution which has closed its business as its rehabilitation plan was not approved by the Financial Sector Restructuring Authority on December 8, 1997. On January 22, 1998 the Extraordinary Meeting of Shareholders did not approve to purchase the said land and building. Therefore, the Company has notified for cancellation of the agreement and refund the advance payments of Baht 20.5 million as its letter dated February 12, 1998. NOTE 10 - APPROPRIATIONS OF EARNINGS On April 24, 1997 the Ordinary General Meeting of Shareholders approved the proposed dividend, payable from the net income of the year 1996 of Baht 1.00 per share on 8 million shares totaling Baht 8.0 million and the appropriation of 5% net income for the year 1996 to legal reserve in the amount of Baht 373,598.29. On April 24, 1996 the Ordinary General Meeting of shareholders approved the proposed dividend, payable from the net income of the year 1995 of Baht 1.70 per share on 8 million shares totaling Baht 13.6 million and the appropriation of 5% net income for the year 1995 to legal reserve in the amount of Baht 769,167.86 NOTE 11 - SEGMENT INFORMATION Thantawan Industry Public Company Limited manufactures plastic products which devided into three main products: straw products, HD.PE bag product and LD.PE bag product. Product purchased for sales are groups as others. The results of its operations for the years ended December 31, 1997 and 1996 are summarized as follows: Baht (Thousand) HD. PE bag LD. PE bag 1997 1996 Straw products products products Others Total Total Sales-export : 1997 109,234 191,799 256,319 10,494 567,846 : 1996 116,250 184,317 187,729 10,526 498,822 sales-local : 1997 17,469 2,562 2,611 121 22,763 : 1996 14,087 3,606 1,977 154 19,824 Total : 1997 126,703 194,361 258,930 10,615 590,609 : 1996 130,337 187,923 189,706 10,680 518,646 Operating profit (loss) : 1997 32,128 19,394 57,270 854 109,646 : 1996 25,434 13,304 24,496 (167) 63,067 Other income 4,953 4,073 General corporate (64,325) (51,641) Interest expense (3,506) (2,527) Income tax (14,138) (5,500) Net income 32,630 7,472 As at December 31, 1997 and 1996 property, plant, and equipment net of accumulated depreciation and amortization are summarized as follows: Baht (Thousand) 1997 1996 Straw products HD.PE LD Products Total Total Assets used by products : 1997 20,702 44,864 57,268 122,834 : 1996 24,504 39,869 60,172 124,545 General assets used 14,301 18,888 Total property, plant and equipment - net 137,135 143,433 NOTE 12 - ASSETS PLEDGED AS COLLATERAL Fixed deposit in the amount of Baht 1 million and part of land and constructions were pledged as collateral for liabilities and commitments with commercial banks. Post-dated cheque in the amount of Baht 7.5 million was pledged as collateral for loan with Export Import Bank of Thailand. NOTE 13 - RECLASSIFICATION OF ACCOUNTS Certain accounts in the financial statements for the year ended December 31, 1996 have been reclassified to conform with the presentation in the financial statements for the year ended December 31, 1997.