SET Announcements

LOXLEY PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 1. EFFECTIVE FROM COUNTRYS ECONOMIC CRISIS The accompanying interim financial statements for the three-month and six-month periods then ended June 30, 1998 included the effects of the economic and financial crisis to the extent the Company, subsidiaries and associated companies are known and can be estimated. These crisis caused by the currency volatility in the Asia were affected from Pacific egion, volatile stock market, in terest rate and continue slowdown in economic of 1997 up to present time and will continue to be existed and, accordingly, there are uncertainties that may affect future operations of the Company, subsidiaries and associated companies. The ultimate outcome of this matter cannot presently be determined. The financial statements for the three-month and six-month periods ended June 30, 1998 do not include any adjustment that might result from these uncertainties. Related effects will be reported in the financial statements as they become known and estimable. 2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements included the accounts of Loxley Public Company Limited and the following subsidiaries owned directly and indirectly by Loxley Public Company Limited or the companies over which Loxley Public Company Limited has control. Percentage of Shareholding As at June 30 1998 1997 Direct Indirect Direct Indirect Subsidiary Companies Loxley Business Information Technology Company Limited 99 - 99 - Loxley Myanmar Company Limited (not yet started principal commercial operations) 99 - 99 - Loxley Wireless Company Limited 99 - 99 - Jago Company Limited (not yet started principal commercial operations) 99 - 99 - Loxley Energy Company Limited (not yet started principal commercial operations) 99 - 45 - Loxley Utilities Services Company Limited 90 - 90 - - 2 - Percentage of Shareholding As at June 30 1998 1997 Direct Indirect Direct Indirect Loxley Comware Company Limited 70 - 70 - Loxley Pacific Company Limited 70 - 70 - Loxley Newteck Company Limited 67 - 67 - Societed Commercial Lao Company Limited 67 - 67 - Loxley Broadcast and Media Company Limited 60 - 60 - Loxley Infra Company Limited 60 - 60 - Loxley Pagephone Company Limited 55 - 55 - LoxData Company Limited 52 - 52 - Loxley Satellite Communications Company Limited (not yet started principal commercial operations) 51 - 51 - Professional Computer Company Limited - 99 - 99 Netone Network Solution Company Limited - 98 49 - Hutchison Telecommunications (Thailand) Company Limited - 55 55 - Open Systems Integrator Company Limited - 83 67 - Loxley Information Company Limited - 65 65 - Loxley Information Services Company Limited - 65 65 - Companies Over Which Loxley Public Company Limited Has Control Loxley Trading Company Limited 50 - 50 - Loxley Property Development Company Limited 40 - 40 - Loxley Intergraph (Thailand) Company Limited - - - 50 Dynamic Integrator Corporation Company Limited - - - 50 - 3 - Percentage of Shareholding As at June 30 1998 1997 Direct Indirect Direct Indirect North - East Asia Telephone and Telecommunication Company Limited - 49 - 49 Loxley Video Post (Bangkok) Company Limited - 31 - 31 Significant intercompany transactions with the above subsidiaries have already been eliminated. In May 1994, the Company additionally invested in the share cap ital of Hutchison Telecommunications (Thailand) Limited (Hutchison) resulting in an increase in the percentage of shareholdings from 45% to 55% . At the date of the acquisition of the shares in Hutchison, the Company had to pay for the additional share capital exceeding the net assets value of that subsidiary. As a result, the Company recorded the Excess of Investment Over Net Assets as part of Other Assets which is being amortized as expense over aperiod of approximately 12 years. As at June 30, 1997, the unamortized balance amounted to approximately Baht 24.9 million. In August 1997, a subsidiary purchased all of the common shares of Hutchison from the Company and other shareholders. The subsidiary had to pay for the share capital exceeding the net assets value of Hutchison. As a result, the subsidiary recordedthe Excess of Investment Over Net Assets as part of Other Assetswhich is being amortized as expense over a period of 8 years. As at June 30, 1998, the unamortized balance amounted to approximately Baht 77.9 million. The Company has included the financial statements of Loxley Tra ding Company Limited, in which the Company invested 50% of the shareholding in May 1994, for consolidation since it had control over the investee. At the date of the acquisition of the shares in Loxley Trading Company Limited, the Company had to pay for the share capital exceeding the net assets value of that subsidiary.As a result, the Company recorded the Excess of Investment Over Net Assets as part of Other Assets which is being amortized as an expense over a period of 15 years. As at June 30, 1998, the unamortized balance amounted to approximately Baht 37.8 million. In respect of including the financial statements of Loxley Trading Company Limited for consolidation, the Company is required to recognize all of the capital deficiency of that subsidiary in the consolidated financial statements, which included the portion applicable to the minority interest totalling Baht 27 million. The Company recorded such amounts as a deferred charge and presented it as part of Other Assets which was amortized to expense over a period of 15 years. However, such balance was cleared up in 1995 by the allocation of the minoritys share in net income subsequently occurred of Loxley Trading Company Limited. - 4 - During the third quarter of 1996, the Company invested 90% in the share capital of Loxley Utilities Services Company Limited. In this connection, the Company had to pay for the share capital exceeding the net assets value of that subsidiary. As a result, the Company recorded the Excess of Investment Over Net Assets as part of Other Assets which is being amortized as expense over a period of 15 years. As at June 30, 1998, the unamortized balance amounted to approximately Baht 51.6 million. The Company accounts for its investments in shares of associated companies for consolidated financial statements and investments in shares of subsidiaries and associated companies for the Companys financial statements by the equity method.In case of the subsidiary and/or associated company reports net loss, the Company will discontinue applying the equity method when the balance of investment in such subsidiary and/or associated company is reduced to zero and shall not recognize for additional losses because the Company did not have contingent liabilities or guarantees for subsidiaries and/or associated companies. The Company will resume applying the equity method only after the subsidiary and/or associated company subsequently reports net income, and its share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. 3. CHANGE IN THE METHOD OF ACCOUNTING 3.1 In December 1997, the Company started adopting the generally accepted practice of providing for deferred income tax resulting from timing differences in reporting revenues and expenses for financial reporting purposes compared to income tax reporting purposes, effective retroactively to January 1, 1997. Accordingly, the income tax applicable to revenues and expenses which are not currently allowable and deductible for income tax purposes is set up as Deferred Income Tax in the balance sheets. This will be allocated to future periods when such revenues and expenses provided for are actually incurred and considered allowable and deductible for income tax purposes. As a result of this deferment, netincome for the three-month and six-month periods end ed June 30, 1997 increased by approximately Baht 20 million and Baht 116.1 million, respectively representing income tax applicable to the timing differences for the three-month and six-month periodsended June 30, 1997 (approximately Baht 20 million and Baht 38.5 million, respectively) and cumulative income tax applicable to timing differences of prior years up to December 31, 1996 (approximately Baht 77.6 million). The interim financial statements of subsidiaries included in this interim financial statements did not include any adjustment effect from the change in the method of accounting for income tax. The Management, however, believes that the effect on this matter was not material to the interim financial statements. - 5 - 3.2 In 1997, the Company appraised its land, previously recorded at cost amounting to approximately Baht 48.1 million, at appraised value totalling approximately Baht 253.6 million. The Company appraised the said land based on the information guidelines provided by an independent appraiser. The revaluation increment in land, totalling approximately Baht 205.5 million, was credited to Revaluation Increment in Land which was shown under Shareholders Equity in the balance sheets. 4. RELATED PARTY TRANSACTIONS A portion of sales of products and services, fees, other income, costs of sales and services and selling and administrative expenses are represented by transactions with their subsidiaries, associated and other related companies. These companies are related through common shareholdings and/or directorships. The accompanying financial statements reflect the effects of these transactions which arose in the ordinary course of business. Account balances with these related companies at June 30, 1998 and 1997 were shown separately in the balance sheets. Significant transactions during the three-month and six-month periods ended June 30, 1998 and 1997 which included in the interim financial statements were as follows: In Thousand Baht Three-month periods ended June 30 Consolidated The Company 1998 1997 1998 1997 Sales of products and services 69,241 24,372 37,285 233,583 Fees and other income 2,860 163 2,991 3,359 Cost of sales and services 39,823 130,967 72,944 272,105 Selling and Administrative Expenses 4,534 - 800 2,281 In Thousand Baht Six-month periods ended June 30 Consolidated The Company 1998 1997 1998 1997 Sales of products and services 88,266 44,424 134,329 387,834 Fees and other income 8,492 3,642 13,386 11,506 Cost of sales and services 73,789 265,526 129,125 469,670 Selling and Administrative Expenses 4,534 - 3,066 2,281 - 6 - 5. ACCOUNTS RECEIVABLE - TRADE As at June 30, 1998, the Company had overdue accounts receivabl e-trade. The aging receivables were as follows: In Thousand Baht Consolidated The Company Over 3 months to 6 months 258,875 151,370 Over 6 months to 12 months 155,666 106,230 Over 12 months 253,042 202,970 Total 667,583 460,570 The Company set up allowance for doubtful accounts for the period ended June 30, 1998 amounting to approximately Baht 282.9 million (Baht 195 million for the Company). Base on historical collection experience, the management believes that the allowance for doubtful accounts is adequate. - 10 - The Company accounted for the investments in Loxley Hitachi Cable Engineering Company Limited and investments in Thai Telephoneand Telecommunication Public Company Limited by the equity method. Subsequently in 1997 and 1996, the Company sold a portion of investments which effected the percentage of shareholding in the said companies reduced to be less than 20%. As a result, the Company changed the accounting method for these investments to the cost method by using the outstanding balance of investments under the equity method as cost of the investments. As at June 30, 1998, the aggregate market value of investments in listed securities was lower than the aggregate cost by approximately Baht 934.2 million. The valuation adjustment was recorded as Provision for unrealized loss on decline in value of long-term investments in listed securities and presented as part of Shareholders Equity in the Balance Sheets. 7. LOANS TO RELATED COMPANIES Consolidated These consists of: In Thousand Baht Interest Rate Amount Objective 1998 1997 1998 1997 Short - Term Loans L.B.L. Algamate Partnership Ltd. For operations 15.75% 13.25% 184,850 184,850 Multimedia Telephony, Inc.(Philippines) For operations 15.00% 15.00% 104,713 77,860 Ekpavee Co., Ltd. For operations - 21.00% - 84,963 Others 91,230 25,230 Total Short-Term Loans 380,793 372,903 Long-Term Loans Thai Telephone and Telecommunication Public Company Limited For operations MLR+0.5% MLR+0.5% 375,000 375,000 Thai Cellulose Products Company Limited For operations MOR+ 1% MOR+ 1% 10,400 10,400 Fax and Phone Co., Ltd. For operations - 15.00% - 3,319 Total Long-Term Loans 385,400 388,719 Less Allowance for Doubtful Accounts 10,400 - Net 375,000 388,719 - 11 - The Company These consists of: In Thousand Baht Interest Rate Amount Objective 1998 1997 1998 1997 Short-Term Loans L.B.L Algamate Partnership Ltd. For operations 15.75% 13.25% 184,850 184,850 Multimedia Telephony, Inc. (Philippines) For operations 15.00% 15.00% 104,713 77,860 Others 118,398 40,481 Total Short-Term Loans 407,961 303,191 Long-Term Loans Thai Telephone and Telecommunication Public Company Limited For operations MLR+0.5% MLR+0.5% 375,000 375,000 Loxley Broadcast and Media Company Limited For operations 15.75% - 18,469 - Thai Cellulose Products Company Limited For operations MOR+ 1% MOR+ 1% 10,400 10,400 Total Long-Term Loans 403,869 - Less Allowance for Doubtful Accounts (28,869) - Net 375,000 385,400 8. LOAN AND ADVANCE FROM RELATED COMPANIES Consolidated These consists of: In Thousand Baht Interest Rate Amount Objective 1998 1997 1998 1997 Short-Term Loan Asia Pacific Post Co., Ltd. For operations 15.75% 13.25% 19,425 10,359 Advance Loxley Utilities Services Co., Ltd. and Siripong Construction Partnership Ltd. Joint Venture For operations - - 5,670 - Total 25,095 10,359 (More)