SET Announcements

Supplemental Cash Flow Information : Cash paid during the year for : Interest expenses 189,741,638 162,618,695 Income tax 18,018,793 29,300,483 The accompanying notes are an integral part of these statements. THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED MARCH 31,1999 AND 1998 1. Summary of Significant Accounting Policies 1.1 The accounting transactions of the Company have been recorded on the accrual basis. 1.2 Allowance for Doubtful Accounts The allowance for doubtful accounts is set-up based on debts deemed uncollectable from debtors as judged from the current status of each account receivable. 1.3 Inventories Finished petroleum products are stated at the lower of cost or net realizable value. The unit cost is determined on the first-in first-out basis by the weighted average of monthly production costs and the volume of each oil product and ex-refinery selling prices. For the year 1999, the company has revised its accounting policy related to the inventory of lubrication oil from previously priced at cost or net realizable value whichever is lower, on a first-in-first-out basis, to a moving average method. Crude oil is stated at the lower of cost or net realizable value. The unit cost is determined on the first-in first-out basis by the weighted average cost and the volume of monthly purchased crude oil. 1.4 Materials and Supplies Materials and supplies are stated at cost determined by the moving average method. 1.5 Turn-Around Expenses Refinery turn-around expenses are amortized over the period of 18 months, which is the standard of Design Basis. 1.6 Long-Term Investment to Related Parties 1.6.1 The investment equal to or over 20 % of the paid-up share capital is recorded on the equity method. 1.6.2 The investment less than 20 % of the paid-up share capital is recorded on the cost method. 1.7 Property, Plant and Equipment and Depreciation Property, plant and equipment are carried at cost. Interest expenses which are related to fixed assets, are booked to the cost of assets. Depreciation is computed by the straight-line method at rates varying from 5% to 20% per annum based upon the estimated useful life of the assets. The company revises the value of its fixed assets should serious fluctuation in the economy occur which has direct effect on the assets.The surplus value from the revaluation is recorded under account Surplus on fixed assets revaluation in Shareholders Equity, which is not available for dividend distribution. Depreciation on the increased value of the assets is deducted from the Surplus on fixed assets revaluation. 1.8 Income Tax Tax expense or tax income comprises current tax expense determined on the basis of the Revenue Code, and deferred income tax caculated from the temporary differences between net assets in balance sheet and that assets for tax purpose. 1.9 Deferred Charges The prepaid land lease for service stations are amortized over the term of the land lease contract on a straight line basis. Deferred charges related to the exchange of buildings between the Company and the Defence Energy Department,of the Ministry of Defence is amortized over a contracted term of 20 years on a straight line basis. Other deferred charges are amortized within 5 years on a straight line basis. 1.10 Foreign Currencies 1.10.1 Foreign currency transactions are converted into Baht at the exchange rate on the date the transactions incurred . The outstanding balance as of the ending period is translated into Baht using the exchange rate as announced by the Bank of Thailand. Differences from foreign exchange translations are booked the total amount as income or expense except for foreign exchange losses prior to year 1996, which are booked as deferred expense and amortized over the period of the loan 1.10.2 Gains or losses resulting from debt repayment during the year are recorded as income or expense. 1.10.3 In cases where forward exchange contracts are made to minimize the risk exposure on foreign exchange of debts in foreign currency, the Company books the exchange rate as per the contract . The Premium associated with this is amortized over the period of the contract. 1.11 Deferred Revenue Deferred revenue, the advance lease income of equipments and others, are amortized over the term of the contract. 1.12 Pension Fund Reserve Pension Fund Reserve is established on the basis of the pension fund amounts payable to employees as of the end of each accounting year. For all employees who have completed five years service with the Company, a five percent of the pension amount is reserved. And for all employees due to retire over the period of the next five years , a 100 percent of the pension amount is reserved. 1.13 Registered Provident Fund The company established a contributory provident covering substantially all employees. Members are required to make monthly contribution to the fund at either 5% or 10% of the members salaries depending on their choice and the Company is required to make monthly contribution at the same rate. 1.14 Borrowing Cost 1.14.1 Interest expenses incurred from loan specifically for the construction of fixed assets are booked as construction cost until the project is completed and the asset is ready for its intended use. 1.14.2 Interest expenses on loan for general purposes, but partly used for the construction are capitalized during work in progress. Upon completion of the project , such interests are booked as expense. 1.15 Public Offering Expenses Public offering expenses which include registered capital fee, underwriting fee and all other expenses incurred in connection with the public offering, are treated as an adjustment against the premium on share capital. 1.16 Earnings Per Share Earnings per share is calculated from the net profit (loss) divided by the weighted average of issued and paid-up share capital. 1.17 Expenditures for the Development and Modification of Computer Systems Expenditures for the development and modification of computer systems, which significantly increase its capacity and efficiency are booked as assets. Expenditures for solving the computer problems for the year 2000 are booked in total as expense in the accounting year the expenses occurred. 2. Trade Accounts and Notes Receivable - Net ( Accounting Policy 1.2 ) Million Baht 1999 1998 Trade accounts and notes receivable 2,119.54 2,393.17 Less Allowance for doubtful accounts 65.73 53.62 Trade accounts and notes receivable - net 2,053.81 2,339.55 As of March 31,1999, the Company has trade account receivables that have problems in repaying debts. The following is an age analysis of the outstanding amount of such debts. Million Baht over 3 - 6 months 8.32 over 6 - 12 months 16.94 over 12 months 71.78 Total 97.04 The Company has set up an allowance for doubtful accounts of Baht 65.73 Million. 3. Inventories ( Accounting policy 1.3 ) The change in the accounting policy in recording the inventory of lubricant oil from the lower of cost or net realization value, determined on the first-in first-out method to the moving average basis resulted in an increase in the value of the lubricant oil inventory, as of March 31, 1999, by Baht 1.52 million and a decrease in the overall net loss results by Baht 1.06 million. 4. Investments and Loans to Related Parties ( Accounting Policy 1.6 ) As of March 31 ,1999 , the investments and loan to related parties of the Company in amount of Baht 451.00 million consists of investments in related parties of Baht 205.20 million ( on cost method of Baht 163.00 million and on equity method of Baht 42.20 million ) and Tariff Prepayment of Baht 245.80 million. The details of which are as follows :- 4.1 Investments in related parties Company Type of Business Relationship Paid -up Share Investment Dividend share holding (Million Baht) capital Ratio As of 31 March (Million (%) Baht) Cost Method Equity Method 1999 1998 1999 1998 Associated company The Bangchak Green Net Co.,Ltd. Retail Business Share holding 1.00 49.00 - - 21.50 11.51 - and Service The Bangchak Green Line Co.,Ltd. Transportation Share holding 0.10 49.00 - - 3.04 2.29 - and Service Mongkhol Chaipattana Co.,Ltd. Retail Business Share holding 3.00 48.98 - - 1.88 1.61 - and Service The Bangchak Power Co.,Ltd. Power Generation Share holding 40.00 39.99 - - 15.78 13.24 - and Steam Production Related company Fuel Pipeline Transportation Ltd.Transportation Share holding 796.00 16.71 133.00 133.00 - - - and Service Auchan Chiang Mai Co.,Ltd. Wholesale, Share holding 300.00 10.00 30.00 30.00 - - - Retail Business Total 163.00 163.00 42.20 28.65 - As of March 31,1999,the Company realized earnings from The Bangchak Green Net, The Bangchak Green Line, Mongkhol Chaipattana and The Bangchak Power in the amounts of Baht 1.23 million , Baht 0.18 million , Baht 0.01 million and Baht 0.22 million, respectively. 4.2 Tariff Prepayment to Fuel Pipeline Transportation Ltd. ( FPT ) The company has provided financial support to FPT through a prepayment of oil transportation fee (Tariff Prepayment) in accordance with the Memorandum of Understanding dated June 14, 1996. Total debt due from FPT prior to the restructuring was Baht 245.80 million. Action is currently being taken to convert Baht 48.75 of this to preferred shares while the balance will be repaid through the offset with the monthly oil throughput fee commencing in March 2000, as per the Memorandum of Understanding dated March 3, 1999. 5. Property, Plant and Equipment - Net ( Accounting Policies 1.7 and 1.14 ) Million Baht 1999 1998 Land 1,344.78 1,248.79 Buildings 467.01 441.17 Piers, Dykes, Fences 189.25 189.77 Machineries, equipments and refinery plants 18,579.02 18,264.92 Office equipments 1,828.36 799.54 Platinum Catalyst 213.75 204.49 Vehicles 366.46 361.92 Leasehold 1,490.67 1,380.96 Asset transferring fee 41.80 41.80 Construction Work in Progress 3,101.57 3,472.29 27,628.77 26,405.65 Less Accumulated Depreciation 8,869.14 7,551.90 Total 18,753.53 18,853.75 Included in the construction work in progress of Baht 3,101.57 million is interest expense of Baht 23.43 million. In this period , the total depreciation is Baht 220.29 million, of which Baht 134.52 million is booked as cost of product and Baht 85.77 million as administrative expenses. 6. Deferred income tax ( Accounting Policy 1.8 ) In 1997, the company recorded an income tax credit as a result of its overall loss position and expected to make use of this in the next five years as permitted in the Revenue Code. In the event the economic did not improve, the company stood the risk in not fully benefitting from this tax credit when time expired. 7. Bank overdrafts and loans from financial institutions Bank overdrafts and loans from financial institutions were Baht 5,772.24 million , most of this is Baht 5,728.73 million short term loans from financial institution overseas with interest rates of 5.96 % per annum. 8. Long - Term Loans ( Accounting Policy 1.10 ) Million Baht 1999 1998 Foreign loan International Bank for Reconstruction and Development 1,456.88 1,292.57 Local loan Government Saving Bank 5,000.00 2,000.00 Debenture 1,070.00 - Total Long term Loan 7,526.88 3,292.57 Less Current portion of long-term loan 1,321.23 332.19 Balance 6,205.65 2,960.38 The loan interest rates vary from 5.78% to 11.75% per annum. 9. Interest Expense ( Accounting Policy 1.14 ) In this period ,the total interest is Baht 301.96 million ,of which Baht 23.43 million is recorded as cost of work in progress and Baht 278.53 million as expense. 10. Risk Management ( Accounting Policy 1.10.3 ) 10.1 Foreign Currency Risk Management As of March 31,1999, the total foreign currency loan of the company consists of a short term loan of USD 150 million and the current portion of loan, due in one year of USD 8.5 million. To minimize foreign exchange risk exposure, a forward foreign exchange contract was obtained for USD 59 million.The premium on the forward contract will be amortized over the period of the contract. 10.2 Oil Price Risk Management As of March 31, 1999, the Company has an agreement guaranteeing the sale price of oil product of 1.19 million barrels, so as to reduce the risk of changes in the oil price. 11. Contingent Liabilities As of March 31 ,1999 and 1998 the Companys contingent liabilities consisted of : 11.1 Obligations Bank guarantees issued by the banks on behalf of the Company as of March 31,1999 and 1998 at the amount of Baht 138.56 and 194.61 million. 11.2 Allegation The Ministry of Finance(the first defendant) was alleged in a land right transgression case (The claim for damages,which was filed with the civil court, amounts to Baht 1,055 million). The land in question ,which is located at the pier of the Refinery,was leased from the Ministry of Finance. The Company,as the lessee of land owned by the Ministry of Finance,was alleged as the fifth defendant along with the Ministry of Finance. According to the Companys Legal Office opinion,regardless as to the outcome of the case, the Company would not be liable for any losses associated with the above mentioned claim as it is protected under a lease agreement. The case is being appealed with the civil court. 12. The Solving of Computer Problem for Year 2000 (Y2K) (Office of the Auditor General as the independent auditor responsible for financial statements audit did not review the information disclosed in this note) The Company has placed great importance in solving the computer problems for the year 2000 (Y2K). It has,since the first quarter of 1997, carried out its modification and the correction work plan so as to have the project completed by the second quarter of 1999. The company has reserved a budget of Baht 49 million for this work and Baht 39.62 million has so far been spent, about 97 percent of the total work plan has been completed. Although the company is capable of solving the computer problems in accordance with its plan, there is still a risk that other companies, with whom the company does business , may not be able to solve their computer problems on time, although the Company does not foresee any major problems that would have an impact on its business. 13. Events Occurring After The Balance Sheet Date 13.1 On April 2, 1999, the company sold its total share holding in the Mongkol Chaipattana Co., Ltd. at book value. 13.2 On April 30, 1999, the company converted the tariff prepayment to FPT into shares (preferred stock) as per the Memorandum of Understanding dated March 3,1999. Following this implementation, the amount of tariff prepayment, as referred in Note 4.2, decreased by Baht 48.75 million and the capital stock in FPT (note 4.1) increased by the same amount, however its shareholding ratio in FPT reduced by 5.29 percent