-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ijei0nVfRvxYK071Pwgj9HI2epHyv844JAFzGJMjVt5qR7AAjE0VftALkTvnCoG9 G6+kTlIy3vDoyMAnFLl6Aw== 0000950170-99-001434.txt : 19990914 0000950170-99-001434.hdr.sgml : 19990914 ACCESSION NUMBER: 0000950170-99-001434 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990714 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDEAN DEVELOPMENT CORP CENTRAL INDEX KEY: 0000943184 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 650548697 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-28806 FILM NUMBER: 99710729 BUSINESS ADDRESS: STREET 1: 200 E LAS OLAS SUITE 1900 CITY: FT LAUDERDALE STATE: FL ZIP: 33301 BUSINESS PHONE: 4074826336 MAIL ADDRESS: STREET 1: 200 E LAS OLAS BLVD CITY: FT LAUDERDALE STATE: FL ZIP: 33301 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT FIRST AMENDMENT TO FORM 8-K Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 14, 1999 ANDEAN DEVELOPMENT CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) FLORIDA 33-90696 65-0648697 State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 600 BRICKELL AVENUE, SUITE 301-B, MIAMI, FLORIDA 33131 - ------------------------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (305) 358-4400 Item 2. ACQUISITION OR DISPOSITION OF ASSETS. On June 30, 1999, Andean Development Corporation ("ADC") acquired 1,332,600 shares of common stock of Consonni USA, Inc. ("CONUSA") representing 44.32% of the issued and outstanding common stock of CONUSA from Pedro Pablo Errazuriz, ADC's Chairman and CONUSA's controlling shareholder. ADC acquired the CONUSA common stock in exchanged for certain assets, including certain real property located in Chile, as well as the forgiveness of debt in the sum of approximately $125,000 due from Errazuriz. The Company obtained an independent appraisal of the common stock of CONUSA as well as an independent appraisal of certain of the assets exchanged for the stock. Prior to this transaction, ADC owned 11.18% of CONUSA's common stock. ADC owns 55.5% of CONUSA's common stock as a result of this transaction. CONUSA is a holding company and its main asset is 88% of Construcciones Electromecanicas Consonni S.A. of Bilbao, Spain, a manufacturer of control panels and substations. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. The audited financial statements of Equipos de Control Electrico, S.A. for the year ended December 31, 1998 are being filed herewith as Exhibit 99.1 and the audited financial statements of Construcciones electromecanicas Consonni, S.A. for the year ended December 31, 1998 are being filed herewith as Exhibit 99.2. (b) Pro Forma Financial Information. The pro forma financial information for the year ended December 31, 1998 and for the six months ended June 30, 1999 are being filed herewith as Exhibit 99.3. (c) Exhibits. The following documents are being filed as exhibits to this report: 23.1 Consent of Price Waterhouse Auditores, S.A, independent auditors as to Equipos de Control Electrico, S.A. 23.2 Consent of Price Waterhouse Auditores, S.A, independent auditors as to Construcciones electromecanicas Consonni, S.A. 99.1 Audited Financial Statements of Equipos de Control Electrico, S.A. as of December 31, 1998. 99.2 Audited Financial Statements of Construcciones Electromecanicas Consonni, S.A. as of December 31, 1998. 99.3 Unaudited pro forma financial information for the year ended December 31, 1998 and for the six months ended June 30, 1999 are incorporated by reference to the Quarterly Report for the Period Ended June 30, 1999 on Form 10-QSB. 99.4 Unaudited pro forma financial information for the year ended December 31, 1997 and December 31, 1998 including 55.96% of CONUSA as part of ADC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ANDEAN DEVELOPMENT CORPORATION Date: September 16, 1999 By:/S/ MAURICIO DE LA BARRA -------------------------------------- Mauricio De la Barra, President EXHIBIT INDEX EXHIBITS DESCRIPTION - -------- ----------- 23.1 Consent of Price Waterhouse Auditores, S.A, independent auditors as to Equipos de Control Electrico, S.A. 23.2 Consent of Price Waterhouse Auditores, S.A, independent auditors as to Construcciones electromecanicas Consonni, S.A. 99.1 Audited Financial Statements of Equipos de Control Electrico, S.A. as of December 31, 1998. 99.2 Audited Financial Statements of Construcciones Electromecanicas Consonni, S.A. as of December 31, 1998. 99.3 Unaudited pro forma financial information for the year ended December 31, 1998 and for the six months ended June 30, 1999 are incorporated by reference to the Quarterly Report for the Period Ended June 30, 1999 on Form 10-QSB. 99.4 Unaudited pro forma financial information for the year ended December 31, 1997 and December 31, 1998 including 55.96% of CONUSA as part of ADC. EX-23.1 2 INDEPENDENT AUDITORS' REPORT ON THE ANNUAL ACCOUNTS To the shareholders of Construcciones Electromecanicas Consonni, S.A. 1. We have audited the annual accounts of Construcciones Electromecanicas Consonni, S.A., consisting of the balance sheet at 31 December 1998, the profit and loss account and the notes for the year then ended, whose preparation is the responsibility of the Company's Directors. Our responsibility is to express an opinion on the aforementioned annual accounts as a whole, based on our audit work carried out in accordance with generally accepted auditing standards in Spain, which require examining, on a test basis, evidence supporting the annual accounts, as well as evaluating their overall presentation and assessing the accounting principles applied and estimates made. 2. In accordance with company legislation, the Directors have presented, for comparative purposes only, for each item of the balance sheet, the profit and loss account and the statement of source and application of funds, the corresponding amounts for the previous year as well as the amounts for 1998. Our opinion refers exclusively to the annual accounts for 1998. On 16 April 1998 and 4 March 1999 we issued our audit report on the annual accounts for 1997 in which we expressed a qualified opinion. 3. As mentioned in Note 1 to the annual accounts, Company Management applied for a declaration of temporary receivership, in a decision adopted by the Board of Directors on 23 July 1996, which was ratified by the Universal, Extraordinary General Shareholders Meeting on 10 September 1996. On 5 March 1998 the Court Decision which approved the Agreement with Creditors was given. Under the terms of the Agreements reached between the Company and its Creditors, an overall acquittal of thousands of Pesetas - PThs 735,744 was made, with respect to the debts originally recorded, which the Company recorded crediting the profit and loss account for the year 1997. In accordance with the principle of prudence, and as any failure to comply with the terms of the Creditors' Agreement or the agreements with the Preferred Creditors would lead to their termination and, hence, to the cancellation of the acquittal recorded, this item should be taken to profit and loss in proportion to the amount of the related debt repaid (Notes 1 and 11 to the accompanying annual accounts). Up to 31 December, and in accordance with the terms of the agreed plan, debts relating to the receivership have been cancelled (net of the corresponding acquittal, PThs 213,056) for an amount of PThs 115,817. At 31 December 1998, the Company presents, net of the outstanding payments of capital, PThs 213,500 (Note 12 to the accompanying annual accounts), a positive net equity of PThs 208,236, which includes the profit for 1998, amounting to PThs 97,655. In spite of the improvement in the economic and financial situation and of the Company's profits in 1998, the strengthening of the Company's financial situation and equity and its ability to meet its financial commitments and, hence, to continue as a going concern, will depend on the fulfillment of the objectives and plans set out in Note 17 to the annual accounts and the payment commitments entered into with its preferred and ordinary creditors, affected by the temporary receivership (Notes 1 and 11 to the annual accounts). 4. The accompanying annual accounts have been prepared on the basis of accounting principles generally accepted in Spain and include, to facilitate your understanding, a summary of significant differences between Spanish and U.S. Generally Accepted Accounting Principles and their effect on the Company's equity (Note 19 to the annual accounts). 5. In our opinion, except for the effects of any adjustment that might be necessary if we knew the final outcome of the uncertainty described in Paragraph 3, above, the accompanying annual accounts for 1998 present fairly, in all material respects, a true and fair view of the shareholders' equity and financial position of Construcciones Electromecnicas Consonni, S.A. at 31 December 1998 and the results of its operations and the resources obtained and applied for the year then ended, and they contain the necessary and relevant information in order to adequately interpret and understand them, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. 6. The accompanying Directors' Report for 1998 contains the information considered relevant to the Company's situation, the evolution of its business and of other matters and does not form an integral part of the annual accounts. We have verified that the accounting information contained in the aforementioned Directors' Report coincides with that of the annual accounts for 1998. Our work as auditors is limited to verifying the Directors' Report within the scope already mentioned in this paragraph and does not include the review of information other than that obtained from the Company's accounting records. Price Waterhouse Auditores, S.A. /S/ F. JAVIER DOMINGO - -------------------------------- F. Javier Domingo Partner - Auditor 12 March 1999 EX-23.2 3 INDEPENDENT AUDITORS' REPORT ON THE ANNUAL ACCOUNTS To the shareholders of Equipos de Control E1ectrico, S.A. as requested by the Management of the Company 1. We have audited the annual accounts of Equipos de Control E1ectrico, S.A., consisting of the balance sheet at 31 December 1998, the profit and loss account and the notes for the 11-month period then ended, whose preparation is the responsibility of the Company's Directors. Our responsibility is to express an opinion on the aforementioned annual accounts as a whole, based on our audit work carried out. Except for the qualification mentioned in paragraph 3, the work has been carried out in accordance with generally accepted auditing standards, which require examining, on a test basis, evidence supporting the annual accounts, as well as evaluating their overall presentation and assessing the accounting principles applied and estimates made. 2. In accordance with Company legislation, the Directors have presented, for comparative purposes only, for each item of the balance sheet, the profit and loss account and the statement of source and application of funds, the corresponding amounts for the previous year as well as the amounts for the 11-month period ended 31 December 1998. Our opinion refers exclusively to the annual accounts for the I 1 -month period ended 31 December 1998. On 4 June 1998 we issued our audit report on the annual accounts for the year ended 31 January 1998 in which we expressed an opinion containing the same qualification as stated in paragraph 3 below. 3. We have not been provided with the documentation necessary to review the tax situation for the year ended 31 January 1996 and previous years which are open to inspection, that correspond to a period previous to the Company's current activities and its present Administrators. As a result, we are unaware of any possible tax contingencies relating to these years which may not have been recorded in the annual accounts at 31 December 1998. Page 2 4. In our opinion, except for the effects of any adjustment that might have been considered necessary if we had been able to review the Company's tax situation with respect to the years open to inspection previous to 31 January 1996, the accompanying annual accounts for the 11-month period ended 31 December present fairly, in all material respects, a true and fair view of the shareholders' equity and financial position of Equipos de Control E1ectrico, S.A. at 31 December 1998 and the results of its operations and the resources obtained and applied for the period then ended, and they contain the necessary and relevant information in order to adequately interpret and understand them, in conformity with generally accepted accounting principles, applied on a basis consistent with that of the preceding year. 5. The accompanying Directors' Report for the 11-month period ended 31 December 1998 contains the information considered relevant to the Company's situation, the evolution of its business and of other matters and does not form an integral part of the annual accounts. We have verified that the accounting information contained in the aforementioned Directors' Report coincides with that of the annual accounts for the 11-month period ended 31 December 1998. Our work as auditors is limited to verifying the Directors' Report within the scope already mentioned in this paragraph and does not include the review of information other than that obtained from the Company's accounting records. Price Waterhouse Auditores, S.A. /S/ F. JAVIER DOMINGO - --------------------------------- Francisco Javier Domingo Partner-Auditor 19 March -1999 EX-99.1 4 Equipos de Control Electrico, S.A. Audit report and annual accounts as at 31 December 1998 and Directors' Report for the period ended 31 December 1998 EQUIPOS DE CONTROL ELECTRICO, S.A. - -------------------------------------------------------------------------------- AUDIT REPORT OF THE ANNUAL ACCOUNTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ANNUAL ACCOUNTS AT 31 DECEMBER 1998 - -------------------------------------------------------------------------------- EX-99.2 5 CONSTRUCCIONES ELECTROMECANICAS CONSONNI, S.A. AUDIT REPORT AND ANNUAL ACCOUNTS AS AT 31 DECEMBER 1998 AND DIRECTORS' REPORT 1998 AUDIT REPORT OF THE ANNUAL ACCOUNTS Page 3 ANNUAL ACCOUNTS AT 31 DECEMBER 1998 Page 4 CONSTRUCCIONES ELECTROMECANICAS CONSONNI, S.A. PROFIT AND LOSS ACCOUNT FOR THE YEARS ENDED ON 31 DECEMBER 1998 AND 1997 (Expressed in thousands of Pesetas -- PThs)
DEBIT 1998 1997 CREDIT - ----- ---- ---- ------ A) EXPENSES B) INCOME 2. Consumption and other outside expenses (Note 15.2) 976,641 750,193 1. Net turnover a) Sales (Note 15.1) 3. Personnel costs (Note 15.3) 366,742 388,781 a) Salaries and wages 292,935 314,811 2. Increases in inventories of finished b) Social Security and other charges 73,807 73,970 work in progress (Note 15.2) 4. Provision for depreciation and 35,904 57,519 4. Other operating income amortization (Notes 5 and 6) a) Other income and other current operating income 5. Variation in trade provisions 11,789 a) Variation in the provision for decline in value of inventories -- 10,463 b) Variation in the provision for -- 1,326 doubtful debts 6. Other operating expenses 103,667 119,947 a) External services (Note 15.4) 102,681 118,979 b) Taxes 986 968 I. OPERATING PROFIT 130,292 -- 7. Financial expenses 28,481 21,531 a) Debts with group companies (Note 12,534 -- 10.2) c) Debts and expenses with third parties 15,947 21,531 II. FINANCIAL PROFIT -- -- II. FINANCIAL LOSS III. PROFIT FROM ORDINARY ACTIVITY 101,811 -- III. LOSS ON ORDINARY ACTIVITY 11. Losses on disposal of fixed assets 165,776 10. Extraordinary income ---------- ----------- 13. Extraordinary expenses 10,947 274,216 13. Income and Profit from previous years ---------- ----------- ---------- ----------- 14. Expenses and losses from previous years 211 48,622 14. Results From the temporary receivership ---------- ----------- ---------- ----------- IV. EXTRAORDINARY PROFIT -- 255,793 IV. EXTRAORDINARY LOSS ---------- ----------- ---------- ----------- V. PROFIT BEFORE TAX 97,655 182,573 V. LOSSES BEFORE TAX ---------- ----------- ========== =========== VI. NET PROFIT FOR THE YEAR PThs 97,655 182,573 VI. NET LOSS FOR THE YEAR PThs ========== ===========
Page 5 CONSTRUCCIONES ELECTROMECANICAS CONSONNI, S.A. NOTES TO THE ACCOUNTS FOR THE YEAR ENDED ON 31 DECEMBER 1998 (Expressed in Thousands of Pesetas - PThs) NOTE 1 -- ACTIVITY Construcciones Electromecanicas Consonni, S.A., hereinafter the Company, was set up on 21 July 1972 under the name "Equipos E1ectricos Consonni, S.A.", and changed its name to its present name on 9 March 1973. Its corporate object is to study, design, build, perfect, repair and install and sell high-, medium- and low-voltage electric equipment. Its corporate address and its production facilities and administrative offices are located in Bilbao. The worsening of the economic and financial situation brought about by the drop in market demand, together with the reduction in prices and margins forced Company Management to apply for a declaration of temporary receivership, in a decision adopted by the Board of Directors on 23 July 1996, which was ratified by the Universal, Extraordinary General Shareholders Meeting on 10 September 1996. The court issued the relevant report on 7 march 1997. The proposal for an Agreement, executed on 21 July 1997, which has been agreed to by creditors for an amount totaling PThs 191,282 of total liabilities which, after deducting the credits entitled to abstain, amounted to PThs 264,597, thus fulfilling the requirement that it must be more than two-thirds of the debtor's liabilities, includes, inter alia, the following agreements: b) Holders of credit rights which do not qualify for any special system and who are affected by this agreement, shall be paid 10% of their credits in the following manner and periods: - During the first two years after the date this agreement is approved, no amount shall be paid. - On the dates the 3rd, 4th, 5th, 6th, 7th and 8th year after the Decision approving the Agreement becomes firm, they shall be paid 17% in each of the four first years mentioned above and 16% in the two last years mentioned, i.e. the 7th and 8th years, of the amount that is equal to 10% of the debts owed to them. No interest shall accrue on the debts. Page 6 c) The remainder of the debts owed to them, i.e. 90%, shall be cleared, subject to the final settlement and payment of the amounts resulting from point a) above. d) Consequently, any failure to pay any of the amounts on the aforementioned dates shall entail non-performance of the agreement, and the agreement shall be deemed not to have been approved and the creditor who has accepted the settlement shall recover its right to be paid the entire amount owed to it as set out in the final list submitted to the Court by the Receiver. e) The preferred debts (pledged, separately privileged, etc.) shall be paid in the manner which is agreed with each of the private individuals or legal entities who are entitled to such preferences. This agreement shall apply to them if they formally agree to it. f) The debts owed to the Social Security and Tax Authorities of Bizkaia are recognized as being preferential and privileged. Therefore, said debts shall be paid by the Company, for the amounts, on the dates and in the manner and subject to any other terms that are expressly agreed with the General Treasury of the Social Security and the Tax Authorities of Bizkaia. g) A Watchdog Committee shall be set up to check that this Agreement is complied with. The Creditor's Agreement has been approved by a Court Decision dated 5 March 1998. NOTE 2 -- BASES OF PRESENTATION OF THE ANNUAL ACCOUNTS The annual accounts have been obtained from the Company's accounting records and are presented in accordance with the generally accepted accounting principles set out in current legislation. The Company's annual accounts for 1998 have yet to be approved by the General Shareholders Meeting. However, the Board of Directors does not expect may changes to be made to them as a result of said approval. The figures set out in the documents that make up these annual accounts, the balance sheet, the profit and loss account and these notes to the accounts, are expressed in thousands of pesetas (PThs). NOTE 3 -- PROPOSED DISTRIBUTION OF PROFIT The General Shareholders Meeting will be asked to approve the profit for the year, PThs 97,655, and its distribution to the Legal Reserve (10%) and to Voluntary Reserves after Tax loss carryforwards have been offset. Page 7 NOTE 4 -- VALUATION STANDARDS The most significant accounting principles and practices used in the preparation of the annual accounts are as follows: a) RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses are valued according to the incurred costs. They are amortized using the straight line method, over 7 years starting from the year after they are included in fixed assets. b) COMPUTER APPLICATIONS They are stated at cost. They are amortized over 7 years starting from the year after they are included in fixed assets. c) ASSETS BEING ACQUIRED UNDER FINANCE LEASES The relating to the finance lease contracts are recorded in the accounts as intangible assets at the cash value of the asset, net of its accumulated amortization, calculated in accordance with the estimated useful life of the related assets, and recording under liabilities the debt for the outstanding installments plus the amount of the purchase option, credited to the captions Bank loans and overdrafts - Creditors for short-term finance leases and Bank loans - Creditors for long-term finance leases on the balance sheet. Furthermore, the deferred financial expenses arising from these operations are recorded as a charge under the capital Deferred expenses on the asset side of the balance sheet, and charged to profit and loss in each year on a pay-back basis. d) TANGIBLE FIXED ASSETS The tangible fixed assets that were recorded on the balance sheet at 31 December 1992 are stated in accordance with valuations made by Galtier Hispania, S.A., in December 1989 and in January 1992, and updated in line with the Retail Price Index for 1992. Additions made as from 1993 are stated at purchase or production cost, in the case of work carried out by the company's staff. The effect of the revaluation made in 1996, in accordance with Local Law 1996/6, to Update Balance Sheets, dated 21 November, has been included in the value of the assets. The maximum rates allowed under Local Law 1996/6 were used in the revaluation carried out in 1996. Page 8 The company's tangible fixed assets at 31 December 1997 were valued by an Independent expert. This valuation has determined that the net book value of the assets at the aforementioned date was slightly lower than the result of the valuation carried out. Tangible fixed assets are depreciated using the straight line method over the useful lives of the respective assets, taking into account the depreciation that is effectively suffered as a result of operating, using and enjoying the asset. The useful lives used to calculate the depreciation of tangible fixed assets are as follows: PRIOR -------------- Machinery 18 Installations 20 Tools and dies 10 Furniture and office equipment 10 Vehicles 5 e) INVESTMENTS Investment securities, be they long-term or current -asset, fixed or variable income, are valued at acquisition cost. Provisions are set up as necessary to record any permanent decline in the value of the investment, whenever the cost price is higher than the amount that results from using rational valuation criteria. f) DEFERRED EXPENSE They record deferred financial expense which the Company considers should be charged over several years. They are amortized when the debts fall due. g) INVENTORIES Inventories of raw materials are valued at acquisition cost, using the average weighted price method. Work in progress is valued at production cost, which is determined by adding the costs directly relating to manufacture to the cost of acquiring the raw materials and other consumable materials. Finished products are valued at selling price less the amount of costs not yet incurred. Page 9 Whenever the market or replacement cost of inventories is lower than those indicated in the previous paragraph, the values are corrected and provisions for `decline in value are set Lip accordingly. h) TRADE DEBTORS AND CREDITORS Debits and credits that result from the company's trading activities, be they debit or credit, short- or long-term, are valued at their nominal value. Provisions are set up according to the risk of bad debt. i) BALANCES WITH GROUP AND ASSOCIATED UNDERTAKINGS For reporting purposes, group and associated undertakings are deemed to include companies in which the Company has no holding but which are related to the Company because they are directly or indirectly controlled by a single company or private individual related to the shareholders of Construcciones Electromecnicas Consonni, S.A. (Note 12). j) OTHER DEBTS Credit line accounts are recorded as the balance of the amount drawn down. The amount of discounted bills is recorded, until it matures, under Debtor accounts and Bank loans and overdrafts. k) CORPORATION TAX The profit and loss account records, when applicable, the Corporation Tax effect, the calculation of which envisages the gross tax accruing in the year, as well as any rebates and deductions in the gross tax to which the Company is entitled. According to the principle of conservative valuation, tax credits stemming from tax loss carryforwards and tax rebates and deductions to which the company is entitled are not taken to profit and loss in the year they are generated, and are expensed in the year they are offset or used. l) EXCHANGE RATE DIFFERENCES Debtors and creditors denominated in foreign currencies are valued at year-end exchange rates. m) LONG-TERM ASSETS AND LIABILITIES Assets and liabilities are deemed to be long term when they accrue after more than one year. Page 10 n) INCOME AND EXPENSES Income and expenses are recorded on the accruals basis, regardless of when the resulting monetary or financial flow occurs. NOTE 5 -- INTANGIBLE ASSETS 5.1 The movements recorded in this caption during the year are as follows:
BALANCE AT BALANCE AT 31.12.97 ADDITIONS 31.12.98 ---------------- ------------- --------------- GROSS Other research and development expenses 98,737 - 98,737 Licenses 3,096 - 3,096 Computer applications 19,003 4,290 23,293 Rights over assets acquired under finance leases - 7,408 7,408 ---------------- ------------- --------------- 120,836 11,698 132,534 ---------------- ------------- --------------- ACCUMULATED AMORTIZATION Other research and development expenses 36,682 13,814 50,496 Licenses 1,093 501 1,594 Computer applications 8,773 2,027 10,800 Rights over assets acquired under finance leases - - - ---------------- ------------- --------------- 46,548 16,342 62,890 ---------------- ------------- --------------- NET PThs 74,288 69,644 --- ================ ===============
5.2 Other research and development expenses include work carried out by the Company to develop new medium-and low-voltage prototypes. The net amount at 31 December 1998 is PThs 48,241. 5.3 The most significant data related to assets acquired under finance leases is as follows: Page 11
TERM OF ORIGINAL COST INSTALLMENTS VALUE THE NOT INCLUDING PAID IN OF CONTRACT MONTHS PURCHASE PRIOR INSTALLMENTS INSTALLMENTS PURCHASE ASSET (MONTHS) ELAPSED OPTION YEARS PAID IN 1998 OUTSTANDING OPTION - ----------- ---------- --------- ------------- ------------ ------------ ------------ --------- Car 48 7 7,236 - 1,400 8,199 172
Deferred interest expense not accrued at 31 December 1998 is recorded under Deferred expenses on the asset side of the balance sheet (Note 8). The amount of installments outstanding at 31 December 1998 has been recorded, together with the value of the purchase option yet to be taken up, under the captions Bank loans-Creditors for long-term finance lease and Bank loans and overdrafts-Creditors for short-term finance lease in the balance sheet (Note 13), in line with the due dates of the aforementioned installments, as broken down here below: SHORT-TERM PThs 2,400 =================== LONG-TERM 2000 2,400 2001 2,400 2002 999 ------------------- PThs 5,799 =================== NOTE 6 -- TANGIBLE FIXED ASSETS 6.1 The movements in the accounts of this caption during the year are as follows:
BALANCE AT BALANCE AT 31.12.97 ADDITIONS 31.12.98 ---------------- ------------- --------------- GROSS Machinery 163,206 1,099 164,305 Technical plant 105,828 1,301 107,129 Tools and dies 40,390 47 40,862 Furniture 66,016 3,216 69,232 Other fixed assets 9,034 - 390,562 ---------------- ------------- --------------- 384,474 6,088 390,562 ---------------- ------------- --------------- ACCUMULATED AMORTIZATION Machinery 78,259 6,865 85,124 Technical plant 44,843 6,068 50,911 Tools and dies 27,651 2,250 29,901 Furniture 44,513 3,520 48,033
Page 12
Other fixed assets 5,455 859 6,314 ---------------- ------------- --------------- 200,721 19,562 220,283 ---------------- ------------- --------------- NET PThs 183,753 170,279 --- ================ ===============
6.2 During 1988, 1991 and 1992, the Company carried out various different voluntary reevaluations in accordance with the reports of independent experts and on trends in the retail price indices since the assets had first been recorded as tangible fixed assets. The approximate net effect of these reevaluations was 217 million of pesetas. On 31 December 1996 the Company also, in accordance with Local Law 6/1996, dated 21 November, restated its tangible fixed assets for a net amount of PThs 30,580. Part of this revaluation was used in 1997 to write off losses accumulated by the company. 6.3 The General Shareholders Meeting of the Company adopted a decision to make up for the lack of documentation about certain tangible fixed assets by proceeding to have the net values of the tangible fixed assets assessed as at 31 December 1997. The result of the assessment carried out by an independent expert was that the net value of the company's assets as at 31 December 1997 was slightly lower than their market value at the aforementioned date. It is Company's policy to take out whatever insurance policies are deemed necessary in order to cover against any risks that might affect tangible fixed assets. NOTE 7 -- INVESTMENTS The movements in the various different accounts in the Investments caption during the year are as follows:
BALANCE AT BALANCE AT 31.12.97 ADDITIONS 31.12.98 ---------------- ------------- --------------- Long-term securities portfolio 175 275 450 Deposits and guarantee deposits given 1,610 4,200 5,810 ---------------- ------------- --------------- PThs 1,785 4,475 6,260 ================ =============
NOTE 8 -- DEFERRED EXPENSE The movements recorded in the year under this caption are the following: Interest expense on finance lease agreements --------------------- Page 13 Balance at 31 December 1997 -- New finance lease agreement in 1998 927 Transfer to profit and loss (262) ------------- Balance at 31 December 1998 PThs 665 ============= NOTE 9 -- CUSTOMERS' ACCOUNTS FOR SALES AND SERVICES 9.1 The analysis of the caption Customers' accounts for sales and services at 31 December 1998 is as follows: BALANCE AT 31.12.98 ---------------- Trade debtors 114,527 Trade bills discounted pending maturity (Note 13) 12,736 Doubtful trade debts 1,326 ------------ PThs 128,589 ============ 9.2 There has been no movement in the provision for doubtful debts in 1998. NOTE 10 --BALANCES AND TRANSACTIONS WITH GROUP AND ASSOCIATED COMPANIES 10.1 The balances with Group and associated companies as at 31 December 1998 are the following: Equipos de Control Electrico, S.A.: - Invoices receivable 349,511 - Unissued invoices 149,836 ------------ PThs 499,347 ============ 10.2 Set out below are the transactions carried out with group and associated undertakings during 1998: PThs ----------------- Sale 1,197,350 Interest expense 12,534 Page 14 NOTE 11 -- PUBLIC ENTITIES 11.1
SHORT-TERM LONG-TERM ---------------- DEBIT CREDIT CREDIT BALANCE BALANCE BALANCE ------------ --------------- ---------------- Bizkaia Tax Authorities - Current debt: Withholdings 194 -- -- VAT 1,130 8,358 -- Payroll withholding tax -- 10,901 -- - Deferred debt -- 35,450 283,600 Social Security: - Current debt -- 7,508 -- - Deferred debt -- 8,196 148,947 Bilbao City Authorities -- -- 534 Basque Regional Authorities -- 6,000 48,550 ------------ --------------- ---------------- PThs 1,324 76,413 481,631 ============ =============== ================
11.2 The balance of the deferred debt with the Local Tax Authorities of Bizhaia includes the amount of the principal and late-payment interest for VAT, Personal Income Tax and Sales Tax for prior years which amounted to PTHs 631,716 at 1996 December 31. Under an agreement between the Company and the Local Tax Authorities dated 19 December 1997, the total debt was reduced by 45%, which represented PThs 284,272. The remaining PThs 347,444 shall be paid by the Company over a 10-year period, at 10% per year in quarterly installments, starting in 1998. Late-payment interest shall be charged on this deferral of 55% of the total debt at a rate of 4.5% per annum. 11.3 The amount of the overdue debt owed to the Social Security authorities records employer's contributions not paid in prior years, which totaled PThs 273,292 as at 1996 December 31. On 16 February 1998, an agreement was reached between the Company and the General Treasury of the Social Security Authorities under which the Authorities reduced the total debt by 40%, i.e. by PThs 109,317. The remaining debt, PThs 163,975 will be paid over a period of 8 years, at the following rates: first and second years 5%; third and fourth years 10%; fifth and sixth years 15% and seventh and eighth years 20%. Page 15 Interest will be charged on the principal outstanding on this deferral at a rate of 4.5% per annum. 11.4 The balance with the Basque Regional Authorities records the principal and the interest on a loan originally granted by the Caixa and guaranteed by this entity, which had to repay it, as the Company failed to honor its repayments. At 31 December 1996 the debt totaled PThs 219,181. Under an agreement between the Basque Regional Authorities dated 30 December 1997 the total debt was reduced by 45%, involving an amount of PThs 98,631. Furthermore, an amount of PThs 60,000 was used to reduce the debt as a result of the foreclosure on the mortgage on the Company's property assets carried out in 1997. The remaining PThs 60,550 shall be paid over a period of 10 years in quarterly installments, starting on 31 March 1998. Interest will be charged on this deferral at a rate of 4.5% per annum. 11.5 Unaccrued income included in the debt deferral agreements entered into with the bodies referred to in the above sections, which has not been recorded as an increased debt with said institutions, amounts to PThs 99,378 in all. 11.6 The repayment schedule of the long-term deferred debt, based on the agreements reached with the public entities indicated in the above paragraphs is as follows: 2000 56,572 2001 57,939 2002 64,771 2003 66,137 2004 et seq. 236,212 -------------- PThs 481,631 ============== Page 16 NOTE 12 -- SHAREHOLDERS' EQUITY 12.1 Set out below is an analysis of movements in the captions that make up the Company's shareholders' equity during 1998:
BALANCE 1997 BALANCE AT PROFIT 1998 AT 31.12.97 DISTRIBUTION PROFIT 31.12.98 -------------- ---------- ------------- Share capital 350,000 -- -- 350,000 Revaluation reserves: - Revaluation P.R. 6/96 (Note 6) 14,535 -- -- 14,535 -------------- ------------- ---------- ------------- Previous-year losses (223,027) 182,573 -- (40,454) Profit/loss for the year 182,573 (182,573) 97,655 97,655 -------------- ------------- ---------- ------------- PThs 324,081 -- 97,655 421,736 ============== ============= ========== =============
12.2 The Extraordinary General Shareholders Meeting of the Company, held on 19 December 1997, decided to reduce the Company's share capital to zero in order to offset losses and simultaneously to increase it by three hundred and fifty million pesetas by creating and issuing 35,000 new registered shares, each with a par value of Pts. 10,000, fully subscribed. As of 31 December 1998, 39% of the share capital has been paid in, equal to an amount of PThs 136,500. The analysis of shareholders' holdings at 31 December 1998 is as follows:
PERCENTAGE PTHS HOLDING ------------ --------------- Consonni USA Inc. 308,000 88% Other shareholders, private individuals 42,500 12% ------------ --------------- 350,000 100% ============ ===============
12.3 REVALUATION RESERVES RESTATEMENT LOCAL LAW 6/1996 The balance of this account may not be used until it has been checked and accepted by the Authorities or five years elapse as from the date the restated balance sheet date. Page 17 However, the part of the balance relating to losses on transfers of restated assets may be used. After the balance of the account has been checked or the deadline for checking it has expired, it may be used for: - - Eliminating book losses. - - Increasing capital, one or more times, after the rectifications proposed have been accepted and accumulated losses have been eliminated. At the same time an appropriation may be made to the legal reserve to increase it by up to 20% of the amount of the capital increase. - - The balance of the account yet to be used to reserves not available for distribution. If all or part of the balance of the account is used before it has been checked and accepted or such check becomes statute-barred, or if it is used for purposes other than those indicated in the previous paragraph, the appropriate taxes must be paid. NOTE 13 -- BANK LOANS AND OVERDRAFTS The analysis of the balance at 31 December 1998 included in the captions Bank loans and overdrafts is as follows:
SHORT LONG TERM TERM ---------- Creditors for finance lease (Note 5,3) 2,400 5,799 Creditors for bills discounted (Note 9) 12,736 -- Banco Exterior de Espana, credit balance of current account 18,165 -- ----------- ---------- PThs 33,301 5,799 =========== ==========
NOTE 14 -- TAX SITUATION 14.1 In spite of the profits recorded in 1998, there has been no Corporation Tax expense because the tax loss carryforwards were higher. The Corporation Tax basis of assessment and reported profits are the same. 14.2 The tax losses carried forward from previous years yet to be offset as at 31 December 1998 are set out below: Page 18 Year the Last year for Amount of Loss was offsetting the loss recorded ------------------------- 1996 2011 161,721 --------------- PThs 161,721 =============== 14.3 The following taxes are open to inspection for the years mentioned herebelow: Corporation Tax 1993 and following Value Added Tax 1994 and following Transfer Tax 1994 and following Personal Income Tax 1993 and following NOTE 15 -- INCOME AND EXPENSES 15.1 Net turnover, PThs 1,595,593, virtually all relates to sales in the domestic market. 15.2 Supplies and variation in inventories: a) RAW MATERIALS CONSUMED -------------------------------- Opening inventories 90,245 Purchases 977,920 Closing inventories (91.524) ------------------ PThs 976,641 ================== b) Changes in stocks of finished goods and work in progress -------------------------------------------------------------
CHANGE OPENING CLOSING (INCREASE) INVENTORIES INVENTORIES DECREASE ----------------- ----------------- Work in progress and semi- finished products 61,246 (173,741) (112,495) Finished goods 94,842 -- 94,842 -------------- ----------------- PThs 156,086 (173,741) (17,653) ==============
Page 19 15.3 The distribution of the personnel by category is as follows: Executives 5 Administrative staff 3 Sales staff 7 Purchases 2 Draughtsmen 8 Workshop 58 ===== Total 83 ===== 15.4 The analysis of external services, PThs 102,681 is the following: Leases 7,169 Repairs and maintenance 1,880 Supplies 8,451 Insurance 2,160 Services of independent professionals 8,624 Transport 13,747 Office material and communications 7,393 Other expenses 53,266 =========== Total PThs 102.681 =========== NOTE 14 -- OTHER INFORMATION 16.1 The members of the Board of Directors have not been paid any remuneration for their duties as Board members, and have been paid a global amount of PThs 13,487 in salaries. 16.2 The Company has been given guarantees by various different banks for an amount totaling PThs 12,830, approximately, as security with regard to customers for different orders that have been fulfilled. 16.3 As the Company's computer applications will not be significantly affected by the Y2000K effect or the introduction of the euro, the Company has not incurred any cost in the year not will have any significant additional costs in the future in these connections. 16.4 At 31 December 1998 the Company does not hold own shares. Page 19 NOTE 17 - THE COMPANY'S PLAN FOR THE FUTURE Page20 The company, in order to strengthen its financial and asset situation, and to meet all its commitments, has drawn up a strategic plan for the future, consisting of the following aspects: a) LIFTING THE TEMPORARY RECEIVERSHIP Towards the end of 1997 and the first two months of 1998, the Company managed to reach agreements which have enabled the temporary receivership to be lifted in March 1998 (Note 1). Solutions that were acceptable to both parties were agreed with all the creditors, which enabled it to continue normal operations with suppliers and banks. A major reduction in debt of more than 735 million of pesetas was obtained, and the balances owed to public authorities were deferred over periods of between 8 and 10 years. In this way the company's stability was ensured and new shareholders undertook, together with the executive group, to contribute 350 million of pesetas in a capital increase, which exceeds the best previous levels of equity. At 31 December 1998, 136.5 million of pesetas of the 350 million of pesetas agreed had been contributed (Note 12). (b) ACTION SCHEDULE The resources obtained from contributions and being released from immediate debt payment commitments are going to be used for: 1. Increasing the Company's ordinary activities. 2. Using outside resources to reduce manufacturing costs. 3. Developing new markets. 4. Improving the information systems in order to better control production and costs, for which purpose the ideas set out in the Modernisation and Management Plan proposed by our consultants shall be followed. 5. Developing new activities in the commercial area, using the Company's sales and technical department. 6. Broadening the product range. The sales division shall be strengthened with a view to export business. Page 21 c) Budget. follow-up and control The Company has set up a committee of its administrative, financial and technical managers to budget and set priorities for the points in the Strategic Plan. It began to work as from the second quarter of 1998, after the debt settlement agreements had been signed and the temporary receivership had been lifted by court order. Page 22 NOTE 18 - STATEMENTS OF SOURCE AND APPLICATION OF FUNDS FOR THE YEARS ENDED ON 31 DECEMBER 1998 AND 1997
APPLICATIONS 1998 1997 SOURCES 1998 1977 3. Acquisitions of 1. Funds generated from fixed assets operations 133,821 502,756 a) Intangible assets 11,698 947 b) Tangible assets 6,088 3,881 c) Investments 4,475 175 2. Shareholders' contributions 136,500 - a) Capital increase 7. Cancellation or 4. Short term liabilities transfer to short b) Bank term of long-term 54,921 83,642 loans 5,799 - debt 9. Deferred expense 927 - c) Other companies - 23,158 7. Early repayment or transfer to short-term of investments - 3,530
Total applications PThs 78,109 88,645 Total sources PThs 276,120 589,444 ========= ========== ========== ============= EXCESS OF SOURCES OVER APPLICATIONS (INCREASE IN WORKING CAPITAL) PThs 198,011 500,799 CHANGE IN WORKING 1998 1997 ------------------------------- --------------------------- CAPITAL Increase Decrease Increase Decrease ------------- ------------- ---------- ------------- 2. Inventories 20,119 - - 155,215 330,980 - - 636 - 109,534 651,756 - - - - 21,000 - 45,368 32,232 - 1,814 - - 6,338 ------------- ------------- ---------- ------------- 352,913 154,902 683,988 183,189 ------------- ------------- ---------- ------------- PTHS 198,011 500,799 ============= ==========
Page 22 The resources (used) generated in the operations are determined from the book result, in the following manner:
1998 1997 ------------------ ------------------- Reported profit (loss) 97,655 182,573 + Depreciation and amortisation for the year 35,904 57,519 + Deferred expenses taken to profit and loss 262 81 + Loss on disposal of tangible fixed assets - 165,776 + Intangible assets written off - 96,807 ------------------ ------------------- PThs 133,821 502,756 ================== ===================
Page 23 NOTE 19 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN SPANISH' GAAP AND US GAAP FOR THE YEAR ENDED 1998 The following represents a description of certain differences in accounting policies related to the Company between Spanish Generally Accepted Accounting Principles (hereinafter Spanish GAAP) and United States Generally Accepted Accounting Principles (hereinafter US GAAP): (a) RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY BETWEEN SPANISH GAAP AND US GAAP
NET PRIOR YEARS SHAREHOLDERS' INCOME NET EQUITY EQUITY ----------------- ------------------- ---------------------- As reported in the accompanying annual accounts at December 31, 1998 97,655 324,081 421,736 Adjustments for US GAAP purposes: 1. Elimination uncalled share capital - (213,500) (213,500) 2. Research and development costs 13,814 (62,055) (48,241) 3. Tax effect (32.5%) (4,490) 20,168 15,678 4. Computer applications depreciation
Page 24
- (6,308) (6,308) 5. Tax effect (32.5%) - 2,050 2,050 6. Fixed assets revaluation 1,700 (12,835) (11,135) 7. Tax effect (32.5%) (553) 4,171 3,618 8. Recognition of tax losses carried forward from prior years - 52,559 52,559 9. Tax deferred assets, valuation allowance 5,043 (78,948) (73,905) ----------------- ------------------- ---------------------- Total adjustments net of taxes 15,514 (294,698) (279,184) ----------------- ------------------- ---------------------- Net income and Shareholder's equity in accordance with US GAAP at December 31, 1998 PThs 113,169 29,383 142,552 ================= =================== ======================
Page 24 1. Uncalled Share Capital Elimination of the amount of share capital pending payment (uncalled share capital) by charging the nominal value of the registered capital (share capital). 2. Research and development costs In accordance with Spanish GAAP, research and development costs are capitalised when they are incurred, and are then generally amortised over five years. In accordance with US GAAP, these costs must always be expensed as incurred. 3. Recognition of the Deferred tax asset in the balance sheet, originated by the adjustment included in paragraph 2 above, at full value, calculated on balance sheet temporary differences using the tax rates at which the taxes are expected to be paid. 4. Depreciation of Computer Applications Adjustment to recalculate the amount of depreciation under the caption Computer applications on the basis of an estimated useful life of 3 years. The effect in the net income for the year 1998 has resulted insignificant. 5. Recognition of the Deferred tax asset in the balance sheet, originated by the adjustment included in paragraph 4, above, at full value, calculated on balance sheet temporary differences using the tax rates at which the taxes are expected to be paid. Page 25 6. Revaluation reserve Under Spanish GAAP, and in accordance with Local Law 6/1996 on balance sheet revaluation, dated November 21, companies may revalue their fixed assets acquired before 1996. Under US GAAP revaluations are not permitted. Page 25 7. Recognition of the Deferred tax asset in the balance sheet, originated by the adjustment included in paragraph 6, above, at full value, calculated on balance sheet temporary differences using the tax rates at which the taxes are expected to be paid. 8. Tax losses carried forward from prior years Recognition of the Deferred tax asset in the balance sheet at full value, due to tax losses carried forward from prior years yet to be offset as at December 31, 1998, calculated using tax rates at which the taxes are expected to be paid. 9. Deferred tax assets valuation allowance Under US GAAP. deferred tax assets are recognised in the balance sheet at full value, but reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realised. At present, the preparation of a viability plan is expected to justify the recovery of the deferred tax asset recorded. 10. Other items 10.1 Statement of cash-flows Spanish GAAP does not require presentation of a statement of cash-flow. However, it is compulsory that a statement of source and application of funds be included as a footnote to the annual accounts of each individual company. 10.2 Extraordinary Income and Expense Under Spanish GAAP, the company has recorded certain income and expenses as extraordinary in the income statement. Under US GAAP, these items would not have been classified as extraordinary items but rather included in the determination of operating results. Page 26 10.3 Leases Under Spanish GAAP, total installments due under a finance lease are credited to appropriate long and short term creditors and the cash cost of the item is capitalized as an intangible asset ("rights over leased assets") and the balance is recorded as deferred interest. Under US GAAP, an asset and the corresponding liability should be recognized at the lower of the fair value or the present value of the minimum lease payments. (b) RELATED PARTY TRANSACTIONS The nature and extent of transactions with all related parties are disclosed, together with the amounts involved, in Notes 4 i) and 10. The sale of materials to Equipos de Control Elecctrico, S.A., implies that intercompany transfer prices are established so that this company receives 3% over the total amount invoiced to the final customer, which in 1998 amounted to PThs 1,256,204. The trading license, PThs 19,000, corresponds to the agreement for the exclusive trading rights held by Equipos de Control E1ectrico, S.A. Page 27 DIRECTORS' REPORT 1998 FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- Page 28 FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- 1998 DIRECTORS' REPORT Following the reorganization process carried out in the past years, 1998 has seen the return to a profit situation for the Company. The adjustments made have led to our being in a more competitive position, which, in turn has permitted improving both production and sales figures, that have reached the highest level in the company's history. In the Business Area we would like to point out the following actions: o A strengthening of our presence in neighboring countries, through approaching major companies such as CEGELEC in France, TOSHIBA in England, ABB in Switzerland and DANIELLI in Italy. For the first time we have supplied the former two companies with equipment destined both towards the Spanish market as well as regions as diverse as China and South America. The business relationship with these two companies leads us to expect excellent possibilities for future growth in the next year. For 1999 we have also received firm orders both from DANIELLI and from the ABB Group. o Creation of an export consortium called Enertrade, composed of four companies from the electromechanical sector, destined, basically, towards promoting exports to North Africa and Central America. In the Production Area we should highlight the following: o Streamlining of production, eliminating almost completely those processes that require minimal technical ability. o Creation of a network of collaborating companies, capable of complementing our activities so that our capacity for development of Engineering generates greater final production. o Establishment of the Quality Standard ISO 9001, to gain the qualification for design and manufacture in accordance with the most demanding quality requirements. FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- Page 29 FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- PAGE 2 Finally, we would like to point out that during the year just ended, we have begun a collaboration program with a local company in Lima - Peru, for the establishment of a new company called Consonni Peru, which will engage in the manufacture of electronic equipment based on technology provided by C.E. Consonni, S.A. This company, which will be formally set up during March 1999, will allow us to access an expanding market with high growth possibilities at the present time. Lastly, in order to undertake the planned growth with a guarantee of success, both in the domestic and international markets, the shareholders have taken on the commitment to complete the repayment of the share capital increase before the end of 1999, which will, without a doubt, assist in participating in new projects that could demand a greater financing capacity. ******* FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- Page 30 FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- DRAWING UP THE ANNUAL ACCOUNTS AND DIRECTORS' REPORT The Board of Directors of Construcciones Electromecanicas Consonni, S.A., on March 8, 1999, in compliance with the requirements laid down in current legislation proceeds to draw up the annual accounts and directors' report for the year from 1 January 1998 to 31 December 1998. S/S PEDRO PABLO ERRAZURIZ - ------------------------------- MR. PEDRO PABLO ERRAZURIZ (CHARIMAN) S/S JUAN PHILLIPS DAVILA - ------------------------------- MR. JUAN PHILLIPS DAVILA (DIRECTOR) S/S IGNACIO MONTALBAN - ------------------------------- MR. IGNACIO MONTALBAN (Deputy Chairman) S/S PEDRO PABLO ERRAZURIZ DOMINGUEZ - -------------------------------------------- MR. PEDRO PABLO ERRAZURIZ DOMINGUEZ (DIRECTOR) S/S JOSE IGNACIO CARRASCO - ------------------------------- MR. JOSE IGNACIO CARRASCO (DIRECTOR) FREE TRANSLATION FROM THE ORIGINAL IN SPANISH - -------------------------------------------------------------------------------- Page 31 FORMULACION DE LAS CUENTAS ANUALES E INFORME DE GESTION El Consejo de Adrninistracion de Construcciones Electromecanicas Consonni, S.A., en fecha 9 de marzo de 1999, y en cumplimiento de los requisitos establecidos en la legislacion vigente precede a formular las cuentas anuales y el informe de gestion, del ejercicio comprendido entre el 1 de enero de 1998 y el 31 de diciembre de 1998. S/S PEDRO PABLO ERRAZURIZ - ------------------------------- S. D. PEDRO PABLO ERRAZURIZ (PRESIDENTE) S/S JUAN PHILLIPS DAVILA - ------------------------------- D. JUAN PHILLIPS DAVILA (Consejero) S/S IGNACIO MONTALBAN - ------------------------------- MR. IGNACIO MONTALBAN (VICEPRESIDENTE) S/S PEDRO PABLO ERRAZURIZ DOMINGUEZ - ------------------------------- MR. PEDRO PABLO ERRAZURIZ DOMINGUEZ (CONSEJERO) S/S JOSE IGNACIO CARRASCO - ------------------------------- MR. JOSE IGNACIO CARRASCO (CONSEJERO) EX-99.4 6 ANDEAN DEVELOPMENT CORPORATION Balance Sheet December 31, 1998 1998 P R O F O R M A BALANCE SHEET (Including 55,96% CONSONNI USA Inc. as part of Andean Development Corporation)
- -------------------------------- ---------------------- -------------------------- ASSETS 1998 1997 - -------------------------------- ---------------------- -------------------------- CURRENT ASSETS - -------------------------------- ---------------------- -------------------------- Cash and cash equivalents 166.733,39 324.556,00 - -------------------------------- ---------------------- -------------------------- Time Deposits 57.127,57 528.575,00 - -------------------------------- ---------------------- -------------------------- Accounts Receivable, net 6.689.853,30 3.205.385,00 - -------------------------------- ---------------------- -------------------------- Due from related parties 901.973,45 520.000,00 - -------------------------------- ---------------------- -------------------------- Other current assets 1.045.458,56 118.038,00 - -------------------------------- ---------------------- -------------------------- Inventory 3.298.575,00 - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- Total Current Assets 12.159.721,27 4.696.554,00 - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- FIXED ASSETS 672.875,00 - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- Land & Building 1.174.143,13 0,00 - -------------------------------- ---------------------- -------------------------- Vineyard 315.856,24 0,00 - -------------------------------- ---------------------- -------------------------- Technical installations & 371.795,52 0,00 Machinery - -------------------------------- ---------------------- -------------------------- Installations 538.236,41 - -------------------------------- ---------------------- -------------------------- Other property, plant & -1.791.004,30 equipment - -------------------------------- ---------------------- -------------------------- Furniture and equipment - -------------------------------- ---------------------- -------------------------- Less: Accumulated depreciation - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- Total Fixed Assets 3.359.959,00 672.875,00 - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- OTHER ASSETS - -------------------------------- ---------------------- --------------------------
- ------------------------------- -------------------- -------------------------- LIABILITIES 1998 1997 - ------------------------------- -------------------- -------------------------- CURRENT LIABILITIES - ------------------------------- -------------------- -------------------------- Obligations with banks 1.646.803,88 576.756,00 - ------------------------------- -------------------- -------------------------- Current portion Long term debt 57.223,10 30.320,00 - ------------------------------- -------------------- -------------------------- Accounts payable 4.328.602,02 787.155,00 - ------------------------------- -------------------- -------------------------- Due to related parties 615.434,24 24.264,00 - ------------------------------- -------------------- -------------------------- Income taxes payable 117.525,10 197.022,00 - ------------------------------- -------------------- -------------------------- Accrued expenses and withhold. 57.319,31 77.531,00 - ------------------------------- -------------------- -------------------------- Current portion of staff sev. 23.953,63 21.530,00 Ind. - ------------------------------- -------------------- -------------------------- Dividends payable 564.020,00 150.000,00 - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- Total Current Liabilities 7.410.881,28 1.844.578,00 - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- LONG TERM LIABILITIES - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- Long term debt, ex.curr.port. 594.423,48 118.754,00 - ------------------------------- -------------------- -------------------------- Staff severance indemnities 65.093,15 87.317,00 - ------------------------------- -------------------- -------------------------- Public entities - ------------------------------- -------------------- -------------------------- Others Debt - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- Total Long Term Liabilities 4.134.477,63 206.071,00 - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- STOCKHOLDERS' - ------------------------------- -------------------- --------------------------
- -------------------------------- ---------------------- -------------------------- Investments in affiliated Co. 1.086.704,91 1.629.998,00 - -------------------------------- ---------------------- -------------------------- Deferred charges 978.342,28 1.072.343,00 - -------------------------------- ---------------------- -------------------------- Real estate held for investment 1.147.389,43 789.447,00 - -------------------------------- ---------------------- -------------------------- Notes Rec. from related party 531.793,09 606.031,00 - -------------------------------- ---------------------- -------------------------- Notes Receivable - other 1.411.900,50 1.339.766,00 - -------------------------------- ---------------------- -------------------------- Deposit and other 133.096,32 - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- Total Other Assets 5.289.226,53 5.437.585,00 - -------------------------------- ---------------------- -------------------------- - -------------------------------- ---------------------- -------------------------- TOTAL ASSETS 20.808.906,80 10.807.014,00 - -------------------------------- ---------------------- --------------------------
- ------------------------------- -------------------- -------------------------- EQUITY - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- Common stock 282,00 282,00 - ------------------------------- -------------------- -------------------------- Additional paid in capital 5.724.319,56 5.724.320,00 - ------------------------------- -------------------- -------------------------- Retained earnings 2.289.693,31 2.197.810,00 - ------------------------------- -------------------- -------------------------- Earning of the period 737.014,11 937.903,00 - ------------------------------- -------------------- -------------------------- Cumulative translation adjust. -43.924,74 -103.950,00 - ------------------------------- -------------------- -------------------------- Monitary Interest 556.163,65 - ------------------------------- -------------------- -------------------------- Dividends 0,00 - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- Total Stockholders' Equity 9.263.547,89 8.756.365,00 - ------------------------------- -------------------- -------------------------- - ------------------------------- -------------------- -------------------------- Total liabilities and stock. 20.808.906,80 10.807.014,00 - ------------------------------- -------------------- --------------------------
ANDEAN DEVELOPMENT CORPORATION Statements of Operations December 1998 1998 P ROFORMA STATEMENT OF OPERATION (Including 55,96% CONSONNI USA Inc. as part of Andean Development Corporation)
- -------------------------------------------------------- ---------------------------------- -------------------------------- REVENUES FROM OPERATIONS 1998 1997 - -------------------------------------------------------- ---------------------------------- -------------------------------- Revenues 15.251.022,45 3.879.062,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- Cost of Operations -12.513.204,63 -1.773.165,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- GROSS PROFIT 2.737.817,82 2.105.897,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- - -------------------------------------------------------- ---------------------------------- -------------------------------- Selling & Administrative Expensis -1.527.504,22 -1.053.221,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- - -------------------------------------------------------- ---------------------------------- -------------------------------- INCOME FROM OPERATIONS 1.210.313,60 1.052.676,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- - -------------------------------------------------------- ---------------------------------- -------------------------------- OTHER INCOME (EXPENSES) - -------------------------------------------------------- ---------------------------------- -------------------------------- - -------------------------------------------------------- ---------------------------------- -------------------------------- Interest Expenses -305.701,21 -32.795,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- Depreciation and amortization -209.209,54 -67.046,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- Interest Incomes 143.402,34 121.174,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- Non operational incomes 220.135,92 6.031,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- Minority Interest -197.713,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- - -------------------------------------------------------- ---------------------------------- -------------------------------- Total other incomes (expenses) -349.085,49 27.364,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- - -------------------------------------------------------- ---------------------------------- -------------------------------- INCOME BEFORE INCOME TAX 861.228,11 1.080.040,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- Income Taxes -124.214,00 -142.137,00 - -------------------------------------------------------- ---------------------------------- -------------------------------- NET INCOME (loss) 737.014,11 937.903,00 - -------------------------------------------------------- ---------------------------------- --------------------------------
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