-----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, Lr4hysCAU1Kae6UFHggJJHS4qVDIJIXaxGxRniM5Z4vnvji26ossfOo/asl+tPu5 oznRdpUb/hafb4YnOzz+Iw== 0000009779-98-000030.txt : 19980629 0000009779-98-000030.hdr.sgml : 19980629 ACCESSION NUMBER: 0000009779-98-000030 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980626 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980626 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAIRCHILD CORP CENTRAL INDEX KEY: 0000009779 STANDARD INDUSTRIAL CLASSIFICATION: BOLTS, NUTS, SCREWS, RIVETS & WASHERS [3452] IRS NUMBER: 340728587 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-06560 FILM NUMBER: 98654916 BUSINESS ADDRESS: STREET 1: 45025 AVIATION DR STREET 2: STE 400 CITY: DULLAS STATE: VA ZIP: 20166 BUSINESS PHONE: 7034785800 MAIL ADDRESS: STREET 1: 45025 AVIATION DRIVE STREET 2: SUITE 400 CITY: DULLES STATE: VA ZIP: 20166 FORMER COMPANY: FORMER CONFORMED NAME: BANNER INDUSTRIES INC /DE/ DATE OF NAME CHANGE: 19901118 8-K 1 2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): June 26, 1998 Commission File Number 1-6560 THE FAIRCHILD CORPORATION (Exact name of Registrant as specified in its charter) Delaware 34-0728587 (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 45025 Aviation Drive, Suite 400 Dulles, VA 20166 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (703) 478-5800 Not Applicable (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS We hereby file the Nacanco Paketleme ("Nacanco") financial statements for the years ended December 31 1997, 1996 and 1995. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits *99.4 Financial statements, related notes thereto and Auditors' Report of Nacanco Paketleme for the fiscal years ended December 31, 1997, 1996 and 1995. (*) filed herewith SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to the signed on its behalf by the undersigned hereunto duly authorized. For THE FAIRCHILD CORPORATION (Registrant) and as its Chief Financial Officer: By: Colin M. Cohen Senior Vice President and Chief Financial Officer Date: June 26, 1998 EX-99 2 NACANCO PAKETLEME SANAYI VE TICARET A.S. AUDITORS' REPORT AND FINANCIAL STATEMENTS AT 31 DECEMBER 1997, 1996 AND 1995 AUDITORS' REPORT To the Board of Directors Nacanco Paketleme Sanayi ve Ticaret A.S. Manisa 1. We have audited the accompanying US dollar balance sheets of Nacanco Paketleme Sanayi ve Ticaret A.S. ("the Company") at 31 December 1997, 1996 and 1995, and the related US dollar statements of income, of changes in shareholders' equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used, and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. In our opinion, the US dollar financial statements referred to above present fairly, in all material respects, the financial position of Nacanco Paketleme Sanayi ve Ticaret A.S. at 31 December 1997, 1996 and 1995 and the results of its operations, the changes in its shareholders' equity and its cash flows for the years then ended in conformity with the accounting principles generally accepted in the United States of America. Basaran Serbest Muhasebeci Mali Musavirlik Anonim Sirketi a member of Price Waterhouse Z Uras, SMMM Istanbul, 12 March 1998
1997 1996 1995 US$'000 US$'000 US$'000 ASSETS Current assets:- Cash and due from banks (Note 4) 14,376 16,632 14,103 Marketable securities 392 394 1,360 Trade receivables (Note 5) 4,875 7,585 10,050 Due from related companies (Note 16) 48 - 12 Inventories (Note 6) 18,813 13,947 15,612 Other receivables and prepaid expenses 166 118 333 Deferred tax assets (Note 10) 112 247 395 Total current assets 38,782 38,923 41,865 Long-term trade receivables 103 114 82 Property, plant and equipment net (Note 7) 35,636 36,230 32,633 Other long-term assets (Note 8) 4,383 1,401 1,892 Total assets 78,904 76,668 76,472 The accompanying notes form an integral part of these financial statements.
1997 1996 1995 US$'000 US$'000 US$'000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:- Trade payables (Note 9) 2,546 2,328 3,371 Due to related companies (Note 16) 649 2,029 4,081 Short-term borrowings (Note 12) - - 2,000 Current portion of long-term borrowings (Note 12) 54 103 186 Income taxes payable (Note 10) 11,216 12,582 11,512 Accrued expenses and other payables (Note 11) 888 1,720 1,853 Total current liabilities 15,353 18,762 23,003 Long-term borrowings (Note 12) 54 206 559 Reserve for employment termination benefits (Note 13) 411 360 289 Non-current deferred tax liability - net (Note 10) 1,330 513 1,107 Total liabilities 17,148 19,841 24,958 Shareholders' equity:- Share capital (Note 15) 18,267 18,267 18,267 Retained earnings (Note 14) 43,489 38,560 33,247 Total shareholders' equity 61,756 56,827 51,514 Total liabilities and shareholders' equity 78,904 76,668 76,472 Commitments and contingencies (Note 21) The accompanying notes form an integral part of these financial statements.
1997 1996 1995 US$'000 US$'000 US$'000 Net sales 99,551 105,069 97,160 Cost of sales (Note 17) (62,419) (66,484) (65,728) Gross profit 37,132 38,585 31,432 General and administrative expenses (Note 18) (1,206) (1,342) (1,117) Selling and marketing expenses (481) (356) (238) Royalty expenses (Note 20) (1,603) (1,603) (1,595) Operating profit 33,842 35,284 28,482 Financial income - net (Note 19) 1,074 1,453 2,675 Other expenses (18) (399) (135) Income before taxes and translation loss 34,898 36,338 31,022 Provision for taxes (Note 10) (20,609) (17,789) (15,248) Translation gain/(loss) 2,113 (430) (311) Net income for the year 16,402 18,119 15,463 Weighted average number of shares with TL1,000 face value each (Note 2) 166,500,000 166,500,000 166,500,000 Earning per share in US dollars (Note 2) 0.099 0.109 0.092 The accompanying notes form an integral part of these financial statements.
Share Retained capital earnings Total US$'000 US$'000 US$'000 1 January 1995 18,267 20,721 38,988 Dividends paid - (2,937) (2,937) Net income for the year - 15,463 15,463 31 December 1995 18,267 33,247 51,514 Dividends paid - (12,806) (12,806) Net income for the year - 18,119 18,119 31 December 1996 18,267 38,560 56,827 Dividends paid - (11,473) (11,473) Net income for the year - 16,402 16,402 31 December 1997 18,267 43,489 61,756
1997 1996 1995 US$'000 US$'000 US$'000 Cash flows from operating activities:- Net income 16,402 18,119 15,463 Adjustments to reconcile net income to net cash provided by operating activities :- Depreciation for the year 2,804 2,413 2,125 Reserve for employment termination benefits 51 71 136 Loss/(gain) on sale of property, plant and equipment (11) 25 (8) Decrease/(increase) in trade receivables 2,710 2,465 (4,827) Decrease in due from related parties (48) 12 5 Decrease in other receivables and prepaid expenses (48) 215 794 Decrease/(increase) in inventories (4,866) 1,665 (1,119) Decrease in long-term assets (2,982) 491 1,224 (Decrease)/increase in trade payables 218 (1,043) 427 (Decrease)/increase in due to related parties (1,380) (2,052) 2,355 (Decrease)/increase in accrued expenses (832) (133) 1,182 Change in taxes (414) 616 2,872 Total adjustments (4,798) 4,745 5,166 Net cash provided by operating activities 11,604 22,864 20,629 Cash flows used in investing activities:- Capital expenditure (2,210) (6,407) (3,411) Proceeds from sale of property, plant and equipment 22 372 114 Investment in subsidiaries - (24) (24) Net cash used in investing activities (2,188) (6,059) (3,321) Cash flows from financing activities:- Dividends paid (11,473) (12,806) (4,721) Payments of bank borrowings (201) (2,436) (2,400) Net cash used in financing activities (11,674) (15,242) (7,121) Net (decrease)/increase in cash and cash equivalents (2,258) 1,563 10,187 Cash and cash equivalents at the beginning of the year 17,026 15,463 5,276 Cash and cash equivalents at the end of the year 14,768 17,026 15,463 Supplemental disclosure of cash flow information:- Cash paid during the year for: Interest 45 234 502 Income taxes 8,595 18,355 7,612 The accompanying notes form an integral part of these financial statements.
NOTE 1 - NATURE OF OPERATIONS Nacanco Paketleme Sanayi ve Ticaret A.S. ("the Company") was established on 10 April 1988 and is registered in Manisa, Turkey. Its primary activity is the production and sale of customized steel and aluminum cans for soft drinks and beer. The Company is 65% owned by Pechiney S.A. (Note 15). NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES The Company maintains its books of account both in Turkish lira based on the Turkish Commercial Code, tax legislation and Turkish Standard Chart of Accounts and in US dollars in accordance with the accounting principles generally accepted in the United States of America (US GAAP) (Note 3). Dividends, when declared, are paid in Turkish lira. There are no exchange restrictions with respect to the Turkish Lira. The following significant accounting policies have been applied in the preparation of these financial statements. Cash and cash equivalents Cash and cash equivalents include cash, due from banks and marketable securities with original maturities of less than three months. Marketable securities Marketable securities consist of reverse repurchase agreements on Turkish government bonds and treasury bills with a predetermined sale price at fixed future dates and are stated at cost plus accrued interest. Inventories Inventories are stated at is the lower of actual cost or net realizable value. Cost is determined using the standard costing method for all inventories. At the year end, price and value differences between standard costs and actual costs are allocated between inventories on hand and the cost of goods sold. The cost elements included in the inventory are materials, labor and an appropriate amount of overhead (Note 6). Property, plant and equipment and related depreciation Property, plant and equipment are stated at cost (Note 7). The depreciation for property, plant and equipment is provided for on a straight-line basis which approximates the estimated useful lives of such assets as follows :- % Buildings 2 Machinery and equipment 5.8 Furniture and fixtures 33 Motor vehicles 33 NOTE 2 - (CONTINUED) Related companies For the purpose of the financial statements, shareholders, the investee company and the companies and parties identified by the Company as being controlled by/affiliated with them are considered and referred to as related companies (Note 16). Income taxation Income taxes are recorded using the liability method. Deferred tax assets and liabilities are recorded with respect to differences between the basis of assets and liabilities for tax purposes and financial reporting purposes. Valuation allowances in respect of deferred tax assets are recorded when it is considered more likely than not that such deferred tax assets will not be realized (Note 10). Forward contracts Forward contracts represent US dollar hedges against firm raw material purchase commitments denominated in Deutschemarks. Gains or losses on such forward contracts are treated as elements of the cost of raw materials purchased. Employment termination benefits Employment termination benefits, as required by Turkish Labor Law, are recognised in the financial statements as they are earned. The total provision represents the vested benefit obligation assuming the termination of the employment of all employees eligible for such termination benefits at the balance sheet date (Note 13). Revenue recognition Revenue is recognised on the shipment of goods. Disclosure about fair value of financial instruments The fair values of certain financial instruments carried at cost, including cash and due from banks, deposits with banks, marketable securities and short term loans are considered to approximate their respective carrying values due to their short-term nature. The carrying value of trade receivables are estimated to be their fair values. Balances denominated in foreign currencies are translated at year-end exchange rates. Fair value of derivatives and foreign exchange instruments (Note 21) are based on the values of the underlying currencies. NOTE 2 - (CONTINUED) Earnings per share Earnings per share disclosed in the accompanying statement of income are determined by dividing net income by the average number of shares in existence during the year concerned. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3 - FOREIGN CURRENCY TRANSLATION The functional currency of the Company is the Turkish lira. Primarily all revenues are denominated in Turkish lira generally with purchase prices tied to the US dollar exchange rates. A significant portion of purchases are denominated in other currencies, primarily the US dollar and the Deutschmark. The Turkish lira has experienced significant inflation since prior to the inception of the Company. Annual inflation in Turkey for the year ended 31 December 1997 was 91.0% (1996 : 84.9%, 1995: 64.9%) based on the nationwide wholesale price index (WPI) announced by the state institute of statistics of the Republic of Turkey. Because the economy of Turkey has been highly inflationary, the Company has selected the US dollar as its reporting currency for international reporting purposes. The translation of the financial statements has been done in accordance with Financial Accounting Standards Board Statement Number 52 "Foreign Currency Translation" for entities in highly inflationary economies by translating transactions denominated in other than the US dollar at the exchange rate on the transaction date. Gains and losses on foreign currency translations are recorded to the statement of income in the period that they occur. Assets and liabilities denominated in other than the US dollar are translated into the US dollar at period end exchange rates. NOTE 4 - CASH AND DUE FROM BANKS
1997 1996 1995 US$'000 US$'000 US$'000 Cash on hand 1 2 6 Due from banks:- Demand deposits- US$ - 174 5 - TL 92 136 28 - other currency - 90 76 Time deposits - US$ 14,283 14,680 13,693 - TL - 27 295 - other currency - 1,523 - 14,376 16,632 14,103
NOTE 5 - TRADE RECEIVABLES
1997 1996 1995 US$'000 US$'000 US$'000 Maksan Mesrubat ve Kutulama San. A.S. 1,920 1,975 2,077 Fruko Tamek Meyva Sulari San. A.S. 755 1,747 1,323 G??ney Biracilik ve Malt San. A.S. 740 738 1,055 Ege Biracilik ve Malt San. A.S. 550 611 1,429 T Tuborg Bira ve Malt San. A.S. 255 797 1,601 Ektam Kibris Ltd. 244 - - Erciyes Biracilik ve Malt San.A.S. 56 - 701 Post-dated cheques - 219 - Other 355 1,498 1,864 4,875 7,585 10,050
NOTE 6 - INVENTORIES
1997 1996 1995 US$'000 US$'000 US$'000 Raw materials 2,377 2,025 1,472 Finished goods 6,399 4,743 5,374 Ends 2,007 1,093 147 Goods in transit 7,172 5,003 7,336 Spare parts 849 1,083 1,283 In process 9 - - 18,813 13,947 15,612
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
January December 1, 1997 Additions Disposals Transfers 31,1997 US$'000 US$'000 US$'000 US$'000 US$'000 Land 294 - - - 294 Buildings 4,751 - - - 4,751 Machinery and equipment 38,889 773 - 1,486 41,148 Motor vehicles 284 8 (36) 48 304 Furniture and fixtures 477 - - 229 706 44,695 781 (36) 1,763 47,203 Construction in progress 1,417 1,429 - (1,763) 1,083 46,112 2,210 (36) - 48,286 Less : Accumulated depreciation(9,882) (2,804) 36 - (12,650) Net book value 36,230 35,636
January Decmeber 1, 1996 Additions Disposals Transfers 31, 1996 US$'000 US$'000 US$'000 US$'000 US$'000 Land 294 - - - 294 Buildings 4,751 - - - 4,751 Machinery and equipment 31,131 - (442) 8,200 38,889 Motor vehicles 239 - (12) 57 284 Furniture and fixtures 463 - - 14 477 36,878 - (454) 8,271 44,695 Construction in progress 3,281 6,407 - (8,271) 1,417 40,159 6,407 (454) - 46,112 Less :Accumulated depreciation (7,526) (2,413) 57 - (9,882) Net book value 32,633 36,230
January December 1, 1995 Additions Disposals Transfers 31, 1995 US$'000 US$'000 US$'000 US$'000 US$'000 Land 294 - - - 294 Buildings 4,751 - - - 4,751 Machinery and equipment 30,712 - (105) 524 31,131 Motor vehicles 247 25 (33) - 239 Furniture and fixtures 456 - (3) 10 463 36,460 25 (141) 534 36,878 Construction in progress 429 3,386 - (534) 3,281 36,889 3,411 (141) - 40,159 Less : Accumulated depreciation (5,436) (2,125) 35 - (7,526) Net book value 31,453 32,633
NOTE 7 - (CONTINUED) The mortgage on real estate, amounting to approximately US$430 (1996: US$821, 1995: US$1,482), has been given to the Manisa Chamber of Commerce. In 1995, the Company gave a sequestration right on its building and machinery to the customs authorieties as collateral against its import commitments (Note 21). The limit of the global sequestration right on the Company's building and machinery amounts to TL265.5 million (some US$1.3 million). The usage amounted to US$1,292 at 31 December 1997 (1996: US$1,162, 1995: US$1,782). NOTE 8- OTHER LONG-TERM ASSETS 1997 1996 1995 US$'000 US$'000 US$'000 Up-front payment for volume discount - net of amortization 4,383 1,294 1,642 Others - 107 250 4,383 1,401 1,892 The Company made a special sales agreement with Fruko-Tamek Meyva Sulari Sanayi A.S. ("Fruko") in 1994. According to the agreement, the Company paid US$2,000,000 to Fruko as a prepayment for volume discount on future sales of a specified number of units. Effective from 1 January 1995, the prepaid discounts have been subject to amortisation based on the quantity of goods sold to Fruko. At April 1997, this agreement was renewed for eight years concluding at year end 2004. The Company made the new agreement with Fruko and Ektam Kibris Limited. According to the agreement, the Company paid an additional DM6,000,000 (some US$3,481,863) as a prepayment for volume discount on future sales of a specified number of units in addition to the remaining US$1,294,159 from the first sale agreement. Effective from 1 January 1997, the prepaid discounts have been subject to amortization with the new amortization rate calculated by using the total quantity of goods to be sold. NOTE 9 - TRADE PAYABLES 1997 1996 1995 US$'000 US$'000 US$'000 Alcan Deutschland GmbH 1,332 - 891 Rasselstein AG - 1,263 558 Le Fer Blanc S.A. - - 993 Other 1,214 1,065 929 2,546 2,328 3,371 Alcan Deutschland GmbH and Pechiney Rhenalu SA are the Company's main aluminium suppliers while Rasselstein AG and Hoogovens S-AAL BV are the Company's main coil supplier. Other payables comprise of trade payables to miscellaneous foreign and domestic suppliers for purchases of raw and auxiliary materials. NOTE 10 - TAXATION The corporation tax rate (including fund premiums) is 27.5%, whereas the minimum effective rate on the total income of a company before exemptions, if any, is 22%. Investment incentive allowance, income from participations and income from investment funds are not subject to corporate tax, however investment incentive allowance is subject to a withholding tax of 16.5%. Income after corporation tax (including fund premiums), adjusted for certain exemptions and deductions, is subject to withholding tax at 11% for quoted companies (companies with a minimum of 15% of their nominal share capital held by the public) and 22% for other companies. Thus, the standard total effective rate is 44% for the Company at 31 December 1997. Interest income on Turkish government bonds and Treasury bills is subject to corporation tax, but is partially exempt from the withholding tax. The partial exemption is determined according to the proportion of the interest income to total income. The total provison for taxes reflected in the accompanying financial statements differs from the amounts computed by applying the above mentioned standard effective rates as follows: 1997 1996 1995 US$'000 US$'000 US$'000 Provision for tax with effective tax rate of 44% 15,355 15,989 13,650 Effect of remeasurement in US$ 5,254 1,800 1,598 Provison for taxes in the accompanying financial statements 20,609 17,789 15,248 Taxes payable calculated by the Company at 31 December 1997, 1996 and 1995 in Turkish lira and converted into US dollars at the exchange rate prevailing at that date are as follows 1997 1996 1995 US$'000 US$'000 US$'000 Statutory taxation 13,756 14,702 12,884 Prepaid taxes (2,540) (2,120) (1,372) Statutory income taxes payable - net 11,216 12,582 11,512 NOTE 10 - (CONTINUED) Deferred taxes:- The breakdowns of cumulative timing differences and resulting deferred tax assets/liabilities provided at 31 December 1997, 1996 and 1995 using the prevailing/expected future tax rates, were as follows:-
1997 Cumulative timing differences Deferred tax (income)/ expense assets/(liabilities) TL million TL millionUS$' 000 Current timing differences:- Accrual for export discounts to be given 3,403 1,497 7 Accrual for professional fees 6,132 2,698 13 Accrual for customer claims - - - Accrual for free cans to be given 14,869 6,542 32 Accrual for other expenses 27,552 12,123 60 22,860 112 Non-current timing differences:- Adjustment for depreciation of fixed assets according to their useful lives (702,755) (309,212) (1,511) Reserve for employment termination benefits 84,187 37,0421 81 (272,170) (1,330)
1996 Cumulative timing differences Deferred tax (income)/ expense assets/(liabilities) TL million TL million US$'000 Current timing differences:- Accrual for export discounts to be given 41,891 18,432 171 Accrual for professional fees 9,783 4,304 40 Accrual for customer claims 6,672 2,936 27 Accrual for free cans to be given - - - Accrual for other expenses 1,906 839 9 26,511 247 Non-current timing differences:- Adjustment for depreciation of fixed assets according to their useful lives (160,350) (70,554) (656) Reserve for employment termination benefits 35,074 15,432 143 (55,122) (513)
NOTE 10 - (CONTINUED)
1995 Cumulative timing differences Deferred tax (income)/ expense assets/(liabilities) TL million TL million US$'000 Current timing differences:- Accrual for export discounts to be given 20,825 8,925 154 Accrual for professional fees 2,975 1,309 22 Accrual for customer claims 6,248 2,749 46 Accrual for free cans to be given 18,743 8,247 139 Accrual for other expenses 4,633 2,038 34 23,268 395 Non-current timing differences:- Adjustment for depreciation of fixed assets according to their useful lives (166,819) (73,400) (1,234) Reserve for employment termination benefits 17,171 7,555 127 (65,845) (1,107)
Tax charges in the accompanying statements of income, which was calculated in Turkish lira on a monthly basis throughout the year, and converted into US dollars at the monthly average rates, amounted to US$20,609,000 in total at 31 December 1997 (1996: US$17,789,000, 1995: US$15,248,000), including the effects of deferred tax debits of US$1,422,000 (1996: credits of US$633,000, 1995: credits of US$1,762,000). In Turkey, there is no procedure for the final agreement of tax assessments. Tax returns are filed within four months of the end of the year to which they relate. The tax authorities may, however, examine the accounting records and/or revise assessments within five years. NOTE 11 - ACCRUED EXPENSES AND OTHER PAYABLES
1997 1996 1995 US$'000 US$'000 US$'000 Value added tax payable - 658 605 Payroll and withholdings 594 571 243 Other 294 491 1,005 888 1,720 1,853 NOTE 12 - BORROWINGS
1997 1996 1995 Maturity Interest rate % US$'000 US$'000 US$'000 Short-term borrowings:- Citibank N.A. Izmir 6 July 1996 Libor plus 1.25 - - 2,000 Long-term borrowings:- Sinai Yatirim ve Kredi Bankasi A.O. 31 August 1999 25 108 309 745 Less: Current portion of long-term borrowings (54) (103) (186) Long-term borrowings 54 206 559
At 31 December 1997, the letters of guarantee provided to Sinai Yatirim ve Kredi Bankasi A.O. for the above borrowing amounted to US$211,000 (1996: US$402,000, 1995: US$969,000). NOTE 13 - RESERVE FOR EMPLOYMENT TERMINATION BENEFITS There are no agreements for pension commitments other then the legal requirement as explained below. Under Turkish labor law, as supplemented by union agreements, the Company is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, who retires, completes 25 years of service (20 years for women), is called up for military service or dies. The amount payable consists of one month's salary, limited to US$511 (1996: US$496, 1995: US$526) for each year of service. The Company has calculated the reserve in accordance with these limits. At 31 December 1997, the Company's total earned benefits calculated on this basis were US$411,000 (1996: US$360,000, 1995: US$289,000). With effect from 1 January 1998 the limit has been increased to US$732 for each year of service. NOTE 14 - RETAINED EARNINGS AND LEGAL RESERVES Retained earnings, as per the statutory financial statements, other than legal reserves are available for distribution, subject to the legal reserve requirements referred to below. The legal reserves consist of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code (TCC). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the issued and fully paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid- in share capital. Under the TCC, the legal reserves are not available for distribution unless they exceed 50% of the paid-in share capital but may be used to offset losses in the event that the general reserve is exhausted. Dividend distribution is made by the Company in Turkish lira in accordance with the Turkish Commercial Code (TCC) after deducting taxes and setting aside the legal reserves as discussed above. NOTE 14 - (CONTINUED) In the accompanying financial statements, legal reserves are not presented separately, but included in 'Retained Earnings'. At 31 December 1997, 1996 and 1995, the legal reserves per the statutory financial statements amounted to TL340,748 million (some US$1,664,000) and TL171,750 million (some US$1,598,000 at the exchange rate prevailing at 31 December 1996) and TL67,397 million(some US$1,133,000 at the exchange rate prevailing at 31 December 1995), respectively. At 31 December 1997, 1996 and 1995, unappropriated profits other than legal reserves per the statutory financial statements amounted to TL218,583 million (some US$1,067,000) and TL11,104 million (some US$103,000 at the exchange rate prevailing at 31 December 1996) and TL216,262 million (some US$3,635,000 at the exchange rate prevailing at 31 December 1995), respectively. NOTE 15 - SHARE CAPITAL The Company's authorized capital consists of 166,500,000 shares of TL1,000 each, which are fully paid up. The Company's paid-in share capital and shareholding structure in terms of Turkish lira at 31 December 1996 and 1995 were as follows:-
1997 1996 1995 TL million Share(%) TL million Share(%) TLmillion Share (%) C> Pechiney S.A 108,225 65.00 - - - - Pechiney International S.A. - - 108,225 65.00 108,219 65.00 RHI Holdings Incorporated 53,055 31.87 53,055 31.87 53,055 31.87 Jeffrey Steiner 5,220 3.13 5,220 3.13 5,220 3.13 National Can Puerto Ric o - - - - 3 - American National Can Company - - - - 3 - 166,500 100.00 166,500 100.00 166,500 100.00 Capital at historical US dollar value 18,267 18,267 18,267 (US$'000)
NOTE 16 - RELATED COMPANY TRANSACTIONS
1997 1996 1995 US$'000 US$'000 US$'000 Due from related companies:- Pechiney Rhenalu 23 - - American National Can Company 24 - - Nacanco China - - 12 Nacanco France S.A. 1 - - 48 - 12 Due to related companies:- Pechiney Rhenalu - 1,417 103 Nacanco France S.A. 591 453 1,053 American National Can Company 30 106 2,579 Nacanco UK 18 53 61 Nacanco Italy - - 280 Nacanco Germany - - 5 Nacanco Dunkerque 3 - - Nacanco Limited 7 - - 649 2,029 4,081 Sales to related companies:- Pechiney Rhenalu scrap aluminium 1,682 1,497 772 Nacanco Iberica aluminium cans - - 259 1,682 1,497 1,031 Purchases from related companies:- Pechiney Rhenalu aluminium coils 14,929 12,329 3,080 Nacanco France S.A. - ends 8,816 11,114 16,676 Sitac - ends/cans 4,231 4,662 - Nogara - ends/cans - 857 - American National Can Company - spare parts 460 633 709 Nacanco Ireland - ends/cans 5,052 241 190 Nacanco UK - ends 381 - 627 Nacanco Italy - cans - - 604 33,869 29,836 21,886
NOTE 16 - (CONTINUED)
Property, plant and equipment purchases:- American National Can Company 192 3,054 2,550 Nacanco UK 87 106 - Nacanco Germany - 3 64 Nacanco Spain - 1 - Nacanco Italy - - 11 279 3,164 2,625 Other charges to the Company:- Royalty expenses 1,250 1,250 1,250
NOTE 17 - COST OF SALES
Cost of sales comprises the following:- 1997 1996 1995 US$'000 US$'000 US$'000 Direct material costs 50,173 52,353 52,183 Labor 5,960 7,601 4,028 Depreciation 2,656 2,602 2,267 Other overheads 3,630 3,928 7,250 62,419 66,484 65,728
NOTE 18 - GENERAL AND ADMINISTRATIVE EXPENSES
1997 1996 1995 US$'000 US$'000 US$'000 Salaries 531 652 434 Fringe benefits 97 70 97 Travel expenses 92 102 70 Communication expenses 89 93 109 Other 397 425 407 1,206 1,342 1,117
NOTE 19 - FINANCIAL INCOME
1997 1996 1995 US$'000 US$'000 US$'000 Financial income:- Interest income on bank deposits 869 928 2,003 Interest income on marketable securities 185 303 798 Other 74 384 376 1,128 1,615 3,177 Financial expenses:- Interest expense on borrowings 54 162 502 Financial income - net 1,074 1,453 2,675
NOTE 20 - ROYALTY The Company had a technical assistance and trademark license agreement with the American National Can Company for a period of five years from 4 April 1988. The agreement included a clause stating that the agreement would be automatically renewed for the subsequent years unless 12 months' written notice was given by either party. The parties drew up an amendment to the existing contract effective from 1 January 1994, changing the annual royalty amounting to US$1,250,000. The amendment was approved by the Foreign Investment Department of Treasury and of the Republic of Turkey. Royalty is subject to withholding tax at the rate of 22% including fund premiums which the Company is also liable to pay. At 31 December 1997, royalty expenses including withholding tax amounted to US$1,603,000 (1996: US$1,603,000, 1995: US$1,595,000). NOTE 21 - COMMITMENTS AND CONTINGENCIES The commitments and contingent liabilities of the Company are summarised as follows:-
1997 1996 1995 US$'000 US$'000 US$'000 Letters of guarantee 874 1,686 4,089 Sequestration rights (Note 7) 1,292 1,162 1,782 Mortgage given (Note 7) - 1 1 2,166 2,849 5,872
NOTE 22 - SUBSEQUENT EVENT - -As of 1 January 1998, the withholding tax rate for royalty was reduced from 22% to 11% including fund premiums which the Company is also liable to pay. -----END PRIVACY-ENHANCED MESSAGE-----