kulthorn kirby public company limited...

KULTHORN KIRBY PUBLIC COMPANY LIMITED (KKC)

Head Office / Factory : 44/1 Moo 7 Lat Krabang Industrial Estate, Chalong Krung Road, Khwaeng Lam Pla Thio,

Khet Lat Krabang, Bangkok 10520 Tel : +66 (0)2326 0831, +66 (0)2739 4893

Fax : +66 (0)2326 0837, +66 (0)2739 4892 e-mail : [email protected] http : //www.kulthorn.com

Nature of Business : Manufacturer of Hermetic Compressor for Refrigeration and Air Conditioning Products Registration No. : 0107537002150 Registered Capital : Baht 700 Million Paid up Capital : Baht 700 Million Issued Shares : Ordinary 700,000,000 Shares, Par Value at Baht 1/share

Subsidiary Companies

1. Kulthorn Premier Company Limited

Head Office/Factory : 446/3 Moo 9, Nong Kee, Kabin Buri, Prachin Buri 25110 Tel : +66 (0)3720 4835-41 Fax : +66 (0)3720 4844

Branch : (1) 42/2 Moo 1, Suwintawong Road, Klong Udom Cholajorn, Amphur Muang, Chachoengsao 24000

Tel : +66 (0)3884 6072-4 Fax : +66 (0)3884 5677 (2) 44/3 Moo 7, Chalong Krung Road, Lam Pla Thio,

Khet Lat Krabang, Bangkok 10520 Tel : +66 (0)2326 0612 Fax : +66 (0)2326 0802

Nature of Business : Manufacturer of - Hermetic Compressor

- Quality Iron Casting

Issued Shares : Ordinary 12,600,000 shares, Par Value at Baht 100/share

Shareholding by KKC : 99.99%

2. Kulthorn Kirby Foundry Company Limited

Head Office/Factory : 1 Moo 22 Suwintawong Road, Saladaeng, Bang Nam Priao, Chachoengsao 24000

Tel : +66 (0)3859 3016-9 Fax : +66 (0)3859 3015

Nature of Business : Manufacturer of Quality Iron Casting


Shareholding by KKC : 100%

ANNUAL REPORT 2009

Kulthorn Kirby Public Company Limited �

3. Kulthorn Steel Company Limited

Head Office/Factory : 61/1 Moo 4, Chalong Krung Road, Lam Pla Thio, Khet Lat Krabang, Bangkok 10520 Tel : +66 (0)2326 0851 Fax : +66 (0)2326 0766

Nature of Business : Steel Coil Center


Shareholding by KKC : 100%

Other References

Registrar :

Thailand Securities Depository Co., Ltd.

62 The Stock Exchange of Thailand Building,

Ratchadaphisek Road, Klongtoey, Bangkok 10110

Tel. +66 (0)2229 2800 Fax. +66 (0)2359 1259

Auditor :

Mr Wichart Lokatekrawee, Certified Public Accountant no. 4451 and/or

Mr Narong Puntawong, Certified Public Accountant no. 3315 and/or

Mrs Ratana Jala, Certified Public Accountant no. 3734

Ernst & Young Office Limited.

33rd Floor, Lake Rajada Office Complex

193/136-137 Rajadapisek Road, Klongtoey, Bangkok 10110

Tel. +66 (0)2264 0777 Fax. +66 (0)2264 0789-90

Law Consultant :

Chor. Chanasongkram Advocates & Solicitors

52/3 Phrasumene Road, Khwaeng Chana Songkram,

Khet Phra Nakhon, Bangkok 10200

Tel. +66 (0)2282 2955-6 Fax. +66 (0)2281 3008

รายงานประจำปี 2552

บริษัท กุลธรเคอร์บี้ จำกัด (มหาชน) �

ANNUAL REPORT 2009


The Company’s information

History

Kulthorn Kirby Company Limited (“the Company”) was established on 24 March 1980 by the cooperation between Simakulthorn Group, Kirby Group Australia, refrigerator producers in Thailand, and the Industrial Finance Corporation of Thailand to operate as a manufacturer and seller of motor compressor, reciprocating type for refrigeration products i.e., refrigerators, freezers, water coolers, and commercial refrigerators. The Company is the first motor compressor manufacturer in Thailand.

The Company was listed in the Stock Exchange of Thailand on 22 February 1991, and later expanded its production to the motor compressor for the air conditioning products. Furthermore, the Company and other investors invested and established new companies to produce major parts of compressor to replace imported parts in order to reduce the production costs and to improve product quality.

The Company’s vision is to be the leader in the motor compressor business in ASEAN.

The company’s mission is to manufacture quality motor compressors with on-time delivery and at a competitive price.

Business Overview of the Company and its Subsidiaries

The Company is the manufacturer and seller of compressors for refrigeration and air conditioning products, details are as follows:

Kulthorn Kirby Public Company Limited is the manufacturer and seller of motor compressor, reciprocating type for refrigeration products i.e. refrigerators, freezers, water coolers, commercial refrigerators, and air conditioners. The reciprocating compressor can be used with many types of refrigerant including Ozone Friendly Substance such as R134a, R404A, R407C and R600a with the sizes from 1/20 horsepower to 10 horsepower. The Company also produces Condensing Unit which is the component of refrigeration products, electrical motor parts, and other motor compressor parts.

Kulthorn Premier Company Limited is the manufacturer of the motor compressor and quality iron casting for motor compressor and automotive parts.

Kulthorn Kirby Foundry Company Limited is the manufacturer of the quality iron casting for motor compressor and automotive parts.

Kulthorn Steel Company Limited is the Steel Coil Center for the manufacturer of motor compressor, electrical motor, and other parts.



Marketing and Industrial Conditions and Competitions

Compressor manufacturing industry has a relatively high competition in both domestic and international market. Moreover, during the past year, the production cost increases significantly due mainly to a rise in raw material cost, this lead to a price competition. As a result, most of manufacturers including the Company have strategies to reduce cost and to create a competitive advantage such as customer relationship, and improve production productivity.

The Company has a marketing strength among other manufacturers since the Company does not manufacture finished products, such as refrigerators, water coolers, freezers or air-conditioners to compete with its customers. Also, the Company emphasizes on satisfying customer needs, therefore, the Company is able to sell its products to all customers.

The Company sells its products domestically and internationally, while the domestic sale and international sale is approximately 22% and 78% of total revenues from sales respectively. The Company determines its products prices by considering various factors, such as competition and customer demand. In the past, the Company could compete with the competitors both for domestic and export products.

Market Share

Motor compressor for refrigerators, freezers and water coolers Kulthorn Kirby Public Company Limited 28% Kulthorn Premier Company Limited 25% Hitachi Compressor (Thailand) Company Limited 26% Imported motor compressors 21%

Motor compressors for air-conditioners Kulthorn Kirby Public Company Limited 14% Thai Compressor Manufacturing Company Limited 6% Siamcompressor Industry Company Limited 31% Daikin (Thailand) Company Limited 12% Copeland (Thailand) Company Limited 10% LG Electronics Company Limited 26% Imported motor compressors 1%

Nature of Customers

The Company’s customers can be categorized into two groups: major manufacturers of refrigerators, freezers and air-conditioners called OEM (Original Equipment Manufacturers), and minor manufacturers of refrigerators, freezers and air-conditioners. The Company distributes its products directly to domestic and international OEM customers, except for Australia and New Zealand markets, where the Company distributes its products via a distributor named Heatcraft Australia Pty Ltd. The Company also appoints local distributors to supply the Company’s products to minor producers, both domestic and international.

ANNUAL REPORT 2009


MAJOR SHAREHOLDERS

List of major shareholders (shareholding in excess of 0.50%) As of the shareholder register closing date 11 March 2009

No. of Shareholdings %

1. Simakulthorn Group 334,413,292 47.77

2. Heatcraft Australia Pty. Ltd. 65,255,000 9.32

3. Ms Nutsuong Ratanapaisorn 34,852,622 4.98

4. Ms Sasi Ingkanant 34,830,614 4.97

5. Ms U-rai Khemumnaj 34,780,541 4.97

6. 1st Lt Supakorn Chantasasawat 34,672,546 4.95

7. Ms Pojanee Khemumnaj 34,146,603 4.88

8. TMB Bank Public Company Limited 32,474,280 4.46

9. Ms Saisamorn Suriyathep 23,549,900 3.36

10. Mrs Supatra Kumtien 21,837,641 3.12

11. Mrs Benjamas Poohaipol 14,000,000 2.00

Original Equipment Manufacturers

12. Kang Yong Electric Public Company Limited 3,862,054 0.55

13. Thai Toshiba Electric Industries Co., Ltd. 3,612,644 0.52

.


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THE BOARD OF DIRECTORS As at 31 December 2009

* Authorized Director

SHAREHOLDING (%)

1. Mr Sumeth Simakulthorn * Chairman 2.00

2. Mr Suraporn Simakulthorn * Managing Director 2.00

3. To be 2nd Lt Samart Mekavanichkul Independent Director 0.0112 (1)

4. Mr Tawatchai Jaranakarun Independent Director 0.0001 (1)

5. Mr Padoong Techasarintr Independent Director -

6. Mr Praphot Aphiphunya Independent Director 0.0693

7. Mr Praphad Phodhivorakhun * Director -

8. Mr Arnon Simakulthorn * Director 2.00

9. Mr Prasan Tanprasert * Director -

10. Mr Sutee Simakulthorn * Director 0.48

11. Mrs Kanit Muangkrachang * Director -

12. Mr Alexander George Henderson * Director -

13. Mr William John Moltner * Director -

14. Mr Paiboon Boompermvitaya * Director 0.376

15. Ms Arpaporn Palungvitvatana Resigned as from 9 November 2009

(1) shareholding by the spouse

THE AUDIT COMMITTEE As at 31 December 2009

1. To be 2nd Lt Samart Mekavanichkul ** Chairman of the Audit Committee

2. Mr Tawatchai Jaranakarun Member of the Audit Committee

3. Mr Padoong Techasarintr ** Member of the Audit Committee

** The director who have adequate expertise and experience to review creditability of the financial reports.

ANNUAL REPORT 2009

Kulthorn Kirby Public Company Limited 11

THE MANAGEMENT As at 31 December 2009

SHAREHOLDING (%)

1 Mr Suraporn Simakulthorn Managing Director/President 2.00

2 Mr Kamol Upalanon Executive Vice President 0.0062 (Technology)

3 Mr Sutee Simakulthorn Executive Vice President 0.48 (Administration)

4 Mr Paiboon Boonpermvitaya Senior Vice President 0.376 (Manufacturing)

5 Mr Titisak Simakulthorn Senior Vice President 0.48 (Marketing and Logistics)

6 Ms Sopida Doungratmaneechot Manager, - Finance Department

7 Mrs Chanpen Phadungsilp Manager, - Accounting & Costing Department

COMPANY SECRETARY : Mr Chanachai Kulnoppaleark

REMUNETATION TO THE COMPANY’S EXECUTIVES IN YEAR 2009

TO DIRECTORS

Remuneration to company’s directors of 15 positions as monthly director fee and the meeting allowance was Baht 1,659,000 and the monthly fee to the members ofthe audit committee of 3 persons was Baht 288,000.

TO MANAGEMENT

Remuneration to the Management, excluding the Finance Department Manager and the Accounting & Costing Department Manager in terms of salary and bonus was Baht 13,879,425.



DIRECTORS IN SUBSIDIARY COMPANIES As at 31 December 2009

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Kulthorn Premier Company Limited

Chairman and Managing Director : Mr Suraporn Simakulthorn

Directors : Mr Sumeth Simakulthorn

Mr Arnon Simakulthorn

Mr Sutee Simakulthorn

Mr Paiboon Boonpermvitaya

Mr Prasan Tanprasert

Mr Suradej Boonyawatana

Mr Titisak Simakulthorn

Kulthorn Kirby Foundry Company Limited

Chairman : Mr Suraporn Simakulthorn

Managing Director : Mr Paiboon Boonpermvitaya

Directors : Mr Sumeth Simakulthorn

Mr Arnon Simakulthorn


Kulthorn Steel Company Limited

Chairman and Managing Director : Mr Suraporn Simakulthorn

Directors : Mr Arnon Simakulthorn


Mr Paiboon Boonpermvitaya

Mr Titisak Simakulthorn

Mr Sutas Simakulthorn

Ms Sornsanan Simakulthorn

ANNUAL REPORT 2009

Kulthorn Kirby Public Company Limited 1�

Kulthorn Kirby Public Company Limited is a manufacturer of hermetic reciprocating type

compressor for refrigeration and air conditioning industries in Thailand, started its operations in

the beginning of 1982. The Company’s products are sold to the domestic manufacturers of

refrigerator, freezer, water cooler, commercial refrigeration product and air conditioner as well

as export.

OPERATIONSThe revenues from sales and services income of the Company and its subsidiary for 2009 was

Baht 6,855.56 million, an decrease from 2008 of Baht 60.24 million or -0.87 %. Total revenues

amounted to Baht 7,019.52 million, an decrease from 2008 of Baht 61.21 million or -0.86 %

The cost of sales and services of the Company and its subsidiaries for 2009 was 89.62 % of

the revenues from sales and services income, while it was 93.73 % in 2008. Selling and

administrative expenses in 2009 amounted to Baht 323.56 million while such expenses in

2008, was Baht 366.88 million. The net interest paid in 2009, increased from 2008 by Baht

2.77 million.

The net Profit of the Company and its subsidiaries in 2009 amounted to Baht 232.00 million

while in 2008, it was net loss of Baht 68.95 million.

FINANCIAL POSITIONThe consolidated total assets in 2009 was Baht 6,335.02 million, an increase of Baht 93.51

million from Baht 6,241.51 million in 2008. There were an increase of the total current assets

for Baht 98.08 million and a decrease of the other assets for Baht 4.57 million.

The consolidated total liabilities in 2009, was Baht 5,104.11 million, a decrease of Baht 138.49

million from Baht 5,242.60 million in 2008.

The consolidated total shareholders’ equity in 2009 was Baht 1,230.91 million, an increase

from 2008 by Baht 232.00 million.

FINANCIAL PERFORMANCE AND FINANCIAL POSITION


บริษัท กุลธรเคอร์บี้ จำกัด (มหาชน) 1�

Kulthorn Kirby Public Company Limited and its subsidiaries Report and financial statements

31 December 2009 and 2008

ANNUAL REPORT 2009


ANNUAL REPORT 2009

Kulthorn Kirby Public Company Limited 21

ANNUAL REPORT 2009


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Kulthorn Kirby Public Company Limited and its subsidiaries Notes to financial statements For the years ended 31 December 2009 and 2008

1. General information

1.1 Corporate information

The Company was incorporated as a limited company under Thai law and transformed to be a public company on 13 June 1994. The Company is domiciled in Thailand and principally engaged in the manufacturing and distribution of hermetic compressors, with its registered address at 44/1 Moo 7 Chalongkrung Road, Khwaeng Lamplatew, Khet Latkrabang, Bangkok.

1.2 Financial crisis

The financial crisis experienced over the past year has had a far reaching adverse

effect on the global economy as evidenced by sharp falls in share prices worldwide, a

tight squeeze on credit including interbank lending, failures of large financial

institutions and reduced consumer confidence. At present, the economic crisis has

eased. However, it continues to substantially affect the business and financial plans of

Thailand enterprises and asset value, and there remains uncertainty as to when the

global economy will return to normalcy. These financial statements have been

prepared on the bases of facts currently known to the Company, and on estimates and

assumptions currently considered appropriate.

2. Basis of preparation

2.1 The financial statements have been prepared in accordance with accounting standards

enunciated under the Accounting Profession Act B.E. 2547 and their presentation has

been made in compliance with the stipulations of the Notification of the Department of

Business Development dated 30 January 2009, issued under the Accounting Act B.E.

2543.

The financial statements in Thai language are the official statutory financial statements

of the Company. The financial statements in English language have been translated

from the Thai language financial statements.

The financial statements have been prepared on a historical cost basis except where

otherwise disclosed in the accounting policies.

ANNUAL REPORT 2009


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2.2 Basis of consolidation

a) The consolidated financial statements include the financial statements of Kulthorn

Kirby Public Company Limited (“the Company”) and its subsidiary companies

(“the subsidiaries”), which are incorporated in Thailand, as follows:

Subsidiary companies Nature of business

Percentage owned by the

Company

Assets as a

percentage to the

consolidated total

assets as at 31

December

Revenues as a

percentage to the

consolidated total

revenues for the year

ended 31 December

2009 2008 2009 2008 2009 2008

Kulthorn Kirby Foundry Company

Limited

Manufacturing and sales iron

castings for compressor parts

and automotives parts

100 100 11 8 9 9

Kulthorn Premier Company

Limited

Manufacturing and sales

hermetic compressors and iron

castings for compressor parts

and automotives parts

100 100 29 24 30 25

Kulthorn Steel Company Limited Slitting of electrical steel for

compressor

100 100 15 15 17 11

b) Subsidiaries are fully consolidated as from the date of acquisition, being the date

on which the Company obtains control.

c) The financial statements of the subsidiaries are prepared for the same reporting

period as the parent company, using consistent significant accounting policies.

d) Material intercompanies balances and transactions between the Company and its

subsidiary companies have been eliminated from the consolidated financial

statements. Investments in the subsidiary companies as recorded in the

Company's financial statements have been eliminated against shareholders'

equity of the subsidiaries. Intercompanies profit as included in the outstanding

balance of inventories has no material effect on the consolidated financial

statements.

2.3 The separate financial statements, which present investments in subsidiaries under the

cost method, have been prepared solely for the benefit of the public.



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3. Adoption of new accounting standards

In June 2009, the Federation of Accounting Professions issued Notification No.

12/2552, assigning new numbers to Thai Accounting Standards that match the

corresponding International Accounting Standards. The numbers of Thai Accounting

Standards as referred to in these financial statements reflect such change.

The Federation of Accounting Professions has issued Notification No. 86/2551 and

16/2552, mandating the use of new accounting standards, financial reporting standard

and accounting treatment guidance as follows.

3.1 Accounting standards, financial reporting standard and accounting treatment guidance which are effective for the current year

Framework for the Preparation and Presentation of Financial Statements

(revised 2007)

TAS 36 (revised 2007) Impairment of Assets

TFRS 5 (revised 2007) Non-current Assets Held for Sale and Discontinued

Operations

Accounting Treatment Guidance for Leasehold Right

Accounting Treatment Guidance for Business Combination under Common Control

These accounting standards, financial reporting standard and accounting treatment

guidance became effective for the financial statements for fiscal years beginning on or

after 1 January 2009. The management has assessed the effect of these standards

and believes that TFRS 5 (revised 2007) and Accounting Treatment Guidance for

Leasehold Right are not relevant to the business of the Company, while Framework for

Preparation and Presentation of Financial Statements (revised 2007), TAS 36 (revised

2007) and Accounting Treatment Guidance for Business Combination under Common

Control will not have any significant impact on the financial statements for the current

period.

ANNUAL REPORT 2009


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3.2 Accounting standards which are not effective for the current year

Effective date

TAS 20 Accounting for Government Grants and

Disclosure of Government Assistance

1 January 2012

TAS 24 (revised 2007) Related Party Disclosures 1 January 2011

TAS 40 Investment Property 1 January 2011

However, TAS 24 (revised 2007) and TAS 40 allow early adoption by the entity before

the effective date.

The management of the Company has assessed the effect of these standards and

believes that TAS 20 and TAS 40 are not relevant to the business of the Company,

while TAS 24 (revised 2007) will not have any significant impact on the financial

statements for the year in which it is initially applied.

4. Significant accounting policies

4.1 Revenue recognition

Sales of goods

Sales of goods are recognised when the significant risks and rewards of ownership of

the goods have passed to the buyer. Sales are the invoiced value, excluding value

added tax, of goods supplied.

Rendering of services

Service revenue is recognised when services have been rendered taking into account

the stage of completion.

Interest income

Interest income is recognised on an accrual basis based on the effective rate.

4.2 Cash and cash equivalents

Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid

investments with an original maturity of three months or less and not subject to

withdrawal restrictions.

4.3 Trade accounts receivable

Trade accounts receivable are stated at the net realisable value. Allowance for doubtful

accounts is provided for the estimated losses that may be incurred in collection of

receivables. The allowance is generally based on collection experiences and analysis

of debtor aging.



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4.4 Inventories

Inventories are valued at the lower of cost (first-in, first-out basis) and net realisable

value. Cost of work in process and finished goods includes raw materials, direct labour

and production overhead.

Allowance for diminution in inventory value will be set up for old, obsolete or

deteriorated inventories.

4.5 Investments

Investments in the subsidiaries are accounted for in the separate financial statements

using the cost method less accumulated allowance for impairment loss (if any).

4.6 Property, plant and equipment and depreciation

Land is stated at cost. Plant and equipment are stated at cost less accumulated

depreciation and allowance for loss on impairment of assets (if any).

Depreciation of plant and equipment is calculated by reference to their costs on the

straight-line basis over the estimated useful lives as follows:

Land improvement and plant - 20 years

Machinery - 5, 8, 10, 15 years

Plant equipment - 5 years

Furniture, fixtures and office equipment - 3, 5, 10 years

Motor vehicles - 5 years

Depreciation is included in determining income.

No depreciation is provided on land and construction in progress.

4.7 Goodwill

Since 1 January 2008, goodwill is initially measured at cost, which is the excess of the

cost of the business combination over the Company’s share in the net fair value of the

acquiree’s identifiable assets, liabilities and contingent liabilities. If the cost of

acquisition is less than the fair value of the net assets of the subsidiary acquired, the

difference is recognised directly in the income statement.

Goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested

for impairment annually and when circumstances indicate that the carrying value may

be impaired.

ANNUAL REPORT 2009


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For the purpose of impairment testing, goodwill acquired in a business combination is

allocated to each of the Company’s cash generating units (or group of cash-generating

units) that are expected to benefit from the synergies of the combination. The Company

estimates the recoverable amount of each cash-generating unit (or group of cash-

generating units) to which the goodwill relates. Where the recoverable amount of the cash-

generating unit is less than the carrying amount, an impairment loss is recognised.

Impairment losses relating to goodwill cannot be reversed in future periods.

4.8 Warranty reserve

Warranty reserve is estimated by reference to actual warranty expenses incurred and

calculated at a percentage of cost of sales and quantities of products under warranty.

4.9 Related party transactions

Related parties comprise enterprises and individuals that control, or are controlled by,

the Company, whether directly or indirectly, or which are under common control with the

Company.

They also include companies and individuals which directly or indirectly own a voting

interest in the Company that gives them significant influence over the Company, key

management personnel, directors and officers with authority in the planning and

direction of the Company’s operations.

4.10 Foreign currencies

Foreign currency transactions are translated into Baht at the exchange rates ruling on

the transaction dates. Assets and liabilities denominated in foreign currency

outstanding on the balance sheet date are translated into Baht at the exchange rates

ruling on the balance sheet date.

Gains and losses on exchange are included in determining income.

4.11 Financial instruments

The Company and its subsidiaries’ financial instruments principally comprise cash and

cash equivalents, trade accounts receivable, investments, short-term lending, trade

accounts payable, other payable and short-term and long-term borrowings, for which

the accounting policies have been disclosed in the related accounting policies.


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4.12 Impairment of assets

At each reporting date, the Company and its subsidiaries perform impairment reviews

in respect of the properly, plant and equipment whenever events or changes in

circumstances indicate that an asset may be impaired. The Company also carries out

annual impairment reviews in respect of goodwill. An impairment loss is recognised

when the recoverable amount of an asset, which is the higher of the asset’s fair value

less costs to sell and its value in use, is less than the carrying amount. In determining

value in use, the estimated future cash flows are discounted to their present value

using a pre-tax discount rate that reflects current market assessments of the time value

of money and the risks specific to the asset. In determining fair value less costs to sell,

an appropriate valuation model is used. These calculations are corroborated by a

valuation model that, based on information available, reflects the amount that the

Company could obtain from the disposal of the asset in an arm’s length transaction

between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognised in the income statement.

4.13 Long-term leases

Hire-purchase and leases of machinery and equipment which transfer substantially all

the risks and rewards of ownership are classified as finance leases. Finance leases

are capitalised at the lower of the fair value of the leased assets and the present value

of the minimum lease payments. The outstanding rental obligations, net of finance

charges, are included in other long-term payables, while the interest element is

charged to the income statements over the lease period. The machinery and

equipment acquired under finance leases is depreciated over the useful life of the

assets and registration of ownership is transferred upon completion of payment.

4.14 Employee benefits

Salaries, wages, bonuses and contributions to the social security fund are recognised

as expenses when incurred.

4.15 Provisions

Provisions are recognised when the Company and its subsidiary companies have a

present obligation as a result of a past event, it is probable that an outflow of resources

embodying economic benefits will be required to settle the obligation, and a reliable

estimate can be made of the amount of the obligation.

ANNUAL REPORT 2009

Kulthorn Kirby Public Company Limited �1

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4.16 Income tax

Income tax is provided in the accounts based on taxable profits determined in

accordance with tax legislation.

5. Significant accounting judgments and estimates

The preparation of financial statements in conformity with generally accepted

accounting principles at times requires management to make subjective judgments

and estimates regarding matters that are inherently uncertain. These judgments and

estimates affect reported amounts and disclosures and actual results could differ.

Significant judgments and estimates are as follows:

5.1 Allowance for doubtful accounts

In determining an allowance for doubtful accounts, the management needs to make

judgment and estimates based upon, among other things, past collection history,

aging profile of outstanding debts and the prevailing economic condition.

5.2 Allowance for diminution in inventory value

In determining allowance for diminution in inventory value, the management needs to

exercise judgement and make estimates based upon, among other things, market

conditions and the condition of the inventory.

5.3 Property, plant and equipment/Depreciation

In determining depreciation of plant and equipment, the management is required to

make estimates of the useful lives and salvage values of the Company’s and

subsidiaries' plant and equipment and to review estimate useful lives and salvage

values when there are any changes.

5.4 Leases

In determining whether a lease is to be classified as an operating lease or finance

lease, the management is required to use judgment regarding whether significant risk

and rewards of ownership of the leased asset has been transferred, taking into

consideration terms and conditions of the arrangement.

5.5 Fair value of financial instruments

In determining the fair value of financial instruments that are not actively traded and for

which quoted market prices are not readily available, the management exercise

judgment, using a variety of valuation techniques and models. The input to these

models is taken from observable markets, and includes consideration of liquidity,

correlation and longer-term volatility of financial instruments.



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5.6 Warranty reserve

In determining warranty reserve, the management needs to exercise judgement,

based upon historical warranty expense data and the quantities of products under

warranty.

5.7 Goodwill

The initial recognition and measurement of goodwill, and subsequent impairment

testing, require management to make estimates of cash flows to be generated by the

asset or the cash generating units and to choose a suitable discount rate in order to

calculate the present value of those cash flows.

5.8 Recognition and derecognition of assets and liabilities

In considering whether to recognise or to derecognise assets or liabilities, the

management is required to make judgement or whether significant risk and rewards of

those assets or liabilities have been transferred, based on their best knowledge of the

current events and arrangements.

6. Trade accounts receivable

The outstanding balances of trade accounts receivable as at 31 December 2009 and 2008, aged on the basis of due dates, are summarised below.

(Unit: Baht)

Consolidated financial statements Separate financial statements

Age of receivables 2009 2008 2009 2008

Trade accounts receivable - related parties

Not yet due 71,400,499 72,837,335 95,307,822 64,115,157

Overdue

Less than 3 months 30,767,775 15,810,258 43,803,580 21,168,433

3 - 6 months 2,496,856 327,226 2,415,964 1,412,416

6 - 12 months 2,210,580 2,556,130 2,210,580 1,470,940

Over 12 months 6,363,946 4,298,774 6,363,946 4,298,774

Total trade accounts receivable - related parties 113,239,656 95,829,723 150,101,892 92,465,720

Trade accounts receivable - others

Not yet due 772,229,523 511,885,427 439,038,530 248,424,350

Overdue

Less than 3 months 412,664,363 235,936,408 229,945,145 127,852,626

3 - 6 months 4,381,241 435,952 522 435,952

6 - 12 months 908 1,413 908 1,413

Over 12 months 6,245,534 6,353,287 6,145,207 6,248,175

Total trade accounts receivable - others 1,195,521,569 754,612,487 675,130,312 382,962,516

Total trade accounts receivable 1,308,761,225 850,442,210 825,232,204 475,428,236

Less: Allowance for doubtful accounts (13,059,754) (7,043,697) (11,029,754) (5,013,697)

Trade accounts receivable, net 1,295,701,471 843,398,513 814,202,450 470,414,539

ANNUAL REPORT 2009

Kulthorn Kirby Public Company Limited ��

10

The outstanding balances of the Company and a subsidiary’s trade accounts receivable as at 31 December 2009 included Baht 163.59 million (The Company only: Baht 116.74 million) of the trade accounts receivable that were sold to a local factoring company at a discount. The Company and a subsidiary still have obligations under the guarantee they provided in respect of the sale.

7. Related party transactions

During the years, the Company and its subsidiaries had significant business

transactions with related parties mainly in respect of purchases and sales of goods.

Such transactions, which have been concluded on commercial terms and bases

agreed upon in the ordinary course of business between the Company and those

related parties. Below is a summary of those transactions.

(Unit: Thousand Baht)

Consolidated financial

statements

Separate financial

statements

For the year ended For the year ended

31 December 31 December Pricing policy

2009 2008 2009 2008 (For the year 2009)

Transactions with subsidiary

companies

Sales of goods and scraps - - 240,573 284,284 Approximate market price

Interest income - - 121 5,451 Interest rate at 5.5 percent per

annum

Income from guarantee fee - - 13,284 15,651 Guarantee fee rate at 1 percent

per annum of guarantee value

Rental income - - 2,160 1,110 Mutually agreed price as

stipulated in the contract

Purchases of goods - - 1,049,743 1,014,409 Market price

Purchase of fixed assets - - 9,000 - Mutually agreed price

Sales of fixed assets - - 11,400 - Mutually agreed price

Transactions with related companies

Sales of goods 468,395 552,710 350,050 419,660 Approximate market price

Interest income 455 - 455 - Interest rate at 6.5 percent per

annum

Rental income 48 - 48 - Mutually agreed price as

stipulated in the contract

Purchases of goods 991,638 1,505,553 698,775 820,167 Market price

Commission expenses 15,570 15,761 15,570 15,761 Commission rate at 1 percent

of sales after deducting

expenses


บริษัท กุลธรเคอร์บี้ จำกัด (มหาชน) ��

11

The balances of the accounts as at 31 December 2009 and 2008 between the Company

and those related parties are as follows: (Unit: Baht)


2009 2008 2009 2008

Trade accounts receivable - related parties

Subsidiary companies

Kulthorn Premier Company Limited - - 41,180,121 16,247,150

Kulthorn Steel Company Limited - - 17,790,970 56,194

Kulthorn Kirby Foundry Company Limited - - 10,446,970 6,670,865

- - 69,418,061 22,974,209

Related companies

Kulthorn Company Limited 47,260,823 35,662,892 36,353,526 35,662,892

Heatcraft Australia Pty Limited 30,280,450 24,283,609 30,280,450 24,283,609

Kulthorn Electric Company Limited 19,783,043 23,258,742 560,938 277,982

Super Alloy Technologies Company Limited 6,344,745 - 6,344,745 -

Kulthorn Metal Products Company Limited 5,902,415 6,019,559 5,902,415 6,019,559

Thai Compressor Manufacturing Company Limited 2,373,466 5,976,769 27,965 2,664,797

Kulthorn International Company Limited 1,076,155 - 1,076,155 -

Others 218,559 628,152 134,666 582,672

113,239,656 95,829,723 80,683,830 69,491,511

Total trade accounts receivable - related parties 113,239,656 95,829,723 150,101,892 92,465,720

Short-term loan to to related parties


Kulthorn Steel Company Limited - - 200,000,000 -

Kulthorn Premier Company Limited - - 50,000,000 -

- - 250,000,000 -

Related company


8,000,000 3,000,000 8,000,000 3,000,000

Total short-term loan to related parties 8,000,000 3,000,000 258,000,000 3,000,000

Other current assets - related parties


Kulthorn Kirby Foundry Company Limited - - 30,095 222,941


Kulthorn Steel Company Limited - - 999,962 1,779,278

- - 3,521,347 5,190,900

ANNUAL REPORT 2009


12

(Unit: Baht)


2009 2008 2009 2008

Related companies

Super Alloy Technologies Company Limited 8,785,408 - 8,785,408 -

Kulthorn Metal Products Company Limited 153,306 12,000 153,306 12,000

Kulthorn Materials and Controls Company Limited - 7,268,005 - -

8,938,714 7,280,005 8,938,714 12,000

Total other current assets - related parties 8,938,714 7,280,005 12,460,061 5,202,900

Trade accounts payable - related parties


Kulthorn Steel Company Limited - - 135,477,167 273,659,480

Kulthorn Kirby Foundry Company Limited - - 55,786,413 30,017,597


- - 193,902,228 304,719,230

Related companies

Kulthorn Materials and Controls Company Limited 206,139,803 114,705,091 116,272,589

Suzhou kulthorn Magnet Wire Company Limited 29,529,597 25,768,552 -

Thai Sintered Products Company Limited 18,071,219 14,735,148 18,071,219 14,735,148

Kulthorn Electric Company Limited 5,223,921 2,172,076 5,127,332 1,906,320


Kulthorn Company Limited 1,238,442 770,548 1,059,279 693,077

Thai Compressor Manufacturing Company Limited 971,151 2,474,649 971,151 2,474,649

Heatcraft Australia Pty Limited 471,510 1,255,539 471,510 1,255,539

Others 75,157 138,677 51,617 70,973

265,812,530 713,018,729 169,732,169 138,599,816

Total trade accounts payable – related parties 265,812,530 713,018,729 363,634,397 443,319,046

Other payables - related parties


Kulthorn Premier Company Limited - - 630,137 -

Kulthorn Steel Company Limited - - - 122,951

- - 630,137 122,951



13

(Unit: Baht)


2009 2008 2009 2008

Related parties

Kulthorn Engineering Limited Partnership 624,792 427,187 624,792 427,187

Kulthorn Company Limited 1,196,588 1,467,463 1,196,588 1,467,463

Advance Tool and Die Company Limited - 110,510 - 110,510

Thai Compressor Manufacturing Company Limited - 150,444 - 150,444

Kulthorn International Company Limited 3,609,275 - 3,609,275 -

Kulthorn Electric Company Limited 47,278 10,005 47,278 10,005

Others 4,872,165 3,653,497 14,527 5,488,969

10,350,098 5,819,106 5,492,460 7,654,578

Total other payables - related parties 10,350,098 5,819,106 6,122,597 7,777,529

During the year, short-term loan to a subsidiary company had the following movements: (Unit: Baht)

Balance as at Balance as at

31 December During the year 31 December

2008 Increase Decrease 2009

Short-term loan to related parties

Subsidiary

Kulthorn Steel Company Limited - 200,000,000 - 200,000,000

Kulthorn Premier Company Limited - 50,000,000 - 50,000,000

- 250,000,000 - 250,000,000

Related parties

Kulthorn Metal Products Company Limited 3,000,000 5,000,000 - 8,000,000

3,000,000 5,000,000 - 8,000,000

Total short-term loan to related parties 3,000,000 255,000,000 - 258,000,000

Directors and management’s remuneration

In 2009 and 2008, the Company and its subsidiaries paid salaries, bonus, meeting

allowances and gratuities to their directors and management as follows:

(Unit: Baht)


2009 2008 2009 2008

Salary and bonus 24,307,794 23,583,599 13,879,425 13,793,500

Meeting allowances 219,000 159,000 219,000 159,000

Gratuities 1,728,000 1,728,000 1,728,000 1,728,000

26,254,794 25,470,599 15,826,425 15,680,500

ANNUAL REPORT 2009


14

Guarantee obligations with related parties

The Company has outstanding guarantee obligations with its related parties, as

described in Note 24.4 to the financial statements.

8. Inventories

(Unit: Baht)

Consolidated financial statements

Allowance for diminution in value of inventory

Cost

Reduction cost to net realisable

value Deteriorated inventories Inventories - net

2009 2008 2009 2008 2009 2008 2009 2008

Finished goods 497,784,645 577,141,365 (11,543,164) (25,197,695) (44,712,704) (27,664,153) 441,528,777 524,279,517

Work in process 185,976,371 164,213,392 (4,266,262) - (3,275,129) (222,000) 178,434,980 163,991,392

Raw materials 562,811,665 1,026,116,939 (923,455) - (27,693,975) (32,118,841) 534,194,235 993,998,098

Goods in transit 110,678,251 11,947,162 - - - - 110,678,251 11,947,162

Total 1,357,250,932 1,779,418,858 (16,732,881) (25,197,695) (75,681,808) (60,004,994) 1,264,836,243 1,694,216,169

(Unit: Baht)

Separate financial statements

Allowance for diminution in value of inventories

Cost

Reduction cost to net realisable

value Deteriorated inventories Inventories - net

2009 2008 2009 2008 2009 2008 2009 2008

Finished goods 281,879,219 341,516,501 (795,042) (3,776,905) (21,229,803) (25,715,581) 259,784,374 312,024,015

Work in process 97,994,115 88,259,389 (276,393) - - - 97,717,722 88,259,389

Raw materials 327,407,993 561,754,471 (923,455) - (22,475,996) (26,008,203) 304,008,542 535,746,268

Goods in transit 23,497,003 11,947,162 - - - - 23,497,003 11,947,162

Total 730,778,330 1,003,477,523 (1,994,890) (3,776,905) (43,775,799) (51,723,784) 685,007,641 947,976,834

9. Restricted bank deposit

This represents a deposit of a subsidiary companies pledged to secure against bank

guarantee granted by a local commercial bank.



15

10. Investments in subsidiaries

As at 31 December 2009 and 2008 the Company has long-term investments in ordinary shares of the following companies:


Percentage

Company's name Share capital of shareholding Investment (At cost)

2009 2008 2009 2008 2009 2008

Million Million Baht Baht

Baht Baht

Kulthorn Kirby Foundry

Company Limited 375 375 100 100 539,999,300 539,999,300

Kulthorn Premier Company

Limited 1,260 900 100 100 1,936,750,571 886,658,003

Kulthorn Steel Company Limited 200 200 100 100 199,999,300 199,999,300

Total 2,676,749,171 1,626,656,603

Less: Allowance for impairment loss on investments in subsidiaries (783,006,712) (662,396,391)

Total investments in subsidiary companies - net 1,893,742,459 964,260,212


On 29 August 2008, the Extraordinary General Meeting of the shareholders No. 1/2551

of Kulthorn Premier Co., Ltd. resolved to increase its registered share capital from Baht

700 million (7,000,000 ordinary shares of Baht 100 each) to Baht 900 million

(9,000,000 ordinary shares of Baht 100 each) through the issuance of 2,000,000

ordinary shares with a par value of Baht 100 each. The Company acquired all newly

issued ordinary shares. The subsidiary had registered the increase in its registered

share capital with the Ministry of Commerce on 10 September 2008.

On 25 March 2009, the meeting of the Board of Directors of the Company No. 2/2552

passed a resolution to approve Kulthorn Premier Co., Ltd. (a subsidiary) to increase its

registered share capital from Baht 900 million (9,000,000 ordinary shares of Baht 100

each) to Baht 1,150 million (11,500,000 ordinary shares of Baht 100 each) through the

issuance of 2,500,000 ordinary shares with a par value of Baht 100 each. The

Company acquired all newly issued ordinary shares amounting to Baht 250 million.

ANNUAL REPORT 2009


16

On 7 November 2009, the Extraordinary General Meeting of shareholders No. 2/2552

of Kulthorn Premier Company Limited, a subsidiary company, approved a decrease in

the subsidiary's registered share capital of Baht 690 million from Baht 1,150 million

(11,500,000 ordinary shares of Baht 100 each) to Baht 460 million (4,600,000 ordinary

shares of Baht 100 each). The decrease represents 60 percent of the subsidiary's

registered share capital, leaving outstanding registered share capital of 40 percent.

There is no capital repayment to the subsidiary' shareholders from the share capital

decrease, and total amount of shareholders' equity of the subsidiary will not change.

On 21 December 2009, the Extraordinary General Meeting of shareholders No. 3/2552

of Kulthorn Premier Co., Ltd. (a subsidiary) passed a resolution to approve to increase

its registered share capital from Baht 460 million (4,600,000 ordinary shares of Baht

100 each) to Baht 1,260 million (12,600,000 ordinary shares of Baht 100 each) through

the issuance of 8,000,000 ordinary shares with a par value of Baht 100 each. The

Company acquired all newly issued ordinary shares amounting to Baht 800 million.

Kulthorn Steel Company Limited

On 10 October 2008, an Extraordinary General Meeting of the shareholders of Kulthorn

Steel Co., Ltd. No. 1/2551 approved to increase its registered share capital from Baht

100 million (1,000,000 ordinary shares of Baht 100 each) to Baht 200 million (2,000,000

ordinary shares of Baht 100 each) through the issuance of 1,000,000 ordinary shares

with a par value of Baht 100 each. The Company acquired all newly issued ordinary

shares. The subsidiary had registered the increase in its registered share capital with

the Ministry of Commerce on 21 October 2008.

During the years ended 31 December 2009 and 2008, no dividend had been received

by the Company from its subsidiaries.



17

11. Property, plant and equipment

(Unit: Baht)


Land Furniture,

improvement Plant fixtures and office Motor Construction

Land and plant Machinery equipment equipment vehicles in progress Total

Cost

As at 31 December 2008 224,678,743 1,153,316,547 4,817,900,486 831,107,274 130,833,403 61,438,638 192,197,124 7,411,472,215

Additions - 15,545,024 30,789,014 15,957,219 7,381,580 7,640,748 388,819,490 466,133,075

Transfer in (out) - 38,239,708 114,919,880 14,610,601 465,410 - (168,235,599) -

Disposals/write-off - - (5,266,245) (2,016,950) (3,591,365) (761,000) (11,160,169) (22,795,729)

As at 31 December 2009 224,678,743 1,207,101,279 4,958,343,135 859,658,144 135,089,028 68,318,386 401,620,846 7,854,809,561

Accumulated depreciation

As at 31 December 2008 423,194,664 2,646,974,327 689,841,958 105,310,146 43,396,396 - 3,908,717,491

Depreciation for the year - 60,395,136 327,436,227 53,243,108 10,951,559 7,051,377 - 459,077,407

Disposals/ write-off - (9,110) (5,314,241) (2,010,125) (3,568,524) (760,999) - (11,662,999)

As at 31 December 2009 - 483,580,690 2,969,096,313 741,074,941 112,693,181 49,686,774 - 4,356,131,899

Allowance for impairment As at 31 December 2008 - 3,881,179 - - - - - 3,881,179

Increase during the year - - - - - - - -

As at 31 December 2009 - 3,881,179 - - - - - 3,881,179

Net book value

As at 31 December 2008 224,678,743 726,240,704 2,170,926,159 141,265,316 25,523,257 18,042,242 192,197,124 3,498,873,545

As at 31 December 2009 224,678,743 719,639,410 1,989,246,822 118,583,203 22,395,847 18,631,612 401,620,846 3,494,796,483

Depreciation for the year

2008 (Baht 454 million included in manufacturing cost, and the balance in administrative expenses) 473,647,543


ANNUAL REPORT 2009


18

(Unit: Baht)


Land Furniture,

improvement Plant fixtures and office Motor Construction

Land and plant Machinery equipment equipment vehicles in progress Total

Cost

As at 31 December 2008 125,007,493 471,666,029 2,594,634,418 657,776,868 93,546,998 33,115,899 88,771,943 4,064,519,648

Additions - 16,500 19,437,115 7,395,346 2,623,987 7,640,749 309,059,373 346,173,070

Transfer in (out) - 38,151,066 86,197,940 14,004,631 180,000 - (138,533,637) -

Disposals/write-off - - (3,076,514) (1,935,000) (3,507,811) (761,000) (11,160,169) (20,440,494)

As at 31 December 2009 125,007,493 509,833,595 2,697,192,959 677,241,845 92,843,174 39,995,648 248,137,510 4,390,252,224

Accumulated depreciation

As at 31 December 2008 - 199,805,670 1,667,966,003 557,484,201 78,726,886 26,339,059 - 2,530,321,819

Depreciation for the year - 21,634,679 134,206,732 40,085,343 6,356,751 2,998,655 - 205,282,160

Disposals/write-off - (9,110) (3,124,513) (1,934,998) (3,490,373) (760,999) - (9,319,993)

As at 31 December 2009 - 211,431,239 1,799,048,222 595,634,546 81,593,264 28,576,715 - 2,726,283,986

Net book value

As at 31 December 2008 125,007,493 271,860,359 926,668,415 100,292,667 14,820,112 6,776,840 88,771,943 1,534,197,829

As at 31 December 2009 125,007,493 288,402,356 898,144,737 81,607,299 11,249,910 11,418,933 248,137,510 1,663,968,238

Depreciation for the year



The Company and a subsidiary have mortgaged and negative pledged their land and

building thereon and machinery, with net book value amounting to approximately Baht

1,054 million (The Company only: Baht 345.6 million) (2008: Baht 1,046.5 million in

consolidated financial statements and Baht 202.7 million in separate financial

statements) with financial institutions to secure against credit facility and loans

obtained from those financial institutions as discussed in Note 13 and 14 to the

financial statements.

As at 31 December 2009, certain equipment items of the Company and its subsidiaries

have been fully depreciated but are still in use. The original cost of those assets

amounted to Baht 2,569 million (The Company only: Baht 1,935.5 million) (2008: Baht

1,819.8 million in consolidated financial statements and Baht 1,465.7 million in

separate financial statements).

As at 31 December 2009, the Company and a subsidiary had machinery, vehicles and

equipment under finance lease agreements with net book values amounting to Baht

331.3 million (The Company only: Baht 173.5 million) (2008: Baht 292.7 million in

consolidated financial statements and Baht 116.2 million in separate financial

statements).



19

12. Goodwill on business combination (Unit: Baht)


2009 2008 2009 2008

Goodwill on business combination 37,619,902 37,619,902 - -

Less: Accumulated impairment loss (37,619,902) (37,619,902) - -

Net book value - - - -

13. Bank overdrafts and short-term loans from financial institutions

(Unit: Baht)

Interest rate

(percent per annum)

Consolidated financial

statements

Separate financial

statements

2009 2008 2009 2008

Bank overdrafts 61,693,555 62,120,655 30,370,511 11,888,195

Short-term loans 328,000,000 1,068,280,000 310,000,000 899,280,000

Trust receipts 591,164,138 829,536,926 388,857,814 418,037,050

Packing credit 292,324,000 139,322,762 200,000,000 139,322,762

Factoring 135,712,487 107,255,391 93,392,330 79,241,682

Total 1,408,894,180 2,206,515,734 1,022,620,655 1,547,769,689

As at 31 December 2009, the Company and its subsidiaries had short-term loans and

trust receipts of approximately Japanese yen 551.3 million, US dollar 9.4 million and

Euro 0.4 million or equivalent to Baht 591.2 million (2008: Japanese yen 110.9 million,

US dollar 8.5 million and Euro 0.4 million or equivalent to Baht 357.7 million), for the

Company only of approximately Japanese yen 415.3 million, US dollar 6.5 million and

Euro 0.3 million or equivalent to Baht 388.9 million (2008: Japanese yen 110.9 million,

US dollar 3.4 million and Euro 0.4 million or equivalent to Baht 181.4 million), for which

the Company and its subsidiaries have not entered into forward contract to hedge

exchange rate risk.

Bank overdrafts and short-term loans from financial institutions of the Company and

Kulthorn Premier Co., Ltd. are secured by a mortgage and negative pledge of their

land, building and machinery. Bank overdrafts and short-term loans of Kulthorn Kirby

Foundry Co., Ltd., Kulthorn Steel Co., Ltd. and certain loans of Kulthorn Premier Co.,

Ltd. are guaranteed by the Company.

ANNUAL REPORT 2009


20

14. Long-term loans

(Unit: Baht)


2009 2008 2009 2008

Long-term loans 2,294,810,342 1,368,012,570 2,294,810,342 486,762,570

Less: Current portion of long-term loans (340,943,259) (1,229,047,527) (340,943,259) (347,797,527)

Long-term loans, net of current portion 1,953,867,083 138,965,043 1,953,867,083 138,965,043

As at 31 December 2009, long-term loans in the consolidated financial statements and the separate financial statements consisted of:

The Company

1) The Company has a Baht 186 million loan from a bank, which shall be repaid within 8 years from the agreement date. The payment of principal is to be made in 16 semi-annual installments, with the first installment to be paid on 30 June 2004, with fifteen installments of Baht 11.5 million, and a final installment of Baht 13.5 million. Interest is to be paid quarterly at a rate of 3.5 percent per annum for the first 18 months, at minimum loan rate (MLR) minus 1 percent per annum for the next 18 months, and at MLR thereafter.

During 2009, the Company completed repayment of the loan to the bank.

In addition, the Company has a Baht 100 million loan from the same bank, which shall be repaid within 8 years from the agreement date. The payment of principal is to be made in 16 semi-annual installments, with the first installment to be paid on 30 June 2004, with 16 equal installments of Baht 6.25 million. Interest is to be paid quarterly at a rate of 3.5 percent per annum for the first 18 months, at MLR minus 1 percent per annum for the next 18 months, and at MLR thereafter.


2) During 2004, the Company entered into loan agreements with two banks to obtain

loans totaling Baht 600 million in order to repay all outstanding debts payable to

its former institution creditors. Details of the loan agreements are as follows:

2.1) The Company has obtained loan from a bank with total facility of Baht 100 million

which is repayable to the bank in 60 equal installments within 5 years. This loan

is subject to a fixed interest rate of 3.5% per annum in year 1 and 2, at the rate of

MLR minus 1 percent per annum in year 3 and at the rate of MLR in year 4 and

onwards.

The loan agreement contains, among others, normal covenants relating to

shareholding of major shareholder and creation of other loan, etc.




21

2.2) The Company has obtained loan from another bank with total facility of Baht 500 million which is repayable in 8 equal installments within 5 years with one and a half year grace period. This loan is subject to a fixed interest rate of 3.5% per annum in year 1 and at the rate of 6-month fixed deposit plus 2.5 percent per annum in year 2 and onwards.


3) During 2006, the Company entered into loan agreements with three banks. Details of the loan agreements are as follows:

3.1) A Baht 250 million loan from a bank shall be repaid within 2 years from the drawdown date. The payment of principal is to be made in 24 monthly installments of Baht 10.42 million each, with the first installment to be paid in May 2006. Interest is to be paid monthly at rate of MLR minus 0.25 percent per annum for the first 12 months and at MLR thereafter.

Under the loan agreement, the Company has to comply with certain conditions including maintaining debt to equity ratio not exceeding 4: 1, gearing ratio not exceeding 3.25: 1, and debt service coverage ratio not less than 1.2: 1.


3.2) A Baht 170 million loan from another bank shall be repaid within 5 years from the drawdown date. The payment of principal is to be made in 60 monthly installments of Baht 2.85 million each, with the first installment to be paid in May 2006. Interest is to be paid monthly at a rate of 5 percent per annum for the first 12 months and at MLR thereafter.

As at 31 December 2009, the outstanding balance of this loan is Baht 2.1 million.

Under the loan agreement, the Company has to comply with certain conditions, including maintaining debt to equity ratios of not more than 3:1 for the separate financial statements and 5:1 for the consolidated financial statements, starting from the 2nd quarter of 2007 until completion of repayment.

3.3) A Baht 240 million loan from another bank shall be repaid within 5 years from the agreement date (25 April 2006). The payment of principal is to be made in 20 quarterly installments of Baht 12 million each, with the first installment to be paid in 31 January 2007. Interest is to be paid quarterly at MLR minus 1.25 percent per annum for the first 12 months as from draw down date, and at MLR minus 1 percent per annum for the next 36 months, and at MLR minus 0.5 percent per annum thereafter.


ANNUAL REPORT 2009


22

4) During 2007, the Company entered into a loan agreement with a bank to obtain a

loan amounting to Baht 70 million. A loan shall be repaid within 5 years from the

drawdown date. The payment of principal and interest is to be made in 60

monthly installments, with the first installment to be paid in August 2007, at Baht

1.215 million each. Interest is charged at the rate of MLR minus 1.0 percent per

annum for the first 2 years and at MLR minus 0.5 percent per annum thereafter.

As at 31 December 2009, the outstanding balance of this loan is Baht 42.7

million.

These loans are secured by a mortgage and pledge of land, building and

machinery of the Company.

5) During 2009, the Company entered into loan agreements with a bank. Details of

the loan agreements are as follows:

5.1) A Baht 250 million loan. The payment of principal is to be made in 36

monthly installments of Baht 3.75 million each for the first 8 months and

Baht 10 million each thereafter, with the first installment to be paid in June

2010. Interest is to be paid monthly at rate of MLR.

Under the loan agreement and subsequent waiver notification from the

bank, the Company has to comply with certain conditions including

maintaining debt to equity ratio not exceeding 3.5:1 for the separate

financial statements and 5:1 for the consolidated financial statement, and

debt service coverage ratio not less than 1.1:1.

As at 31 December 2009, the outstanding balance of this loan is Baht 250

million.

5.2) During 2009, the Company and its subsidiaries entered into a Bridging

Credit Facility agreement with a commercial bank to obtain loan facilities in

an aggregate principal amount not exceeding Baht 4,940,000. The loan

facilities include loan facility, working capital facility, contingent facility and

hedging facility.



23

According to the Bridging Credit Facility agreement, in December 2009, the

Company drawdown Baht 2,000 million loan of Baht 2,500 million loan

facility from the bank, the loan shall be repaid within 6 years. The

repayment of the principal is to be made in 24 quarterly installments, with

the first installment to be paid on March 31, 2010. The repayment of the

principal on the loan will be in accordance with the schedule below:

(Unit : million Baht)

Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

2010 50 50 100 100 300

2011 80 160 80 80 400

2012 88 176 88 88 440

2013 88 176 88 88 440

2014 88 176 88 88 440

2015 96 192 96 96 480

The loan is subject to interest at the rate with reference to THBFIX, and

interest is to be paid on a monthly basis for 72 months.

Under the loan agreement, the Company has to comply with certain

conditions including maintaining debt to equity ratio not exceeding 5:1 for

the consolidated financial statement, current ratio for consolidated financial

statements not less than 0.9:1, and debt service coverage ratio for the

consolidated financial statement not less than 1:1.

As of the 31 December 2009, the outstanding balance on this loan is Baht

2,000 Million.

Long-term loans from financial institutions are guaranteed by the mortgage

and pledge of the Company’s property, plant and machinery.

Subsidiaries


1) During 2004, Kulthorn Premier Company Limited has entered into loan

agreements with two banks to obtain loan facilities amounting to approximately

Baht 1,205 million. Details of the loan agreements are as follows:

ANNUAL REPORT 2009


24

1.1) A Baht 1,160 million loan from a bank shall be repaid within 8 years from the agreement date. The payment of principal is to be made in 28 quarterly installments, with the first installment to be paid within 15 months after the agreement date and the following installments payable at the ending date of each installment period. The stipulated principal payment per installment is Baht 15 million for the first four installments, Baht 42.5 million for the next four installments and Baht 46.5 million for the final twenty installments. Interest is to be paid on a monthly basis at a rate of 4 percent per annum for the first two years, MLR less 0.5 percent per annum for the next two years, and at MLR per annum in year 5 and onwards.

During 2008, the subsidiary negotiated a rescheduling of the payment of outstanding principal with the bank, whereby payment is to be repaid in four installments of Baht 25 million, four installments of Baht 50 million, four installments of Baht 60 million and last six installments of Baht 65 million.

During 2009, the management of the subsidiary negotiated a rescheduling of the loan with the bank, and the bank approved a rescheduling whereby the remaining balance is to be paid in quarterly installments, with two installments waived, two installments of Baht 50 million, four installments of Baht 60 million, four installments of Baht 65 million and the last two installments amounting to Baht 115 million each. Interest is to be paid on a monthly basis. In addition, the subsidiary received a waiver for certain covenants, including the requirements to maintain certain debt to equity and debt service coverage ratios for 2008; although the subsidiary is to maintain the original ratios thereafter, and if the subsidiary subsequently has excess cash, the two waived installments of principal are to be paid in compliance with agreed conditions.

However, the subsidiary completed repayment of the loan to the bank within 2009.

1.2) Loans totalling Baht 41 million from another bank. The details are as follow:

1.2.1) A loan of Baht 11 million shall be repaid within 4 years from the agreement date. The payment of principal is to be made in 48 monthly installments, with the first installment to be paid on 30 June 2004. The stipulated principal payment per installment is Baht 0.12 million for the first twelve installments, Baht 0.25 million for the next twenty-four installments, Baht 0.31 million for the following eleven installments and Baht 0.27 million for the final installment. Interest is to be paid on a monthly basis at MLR per annum.

During 2008, the subsidiary completed repayment of the loan to the bank.



25

1.2.2) A loan of Baht 30 million shall be repaid within 4 years from the

agreement date. The payment of principal is to be made in 48 monthly

installments, with the first installment to be paid in the month the first

drawdown is made. The stipulated principal payment per installment is

Baht 0.33 million for the first twelve installments, Baht 0.66 million for the

next twenty-four installments, Baht 0.83 million for the following eleven

installments and Baht 0.88 million for the final installment. Interest is to be

paid on a monthly basis at MLR per annum.


2) During 2006, the subsidiary has entered into a loan agreement with a bank to

obtain loan facilities amounting to Baht 36 million, repayable within 4 years from

the drawdown date. The payment of principal is to be made in 16 quarterly

installments, with the first installment to be paid within 3 months after the

drawdown date and the following installments payable at the ending date of each

installment period. The stipulated principal payment per installment is Baht 2.25

million. Interest is to be paid on a monthly basis at a rate of 5.5 percent per

annum and 6.0 percent per annum for the first year and the second year,

respectively and MLR less 0.5 percent per annum for the third year and onward.


All long-term loans of the subsidiary are secured by mortgages and pledges of

land, building and machinery of the subsidiary and certain long-term loans are

guaranteed by the Company.

Kulthorn Kirby Foundry Company Limited

During 2006, Kulthorn Kirby Foundry Company Limited has entered into a loan

agreement with a bank to obtain a loan amounting to Baht 120 million. A loan shall be

repaid within December 2009. The repayment of principal is to be made in 12 quarterly

installments, with the first installment to be paid in March 2007 and the following

installments payable at the ending date of each installment period. The stipulated

principal payment per installment is Baht 10 million, totalled 12 installments. Interest is

to be paid on a monthly basis at a rate of MLR less 1.5 percent per annum for the first

year, and at MLR per annum thereafter.


Long-term loan of the subsidiary is guaranteed by the Company.

ANNUAL REPORT 2009


26

15. Liabilities under hire-purchase and financial lease agreements

(Unit: Baht)


2009 2008 2009 2008

Liabilities under hire-purchase and financial

lease agreements 198,996,196 224,663,110 103,385,171 83,503,048

Less: Deferred interest (16,612,501) (24,508,714) (9,028,113) (9,133,684)

Total 182,383,695 200,154,396 94,357,058 74,369,364

Less: Current portion due within one year (74,071,692) (60,954,052) (35,200,362) (22,903,409)

Liabilities under hire-purchase and financial

lease agreements, net of current portion 108,312,003 139,200,344 59,156,697 51,465,955

The Company and its subsidiaries have entered into the finance lease agreements for

rental of machinery and motor vehicles for use in its operation, whereby it is committed

to pay rental on a monthly basis. The terms of the agreements are generally between 3

and 4 years.

As at 31 December 2009, future minimum lease payments required under the finance

lease agreements were as follows:

(Unit: Baht)


Less than 1

year 1-5 years Total

Less than 1

year 1-5 years Total

Future minimum lease

payments 84,352,266 114,643,930 198,996,196 40,408,722 62,976,449 103,385,171

Deferred interest expenses (10,280,574) (6,331,927) (16,612,501) (5,208,360) (3,819,753) (9,028,113)

Present value of future

minimum lease payments 74,071,692 108,312,003 182,383,695 35,200,362 59,156,696 94,357,058



27

16. Provisions for loss on tax assessment

In October 2007, the Company received tax assessment notification for corporate

income tax for the year 2004 from the Revenue Department of Baht 44.0 million

together with related penalties of Baht 44.0 million and surcharges of Baht 19.2 million,

totaling Baht 107.3 million, as a result of the recognition of loss from investment in a

subsidiary company from share capital reduction of the subsidiary company as taxable

expense of the Company. The Company already paid the tax of Baht 44.0 million and

the Company considered to lodge an appeal to request from the Revenue Department

for the reduction of such penalties and surcharge of Baht 63.2 million since the

Company had no intention to avoid tax liabilities. However, for a prudent reason, the

Company has recorded a loss on such tax assessment in full amount in the account

since the 2007 year.

During the second quarter of this year, the Company received a letter from the Revenue

Department notifying it that the result of its corporate income tax appeal was that the

Company is ordered to pay a penalty and surcharge totaling Baht 32.4 million. The

Company therefore reserved provision for tax assessment of Baht 30.8 million in the

income statement for the year 2009.

During the current year, the Company paid certain amount of the penalty and surcharge.

Outstanding balance of the penalty and surcharge from the tax assessment as at 31

December 2009 is Baht 10.9 million.

ANNUAL REPORT 2009


28

17. Other current liabilities

The outstanding balances of warranty reserve which are included in other current

liabilities are as follow:

(Unit: Baht)

Consolidated

financial statements

Separate

financial statements

2009 2008 2009 2008

Warranty reserve 8,265,000 6,663,000 2,525,000 2,343,000

18. Share capital

On 11 December 2008, the Extraordinary General Meeting of the Company’s

shareholders No. 1/2551 approved an increase in the Company’s issued and paid up

share capital from Baht 500 million (500,000,000 ordinary shares of Baht 1 each) to

Baht 700 million (700,000,000 ordinary shares of Baht 1 each) through the issuance of

200,000,000 ordinary shares with a par value of Baht 1 each to the existing

shareholders, at a price of Baht 1 each, or for a total of Baht 200 million. As at 31

December 2008, the Company had received full payment for the shares and presented

this as share subscription received in advance in shareholders' equity. The Company

subsequently registered the increase in its issued and paid up share capital with the

Ministry of Commerce on 7 January 2009. On 12 January 2009, the Stock Exchange of

Thailand approved the listing of the additional shares as listed securities, to be traded

on the securities market commencing on that date.

19. Statutory reserve

Pursuant to the section 116 of the Public Limited Companies Act B.E. 2535, the

Company is required to set aside to a statutory reserve at least 5 percent of its net

income after deducting accumulated deficit brought forward (if any), until the reserve

reaches 10 percent of the registered capital. The statutory reserve is not available for

dividend distribution.

20. Dividend paid

On 11 December 2008, the Extraordinary General Meeting of the Company's

shareholders No. 1/2551 passed a resolution to approve an interim dividend payment

to the Company's shareholders of Baht 0.50 per share, or a total of Baht 250 million,

from the unappropriated retained earnings as at 31 June 2008 derived from promoted

operations, as proposed by the Company's Board of Directors. Dividends paid from the

earnings of the promoted operations are tax-exempt for the recipients. The Company

paid the dividend on 19 December 2008.



29

21. Expenses by nature

Significant expenses by nature are as follows:

(Unit: Baht)


2009 2008 2009 2008

Raw materials and consumables used 4,870,878,299 5,531,550,630 3,445,571,976 3,682,202,507

Changes in inventories of finished goods and

work in progress 60,723,459 (155,929,779) 49,902,557 (38,423,014)

Salary, wages and other employee benefits 558,552,977 421,958,053 303,719,164 252,563,026

Depreciation 459,077,407 473,647,543 205,282,160 204,092,792

Net loss (gain) on exchange 1,557,631 61,070,215 (8,940,562) 29,286,216

Rental expenses 9,412,252 9,781,171 1,985,085 2,165,500

22. Corporate income tax

Corporate income tax was calculated on net income of non-promoted operation, after

adding back certain expenses and provisions which are disallowed for tax computation

purposes, and deducting income which is tax-exempted.

23. Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing the net income (loss) for the

year by the weighted average number of ordinary shares in issue during the year.

24. Commitment and contingent liabilities

24.1 Capital commitments

As at 31 December 2009, a subsidiary has capital commitments of approximately Baht

2.7 million, relating to acquisition of machinery.

24.2 Operating lease commitments

As at 31 December 2009, the Company and its subsidiaries have entered into several

lease agreements in respect of the lease of land, motor vehicles, and office equipment.

The terms of the agreements are generally between 1 and 3 years. As at 31 December

2008, future minimum lease payments required under these operating leases contracts

were as follows:

ANNUAL REPORT 2009


30

(Unit: Million Baht) Consolidated

financial statements Separate financial

statements

Payable within

Less than 1 year 7.1 0.2

1 to 3 years 9.9 0.3

24.3 Long-term service commitments

a) As at 31 December 2009, the Company and its subsidiaries have commitments

relating to service agreements payable in the future as follows:

(Unit: Million Baht) Consolidated

financial statements Separate financial

statements

Payable within

Less than 1 year 6.8 2.4

Over than 1 year 0.2 -

b) A subsidiary entered into technical support license and royalty agreement with an

overseas company. Under the agreement, the subsidiary has obliged to pay

license and royalty fee to that company at the rate stipulated in the agreement.

The agreement has been in effect since 15 July 2004 and shall continue unless

cancelled by either party.

As at 31 December 2009, the subsidiary has outstanding royalty fees amounting

to approximately Baht 9.1 million (2008: Baht 7.6 million).

c) The Company and its subsidiary have commitments related to sales commissions

payable to sale agents at the rate stipulated in the agreements or rate agreed

between parties.

24.4 Guarantees

a) As at 31 December 2009, the Company has contingent liabilities relating to the

guarantees of bank overdrafts, loans and forward exchange contract given to

subsidiaries as follows:

Subsidiaries Unit

Guaranteed

facility Facility used

Kulthorn Premier Company Limited Million Baht 1,459 9.0

Kulthorn Kirby Foundry Company Limited Million Baht 205 35.4

Kulthorn Steel Company Limited Million Baht 485 374.0

Million US dollar 3 0.2



31

b) As at 31 December 2009, there were outstanding bank guarantees of

approximately Baht 58.3 million (The Company only: Baht 27.4 million) issued by

the banks on behalf of the Company and its subsidiaries in respect of certain

performance bonds as required in the normal course of business of the Company

and its subsidiaries. These included letter of guarantee to guarantee electricity

use and others amounting to Baht 42.7 million (The Company only: Baht 14.3

million), and to guarantee payment due to the Revenue Department amounting to

Baht 13 million in respect of provision for loss on tax assessment, as described in

Note 16 to the financial statements.

25. Promotional privileges

25.1 The Company has been granted certain promotional privileges according to the

Investment Promotion Act B.E. 2520 as approved by the Board of Investment with

significant privileges as follows:

Certificate No. Certificate No.

1364(2)/2546 1421(2)/2552

1. Promotional privileges for Manufacturing of

compressors for air condition

and refrigerator

Manufacturing of

compressors for air condition

and refrigerator

2. The significant privileges are

2.1 Exemption of corporate income tax on net profit from

promotional operation for 3 years.

In case that the Company has loss during the exemption

of corporate income tax on net income, it can carry

forward loss from operations to offset against income after

exemption period, for a period of 5 years commencing as

from the expiration of exemption period.

From 4 January 2006

until 3 January 2009

-

2.2 Exemption of corporate income tax on net profit from

promotional operation which does not exceed 100 percent

of investment, excluding land and working capital for a

period of 5 years.



forward loss from operations to offset against income after

exemption period, for a period of 5 years commencing as

from the expiration of exemption period.

- Granted

2.3 Exemption from import duty on raw materials and

essential materials imported for use specifically in

producing for export for a period of 1 year as from the date

of first import.

Granted Granted

ANNUAL REPORT 2009


32

Certificate No. Certificate No.

1364(2)/2546 1421(2)/2552

2.4 A fifty percent reduction of import duty on imported

machinery as approved by the Board.

Already expired on

25 January 2006

-

2.5 Exemption from import duty on imported machinery as

approved by the Board.

- Granted

2.6 Dividend paid from those investment promoted operations

which are exempted from corporate income tax are in turn

exempted from inclusion in the determination of income

tax.

Granted Granted

3. Date of first earning operating income. 4 January 2006 The Company has not yet

commenced its promoted

operation

The Company has to comply with certain conditions and restrictions specified under

the promotion certificates.

Sales of the Company amounting to approximately Baht 4,532 million for the year

ended 31 December 2008 included revenue from manufacturing and sales derived

from promoted operations of approximately Baht 1,666 million.

Sales of the Company for the year ended 31 December 2009 amounted to

approximately Baht 4,547 million but there were no revenue from manufacturing and

sales derived from promoted operations.

25.2 Kulthorn Kirby Foundry Co., Ltd., a subsidiary company, has been granted the

following tax privileges for certain specified category of products under the Investments

Promotion Act B.E. 2520 as approved by the Board of Investment with significant

privileges as follows:

Certificate No.

1048/2541 2127(2)/2548

1. Promotional privileges for Manufacturing of casting iron

parts

Manufacturing of casting iron

parts


2.1 Exemption of corporate income tax on net earnings for

the period of 8 years commending as from the date of

earning operating income.



forward loss from operations to offset against income

after exemption period, for a period of 5 years

commencing as from the expiration of exemption period.

From 4 January 2002 until

3 January 2010

The Company has not yet


operation



33

Certificate No.

1048/2541 2127(2)/2548

2.2 Dividend paid from those investment promoted

operations which are exempted from corporate income

tax are in turn exempted from inclusion in the

determination of income tax.

Granted Granted

2.3 A fifty percent reduction of the import duty on imported

machinery except for machinery which is subject to

import duty less than ten percent.

Granted -

2.4 Exemption from import duty on imported machinery as

approved by the Board.

- Granted

3. Date of first earning operating income 4 January 2002 The Company has not yet


operation

The subsidiary company has to comply with certain conditions and restrictions

specified under the promotion certificates.

25.3 Kulthorn Premier Co., Ltd., a subsidiary company, has been granted the following

remaining tax privileges under the BOI certificate No. 1552/2539 dated 13 August 1996

for certain specified category of products under the Investments Promotion Act B.E.

2520 as approved by the Board of Investment under the transfer of business from

Sanyo Universal Electric Plc. In addition, during the year 2007, the subsidiary has been

granted promotional privileges under The Investment Promotion Act B.E. 2520, as

approved by the Board of Investment on 26 September 2007 for the manufacture of

compressors for refrigerator. Subject to certain imposed conditions, the privileges

include the following:

ANNUAL REPORT 2009


34

Certificate No.

1552/2539 2167(2)/2550

1. Promotional privileges for Manufacturing of

compressors for refrigerator

Manufacturing of

compressors for refrigerator


2.1 Exemption of corporate income tax on net

earnings for a period of 8 years commencing as

from the date of earning operating income.

In case that the Company has loss during the

exemption of corporate income tax on net

income, it can carry forward loss from operations

to offset against income after exemption period,

for a period of 5 years commencing as from the

expiration of exemption period.

From 6 May 1998 until

5 May 2006

-

2.2 Exemption of corporate income tax on net

income from the promoted operation which does

not exceed 100 percent of investment, excluding

land and working capital for a period of 8 years

commencing as from the date of earning first

operating income.

In case that the Company has loss during the

exemption of corporate income tax on net

income, it can carry forward loss from operations

to offset against income after exemption period,

for a period of 5 years commencing as from the

expiration of exemption period.

- From 14 January 2008 until

13 January 2016

2.3 Dividend paid from those investment promoted

operations which are exempted from corporate

income tax are in turn exempted from inclusion

in the determination of income tax.

Granted Granted

2.4 A fifty percent reduction of corporate income tax

on its net income, for a period of 5 years after

the corporate income tax exemption expired as

discussed in 2.1, 2.2

From 6 May 2006 until

5 May 2011

From 14 January 2016 until

13 January 2021

2.5 Permission to double deduct the costs of

transportation, electricity and water supply for

corporate income tax purpose commencing as

from the date of first earning operating income.

This privilege expired in

May 2008

For a period of 10 years

commencing as from the

date of first earning

operating income.

2.6 Permission to deduct 25 percent of the cost of

installation and construction of facilities, in

addition to normal depreciation charges.

This privilege expired in May

2008

Granted

2.7 Exemption from import duty on raw materials

and essential materials imported for use

specifically in producing for export.

Already expired on

August 2006

For a period of 5 years

commencing as from the

date of first import.



35

Certificate No.

1552/2539 2167(2)/2550

2.8 Five percent of any increment in export income

over that of the preceding year is deductible from

taxable income commencing as from the date of

first earning operating income, provided that the

export sales of that year are not lower than the

average export sales of the past three years,

except for the first two years.

This privilege expired in May

2008

-

2.9 Seventy-five percent reduction of import duty on

raw materials and essential materials imported

for use specifically in production for domestic

sales, for a period of 1 year commencing from

the date of first importation.

- Granted

2.10 Exemption from import duty on items imported

for re-export, for a period of 5 years commencing

from the date of first importation.

- Granted

3. Date of first earning operating income 6 May 1998 14 January 2008

The subsidiary company has to comply with certain conditions and restrictions

specified under the promotion certificates.

26. Financial information by segment

The operations of the Company and its subsidiary companies involve a single industry

segment in manufacturing and sales of compressor parts and are carried on only in

Thailand. As a result, all of the revenues, operating profits (loss) and assets as

reflected in these financial statements pertain to the aforementioned industry segment

and geographic area. However, the Company and its subsidiaries operate in both local

and overseas markets and financial information by market for year ended

31 December 2009 and 2008, is as follow:

(Unit: Million Baht)


For the years ended 31 December For the years ended 31 December

2009 2008 2009 2008

Income from direct and indirect export 4,431 4,352 3,273 3,513

Income from local sales 2,425 2,564 1,274 1,019

6,856 6,916 4,547 4,532

ANNUAL REPORT 2009


36

27. Financial instruments

27.1 Financial risk management

The Company and its subsidiaries’ financial instruments, as defined under Thai

Accounting Standard No. 32 “Financial Instrument: Disclosure Presentations”,

principally comprise cash and cash equivalents, trade accounts receivable, short-term

loan, investments, trade accounts payable, other payables and short-term and long-

term loans. The financial risks associated with these financial instruments and how they

are managed is described below.

Credit risk

The Company and its subsidiary companies are exposed to credit risk primarily with

respect to trade accounts receivable and other receivable. The management of the

Company and its subsidiary companies manage the risk by adopting appropriate credit

control policies and procedures and therefore do not expect to incur material financial

losses. In addition, the Company and its subsidiary companies do not have high

concentration of credit risk since they have a large customer base. The maximum

exposure to credit risk is limited to the carrying amounts of receivables and other

receivables as stated in the balance sheets.

Interest rate risk

The Company and its subsidiaries’ exposure to interest rate risk relates primarily to

their cash at banks, bank overdrafts, short-term and long-term borrowings. However,

since most of the Company and its subsidiaries’ financial assets and liabilities bear

floating interest rates or fixed interest rates which are close to the market rate, the

interest rate risk is expected to be minimal.

Significant financial assets and liabilities as at 31 December 2009 and 2008 classified

by type of interest rates are summarised in the table below, with those financial assets

and liabilities that carry fixed interest rates further classified based on the maturity date,

or the repricing date if this occurs before the maturity date.



37


Consolidated financial statements as at 31 December 2009

Fixed interest rates Floating Non-

Within Over Interest interest Interest

1 year 1-5 years 5 years rate bearing Total rate

(% p.a.)

Financial assets

Cash and cash equivalents - - - 48,557 116,000 164,557 %

Trade accounts receivable - net - - - - 1,295,701 1,295,701 -

Short-term loan to related parties 8,000 - - - - 8,000 6.5%

Restricted bank deposit - - - 630 630 0.25%

8,000 - - 49,187 1,411,701 1,468,888

Financial liabilities

Bank overdrafts and short-term loans

from financial institutions 1,009,481 - - 399,413 - 1,408,894 1.74 - 7%

Trade accounts payable - - - - 986,228 986,228 -

Other payables - - - - 58,202 58,202 -

Liabilities under hire-purchase and

financial lease agreements 74,072 108,312 - - - 182,384 5.6 - 9.21%

Long-term loans - - - 2,294,810 2,294,810 5.47 - 5.85%

1,083,553 108,312 - 2,694,223 1,044,430 4,930,518


Consolidated financial statements as at 31 December 2008




(% p.a.)

Financial assets

Cash and cash equivalents - - - 63,087 , 109,334 0.5%-0.75%

Trade accounts receivable - net - - - - 843,398 843,398 -

Restricted bank deposit - - - 150 - 150 0.5%

- - - 63,237 889,645 952,882



from financial institutions

1,997,140 - - 209,376 - 2,206,516 5.75%-7.55%

Trade accounts payable - - - - 1,221,897 1,221,897 -

Other payables - - - - 43,936 43,936 -


financial lease agreements 60,954 139,200 - - - 200,154 6.87%-16.25%

Long-term loans - - - 1,368,013 - 1,368,013 4.25%-7.5%

2,058,094 139,200 - 1,577,389 1,265,833 5,040,516

ANNUAL REPORT 2009


38


Separate financial statements as at 31 December 2009




(% p.a.)

Financial assets

Cash and cash equivalents - - - 371 48,401 48,772 0.25-0.50%

Trade accounts receivable - net - - - - -

Short-term loan to related parties 258,000 - - - - 258,000 5.5-6.5%

Investments in subsidiaries- net - - - - 1,893,742 1,893,742 -

258,000 - - 371 2,756,345 3,014,716



from financial institutions 838,858 - - 183,763 - 1,022,621 4-6.15%

Trade accounts payable - - - - 611,956 611, 56 -

Other payables - - - - 49,950 49,950


financial lease agreements 35,200 59,157 - - - 94,357 5.90-9.21%

Long-term loans - - - 2,294,810 - 2,294,810 3.47-5.85%

874,058 59,157 - 2,478,573 661,906 4,073,694


Separate financial statements as at 31 December 2008




(% p.a.)

Financial assets

Cash and cash equivalents - - - 33,047 4,621 37,668 0.75%

Trade accounts receivable - net - - - - 470,415 470,415 -

Investments in subsidiaries- net - - - - 964,260 964,260 -

- - - 33,047 1,439,296 1,472,343



from financial institutions 1,456,640 - - - 1,547,770

5.75% -

7.55%

Trade accounts payable - - - - 652,891 652,891

Other payables - - - - 40,513 40,513


financial lease agreements 22,903 51,466 - - - 74,369

6.87%-

16.25%

Long-term loans - - - 486,763 - 486,763 4.25%-7.5%

1,479,573 51,466 - 577,893 693,404 2,802,306



39

Foreign currency risk

The Company and its subsidiaries’ exposure to foreign currency risk arises mainly from

trading transactions that are denominated in foreign currencies.

Below is the summary of the Company and its subsidiaries’ foreign currency-

denominated financial assets/liabilities as at 31 December 2009 and 2008 which were

unhedged.

31 December 2009

Consolidated financial statements Separate financial statements Exchange rate

Foreign currency

Financial

assets

Financial

liabilities

Financial

assets

Financial

liabilities Buying Selling

(Thousand) (Thousand) (Thousand) (Thousand) (Baht per one foreign

currency unit)

US dollar 14,095 18,399 8,149 9,182 33.2207 33.5168

Japanese yen - 589,078 - 427,413 0.3590 0.3656

Euro 233 397 233 390 47.4583 48.1284

Taiwan dollar - 77 - 77 1.0248 1.0370

Australian dollar - 16 - 16 29.4838 30.0488

Singapore dollar - 1 - 1 23.5049 23.9525

Switzerland dollar - 20 - 20 4.5821 4.6606

31 December 2008

Consolidated financial statements Separate financial statements Exchange rate

Foreign currency

Financial

assets

Financial

liabilities

Financial

assets

Financial

liabilities Buying Selling

(Thousand) (Thousand) (Thousand) (Thousand) (Baht per one foreign

currency unit)

US dollar 85,235 384,639 85,235 384,512 34.8051 35.0824

Japanese yen 4 178,193 4 54,568 0.3829 0.3898

Euro 2,594 49,194 2,594 49,178 48.8809 49.6515

Taiwan dollar - 82 - 82 1.0522 1.0634

Australian dollar 996 1,259 996 1,259 23.8700 24.3809

Pound sterling - 1,957 - 1,957 50.3262 51.1328

Singapore dollar - 57 - 57 24.0117 24.4296

Switzerland dollar 23 - 23 - 32.8102 32.8951

As at 31 December 2009, a subsidiary had the following outstanding forward contacts:


Foreign currency Amount sold Maturity date Contractual exchange rate for amount sold

(Million) (Baht per one foreign currency unit)

US Dollar 0.2 18 March 2010 35.5100

Japanese yen 136 14 February 2010 0.3676

ANNUAL REPORT 2009


40


Foreign currency Amount sold Maturity date Contractual exchange rate for amount sold

(Million) (Baht per one foreign currency unit)

2009

US Dollar - Nil -

2008

US Dollar 5.5 20 January -22 June 2009 34.4103 - 34.5913

27.2 Fair values of financial instruments

Since the majority of the Company and its subsidiaries’ financial assets and financial

liabilities bear floating interest rates or fixed interest rates, which are close to market

rate their fair value is not expected to be materially different from the amounts

presented in the balance sheets.

A fair value is the amount for which an asset can be exchanged or liability settled

between knowledgeable, willing parties in an arm’s length transaction. The fair value is

determined by reference to the market price of the financial instrument or by using an

appropriate valuation technique, depending on the nature of the instrument.

28. Litigation

In 2008, a subsidiary company was sued by a supplier for settlement of debt,

amounting to Baht 0.2 million. On 5 November 2008, the court of first instance

dismissed the case. However, the plaintiff filed an appeal with the court in December

2008 and this is currently being heard. The subsidiary company's management

believes that no loss will result and therefore no liabilities are currently recorded in the

balance sheet.

29. Capital management

The primary objectives of the Company’s and the subsidiaries’ capital management is

to ensure that it has an appropriate financial structure and preserves the ability to

continue their business as a going concern.

According to the balance sheet as at 31 December 2009, the Group's debt-to-equity

ratio was 4.15:1 (2008: 5.25:1) and the Company's was 3.47:1 (2008: 2.91:1).



41

30. Subsequent event

On 23 February 2010, the meeting of the Board of Directors of the Company No.

1/2553 passed the following resolutions.

a) To approve the Company to enter into a Syndicated Loan Agreement in the

amount of approximately Baht 8,000 million, and designated the Managing

Director the right to consider any related conditions.

b) To approve the Company to invest in 100% of total ordinary shares of Kulthorn

Materials & Controls Company Limited at the book value as of 28 February 2010

for the total value up to Baht 300 million.

c) To approved an increase in the Company’s share capital from Baht 700 million

(700,000,000 ordinary shares of Baht 1 each) to Baht 850 million (850,000,000

ordinary shares of Baht 1 each) through the issuance of 150,000,000 ordinary

shares with a par value of Baht 1 each to the existing shareholders according to

their shareholding in the Company.

31. Approval of financial statements

These financial statements were authorised for issue by the Company’s authorised

Directors on 25 February 2010.

ANNUAL REPORT 2009


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