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
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
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
ASSETS
Current assets:-
Cash and due from banks (Note 4) 14,376 16,632 14,103
Marketable securities 392 394 1,360
Trade receivables (Note 5) 4,875 7,585 10,050
Due from related companies (Note 16) 48 - 12
Inventories (Note 6) 18,813 13,947 15,612
Other receivables and prepaid expenses 166 118 333
Deferred tax assets (Note 10) 112 247 395
Total current assets 38,782 38,923 41,865
Long-term trade receivables 103 114 82
Property, plant and equipment
net (Note 7) 35,636 36,230 32,633
Other long-term assets (Note 8) 4,383 1,401 1,892
Total assets 78,904 76,668 76,472
The accompanying notes form an integral part of these
financial statements.
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
Net sales 99,551 105,069 97,160
Cost of sales (Note 17) (62,419) (66,484) (65,728)
Gross profit 37,132 38,585 31,432
General and administrative
expenses (Note 18) (1,206) (1,342) (1,117)
Selling and marketing expenses (481) (356) (238)
Royalty expenses (Note 20) (1,603) (1,603) (1,595)
Operating profit 33,842 35,284 28,482
Financial income - net (Note 19) 1,074 1,453 2,675
Other expenses (18) (399) (135)
Income before taxes and
translation loss 34,898 36,338 31,022
Provision for taxes (Note 10) (20,609) (17,789) (15,248)
Translation gain/(loss) 2,113 (430) (311)
Net income for the year 16,402 18,119 15,463
Weighted average number of shares
with TL1,000 face value each
(Note 2) 166,500,000 166,500,000 166,500,000
Earning per share in US
dollars (Note 2) 0.099 0.109 0.092
The accompanying notes form an integral part of these
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Share Retained
capital earnings Total
US$'000 US$'000 US$'000
<S>
<C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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.
</TABLE>
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
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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
</TABLE>
NOTE 5 - TRADE RECEIVABLES
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
Maksan Mesrubat ve Kutulama San. A.S. 1,920 1,975 2,077
Fruko Tamek Meyva Sulari San. A.S. 755 1,747 1,323
G??ney Biracilik ve Malt San. A.S. 740 738 1,055
Ege Biracilik ve Malt San. A.S. 550 611 1,429
T Tuborg Bira ve Malt San. A.S. 255 797 1,601
Ektam Kibris Ltd. 244 - -
Erciyes Biracilik ve Malt San.A.S. 56 - 701
Post-dated cheques - 219 -
Other 355 1,498 1,864
4,875 7,585 10,050
</TABLE>
NOTE 6 - INVENTORIES
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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
</TABLE>
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
January December
1, 1997 Additions Disposals Transfers 31,1997
US$'000 US$'000 US$'000 US$'000 US$'000
<S> <C> <C> <C> <C> <C>
Land 294 - - - 294
Buildings 4,751 - - - 4,751
Machinery and equipment 38,889 773 - 1,486 41,148
Motor vehicles 284 8 (36) 48 304
Furniture and fixtures 477 - - 229 706
44,695 781 (36) 1,763 47,203
Construction in progress 1,417 1,429 - (1,763) 1,083
46,112 2,210 (36) - 48,286
Less :
Accumulated depreciation(9,882) (2,804) 36 - (12,650)
Net book value 36,230 35,636
</TABLE>
<TABLE>
<CAPTION>
January Decmeber
1, 1996 Additions Disposals Transfers 31, 1996
US$'000 US$'000 US$'000 US$'000 US$'000
<S> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
January December
1, 1995 Additions Disposals Transfers 31, 1995
US$'000 US$'000 US$'000 US$'000 US$'000
<S>
<C> <C> <C> <C> <C> <C>
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
</TABLE>
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$'000
Statutory taxation 13,756 14,702 12,884
Prepaid taxes (2,540) (2,120) (1,372)
Statutory income taxes
payable - net 11,216 12,582 11,512
NOTE 10 - (CONTINUED)
Deferred taxes:-
The breakdowns of cumulative timing differences and
resulting deferred tax assets/liabilities provided at 31
December 1997, 1996 and 1995 using the prevailing/expected
future tax rates, were as follows:-
<TABLE>
<CAPTION>
1997
Cumulative
timing differences Deferred tax
(income)/ expense assets/(liabilities)
TL million TL millionUS$'
000
<S> <C> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
1996
Cumulative
timing differences Deferred tax
(income)/ expense assets/(liabilities)
TL million TL million
US$'000
<S> <C> <C> <C>
Current timing differences:-
Accrual for export discounts
to be given 41,891 18,432 171
Accrual for professional fees 9,783 4,304 40
Accrual for customer claims 6,672 2,936 27
Accrual for free cans to be given - - -
Accrual for other expenses 1,906 839 9
26,511 247
Non-current timing differences:-
Adjustment for depreciation of fixed assets
according to their useful lives (160,350) (70,554) (656)
Reserve for employment
termination benefits 35,074 15,432 143
(55,122) (513)
</TABLE>
NOTE 10 - (CONTINUED)
<TABLE>
<CAPTION>
1995
Cumulative
timing differences Deferred tax
(income)/ expense assets/(liabilities)
TL million TL million US$'000
<S> <C> <C> <C>
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)
</TABLE>
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$1,762,000).
In Turkey, there is no procedure for the final agreement of
tax assessments. Tax returns are filed within four months of
the end of the year to which they relate. The tax
authorities may, however, examine the accounting records
and/or revise assessments within five years.
NOTE 11 - ACCRUED EXPENSES AND OTHER PAYABLES
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
Maturity Interest rate % US$'000 US$'000 US$'000
<S><C> <C> <C>
<C> <C>
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
</TABLE>
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$3,635,000 at the exchange rate
prevailing at 31 December 1995), respectively.
NOTE 15 - SHARE CAPITAL
The Company's authorized capital consists of 166,500,000
shares of TL1,000 each, which are fully paid up. The
Company's paid-in share capital and shareholding structure
in terms of Turkish lira at 31 December 1996 and 1995 were
as follows:-
<TABLE>
<CAPTION>
1997 1996 1995
TL million Share(%) TL million Share(%) TLmillion Share (%)
<S> <C> <C> <C> C> <C> <C>
Pechiney S.A 108,225 65.00 - - - -
Pechiney
International S.A. - - 108,225 65.00 108,219 65.00
RHI Holdings
Incorporated 53,055 31.87 53,055 31.87 53,055 31.87
Jeffrey Steiner 5,220 3.13 5,220 3.13 5,220 3.13
National Can
Puerto Ric o - - - - 3 -
American National
Can Company - - - - 3 -
166,500 100.00 166,500 100.00 166,500 100.00
Capital at historical
US dollar value 18,267 18,267 18,267
(US$'000)
</TABLE>
NOTE 16 - RELATED COMPANY TRANSACTIONS
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
Due from related companies:-
Pechiney Rhenalu 23 - -
American National Can Company 24 - -
Nacanco China - - 12
Nacanco France S.A. 1 - -
48 - 12
Due to related companies:-
Pechiney Rhenalu - 1,417 103
Nacanco France S.A. 591 453 1,053
American National Can Company 30 106 2,579
Nacanco UK 18 53 61
Nacanco Italy - - 280
Nacanco Germany - - 5
Nacanco Dunkerque 3 - -
Nacanco Limited 7 - -
649 2,029 4,081
Sales to related companies:-
Pechiney Rhenalu
scrap aluminium 1,682 1,497 772
Nacanco Iberica
aluminium cans - - 259
1,682 1,497 1,031
Purchases from related companies:-
Pechiney Rhenalu
aluminium coils 14,929 12,329 3,080
Nacanco France S.A. - ends 8,816 11,114 16,676
Sitac - ends/cans 4,231 4,662 -
Nogara - ends/cans - 857 -
American National Can
Company - spare parts 460 633 709
Nacanco Ireland - ends/cans 5,052 241 190
Nacanco UK - ends 381 - 627
Nacanco Italy - cans - - 604
33,869 29,836 21,886
</TABLE>
NOTE 16 - (CONTINUED)
<TABLE>
<CAPTION>
Property, plant and equipment purchases:-
<S> <C> <C> <C>
American National Can Company 192 3,054 2,550
Nacanco UK 87 106 -
Nacanco Germany - 3 64
Nacanco Spain - 1 -
Nacanco Italy - - 11
279 3,164 2,625
Other charges to the Company:-
Royalty expenses 1,250 1,250 1,250
</TABLE>
NOTE 17 - COST OF SALES
<TABLE>
<CAPTION>
Cost of sales comprises the following:-
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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
</TABLE>
NOTE 18 - GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
Salaries 531 652 434
Fringe benefits 97 70 97
Travel expenses 92 102 70
Communication expenses 89 93 109
Other 397 425 407
1,206 1,342 1,117
</TABLE>
NOTE 19 - FINANCIAL INCOME
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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
</TABLE>
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$1,595,000).
NOTE 21 - COMMITMENTS AND CONTINGENCIES
The commitments and contingent liabilities of the Company
are summarised as follows:-
<TABLE>
<CAPTION>
1997 1996 1995
US$'000 US$'000 US$'000
<S> <C> <C> <C>
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
</TABLE>
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.
