Consolidated Financial Statements
With Independent Auditors’ Report
March 31, 2007 and December 31, 2006
With Comparative Figures for 2005 and 2004
PT SAMPOERNA AGRO Tbk
WITH COMPARATIVE FIGURES FOR 2005 AND 2004
Table of Contents
Page
Independent Auditors’ Report
Consolidated Balance Sheets ………. 1-2
Consolidated Statements of Income ……….. 3
Consolidated Statements of Changes in Equity ..……….… 4
Consolidated Statements of Cash Flows ……….. 5
Notes to the Consolidated Financial Statements ………. 6-55
Independent Auditors’ Report
Report No. RPC-7296
The Shareholders, Boards of Commissioners and Directors
PT Sampoerna Agro Tbk (formerly PT Selapan Jaya) and Subsidiaries
We have audited the consolidated balance sheets of of PT Sampoerna Agro Tbk (formerly PT Selapan Jaya) (“the Company”) and Subsidiaries (the “Group”) as of March 31, 2007 and December 31, 2006, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the three months ended March 31, 2007 and the year ended December 31, 2006. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain Subsidiaries, which statements reflect combined total assets accounting for 34.1% of the consolidated total assets as of March 31, 2007, and combined net sales accounting for 14.8% of the consolidated net sales for three months ended March 31, 2007. Those statements were audited by other independent auditors, whose unqualified reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the reports of the other independent auditors. The consolidated financial statements of PT Sampoerna Agro Tbk (formerly PT Selapan Jaya) and Subsidiaries for the years ended December 31, 2005 and 2004 were audited by Prasetio, Sarwoko & Sandjaja, whose report dated February 28, 2006, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards established by the Indonesian Institute of Accountants. 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 audits and the reports of the other independent auditors provide a reasonable basis for our opinion.
figures for 2005 and 2004 have been reissued to include several additional disclosures.
Purwantono, Sarwoko & Sandjaja
Peter Surja
Public Accountant License No. 05.1.0976
May 29, 2007
December 31,
December 31,
Notes March 31, 2007 2006 2005 2004
LIABILITIES AND
SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade payables 11 54,206,141 36,011,899 51,195,307 18,633,050 Taxes payable 2o,13b 8,739,065 30,074,515 11,768,112 20,757,570 Accrued expenses 14 28,117,136 7,295,656 5,202,100 9,832,511 Sales advances 12 8,134,429 6,218,498 15,350,143 2,167,354 Due to related parties 2q,25a 6,707,641 537,797 25,698 25,698 Current portion of long-term:
Bank loans 15 - 32,125,000 57,000,000 54,579,775 Deferred interest payable 16 - - 2,800,000 4,000,000
TOTAL CURRENT LIABILITIES 105,904,412 112,263,365 143,341,360 109,995,958
LONG-TERM LIABILITIES
Long term debts-net of current portion:
Bank loans 15 1,103,800,000 81,356,285 197,927,531 257,811,758 Deferred interest payable 16 - - 890,614 18,218,335 Provision for employee service
entitlements 2p,17 1,192,473 10,050,823 9,087,296 7,630,135 Other long-term liability 2q,25c 15,925,258 - 5,183,619 5,183,619
TOTAL LONG-TERM LIABILITIES 1,120,917,731 91,407,108 213,089,060 288,843,847
TOTAL LIABILITIES 1,226,822,143 203,670,473 356,430,420 398,839,805
MINORITY INTERESTS IN NET
ASSETS OF SUBSIDIARIES 2b,26a 16,281,243 3,527,154 2,617,617 2,031,241
December 31,
Notes March 31, 2007 2006 2005 2004
SHAREHOLDERS’ EQUITY
Share capital
Authorized – 2,200,000,000 shares at par value per share of Rp500 (full amount) each in 2007 and 2006,
2,000,000,000 shares at par value per share of Rp500 (full amount) in 2005,
and 25,883 shares at par value per share of Rp10,000,000 (full amount) in 2004 Issued and fully paid - 571,460,000 shares in 2007 and 2006,
517,660,000 shares in 2005
and 25,883 shares in 2004 18 285,730,000 285,730,000 258,830,000 258,830,000 Difference in the value of
restructuring transactions of
entities under common control 2s,3,31 (275,971,501) (126,693,758) (126,693,758) (126,693,758) Assets revaluation increment 2i,2j, 10 75,746 75,746 26,975,746 26,975,746 Difference in foreign currency
translation 2a 185,755 - - -
Retained earnings 180,366,456 249,134,710 136,984,090 75,674,603
SHAREHOLDERS’ EQUITY, NET 190,386,456 408,246,698 296,096,078 234,786,591
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY 1,433,489,842 615,444,325 655,144,115 635,657,637
Difference in the
value of
restructuring Retained
transactions of Assets Difference in earnings Total
Pro-forma entities under revaluation Foreign Currency (Accumulated shareholders’
Notes Share capital capital common control increment Translation deficit) equity, net
Balance as of December 31, 2003 258,830,000 (2,216,612) (87,266,274) 26,975,746 - (25,492,138) 170,830,722
Pro-forma effect from additional
share capital subscription - 17,650,000 - - - 17,650,000
Net income for 2004 (one year) - - - - 105,705,871 105,705,871
Pro-forma capital in a Subsidiary’s net income for the period from January 1, 2004 to
October 26, 2004
(prior to the acquisition) - 4,539,130 - - - (4,539,130) -
Adjustment on pro-forma capital in relation to a restructuring transaction of entities under common control
(at the acquisition date) 31 - (19,972,518) (39,427,484) - - - (59,400,002)
Balance as of December 31, 2004 258,830,000 - (126,693,758) 26,975,746 - 75,674,603 234,786,591
Net income for 2005 (one year) - - - 61,309,487 61,309,487
Difference in the
value of
restructuring Retained
transactions of Assets Difference in earnings Total
Pro-forma entities under revaluation Foreign Currency (Accumulated shareholders’
Notes Share capital capital common control increment Translation deficit) equity, net
Issuance of bonus shares through convertion of asset revaluation
increment 26,900,000 - - (26,900,000) - - -
Dividend distribution by Subsidiaries 18 - - - - (520,000) (520,000)
Net income for 2006 (one year) - - - 112,670,620 112,670,620
Balance as of December 31, 2006 285,730,000 - (126,693,758) 75,746 - 249,134,710 408,246,698
Difference in the purchase price of Palma Agro compared to its
net book value 3 - - (275,971,501) - - - (275,971,501 )
Reversal in difference in the value of restructuring transactions of entities under common control due to change common control
shareholders 2s,31 - - 126,693,758 - - (27,400,000) 99,293,758
Difference in foreign currency
translation 2a - - - - 185,755 - 185,755
Net loss for March 2007 (three months) - - - (41,368,254) (41,368,254)
2007 2006 2005 2004
subsidiaries after deducting cash
2007 2006 2005 2004
Notes (Three Months) (One Year) (One Year)
Cash receipts from interest of late
conversion - - - 748,094
Payment of obligation under
capital leases - - - (193,975)
Net cash provided by (used in)
financing activities 51,633,585 (180,897,030) (112,600,551) (57,365,603)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 3,650,680 41,091,501 (58,369,018) 9,656,374
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 64,237,583 23,146,082 81,515,100 71,858,726
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 4 67,888,263 64,237,583 23,146,082 81,515,100
Supplemental information on cashflows Non-cash activities
Bank facility fees deducted
from proceeds of bank loan 15 15,961,750 - - - Acquisition of Subsidiaries
financed by bank loan 3 538,139,000 - - -
Lending to a related party
1. GENERAL
a. PT Sampoerna Agro Tbk (formerly PT Selapan Jaya) (“the Company”)
The Company is a limited liability company established in Indonesia on June 7, 1993, based on Notarial Deed of Tina Chandra Gerung, S.H No. 8. The Articles of Association were approved by the Ministry of Justice and Human Rights under Letter No. C2-1840.HT.01.01.TH.94 dated February 4, 1994, and published in the State Gazette No. 60, Supplement No. 4842 dated July 29, 1994.
Based on Notarial Deed Sutjipto, S.H., M.Kn. No. 52 dated February 16, 2007, the Company changed its name from PT Selapan Jaya to PT Sampoerna Agro. The amendment was approved by the Ministry of Justice and Human Rights under Letter No. W7-02335 HT.01.04-TH.2007 dated March 9, 2007.
The Articles of Association have been amended from time to time, the latest amendment of which was made under Notarial Deed No. 87 of Sutjipto, S.H., M.Kn., dated April 11, 2007 concerning about initial public offering plan, change in the share’s par value by stock split, increase in paid up share capital and changes to comply with Indonesian capital market law, including the change in the Company’s name from PT Sampoerna Agro to PT Sampoerna Agro Tbk.
The Company was approved as a Domestic Capital Investment Company (“PMDN”) based on the approval of the Capital Investment Coordinating Board (“BKPM”) through Letter No. 336/I/PMDN/1994 dated June 3,1994.
On January 9, 2007, the Company ammended its Articles of Association which were covered by Notarial Deed of Linda Herawati S.H., No. 16 concerning about the change in the Company’s status from Domestic Capital Investment to Foreign Capital Investment.
Based on various letters and permits secured by the Company from local, regional and national government agencies, the Company may develop 25,700 hectares of palm oil plantations in Ogan Komering Ilir, South Sumatera, consisting of 7,200 hectares of its own plantations (referred to as the Nucleus or “Inti”) and 18,500 hectares of Plasma plantations with milling capacity of up to 360 tonnes of fresh fruit bunches per hour. The land right certificate (“Hak Guna Usaha”) for 3,243 hectares of Inti plantations will expire in 2037 but can be renewed up to 2097.
The Company commenced its commercial operations in November 1998 and its head office is located at Jalan Basuki Rahmat No. 788, Palembang, South Sumatera.
b. Subsidiaries
On January 26, 2007, the Company acquired 100% shares of Palma Agro Ltd. (PAL), whereas PAL owned 93.6% shares in PT Sungai Rangit.
1. GENERAL (continued)
b. Subsidiaries (continued)
The Company’s investment in Subsidiaries after above mentioned acquisitions consist of the following:
Total assets
Percentage of ownership (before elimination)
interest (in million Rp)
Subsidiaries Activities bunches per hour)
Aek Tarum Palm oil and rubber plantations and
palm oil mill operations 60
Mutiara Bunda Jaya Palm oil plantations and palm oil mill operations 80 Telaga Hikmah Palm oil plantations and palm oil mill operations 60 Sungai Rangit Palm oil plantations and palm oil mill operations 30
Gunung Tua Abadi Palm oil plantations -
Binasawit Makmur Palm oil plantations and palm oil seedling -
Palma Agro Holding company and management services -
1. GENERAL (continued)
b. Subsidiaries (continued)
The details of subsidiaries land right areas, totaling 49,069.09 hectares, are as follows :
Subsidiaries Hectares Valid until
Aek Tarum 2,189.70 August 16, 2096 *
Sungai Rangit 13,118.00 September 29, 2036
0.32 September 24, 2030
903.45 March 8, 2036
469.01 June 18, 2038
435.23 September 24, 2038
2,135.81 September 24, 2039
*) Already obtained approval for an extention of 25 years and a renewal for another 35 years.
c. Employees, directors and commissioners
Based on Circular Resolution of Shareholders as covered by Notarial Deed of Sutjipto, S.H. M.Kn. No. 235 dated May 25, 2007, the composition of commissioners and directors of the Company is as follows:
Board of Commissioners: Board of Directors:
Michael Joseph Sampoerna - President Commissioner Goh Cheng Beng - President Director
Ekadharmajanto Kasih - Commissioner Ali Gunawan Budiman - Director
Sugiarta Gandasaputra - Commissioner Yasin Chandra - Director
Phang Cheow Hock - Independent Commissioner Chang Poh Sang - Director
Arief Tarunakarya Sie Eddy Kurniawan - Director
Surowidjojo - Independent Commissioner
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies adopted by the Group conform to generally accepted accounting principles in Indonesia. The significant accounting principles applied consistently in the preparation of the consolidated financial statements for the three months period ended March 31, 2007 and years ended December31, 2006, 2005 and 2004 are as follows:
a. Basis of preparation of consolidated financial statements
The consolidated financial statements have been prepared in accordance with accounting and practices generally accepted in Indonesia, which includes Statements of Financial Accounting Standards (PSAK) issued by the Indonesian Institute of Accountants and Regulations and Guidelines on Financial Statements Presentation set out by the Capital Market Supervisory Agency (BAPEPAM).
The consolidated financial statements, presented in thousands of Rupiah unless otherwise stated, have been prepared on accrual basis, except for statements of cash flows, and using historical costs, except for inventories that are valued at the lower of cost or net realizable values and certain items of fixed assets and mature plantations which were revalued on April 30, 2003.
The consolidated statements of cash flows present cash receipts and payments classified into operating, investing and financing activities, and are presented using the direct method.
The reporting currency used in the preparation of the consolidated financial statements is in Rupiah, except for PAL, which has adopted the US Dollar as its fuctional, reporting and recording currency since January 1, 2007. For consolidation purposes, the accounts of PAL are translated into Rupiah amounts on the following basis:
Balance sheet accounts : Prevailing rate of exchange as published by Bank Indonesia at the last banking day as of March 31, 2007 amounting to Rp9,118 (full amount) per US$1.
Income statement accounts : The exchange rates prevailing at the date of transactions.
Gains or losses arising from translation of balance sheet and income statements accounts are presented as “Difference in Foreign Currency Translation” in the equity section of the consolidated balance sheet.
b. Basis of consolidation
The consolidated financial statements include the Company’s financial statements and all subsidiaries' financial statements that are controlled by the Company. Control is presumed to exist where more than 50%, directly or indirectly of a subsidiary's voting power, is controlled by the Company; or where the Company is able to govern the financial and operating policies of a subsidiary; or control the removal or appointment of a majority of a subsidiary's board of directors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b. Basis of consolidation (continued)
The proportionate share of the minority shareholders in the equity of the subsidiaries is presented in “Minority Interest in Net Assets of Subsidiaries” in the consolidated balance sheets. When cumulative losses applicable to minority interest exceed the minority shareholders’ interest in the subsidiaries’ equity, the excess is charged against the majority shareholders’ interest, except in rare cases when minority shareholders have a binding obligation to make good on such losses and minority shareholders able to cover those losses. Subsequent profits earned by Subsidiaries under such circumstances that are applicable to the minority interest shall be allocated to the majority interest to the extent minority losses previously absorbed have been fully recovered.
c. Foreign currency transactions and balances
Transactions in currencies other than Rupiah are recorded at the prevailing exchange rates in effect on the date of the transactions.
As of the balance sheet dates, all foreign currency monetary assets and liabilities are translated at the middle exchange rates quoted by Bank Indonesia on those dates. The resulting net foreign exchange gains or losses are recognized in the current period’s statement of income.
The exchange rates used as of March 31, 2007, December 31, 2006, 2005 and 2004 were Rp9,118, Rp9,020, Rp9,830, and 9,290 per US$1 (full amount), respectively.
d. Revenue and expense recognition
Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have been passed to the buyer.
Expenses are recognized when these are incurred (accrual basis) .
e. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and in bank, and short-term deposits with maturities within three (3) months or less and not pledged as collateral.
f. Inventories
Inventories are stated at the lower of cost or net realizable value.
Cost is determined using the weighted average method and comprises all costs of purchase, costs of conversion and appropriate overheads incurred in bringing the inventory to its present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated cost necessary to make the sale.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g. Prepaid expenses
Prepaid expenses are charged to operations over the periods benefited using straight-line method of amortization.
h. Plantation assets
Plantation assets are classified as immature plantations and mature plantations.
Immature plantation
All costs relating to the development of the palm oil and rubber plantations for the Group’s own operations (Inti plantations) together with a portion of indirect overheads, including general and administrative expenses incurred, and also interest expenses from loan used in developing immature plantation are capitalized until commercial production is achieved. These costs will be transferred to mature plantations and amortized over the estimated 20 years productive lives of the palm oil and rubber plantations, starting from the commencement of commercial production.
Mature plantation
In general, palm oil plantations are considered mature four years after planting and rubber plantations are considered mature five to six years after planting. Actual time to maturity is dependent upon vegetative growth and is assessed by management.
Mature plantations are stated at cost, except for certain mature plantations which are stated at revalued amounts, less accumulated amortization.
i. Fixed assets
Fixed assets are stated at cost, except for certain fixed assets which are stated at revalued amounts, less accumulated depreciation.
Fixed assets, except land, are depreciated using the straight-line method over their estimated useful lives as follows:
Years
Buildings 20
Infrastructures 20
Storage tanks 16
Machinery and equipments 12
Vehicles and heavy equipments 4-8
Office equipments 4-8
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i. Fixed assets (continued)
The cost of repairs and maintenance is charged to expense as incurred; significant renewals or betterments are capitalized. Interest expenses incurred in relation with loan used in constructing the assets are capitalized. When assets are retired or otherwise disposed of, their carrying value and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the current period’s statements of income.
Construction in progress represents the accumulated cost of materials and other costs related to the asset under construction until it is ready to be used. When the asset is complete and ready for its intended use, these costs are transferred to the relevant accounts.
j. Impairment of assets
The recoverable amount of an asset is estimated whenever events or changes in circumstances indicate that its carrying amount may not be fully recoverable. Impairment in asset value, if any, recognized as loss in the current year’s statement of income, unless assets are carried at revalued amounts. Impairment losses on revalued assets are recognized directly against the “Assets Revaluation Increment” for the related assets to the extent that the impairment losses do not exceed the amounts recognized in the assets revaluation increment attributable to such assets. The amount of an impairment loss for a revalued asset which exceeds the amount of the “Assets Revaluation Increment” attributable to such asset is recognized in the current period’s statements of income.
k. Advances (investment credit) for Plasma plantations
Plasma plantations is an Indonesian Government policy to develop the plantations on mutual agreements with smallholders or cooperatives. Group (referred to as “Inti”) can acquire land rights to develop plantations only if they develop plantations for smallholders (Plasma participants) in addition to their own plantations. Inti are required to assist and supervise smallholders in technical matters relating to the plantation and to purchase the fresh fruit bunch (FFB) produced by Plasma plantations at prices determined by the Indonesian Government.
Once developed, the Plasma plantations are transferred to the smallholders at a conversion rate determined by the Government, and where the conversion price might be lower than the carrying value of the Plasma plantation transferred. Therefore, Group determine the allowance for loss on conversion based on a periodic review of the estimated difference between the carrying value of the Plasma plantation and the conversion value. The Plasma farmers are required to sell the fresh fruit bunch to Inti.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l. Nursery
Cost incurred in the preparation of the nursery, purchase of seedlings and their maintenance are stated at cost. The accumulated cost are transferred to “Immature Plantations” account at the time of planting.
m. Deferred land right cost and Deferred charges
Costs incurred in relation to obtain land rights in the form of “Hak Guna Usaha” (HGU) and “Hak
Guna Bangunan” (HGB) are recorded as “Deferred land right cost”, which are amortized on a
straight-line basis over the term of the related land rights.
Fees incurred in obtaining long-term loan facilities are deferred as part of “Deferred charges”, which are amortized on a straight-line basis over the term of the related facilities. If the Company effectively in a technical or payment default position, which has the consequences that the principle amount of the debt together with accrued interest will become due and payable, the related deferred long-term bank loan administration costs are charged to current operations.
Costs and expenses incurred in connection with Initial Public Offering plan are capitalized and recorded as part of “Deferred Expenses” and will be deducted directly from the additional paid in capital resulting from the Initial Public Offering.
n. Leases
Lease transactions are accounted for under the capital lease method if all of the following criteria are met:
(i) The lessee has an option to purchase the leased assets at the end of the lease period at a price mutually agreed upon at the commencement of the lease agreement.
(ii) Total periodic payments plus residual value fully cover the acquisition cost of leased capital goods plus interest there on which is the lessor’s profit.
(iii) Lease period covers a minimum of two years.
Lease transactions that do not meet all of the criteria mentioned above are accounted for under the operating lease method.
Assets under capital leases are recognized at the present value of the lease payments at the beginning of the lease term including residual value (option price) to be paid at the end of the lease period. The related lease liabilities are presented in the balance sheet as “Obligation under capital leases”. Depreciation is computed based on the same policies as for fixed assets.
o. Corporate income tax
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o. Corporate income tax (continued)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Amendments to tax obligations are recorded when an assessment is received or, if appealed against by the Group, when the result of the appeal is determined.
p. Provision for employee service entitlements
The Group has applied Statement of Financial Accounting Standards (SFAS) No. 24 (Revised 2004), “Employees’ Benefits” to recognize employee benefits liabilities in accordance with Labor Law No. 13/2003 dated March 25, 2003 (the Law). This statement requires the Company to provide all employee benefits under formal and informal plans or agreements, under legislative requirements or through industry arrangements, including post-employment benefits, short-term and other long-term employee benefits, termination benefits and equity compensation benefits. The calculation of liability of employees benefits based on the Law is determined using the “Projected Unit Credit” actuarial method. Actuarial gains or losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting year exceeded 10% of the defined benefit obligation at that date. These gains or losses are recognized on a straight-line basis over the expected average remaining working lives of the employees.
q. Transactions with related parties
The Group have transactions with entities which are regarded as having a special relationship as defined under SFAS No. 7, “Related Party Disclosure”. Significant transactions with related parties, whether or not conducted under normal terms and conditions similar to those with non-related parties are disclosed in the notes to consolidated financial statements.
r. Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimations and assumptions that affect amounts reported therein. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates.
s. Restructuring under common control
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
s. Restructuring under common control (continued)
The difference between the par value of issued share capital or cash payment made by the Company to acquire the Subsidiaries with the Company’s interests in the net assets of such Subsidiaries is recognized as “Difference in the Value of Restructuring Transactions of Entities Under Common Control”, a component of shareholders’ equity. The difference in value of restructuring transactions of entities under common control resulting from past acquisition of Subisidiaries is realized to the related accounts in accordance with SFAS No. 22 “Accounting for Business Combination” when the transacting parties are no longer under common control.
t. Troubled debt restructuring
Troubled debt restructuring is recorded in accordance with SFAS No. 54, “Accounting for Troubled Debt Restructuring”. Net gain arising from trouble debt restructuring is presented as the “Extraordinary Item”, net of the related income tax effect.
u. Segment information
The primary segment information of the Company and Subsidiaries is presented based business segments since the financial information used by management in evaluating the performance and determining the allocation of resources is based on the segment information relating to CPO, PK and other by-products. These segments are considered by management to have significant effects on the Group’s risks and rates of return. In relation to the acquisition of Palma Agro, there is secondary segment information. Sungai Rangit, the operating subsidiary of Palma Agro, has the business operations in Central Kalimantan, while the Company’s and other Subsidiaries have the business operations in South Sumatera.
v. Basic net earnings (loss) per share
3. ACQUISITION OF SUBSIDIARIES
Acquisition of Palma Agro Ltd. (PAL)
On January 26, 2007, the Company acquired 100% ownership interest in PAL from Carlton Services Limited and Mayfair Trust Group with a purchase price amounting to US$59,000,000 or equivalent to Rp538,139,000. PAL is a holding company, established in Republic of Seychelles, and owns 93.6% shares of Sungai Rangit, another company engaged in palm oil plantation in Central Kalimantan. The Company, Carlton Services Limited and Mayfair Trust Group were considered as entities under common control. Accordingly, this transaction has been accounted for in accordance with PSAK No. 38 “Accounting for Restructuring of Entities under Common Control” as described in Note 2s. The difference between PAL’s book value (after taking up the carrying value of its investment in Sungai Rangit) with the purchase price amounting to Rp275,971,501, was presented as part of equity in the 2007 consolidated balance sheet as part of the account “Difference in the value of restructuring transactions of entities under common control”
The details arising from the acquisition of PAL is computed as follows:
Net book value of assets acquired 262,167,499
Difference in the value of restructuring
transactions of entities under common control 275,971,501
Purchase price, financed by bank loan (Note 15) 538,139,000
Cash balance received from the acquisition 12,970,290
The audited accounts of PAL and Sungai Rangit as of December 31, 2006 were used as the basis to determine the net book value of their assets for the above calculation The accounts of PAL and Sungai Rangit in 2006 and prior periods were not retroactively consolidated to the acounts of the Company since PAL and Sungai Rangit, together with the Company, were not under common control during those periods.
Acquisition of PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai, PT Pertiwi Lenggara Agromas and PT Usaha Agro Indonesia
On March 30, 2007, the Company acquired 99% ownership interest in six (6) non-operating companies (hereafter named Subsidiaries), which own land permits to develop plantation, as follows:
a. PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai were acquired from PT Nitiagro Lestari, a Company’s shareholder, with the purchase price amounting to Rp3,465,000.
b. PT Pertiwi Lenggara Agromas was acquired from PT Wahana Sekar Agro and PT Berkah Sawitri Nusantara with purchase price amounting to Rp4,950.
c. PT Usaha Agro Indonesia was acquired from Hendra Prasetya and Aris Budiraharjo with purchase price amounting to Rp4,950.
3. ACQUISITION OF SUBSIDIARIES (continued)
Acquisition of PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai, PT Pertiwi Lenggara Agromas and PT Usaha Agro Indonesia (continued)
Purchase of UAI was accounted for using purchase method, which resulted to goodwill amounting to Rp162, that will be amortized over 5 years.
The cash flows arising from the acquisitions of those companies are as follows:
Total assets 842,283
Total liabilities (6,635,241)
Net book value of assets acquired (5,792,958)
Goodwill obtained from initial acquisition by the Sampoerna Group
and goodwill UAI 9,267,858
Total purchase price 3,474,900
Less: cash balance received from acquisition (9,683)
Payments for the acquisitions, net of cash
balance of acquired subsidiaries received from acquisition 3,465,217
The audited accounts of those newly acquired subsidiaries as of December 31, 2006 were used as the basis to determine net book value of their assets for the above calculation.
The accounts of 6 Subsidiaries mentioned above in 2006 and prior periods were not retroactively consolidated to the accounts of the Company since these Subsidiaries together with the Company were not under common control during those periods.
4. CASH AND CASH EQUIVALENTS (continued)
December 31,
Average annual interest rates on time deposits were as follows:
2007 2006 2005 2004 transactions, bank loans and past years tax liabilities of a newly acquired Subisdiary . The details of restricted time deposits are as follows:
5. TRADE RECEIVABLES – THIRD PARTIES
5. TRADE RECEIVABLES – THIRD PARTIES (continued)
Trade receivables in foreign currency amounted to US$18,729 in 2006.
All trade receivables will due in 30 days.
Management believes that all trade receivables are fully collectible, and no provision for losses is
Venture Max Resources Pte., Ltd.,
Singapore (Notes 15 and 25d) 159,610,590 - -
PT Sampoerna Bio Energi (Note 25e) 17,299,736 - - -
Total 176,910,326 - - -
Management believes that all other receivables are fully collectible, and hence no provision for loss allowance is necessary.
Fertilizers, spare parts and
maintenance supplies 28,359,163 17,931,371 30,693,900 12,936,029
7. INVENTORIES (continued)
As of March 31, 2007, December 31, 2006, 2005 and 2004, all inventories were covered by insurance against losses from fire and other risks under blanket policies with insurance coverage totalling Rp148,782,073, Rp114,782,073, Rp78,896,992 and Rp109,042,393, respectively, which in the management’s opinion is adequate to cover possible losses from such risks.
Management believes that inventories are realizable, hence no provision for inventory obsolescence is necessary.
8. ADVANCES FOR PLASMA PLANTATIONS – NET
December 31,
Plasma plantations transferred to Plasma participants at
Advances, net after provision 46,970,190 45,637,663 38,726,493 42,116,302
Investment credit
Beginning balance 7,518,816 13,490,600 24,851,084 42,930,987
Addition: Capitalized interest (Note 22) 89,843 1,313,181 2,292,379 2,369,673
Refund to the Bank (7,608,659) (2,801,249) - -
Assigned to Plasma participants - (4,483,716) (13,652,863) (20,449,576)
Management believes that the provision for Plasma plantations is adequate to cover possible losses arising from unrecoverable Plasma plantations.
The Company is developing Plasma plantations under an “Anak Angkat Bapak Angkat” (AABA) scheme and financed in the form of “Kredit Usaha Kecil” (KUK) and “Kredit Koperasi Primer untuk
8. ADVANCES FOR PLASMA PLANTATIONS – NET (continued)
Aek Tarum and Mutiara Bunda Jaya are or have been involved in Plasma schemes implemented under Indonesian Government guidelines whereby companies assume responsibility for developing plantations to the productive stage for transfer to Plasma participants under a PIR-Trans
(“Perkebunan Inti Rakyat - Transmigrasi”) scheme.
Telaga Hikmah has been developing Plasma plantation under KKPA scheme.
Once the plantation areas reach the production stage, these areas will be transferred to Plasma participants who will receive two hectares each.
The Company
The Plasma plantations costs as of March 31, 2007, represent the cost of development of 1,316 (2006: 1,316, 2005: 1,142 and 2004:1,094) hectares of Plasma areas, for approximately 658 (2005: 571 and 2004: 547) Plasma participants. The Company, on behalf of Plasma participants, is in the process of obtaining bank financing for the new Plasma areas through the “Kredit Koperasi Primer
Anggota” program.
Mutiara Bunda Jaya
Mutiara Bunda Jaya is involved in developing 8,296 hectares of Plasma palm oil plantations for 4,273 farmers in the vicinity of the Inti plantation area. Following approval from PT Bank Rakyat Indonesia (Persero) Tbk (BRI), the Company has transferred Plasma loan facility to Plasma participants amounting to Rp5,517,088 for 560 hectares to 280 Plasma participants in 2005 and amounting to Rp20,449,576 for 2,308 hectares to 1,154 Plasma participants in 2004.
The write-off of provision for Plasma plantations in 2005 and 2004 represents the excess of Plasma development cost over the amount of Plasma loan (investment credit) assigned to Plasma participants, resulting in a realized loss of Rp2,855,606 and Rp12,971,371, respectively.
Telaga Hikmah
Advances for Plasma plantations in which Telaga Hikmah represent expenditures related to the development of Plasma palm oil plantations still in the development stage. Based on the restructuring agreement between the Telaga Hikmah and Bank Rakyat Indonesia (Persero) Tbk (BRI) No. R.479-MEN/DPB/AKH/08/2000 dated August 21, 2000, Telaga Hikmah’s commitment to develop Plasma areas was reduced from 15,000 hectares to 5,000 hectares. As of March 31, 2007, Telaga Hikmah had planted 3,684 hectares for 1,842 Plasma participants.
8. ADVANCES FOR PLASMA PLANTATIONS – NET (continued)
Investment credit
PT Bank Rakyat Indonesia (Persero) Tbk (BRI)
On November 1, 1989 and May 28, 1996, Mutiara Bunda Jaya and Telaga Hikmah obtained Plasma loans from BRI for the development of 8,238 hectares and 15,000 hectares of Plasma palm oil plantations, respectively. The maximum Plasma loan facilities for Mutiara Bunda Jaya and Telaga Hikmah were Rp72,673,158 (including interest during the four years grace period amounting to Rp25,650,000) and Rp112,068,000 (including interest during construction of Rp40,955,400), respectively. Mutiara Bunda Jaya’s Plasma loan is to be repaid through 2001 and the loan facility for Telaga Hikmah is to be repaid within 16 years through December 31, 2012, including a grace period of seven years through March 31, 2003.
Mutiara Bunda Jaya
On January 29, 2003, BRI through Letter No. R.063-ADK/DKR/01/2003, approved a restructuring program for its Plasma loan to Mutiara Bunda Jaya. Under this restructuring program, the conversion of Plasma areas of 8,238 hectares of Plasma palm oil plantations to 4,273 smallholders is due to be fully made by December 31, 2003. As of December 31, 2005, Mutiara Bunda Jaya has not converted Plasma area of 310 hectares. In this regard, BRI asked MBJ to repay the corresponding Plasma loan amounting to Rp2,801,249 which was fully settled in March 2006.
As of March 31, 2007, Mutiara Bunda Jaya is still in the process of negotiation with Plasma participants to convert the area by using local government assistance as mediator.
In 2005 and 2004, Mutiara Bunda Jaya has transferred Plasma loan facility to Plasma participants amounting to Rp5,517,088 and Rp20,449,576, respectively. As of March 31, 2007, total Plasma loan had been transferred to plasma participants amounting to Rp69,871,909.
The Plasma loan bears annual interest at the rate of 14% in 2006 and 2005 and between 15.75% to 16% in 2004.
Telaga Hikmah
On August 21, 2000, BRI through Letter No. R.479-MEN/DPB/AKH/08/2000, approved a restructuring program for its Plasma loan in Telaga Hikmah. Under the restructuring arrangement, the maximum facilities were changed from Rp112,068,000 to Rp101,646,000 which consists of principal of Rp53,796,000 and interest during construction of Rp47,850,000. The commitment for Plasma development under the loan was reduced from 15,000 hectares to 5,000 hectares. Under this restructuring program, the conversion of Plasma areas to smallholders is due to be made by December 31, 2004. The loan is to be repaid by Plasma participants on a quarterly basis within five years, commencing in the first quarter of 2007. The Plasma loan bears floating interest rates ranging from 12% to 14% in 2006, from 12% to 15% in 2005 and 14.62% to 17.02% in 2004.
The loan is to be repaid by Plasma participants on a quarterly basis within five years, commencing in the first quarter of 2007. The Plasma Loan bears floating interest rates ranging from 12% to 14% in 2006 from 12% to 15% in 2005 and 14.62% and 17.02% in 2004.
9. PLANTATION ASSETS
Plantation assets are classified as immature and mature plantations.
9. PLANTATION ASSETS (continued)
Additions to mature plantations in 2007 included Palma Agro’s acquisition cost of Sungai Rangit’s mature plantations amounting to Rp13,305,714 net of amortization of Rp665,286. It also included Sungai Rangit’s beginning balance of mature plantations which was as follows:
Cost 275,074,607
Accumulated depreciation (39,902,712)
Net book value 235,171,895
Additions to mature plantation in 2007, included the realization of the difference in value of restructuring transactions of entities under common control amounting to Rp99,293,758 due to changes in controlling shareholders (Note 2s and 31).
Sungai Rangit has Partnership Plantation with carrying value of Rp47,458,719 (1,809 ha) as of March 31, 2007 (Note 27f).
b. Immature plantations
The immature plantations represents costs incurred relating to the development of the Group’s palm and rubber plantations (Inti plantations) such as land clearing, planting, fertilizing and other maintenance activities until the palm oil and rubber areas are considered mature (Note 2h).
The movement of immature plantations is as follows:
9. PLANTATION ASSETS (continued)
b. Immature plantations (continued)
Additions of immature plantations in 2007 included beginning balance of immature plantations amounting to Rp74,123,053 from Sungai Rangit which was consolidated starting in 2007.
Plantation assets from Mutiara Bunda Jaya, Telaga Hikmah, Aek Tarum and Gunung Tua Abadi are pledged as collateral for bank loans facilities (Note 15).
10. FIXED ASSETS (continued)
As of March 31, 2007, detail of percentage of completion and estimation of completion dated were as follow: depreciation method for storage tanks, vehicle and heavy equipment, and office equipment from the double-declining balance method to the straight-line method (Note 2i). The difference in balance of accumulated depreciation, computed based on the double-declining balance method and the straight-line method, as of January 1, 2004 amounting to Rp2,144,395 was recorded as part of “Other Income/(Expenses) - Others, net” in the 2004 consolidated statements of income.
On April 30, 2003, fixed assets in the Company were revalued by PT Fiera Admiratiara, an independent appraisal, using the market value approach. The difference resulting from the revaluation of the Company’s fixed assets of Rp26,975,746 net of the related tax effect was recorded as “Assets Revaluation Increment” under shareholders’ equity in the consolidated balance sheets.
Fixed assets from Mutiara Bunda Jaya, Telaga Hikmah, Aek Tarum and Gunung Tua Abadi are pledged as collateral for bank loans facilities (Note 15).
Fixed assets which consist of land, machinery and equipments, storage tanks, vehicles and heavy equipments with net book values totalling to Rp194,101,834 were pledged as collateral for bank loan facilities obtained from Credit Suisse (Note 15).
Additions to fixed assets in 2007, included beginning balances of fixed assets from Sungai Rangit which was consolidated starting from January 1, 2007 as follows:
Cost 128,826,907
Accumulated depreciation (28,863,404)
10. FIXED ASSETS (continued)
Deductions in fixed assets represent the sales and write-off of fixed assets with details as follows:
2007 2006 2005 2004
Depreciation of fixed assets and amortization of mature plantations were as follows:
2007 2006 2005 2004
( Three Months) (One Year) (One Year) (One Year)
Depreciation of fixed assets 11,996,627 33,843,538 32,334,228 27,111,024
Amortization of mature plantations (Note 9a) 7,246,214 9,363,237 8,839,754 9,524,241
Total 19,242,841 43,206,775 41,173,982 36,635,265
Depreciation of fixed assets and amortization of mature plantations were charged to the following accounts:
11. TRADE PAYABLES (continued)
An aging analysis of trade payables was as follows:
December 31,
13. TAXATION (continued)
c. Components of corporate income tax expense (benefit)
2007 2006 2005 2004
The reconciliation between the consolidated income (loss) before corporate income tax expense as shown in the consolidated statements of income and the current estimated taxable income (tax loss) is as follows:
2007 2006 2005 2004
( Three Months) (One Year) (One Year) (One Year)
Consolidated income (loss) before
13. TAXATION (continued)
Estimated taxable income (tax loss) (51,794,554) 163,741,744 85,664,118 126,351,857
Taxable income (tax loss) relating to
Subsidiaries, net (25,218,559) 142,848,273 82,876,979 96,152,072
Estimated taxable income -
(tax loss) of the Company (26,575,995) 20,893,471 2,787,139 30,199,785
Tax losses carried forward from
prior years - - - (878,056) payable (claim for tax refund) are as follows:
13. TAXATION (continued) Taxes” since the related tax year was not ended yet.
For plantation companies, tax losses which are subject to the approval of the tax authorities, may be carried forward and utilized to offset taxable income for up to eight years.
e. The reconciliation between income tax expense (benefit), computed using the marginal tax rate of 30% from consolidated income (loss) before corporate income tax expense (benefit) and corporate income tax expense as shown in the consolidated statements of income is as follows:
2007 2006 2005 2004
f. Deferred tax assets (liabilities):
13. TAXATION (continued)
f. Deferred tax assets (liabilities): (continued)
December 31, consolidated starting from January 1, 2007, amounted to Rp326,505 as of December 31, 2006.
The utilization of deferred tax assets recognized by the Group is dependent upon future taxable income in excess of income arising from the reversal of existing taxable temporary differences. As of March 31, 2007, the management believes that the Group, except for Sungai Rangit, will generate sufficient taxable income in the foreseeable future to enable them to realize the deferred tax assets. Accordingly, Sungai Rangit did not recognize deferred tax asset from its fiscal loss.
g. In January 2007, the Company received tax assessment letters from the Tax Office, which approved to refund the Company's claim for corporate income tax at the amount of Rp3,420,782 from the total claim of Rp3,616,037. Out of the said approved amount, Rp195,255 was charged as part of "Licences and permits" in the General and administration expenses. From the approved amount, Rp136,000 was transferred as current period’s prepaid income tax and Rp1,615,220 was already received. The remaining amount of Rp1,669,562, which was received in April 2007, was reclassified as part of “Other receivables” as of March 31, 2007 (Note 6).
15. LONG-TERM BANK LOANS
Long-term portion 1,103,800,000 81,356,285 197,927,531 257,811,758
Credit Suisse, Singapore Branch
The Company
On January 26, 2007, the Company obtained a term loan amounting to US$100,000,000 from Credit Suisse, Singapore branch. The loan which bears interest at LIBOR +2.5%, shall be repaid in sixteen quarterly installments ranging from US$4,600,000 to US$8,300,000 starting April 26, 2008 (after a grace period of 15 months) up to January 26, 2012. Based on the loan agreement, the loan shall be used mainly for the purpose of (i) intra-group lending to the Company’s parent for refinancing its existing financial indebtness, (ii) for funding business expansion, working capital, and repayment of the existing financial indebtness of the Company and Subsidiaries, and (iii) to pay costs incurred relation to the loan facility.
The loan contains certain restrictions on the Company, among others, to enter into a merger or acquisition, provide guarantee, change in business, and enter into treasury transactions. The loan also requires the Company to maintain certain financial covenants and financial ratios as mentioned in the agreement.
The loan is collateralized/secured by the following:
1. Corporate guarantee from Binasawit Makmur, Mutiara Bunda Jaya, Aek Tarum, Gunung Tua Abadi and Telaga Hikmah, all Subsidiaries of the Company.
15. LONG-TERM BANK LOANS (continued)
Credit Suisse, Singapore Branch (continued)
The Company may accelerate its loan repayment by informing the facility agent minimum 10 days before current period ended and pay at the end of the current period the amount of outstanding loan plus accrued interest and other charges as mentioned in the agreement.
The Company has used the loans, among others, for the following details:
1. US$ 17,505,000 was lent by the Company to Venture Max Resources Pte., Ltd., Singapore, its parent company, to partially refinance its acquisition of the Company’s shares (Note 25d). This loan shall be due in one day after the receipt of repayment notice from the Company. Based on the amendment to the facility agreement dated March 29, 2007, which were entered into between Venture Max Resource Pte., Ltd. and the Company, this facility shall bear interest at 3 month LIBOR starting July 1, 2007.
2. US$59,000,000 was used for 100% acquisition of the shares of Palma Agro Ltd. (PAL) which was established in Republic Seychelles (Note 3). PAL holds 93.6% shares ownership in Sungai Rangit.
On January 16, 2007, based on assesment of PT Fiera Admiratiara, an independent appraisal, the value of Sungai Rangit ranges between US$54,000,000 to US$63,000,000.
3. Equivalent to Rp138,546,841 was lent to Telaga Hikmah and Mutiara Bunda Jaya, to settle their loan to PT Bank Rakyat Indonesia (Persero) Tbk (BRI). On January 29, 2007, Telaga Hilmah and Mutiara Bunda Jaya have fully repaid their loans to BRI, which amounted to Rp71,054,570 and Rp42,426,715.
4. Equivalent to Rp14,969,000 was lent to Telaga Hikmah and Mutiara Bunda Jaya to secure the repayment of their plasma participants’ loans to BRI.
Facility fee incurred in this loan amounting to Rp15,961,750 was recorded net of its amortization of Rp532,058, as part of Deferred Charges in the 2007 balance sheet.
PT Bank Central Asia Tbk (BCA)
Sungai Rangit
On November 15, 2006, Sungai Rangit obtained investment loan facilities from BCA, with the following details:
a) Facility at the maximum of Rp180,000,000, to be used to repay the convertible loan, which is repayable in six (6) years after two (2)-year grace period, starting from the initial withdrawal. b) Facility at the maximum of Rp95,000,000 or its equivalent amount in US dollar, to be used to
expand the plantation activities and for rehabilitation program for palm oil mill and plantation, which is repayable in six (6) years after two (2)-year grace period, starting from the initial withdrawal.
15. LONG-TERM BANK LOANS (continued)
PT Bank Central Asia Tbk (BCA) (continued)
Above facilities bore interest at the bank’s prime lending rate minus 2% for Rupiah withdrawal and at 1 month SIBOR plus 1.5% for US dollar withdrawal. The facilities were collateralized by landrights and buildings, new plantation area, and CPO plants, and secured by the Letter of Undertaking from PT Sampoerna Bio Energi.
The loan contains certain restrictions on Sungai Rangit, among others, to enter into a merger or acquisition, provide guarantee, change in business, obtain of new lending or give borrowing, enter into new investment, and change in the composition of Sungai Rangit’s shareholders (except if the majority shares is still owned by Sampoerna Group).
PT Bank Rakyat Indonesia (Persero) Tbk (BRI)
Mutiara Bunda Jaya
On January 29, 2003, Mutiara Bunda Jaya entered into a bank loan restructuring agreement with BRI. Under this loan-restructuring program, BRI agreed to reschedule settlement of the outstanding loan under the following conditions:
a) The Inti loan facility limit was reduced from Rp64,465,402 to Rp60,670,989. b) BRI loan facilities were restructured as follows:
1. Inti Plantation I with a maximum facility of Rp6,909,426. The loan is repayable on a quarterly basis and is to be fully repaid by the end of 2005. Payments commenced in the fourth quarter of 2004. The loan bears interest at the rate at 19% per annum for 2004 and 2005. The loan facility was settled in 2005.
2. Inti Plantation II and IDC I with maximum facilities of Rp1,996,106 and Rp2,838,742, respectively. The loans are repayable commencing on the first quarter of 2003 on a quarterly basis and are to be fully repaid by the end of 2004. The loans bear interest at the rate of 19% per annum for 2004.
3. Inti Plantation III and IDC II with maximum facilities of Rp45,416,992 and Rp3,509,723, respectively. The loans are repayable commencing on the first quarter of 2006 on a quarterly basis and are to be fully repaid by the end of the second quarter of 2010. The loan bears interest at the rate of 19% per annum for the period October 2002 through December 2010. For the period from October 2002 through December 2004, a portion of the interest at the rate of 4% per annum is deferred. The deferred interest was agreed to be repayable on a quarterly basis commencing in the first quarter of 2009 and was to be fully paid by the second quarter of 2010.However, such deferred interest had been written-off by BRI in 2005 (Note 16). c) BRI agreed to reschedule overdue interest payments of Rp12,224,000. The deferred interest is
repayable on a quarterly basis commencing in the first quarter of 2006 and is to be fully paid by the end of 2008 (Note 16).
Mutiara Bunda Jaya’s loans are secured by inventories, plantation assets, fixed assets consisting of palm oil mill and buildings, guarantee deposits, personal guarantees from shareholders and corporate guarantees from the Company dan PT Selapan Permai Lestari (Notes 4, 7, 9 and 10).
The loans from BRI bear annual interest ranging from 12% to 16% per annum 12% to 15% per annum and 12% to17% per annum in 2006, 2005 and 2004, respectively.
15. LONG-TERM BANK LOANS (continued)
PT Bank Rakyat Indonesia (Persero) Tbk (BRI) (continued)
Mutiara Bunda Jaya (continued)
Company’s corporate status, articles of association and the Company’s management, sale or transfer of their fixed assets, investing in other companies, obtaining new long-term loans, payment of payable to shareholders and granting of guarantees.
On January 29, 2007, these loans have been fully repaid to BRI.
Telaga Hikmah
On June 19, 2003, Telaga Hikmah entered into a bank loan restructuring agreement with BRI. Under this loan restructuring agreement, BRI agreed to reschedule the settlement of the outstanding bank loan facilities under the following conditions among others:
a. The limit of the Telaga Hikmah Inti loan facilities remains the same at Rp101,055,000.
b. The outstanding Inti loan balance as of December 31, 2002 of Rp71,145,461 will be repaid on a quarterly basis based on a repayment schedule starting from the first quarter of 2004 through the second quarter of 2009. The remaining Inti loan facility of Rp29,909,539 shall be drawn down in 2003 and shall be repaid on a quarterly basis starting from the first quarter of 2006 through the third quarter of 2009.
c. The interest rate for the Inti loan is a floating rate of 18.5% per annum, and such rate is from time to time subject to adjustment by BRI to reflect prevailing interest rates.
d. Effective for the period starting from January 1, 2003 through December 31, 2003 interest on the Inti loan balance of Rp71,145,461 is due to be paid on a current basis at the rate of 11% per annum. Payment of the portion of the interest incurred at the rate 7.5% per annum is deferred. Payments of such deferred interest are to be made on a quarterly basis starting from the third quarter of 2007 through the end of the third quarter of 2009.
e. BRI agreed to reschedule payment for interest amounting to Rp10,690,613. The deferred interest (Note 16) is repayable, commencing on the first quarter of 2004 on a quarterly basis based on a repayment schedule and is to be fully paid by the end of the second quarter of 2007.
Telaga Hikmah’s loan is secured by plantation assets, fixed assets consisting of palm oil mill, buildings, vehicles and heavy equipment, guarantee deposits, personal guarantees from former shareholders, corporate guarantees from the Company and PT Selapan Permai Lestari and a corporate guarantee from Aek Tarum (Notes 4, 9 and 10).
The loans from BRI bear annual interest ranging from 12% to 16% per annum 12% to 15% per annum and 12% to 17% per annum in 2006, 2005 and 2004, respectively.
The restructured loan agreements for Mutiara Bunda Jaya and Telaga Hikmah provide several requirements which need prior written approval from BRI with respect to transactions that exceed certain thresholds agreed with BRI, such as, among others, mergers, acquisitions, change in the Company’s corporate status, articles of association and the Company’s management, sale or transfer of their fixed assets, investing in other companies, obtaining new long-term loans, payment of payable to shareholders and granting of guarantees.
15. LONG-TERM BANK LOANS (continued)
PT Bank Mandiri (Persero) Tbk (Mandiri)
The Company, Aek Tarum and Gunung Tua Abadi
On November 28, 2002, the Company, Aek Tarum and Gunung Tua Abadi entered into bank loan restructuring agreements with Mandiri. Under these loan restructuring agreements, Mandiri agreed to reschedule the settlement of the outstanding bank loan facilities under the following conditions, among others:
a) Maximum loan facilities are revised from Rp337,126,938 to Rp292,214,288 with the investment credit facilities and interest during construction facilities reduced from Rp225,881,189 and Rp111,245,749 to Rp205,911,715 and Rp86,302,573, respectively.
b) The loans should be repaid on a quarterly basis starting from the first quarter of 2003 through the fourth quarter of 2008.
c) The interest rate for the loans granted to the Company and Aek Tarum is a floating rate of 19% and ranges from 16% to 19% per annum, respectively, and such rates are from time to time subject to adjustment by Mandiri to reflect the prevailing interest rates.
d) The interest rate for the loan to Gunung Tua Abadi (Inti Plantation II and IDC II, and Inti Plantation III and IDC III) is a floating interest rate at 18% per annum.
e) The penalty for late payments (principal and interest) is 2% above the commercial interest rate.
The loans are secured by inventories, plantation assets, fixed assets consisting of palm oil mill, vehicles and heavy equipment, guarantee deposits, a corporate guarantee from Aek Tarum for the Company’s loan, and also a guarantee from the Company and Aek Tarum for the Gunung Tua Abadi’s Loan (Notes 4, 7, 9 and 10).
The loans from Mandiri bear interest at rates ranging from 13.8% to 14.4% per annum, 12.9% to 16% per annum and 14.5% to 16% per annum in 2006, 2005 and 2004, respectively. In 2005, Aek Tarum has fully repaid the loan.
Under the terms of the covering restructured loan agreements, the Company, Aek Tarum and Gunung Tua Abadi are required to obtain prior written approval from Mandiri with respect to transactions that exceed certain thresholds agreed with Mandiri, such as, among others, mergers, acquisitions, change in the Company’s status, article of association and Company’s management, sale or transfer of their fixed assets, investing in other companies, obtaining new long-term loans, payment of payables to shareholders, granting of guarantees. The Company, Aek Tarum and Gunung Tua Abadi are also required to maintain cash flow and financial ratios as specified in the agreement.
16. DEFERRED INTEREST PAYABLE
In accordance with the respective bank loan restructuring agreements of Mutiara Bunda Jaya (MBJ) and Telaga Hikmah (TH) with BRI in relation to Inti plantation loans (Note 15), the BRI agreed to defer settlement of the following interest payable:
Interest on the Inti loan for the year ended December 31, 2002, repayable on a quarterly basis from first quarter of 2004 up to
end of the second quarter of 2007 - - 3,690,614 7,690,613
Payable by MBJ to BRI:
Interest on the Inti loan for the nine-month period ended September 30, 2002,
repayable on a quarterly basis from first quarter of 2006
In 2005, based on a letter issued by BRI, Mutiara Bunda Jaya settled the deferred interest by paying an amount of Rp9,200,000. The remaining balance of Rp5,327,722 which was waived by BRI was recorded as “Extraordinary Item” in the 2005 consolidated statement of income and presented net of the related income tax effect of Rp1,598,317.
