Mar_99 - CAP SA

CAP S.A. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED MARCH 31, 1999 AND 1998
(thousands of US dollars)
1. COMPOSITION OF THE CONSOLIDATED GROUP AND REGISTRATION IN THE SECURITIES
REGISTER
The Company and its subsidiaries Compañía Siderúrgica Huachipato S.A. and Compañía Minera del
Pacífico S.A. are inscribed in the Securities Register of the Chilean Superintendency of Securities and
Insurance and are regulated by that Superintendency
The consolidated group comprises CAP S.A. (the Company) and the following direct and indirect
subsidiaries:
Compañía Siderúrgica Huachipato S.A.
Compañía Minera del Pacífico S.A.
Compañía Distribuidora de Petróleos del Pacífico Ltda.
Soc. de Ingeniería y Movimientos de Tierra del Pacífico Ltda.
Pacific Ores & Trading N.V.
Pacific Ores & Trading B.V.
Manganesos Atacama S.A.
Abastecimientos CAP S.A.
P.O.R.T. Investments Ltd. N.V.
P.O.R.T. Finance Ltd. N.V.
Tax No.
% holding
94.637.000-2
94.638.000-8
79.942.400-2
79.807.570-5
Foreign
Foreign
90.915.000-0
94.235.000-7
Foreign
Foreign
99.999
99.999
99,999
99.999
99.999
99,999
98,743
99,999
100.000
100.000
2. SUMMARY OF ACCOUNTING PRINCIPLES APPLIED
a.
Presentation – The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in Chile and instructions given by the Superintendency of Securities
and Insurance.
b.
Consolidation – Significant inter-company transactions have been eliminated in the consolidated
financial statements.
c.
Currency of the financial statements – The financial statements of the Company and most of the
subsidiaries in Chile are prepared in US dollars. The financial statements of subsidiaries abroad are
translated into US dollars in accordance with generally accepted accounting principles. The financial
statements of the other Chilean subsidiaries are prepared in local currency and translated into US
dollars at the closing exchange rates.
d.
Translation – Assets and liabilities in currencies other than the US dollar are shown at the closing
exchange rates. Exchange differences are shown in the results.
e.
Time deposits – Time deposits include principal plus accrued interest.
f.-
Inventories – The main inventories are valued at absorption cost, as follows:



Steel products, at production cost of the last base quarter.
Finished products and minerals, at average production or acquisition cost.
Raw materials, supplies in warehouse and other inventories, at average acquisition cost.
Materials in transit, at cost.
The cost of inventories does not exceed the net realization value.
2
C A P S.A.
g. Fixed assets – Fixed assets are shown at cost or technical appraisal value and include interest
incurred during construction periods and the principal renovations and improvements.
Maintenance and repair costs are charged to income.
h.
Leased assets – Assets acquired under financial leases by subsidiaries are shown as acquisitions of
fixed assets, recording the sum of lease installments as a liability and the interest on an accrued
basis. Such assets do not legally belong to the subsidiaries, so they cannot freely dispose of
them until the purchase option is exercised.
i.
Depreciation – Fixed assets are depreciated on the straight-line method over the estimated useful
lives of the assets. In the subsidiaries Compañía Siderúrgica Huachipato S.A. and Compañía
Minera del Pacífico S.A., depreciation is adjusted as a function of production (between 70% and
120% of lineal depreciation).
k.
Research and development costs – Research and development costs are charged to income.
There have been no significant costs of this kind over the last five years.
l.
Mining claims -Disbursements in mining claims and mining companies which are not being
exploited, are charged to income.
m.
Exploration costs – Expenses incurred in exploring for minerals or mines are charged to
income.
m. Investments in related companies – Investments in non-consolidated related companies are shown
at their equity value
n.
Negative goodwill – Negative goodwill is amortized over the estimated term of return of the
investment. In the case of losses by the company invested in, such amortization may be adjusted
to the amount of the accumulated loss on that investment.
o.
Severance indemnities – Provisions are made for severance indemnities included in current work
contracts mainly using the present value method of the accrued cost of the benefit, using a
discount rate of 8% and considering an average permanence in the company of between 10 and
17 years.
p.
Vacations – The cost of vacations and other personnel benefits are booked on an accrual basis.
q.
Deferred taxes – The Company and most of its subsidiaries record in their financial statements
the effect of deferred taxes relating to significant timing differences which will be reversed in the
near future without being offset by new differences of the same kind. There were no significant
timing differences of this kind in 1998 and 1997. Timing differences whose reversal is offset by
future differences of the same kind are treated as permanent differences.
r.
Statement of cash flow – Cash and cash equivalents includes cash and bank balances, and time
deposits not exceeding 90 days term.
3. ACCOUNTING CHANGES
The accounting principles and criteria described in Note 2 were applied uiniformly during 1999 and 1998.
4. STATEMENT OF CASH FLOW
The net cash flow from operating activities shows the net inflows or outflows of cash and cash equivalents
during the period resulting from operations affecting the results of CAP S.A. and subsidiaries.
C A P
S.A.
3
5. TIME DEPOSITS
These comprise:
Currency
Swiss Bank Corporation - New York Branch
MeesPierson (THE HAGUE) N.V.
MeesPierson (CURACAO) N.V.
Total
( Code 11020 )
US$
US$
US$
1999
MUS$
1,001
100
905
2,006
1998
MUS$
952
300
879
2,131
6. INVENTORIES
These comprise
1999
MUS$
1998
MUS$
Steel products:
Finished products
Semi-finished products & those being processed
Primary & other products
Steel sub-products
Sub total
17,626
36,575
8,584
13,561
76,346
11,835
26,754
8,858
6,626
54,073
Mining products:
Finished pellets
Pellet chips
Pre-concentrates
Fines & lumps
Other minerals being processed
Sub total
12,091
1,486
348
9,106
1,492
24,523
4,721
584
20,982
3,499
933
30,719
Raw materials:
Imported carbon
Alum-Zinc alloy, silicon
Iron ore
Lime, limestone & other raw materials
Raw materials in transit
Sub total
7,145
2,866
3,529
8,534
635
22,709
11,377
1,790
2,574
8,843
1,166
25,750
Supplies, etc.
Materials, spares & supplies
Equipment & materials for sale
Supplies in transit
Sub total
48,541
1,754
3,940
54,235
42,275
1,524
6,391
50,190
177,813
160,732
Total
( Code 11090 )
C A P
4
S.A.
7. FIXED ASSETS
Fixed assets consist mainly of land, buildings, infrastructure works, machinery and equipment in the
mines, pellets plant, mineral shipment ports, steel mill and moorings.
1999
MUS$
MUS$
4,030
36,425
360,380
64,377
1,303,998
84,811
5,692
12,578
7,726
1,880,017
4,024
36,424
357,934
64,101
1,292,118
100,312
6,673
16,456
25,302
1,903,344
(1,133,877)
(1,120,256)
746,140
783,088
Technical
appraisals
MUS$
Cost
MUS$
Land
Improvements to land & roads
Buildings
Infrastructure works
Machinery & equipment
Transport & handling equipment
Leased fixed assets
Other assets
Works in progress
Sub total
Depreciation
Total
( Code 12000 )
Total
1998
Total
3,223
33,983
354,250
45,381
1,251,709
79,895
5,692
12,578
7,726
1,794,437
(1,039,497)
754,940
807
2,442
6,130
18,996
52,289
4,916
---85,580
94,380)
(8,800)
Depreciation amounts to MUS$ 12,141 in 1999 and MUS$ 15,215 in 1998, and includes MUS$ 223 and
MUS$ 181 respectively with respect to depreciation of technical appraisals.
8. INVESTMENTS IN RELATED COMPANIES
The principal nature of investments in non-consolidated related companies is:
a) At March 31, 1999:
Number of
paid
shares
Direct
percentage
holding
Equity of
company
Book value
of
investment
MUS$
%
Results
recorded by
investor
company
MUS$
MUS$
Compañía Minera Huasco S,A,
Compañía Minera La Jaula
Cía, Minera Carmen de Andacollo
Propal S,A,
Total
( Code 13010 )
1,050,000
10,500
1,647
490
50.000
50.000
27.000
49.000
26,356
20,985
-5,000
13,178
4,825
-2,450
20,453
483
71
(1,315)
--
b) At March 31, 1998:
Number of
sharess
Direct
percentage
holding
Equity of the
company
MUS$
%
Compañía Minera Huasco S,A,
Compañía Minera La Jaula
Cía, Minera Carmen de Andacollo
Total
( Code 13010 )
934,950
10,500
1,647
These shares have no market quotation.
50.000
50.000
27.000
Book value
of
investment
MUS$
18,699
20,990
7,653
9,350
4,607
2,067
16,024
Results
recorded by
investor
company
MUS$
--(1,427)
C A P
S.A.
5
9. OTHER ASSETS
Apart from the investments in related companies (Note 8) and the long-term acounts receivable from
related companies (Note 15b), Other assets include:
1999
1998
MUS$
MUS$
a) Investments in other companies
Agronova Fruta S.A.
Total
( Code 13025 )
b) Negative goodwill:
Cía. Minera Carmen de Andacollo
Total (code 13027)
c) Long-term debtors:
Loans to personnel
Other
Total
( Code 13030 )
d) Other long-term assets:
Rights in installations
Inventories saleable in over one year, net of provision
( Note 14 )
Actuarial adjustments to deferred severance indemnities
Fixed assets for sale
Unaccrued portion of credit insurance premium
Unaccrued portion of financial cost of long-term credits
Unaccrued portion of special bonus under collective agreement
Other
Total
( Code 13080 )
73
73
77
77
---
(1,526)
(1,526)
11,121
2,461
13,582
11,574
5,929
17,503
100
100
17,060
374
1,195
2,577
4,919
2,964
1,045
30,234
22,340
429
2,371
3,262
7,613
4,827
1,354
42,296
During the second half of 1998 and first quarter of 1999, negative goodwill with respect to the investment
in Compañía Minera Carmen de Andacollo was amortized in an amount equivalent to the proportional loss
shown in this associate company in the same period.
C A P
S. A.
10. SHORT-TERM OBLIGATIONS WITH BANKS ( Code 21010 )
6
The detail of these is as follows:
(in thousands of US dollars)
Currency
Other foreign currencies
Unidades de Fomento
US dollars
Bank
Banco de Chile
Banco de Crédito e Inversiones
Banco Sud Americano
Corp Banca
Banco Santiago
Banco Santander
ABN – AMRO Bank
MeesPierson Bank N,V,
Total
( Code 21010 )
1999
MUS$
1998
MUS$
1999
MUS$
1998
MUS$
1999
MUS$
1998
MUS$
Chilean pesos
1999
MUS$
Total
1998
MUS$
1999
MUS$
5,044
21,436
10,302
15,226
12,900
18,857
8,173
8,194
--5,159
10,329
-15,218
-9,152
---------
---------
---------
---------
---------
---------
5,044
21,436
10,302
15,226
12,900
18,857
8,173
8,194
--5,159
10,329
-15,218
-9,152
100,132
39,858
--
--
--
--
--
--
100,132
39,858
Principal due
98,093
98,093
Average annual interest rate
(weighted by amounts of principal)
7,20%
7,22%
Percentage in foreign currency
Percentage in local currenncy
1998
MUS$
100%
The figures shown include interest accrued to the year-end.
C A P
S. A.
7
11. OTHER SHORT-TERM OBLIGATIONS (Codes: 21025 al 21110)
a) The detail of these is as follows:
(in thousands of US dollars)
Currency
Other foreign currencies
Unidades de Fomento
US dollars
Items
Current portion of other long-term
liabilities
Notes payable
1999
MUS$
*
4,659
*
16,329
Accounts payable to related
companies
Dividends payable
Accounts payable
Sundry creditors
Provisions ( Note 14 )
Withholdings
Income tax (Note 16)
Unearned income
Other current liabilities
Total
( Códigos 21025al 21110 )
6,611
-2,922
667
2,832
-67
--34,087
Principal due
33,813
Average annual interest rate
*
5.84%
1998
MUS$
1999
MUS$
1998
MUS$
1998
MUS$
1999
MUS$
Total
1998
MUS$
4,672
--
--
--
--
--
--
36,316
--
--
--
--
--
21
--8,678
1,187
14,875
-155
258
-66,141
-----------
-----------
-----------
-----------
143
207
14,943
240
27,984
3,578
3,314
366
-50,775
99
201
21,604
211
23,779
8,482
2,041
173
1
56,612
50,775
1999
MUS$
*
4,659
*
16,329
6,754
207
17,865
907
30,816
3,578
3,381
366
-84,862
84,588
*
5.84%
(weighted by amounts of principal)
Percentage in foreign currency
Percentage in local currency
1999
MUS$
Chilean pesos
40.17%
59.83%
1998
MUS$
4,672
36,337
99
201
30,282
1,398
38,654
8,482
2,196
431
1
122,753
C A P
S. A.
8
C A P
S.A.
9
b. Detail of the principle liabilities:
The main current liabilities not detailed in other notes, are:
Accounts payable:
Harbison Walker
Pan Ocean
Fundición Nodular
Refratechnik GMBh
Allied Mineral Products
Compañía Minera Autlan
Magotteaux Andino Ltda.
Detroit Diesel-MTU Allison S.A.
Hechett Multiserv S.A.
Compañía de Petróleos de Chile S.A.
Empresa Nacional de Electricidad S.A.
Indura S.A.
Finning Chile S.A.
Vulco S.A.
Shell Chile S.A.
Moly-Cop Chile S.A.
Svedala Chile S.A.
Occidental Chemical Chile S.A.
Orica Chile S.A.
Vesuvius Refractarios S.A.
Harbison Walker Refractarios S.A.
Ferrostaal A.G.
Minco Sales
Fleetwood Paper
Highway Material Inc.
Pittsburg Ann
Howden S.
Petrox S.A.
Michelin Chile Ltda.
Empresa Nacional de Explosivos S.A.
Refractarios Chilenos S.A.
Küpfer Hermanos S.A.
Ferronor S.A.
ICI Explosives Chile
Const. Ref. Recsa S.A.
Others of smaller individual amounts
Total
( Code 21050 )
Notes payable:
BHP Australia Coal Pty. Ltd.
Fording Coal Limited
Luscar Ltd.
Consol of Canada Inc.
Ferrostaal A.G.
Others of smaller individual amounts
Total
( Code 21060 )
1999
MUS$
1998
MUS$
Expiry
133
39
12
57
82
294
198
87
706
417
2,123
339
341
131
293
139
97
217
234
222
1,044
--------------10,660
17,865
-239
37
---307
165
963
592
2,658
424
517
--------284
30
214
830
111
124
688
247
437
772
159
389
488
361
19,246
30,282
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
April, 1999
9,701
3,124
1,752
1,752
---
8,253
5,152
1,840
1,839
19,232
21
16,329
36,337
April, 1999
April to August 1999
April & July 1999
May y& August 1999
May & August 1999
C A P
S. A.
10
12. LONG-TERM LIABILITIES TO BANKS & FINANCIAL INSTITUTIONS (Codes 21015 & 22010)
The detail of these is as follows (including the short-term portion):
(in thousands of US dollars)
Currency
or
adjust-me
nt unit
Í
Bank or Financial Institution
Short-te
rm
portion
MUS$
Long-term maturities
Principal
2000
2001
2002
2003
2004
2005
Total at
03.31.99
Annual interest
rate
Due at
03.31.99
MUS$
MUS$
MUS$
MUS$
MUS$
MUS$
MUS$
%
MUS$
M.H. Panamá S.A.- Coke Tranch I
M.H. Panamá S.A.- Coke Tranch II & III
YEN
US$
10,377
4,694
9,940
4,328
4,971
2,165
---
---
---
---
25,288
11,187
Kreditanstalt Für Wiederaufbau – Coke
M.H. Panamá S.A. – Galvanizing
US$
US$
2,219
604
1,095
--
1,095
--
---
---
---
---
4,409
604
M.H. Panamá S.A.-Cold rollerT. I to III & IX
M.H. Panamá S.A.-Cold roller Tranch IV
Banque Paribas – Cold roller
Chase Manhattan Bank
The Bank of Tokyo-Mitsubishi Ltd.-N.York
Dresdner Bank Luxembourg S.A.
The Sumitomo Corp. – MDF
US$
US$
US$
US$
US$
US$
US$
2,983
7,494
4,577
3,243
6,544
2,274
653
2,593
7,186
4,037
2,918
3,104
1,088
--
2,593
-4,037
2,918
6,207
2,176
--
2,593
-4,037
2,918
6,208
2,176
--
2,593
-4,037
2,918
6,208
2,176
--
2,593
-4,037
2,918
6,208
2,176
--
2,593
-2,019
1,460
6,206
2,177
--
18,541
14,680
26,781
19,293
40,685
14,243
653
International Finance Corp (Subordinated)
Union Bank of Switzerland N.Y.
(Syndicated)
Union Bank of Switzerland N.Y.
Santander Investment Bank Limited
Santander Investment Bank Limited
Banco Santander London Branch
Total
( Codes 21025 & 22020 )
US$
US$
31
1,605
---
2,000
75,000
---
---
---
---
2,031
76,605
US$
US$
US$
US$
-20,096
288
2,053
69,735
-18,724
-1,000
56,013
-18,724
65,000
-186,886
----17,932
----17,932
----17,932
----14,455
-57,544
65,288
3,053
380,885
Figures shown as short term include interest accrued to the year-end.
Fixed rate 4.00
Fixed rate
6.495 +1.25
Fixed 6.49
Fixed rate
6.87 + 1.25
Libor + 0.95
Libor + 0.95
Fixed rate 7.90
Libor + 0.45
Libor + 0.60
Libor + 0.50
Fixed 6.87 +
1.50
Libor
Libor + 0.65
Libor + 0.75
Libor + 0.75
Libor + 0.2405
Total in foreign currency
Total in local currency
At 03.31.98
Short-te
rm
portion
MUS$
Long-te
rm
portion
MUS$
24,851
10,820
9,391
4,842
22,116
10,821
4,381
592
2,230
1,219
4,381
593
18,150
14,371
26,242
18,970
40,348
14,145
640
3,112
7,723
4,660
3,351
6,626
2,310
1,484
18,149
14,371
26,242
18,970
40,348
14,145
640
2,000
75,000
37
1,808
2,000
75,000
-56,173
65,000
3,000
374,683
2,375
11,116
321
2,100
64,705
-56,173
65,000
3,000
371,949
MUS$ 380.885
MUS$ - - - - -
C A P S. A.
11
The Company has carried out the following swap transactions:
a. Currency swap of a credit from Kreditanstalt für Wiederaufbau whose principal due at March 31,
1999 is MUS$ 4,381. This credit was granted in German marks and this transaction
transformed these into their equivalent in US dollars at a rate of DM 1.691 per dollar, with the
interest rate remaining at 6.49% p.a..
b.
b. Currency and interest-rate swap of a yen-denominated loan granted by Santander Investment
Bank Limited, whereby this was transformed into a US dollar obligation with an interest rate of
Libor + 0.75%. The principal outstanding amounts to MUS$ 56,173 at March 31, 1999.
c. Interest rate swap changing the floating rate on some credits as follows:
Bank or financial institution
MH Panamá – Cont. galvanizing
MH Panamá - Coke tranches II & III
Sumitomo Corporation - (MDF)
Term of swap
07.07.1993 to 07.07.1999
30.04.1993 to 27.04.2001
03.07.1993 to 03.07.1999
Balance of
principal at
31.03.99
MUS$
Swap rate
592
10,820
640
6,870
6,495
6,870
%
C A P S. A.
12
13. OTHER LONG-TERM LIABILITIES (Codes: 22040-22050-22070)
The maturities and main characteristics of these are as follows:
(in thousands of US dollars)
Total at
Maturities
Currency
or
adjust-me
nt unit
Average
annual
interest
rate
Principal
due
03.31.98
2000
2001
2002
2003
2004
2005
on-wa
rds
03.31.99
MUS$
MUS$
MUS$
MUS$
MUS$
MUS$
MUS$
U.F.
US$
4
2,176
-6,005
-495
-118
-105
-210
4
9,109
8,94
4
9,109
---
-13,695
Long-term provisions
$
US$
4,458
829
3,560
829
3,716
728
3,358
726
3,199
--
17,337
--
35,628
3,112
6,62
Libor
35,628
3,112
3,912
302
38,328
2,360
Other long-term liabilities
U.F.
US$
---
-1,195
2
--
---
---
---
2
1,195
2
1,195
---
2
2,371
7,467
11,589
4,941
4,202
3,304
17,547
49,050
49,050
4,214
56,756
MUS$
MUS$
13,416
35,634
Sundry creditors
Total (Codes 22040,22050 & 22070)
Total in foreign currency
Total in local currency
Exchange rate
$
484.08
%
at
03.31.99
Short-te
rm
portion
Long-te
rm
portion
MUS$
MUS$
MUS$
C A P S. A.
13
14. SHORT AND LONG-TERM PROVISIONS AND WRITE-OFFS
a) Short-term provisions are as follows:
1999
MUS$
1998
MUS$
4,354
8,952
5,600
7,058
4,852
30,816
3,912
10,054
5,556
5,448
13,684
38,654
3,899
7,272
106
4,706
9,024
113
Shown in current liabilities:
Severance indemnities
Vacations
Long-service bonuses
Other personnel provisions
Other sundry provisions
Total
( Code 21080 )
Deducted from the respective assets:
For short and long-term bad debts
For inventories
Other current assets
The policy of the Company and its subsidiaries is to make provisions for all accounts subject to judicial
collection and specific and global provisions for outstanding accounts showing some degree of payment
risk. Debtors of the kind specifically mentioned in Circular 458 of the Superintendency of Securities and
Insurance (in suspension of payments or bankruptcy) are for insignificant amounts and are fully provided
for. There are no accounts receivable from related companies that are of doubtful recovery. The
management of the Company and the subsidiaries therefore believe that the provisions made reasonably
cover the risks of non-payment on all its accounts receivable.
b) Write-offs:
There were no significant write-offs in the first quarters of 1999 and 1998.
c) Long-term provisions are the following:
Severance indemnities
Other personnel provisions
Sundries
Total
( Code 22050 )
1999
MUS$
1998
MUS$
29,515
6,113
3,112
38,740
27,654
10,234
2,800
40,688
The long-term provision for severance indemnities showed the following movement:
Balance at January 1
Provision for the year
Payments during year & transfers to short-term
Total
1999
MUS$
1998
MUS$
31,986
1,029
(3,500)
29,515
30,587
1,194
(4,127)
27,654
C A P S. A.
15. ACCOUNTS
COMPANIES
14
RECEIVABLE
AND
PAYABLE
AND
TRANSACTIONS
WITH
RELATED
a. Main related companies:
The Company and subsidiaries had transactions with the following related companies during 1999 and
1998:
RUT
Shareholders and directors in common
Forestal Terranova S.A.
96,708,490-5
Invercap S.A. (Associate)
96,707,470-0
Director in common:
Sociedad Naviera Ultragas Ltda.
80,927,500-0
Associate companies:
Compañía Minera Carmen de Andacollo
Compañía Minera Huasco S.A.
Compañía Minera La Jaula
Propal S.A.
78,126,110-6
96,778,700-0
78,781,830-7
96,835,610-0
Subsidiaries of Forestal Terranova S.A.:
Andinos S.A.
96,469,000-6
Fibranova S.A.
96,623,490-3
Subsidiaries and associates of Invercap S.A.:
Sabimet S.A.
Centroacero S.A.
Cintac S.A.
Inversiones Quilicura S.A.
Tecno Steel S.A.
91,596,000-6
96,619,660-2
92,544,000-0
96,639,150-2
96,706,060-7
b. Balances receivable and payable: These arise from the ordinary course of business as follows:
1999
1998
Maturity
MUS$
MUS$
Short-term receivables:
Propal S.A.
1,568
-Ct. Acct.
Compañía Minera Carmen de Andacollo
105
105
Ct. Acct.
Compañía Minera Huasco S.A.
137
257
Ct. Acct.
Sabimet S.A.
183
785
Ct. Acct.
Compañía Minera La Jaula
-9
Ct. Acct.
Cintac S.A.
1,289
3,364
Ct. Acct.
Inversiones Quilicura S.A.
92
147
Ct. Acct.
Invercap S.A.
106
124
Ct. Acct.
Centroacero S.A.
1,676
101
Ct. Acct.
Tecno Steel S.A.
-130
Ct. Acct.
Total
( Code 11070 )
5,156
5,022
Long-term receivables:
Compañía Minera Carmen de Andacollo
Compañía Minera Huasco S.A.
Total
( Code 13035 )
13,426
11,046
24,472
12,544
492
13,036
C A P S. A.
15
Short-term payables:
Compañía Minera Huasco S.A.
Compañía Minera La Jaula
Cintac S.A.
Fibranova S.A.
Sociedad Naviera Ultragas Ltda.
Totales
( Código 21075 )
1999
MUS$
1998
MUS$
6,594
131
18
11
-6,754
--48
-51
99
Expiry
Ct.Acct.
Ct.Acct.
Ct.Acct.
Ct.Acct.
c. Transactions: The principal transactions with non-consolidated related companies are as follows:
1999
1998
MUS$
MUS$
Sales of steel products, pellets, etc. to:
Propal S.A.
Cintac S.A.
Sabimet S.A.
Centroacero S.A.
Inversiones Quilicura S.A.
Tecno Steel S.A.
Compañía Minera Huasco S.A.
273
3,946
301
1,745
194
-17,927
-5,398
1,476
93
276
332
--
Interest and other credits to income received from:
Propal S.A.
Compañía Minera Huasco S.A.
Compañía Minera Carmen de Andacollo
Sociedad Naviera Ultragas Ltda.
Invercap S.A.
146
3,218
235
4
1
-279
249
2
--
Purchases of products, services, etc. from:
Compañía Minera Huasco S.A.
Fibranova S.A.
Cintac S.A.
Sabimet S.A.
Sociedad Naviera Ultragas Ltda.
Centroacero S.A.
Andinos S.A.
9,179
18
27
2
1,427
18
--
-24
-38
1,736
-6
16. INCOME TAX AND DEFERRED TAXES
a) Taxable income and provision for income tax
1998
MUS$
Taxable income
Tax loss for the period
Provision for corporation income tax
5,914
16,892
905
In 1999 and 1998, tax losses relate to CAP S.A. and one of its subsidiaries.
1997
MUS$
16,157
5,591
2,556
C A P S. A.
b) Tax profits
16
At March 31, the Company and its subsidiaries show the following consolidated balances of retained tax
profits, accumulated tax losses and credits for shareholders:
1999
1998
MUS$
MUS$
Tax profits carrying credits
Tax profits without credits
Exempt income
Income not considered for tax purposes
Tax losses
Credits for shareholders
30,626
812
9
2,237
1,594
4,678
94,223
3,457
10
2,237
5,588
15,391
c) Net taxes recoverable
The net taxes recoverable relate to the tax situation of the Company and some subsidiaries, as follows:
1999
1998
MUS$
MUS$
Income tax
Article 21 tax
Extraordinary income from applying accumulated tax
losses of subsidiary
Net charge to income for income tax
Balance previous year
Monthly provisional payments
Credits for training expenses, etc.
Net income tax recoverable
(905)
(18)
--(923)
5.650
2.385
392
7.504
(3.030)
(20)
409
(2.641)
2.261
135
391
146
At March 31, 1999 and 1998, net income tax recoverable is shown in current assets for MUS$ 10,885 and
MUS$ 2,342 respectively and in income tax under current liabilities for MUS$ 3,381 and MUS$ 2,196
respectively.
d) Future accounting change for deferred taxes
Circular 1,383 of the Superintendency of Securities and Insurance requires the booking, as from January
1, 1999, of all deferred taxes for timing differences, tax losses and other events that create differences
between the book and taxation treatment of assets and liabilities, in the terms set out in Technical Bulletin
No.60 of the Chilean Institute of Accountants. Circular 1,421 of January 12, 1999 postponed this
obligation until the third quarter of 1999. In the financial statements for the first half of 1999, the effects of
applying this criteria should only be shown in a Note to the accounts. Until the coming into force of
Circular 1383, Circular 986 requires the booking of deferred taxes and provides the option of excluding
the effects of deferred taxes for timing differences whose reverssal is compensated by new differences of
the same kind. The terms of Technical Bulletin No.60 are only applicable to timing differences, tax
benefits and events creating differences between the book and taxation treatment of asets and liabilities
that arise after the first year in which it is applied.
C A P S. A.
17
If this change had been applied since January 1, 1999, the Company and its subsidiaries would have
recorded deferred taxes as follows:
At March 31, 1999, the accumulated balances of timing differences, excluding the initial balances at
January 1, 1999, which would have generated deferred taxes, are the following:
Deferred assets
Short term
Long term
Deferred liabilities
Short term
Long term
Timing differences
MUS$
Provision for bad debts
Provision for vacations
Provision for service bonuses
Sundry provisions
Accumulated tax loss
Leasing obligations
Provision for retirement pensions
Provision for work accidents
Manufacturing costs
Severance indemnities
Tax depreciation difference
Interest and commissions
Leasing operations
Total
MUS$
MUS$
MUS$
96
(512)
527
(2,218)
1,532
---------
15
(171)
(439)
--(91)
------(155)
--------4778
-----
------44
29
-864
7,507
(240)
(542)
(575)
(841)
4,778
7,662
The amounts of assets and liabilities for deferred taxes that would have been generated and reversed
during the period are as follows:
Deferred taxes
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Total
Net credit
(charge)
MUS$
(85)
(141)
(717)
(1,150)
(2,093)
C A P S. A.
18
Accumulated balances at the start of the year of the asset and liability accounts for deferred taxes and
their respective complementary accounts, would have been as follows:
Initial balances
Short-term deferred taxes receivable
Provision for bad debts
Provision for vacations
Provision for service bonuses
Sundry provisions
Long-term deferred taxes receivable
Provision for bad debts
Provision for vacations
Provision for service bonuses
Provision
for
materials
obsolescence
Leasing obligations
Sundry provisions
Short-term deferred taxes payable
Manufacturing costs
Long-term deferred taxes payable
Severance indemnities
Tax depreciation difference
Interest and commissions
Leasing operations
Provision for retirement pensions
Provision for work accidents
Total
Deferred
taxes
MUS$
Complemenetary
Accounts MUS$
Terms
Estimated
Weighted
for
average
reversal
(2,512)
468
1,232
186
626
2.40
3,4
2,5
3,1
1,3
(1,841)
6.58
300
176
306
898
3,4
2,5
3,5
10
116
45
3,1
5,3
4,936
(4,936)
2.30
2,3
63,861
(6,047)
(54,363)
(2,447)
(849)
(114)
(41)
(64,444)
16.11
18
16,3
10
7
10
10
64,444
The composition of the income taxes account following the recording of deferred taxes, would have been
as fiollows:
1988
MUS$
Current tax charge
Income tax
Special Art..21 tax
Tax loss benefit
Deferred taxes:
Effect on assets and liabilities of deferred tax for the year
Effect of amortization of complementary accounts of deferred assets
and liabilities
Tax loss benefit
Total charge to income
905
18
(546)
2,323
1,198
(230)
3,668
C A P S. A.
19
17. SHAREHOLDERS’ EQUITY
The equity accounts have shown the following movement:
Reserves
Paid
capital
MUS$
Retained earnings
Participation Accumuin reserves lated
of
subsidiaries
MUS$
MUS$
Balance at January 1, 1998
Transfers
Net equity changes in
subsidiaries
Net income for year
Balances at March 31, 1998
379,444
--
3,689
--
79,432
39,828
--379,444
(321)
-3,368
--119,260
Balances at January 1, 1999
Transfers
Equity changes in subsidiaries
Net income for year
Balances at March 31, 1999
379,444
---379,444
3,317
-(306)
-3,011
99,346
30,358
--129,704
For the
year
Interim
dividends
TOTAL
MUS$
MUS$
MUS$
39,828
(39,828)
(12,490) 489,903
---
--(321)
11,009
- - 11,009
11,009 (12,490) 500,591
30,358
(30,358)
-127
127
(9,585) 502,880
---(306)
-127
(9,585) 502,701
Paid capital:
At March 31, 1999 and 1998, the authorized, subscribed and paid capital is represented by149,448,112
shares of no par value.
Participationin reserves of subsidiaries:
These resrves originated from equity changes in subsidiaries and their associate companies that maintain
their books in Chilean pesos.
Earnings Distribution:
Under current legislation, at least 30% of earnings for the year should be distributed as cash dividends,
unless otherwise agreed unanimously by the shareholders at a general meeting. The board and
shareholders meetings in 1999 and 1998 agreed to the distribution of the following dividends:
Dividend
Nº 57 Interim
Nº 58 Final
Nº 59 Interim
Nº 60 Interim
Nº 61 Interim
Income of
year
Date agreed
1997
1997
1998
1998
1998
05.12.97
16.04.98
03.07.98
01.10.98
04.12.98
Date paid to
shareholders
21.01.98
24.04.98
24.07.98
23.10.98
22.01.99
MUS$
3,403
7,424
3,228
3,193
3,164
C A P S. A.
20
The dividend policy agreed by shareholders is to distribute 50% of income as dividends and retain 50% as
reserves.
18. OWNERSHIP STRUCTURE
The book value of the shares at March 31, 1999 is 3.3637 US dollars, equivalent to 1,628 Chilean pesos
per share, (1998 : 3.3496 US dollars equivalent to 1,522 pesos per share).
The distribution of shareholders at March 31, 1999 is:
Total percentage
holding
Kind of shareholder
10% holding or more
Less than 10% holding:
With investment of UF 200 or more
28.18%
Number of
share-holde
rs
1
70.48%
1,827
1.34%
100.00%
5,766
7,594
With investment of less than UF 200:
Total
Invercap S.A. is the controlling shareholder of the Company.
19.SHARE TRANSACTIONS
Share transactions made in 1999 and 1998 by the principal shareholders, chairman, directors and
managers of the Company are as follows:
Name
a) Purchases:
Invercap S.A.
Sergio Verdugo Aguirre
Sonia Cárdenas Pavincich
Cía. Explotadora de Minas
South Pacific Investments S.A.
b) Sales:
Relationship
Majority shareholder
Manager
Wife of manager
Related to director
Related to chairman
Number of shares
1998
1997
---23.421
17.829
581.648
4.000
3.000
---
--
--
None
20. DIRECTORS’ REMUNERATION
The following shows the remuneration paid to the directors of the Company and subsidiaries:
1999
MUS$
1998
MUS$
C A P S. A.
21
Meeting attendance
Representation expenses
Total
84
23
107
86
23
109
21. SALES AND COST OF SALES
These comprise the following:
1999
MUS$
1998
MUS$
Sales:
Domestic market:
Steel products
Pellets, lumps & fines
Other products
Services
External market:
Steel products
Pellets
Lumps and fines
Other products
Services
Total
( Code 41110 )
65,995
17,971
4,230
3,267
102,306
76
5,114
733
3,503
-7,857
-1,321
104,144
6,903
24,437
15,357
920
3,090
158,936
Cost of sales:
Personnel
Raw materials
Supplies
Purchase of products for sale
Services bought or hired
General expenses
Depreciation
Transfer of expenses
Changes in product inventories
Total
( Code 41120 )
26,877
32,732
17,178
1,455
19,997
4,441
12,134
(3,000)
(17,373)
94,441
31,462
27,653
21,713
1,271
28,808
3,889
15,209
(2,202)
3,028
130,831
Costs breakdown:
Fixed
Variable
46.0 %
54,0 %
46,7%
53,3%
22. OTHER NON-OPERATING INCOME AND EXPENSES
The detail of these is as follows :
1999
MUS$
Other income:
Services rendered
Exchange adjustments & differences
Profits on sale of fixed & other assets (net)
C.M.P. insurance claim August 1997
Reversal of provisions & adjustments
Other
Total
(Code 42130)
Other expenses:
Services paid
Adjustment to provisions
Mining licenses
1998
MUS$
478
516
152
1,289
3,556
1,431
7.422
325
730
3,809
--161
5,025
72
192
114
76
1,162
234
C A P S. A.
22
Process engineering, and project research &
development
Other
Total
(Code 42230)
705
399
1,482
673
796
2,841
23. CONTINGENCIES AND COMMITMENTS
These consist of the following:
a. Direct commitments:
Guarantees given
1999
MUS$
1998
MUS$
35
31
790
34
Short term:
Mineral sale commitments
Customer orders for future purchases of steel products
Purchase orders placed
Inventories on consignment
Deferred customs duties
Other
159,880
-30,127
1,985
203
267
176,128
76,980
105,004
2,136
669
2,136
Long term:
Mineral sale commitments
Deferred customs duties
339,551
1,819
349,330
1,937
National customs authority
Other minor items
Other direct commitments
Mineral sale commitments correspond to contracts signed with domestic and foreign customers valued at
prices prevailing at the year-end. These contracts are revised periodiclly with the customers. The average
term of the contracts is three years
As part of the association agreement between our subsidiary Compañía Minera del Pacífico S.A. and MC
Inversiones Ltda. mentioned below, Compañía Minera Huasco S.A. began operations on July 1, 1998.
From that date,Compañía Minera del Pacífico S.A. buys all the production of pre-concentrates of that
company and sells it its production of pellets. The commitments to sell basic and self-fluxing pellets will be
met through sales made by Compañía Minera Huasco S.A.
In Compañía Minera del Pacífico S.A., deferred customs duties are not recorded as liabilities as it is
expected to benefit from export incentives that would exempt it from paying these duties.
Compañía Siderúrgica Huachipato S.A. is jointly and severally liable for long-term credits received by
CAP S.A. which amounted to MUS$ 375,147at March 31, 1999.
Compañía Minera del Pacífico S.A. is jointly and severally liable for credits received by CAP S.A. from
Union Bank of Switzerland and Santander Investment Bank Limited which, at March 31, 1999, amount to
MUS$ 199,438 and a commitment to grant guarantees in favor of the Company for up to MUS$ 200,000.
Compañía Minera del Pacífico S.A. granted its guarantee for up to 30% of the liabilities under a credit to
its associate Compañía Minera Carmen de Andacollo from Canada Tungsten (Cayman) Inc.. The amount
outstanding under the credit at March 31, 1999 is MUS$ 37,500.
Association agreements:
On December 9, 1998, agreement was reached to reduce the capital of the associate company
Compañía Minera Carmen de Andacollo. This sets out that the 2,538 subscribed but un-paid shares held
C A P S. A.
23
by Compañía Minera del Pacífico S.A., equivalent to MUS$ 3,981, must be paid up no later than
December 31, 1999.
Compañía Minera del Pacífico S.A. (C.M.P.) and MC Inversiones Ltda., a subsidiary of Mitsubishi
Corporation, have a joint project for expanding the Los Colorados mine, producing iron pre-concentrates,
converting the pre-concentrates into pellets and commercializing the pellets. C.M.P. has therefore sold to
MC Inversiones Ltda. 50% of its absolute rights to the mining claims and water rights of the Los Colorados
mine. Both companies contributed their rights in Compañía Minera La Jaula. C.M.P. also holds 50% of
Compañía Minera Huasco S.A.,, a close corporation formed to exploit the above mining claims. Neither of
the parties may, within a period of ten years, assign, transfer, mortgage, charge, pledge or dispose of in
any other way its shares in the two above-mentioned companies without the prior consent of the other
party.
The project was financed by a credit of MUS$ 71,700 from the Mitsubishi Corporation group through MV
Cayman Limited. The amount of the credit including accrued interest at March 31, 1999 is MUS$ 81,247.
As project sponsors, C.M.P. and MC Inversiones Limitada have committed to to support the obligation of
Compañía Minera Huasco S.A. to build up financial reserves of up to approximately MUS$ 10,700 from
the project cash flows over the first two years of operations. Each sponsor is contingently liable for 50% of
the commitments and their potential materialization will be by subordinated loans..
Once twenty years have passed from July 1, 1998, and C.M.P. has fully depreciated its pellets plant,
Compañía Minera Huasco S.A. shall have the option to acqure that plant.
Other contracts signed:
Compañía Minera del Pacífico S.A.: Ship charter agreement expiring in 2003. The total value of the
contract amounts to MUS$ 40,585 at March 31, 1999 (MUS$ 51,041 at March 31, 1998).
In 1994, Compañía Minera del Pacífico S.A. signed a 5-year operative leasing aggreement over
equipment for operating El Romeral mines. The value of the un-accrued future installments at March 31,
1999 amount to approximately MUS$ 1,374.
b. Contingencies for lawsuits pending that could result in losses for the Company.
On March 22,1993, the subsidiary Compañía Minera del Pacífico was notified of a demand against it by
Huasco Valley olive-growers for damages amounting to MUS$ 60,000 due to particle emissions from the
pellets plant.
The subsidiary in turn made a counter-claim for the joint payment of material damages of approximately
MUS$ 29,000 and the joint and several payment of moral damages of approximately MUS$ 38,000.
In December 1997, both parties were notigfied by the La Serena court in the first instance that both
demands had been dismissed. The olive-growers appealed against this decision and Compañía Minera
del Pacífico S.A. joined this action.
In September 1998, the La Serena appeals court rejected the appeal of the olive growers and the joining
of Compàñía Minera del Pacífico S.A. to this action. As a result, both parties have appealled to the
Supreme Court.
While this case is still proceeding, legal counsel believes it will not result in a loss for the subsidiary.
On April 22, 1998, the subsidiary Manganesos Atacama S.A. (MASA) received Resolution 1249 from the
Coquimbo Health Service concerning environmental problems. MASA appealed to the La Serena appeals
court which gave judgment in its favor. The Coquimbo Health Service then appealed to the Supreme
Court which gave judgment in favor of the Service and ordered MASA tocomply with the environmental
demands within 60 days.
On the expiry of that term, MASA advised the Appeals Court that it had fully complied with the demand,
although the Coquimbo Health Service has still not pronounced on the matter.
C A P S. A.
24
On the other hand, the Coquimbo municipality has told MASA that its ferro-alloy plant is badly located
according to the local regulatory plan and has ordered that it be re-located within one year, in accordance
with Art.62 of the General Law on Town-Planning and Construction.
This could result in MASA being obliged to oppose this order before the courts.
c. Management restrictions and financial covenants.
The loan agreements signed by the Company with Union Bank of Switzerland and Santander Investment
Bank Limited require compliance with certain obligations, mainly referring to the provision of periodic
consolidated financial information, the maintenance to date of liabilities to third parties, obtaining the prior
consent of the bank for disposing of or selling all or a substantial part of its assets and giving charges over
them. These agreements also require compliance, on the basis of the consolidated financial statements,
of financial covenants, mainly interest cover, liquidity, minimum equity abd debt-equity ratio. The
Company also has to meet financial covenants on another loan agreement, concerning the maintenance
of liquidity and long-term debt ratios.
24. INSURANCE, AND GUARANTEES RECEIVED
At March 31, 1999, the following was the contracted insurance cover and guarantees received::
a)
The Company and its subsidiaries have insurance policies covering their assets and other business
risks for an amount of approximately US$ 1,112,000, whose maximum amount payable per claim is
approximately MUS$ 200,000. These policies expire on July 31, 1999.
b)
Guarantees received from third parties:
1998
MUS$
Amounts in guarantee for sales
Mortgages & pledges covering loans to personnel
Amounts & notes received from suppliers & contractors
to guarantee works & advances
Contracts outstanding, etc.
Guarantees received for financings
Total
1997
MUS$
6.004
15.054
6.803
16.946
7.929
195
5.981
35.163
3.975
5.610
5.100
38.434
25. THE YEAR 2000 PROBLEM
Costs incurred and provisioned relating to the so-called year 2000 problem are:
1999
MUS$
Hardware
Software
Advisors & others
Total
1998
MUS$
10
42
31
83
-----
The Company and its subsidiaries have made no provisions for contingencies nor written off items related
to the year 2000 problem.
C A P S. A.
26.
25
SANCTIONS
During 1999 and 1998, neither the Company or its subsidiaries nor its directors or managers for their
duties as such, have been sanctioned by the Superintendency of Securities and Insurance.
27.SUBSEQUENT EVENTS
No significant event has occurred between January 1 and April 30, 1999 (the date of issue of these
financial statements) that affects them.
Santiago, April 30, 1999