Shih Wei Navigation Co., Ltd. and Subsidiaries

Transcription

Shih Wei Navigation Co., Ltd. and
Subsidiaries
Consolidated Financial Statements for the
Years Ended December 31, 2012 and 2011 and
Independent Auditors’ Report
SHIH WEI NAVIGATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Par Value)
2012
Amount
ASSETS
CURRENT ASSETS
Cash (Note 4)
Financial assets at fair value through profit or loss - current
(Notes 2 and 5)
Held-to-maturity financial assets - current (Notes 2 and 6)
Accounts receivable (Note 2)
Inventories (Note 2)
Noncurrent assets classified as held for sale (Notes 2 and 8)
Restricted assets - current (Notes 10 and 19)
Other current assets (Notes 15 and 18)
Total current assets
$
2011
Amount
%
996,065
3
$ 1,981,114
8
156,929
29,360
258,086
16,103
258,585
1
1
1
89,650
15,138
20,022
163,659
848,813
623,514
223,398
1
3
3
1
1,715,128
6
3,965,308
16
CURRENT LIABILITIES
Short-term bank loans (Notes 10 and 19)
Notes and accounts payable
Income tax payable (Notes 2 and 15)
Accrued expenses
Financial liabilities at fair value through profit or loss current (Notes 2 and 5)
Receipts in advance (Note 8)
Current portion of convertible bonds payable (Notes 2, 5 and 11)
Current portion of long-term bank loans (Notes 12 and 19)
Other current liabilities (Notes 2 and 15)
Total current liabilities
INVESTMENTS
Financial assets carried at cost - noncurrent (Notes 2 and 7)
PROPERTY AND EQUIPMENT (Notes 2, 9, 12, 19 and 20)
Cost
Land
Buildings
Transportation equipment
Vessel equipment
Office equipment
Leasehold improvements
Total cost
Less: Accumulated depreciation
Prepayments for equipment
Net property and equipment
28,388
28,421
-
579,422
30,906
1,160
30,158,043
2,602
30,772,133
4,944,825
25,827,308
324,478
2
104
106
17
89
1
79,937
30,906
1,160
21,559,860
2,522
5,675
21,680,060
3,969,149
17,710,911
2,058,910
1
88
89
16
73
8
26,151,786
90
19,769,821
81
38,571
105,595
921,455
1
3
32,071
78,578
556,856
1
2
1,065,621
4
667,505
3
OTHER ASSETS
Refundable deposits - noncurrent
Deferred charges (Note 2)
Restricted assets - noncurrent (Notes 12 and 19)
Total other assets
-
LONG-TERM LIABILITIES
Financial liabilities at fair value through profit or loss noncurrent (Notes 2, 5 and 11)
Convertible bonds payable (Notes 2, 5 and 11)
Long-term bank loans (Notes 12 and 19)
Total long-term liabilities
OTHER LIABILITIES
Accrued pension cost (Notes 2 and 13)
Guarantee deposits received
Deferred income tax liabilities - noncurrent (Notes 2 and 15)
Total other liabilities
Total liabilities
STOCKHOLDERS' EQUITY
Capital stock - par value NT$10.00, authorized - 500,000 thousand
shares; issued and outstanding 366,350 thousand shares
Capital surplus
Additional paid-in capital from share issuance in excess of par
Convertible bonds converted at a price in excess of the common
stock's par value
Equity component of convertible bonds
Others
Total capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Cumulative translation adjustments
Net loss not recognized as pension cost
Total other equity
Total stockholders' equity
TOTAL
$ 28,960,923
100
$ 24,431,055
2012
Amount
LIABILITIES AND STOCKHOLDERS’ EQUITY
%
100
TOTAL
The accompanying notes are an integral part of the consolidated financial statements.
-2-
$
2011
Amount
%
295,555
168,561
37,959
138,775
1
1
-
30,440
67,355
429,738
2,166,922
257,529
$
%
557,745
131,185
132,145
123,593
2
1
1
1
2
8
1
159,020
352,370
1,579,131
50,821
1
1
6
-
3,592,834
13
3,086,010
13
17,689,532
61
26,730
420,118
12,874,898
2
52
17,689,532
61
13,321,746
54
13,521
288
79,596
-
14,458
297
129,577
1
93,405
-
144,332
1
21,375,771
74
16,552,088
68
3,663,500
13
3,663,500
15
689,413
3
689,413
3
371,904
42,864
7,123
1,111,304
1
4
371,904
42,864
7,123
1,111,304
2
5
1,356,253
667,497
1,855,463
3,879,213
5
2
6
13
1,265,404
1,017,521
1,488,735
3,771,660
5
4
6
15
(1,061,045)
(7,820)
(1,068,865)
(4)
(4)
7,585,152
26
7,878,967
32
$ 28,960,923
100
$ 24,431,055
100
(659,789)
(7,708)
(667,497)
(3)
(3)
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2012
Amount
OPERATING REVENUES (Notes 2 and 18)
2011
Amount
%
%
$ 4,045,636
100
$ 4,061,861
100
3,618,581
89
2,640,639
65
GROSS PROFIT
427,055
11
1,421,222
35
OPERATING EXPENSES (Notes 14, 16 and 18)
200,622
5
188,310
5
OPERATING INCOME
226,433
6
1,232,912
30
15,979
198
-
24,368
12,846
1
-
212,533
419
283,093
5
7
133,359
52,014
-
3
1
-
9,749
-
16,406
1
62,059
200,930
2
5
91,251
2
784,960
19
330,244
8
226,952
6
163,739
4
27,365
-
1
-
229,826
6
6,118
-
60,663
7,006
1
-
260,435
7
461,234
11
750,958
18
1,101,922
27
93,880
2
193,427
5
657,078
16
908,495
22
OPERATING COSTS (Notes 16 and 18)
NONOPERATING INCOME AND GAINS
Interest income
Dividend income
Gain on disposal of property and equipment (Notes 2
and 8)
Gain on sale of investments, net (Notes 2, 5 and 7)
Exchange gains, net (Notes 2 and 5)
Gain on valuation of financial assets, net (Notes 2
and 5)
Gain on valuation of financial liabilities, net (Notes 2
and 5)
Miscellaneous income (Note 18)
Total nonoperating income and gains
NONOPERATING EXPENSES AND LOSSES
Interest expense (Notes 2, 9, 10, 11 and 12)
Loss on disposal of property and equipment (Notes 2
and 8)
Exchange loss, net (Notes 2 and 5)
Loss on valuation of financial liabilities, net (Notes 2
and 5)
Miscellaneous expense
Total nonoperating expenses and losses
INCOME BEFORE INCOME TAX
INCOME TAX (Notes 2 and 15)
CONSOLIDATED NET INCOME
$
$
ATTRIBUTABLE TO:
(Continued)
-3-
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2012
Amount
Stockholders of the parent
Minority interest
2011
Amount
%
$
657,078
-
16
-
$
908,495
-
22
-
$
657,078
16
$
908,495
22
2012
EARNINGS PER SHARE (Note 17)
Basic
Diluted
2011
Before
Income
Tax
After
Income
Tax
Before
Income
Tax
After
Income
Tax
$
$
$
$
$
$
$
$
2.05
2.01
1.79
1.76
-4-
%
3.01
2.98
2.48
2.47
(Concluded)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of New Taiwan Dollars, Except Cash and Stock Dividends Per Share)
Capital Stock Issued and
Outstanding (Note 14)
Shares
(Thousands)
Amount
BALANCE, JANUARY 1, 2011
Capital Surplus
(Notes 2, 11
and 14)
Other Equity (Notes 2, 13 and 14)
Retained Earnings (Note 14)
Cumulative
Net Loss Not
Unappropriated
Translation
Recognized as
Legal Reserve Special Reserve
Earnings
Adjustments
Pension Cost
366,350
$ 3,663,500
$ 1,111,304
$ 1,151,902
$
70,431
Appropriation of the 2010 earnings
Legal reserve
Special reserve
Cash dividends - $3 per share
-
-
-
113,502
-
947,090
-
Consolidated net income for the year ended December 31, 2011
-
-
-
-
-
Translation adjustments on long-term equity method investments
-
-
-
-
Change in net loss not recognized as pension cost
-
-
-
366,350
3,663,500
Appropriation of the 2011 earnings
Legal reserve
Special reserve
Cash dividends - $1.5 per share
-
Consolidated net income for the year ended December 31, 2012
$ 2,739,882
$
(5,962)
$ 7,719,498
-
-
908,495
-
-
908,495
-
-
351,770
-
351,770
-
-
-
-
1,111,304
1,265,404
1,017,521
1,488,735
-
-
90,849
-
-
-
-
-
Translation adjustments on long-term equity method investments
-
-
-
Change in net loss not recognized as pension cost
-
-
366,350
$ 3,663,500
BALANCE, DECEMBER 31, 2011
BALANCE, DECEMBER 31, 2012
(1,746)
(659,789)
(7,708)
(1,099,050)
(1,746)
7,878,967
(90,849)
350,024
(549,525)
-
-
(549,525)
-
657,078
-
-
657,078
-
-
-
-
(401,256)
-
-
-
-
$ 1,111,304
$ 1,356,253
667,497
$ 1,855,463
-5-
(350,024)
-
(113,502)
(947,090)
(1,099,050)
$ (1,011,559)
Total
Stockholders'
Equity
$
(401,256)
$ (1,061,045)
(112)
$
(7,820)
(112)
$ 7,585,152
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income
Adjustments to reconcile consolidated net income to net cash provided
by operating activities
Depreciation
Amortization
Amortization of deferred charges classified as interest expense
Gain on disposal of property and equipment, net
Gain on sale of investments, net
Deferred income tax
Loss (gain) on valuation of financial assets, net
Loss (gain) on valuation of financial liabilities, net
Amortization of discounts on convertible bonds payable
Net changes in operating assets and liabilities
Financial assets at fair value through profit or loss
Accounts receivable
Inventories
Other current assets
Notes and accounts payable
Income tax payable
Accrued expenses
Other current liabilities
Accrued pension cost
Receipts in advance
Net cash provided by operating activities
$
657,078
2011
$
908,495
1,170,088
89,920
3,750
(185,168)
(419)
(53,980)
(7,375)
(153,356)
9,620
899,387
61,737
2,250
(133,359)
(52,014)
(25,577)
2,261
62,498
9,405
(63,506)
(10,341)
(102,691)
(107,342)
39,177
(94,186)
18,513
(23,548)
(1,049)
(26,845)
42,318
196
(70,576)
(14,388)
62,934
106,995
10,628
32,112
(1,065)
(11,457)
1,158,340
1,892,780
573,405
(29,199)
14,787
(99,956)
(7,956,960)
57,947
70,607
(4,524,764)
263,966
(6,500)
(123,675)
226,908
293,910
400
(44,868)
222,848
Net cash used in investing activities
(7,137,224)
(3,923,920)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term bank loans
Increase in long-term bank loans
(247,503)
5,822,584
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in advance real estate receipts
Increase in deferred marketing expenses
Proceeds of the disposal of financial assets carried at cost
Proceed of the disposal of held-to-maturity financial assets
Acquisition of investment accounted for by the equity method
Acquisition of property and equipment
Proceeds of the disposal of property and equipment, and deferred
charges
Decrease (increase) in refundable deposits
Increase in deferred charges
Decrease in restricted assets
-6-
(628,035)
3,183,181
(Continued)
2012
Decrease in guarantee deposits received
Cash dividends
2011
(4)
(549,525)
Net cash provided by financing activities
(44,910)
(1,099,050)
5,025,552
EFFECT OF EXCHANGE RATE CHANGES
NET DECREASE IN CASH
CASH, BEGINNING OF YEAR
1,411,186
(31,717)
52,365
(985,049)
(567,589)
1,981,114
2,548,703
CASH, END OF YEAR
$
996,065
$ 1,981,114
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid (excluding capitalized interest)
Income tax paid
$
$
209,315
242,046
$
$
NONCASH INVESTING AND FINANCING ACTIVITIES
Current portion of long-term bank loans
Property and equipment reclassified to noncurrent assets classified as
held for sale
Decrease in advance real estate receipts (classified under other current
liabilities)
Decrease in noncurrent assets classified as held for sale
Decrease in deferred marketing expenses (classified under other
current assets)
INVESTING ACTIVITIES AFFECTING BOTH CASH AND
NONCASH ITEMS
Acquisition of fixed assets
Acquisition of property, plant and equipment
Increase in payable for equipment purchased (classified under
accounts payable)
Cash paid
-7-
141,409
112,009
$ 2,166,922
$ 1,579,131
$
-
$
848,813
$
$
828,462
832,710
$
$
-
$
74,550
$
-
$ 7,960,848
$ 4,524,764
(3,888)
$ 7,956,960
$ 4,524,764
(Continued)
The Corporation acquired 100% equity interest in the Gueishan Island Marine Biology Development Co., Ltd.
in December 2012. The fair values of the acquired assets and liabilities are summarized as follows:
$
Cash
Other current assets
Property and equipment
Accrued expenses
Current portion of long-term bank loans
Net assets
Percentage of ownership acquired
Fair value of the net identifiable assets acquired in excess of the acquisition cost
Payable on the equity investment
Cash paid
$
-8-
44
827
578,053
(443)
(160,000)
418,481
100%
418,481
(78,481)
340,000
(240,000)
100,000
(Concluded)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
Shih Wei Navigation Co., Ltd. (the “Corporation”) was incorporated in March 1985 under the Company
Act of the Republic of China. The Corporation mainly provides cargo shipping services, shipping agency,
and sells and leases ships.
The Corporation’s shares began to be traded on the Taiwan GreTai Securities Market in July 2001 and then
became listed on the Taiwan Stock Exchange in August 2003.
The Corporation and its subsidiaries’ investment relationships and percentages of ownership as of
December 31, 2012 were as follows.
四維航業股份有限公司
Shih Wei Navigation Co., Ltd.
100%
Gueishan Island Marine Biology
龜山島海洋生物開發股份有限公司
Development(龜山島公司)
Co., Ltd. (Gueishan Island)
100%
100%
Dong Lien Maritime S.A. Panama
(Dong Lien)
Fortunate Maritime S.A. Panama
(Fortunate)
100%
Grand Ocean Navigation (Panama) S.A.
Elegant Pescadores S.A. (Panama)
Blossom Pescadores S.A. (Panama)
Royal Pescadores S.A. (Panama)
Brave Pescadores S.A.
Brilliant Pescadores S.A.
Shining Pescadores S.A. (Panama)
Moon Bright Shipping Corporation
Genius Pescadores S.A. (Panama)
Gallant Pescadores S.A.
Grand Pescadores S.A. (Panama)
Jackson Steamship S.A.
Sunny Pescadores S.A. (Panama)
Excellent Pescadores S.A. (Panama)
Bright Pescadores S.A. Panama
Honor Pescadores S.A. Panama
Grand Overseas S.A. Panama
Superior Pescadores S.A. Panama
Valor Pescadores S.A. Panama
Unicorn Brilliant S.A. Panama
Poseidon Pescadores S.A. Panama
Pharos Pescadores S.A. Panama
Leader Pescadores S.A. Panama
Beacon Pescadores S.A. Panama
Well Pescadores S.A. Panama
Glaring Pescadores S.A. Panama
Vigor Pescadores S.A. Panama
Trump Pescadores S.A. Panama
Fourseas Pescadores S.A. Panama
Fair Pescadores S.A. Panama
Huge Pescadores S.A. Panama
Forever Pescadores S.A. Panama
Eternity Pescadores S.A. Panama
Federal Pescadores S.A. Panama
Patriot Pescadores S.A. Panama
Wise Pescadores S.A. Panama
Penghu Pescadores S.A. Panama
Modest Pescadores S.A. Panama
Skyhigh Pescadores S.A. Panama
Dancewood Pescadores S.A. Panama
Danceflora Pescadores S.A. Panama
Stamina Pescadores S.A. Panama
Spinnaker Pescadores S.A. Panama (incorporated
(一○一年四月成立)
in April 2012)
Endurance Pescadores S.A. Panama (incorporated
(一○一年十一月成立)
in November 2012)
Dong Lien, Fortunate and Dong Lion’s subsidiaries mainly provide cargo shipping services, serve as
shipping agents, and sell, lease and build ships and their spare parts. Gueishan Island mainly provides
resort hotels service.
As of December 31, 2012 and 2011, the Corporation and its subsidiaries had 1,083 and 873 employees,
respectively.
-9-
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in conformity with the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally
accepted in the Republic of China.
For the convenience of readers, the accompanying consolidated financial statements have been translated
into English from the original Chinese version prepared and used in the Republic of China. If there is any
conflict between the English version and the original Chinese version or any difference in the interpretation
of the two versions, the Chinese-language consolidated financial statements shall prevail. However, the
accompanying consolidated financial statements do not include the English translation of the additional
footnote disclosures that are not required under generally accepted accounting principles but are required by
the Securities and Futures Bureau (SFB) for their oversight purposes.
The significant accounting policies of the Corporation and its subsidiaries are summarized as follows:
Basis of Consolidation
The consolidated companies are the Corporation’s direct or indirect subsidiaries of which the Corporation
holds more than 50% of their respective common shares and all other direct or indirect investees over which
the Corporation has substantive control. All significant intercompany transactions or balances were
eliminated during the consolidation.
The Corporation acquired 100% of the stock of Gueishan Island Marine Biology Development Co., Ltd.
(“Gueishan Island”) in December 2012. Thus, Gueishan Island was included in the consolidated financial
statement as of and for the year ended December 31, 2012.
Foreign-currency Transactions
The subsidiaries’ financial statements expressed in foreign currencies have been translated into New
Taiwan dollars at the following exchange rates: Assets and liabilities - year-end spot rate; stockholders’
equity - historical exchange rate; and income statement accounts - current year’s average rate. Differences
resulting from the above translation are recorded as “cumulative translation adjustments” under the
stockholders’ equity.
Nonderivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in
effect when the transactions occur. Exchange differences arising from the settlement of foreign-currency
assets and liabilities are recognized in profit or loss.
At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing
exchange rates, and the exchange differences are recognized in profit or loss.
At the balance sheet date, foreign-currency nonmonetary assets that are carried at cost continue to be stated
at exchange rates at trade dates.
Accounting Estimates
Under the above guidelines and principles, certain estimates and assumptions have been used for the
allowance for doubtful accounts; allowance for loss on inventories; depreciation of property and equipment;
deferred charges amortized; impairment of assets; income tax; pension cost; bonuses to employees,
directors and supervisors; etc. Actual results may differ from these estimates.
- 10 -
Current and Noncurrent Assets and Liabilities
Current assets include cash and those held primarily for trading purposes or to be realized, sold or
consumed within one year from the balance sheet date. All other assets such as property and equipment
and intangible assets are classified as noncurrent. Current liabilities are obligations incurred for trading
purposes or to be settled within one year from the balance sheet date. All other liabilities are classified as
noncurrent.
Financial Instruments at Fair Value Through Profit or Loss
Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss
(FVTPL) include financial assets or financial liabilities held for trading. The Corporation and its
subsidiaries recognize a financial asset or a financial liability on its balance sheet when the Corporation and
its subsidiaries become parties to the contractual provisions of the financial instrument. A financial asset
is derecognized when the Corporation and its subsidiaries lose control of their contractual rights over the
financial asset. A financial liability is derecognized when the obligation specified in the relevant contract
is discharged, canceled or expired.
Financial instruments at FVTPL are initially measured at fair value. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit
or loss. At each balance sheet date subsequent to initial recognition, financial assets or financial liabilities
at FVTPL are remeasured at fair value, with changes in fair value recognized directly in profit or loss in the
year in which they arise. On derecognition of a financial asset or a financial liability, the difference
between its carrying amount and the sum of the consideration received and receivable or consideration paid
and payable is recognized in profit or loss. All regular way purchases or sales of financial assets are
recognized and derecognized on a trade date basis.
A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a
financial liability held for trading. If the fair value of the derivative is positive, the derivative is
recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.
Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows:
Publicly traded stocks - at closing prices; open-end mutual funds - at net asset values; financial assets and
financial liabilities without quoted prices in an active market - at values determined using valuation
techniques; and derivatives - at values calculated using bank-quoted prices.
Noncurrent Assets Classified as Held for Sale
Noncurrent assets that meet the held-for-sale criteria are measured at the lower of carrying amount and fair
value. If the carrying amount exceeds the asset's fair value less costs to sell, an impairment loss is
recognized.
Financial Assets Carried at Cost
Investments in equity instruments with no quoted prices in an active market and with fair values that cannot
be reliably measured, such as non-publicly traded stocks, are measured at their original cost. Cash
dividends are recognized on the ex-dividend date, except for dividends distributed from the pre-acquisition
profit, which are treated as a reduction of investment cost. Stock dividends are not recognized as
investment income but are recorded as an increase in the number of shares. The total number of shares
subsequent to the increase is used for the recalculation of cost per share. An impairment loss is recognized
when there is objective evidence that the asset is impaired. A reversal of this impairment loss is
disallowed.
- 11 -
Impairment of Assets
If the recoverable amount of an asset (mainly property and equipment and deferred charges) is estimated to
be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An
impairment loss is charged to earnings. If an impairment loss reverses, the carrying amount of the asset is
increased accordingly, but the increased carrying amount may not exceed the carrying amount that would
have been determined had no impairment loss been recognized for the asset in prior years. A reversal of
an impairment loss is recognized in earnings.
Inventories
Inventory is vessel fuel, which is stated at the lower of cost or net realizable value. Inventory write-downs
are made by item.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Borrowing costs directly
attributable to the acquisition or construction of property and equipment are capitalized as part of the cost of
those assets. Major additions, replacements and betterments are capitalized, while maintenance and
repairs are expensed currently.
Depreciation is provided on a straight-line basis over the estimated useful lives, as follows: buildings, 50
years; transportation equipment, 5 years; vessel equipment, 3 to 25 years; office equipment, 3 to 8 years;
leasehold improvements, lease terms. Property and equipment still in use beyond their original estimated
useful lives are further depreciated over their newly estimated useful lives.
The related cost and accumulated depreciation of property and equipment are derecognized from the
balance sheet upon its disposal. Any gain or loss on disposal of the asset is included in nonoperating gains
or losses in the period of disposal.
Deferred Charges
Deferred charges, mainly the costs of vessel overhaul, golf club memberships and syndicated loan fees, are
initially recorded at cost and amortized using the straight-line method over 2 to 3 years, over 20 years and
over loan terms, respectively.
Convertible Bonds
The Corporation first determines the carrying amount of the liability component by measuring the fair value
of a similar liability that does not have an associated equity component, then determines the carrying
amount of the equity component, representing the equity conversion option, by deducting the fair value of
the liability component from the fair value of the convertible bonds as a whole. The liability component
(excluding embedded derivatives) is measured at amortized cost using the effective interest method, while
the embedded non-equity derivatives are measured at fair value. Upon bond conversion, the Corporation
uses the aggregate carrying amount of the liability and equity components of the bonds at the time of
conversion as a basis to record the common shares issued.
Pension
Under the defined benefit pension plan, pension cost is recognized on the basis of actuarial calculations.
Unrecognized net transition obligation and the unrecognized net actuarial gain or loss are amortized using
the straight-line method over the average remaining service years of employees.
- 12 -
Under the defined benefit pension plan, the minimum amount of pension liability should be recognized in
the balance sheet. If the accrued pension liability already shown in the book is less than the minimum
amount, the difference should be recognized as additional pension liability. If the additional liability does
not exceed the sum of unrecognized prior service cost and unrecognized transitional net benefit obligation,
the deferred pension cost account should be charged. Deferred pension cost is classified as an intangible
asset. If the additional liability exceeds this sum, the excess should be charged to the net loss not yet
recognized as net pension cost account, which is classified as a reduction of stockholders’ equity.
Under the defined contribution plan, the required monthly contributions to employees’ individual pension
accounts are recognized as pension cost.
Income Tax
The Corporation applies the inter-year allocation method to its income tax, whereby deferred income tax
assets and liabilities are recognized for the tax effects of temporary differences. Valuation allowances are
provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be
realized. A deferred income tax asset or liability is classified as current or noncurrent in accordance with
the classification of the related asset or liability for financial reporting. However, if a deferred income tax
asset or liability does not relate to an asset or liability in the financial statements, it is classified as current or
noncurrent on the basis of the expected length of time before it is realized or settled.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as
income tax in the year the stockholders approve the retention of earnings.
Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts
Revenue is recognized when the earnings process has been completed and the economic benefits associated
with the transaction have been realized or are realizable. The revenues from vessel leases are recognized
over the contract periods. Cargo revenues are recognized when the cargos are transported to the port of
discharge.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
agreed between the Corporation and its subsidiaries and the customers for service rendered in the normal
course of business. For trade receivables due within one year from the balance sheet date, as the nominal
value of the consideration to be received approximates its fair value and transactions are frequent, fair value
of the consideration is not determined by discounting all future receipts using an imputed rate of interest.
An allowance for doubtful accounts is provided on the basis of a review of the collectability of accounts
receivable. The Corporation and its subsidiaries make this review by an aging analysis of the outstanding
receivables and assessing prior years’ collectability of receivables and economic situation.
Reclassifications
Certain accounts in the financial statements as of and for the year ended December 31, 2011 have been
reclassified to conform to the presentation of the financial statements as of and for the year ended
December 31, 2012.
- 13 -
3. ACCOUNTING CHANGE
Operating Segments
On January 1, 2011, the Corporation and its subsidiaries adopted the newly issued Statement of Financial
Accounting Standards (SFAS) No. 41 - “Operating Segments.” The statement requires that segment
information be disclosed on the basis of the information about the components of the Corporation that
management uses to make operating decisions. SFAS No. 41 requires the identification of operating
segments on the basis of internal reports that are regularly reviewed by the Corporation's chief operating
decision maker in order to allocate resources to the segments and assess their performance. This statement
supersedes SFAS No. 20 - “Segment Reporting.” For this accounting change, the Corporation and its
subsidiaries only changed the presentation of segment information.
4. CASH
December 31
2012
Cash on hand
Checking accounts and demand deposits
Time deposits
2011
$
303
789,289
206,473
$
142
464,748
1,516,224
$
996,065
$ 1,981,114
5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31
2012
Financial assets held for trading - current
Mutual funds
Domestic quoted stocks
Forward exchange contracts
Financial liabilities held for trading - current
Liability component of convertible bonds (Note 11)
Currency option contracts
Financial liabilities held for trading - noncurrent
Liability component of convertible bonds (Note 11)
2011
$ 150,662
4,875
1,392
$
83,376
5,212
1,062
$ 156,929
$
89,650
$
28,980
1,460
-
$
1,171
157,849
$
30,440
$ 159,020
$
-
$
26,730
The Corporation and its subsidiaries used forward exchange and currency option contracts in 2012 and
2011 for trading purposes. These contracts were classified as financial instruments held for trading and
were measured at fair value because the hedge accounting requirement does not apply to them.
- 14 -
Outstanding forward exchange contracts as of December 31, 2012 and 2011 were as follows:
Contract Amount
(In Thousands)
Currency
Maturity Date
Yen/USD
Yen/USD
Yen/USD
2013.12.30
2013.12.30
2013.12.30
JPY516,300/USD6,000
JPY512,880/USD6,000
JPY42,740/USD500
Yen/USD
Yen/USD
Yen/USD
Yen/USD
Yen/USD
Yen/USD
2012.02.02
2012.10.31
2012.10.31
2013.12.30
2013.12.30
2013.12.30
JPY150,000/USD1,899
JPY2,003,320/USD23,200
JPY500,888/USD5,800
JPY516,300/USD6,000
JPY512,880/USD6,000
JPY42,740/USD500
December 31, 2012
Buy
Buy
Buy
December 31, 2011
Sell
Buy
Buy
Buy
Buy
Buy
Outstanding currency option contracts as of December 31, 2012 and 2011 were as follows:
Contract Amount
(In Thousands)
Exercise Price
Maturity Date
USD
1,000
USD
1,000
USD
1,000
USD
1,000
JPY 300,000
USD
1,000
USD
2,000
USD
1,500
JPY 63,000
JPY 81,000
USD
1,000
JPY81/USD1
USD1.28/EUR1
JPY80.8/USD1
JPY86.25/USD1
JPY83/USD1
USD1.025/AUD1
JPY83.15/USD1
JPY83.15/USD1
JPY80.5/USD1
JPY81/USD1
JPY81/USD1
2013.01.07
2013.01.07
2013.01.09
2013.01.16
2013.01.21
2013.01.22
2013.01.24
2013.01.24
2013.02.06
2013.02.18
2013.02.18
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
NTD30.6/USD1
NTD30/USD1
JPY79.5/USD1
NTD30.7/USD1
USD1.28/EUR1
NTD29.95/USD1
NTD29.95/USD1
NTD29.95/USD1
NTD30.7/USD1
JPY77.2/USD1
2012.01.13
2012.01.13
2012.01.17
2012.01.19
2012.01.19
2012.01.30
2012.01.30
2012.01.30
2012.01.30
2012.01.30
December 31, 2012
Sell USD put option
Sell USD call option
Sell USD put option
Sell JPY call option
Sell USD put option
Sell USD put option
Sell USD put option
December 31, 2011
Sell USD put option
Sell USD put option
Sell USD put option
Sell USD put option
Sell USD put option
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
2,000
1,500
Net gains on financial assets held for trading were $10,168 thousand in 2012 and $17,568 thousand in 2011,
respectively. Net gains and net losses on financial liabilities held for trading were $66,352 thousand in
2012 and $61,683 thousand in 2011, respectively.
- 15 -
6. HELD-TO-MATURITY FINANCIAL ASSETS
December 31
2012
Bond investments - Deutsche Bank Aktiengesellschaft
$
2011
-
$ 15,138
The Corporation and its subsidiaries bought three-year corporate bonds issued by Deutsche Bank
Aktiengesellschaft, with face values of US$500 thousand on June 4, 2009 and a coupon interest rate of 3%.
Interest is calculated annually. The principal is fully repayable on the maturity date.
7. FINANCIAL ASSETS CARRIED AT COST
December 31
Domestic unlisted common stocks
Lustrous Technology Ltd.
Overseas unlisted common stocks
K/S Danred I (investment cost: US$519 thousand)
Lando Co., Ltd. (investment cost: ￥3,000 thousand)
2012
2011
$ 10,888
$ 10,888
16,721
779
16,721
812
$ 28,388
$ 28,421
The above equity investments, which had no quoted prices in an active market and of which fair values
could not be reliably measured, were carried at cost.
8. NONCURRENT ASSETS CLASSIFIED AS HELD FOR SALE
December 31
2012
Land and building in the Chang-an section in Taipei City
$
16,103
2011
$ 848,813
The Corporation entered into a joint construction contract with Wang Tai Construction Co., Ltd. (“Wang
Tai”) on February 12, 2009. Under the contract, the Corporation provided land in the Chang-an section in
Taipei City and Wang Tai provided the construction fund. After the completion of the construction, the
Corporation and Wang Tai will own 61 percent and 39 percent of the entire land and building, respectively.
Based on the joint construction contract, the land, the buildings and the buildings under construction, the
financing fund, the proceeds of the sales of land and buildings, and the related interest income should be
entrusted to Mega International Commercial Bank Co., Ltd. As of September 30, 2011, the land was
classified as held for sale because the project was expected to be completed and sold within one year. In
January 2012, the real estate title to the project was transferred, and the Corporation acquired the buildings
ownership under the contract. The fair value of transferred-in assets, buildings, amounted to $320,304
thousand and the cost of transferred-out assets, land, amounted to $347,669 thousand. The loss of $27,365
thousand was recognized from the exchange of assets.
- 16 -
In 2009, the Corporation entered into presale contracts with third parties and related parties for the third and
higher floors of the buildings. The related land rights of the above joint construction project amounted to
$1,567,550 thousand, including related-party transactions amounting to $135,800 thousand with Lan
Jun-De, Lin Hui-Ling and Chen Huo-Tsai. Proceeds of the presales of the residential buildings (and
related land rights) were split between the Corporation and Wang Tai at a ratio of 55.65% to 44.35%, and
those from the presales of the parking spaces (and related land rights) were split at a ratio of 52.44% to
47.56%. As of December 31, 2011, the Corporation had collected $255,057 thousand of the proceeds of
the project, including those from related-party transactions amounting to $26,315 thousand, which was
classified as receipts in advance. In addition, the Corporation sold the first and second floors of the
buildings from this project to related parties, Liang Yu Investment Co. and Chi Huan Investment Co., for
$227,371 thousand. As of December 31, 2012, the real estate title to this project had been transferred to
the counter-parties and the Corporation collected total proceeds of $1,092,428 thousand. The gain of
$212,533 thousand on property disposal, including those from related-party transactions amounting to
$69,926 thousand, is the total proceeds of the projects of $1,092,428 thousand net of (a) the carrying
amounts of $805,345 thousand of the building and (b) marketing expenses and other expenses of $74,550
thousand.
9. PROPERTY AND EQUIPMENT
Accumulated depreciation consisted of:
December 31
2012
Buildings
Transportation equipment
Vessel equipment
Office equipment
Leasehold improvements
$
2011
9,353
1,080
4,932,676
1,716
-
$
8,267
886
3,953,829
1,309
4,858
$ 4,944,825
$ 3,969,149
2012
2011
$ 4,169
0.92%-1.944%
$ 14,163
0.86%-1.72%
Information on capitalized interest is as follows:
Capitalized interest
Capitalization rates
10. SHORT-TERM BANK LOANS
December 31
2012
Bank credit loans: Due in January 2013, 1.30% interest per annum
in 2012
Bank credit loans: US$3,290 thousand, due in May 2013, 1.21%
interest per annum in 2012; due in May 2012, 1.50% interest per
annum in 2011
Secured bank loans: ￥993,000 thousand, due in January 2012,
0.87% interest per annum in 2012
Secured bank loans: US$2,322 thousand, due in February 2012,
1.42% interest per annum in 2012
- 17 -
2011
$ 200,000
$
-
95,555
99,618
-
387,814
-
70,313
$ 295,555
$ 557,745
U.S. certificates of deposit were used as collaterals for the above secured bank loans.
11. CONVERTIBLE BONDS PAYABLE
On January 14, 2010, the Corporation made a third issue of five-year unsecured convertible bonds, with a
face value of $450,000 thousand and a coupon rate of 0%. The effective interest rate was 2.27%. On the
third anniversary of issuance, the bondholders may require the Corporation to buy back their bonds at
103.03% of face value. The bondholders may request the Corporation to convert the bonds into the
Corporation’s common stock starting from one month after the issuance date to 10 days before the due date.
The conversion price at the issuance of the bonds was set at $46.2 which is required to be adjusted in
accordance with the bond agreement. The Corporation should redeem the remaining bonds at face value
upon maturity. During the period from one month after the issuance date to 40 days before the due date, if
the closing price of the Corporation’s common stock at the Taiwan Stock Exchange reaches 130% of the
conversion price for a period of 30 consecutive trading days, or the total amount of outstanding bonds is
less than 10% of the total issued amount, the Corporation may redeem the remaining bonds at a price
calculated using a predetermined formula.
The Corporation had adjusted the conversion price for the capital increase by cash in accordance with bond
conversion terms. As of December 31, 2012, the adjusted conversion price was $36.48.
As of December 31, 2012, bondholders did not exercise convertible rights and the Corporation did not
redeem any outstanding convertible bonds.
Convertible bond information based on Statement of Financial Accounting Standards No. 36 - “Financial
Instruments: Disclosure and Presentation” is as follows:
December 31
Face value of convertible bonds
Liability component
Equity component
Transaction costs
Carrying amount of convertible bonds payable
Amortized bond discount
Convertible bonds payable
Less: Current portion of convertible bonds payable
- 18 -
2012
2011
$ 450,000
(1,800)
(42,864)
405,336
(3,500)
401,836
27,902
429,738
(429,738)
$ 450,000
(1,800)
(42,864)
405,336
(3,500)
401,836
18,282
420,118
-
$
$ 420,118
-
12. LONG-TERM BANK LOANS
December 31
a. Eight-year secured bank loans: US$526,730 thousand and
￥1,650,942 thousand in 2012 and US$228,618 thousand and
￥8,149,857 thousand in 2011, with interest rate from 0.80% to
2.06% and from 0.86% to 2.01%, respectively; repayable in 32
quarterly installments between August 2011 and November 2020
b. Three-year secured bank loans: Interest rate from 1.25% to
1.44% in 2012 and from 1.25% to 1.45% in 2011, respectively;
the credit period revolved until August and October in 2014,
one-time repayment in every end of credit period
c. Eighteen-month credit bank loans: Interest rate of 1.538%;
one-time repayment in June 2014
d. Three-year credit bank loans: Interest rate from 1.30% to
1.35%; one-time repayment in March 2015
e. Ten-year secured bank loans: US$10,920 thousand in 2012 and
US$11,990 thousand in 2011, with interest rate of 1.06% and
1.12%, respectively; repayable in 40 quarterly installments until
December 2018
f. Three-year credit bank loans: Interest rate from 1.681% to
1.687%; repayable in monthly installments after 12 months from
the drawdown date until August 2015
g. Two-year credit bank loans: Interest rate from 1.04% to 1.08%
in 2012 and from 0.95% to 1.10% in 2011, respectively;
originally due in February 2013, with maturity extend to
February 2014, with one-time repayment
h. Three-year secured bank loans: US$8,000 thousand in 2012,
with interest rate from 0.82% to 0.84%; one-time repayment in
November 2015
i. Seven-year secured bank loans: US$7,583 thousand in 2012
and US$13,972 thousand in 2011, with interest rate from 1.095%
to 1.712% and from 1.51% to 1.71%, respectively; repayable in
28 quarterly installments until June 2018
j. Three-year secured bank loans: Interest rate of 1.72%;
repayable in 36 monthly installments until July 2015
k. Eighteen-month credit bank loans: US$6,410 thousand, with
interest rate from 1.355% to 1.498%; one-time repayment in
January 2014
l. Four-year secured bank loans: Interest rate of 2.805%;
one-time repayment in September 2013
m. Five-year secured bank loans: US$4,690 thousand in 2012 and
US$5,530 thousand in 2011, with interest rate of 1.012% and
1.20% respectively; repayable in 20 quarterly installments until
February 2015
n. Three-year secured bank loans: US$3,300 thousand, with
interest rate of 1.03%; one-time repayment in November 2014
o. Three-year secured bank loans: Interest rate of 1.5% in 2012
and from 1.20% to 1.50% in 2011; repayable in 36 monthly
installments until December 2014
p. Two-year credit bank loans: Interest rate from 1.30% to 1.40%;
one-time repayment in August 2013
- 19 -
2012
2011
$ 15,851,575
$ 10,104,315
700,000
200,000
600,000
-
400,000
-
317,117
362,997
300,000
-
250,000
250,000
232,320
-
220,220
423,006
187,198
-
186,154
-
160,000
-
136,198
262,243
167,421
95,832
-
80,408
115,000
80,000
80,000
(Continued)
December 31
2012
q. Three-year credit bank loans: Interest rate of 1.50% in 2012
and from 1.20% to 1.50% in 2011, respectively; repayable in 36
monthly installments until December 2014
r. Syndicated bank loan: Interest rate from 1.606% to 1.633% in
2012 and 1.359% to 1.693% in 2011
s. Eighteen-month credit bank loans: Interest rates of 1.13% in
2012 and 2011; one-time repayment in June 2013; early
repayment was made in June 2012
t. Secured bank loans: US$10,663 thousand and ￥390,000
thousand, with interest from 1.00% to 1.51%; repayable in 32
quarterly installments from the date on which the final loan
drawdown is made
u. Three-year credit bank loans: Interest rate of 1.50% in 2012
and from 1.35% to 1.50% in 2011, respectively; the credit period
originally due in December 2014, with one-time repayment;
early repayment was made in March 2012
v. Four-year and seven-month secured bank loans: Interest rate
from 1.50% to 1.72%; repayable in 19 quarterly installments and
repay $120,000 thousand in last time until August 2015; early
repayment was made in February 2012
Less: Current portion
$
2011
59,432
$
85,000
-
1,080,000
-
600,000
-
475,124
-
300,000
(2,166,922)
$ 17,689,532
211,166
(1,579,131)
$ 12,874,898
(Concluded)
In July 2010, the Corporation entered into a syndicated secured facility agreement with Industrial Bank of
Taiwan and seven other banks for loan (r), as follows:
a. The credit line is $1.8 billion and the first loan drawdown should not be less than 60% of the credit line.
The first repayment is due on the 18th month from the first loan drawdown date. The credit line will
subsequently be decreased to zero over four periods semiannually. If the credit line drawdown
exceeds the available credit line on the date the credit line is decreased, the Corporation should repay
this excess immediately.
b. The credit period is three years from the first loan drawdown date.
c. Dong Lien Maritime S.A. Panama (“Dong Lien”) used its U.S. certificate of deposit as a collateral for a
syndicated loan. Under the syndicated loan agreement, the Corporation directly own 100% of Dong
Lien and Fortunate Maritime S.A. Panama (“Fortunate”). In addition, the Corporation should have the
power to participate in the operating policy decisions of Dong Lien and Fortunate. Further, Dong Lien
should directly own 100% of the 42 subsidiaries listed on the loan agreement.
d. The Corporation should maintain the following financial ratios under the syndicated loan agreement:
1) Current ratio - the ratio of current assets to current liabilities should not be less than 100%;
2) Financial liabilities ratio - the ratio of financial liabilities plus contingent liabilities to tangible net
assets should not exceed 200%;
3) Interest coverage ratio - the ratio of income before taxes, interest expense, depreciation and
amortization to interest expense should not be less than 400%; and
- 20 -
4) Tangible net assets (equities minus intangible assets) should not be less $6.5 billion.
The above ratios should be calculated on the basis of the audited semiannual and annual consolidated
financial statements accepted by the bank’s documentary agent. However, the Corporation failed to meet
the current ratio and the financial liability ratio specified in the syndicated loan agreement on June 30,
2012. As of June 30, 2011, the Corporation reclassified the syndicated loans over one year from the
balance sheet date of NT$1,080,000 thousand to current portion of long-term bank loans. In September
2011, two thirds of the banking syndicate agreed to waive the examination of the required ratios as shown
in the audited consolidated financial statements for the six months ended June 30, 2011. Early repayment
of the syndicated bank loan was made in June 2012.
New Taiwan dollar demand deposits and U.S. certificate of deposit were used as collaterals for the above
loan (b); U.S. certificate of deposit for loan (h) and (n); land for loan (l); land and building for loan (o); and
vessel equipment, for other secured bank loans.
13. PENSION PLANS
The pension plan adopted by the Corporation under the Labor Pension Act (LPA) is a defined contribution
plan. Under the LPA, the Corporation makes monthly contributions to employees’ individual pension
accounts at 6% of monthly salaries and wages. Related pension costs were $3,942 thousand in 2012 and
$3,503 thousand in 2011.
Based on the defined benefit plan adopted by the Corporation under the Labor Standards Law, pension
payments are calculated on the basis of the length of service and average basic pay of the six months before
retirement. The employee earns two base units each year for the first 15 years of service, and one base
unit for each additional year thereafter, but not more than 45 base units in total.
The Corporation contributes amounts equal to 4.3% of total monthly salaries and wages to a pension fund
administered by the pension fund monitoring committee. The pension fund is deposited in the Bank of
Taiwan in the committee’s name.
Other information on the defined benefit plan of the Corporation is as follows:
a. Changes in the pension funds:
2012
2011
Balance, beginning of year
Contributions
Interest income
$ 12,153
2,152
127
$ 10,045
1,980
128
Balance, end of year
$ 14,432
$ 12,153
2012
2011
b. Components of net periodic pension cost
Interest cost
Projected return on plan assets
Amortization
$
Net periodic pension cost
$
- 21 -
602
(243)
743
1,102
$
604
(226)
537
$
915
c. Reconciliation of funded status of the plan and accrued pension cost as of December 31, 2012 and 2011
December 31
2012
2011
Benefit obligation
Vested benefit obligation
Non-vested benefit obligation
Accumulated benefit obligation
Additional benefit based on future salaries
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized net loss
Additional liability
$ 16,417
11,536
27,953
3,497
31,450
(14,432)
17,018
(11,317)
7,820
$ 15,956
10,655
26,611
3,482
30,093
(12,153)
17,940
(11,190)
7,708
$ 13,521
$ 14,458
Vested benefit
$ 16,417
$ 15,956
d. Actuarial assumptions as of December 31, 2012 and 2011
December 31
Discount rate used in determining present values
Future salary increase rate
Expected rate of return on plan assets
2012
2011
1.75%
2.00%
1.75%
2.00%
2.00%
2.00%
14. STOCKHOLDERS’ EQUITY
Under the Company Law, the capital surplus from shares issued in excess of par (additional paid-in capital
from issuance of common shares and conversion of bonds) may be used to offset a deficit; in addition,
when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or
transferred to capital (limited to a certain percentage of the Corporation’s paid-in capital and once a year).
The capital surplus from employee stock options may not be used for any purpose.
According to the Corporation’s Articles of Incorporation, the legal reserve should be set aside at 10% of
annual income less any deficit. Under Company Law, after a special reserve is appropriated or reversed,
the remainder of income adding prior accumulated unappropriated retained earnings should be distributed at
not less than 2% of employees’ bonus and at not higher than 5% of remuneration to directors and
supervisors. And the above distributions should be approved by the board of directors at stockholders
meeting.
The Corporation’s dividend policy is based on the prudence principle, under which the Corporation
considers the long-term financing structure and operation. Thus, when earnings and funds become
sufficient for operating and expanding, then cash dividends or stock dividends will be distributed. The
most recent dividend policy provides for the distribution of stock dividends at up to 50% of earnings and
cash dividends of at least 50%.
- 22 -
For 2012 and 2011, earnings appropriations included the following: The bonuses to employees were
estimated at $12,000 thousand and $16,000 thousand, respectively, and the remunerations to directors and
supervisors were estimated both at $8,000 thousand, which were 2.83%, 2.79%, 1.89% and 1.39%,
respectively, of appropriations of earnings. Material differences between these estimates and the amounts
proposed by the Board of Directors in the following year are adjusted for also in the following year. If the
actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences
are recorded in the year of stockholders’ resolution as a change in accounting estimate. If a share bonus is
resolved to be distributed to employees, the number of shares is determined by dividing the amount of the
share bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of
the day immediately preceding the stockholders’ meeting.
Based on a directive issued by the Securities and Futures Bureau (SFB), an amount equal to the net debit
balance of certain stockholders’ equity accounts (including net loss not recognized as pension cost and
cumulative translation adjustments) should be transferred from unappropriated earnings to a special reserve.
Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.
Legal reserve should be appropriated until it has reached the Corporation’s paid-in capital. This reserve
may be used to offset a deficit. If the Corporation has no deficit and the legal reserve has exceeded 25%
of the Corporation’s paid-in capital, the excess may be transferred to capital or distributed in cash.
Except for non-ROC resident stockholders, all stockholders receiving the dividends are allowed a tax credit
equal to their proportionate share of the income tax paid by the Corporation.
The appropriations from earnings for 2011 and 2010 were approved in the stockholders’ meetings on June
28, 2012 and June 24, 2011, respectively. The appropriations, including dividends per share, were as
follows:
Appropriation of Earnings
For
For
Year 2011
Year 2010
Legal reserve
(Reversal of appropriation) appropriation of
special reserve
Cash dividends
$
90,849
$
(350,024)
549,525
$
290,350
113,502
Dividends Per Share
(NT$)
For
For
Year 2011 Year 2010
$
947,090
1,099,050
$ 2,159,642
-
$
1.50
$
3.00
1.50
$
3.00
The bonus to employees and the remuneration to directors and supervisors for 2011 and 2010 approved in
the stockholders’ meetings on June 28, 2012 and June 24, 2011, respectively, were as follows:
Years Ended December 31
2011
2010
Remuneration
Remuneration
to Directors
to Directors
Bonus to
and
Bonus to
and
Employees
Supervisors
Employees
Supervisors
Amounts approved in stockholders’
meetings
Amounts recognized in respective
financial statements
$ 16,000
$
16,000
$
-
- 23 -
$
8,000
$ 23,000
$ 10,000
8,000
23,000
10,000
-
$
-
$
-
There were no differences between the approved amounts of the bonus to employees and the remuneration
to directors and supervisors in the stockholders’ meeting and the accrual amounts reflected in the financial
statements for the years ended December 31, 2011 and 2010.
The appropriation of the 2012 earnings was proposed by the board of directors on March 26, 2013. The
appropriations, including dividends per share, were as follows:
Appropriation
of Earnings
$
Legal reserve
Reversal of special reserve
Cash dividends
Dividends Per
Share
65,708
401,368
403,350
$ 1.00
$ 870,426
$ 1.00
The board of directors also approved $12,000 cash bonus to employees and $8,000 thousand remuneration
to directors and supervisors. The resolved amounts of the bonus to employees and the remuneration to
directors and supervisors were equal to the accrual amounts reflected in the financial statements for the year
ended December 31, 2012.
The 2012 appropriations of earnings, bonus to employees and remuneration to directors and supervisors
will be resolved by the stockholders in their meeting scheduled for June 19, 2013.
For the Corporation to invest in its subsidiaries, the board of directors resolved on November 1, 2012 to
have a capital increase by cash, which was approved by the Securities and Futures Bureau on December 18,
2012. The board resolved to issue 37,000 thousand common shares at NT$19.5 per share, with a NT$10
par value and the record date of March 8, 2013.
Information on the bonus to employees, directors and supervisors is available on the Market Observation
Post System web site of the Taiwan Stock Exchange.
15. INCOME TAX
a. A reconciliation of income tax expense based on income before income tax at the statutory rate of 17%
and income tax expense was as follows:
2012
2011
Income tax expense at the statutory rate
Tax effect of adjusting items:
Permanent differences
Temporary differences
Additional tax at 10% of unappropriated earnings
Current income tax expense
Deferred income tax expense
Temporary differences
Adjustments for prior years’ tax
$ 127,663
$ 187,327
Income tax expense
$
(95,596)
53,980
61,814
147,861
6,102
25,577
219,006
(53,980)
(1)
(25,577)
(2)
93,880
$ 193,427
Income tax payables as of December 31, 2012 and 2011 were net of prepaid income taxes of $109,902
thousand and $86,861 thousand, respectively.
- 24 -
b. Deferred income tax assets (liabilities) were as follows:
December 31
2012
Current (classified under other current assets (liabilities))
Unrealized exchange (gains) loss
Difference in amortized lives
Noncurrent
Estimated cash dividend income - equity method
Cumulative translation adjustments
Loss carryforwards
Less: Valuation allowance
Deferred income tax liabilities
2011
$
909
410
$
(1,967)
-
$
1,319
$
(1,967)
$ (88,511)
7,891
1,024
155
(155)
$ (139,383)
8,604
1,202
-
$ (79,596)
$ (129,577)
c. Information on the integrated income tax is as follows:
December 31
Imputation credit account balance
2012
2011
$ 366,733
$ 195,659
The creditable ratios for the distribution of the earnings of 2012 and 2011 were 21.81% (estimate) and
21.43% (actual), respectively.
The ratio for the imputation credits allocable to the Corporation’s stockholders is based on the balance
of the imputation credit amount (ICA) as of the date of dividend distribution. The expected creditable
ratio for the 2012 earnings, with the current income tax payable taken into consideration, may be
adjusted, depending on the ICA balance on the date of dividend distribution.
d. Income tax returns through 2010 and undistributed earnings returns through 2009 of the Corporation
and Gueishan Island have been assessed and cleared by the tax authorities.
e. Incomes of other subsidiaries incorporated in Panama are tax-exempt.
16. PERSONNEL, DEPRECIATION AND AMORTIZATION EXPENSES
Cost of Sales
Personnel
Payroll
Insurance
Pension
Others
Depreciation
Amortization
2012
Operating
Expenses
Total
$
748,451
3,816
914
145,296
$
85,647
6,568
4,130
3,274
$
834,098
10,384
5,044
148,570
$
898,477
$
99,619
$
998,096
$ 1,167,497
$
87,972
$
$
2,591
1,948
- 25 -
$ 1,170,088
$
89,920
Cost of Sales
Personnel
Payroll
Insurance
Pension
Others
Depreciation
Amortization
2011
Operating
Expenses
Total
$ 619,440
4,048
873
120,526
$
87,511
6,070
3,545
3,127
$ 706,951
10,118
4,418
123,653
$ 744,887
$ 100,253
$ 845,140
$ 896,174
$ 60,049
$
$
$ 899,387
$ 61,737
3,213
1,688
17. EARNINGS PER SHARE
The numerators and denominators used in calculating basic earnings per share (EPS) were as follows:
Amounts (Numerator)
Before
After
Income Tax
Income Tax
Shares
(Denominator)
(In Thousands)
EPS (NT$)
Before
After
Income
Income
Tax
Tax
Year ended December 31, 2012
Basic EPS
Income attributable to common
stockholders
Effect of dilutive potential common
stock
Bonuses to employees
Convertible bonds
$
750,958
$
11,870
$
657,078
366,350
11,870
832
12,336
$
2.05
$
1.79
762,828
$
668,948
379,518
$
2.01
$
1.76
$ 1,101,922
$
908,495
366,350
$
3.01
$
2.48
27,450
925
11,646
935,945
378,921
$
2.98
$
2.47
Year ended December 31, 2011
Basic EPS
Income attributable to common
stockholders
Effect of dilutive potential common
stock
Bonuses to employees
Convertible bonds
27,450
$ 1,129,372
$
The Accounting Research and Development Foundation (ARDF) issued Interpretation 2007-052, which
requires companies to recognize bonuses paid to employees, directors and supervisors as compensation
expenses beginning January 1, 2008. These bonuses were previously recorded as appropriations from
earnings. If the Corporation decides to settle the bonus to employees by cash or shares, the Corporation
should presume that the entire amount of the bonus will be settled in shares, and, if the shares have a
dilutive effect, the resulting potential shares should be included in the weighted average number of shares
outstanding used in the calculation of diluted EPS. The number of shares is estimated by dividing the
entire amount of the bonus by the closing price of the shares at the balance sheet date. The dilutive effect
of the potential shares needs to be included in the calculation of diluted EPS until the stockholders resolve
the number of shares to be distributed to employees at their meeting in the following year.
- 26 -
18. RELATED-PARTY TRANSACTIONS
a. Related parties and their relationships with the Corporation
Relationship with the Corporation
and Subsidiaries
Related Parties
Coreocean Maritime S.A. Panama (“Coreocean”)
Transformer Maritime S.A. Panama (“Transformer”)
Efficiency Ship Management Corporation (“Efficiency”)
Corebright Maritime S.A. Panama (“Corebright”)
Corebest Maritime S.A. Panama (“Corebest”)
Coreleader Maritime S.A. Panama (“Coreleader”)
Corediamond Maritime S.A. Panama (“Corediamond”)
Corepilot Maritime S.A. Panama (“Corepilot”)
Corewinner Maritime S.A. Panama (“Corewinner”)
Oceanlance Maritime S.A. Panama (“Oceanlance”)
Huo Da Investments Co., Ltd. (“Huo Da”)
Huan Shin Investments Co., Ltd. (“Huan Shin”)
Luo Pan Investments Co., Ltd. (“Luo Pan”)
Chi Huan Investment Co.
Liang Yu Investment Co.
Lan Jun-De
Chen Huo-Tsai
Lin Hui-Ling
Chairman is an immediate relative of the
Corporation’s chairman
Related party in substance
Chairman is the spouse of the Corporation’s
chairman
Chairman of the Corporation
Supervisor of the Corporation
Senior manager of the Corporation
b. Significant related-party transactions (in addition to those disclosed in Note 8)
2012
Amount
Operating revenues
Management income
Coreocean
Transformer
Efficiency
Corediamond
Corepilot
$
- 27 -
532
532
532
532
532
2011
Amount
%
-
$
531
531
531
-
%
(Continued)
2012
Amount
Corewinner
Corebright
Oceanlance
Corebest
Coreleader
Commission revenue
Efficiency
Transformer
Coreocean
Corepilot
$
$
2011
Amount
%
532
487
355
175
87
-
1,296
659
643
610
-
7,504
-
$
$
%
-
-
1,718
1,428
1,279
-
-
6,018
(Concluded)
The management income and commission revenue were obtained from providing related parties with
shipping services based on agreed terms.
2012
Amount
Ship rental expense (classified under operating
cost)
Oceanlance
Rental revenue (classified under miscellaneous
income)
Luo Pan
Huo Da
Huan Shin
2011
Amount
%
%
$ 85,762
2
$
-
-
$
24
24
12
-
$
24
24
12
-
$
60
-
$
60
-
The rental revenue was from leasing parts of the office.
2012
Amount
Prepaid rent (classified under other current
assets)
Oceanlance
$
8,422
2011
Amount
%
3
$
%
-
-
The rental revenue was from leasing parts of the office.
c. Compensation of directors, supervisors and management personnel:
Salaries
Incentives
Special compensation
Bonus
- 28 -
2012
2011
$ 16,410
4,844
350
3,672
$ 14,752
2,993
245
4,869
$ 25,276
$ 22,859
19. MORTGAGED OR PLEDGED ASSETS
The following assets were mortgaged or pledged as collateral for bank guarantee and loans:
December 31
2012
Restricted assets
Pledged time deposits (classified as restricted assets)
Pledged demand deposits (classified as restricted assets)
Property and equipment
Land
Building, net
Vessel equipment, net
Prepayment for equipment
$
2011
861,344
60,111
$
1,120,351
60,019
579,422
21,553
22,713,706
-
79,937
22,639
15,576,448
943,143
$ 24,236,136
$ 17,802,537
20. SIGNIFICANT COMMITMENTS AND CONTINGENCIES
With some shipbuilding companies, the subsidiaries entered into vessel construction contracts amounting to
￥5,100,000 thousand and US$41,500 thousand. As of December 31, 2012, ￥883,000 thousand and
US$1,250 thousand had been paid.
21. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments
December 31
2012
Carrying
Amount
2011
Carrying
Amount
Fair Value
Fair Value
Nonderivative instruments
Assets
Financial assets at fair value
through profit or loss - current
Held-to-maturity financial assets current
Financial assets carried at cost noncurrent
Refundable deposits
Restricted assets - noncurrent
Liabilities
Long-term bank loans (including
current portion)
Convertible bonds payable
Guarantee deposits received
$
155,537
$
155,537
$
88,588
$
88,588
-
-
15,138
15,138
28,388
38,571
921,455
38,571
921,455
28,421
32,071
556,856
32,071
556,856
19,856,454
429,738
288
19,856,454
429,738
288
14,454,029
420,118
297
14,454,029
420,118
297
(Continued)
- 29 -
December 31
2012
Carrying
Amount
2011
Carrying
Amount
Fair Value
Fair Value
Derivative instruments
Financial assets at fair value through
profit or loss - current
Financial liabilities at fair value
through profit or loss - current
Liability component of convertible
bonds
Currency options contracts
Financial liabilities at fair value
through profit or loss - noncurrent
Liability component of convertible
bonds
$
1,392
$
1,392
$
1,062
28,980
1,460
-
28,980
510
-
1,171
157,849
-
-
26,730
$
1,062
1,008
157,849
26,730
(Concluded)
b. Methods and assumptions used in determining fair values of financial instruments
1) The balance sheet carrying amounts of cash, accounts receivable, restricted assets - current,
short-term bank loans, notes and accounts payable, accrued expenses, and payable on the equity
investment (reclassified as other current liabilities) which were not included in the instruments
mentioned above, approximate fair value because of their short maturities.
2) For financial instruments at fair value through profit or loss and held-to-maturity financial assets
with an active market, the fair value is based on quoted market prices. For those financial
instruments without an active market, the fair value is estimated using valuation techniques
incorporating estimates and assumptions that are consistent with those generally used by other
market participants for instrument pricing.
3) For financial assets carried at cost, the fair values cannot be estimated because related stocks have
no active market and a reliable determination of their fair value entails an unreasonably high cost;
thus, their fair value is not presented.
4) For refundable deposits, restricted assets - noncurrent and guarantee deposits received, their future
receipt, settlement or payment terms are uncertain; thus, their fair value is their book value.
5) For long-term bank loans, their fair value is estimated using the present value of future cash flows
discounted at interest rates the Corporation and its subsidiaries may obtain for similar loans (e.g.,
similar maturities).
6) For convertible bonds payable, their fair value is estimated using the present value of future cash
flows.
c. As of December 31, 2012 and 2011, financial assets exposed to fair value interest rate risk amounted to
$0 thousand and $15,138 thousand, respectively; financial liabilities exposed to fair value interest rate
risk amounted to $1,279,738 thousand and $1,527,863 thousand, respectively; and financial liabilities
exposed to cash flow interest rate risk amounted to $19,302,009 thousand and $13,904,029 thousand,
respectively.
- 30 -
d. Financial risks
1) Market risk
Financial instruments at fair value through profit or loss are held by the Corporation and its
subsidiaries for trading in active markets. Hence, the Corporation and its subsidiaries are exposed
to market risks as a result of price fluctuations. The Corporation and its subsidiaries run a control
system to mitigate this risk, and management does not anticipate any material loss due to this risk.
The Corporation and its subsidiaries also hold foreign-currency assets, liabilities, forward exchange
contracts and currency option contracts. Hence, the Corporation and its subsidiaries are exposed
to market risks as a result of exchange rate fluctuations. The Corporation and its subsidiaries run a
control system and monitor the exchange rate fluctuations to reduce market risks.
2) Credit risk
The Corporation and its subsidiaries are exposed to credit risk on counter-parties’ default on
contracts. However, the amount of the Corporation and its subsidiaries’ maximum exposure to
credit risk on its financial instruments is equal to the book value. In addition, the Corporation and
its subsidiaries transact only with selected financial institutions and corporations with good credit
ratings. Thus, management does not anticipate any material losses on default on contracts.
3) Liquidity risk
The Corporation and its subsidiaries meet their cash flow demand in operation mainly through
financing, which includes using unused credit line and entering into new loan agreements with
financial institutions.
In addition, the Corporation and its subsidiaries’ financial instruments at fair value through profit or
loss is publicly traded in an active market and can readily be sold in the market at their approximate
fair values. However, their financial assets that are carried at cost are with significant liquidity
risks because these assets do not have quoted market prices in an active market.
4) Cash flow interest rate risk
The Corporation and its subsidiaries’ short-term and long-term loans are floating-rate loans.
Effective interest rates and future cash flows of the Corporation and its subsidiaries will fluctuate as
a result of changes in market interest rate.
The Corporation issued zero-coupon convertible bonds; thus, there is no cash flow interest rate risk
due to interest rate fluctuations.
22. OPERATING SEGMENT FINANCIAL INFORMATION
a. Segment information
On January 1, 2011, the Corporation and its subsidiaries adopted the newly issued Statement of
Financial Accounting Standards (SFAS) No. 41 - “Operating Segments.” SFAS No. 41 requires
identification of operating segments on the basis of internal reports that are regularly reviewed by the
Corporation and its subsidiaries' chief operating decision maker in order to allocate resources to the
segments and assess their performance. The Corporation and other subsidiaries are regarded as one
operating segment and mainly provides cargo shipping services and acts as a shipping agency.
However, Gueishan Island Marine Biology Development Co., Ltd. has not engaged in operating
activities. The information of the operating segment is the same as that presented in the accompanying
financial statements.
- 31 -
b. Geographical information
Sales to Other Than
Consolidated Entities
2012
2011
Europe
Asia
Taiwan
United States
Oceania
Noncurrent Assets
December 31
2012
2011
$
1,808,693
2,095,268
128,802
7,795
5,078
$
2,197,382
1,624,821
230,304
9,354
-
$
1,127,900
26,089,507
-
$
4,045,636
$
4,061,861
$ 27,217,407
$
632,345
19,804,981
-
$ 20,437,326
Noncurrent assets were property and equipment and other assets.
c. Service information
2012
2011
Ship leasing
Shipping transportation
Others
$ 3,311,071
726,770
7,795
$ 3,717,602
334,904
9,355
$ 4,045,636
$ 4,061,861
d. Major customers
The following customers accounted for at least 10% of consolidated revenue:
2012
2011
% to
Amount
Sale
Amount
$ 550,975
535,014
331,552
202,199
Company A
Company B
Company C
Company D
- 32 -
14
13
8
5
$
484,797
453,382
% to
Sale
12
11
23. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND
LIABILITIES
Significant financial assets and liabilities denominated in foreign currencies as of December 31, 2012 and
2011 are summarized as follows:
(In Thousands of Foreign Currencies and New Taiwan Dollars)
December 31
2012
Exchange
Rate
New Taiwan
Dollars
55,943
912,848
2,233
248
29.04
0.3364
4.60
39.16
$$ 1,624,580
307,082
10,269
9,718
4,816
29.04
579,081
1,668,941
-
Foreign
Currencies
2011
Exchange
Rate
New Taiwan
Dollars
91,907
370,895
479
569
30.275
0.3906
4.8070
39.18
$$ 2,782,492
144,872
2,301
22,284
139,845
2,619
30.275
79,286
29.04
0.3364
16,816,518
561,383
282,198
9,561,951
30.275
0.3906
8,543,543
3,734,898
-
-
404,421
0.3906
157,849
Foreign
Currencies
Financial assets
Monetary items
USD
JPY
RMB
EUR
Non-monetary items
USD
$
$
Financial liabilities
Monetary items
USD
JPY
Nonmonetary items
JPY
- 33 -

Shih Wei Navigation Co., Ltd. and Subsidiaries

Transcription

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