Walsin Technology Corporation and Subsidiaries

Transcription

Walsin Technology Corporation and
Subsidiaries
Consolidated Financial Statements for the
Years Ended December 31, 2011 and 2010 and
Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders
Walsin Technology Corporation
We have audited the accompanying consolidated balance sheets of Walsin Technology Corporation
and subsidiaries (collectively, the “Company”) as of December 31, 2011 and 2010, and the related
consolidated statements of income, changes in stockholders’ equity, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. The accompanying consolidated financial statements included
assets of some investees of Gallatown Developments Limited (“Gallatown”) that were 7.90%
(NT$2,166,736 thousand) and 3.80% (NT$2,194,016 thousand) of the consolidated total assets as
of December 31, 2011 and 2010, respectively, and net sales that were 15.96% (NT$4,007,390
thousand) and 12.38% (NT$4,978,113 thousand) of the consolidated net sales for the years ended
December 31, 2011 and 2010, respectively. These amounts were based on the financial
statements audited by other independent auditors. Accordingly, our opinion, insofar as it relates
to these amounts is based solely on the reports of the other auditors.
We conducted our audits in accordance with the Rules Governing the Audit of Financial
Statements by Certified Public Accountants and auditing standards generally accepted in the
Republic of China. Those rules and standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits and the
reports of the other auditors provide a reasonable basis for our opinion.
-1-
In our opinion, based on our audits and the reports of the other auditors, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Walsin
Technology Corporation and subsidiaries as of December 31, 2011 and 2010, and the results of
their operations and their cash flows for the years then ended, in conformity with the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business
Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting
standards, and accounting principles generally accepted in the Republic of China.
March 21, 2012
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated
financial position, results of operations and cash flows in accordance with accounting principles
and practices generally accepted in the Republic of China and not those of any other jurisdictions.
The standards, procedures and practices to audit such consolidated financial statements are those
generally accepted and applied in the Republic of China.
For the convenience of readers, the auditors’ report and 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
auditors’ report and consolidated financial statements shall prevail. Also, as stated in Note 2 to
the consolidated financial statements, the additional footnote disclosures that are not required
under generally accepted accounting principles were not translated into English.
-2-
WALSIN TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
(In Thousands of New Taiwan Dollars)
2011
Amount
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 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)
Notes receivable (Notes 2 and 7)
Notes receivable from related parties (Notes 2, 7 and 24)
Accounts receivable (Notes 2 and 7)
Accounts receivables from related parties (Notes 2, 7 and 24)
Other receivables
Other receivables from related parties (Note 24)
Inventories (Notes 2 and 8)
Deferred income tax assets - current (Notes 2 and 22)
Other current assets (Note 2)
Total current assets
INVESTMENTS
Long-term equity investments at equity method (Notes 2 and 9)
Available-for-sale financial assets - noncurrent (Notes 2 and 10)
Financial assets carried at cost - noncurrent (Notes 2 and 11)
Total investments
PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 12)
Cost
Land
Buildings and improvements
Machinery and equipment
Transportation equipment
Leasehold improvements
Other equipment
Less: Accumulated depreciation
Less: Accumulated impairment
Construction in progress and prepayments for equipment
Property, plant and equipment, net
INTANGIBLE ASSETS (Note 2)
Computer software
Goodwill
Land use rights
Other intangible assets
Total intangible assets
OTHER ASSETS (Notes 2 and 13)
Idle assets
Guarantee deposits paid
Deferred charges
Deferred income tax assets - noncurrent
Other assets - others
$
2010
Amount
%
3,879,024
79,184
23,993
151,892
1
3,923,639
9,947
85,461
229,240
3,827,603
144,481
790,033
14
1
14
1
14
1
3
13,144,498
$
%
9,627,139
38,584
244,633
2,029
11,014,045
20,205
515,573
9,904
5,651,830
156,177
547,944
17
19
1
10
1
48
27,828,063
48
2,641,789
675,367
172,240
10
2
1
5,239,426
1,032,790
171,999
9
2
-
3,489,396
13
6,444,215
11
CURRENT LIABILITIES
Short-term loans (Note 14)
Notes payable
Accounts payable
Income tax payable (Notes 2 and 22)
Financial liabilities at fair value through profit or loss - current (Notes 2 and 5)
Hedging derivative liabilities - current (Notes 2 and 27)
Payables on equipment (Note 24)
Other payables (Note 24)
Current portion of long-term debt (Note 16)
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES
Financial liabilities at fair value through profit or loss - noncurrent (Notes 2, 5
and 15)
Bonds payable (Notes 2 and 15)
Long-term debt (Note 16)
Long-term payable
Total long-term liabilities
RESERVE FOR LAND VALUE INCREMENT TAX (Notes 12 and 13)
453,203
6,961,119
17,393,001
55,411
211,278
2,424,223
27,498,235
(18,118,520)
(197,349)
608,106
2
25
63
1
9
100
(66)
(1 )
2
638,039
9,627,551
29,218,033
123,542
191,338
4,965,056
44,763,559
(24,747,550)
(153,232)
1,999,153
1
17
51
9
78
(43)
3
9,790,472
35
21,861,930
38
141
181,439
10,979
1
-
126
125,609
370,943
7,315
1
-
192,559
1
503,993
1
193,569
74,570
75,688
355,719
127,013
1
1
1
362,864
84,250
133,756
329,108
140,144
1
1
-
826,559
3
1,050,122
2
OTHER LIABILITIES
Accrued pension cost (Notes 2 and 17)
Guarantee deposits received
Other liabilities - others
Total other liabilities
Total liabilities
PARENT COMPANY STOCKHOLDERS’ EQUITY
Capital stock
Common stock (Note 18)
Advance receipts for common stock (Note 18)
Capital surplus
Additional paid-in capital from share issuance in excess of par
Treasury stock transactions
Gain on disposal of property, plant and equipment
Long-term equity investments at equity method
Capital surplus from business combination
Retained earnings (Note 19)
Legal reserve
(Accumulated deficit) unappropriated earnings
Cumulative translation adjustments (Note 2)
Unrealized valuation gain or loss on financial instruments (Notes 2 and 10)
Unrealized revaluation increment
Treasury stock (Notes 2 and 20)
Total parent company stockholders’ equity
Total other assets
MINORITY INTEREST
Total stockholders' equity
TOTAL
$ 27,443,484
100
$ 57,688,323
2011
Amount
LIABILITIES AND STOCKHOLDERS’ EQUITY
100
TOTAL
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 21, 2012)
-3-
$
2010
Amount
%
1,592,691
192,639
1,018,496
15,530
603,211
1,404,679
419,683
103,966
6
1
4
2
5
2
-
5,350,895
$
%
3,843,314
700,848
5,173,028
173,723
4,920
2,172
1,095,456
2,447,752
1,500,000
105,321
7
1
9
2
4
3
-
20
15,046,534
26
5,297,035
5,741
19
-
6,958
917,158
14,347,879
-
1
25
-
5,302,776
19
15,271,995
26
31,075
-
46,728
-
277,003
81,522
973
1
-
260,520
172,568
7,330
1
-
359,498
1
440,418
1
11,044,244
40
30,805,675
53
6,900,634
-
25
-
6,639,888
6,639
12
-
5,701,589
9,961
244,284
78,055
1,487,077
21
1
6
5,698,500
13,195
244,284
82,002
1,487,077
10
3
95,257
(542,961)
1,095,554
(347,838)
3,021
-
(2 )
4
(1 )
-
952,566
235,214
69,672
3,021
(68,855)
2
-
14,724,633
54
15,363,203
27
1,674,607
6
11,519,445
20
16,399,240
60
26,882,648
47
$ 27,443,484
100
$ 57,688,323
100
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2011 AND 2010
(In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)
2011
Amount
NET SALES
%
2010
Amount
%
$ 25,102,369
100
$ 40,207,041
100
23,409,341
93
34,303,351
85
GROSS PROFIT
1,693,028
7
5,903,690
15
OPERATING EXPENSES
Selling
General and administrative
Research and development
1,159,292
908,757
511,262
5
4
2
1,469,553
1,468,986
696,083
4
3
2
2,579,311
11
3,634,622
9
(886,283)
(4)
2,269,068
6
137,606
1
107,866
-
182,434
20,931
86,489
16,709
59,715
598
11,858
125,568
1
1
236,744
27,574
65,115
35,765
63,167
12,318
23,186
214,726
1
1
641,908
3
786,461
2
195,010
10,833
19,488
22,366
346,592
1
1
275,211
35,029
139,751
315,824
1
1
594,289
2
765,815
2
(Continued)
COSTS OF SALES
Total operating expenses
OPERATING (LOSS) INCOME
NONOPERATING INCOME AND GAINS
Interest income
Investment income recognized under equity method
(Notes 2 and 9)
Investment income (Notes 2 and 23)
Gain on disposal of assets
Gain on sale of investments, net
Foreign exchange gain, net
Reversal of allowance for doubtful accounts
Reversal of impairment loss
Valuation gain on financial assets
Valuation gain on financial liabilities
Others
Total nonoperating income and gains
NONOPERATING EXPENSES AND LOSSES
Interest expense
Loss on disposal of assets
Foreign exchange loss, net
Impairment loss
Valuation loss on financial assets
Others
Total nonoperating expenses and losses
-4-
2011
Amount
(LOSS) INCOME BEFORE INCOME TAX
$
INCOME TAX EXPENSE (Notes 2 and 22)
2010
Amount
%
(838,664)
(3)
(112,114)
(1)
$
%
2,289,714
6
(555,390)
(2)
TOTAL CONSOLIDATED NET (LOSS) INCOME
$
(950,778)
(4)
$
1,734,324
4
ATTRIBUTED TO
Parent company stockholders
Minority interests
$ (1,057,342)
106,564
(4)
-
$
952,566
781,758
2
2
$
(4)
$
1,734,324
4
(950,778)
2011
BASIC (LOSS) EARNINGS PER SHARE (NEW
TAIWAN DOLLARS, Notes 2 and 18)
Basic (loss) earnings per share before distribution to
minority interest
Basic (loss) earnings per share attributed to the
parent company's stockholders
DILUTED EARNINGS PER SHARE (NEW TAIWAN
DOLLARS, Notes 2 and 18)
Diluted earnings per share before distribution to
minority interest
Diluted earnings per share attributed to the parent
company's stockholders
-5-
2010
Before
Income
Tax
After
Income
Tax
Before
Income
Tax
After
Income
Tax
$ (1.22)
$ (1.38)
$
$
2.53
$
1.39
$
2.53
3.35
$ (1.54)
$
3.34
$ 1.39
(Continued)
Pro forma information assuming the Company’s shares held by its subsidiaries were accounted for as an
investment instead of treasury stock is as follows:
2011
CONSOLIDATED NET (LOSS) INCOME ATTRIBUTED TO
STOCKHOLDERS OF THE PARENT COMPANY
2010
$ (1,060,576)
2011
BASIC (LOSS) EARNINGS PER SHARE (NEW
TAIWAN DOLLARS)
Basic (loss) earnings per share before distribution to
minority interest
Basic (loss) earnings per share attributed to the
parent company’s stockholders
$
952,566
2010
Before
Income
Tax
After
Income
Tax
Before
Income
Tax
After
Income
Tax
$ (1.23)
$ (1.39)
$
$
2.52
$
1.38
$
2.51
$
1.38
3.32
$ (1.54)
DILUTED EARNINGS PER SHARE (NEW TAIWAN
DOLLARS)
Diluted earnings per share before distribution to
minority interest
Diluted earnings per share attributed to the parent
company’s stockholders
$
3.32
-6-
(Concluded)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Capital Stock
Issued and
Advance
Outstanding
Receipts for
Common Stock
Common Stock
BALANCE, JANUARY 1, 2010
$
6,638,023
$
-
From Share
Issuance in
Excess of Par
$
5,696,878
Treasury Stock
Transactions
$
1,993
Transfer of special reserve to accumulated deficit (Note 19)
-
-
-
-
Offset of accumulated deficit (Note 19)
-
-
-
-
1,865
6,639
1,622
-
Treasury stock transferred to employees (Note 20)
-
-
-
Changes in the Company's common shares held by subsidiaries
(Note 20)
-
-
Unrealized valuation gain or loss on available-for-sale financial
assets
-
Unrealized valuation gain or loss on investee's available-for-sale
financial assets
Capital Surplus
Gain on
Disposal of
Property, Plant
and Equipment
$
270,307
Retained Earnings
Long-term
Equity
Investments at
Equity Method
$
$
1,487,077
-
-
-
-
-
-
-
11,202
-
-
-
-
-
-
-
-
-
-
-
Unrealized valuation gain or loss on derivative financial liability
for cash flow hedging
-
-
Change in equity in investee's net assets
-
Legal Reserve
$
214,278
Special Reserve
$
$
$
1,014,362
$
71,244
$
3,021
Minority
Interest
Total
$ 11,966,717
$ 27,086,126
Treasury Stock
$
(108,853 )
-
-
-
-
-
-
240,301
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,126
-
-
-
-
-
-
-
39,551
-
50,753
-
-
-
-
-
-
-
-
447
-
447
-
-
-
-
-
-
-
8,799
-
-
-
8,799
-
-
-
-
-
-
-
-
(39,406 )
-
-
-
(39,406 )
-
-
-
-
-
-
-
-
-
29,035
-
-
-
29,035
-
-
-
-
10,622
-
-
-
-
-
-
-
-
-
10,622
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(779,148 )
Minority interest
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated net income for 2010
-
-
-
-
-
-
-
-
-
952,566
-
-
-
-
6,639,888
6,639
5,698,500
13,195
244,284
82,002
1,487,077
-
-
952,566
235,214
69,672
3,021
257,196
-
-
-
-
-
-
-
95,257
-
-
(95,257 )
(257,196 )
(85,732 )
-
-
-
-
-
3,089
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58,805
-
58,805
Cumulative translation
investments
adjustments
on
long-term
(208,097 )
(448,398 )
Unrealized
Revaluation
Increment
-
(26,023 )
-
208,097
Cumulative
Translation
Adjustments
Unrealized
Valuation Gain
or Loss on
Financial
Instruments
208,097
Employee stock warrants converted into common stock
(Note 18)
-
71,380
Capital Surplus
from Business
Combination
Unappropriated
Earnings
(Accumulated
Deficit)
(214,278 )
equity
BALANCE, DECEMBER 31, 2010
Appropriations and distributions (Note 19)
Legal reserve
Stock dividends
Cash dividends
Employee stock warrants converted into common stock
(Note 18)
3,550
(6,639 )
(779,148 )
(1,229,030 )
(68,855 )
(1,229,030 )
781,758
1,734,324
11,519,445
26,882,648
(85,732 )
(Note 20)
-
-
-
-
-
-
-
-
-
-
-
Unrealized valuation gain or loss on available-for-sale financial
assets
-
-
-
-
-
-
-
-
-
-
-
(283,801 )
-
-
-
(283,801 )
financial assets
-
-
-
-
-
-
-
-
-
-
-
(133,709 )
-
-
-
(133,709 )
Change in equity in investee's net assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,947 )
-
-
-
-
-
-
-
-
-
-
860,340
-
-
-
-
860,340
Cash dividend received by subsidiaries
-
-
-
83
-
-
-
-
-
-
-
-
-
-
-
83
Sale of the Company's stock held by subsidiaries (Note 20)
-
-
-
-
-
-
-
-
-
-
-
-
10,050
-
6,733
Minority interest
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated net (loss) income for 2011
-
-
-
-
-
-
-
-
-
-
-
-
-
Cumulative translation
investments
adjustments
on
long-term
(3,947 )
equity
BALANCE, DECEMBER 31, 2011
$
6,900,634
$
-
$
5,701,589
(3,317 )
$
9,961
$
244,284
$
78,055
$
1,487,077
-7-
$
95,257
$
-
(1,057,342 )
$
(542,961 )
$
1,095,554
$
(347,838 )
$
3,021
$
-
(9,951,402 )
106,564
$
1,674,607
(9,951,402 )
(950,778 )
$ 16,399,240
CONSOLIDATED STATEMENTS OF CASH FLOWS
2011
CASH FLOWS FROM OPERATING ACTIVITIES
Total consolidated (loss) income
Adjustments to reconcile net (loss) income to net cash provided by
operating activities
Depreciation and amortization
Compensation cost of treasury stock transferred to employees
Valuation loss (gain) on financial assets
Valuation gain on financial liabilities
Amortization of bond discount
Impairment loss (reversal of impairment loss) on assets
Net (gain) loss on disposal of assets
Gain on disposal of available-for-sale financial assets - noncurrent
Investment income recognized under equity method
Cash dividends from equity-accounted investees
Impairment loss of available-for-sale financial assets - noncurrent
Impairment loss of goodwill
Net changes in operating assets and liabilities
Financial assets at fair value through profit or loss - current
Held-to-maturity financial assets - current
Notes receivable
Notes receivable from related parties
Accounts receivable
Accounts receivable from related parties
Other receivables
Other receivables from related parties
Inventories
Other current assets
Deferred tax assets - noncurrent
Other assets
Notes payable
Accounts payable
Accounts payable to related parties
Income tax payable
Other payables
Accrued pension cost
Other liabilities
Long-term payable
Net cash provided by operating activities
-8-
$
(950,778)
2010
$ 1,734,324
3,121,497
22,366
(11,858)
8,876
19,488
(75,656)
(16,611)
(182,434)
4,268
18,140
6,995
4,208,303
11,084
(12,318)
(23,186)
5,917
(63,167)
35,029
(62,331)
(236,744)
98,439
-
(80,532)
(23,993)
87,526
2,028
(1,315,889)
(20,547)
(13,114)
(219,462)
(208,395)
(504,706)
(48,596)
279,727
(102,630)
1,280,026
(75,559)
(77,043)
12,847
16,483
49,471
5,741
21,231
29,197
(598)
353,482
(8,518)
43,586
(7,535)
(498,944)
29,860
202,077
(37,038)
(112,702)
133,774
(1,287)
42,957
55,704
(26,592)
16,570
(13,943)
-
1,007,676
5,916,631
(Continued)
2011
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in available-for-sale financial asset - noncurrent
Proceeds from disposal of available-for-sale financial asset noncurrent
Increase in long-term equity investments at equity method
Decrease in restricted assets
Proceeds from disposal of property, plant and equipment
Cash paid for acquisition of property, plant and equipment
Increase in guarantee deposits paid
Increase in intangible assets and deferred charges
$
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Decrease in short-term bills payable
Increase in long-term debt
Issuance of convertible bonds
Increase in guarantee deposits received
Proceeds from transfer of treasury stock to employees
Proceeds from disposal of treasury stock
Proceeds from employee stock warrant converted into common stock
Decrease in minority interest
Cash dividends paid
Net cash provided by financing activities
EFFECT OF LOSS OF CONTROL OVER SUBSIDIARY
(19,264)
(558,470)
311,383
(4,750,066)
64,223
57,710
(4,379,097)
(6,512)
(52,505)
(2,428,465)
(9,313,334)
1,551,738
1,859,355
23,027
15,679
(99,481)
(85,649)
(271,759)
(34,997)
6,555,800
995,000
75,045
39,669
10,126
(503,964)
-
3,264,669
6,864,920
187,172
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
$
32,806
350,430
(2,770,571)
(13,296)
(8,570)
(7,779,167)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
2010
(425,069)
(5,748,115)
3,043,148
9,627,139
6,583,991
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 3,879,024
$ 9,627,139
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Property, plant and equipment transfer to intangible assets
Property, plant and equipment transfer to deferred charges
Property, plant and equipment transfer to idle assets
Idle asset transfer to property, plant and equipment
Transfer of current portion of long-term debt to current liabilities
Changes of equity in the investee's net assets
$
$
$
$
$
$
$
34,830
$
29,157
$
$
15,019
$ 1,500,000
$
10,622
(Continued)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
-9-
7,895
25,891
41,714
5,510
419,683
(3,947)
2011
Unrealized valuation gain or loss on available-for-sale financial assets
financial assets
Unrealized valuation gain or loss on derivative financial liability for
cash flow hedging
Translation adjustments on long-term equity investments
Dividends to subsidiaries transferred to capital surplus
Adjustments to stockholders' equity due to sale of the Company's stock
held by subsidiaries
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest (excluding capitalized interest)
Income tax
CASH PAID DURING THE YEAR FOR ACQUISITION OF
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment acquired
Add: Payable for purchases of property, plant and equipment,
beginning of year
Deduct: Payable for purchases of property, plant and equipment, end
of year
Cash paid during the year for acquisition of property, plant and
equipment
2010
$
(283,801)
$
8,799
$
(133,709)
$
(39,406)
$
$
$
$
860,340
58,805
83
$
$
$
$
29,035
(779,148)
447
-
$
6,733
$
-
$
$
264,656
138,735
$
$
264,901
361,526
$ 2,715,136
$ 4,982,659
1,095,456
491,894
(1,040,021)
$ 2,770,571
(1,095,456)
$ 4,379,097
The fair values of assets and liabilities of the subsidiary over which control was lost were summarized as
follows:
Current assets
Investments
Property, plant and equipment
Intangible assets
Other assets
Goodwill
Current liabilities
Long-term liabilities
Other liabilities
Minority interest
Net assets of the subsidiary
Cash balance of subsidiary
Long-term investment in the subsidiary before loss of control
Net cash in subsidiary over which control was lost
$ 19,074,228
4,678,750
11,773,294
166,975
152,437
125,609
(12,675,068)
(11,412,123)
(169,901)
(9,932,301)
1,781,900
(7,779,167)
(1,781,900)
$ (7,779,167)
- 10 -
(Concluded)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
Walsin Technology Corporation (“WTC”) was incorporated in the Republic of China (ROC) on July 29,
1970 to design, develop and manufacture semiconductors and LED (light-emitting diode) chips. In 1992,
WTC purchased the machinery, equipment and inventory of the electronic department of Walsin Lihwa
Corporation to establish its Yang-Mei Plant on July 1 and changed its major operations to the manufacture
of electronic ceramics, including multilayer ceramic capacitors (“MLCC”) and ceramic resistors. In 1995,
WTC established a branch in Kaohsiung to research, develop, produce and sell products such as chip
resistors, RF (radio frequency) devices and high-frequency inductors and, in 2006, WTC established a
branch in Taichung to produce disc capacitors and new products. WTC closed its operations in the
Taichung branch in August 2009. WTC’s common stock began to be traded in Taiwan’s over-the-counter
(OTC) market on November 21, 1997. Later, WTC’s stock ceased to be OTC traded and became listed on
the Taiwan Stock Exchange on September 17, 2001. The major stockholder, Walsin Lihwa Corporation,
held 18.11% ownership interest in WTC as of December 31, 2011. WTC’s head office is located at 566-1,
Kao-shi Road, Yang-Mei, Taoyuan.
Gallatown Developments Limited (“Gallatown”) was incorporated in the Cayman Islands as an investment
holding company.
Pan Overseas (B.V.I.) Investment (“POE-BVI”) was incorporated in the British Virgin Islands as an
investing holding company.
Prosperity Dielectrics Co., Ltd. (“PDC”), a listed company on the over-the-counter Stock Market of the
Taiwan GreTai Securities Market, is engaged in manufacturing and selling of electric capacitors, resistors
and semiconductor chip.
Hannstar Board Corp. (“Hannstar”), a listed company on the Taiwan Stock Exchange, is engaged in
manufacturing and selling printed circuit board. WTC lost its control over Hannstar after it lost the
majority in the board of directors of Hannstar in its provisional stockholders’ convention. Hannstar was
no longer included as a consolidated entity in the consolidated financial statement since June 10, 2011.
As of December 31, 2011 and 2010, WTC and its subsidiaries had 8,611 and 22,755 employees,
respectively.
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 (“ROC”).
For readers’ convenience, the accompanying consolidated financial statements have been translated into
English from the original Chinese version prepared and used in the ROC. If inconsistencies arise between
the English version and the Chinese version or if differences arise in the interpretations between the two
versions, the Chinese version of the financial statements shall prevail. However, the Corporation’s
financial statements do not include the English translation of additional disclosures that are not required
under generally accepted accounting principles but are required by the Securities and Futures Bureau for
their oversight purposes.
- 11 -
Significant accounting policies are summarized as follows:
Principles of Consolidation
All significant intercompany balances and transactions have been eliminated upon consolidation. WTC
and its subsidiaries adopted Statement of Financial Accounting Standards No. 7 - “Consolidated Financial
Statements” and included all controlled investees in the consolidated financial statements as of and for the
years ended December 31, 2011 and 2010.
The consolidated entities (collectively, the “Company”) were as follows:
Name of Investor
Name of Subsidiary
Ownership
Interest
WTC
PDC
42.90%
WTC
Hannstar
19.97%
WTC
WTC
Gallatown
POE-BVI
Gallatown
Walsin Technology Corporation (HK)
Limited (“WTC (HK)”)
Walsin Technology Hong Kong Holding
Ltd. (“WTHC-HK”)
Walsin Technology Corporation
(Malaysia) Sdn. Bhd. (“WTCM”)
Walsin Electronics (S) Pte. Ltd. (“WES”)
Walsin Technology Corporation U.S.A.
(“WTCA”)
Walsin Passive Component (HK) Limited
(“WPC”)
Eden International Corporation (HK)
Limited (“Eden (HK)”)
Kamaya Electric Co., Ltd. (Kamaya)
100.00%
91.44%
100.00%
Dongguan Walsin Technology
Electronics Co., Ltd. (“DG”)
Suzhou Walsin Technology Electronics
Co., Ltd. (“SZ”)
Walsin Electronics (Shenzhen) Co., Ltd.
(“Shen Zhen”)
Pan Overseas Electronic Co., Limited
(Guang Zhou) (“POE-GZ”)
Dongguan Huafai Trading Co., Ltd.
(“Huafai”)
100.00%
100.00%
POE-BVI
POE-BVI
FB
Kamaya
Hua Ying Technology (Chongqing) Co.,
Ltd. (“Hua Ying”)
Gallatown
Fine Bright Technology Limited (“FB”)
Gallatown
Kamaya Electric(M) Sdn. Bhd. (“KM”)
Kamaya
Kamaya
Kamaya
Kamaya Electric (HK) Limited
Kamaya, Inc. (“KI”)
Nitsuko Electronics Corporation (“NTK”)
100.00%
100.00%
70.00%
PDC
100.00%
PDC
PDC Prime Holdings Limited (“PDC
Holdings”)
Hannstar Board Corp.
PDC
PDC Holdings
PDC Holdings
Frontier International Ltd.
PDC Success Investments Ltd.
Frontier Electronic Co., Ltd.
100.00%
100.00%
100.00%
Gallatown
Gallatown
Gallatown
Gallatown
Gallatown
Gallatown
Gallatown
WTHC-HK
WTHC-HK
WTHC-HK
WTHC-HK
WTHC-HK
WTHC-HK
Principal Activity
100.00%
Manufacturing and selling of electric
capacitors, resistors and
semiconductor chip, etc.
Manufacturing and selling printed
circuit board
Investment holding
Investment holding
Selling of passive electronic
components
Investment holding
100.00%
Selling passive electronic components
100.00%
100.00%
Marketing service
100.00%
100.00%
99.42%
Manufacturing and selling high level
electric chip and resistors
Manufacturing and selling passive
electronic components
100.00%
100.00%
100.00%
100.00%
3.75%
100.00%
4.81%
100.00%
0.01%
Trading of electronic parts,
warehousing and commission
agency
Manufacturing and selling of electric
capacitors, and resistors
Investment holding
Investment holding
Investment holding
Manufacturing and selling high level
electric chip and resistors
Manufacturing and selling of film
capacitors, noise filters.
Investment holding
circuit board
Investment and trade business
Investment holding
International trade
(Continued)
- 12 -
Name of Investor
Name of Subsidiary
Ownership
Interest
Principal Activity
PDC Success Investments Ltd.
PDC (Suzhou) Co., Ltd.
100.00%
Dongguan Frontier Electronic Co., Ltd.
100.00%
Frontier Electronic (Kun Shan) Co., Ltd.
100.00%
Hunan Frontier Electronic Co., Ltd.
100.00%
Frontier Electronic Co., Ltd.
Frontier Electronic (Chongqing) Co., Ltd.
100.00%
Hannstar Board (BVI)
Holdings Corp.
Hannstar Board International
Holdings Ltd.
Holdings Ltd.
Holdings Ltd.
Holdings Ltd.
Hannstar Board Holdings
(Hong Kong) Ltd.
Hannstar Board Holdings
(Hong Kong) Ltd.
Hannstar Board (BVI) Holdings Corp.
Hannstar Board International Holdings
Corp.
Hannstar Board (SAMOA) Holdings
Corp.
Walsin Board Corp.
100.00%
100.00%
Manufacturing and selling of
electronic parts and ceramic
components
Manufacturing and selling transformer,
coils and rectifier diode
Manufacturing magnetic component
and semiconductor
Manufacturing and selling transformer,
coils and magnetic component
Manufacturing and selling of
electronic part, etc.
Investment holding
Investment holding
100.00%
Investment holding
100.00%
Hannstar Board
Holdings (Hong Kong) Ltd.
Hannstar Board International (Singapore)
Private Ltd.
Hannstar Board Tech (Jiang Yin) Corp.
100.00%
circuit board
Investment holding
100.00%
Investment holding
100.00%
Hannstar Precision Tech (Jiang Yin)
Corp.
100.00%
circuit board
circuit board
(Concluded)
A subsidiary is excluded from the consolidated financial statements when the Company loss substantial
control over it, but the subsidiary’s income and expenses during the period the Company has control over it
are consolidated.
a. The information of subsidiaries not included in the consolidated financial statements: None.
b. The difference of the fiscal year between parent company and subsidiaries: None.
c. Special risks of business operation of subsidiaries overseas: None.
Foreign Currencies
The consolidated financial statements of foreign operations are translated into New Taiwan dollars at the
following exchange rates:
a.
b.
c.
d.
Assets and liabilities - at exchange rates prevailing on the balance sheet date;
Stockholders’ equity - at historical exchange rates;
Dividends - at the exchange rate prevailing on the dividend declaration date; and
Income and expenses - at average exchange rates for the year.
Exchange differences arising from the translation of the financial statements of foreign operations are
recognized as a separate component of stockholders’ equity. Such exchange differences are recognized in
profit or loss in the year in which the foreign operations are disposed of.
Non-derivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange
in effect when the transactions occur. Exchange differences arising from 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.
- 13 -
At the balance sheet date, foreign-currency nonmonetary assets (such as equity instruments) and liabilities
that are measured at fair value are revalued using prevailing exchange rates, with the exchange differences
treated as follows:
a. Recognized in stockholders’ equity if the changes in fair value are recognized in stockholders’ equity;
b. Recognized in profit and loss if the changes in fair value are recognized in profit or loss.
Foreign-currency nonmonetary assets and liabilities that are carried at cost continue to be stated at exchange
rates at trade dates.
If the functional currency of an equity-method investee is a foreign currency, translation adjustments will
result from the translation of the investee’s financial statements into the reporting currency of the Company.
Such adjustments are accumulated and reported as a separate component of stockholders’ equity.
Accounting Estimates
Under above guidelines and principles, certain estimates and assumptions have been used for the allowance
for doubtful accounts, allowance for loss on inventories, depreciation and impairment of property, plant and
equipment, income tax, pension cost, bonuses to employees, directors and supervisors, etc. Actual results
may differ from these estimates.
Current/Noncurrent Assets and Liabilities
Current assets include cash and cash equivalents, and those assets 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, plant 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.
Cash Equivalents
Cash equivalents consist of commercial paper, bank acceptances and repurchase agreements collateralized
by bonds, which are highly liquid financial instruments with maturities of three months or less when
acquired and with carrying amounts that approximate their fair values.
Financial Assets and Liabilities 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 and those designated as at
FVTPL on initial recognition. The Company recognizes a financial asset or a financial liability on its
balance sheet when the Company becomes a party to the contractual provisions of the financial instrument.
A financial asset is derecognized when the Company has lost control of its contractual rights over the
financial asset. A financial liability is derecognized when the obligation specified in the relevant contract
is discharged, cancelled 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. Cash dividends received subsequently (including those received in the year of
investment) are recognized as income for the year. 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.
- 14 -
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.
Held-to-maturity Financial Assets
Held-to-maturity financial assets are carried at amortized cost using the effective interest method
(straight-line method is used if there will be no significant difference). Held-to-maturity financial assets
are initially measured at fair value plus transaction costs that are directly attributable to the acquisition.
Profit or loss is recognized when the financial assets are derecognized, impaired, or amortized. All regular
way purchases or sales of financial assets are accounted for using trade date basis.
An impairment loss is recognized when there is objective evidence that the investment is impaired. The
impairment loss is reversed if an increase in the investment’s recoverable amount is due to an event which
occurred after the impairment loss was recognized; however, the adjusted carrying amount of the
investment may not exceed the carrying amount that would have been determined had no impairment loss
been recognized for the investment in prior years.
Impairment of Accounts Receivable
An allowance for doubtful accounts is provided on the basis of a review of the collectibility of accounts
receivable. The Company assesses the probability of collections of accounts receivable by examining the
aging analysis of the outstanding receivables and assessing the value of the collateral provided by
customers.
As discussed in Note 3 to the consolidated financial statements, on January 1, 2011, the Company adopted
the third-time revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments:
Recognition and Measurement.” One of the main revisions is that impairment of receivables originated by
the Company should be covered by SFAS No. 34. Accounts receivable are assessed for impairment at the
end of each reporting period and considered to be impaired when there is objective evidence that, as a result
of one or more events that occurred after the initial recognition of the accounts receivable, the estimated
future cash flows of the asset have been affected.
Inventories
Inventories consist of raw materials, supplies, finished goods, work-in-process and semi-finished goods and
are stated at the lower of cost or net realizable value. Inventory write-downs are made item by item,
except where it may be appropriate to group similar or related items. Net realizable value is the estimated
selling price of inventories less all estimated costs of completion and costs necessary to make the sale.
Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the balance
sheet date. Estimated losses on scrap and slow-moving items are recognized as an allowance for inventory
obsolescence on the balance sheet.
Investments Accounted for by Equity Method
Investments in which the Company holds 20% or more of the investees’ voting shares or exercises
significant influence over the investees’ operating and financial policy decisions are accounted for by the
equity method.
- 15 -
The investment cost is allocated to the assets and liabilities of the investee on the basis of their fair values
(proportionate to the percentage of ownership) at the date of investment, and the investment cost in excess
of the fair value of the identifiable net assets of the investee is recognized as goodwill. Goodwill is not
amortized, but should be tested for impairment every year and for specific events or changes in
circumstances which indicated that such carrying value may not be recoverable. The fair value of the net
identifiable assets of the investee in excess of the investment cost is used to reduce the fair value of each of
the noncurrent assets of the investee (except for financial assets other than investments accounted for by the
equity method, noncurrent assets held for sale, deferred income tax assets, prepaid pension or other
postretirement benefit) in proportion to the respective fair values of the noncurrent assets, with any excess
recognized as an extraordinary gain.
The Company’s investments previously classified as available-for-sale financial assets are reclassified into
investments accounted for by the equity method when the Company is able to exercise significant influence
over the investee. The carrying amount of the investment at the beginning of the year is deemed cost for
the purpose of applying the equity method.
When the Company subscribes for its investee’s newly issued shares at a percentage different from its
percentage of ownership in the investee, the Company records the change in its equity in the investee’s net
assets as an adjustment to investments, with a corresponding amount credited or charged to capital surplus.
When the adjustment should be debited to capital surplus, but the capital surplus arising from long-term
investments is insufficient, the shortage is debited to retained earnings.
An investment is evaluated for impairment on the balance sheet date and loss is recognized if there is
objective evidence showing that the investment is impaired. The impairment losses on those investments
in which the Company has significant influence but with no control are evaluated at their respective
carrying amounts.
Available-for-sale Financial Assets
Available-for-sale financial assets are initially measured at fair value plus transaction costs that are directly
attributable to the acquisition.
At each balance sheet date subsequent to initial recognition,
available-for-sale financial assets are remeasured at fair value, with changes in fair value recognized in
equity until the financial assets are disposed of, at which time, the cumulative gain or loss previously
recognized in equity is included in profit or loss for the year. All regular way purchases or sales of
financial assets are recognized and derecognized on a trade date basis.
The recognition, derecognition and the fair value bases of available-for-sale financial assets are the same
with those of financial assets at fair value through profit or loss.
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 recalculation of cost per share.
An impairment loss is recognized when there is objective evidence that the financial asset is impaired.
Any subsequent decrease in impairment loss on an equity instrument classified as available-for-sale is
recognized directly in equity.
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 and stocks traded in the Emerging Stock Market,
are measured at their original cost. The accounting treatment for dividends on financial assets carried at
cost is the same with that for dividends on available-for-sale financial assets. An impairment loss is
recognized when there is objective evidence that the asset is impaired. A reversal of this impairment loss
is disallowed.
- 16 -
Property, Plant and Equipment and Idle Assets
Property, plant and equipment are stated at cost less accumulated depreciation. Expenditures that would
increase the value or extend the useful lives of property, plant and equipment are capitalized.
Interest incurred during asset construction period is capitalized until the asset is substantially completed and
ready for its intended use.
Depreciation is provided on a straight-line basis over estimated service lives as follows:
Other equipment
2 to 50 years
2 to 12 years
2 to 6 years
2 to 10 years
3 to 5 years or the contract term
Property, plant and equipment (including idle assets) that are not used in operations are classified as other
assets at the lower of net realizable values or book values, and any excess of book value over net realizable
value is reported as nonoperating loss.
An additional service life and a new residual value will be determined for any depreciable asset which is
still in use after the end of its prescribed useful life, and the original residual value is depreciated on the
straight-line method.
Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is credited or charged to nonoperating income or loss.
Intangible Assets
Intangible assets are stated at cost and amortized on a straight-line basis over their maturity periods.
Landrights is amortized on a straight-line basis over useful lives.
License fee is amortized on a straight-line basis over the contract term or over the economic useful lives of
the assets.
Computer software is amortized on a straight-line basis over 3 years or over the economic useful lives of
the assets.
Deferred Charges
Deferred charges are stated at cost and amortized on a straight-line basis over their maturity periods.
Impairment of Assets
If the recoverable amount of an asset (mainly property, plant and equipment, intangible assets, deferred
charges and investments accounted for by the equity method) 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 unless the asset is carried at a revalued amount, in which case the impairment loss is
first treated as a deduction to the unrealized revaluation increment and any remaining loss is charged to
earnings.
- 17 -
If an impairment loss subsequently 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, unless the asset is carried at a revalued amount, in which case the reversal of the
impairment loss is first recognized as gains to the extent that an impairment loss on the same revalued asset
was previously charged to earnings. Any excess amount is treated as an increase in the unrealized
revaluation increment.
For the purpose of impairment testing, goodwill is allocated to each of the relevant cash-generating units
(“CGUs”) that are expected to benefit from the synergies of the acquisition. A CGU to which goodwill
has been allocated is tested for impairment annually or whenever there is an indication that the CGU may
be impaired. If the recoverable amount of the CGU becomes less than its carrying amount, the impairment
is allocated to first reduce the carrying amount of the goodwill allocated to the CGU and then to the other
assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU. A reversal of an
impairment loss on goodwill is disallowed.
Pension Cost
WTC, PDC and Hannstar (lost control on June 10, 2011) each have defined benefit pension plans covering
all employees. Pension cost under a defined benefit plan is determined by actuarial valuations.
Contributions made under a defined contribution plan are recognized as pension cost during the year in
which employees render services.
Curtailment or settlement gains or losses on the defined benefit plan are recognized as part of the net
pension cost for the year.
NTK and Kamaya also have defined benefit plans and defined contribution plans based on their local laws.
Under local laws, the subsidiaries in PRC, WES and KM have defined contribution plans and recognize net
pension costs based on monthly contributions.
Income Tax
The Company adopted Statement of Financial Accounting Standards No. 22, “Accounting for Income
Taxes,” which requires the asset and liability approach to financial accounting and tax reporting. Deferred
income tax assets and liabilities are computed quarterly on the basis of the differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowance is provided for deferred tax assets that are not certain to be realized.
Income tax expense or benefit is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
If the Company can control the timing of the reversal of a temporary difference arising from the difference
between the book value and the tax basis of a long-term equity investment in a foreign subsidiary or joint
venture and if the temporary difference is not expected to reverse in the foreseeable future and will, in
effect, exist indefinitely, then a deferred tax liability or asset is not recognized.
Tax credits for purchases of machinery, equipment and technology, research and development expenditures
are recognized as reduction of current income tax expense.
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 of WTC, PDC and
Hannstar (lost control on June 10, 2011) is provided for as income tax in the year the stockholders approve
to retain the earnings.
- 18 -
Stock-based Compensation
Employee stock options granted on or after January 1, 2008 are accounted for under SFAS No. 39,
“Accounting for Share-based Payment.” Under the statement, the value of the stock options granted,
which is equal to the best available estimate of the number of stock options expected to vest multiplied by
the grant-date fair value, is expensed on a straight-line basis over the vesting period, with a corresponding
adjustment to capital surplus - employee stock options. The estimate is revised if subsequent information
indicates that the number of stock options expected to vest differs from previous estimates.
Employee stock options granted between January 1, 2004 and December 31, 2007 were accounted for under
the interpretations issued by the Accounting Research and Development Foundation. WTC and the
subsidiaries of Hannstar (lost control on June 10, 2011) and PDC used the intrinsic value method.
Treasury Stock
Treasury stock is the Company’s own stock acquired according to the Stock Exchange Law. When the
Company does not dispose or write off these stocks, their cost is listed as a deduction in stockholders’
equity.
The difference is listed as capital surplus - treasury stock when the disposal price is higher than book value.
If the price is lower, the difference will be recognized as deduction of capital surplus - treasury stock, but
the capital surplus - treasury stock is insufficient, the shortage is debited to retained earnings.
The Company adopted Statement of Financial Accounting Standards No. 30 “Accounting for Treasury
Stocks,” which requires the Company to treat intercompany stockholdings as treasury stock.
Revenue Recognition
Revenue from sales of goods is recognized when the Company has transferred to the buyer the significant
risks and rewards of ownership of the goods, primarily upon shipment, because the earnings process has
been completed and the economic benefits associated with the transaction have been realized or are
realizable.
Earnings (Loss) Per Share
Basic earnings (loss) per common share is calculated by dividing net earnings (loss) attributable to common
stock by the weighted-average number of common shares outstanding.
On a diluted basis, both net earnings (loss) and shares outstanding are adjusted to assume the conversion of
employee stock options from the date of issuance, and adopt the treasury stock method to calculate the
stock warrants’ dilutive potential common shares. However, if the employee stock options contain an
anti-dilutive effect, they will be excluded from the earnings (loss) per share calculation.
Hedge Accounting
Derivatives that are designated and effective as hedging instruments are measured at fair value, with
subsequent changes in fair value recognized either in profit or loss, or in stockholders’ equity, depending on
the nature of the hedging relationship.
- 19 -
Hedge accounting recognizes the offsetting effects on profit or loss of changes in the fair values of the
hedging instrument and the hedged item as follows:
Cash flow hedge:
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is
recognized in stockholders’ equity. The amount recognized in stockholders’ equity is recognized in profit
or loss in the same year or years during which the hedged forecast transaction or an asset or liability arising
from the hedged forecast transaction affects profit or loss. However, if all or a portion of a loss recognized
in stockholders’ equity is not expected to be recovered in the future, the amount that is not expected to be
recovered is reclassified into profit or loss.
Nonderivative Financial Instruments
The recognition and valuation of nonderivative financial assets and liabilities are in accordance with the
above accounting policies and generally accepted accounting principles.
Reclassifications
Certain accounts in the consolidated financial statements as of and for the year ended December 31, 2010
have been reclassified to conform to the presentation of the consolidated financial statements as of and for
the year ended December 31, 2011.
3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES
Financial Instruments
On January 1, 2011, the Company adopted the newly revised Statement of Financial Accounting Standards
(SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions included
loans and receivable originated by the Company under the scope of SFAS No. 34. This accounting change
did not have any effect on the Company’s consolidated financial statements for the year ended December
31, 2011.
Operating Segments
On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The
statement requires that segment information be disclosed based on the information about the components of
the Company that management uses to make operating decisions. SFAS No. 41 requires identification of
operating segments on the basis of internal reports that are regularly reviewed by the Company'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 Company
restated the segment information in the consolidated financial statements as of and for the year ended
December 31, 2010 to conform to the disclosures as of and for the year ended December 31, 2011.
- 20 -
4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of December 31, 2011 and 2010 were summarized as follows:
2011
Cash on hand
Demand deposits
Checking deposits
Foreign currency deposits
Certificates of deposits
Cash equivalents
$
2010
7,731
91,410
4,499
1,883,790
1,707,594
184,000
$ 3,879,024
$
7,293
1,499,982
32,350
2,175,219
5,238,295
674,000
$ 9,627,139
Certificates of deposits amounting to $20,600 thousand as of December 31, 2011 and 2010 had been
pledged to the Bureau of Tariff and suppliers to secure imported goods and were reported as other assets guarantee deposits paid (see Note 25).
Certificates of deposits amounting to $1,300 thousand as of December 31, 2010 had been pledged for
litigation. The amounts was reported as other assets - guarantee deposits paid (see Note 25).
Certificates of deposits amounting to $5,159 thousand and $1,459 thousand as of December 31, 2011 and
2010, respectively, had been pledged for litigation and to secure purchase orders of oil. The amounts were
reported under other assets - guarantee deposits paid (see Note 25).
Certificates of deposit amounting to $29,594 thousand and $18,118 thousand as of December 31, 2011 and
2010, respectively, had been pledged to secure electricity purchase guarantee deposits. The amounts were
reported under other assets - guarantee deposits paid (see Note 25).
5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets or liabilities held for trading as of December 31, 2011 and 2010 were summarized as
follows:
2011
Financial assets held for trading
Domestic listed companies
Stock index funds
Forward exchange contracts, net
Financial liabilities held for trading
Foreign exchange swap, net
Embedded derivatives of convertible bonds (Note 15)
Less: Noncurrent liabilities
2010
$ 61,940
17,244
-
$
38,584
$ 79,184
$ 38,584
$
-
$
4,920
6,958
(6,958)
$
-
$
4,920
The Company entered into derivative contracts during the year ended December 31, 2010 to manage
exposures to exchange rate fluctuations. The financial risk management objective of the Company is to
minimize risks due to changes in foreign exchange rate.
- 21 -
For information on outstanding forward exchange contracts and foreign exchange swap as of December 31,
2010, please see Note 27.
6. HELD-TO-MATURITY FINANCIAL ASSETS
December 31
2011
Note interest investment collective fund trust scheme
2010
$ 23,993
$
-
In December 2011 SZ bought half-year investment commodity at par value of $23,993 thousand.
7. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable as of December 31, 2011 and 2010 were summarized as follows:
2011
Third parties
Notes receivable
Less: Allowance for doubtful accounts
$
151,892
151,892
4,028,014
(104,375)
3,923,639
$
$
4,075,531
$ 11,258,678
$
1
9,947
-
$
2,029
20,205
-
$
9,948
$
22,234
Accounts receivable
Related parties
Notes receivable
Accounts receivable
2010
244,633
244,633
11,147,170
(133,125)
11,014,045
Factored accounts receivable of WTC were as follows:
(Unit: US$ in Dollars; NT$ in Thousands)
Counterparties
Far Eastern International
Bank
Far Eastern International
Bank
Receivable Sold
at Year Beginning
NT$
NT$
Note 1:
Note 2:
Note 3:
Note 4:
Receivable Sold
Year Ended December 31, 2010
Advances
Amounts
Receivable Sold
Received at
Collected
at Year-end
Year-end
70,937
(Note 2)
NT$ 164,543
(Note 3)
NT$ 235,480
(Note 4)
26,496
123,997
150,493
97,433
NT$ 288,540
NT$ 385,973
NT$
-
NT$
NT$
-
NT$
Interest Rates
on Advances
Received (%)
-
-
-
-
-
Receivable sold at year end had been removed from the receivable account.
US$2,214,678.10
US$5,648,576.00
US$7,863,254.10
The above credit lines may be used on a revolving basis.
- 22 -
Credit Line
NT$
-
-
Pursuant to the factoring agreements, losses from commercial disputes (such as sales returns and discounts)
shall be borne by WTC, while losses from credit risk shall be borne by the banks.
8. INVENTORIES
Inventories as of December 31, 2011 and 2010 were summarized as follows:
Raw materials
Supplies
Work-in-process
Semi-finished goods
Finished goods
Inventories in transit
2011
2010
$ 1,157,540
65,035
453,912
539,110
1,503,681
108,325
$ 1,414,238
78,897
1,159,046
822,850
1,836,303
340,496
$ 3,827,603
$ 5,651,830
As of December 31, 2011 and 2010, the allowance for inventory devaluation was $394,624 thousand and
$639,273 thousand, respectively.
The cost of inventories recognized as cost of goods sold in 2011 and 2010 was $23,409,341 thousand and
$34,303,351 thousand, respectively, which included a net gain of $359,122 thousand and $984,228
thousand, respectively, due to write-downs of inventories, loss from disposal of inventory, income from
scrap sales and loss on physical inventories.
9. LONG-TERM EQUITY INVESTMENTS
Long-term equity investments accounted for under equity method as of December 31, 2011 and 2010 were
summarized as follows:
2011
2010
Original
Investment
Cost
Carrying
Value
Ownership
Percentage
$ 1,566,277
$ 2,111,313
19.97
-
-
192,852
379,386
157,769
372,707
$ 2,138,515
$ 2,641,789
Carrying
Value
Ownership
Percentage
Listed companies
Hannstar Board Corp. (Hannstar)
Global Brands Manufacture Co.,
Ltd. (GBM)
-
$
-
-
4,575,923
39.83
165,193
498,310
49.00
32.14
Unlisted companies
Kunshan Walsin Color
Electronics & Plastics Co.,
Ltd. (“Walsin Color-KS)
Walsin Color Co., Ltd. (WC)
- 23 -
49.00
29.14
$ 5,239,426
Investment income (loss) recognized under equity method for the years ended December 31, 2011 and 2010
was summarized as follows:
2011
Hannstar
GBM
WC
Walsin Color-KS
$
99,157
141,544
(37,780)
(20,487)
$ 182,434
2010
$
210,750
30,098
(4,104)
$ 236,744
The major operation of WC before 2008 was selling of TFT-LCD and providing management services to
group companies. WC changed its major operations to be an investment holding company and provide
management services to group companies after 2009.
Walsin Color-KS engaged in manufacturing and selling of passive electronic components.
Hannstar, a company listed on the Taiwan Stock Exchange, is engaged in manufacturing and selling of
printed circuit boards. On June 10, 2011, WTC had not taken control of Hannstar by losing the majority
of the board of directors in Hannstar’s provisional stockholders’ convention. But WTC still has
significant influence over Hannstar; thus, the investment was accounted for by the equity method in 2011,
as before. The investment income of $99,157 thousand for the period from June 10 to December 31, 2011
was recorded as “investment income recognized under equity method” for the year ended December 31,
2011.
GBM, a company listed on the Taiwan Stock Exchange, is engaged in manufacturing and selling of printed
circuit board. In March 2010, Hannstar acquired 165,000 thousand shares of common stock of GBM at
$28.75 per share. The Company accounts for this investments by the equity method. WTC had not
taken control of Hannstar by gaining the majority of the board of directors. Then, the Company ceased to
have control of Hannstar, Hannstar was no longer included as a consolidated entity in the consolidated
financial statement, since June 10, 2011. The investment income for the period from January 1 to June 9,
2011 was recorded as “investments income recognized under equity method” for the year ended December
31, 2011.
10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - NONCURRENT
Available-for-sale financial assets as of December 31, 2011 and 2010 were summarized as follows:
2011
Listed companies
Walton Advanced Electronics Ltd.
Gigabyte Technology Co., Ltd.
Walsin Lihwa Corp.
Walton Chaintech Corporation
Nuvoton Technology Corp.
Foreign listed companies
NEC
Sharp Corporation
Hitachi Ltd.
$
510,103
232,124
82,071
19,264
1,019
3,777
8,796
39,382
- 24 -
2010
$
510,103
232,124
82,071
18,000
23,880
7,745
35,293
(Continued)
2011
Sony Corporation
Murata Seisakusho Co., Ltd.
Mizuho Financial Group
Unrealized valuation (loss) profit of available-for-sale financial
assets
$
23,919
4,334
1,016
2010
$
29,419
3,757
2,308
(250,438)
$
675,367
88,090
$ 1,032,790
(Concluded)
As of December 31, 2011 and 2010, the market values of listed companies were determined by the closing
prices.
Kamaya Electronic Ltd. and NTK evaluated the equity securities of Sony Corporation, Mizuho Financial
Group and NEC and recognized an impairment loss of $18,140 thousand for the year ended December 31,
2011, which was recorded as a deduction of investment income. For additional information, please see
Note 23 to the consolidated financial statements.
11. FINANCIAL ASSETS CARRIED AT COST
Financial assets carried at cost as of December 31, 2011 and 2010 were summarized as follows:
2011
Unlisted companies
Elcon International Co., Ltd.
Ta Cheng Investment Co., Ltd.
Euroc Venture Capital Corp.
Parawin Venture Capital Corp.
HannSpree Inc.
Foreign unlisted companies
Suzaka Spa
Dohoku Denshi Kogyo
Mikasa Denshi Kogyo
Naie Denshi Kogyo
Hokko Denshi Kogyo
2010
Original
Investment
Cost
Carrying
Value
Carrying
Value
$
$
$
18,819
150,100
14,430
15,000
35,000
150,100
9,230
10,000
-
150,100
9,230
10,000
-
176
1,562
547
547
2,734
176
2,734
161
2,508
$ 238,915
$ 172,240
$ 171,999
The Company’s financial assets carried at cost do not have a quoted market price in an active market and
their fair value could not be reliably measured. Therefore, the above equity investments were carried at
cost and evaluated for impairment loss periodically.
- 25 -
12. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 2011 and 2010 were summarized as follows:
Cost
Land
Other equipment
Construction in progress and
prepayments for equipment
$
388,385
6,961,119
17,393,001
55,411
211,278
2,424,223
Revaluation
Increment
2011
Accumulated
Depreciation
Accumulated
Impairment
$
$
$
608,106
$ 28,041,523
$
64,818
-
2,962,045
12,892,250
38,757
188,252
2,037,216
-
-
64,818
$ 18,118,520
9,748
90,758
49,843
-
$
443,455
3,908,316
4,450,908
16,654
23,026
387,007
47,000
$
197,349
2010
Carrying
Value
Carrying
Value
$
$
629,095
6,361,716
10,886,075
39,386
14,677
1,931,828
561,106
1,999,153
9,790,472
$ 21,861,930
For the year ended December 31, 2011, interest expense (before capitalized interest) was $197,843
thousand; capitalized interest on asset construction amounted to $2,833 thousand; and the capitalized
interest rates range from 1.18% to 1.40%.
PDC revalued its land and the revaluation increment as of December 31, 2011 and 2010 was as follows:
Revaluation
Year
Revaluation
Increment
Reserve for
Land Value
Increment Tax
2008
$ 64,818
$ 13,734
Land
Hannstar revalued its land and the revaluation increment as of December 31, 2010 was as follows:
Revaluation
Year
Revaluation
Increment
Reserve for
Land Value
Increment Tax
1997
$ 56,797
$ 15,653
Land
Because the ownership of farm land can not be registered under the name of a legal entity according to
certain restrictions under the land regulations, the ownership of the land stated below resides in the specific
third person assigned by Hannstar and Hannstar was the designated obligee, which prohibits the selling,
pledging or hypothecating of the property. The designated amount was $22,860 thousand. The related
information was as follows:
Number of
Land
Location of Land
Stone Brook Section, Shulin Town, Taipei County
48-6
Square Meter
(㎡)
2,100
Amount
$ 17,967
See Note 24 to the consolidated financial statements for property, plant and equipment transactions with
related parties.
- 26 -
13. OTHER ASSETS
Other assets as of December 31, 2011 and 2010 were summarized as follows:
2011
Idle assets
Land
Other equipment
Less:
Less:
$
142,383
176,175
276,124
35,134
629,816
(327,352)
(108,895)
193,569
74,570
75,688
355,719
105,154
21,859
$
826,559
Accumulated depreciation
Accumulated impairment
Deferred charges (Note 2)
Deferred tax asset - noncurrent (Note 22)
Prepaid pension cost (Note 17)
Other assets - other
2010
$
221,564
317,784
375,385
516,534
1,431,267
(853,914)
(214,489)
362,864
84,250
133,756
329,108
134,226
5,918
$ 1,050,122
WTC revalued its land and revaluation increments of idle assets over the years were as follows:
Revaluation
Year
Revaluation
Increments
Reserve for
Land Value
Increment Tax
1993-2005
$ 22,804
$ 17,341
Land
PDC sold the land and buildings in Nantou to non-related parties in March 2011, and resulted in disposal
gain which was record as “gain on disposal of assets” for the year ended December 31, 2011.
14. SHORT-TERM LOANS
Short-term loans as of December 31, 2011 and 2010 were summarized as follows:
2011
Credit loans
Interest
Rate %
1.10-2.50
2010
Amount
Interest
Rate %
Amount
$ 1,592,691
0.6707-7.30
$ 3,843,314
15. BONDS PAYABLE
Bonds payable as of December 31, 2010 were summarized as follows:
2010
Liability component
Unsecured domestic convertible bonds - first issue
Discount on bonds payable
$ 1,000,000
(82,842)
$
- 27 -
917,158
On September 3, 2010, Hannstar issued 5-year unsecured convertible bonds, with a face value of
NT$1,000,000 thousand and a coupon rate of zero percent. The effective interest rate was 1.76%. If the
bonds are not converted, Hannstar shall redeem the bonds at 100% of their face value upon maturity.
According to SFAS No. 36, Hannstar has bifurcated the bonds into liability component and equity
component. The equity component, conversion option, was $76,918 thousand. Liability component
includes $6,958 thousand of embedded derivative measured at fair value and $917,158 thousand of
non-derivative liabilities measured at amortized cost. The terms and conditions of the bonds are
a. Date of issuance: September 3, 2010
b. Par value: NT$100 thousand
c. Location of issuance: Taiwan
d. Price of issuance: 100%
e. Total amount: NT$1,000,000 thousand
f. Interest rate: 0%
g. Date of maturity: September 3, 2015
h. Provision of conversion option:
The bonds are convertible into Hannstar’s common shares at predetermined price.
i.
Conversion period: From October 4, 2010 to August 24, 2015
j.
Conversion price and adjustment:
1) NT$28.50 per share at the issuing date.
2) For any subsequent changes in Hannstar’s paid-in capital, the conversion price is adjusted
accordingly.
3) NT$24.63 per share on December 31, 2010.
k. Provision of request to redeem the bonds:
1) Redemption at maturity:
Unless previously redeemed or converted or purchased and cancelled, Hannstar will redeem the
Bonds at 100 percent of their principal amount in NT dollars on the Maturity Date.
2) Redemption at the option of Hannstar:
Hannstar may redeem the bonds after one month from the date of issue until 40 days before the date
of maturity at a redemption price equal to the par value of outstanding principal amount in advance,
(i) if the closing price of the common shares on the TSE translated into NT dollars at the prevailing
rate for a period of 30 consecutive trading days, is at least 30% of the conversion price or (ii) in
whole but not in part at any time prior to date of maturity, if at least 90% of principal amount of the
bonds has already been redeemed, converted or purchased and cancelled.
- 28 -
3) Redemption at the option of bondholders:
Hannstar will, at the option of the holder of any Bonds, redeem all or some of that holder’s bonds
on September 3, 2013, at 100 percent of their principal amount in NT dollars.
Net foreign exchange loss on embedded derivatives of convertible bonds was $116 thousand in 2010.
16. LONG-TERM DEBT
Long-term debts as of December 31, 2011 and 2010 were summarized as follows:
2011
Annual
Interest Rate
%
First Commercial Bank syndicated loan
Unsecured loan repayable from August 29, 2007 to
February 27, 2012, with the first installment due on
February 27, 2011, followed by semiannual
installments at 30% each and the final 40% on
February 27, 2012; in May 2011, the Company
paid the principal in full in advance.
Yuanta Commercial Bank
Unsecured loan repayable from December 29, 2010 to
December 21, 2013. The authorized credit limit
may be used on revolving basis for a period of
three years from December 29, 2010. The
principal is fully repayable upon maturity; floating
interest.
Hua Nan Bank
December 30, 2013; the principal is fully repayable
upon maturity; floating interest.
Taishin Bank
Unsecured loan repayable from February 25, 2011 to
February 25, 2014. The principal is fully
repayable upon maturity; floating interest.
First Commercial Bank
Fubon Financial
Far Eastern International Bank
January 24, 2014. The principal is fully repayable
HSBC
Unsecured loan repayable from May 27, 2011 to May
27, 2014. The principal is fully repayable upon
maturity; floating interest.
China Development Industrial Bank
Unsecured loan repayable from June 29, 2011 to June
Unsecured loan repayable from September 30, 2011
to September 30, 2014. The principal is fully
-
2010
Annual
Interest Rate
%
Balance
$
Balance
-
1.600
$ 2,500,000
1.5710
500,000
1.350
200,000
1.4757
300,000
1.2326
300,000
1.5300
500,000
-
-
1.6000
300,000
-
-
1.6237
500,000
-
-
1.5710
350,000
-
-
2.0200
500,000
-
-
1.8000
200,000
-
-
1.6500
100,000
-
-
(Continued)
- 29 -
2011
Annual
Interest Rate
%
December 21, 2014. The principal is fully
Chang Hwa Bank
Industrial Bank of Taiwan
Land Bank
Unsecured loan repayable from September 7, 2011 to
September 7, 2014 with the first installment due on
September 7, 2013 followed by semiannual
installment at 15% each and the final 70% on
September 7, 2014; floating interest.
Chinatrust Commercial Bank
Unsecured loan repayable from October 4, 2011 to
July 31, 2014. The principal is fully repayable
ING Bank
Unsecured loan repayable from January 19, 2010 to
January 18, 2013; the principal is fully repayable
Secured loan repayable from May 14, 2010 to June
28, 2013; floating interest.
BNP PARIBAS Bank
Secured loan repayable from July 22, 2010 to July 21,
2012; floating interest.
Secured loan repayable from July 28, 2010 to July 27,
2012.
First Commercial Bank
Secured loan repayable from November 23, 2011 to
November 22, 2014, with the first installment due
on May 23, 2013 followed by semiannual
installment at 25% each.
Far Eastern International Bank syndication loan
December 14, 2013; the principal is fully repayable
upon maturity.
to September 27, 2013; the principal is fully
repayable upon maturity.
Unsecured loan repayable from March 25, 2010 to
August 24, 2012; the principal is fully repayable
upon maturity.
to September 27, 2013; the principal is fully
repayable upon maturity.
1.6000
2010
Annual
Interest Rate
%
Balance
$
Balance
100,000
-
$
-
1.6590
200,000
-
-
1.5645-1.5687
400,000
-
-
1.7008-1.7030
300,000
-
-
1.6490-1.6500
300,000
-
-
1.8600
302,750
1.8550
291,300
1.6800
292,911
1.71
268,724
2.362
238,034
2.39-2.44
231,995
1.281
181,649
1.0028
174,728
2.6085
151,374
-
-
-
-
1.35
4,800,000
-
-
1.05
291,300
-
-
1.05
174,780
-
-
1.05
436,950
(Continued)
- 30 -
2011
Annual
Interest Rate
%
Mega International Commercial Bank
to September 27, 2013, with the first installment
due on September 27, 2012, followed by
semiannual installments at 30% each and the final
40% on September 27, 2013.
Ta Chong Bank
25, 2013, with the first installment due on June 25,
2012, followed by semiannual installments at 30%
each and the final 40% on June 25, 2013.
E.SUN Commercial Bank
Unsecured loan repayable from May 5, 2010 to May
5, 2013. The principal is due in semiannual
installments commencing May 4, 2012.
Taishin International Bank
Unsecured loan repayable from April 22, 2010 to
April 22, 2013, with the first installment due on
April 22, 2012, followed by semiannual
April 22, 2013.
Taishin International Bank
Unsecured loan repayable from November 17, 2010
to April 22, 2013, with the first installment due on
April 22, 2012, followed by semiannual
April 22, 2013.
Bank SinoPac
March 24, 2013; the principal is fully repayable
upon maturity.
Bank SinoPac
Unsecured loan repayable from October 21, 2010 to
October 21, 2013, with the first installment due on
October 21, 2012, followed by semiannual
October 21, 2013.
March 22, 2013, with the first installment due on
March 23, 2012, followed by semiannual
March 23, 2013.
HSBC
March 22, 2013. The principal is due in
semiannual installments commencing from
March 23, 2012.
Shanghai Commercial & Savings Bank
December 29, 2012. The principal is due in
semiannual installments commencing from June
29, 2012.
Fubon Financial
March 22, 2013, with the first installment due on
March 22, 2012, followed by semiannual
March 22, 2013.
-
2010
Annual
Interest Rate
%
Balance
$
Balance
-
1.16
$
436,950
-
-
1.05
873,900
-
-
0.99
436,950
-
-
1.05
582,600
-
-
1.15
174,780
-
-
1.21
174,780
-
-
1.10
291,300
-
-
1.15
436,950
-
-
1.07
436,950
-
-
1.14
291,300
-
-
1.14
582,600
(Continued)
- 31 -
2011
Annual
Interest Rate
%
to September 27, 2013, with the first installment
due on September 27, 2012, followed by
semiannual installments at 30% each and the final
40% on September 27, 2013.
Bangkok Bank
Unsecured loan repayable from January 11, 2010 to
January 10, 2014. The principal is due in
semiannual installments commencing from
January 11, 2012.
Bangkok Bank
10, 2014. The principal is due in semiannual
installments commencing from June 8, 2012.
Bank of ANZ
29, 2013. The principal is due in quarterly
installments commencing from June 29, 2012.
-
Balance
$
Balance
-
1.25
-
-
2.30
582,600
-
-
1.55-2.31
555,806
-
Less: Current portion
2010
Annual
Interest Rate
%
5,716,718
(419,683)
$ 5,297,035
1.80
$
291,300
29,336
15,847,879
(1,500,000)
$ 14,347,879
(Concluded)
In August 2007, WTC entered into a syndicated credit facility with First Bank and other banks. According
to the terms of the loan contract, WTC promised to maintain specific financial ratios such as current ratio,
liability ratio and net value of tangible assets during the loan period. As of December 31, 2011, liability
ratio (the ratio of total liability to the tangible net worth, including minority interest) was not higher than
140% - current ratio was not lower than 100% and interest coverage ratio (earnings before income tax,
interest, depreciation and amortization divided by interest expense) was not lower than 300%. The net
value of tangible assets (including minority interest), was not lower than $23,500,000 thousand. These
ratio calculations are based on WTC’s annual and semiannual consolidated audited financial statements for
the years ended December 31, 2011 and 2010. On February 9, 2010, WTC had obtained the bank’s
consent to extend the date of loan maturity to February 2012, and paid the principal in full in advance in
May 2011.
WTC should maintain certain financial ratios in its audited annual and semiannual consolidated financial
statements during the loan term.
In January 2010, WTHC-HK entered into a syndicated credit facility with ING Bank and other banks.
According to the terms of the loan contract, WTC promised to maintain specific financial ratios such as
current ratio, liability ratio and net value of tangible assets during the loan period. As of December 31,
2011, liability financial ratio (the ratio of total liability to the tangible net worth, including minority
interest) was not higher than 140%, current ratio was not less than 100% and interest coverage ratio
(earnings before income tax, interest, depreciation and amortization divided by interest expense) was not
lower than 300%. The net value of tangible assets (including minority interest), was not lower than
$23,500,000 thousand. These ratio calculations are based on WTC’s annual and semiannual consolidated
audited financial statements for the years ended December 31, 2011 and 2010. In January 2011,
WTHC-HK had obtained the bank’s consent to extend the date of loan maturity to January 2013.
In May 2010, Kamaya obtained a secured loan from Chinatrust Commercial Bank. The loan term is two
years from May 2010 to May 2012. The secured loan was guaranteed by WTC. Kamaya will pay
interest every month at floating rate. For the year ended June 30, 2011, Kamaya had obtained the bank’s
consent to extend the date of loan maturity to June 2013.
- 32 -
In July 2010, Kamaya obtained a secured loan from BNP PARIBAS Bank. The loan term is two years
from July 2010 to July 2012. The secured loan was guaranteed by WTC. Kamaya will pay interest every
month at floating rate.
In July 2010, DG obtained a secured loan from China Development Industrial Bank. The loan term is two
years from July 2010 to July 2012. The secured loan was guaranteed by WTC. DG will pay interest
every quarter at floating rate.
In November 2011, DG obtained a secured loan from First Commercial Bank. The loan term is three
years from November 2011 to November 2014. The secured loan was guaranteed by WTC. DG will pay
interest semiannually at floating rate.
As of November 25, 2009, Hannstar entered into a syndicated credit facility for $700,000 thousand with Far
Eastern International Bank and other banks to repay debts and for improving financial structure. The
principal had been fully repaid in December 2010.
As of June 23, 2010, Hannstar entered into a secured loan agreement for $2,800,000 thousand with Far
Eastern International Bank for working capital needs. Common stock of GBM was pledged to secure
long-term debt under the loan agreement with Far Eastern International Bank. The 60% secured loan was
stated at the lower of closing price before the date of allocating or average price for a period of 60 trading
days, the 40% loan was sated as unsecured loan. The authorized credit limit with Far Eastern International
Bank was $2,400,000 thousand, and the principal had been fully repaid in December 2010.
As of June 23, 2010, Hannstar entered into a syndicated credit facility for $4,800,000 thousand with Far
Eastern International Bank and other banks to repay debts and for working capital needs. The authorized
credit limit with Far Eastern International Bank and other banks was $4,800,000 thousand as of December
31, 2010.
Under loan agreements with banks:
a. Hannstar should maintain certain financial ratios in its audited annual and semiannual consolidated
financial statements during the loan term.
b. Hannstar Board International Holdings (Hong Kong) Ltd. and Hannstar Board International Holdings
Ltd. should maintain certain financial ratios in their audited annual and semiannual consolidated
financial statements during the loan term. Under the loan agreements with Taishin International Bank
and Ta Chong Bank, Hannstar Board International Holdings Ltd. should maintain certain financial
ratios in its audited annual consolidated financial statements during the loan term.
c. Hannstar Board Tech (Jiang Yin) Corp. and Hannstar Precision Tech (Jiang Yin) Corp. should maintain
certain financial ratios in their audited annual financial statements during the loan term. Hannstar
Board International Holdings Ltd. should maintain certain financial ratios in its audited annual
consolidated financial statements during the loan term.
17. PENSION PLAN
The pension plan under the Labor Pension Act (LPA) is a defined contribution plan. Under the LPA,
companies including WTC, PDC and Hannstar (lost control on June 10, 2011) make monthly contributions
to employees’ individual pension accounts at 6% of monthly salaries and wages.
- 33 -
Under the Labor Standards Law, WTC, PDC and Hannstar (lost control on June 10, 2011) have defined
benefit pension plan covering all eligible employees. The benefits are calculated on the basis of the length
of service and average monthly wages of the six months before retirement. WTC, PDC and Hannstar (lost
control on June 10, 2011) contribute amounts equal to 3%, 2% and 2.76%, respectively, 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. The fair value of WTC’s plan
assets was greater than the net periodic pension cost; thus, WTC had stopped contributing to the fund
deposited in Bank of Taiwan from December 1, 2010 to November 30, 2011. NTK and Kamaya both
have a defined benefit pension plan and a defined contribution plan in compliance with their local laws.
Net pension costs of defined benefit pension plans for 2011 and 2010 were summarized as follows:
2011
2010
Service cost
Interest cost
Expected return on plan assets
Amortization of net transition obligation
Amortization of unrecognized net loss
Other
$ 29,844
6,139
(7,966)
(108)
627
-
$ 32,142
7,969
(9,941)
(168)
867
(163)
Net pension cost
$ 28,536
$ 30,706
Assumptions used in determining the actuarial present value of the projected benefit obligation as of
December 31, 2011 and 2010 were summarized as follows:
2011
2010
2.00%
2.00%
2.00%-2.25%
2.00%
2.00%
2.00%-2.50%
2011
2010
Actuarial present value of benefit obligations
Vested benefits
Nonvested benefit
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
Plan assets at fair value
Projected benefit obligation in excess of plan assets
Unrecognized net transition assets
Unrecognized net loss
$ 294,173
147,246
441,419
52,283
493,702
(312,979)
180,723
(8,874)
$ 283,558
247,108
530,666
115,591
646,257
(494,935)
151,322
643
(25,671)
Accrued pension cost, net
$ 171,849
$ 126,294
Weighted-average discount rate
Expected long-term rate of return on plan assets
Assumed rate of increase in future compensation levels
Accrued pension cost for the years ended December 31, 2011 and 2010 was summarized as follows:
Accrued pension cost
Prepaid pension cost (reported as other currents - other)
- 34 -
2011
2010
$ 277,003
(105,154)
$ 260,520
(134,226)
$ 171,849
$ 126,294
The subsidiaries in PRC, WES and KM have their defined contribution plans pursuant to existing laws.
18. CAPITAL STOCK
December 31
2011
2010
Authorized capital
Share (’000)
Par value
Capital
800,000
$
$ 8,000,000
800,000
$
10
$ 8,000,000
Issued capital
Share (’000)
Par value
Capital
690,063
$
10
$ 6,900,634
663,988
$
10
$ 6,639,888
WTC’s paid-in capital as of January 1, 2011 was $6,639,888 thousand. During the year ended December
31, 2010, employee stock warrants were converted into 355,000 common shares at $18.70 per share. As
of December 31, 2010, the procedures for registration of 355,000 common shares issued for the execution
of employee stock warrants were not completed; thus the proceeds were reported as advance receipts for
common stock. As of January 2011, the procedures for registration of 355,000 common shares issued for
the execution of employee stock warrant were completed and converted into 355,000 common shares. As
at June 22, 2011, WTC stockholders’ meeting resolved to issue additional capital stock of $257,196
thousand through stock dividend. Thus, as of December 31, 2011, WTC’s paid-in capital had increased to
$6,900,634 thousand, divided into 690,063,380 common shares with NT$10 par value.
WTC’s paid-in capital as of January 1, 2010 was $6,638,023 thousand. During the year ended December
31, 2010, employee stock warrants were converted into 541,500 common shares at $18.70 per share. As
of December 31, 2010, the procedures for registration of 355,000 common shares issued for the execution
of employee stock warrant were not completed; thus, the proceeds were reported as advance receipts for
common stock. As of December 31, 2010, WTC’s paid-in capital had increased to $6,639,888 thousand,
divided into 663,988,765 common shares with NT$10 par value.
Earnings per share is calculated using the weighted average number of shares of common stock outstanding
during the year. For the year ended December 31, 2010, the weighted average number of shares used in
the calculation of earnings per share had been restated for the retroactive effect of the stock dividends
issued in 2011.
Earnings (loss) per share for the years ended December 31, 2011 and 2010 was calculated as follows:
2011
Amount (Numerator)
Before Tax
(Before
Minority
Interest Loss)
Basic loss per share - for
common stock
$
(838,664 )
After Tax
(Before
Minority
Interest Loss)
$
(950,778 )
Loss Per Share (In Dollars)
After Tax
(Attributed to
Parent
Company
Stockholders)
Shares
(Denominator)
$ (1,057,342 )
687,764,583
- 35 -
Before Tax
(Before
Minority
Interest Loss)
After Tax
(Before
Minority
Interest Loss)
After Tax
(Attributed to
Parent
Company
Stockholders)
$ (1.22)
$ (1.38)
$ (1.54)
2010
Amount (Numerator)
Basic earnings per share for common stock
Potential common shares
with dilutive effect
Employee stock
warrants
Bonuses paid to
employees
Diluted earnings per
shares
Before Tax
(Before
Minority
Interest Loss)
After Tax
(Before
Minority
Interest Loss)
$ 2,289,714
$ 1,734,324
-
After Tax
(Attributed to
Parent
Company
Stockholders)
$
Shares
(Denominator)
952,566
684,495,941
-
-
48,156
-
-
-
1,843,173
$ 2,289,714
$ 1,734,324
952,566
686,387,270
$
Earnings Per Share (In Dollars)
After Tax
Before Tax
After Tax
(Attributed to
(Before
(Before
Parent
Minority
Minority
Company
Interest Loss)
Interest Loss)
Stockholders)
$
3.35
$
2.53
$
1.39
$
3.34
$
2.53
$
1.39
Due to net loss in 2011, the diluted earnings per share had not been calculated.
The Accounting Research and Development Foundation 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.
The Company may decide to distribute bonuses to employees in cash or shares; in this case, the Company
should presume that the entire amount of the bonus will be settled in shares and, if the resulting potential
shares have a dilutive effect, these shares should be included in the weighted average number of shares
outstanding used in the calculation of diluted earnings per share (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 should 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.
19. RETAINED EARNINGS
Based on the ROC Company Law and WTC’s Articles of Incorporation, 10% of WTC’s earnings, less tax
and any deficit, should be appropriated as legal reserve until this reserve equals to the paid-in capital and as
special reserve as regulated by laws or domestic authorities. Unappropriated earnings could be retained
for operating needs, if necessary. The remaining balance, if any, should be distributed in the following
order:
a. Bonuses to employees - 5%, including subsidiaries’ employees, if approved by the board of directors;
b. Remuneration to directors and supervisors - 2%; and
c. Any remainder, as dividends, bonuses to stockholders.
WTC’s Articles of Incorporation also provide that profit of WTC may be distributed by way of cash
dividend and/or stock dividend. Distribution of profits provides that ratio for cash dividend shall not
exceed 50% of the total distribution. However, according to the capital budget of next year, WTC can
make certain adjustment to the dividend policy stated above to raise the ratio of cash dividend up to 100%
of the total distribution to stockholders if necessary.
- 36 -
The appropriations of earnings for 2010 and 2009 had been approved in the shareholders’ meetings on June
22, 2011 and June 25, 2010, respectively. The appropriations and dividends per share were as follows:
Appropriation of Earnings
For
For
Year 2010
Year 2009
Legal reserve
Stock dividends
Cash dividends
$
95,257
257,196
85,732
$
-
Dividends Per Share
(NT$)
For
For
Year 2010 Year 2009
$0.387
0.129
$-
WTC’s board of directors had proposed and the stockholders had approved the distribution from 2010
earnings. Information on earnings appropriation can be accessed online through the Market Observation
Post System of the Taiwan Stock Exchange (http://e-mops.tse.com.tw).
WTC’s stockholders approved the board of director’s proposal to offset $214,278 thousand of the legal
reserve and $26,023 thousand of the capital surplus with accumulated deficit in 2009. Information on the
offsetting of loss can be accessed online through the Market Observation Post System of the Taiwan Stock
Exchange (http://e-mops.tse.com.tw).
Due to the net loss and accumulated deficit for the year ended and as of December 31, 2011, WTC did not
appropriate bonuses to employees, directors and supervisors.
For the year ended December 31, 2010, the accrued bonus to employees was $36,495 thousand, and the
accrued remuneration to directors and supervisors was $14,598 thousand. The bonus to employees and
remuneration to directors and supervisors represented 5% and 2%, respectively, of net income (net of the
bonus and remuneration). Material differences between such estimated amounts and the amounts
proposed by the Board of Directors in the following year are adjusted for in the current 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.
The amounts of the bonus to employees and the bonus to directors and supervisors approved in 2011 were
$18,437 thousand and $7,375 thousand and the related amounts accrued in 2010 were $36,495 thousand
and $14,598 thousand. The differences had been adjusted in profit and loss for the year ended December
31, 2011.
On November 23, 2007, WTC’s board of directors resolved to issue employee stock warrants in accordance
with Article 28.3 of the Securities and Exchange Law, which limited the number of warrants for
distribution to 4,000,000 units. Each unit has the right to buy one newly issued common share. The
exercise price is the closing price of WTC’s common shares at the warrant issuance date. The warrant
holder can exercise the right up to 50% of the granted warrant units no earlier than two years from the
granted date. After three years from the granted date, warrant holders are eligible to exercise all the
warrants owned. As of December 25, 2007, WTC had issued 4,000,000 units of the employee stock
warrants to the employees at the exercise price of NT$21.55 dollars per unit.
The exercise price of these warrants mentioned above had been retroactively restated to NT$18.00 dollars
per share for the distribution of stock dividends issued over the years. The employee stock warrants
issued by WTC were exercised at market value; thus there was no intrinsic value or compensation cost
recognized in 2011 and 2010.
- 37 -
WTC’s employee stock warrants and related information for the years ended December 31, 2011 and 2010
were summarized as follows:
2011
Units
(Thousands)
Outstanding, beginning of year
Forfeited
Exercised
Adjustment from ownership
dilution
2,786.5
(211.0)
-
Outstanding, end of year
2,575.5
Exercisable, end of year
2,575.5
2010
Weightedaverage
Exercise Price
(Dollars)
$
-
Units
(Thousand)
18.7
-
3,697.0
(369.0)
(541.5)
(0.7)
$
Weightedaverage
Exercise Price
(Dollars)
$
-
18.0
2,786.5
18.7
-
$
18.7
2,786.5
The information on WTC’s outstanding stock warrants as of December 31, 2011 was as follows:
Range of
Exercise Price
(Dollars)
Outstanding Stock Warrants
Weightedaverage
WeightedExpected
average
Units
Remaining
Exercise Price
(Thousands)
Years
(In Dollars)
$18.70-18.00
2,575.5
0.98
Exercisable Stock Warrants
Weightedaverage
Units
Exercise Price
(Thousands)
(In Dollars)
$18.00
2,575.5
$18.00
20. TREASURY STOCK
Treasury stock transactions for the years ended December 31, 2011 and 2010 were summarized as follows:
2011
Purchase Reason
Common shares held by subsidiaries
Treasury Stock
Held as of
January 1, 2011
18,950,797
Increase
During the Period
Decrease During
the Period
57,287
(19,008,084)
Treasury Stock
Held as of
December 31,
2011
-
2010
Purchase Reason
Treasury stock for granting to the
employees
Common shares held by subsidiaries
Treasury Stock
Held as of
January 1, 2010
Increase
During the Period
Decrease During
the Period
Treasury Stock
Held as of
December 31,
2010
2,885,000
18,950,797
-
(2,885,000)
-
18,950,797
21,835,797
-
(2,885,000)
18,950,797
As of December 31, 2010, the treasury stock of WTC in the amount of $68,855 thousand was held by
subsidiaries.
- 38 -
The shares held by WTC for granting to the employees should be transferred to employees within three
years from the date when the shares were bought. The employees of WTC and the subsidiaries, in which
WTC holds directly or indirectly more than one half of the total number of voting shares, have the right to
exercise the warrants owned from the granted date.
The highest number of treasury shares held by WTC as of December 31, 2010 was 2,885,000 shares, which
amounted to $39,551 thousand, pursuant to the law. The treasury stock had been granted to employees as
of December 31, 2010.
According to the Stock Exchange Law of ROC, the treasury stock should not be pledged and does not have
the same right as the common stock.
PDC, WTC’s subsidiary, held 1,479,744 shares of WTC. In 2011, after the stock dividends were received
by PDC, 57,287 shares were added to treasury stock. Besides, after the sale of all of shares by PDC,
1,537,031 shares were deducted from treasury stock and the loss of $3,317 thousand was recognized as a
deduction of the capital surplus from treasury stock transactions in stockholders’ equity. As at December
31, 2011, PDC did not hold any share of WTC’s common stock. Thus, WTC recorded decrease in
treasury stock in the amount of $48 thousand for the year ended December 31, 2011.
On June 10, 2011, WTC had not taken control of Hannstar by losing the majority of the board of directors
in Hannstar’s provisional stockholders’ convention. Since then, Hannstar was not a subsidiary of WTC.
As of June 10, 2011, 17,471,053 shares of WTC’s common stock held by Hannstar with carrying value of
$58,757 thousand were recorded as decrease in treasury stock for the year ended December 31, 2011.
WTC transferred to employees 2,885,000 treasury shares amounting to $39,669 thousand in 2010. Based
on Interpretation 2007-266 issued by the Accounting Research and Development Foundation, employee
stock options granted during the year ended December 31, 2010 were priced using the Black-Scholes
model, and compensation cost of $11,084 thousand (recorded as salary expense) was recognized in 2010.
In 2010, the amount of $11,202 thousand was recorded as capital surplus - treasury stock, including
compensation cost of $11,084 thousand and the difference of $118 thousand between the transferred value
of $39,669 thousand and the book value of $39,551 thousand of the treasury shares granted.
21. PERSONNEL, DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES
Personnel, depreciation, depletion and amortization expenses for the years ended December 31, 2011 and
2010 were summarized as follows:
Operating
Cost
2011
Operating
Expenses
$3,057,440
269,478
69,656
163,103
2,853,094
16,584
$925,349
86,313
56,791
54,723
187,934
14,177
Function
Expense Item
Personnel expense
Salaries
Labor/health insurance
Pension cost
Others
Depreciation
Amortization
- 39 -
Total
Operating
Cost
2010
Operating
Expenses
$3,982,789
355,791
126,447
217,826
3,041,028
30,761
$3,896,322
313,662
73,898
185,775
3,865,393
19,691
$1,226,267
97,453
39,133
54,484
236,572
21,095
Total
$5,122,589
411,115
113,031
240,259
4,101,965
40,786
22. INCOME TAX
Components of income tax expense (benefit) were summarized as follows:
Current income tax benefit
Deferred income tax asset and allowance adjustment
Prior year’s tax expense adjustment
$ (26,661)
192,446
(53,671)
Income tax expense, net
$ 112,114
Under Article 10 of the Statute for Industrial Innovation passed by the Legislative Yuan in April 2010, a
profit-seeking enterprise may deduct up to 15% of its research and development expenditures from its
income tax payable for the fiscal year in which these expenditures are incurred, but this deduction should
not exceed 30% of the income tax payable for that fiscal year. This incentive took effect from January 1,
2010 and is effective till December 31, 2019.
In May 2010, the Legislative Yuan passed another amendment of Article 5 of the Income Tax Law, which
reduced a profit-seeking enterprise’s income tax rate from 20% to 17%, effective January 1, 2010.
Deferred income tax assets as of December 31, 2011 were summarized as follows:
Deferred income tax assets
Tax credits
Loss carryforwards
Impairment loss
Unrealized loss from inventory devaluation
Net loss on equity investments
Unrealized loss from idle assets impairment
Useful lives of property, plant and equipment is different from tax law
Others
Total deferred income tax asset
Less: Allowance
Deferred income tax assets, net
Deferred income tax assets - noncurrent
$ 143,368
155,192
23,510
58,537
50,164
24,399
220,970
54,790
730,930
(230,730)
500,200
(355,719)
Deferred income tax assets - current
$ 144,481
Income tax benefit for the current year ended December 31, 2011 were summarized as follows:
Income tax loss at statutory rate of 17% (rounded-off)
Tax effect on adjusting items:
Other adjustments for permanent difference
$ (96,342)
Income tax benefit for the current year
$ (26,661)
69,681
The income tax payable of $15,530 thousand as of December 31, 2011 was mainly the tax payable of WTC,
PDC and the subsidiaries in PRC in 2011.
WTC’s information on imputation credit (“IC”) on the undistributed earnings as of December 31, 2011 was
IC on undistributed earnings as of December 31, 2011
Undistributed earnings before 1997
Undistributed earnings in 1998 and onward
Expected IC ratio on earnings to be distributed in 2012
Actual IC ratio on distributed earnings in 2011
- 40 -
$ 75,679
$
$ (542,961)
12.58%
The investment tax credits of WTC and PDC as of December 31, 2011, for income tax purposes were
Investment Tax
Credit
Expiry Year
2012
2013
2014
$
87,950
52,968
2,450
$ 143,368
Losses carryforwards of WTC, PDC, WTCA and subsidiaries in PRC as of December 31, 2011 for income
tax purposes were summarized as follows:
Expiry Year
Amount
2016
2019
2023
$ 102,051
48,000
5,141
$ 155,192
WTC’s income tax returns through 2008 had been approved by the tax authorities.
PDC’s income tax returns through 2009 had been approved by the tax authorities.
23. INVESTMENT INCOME
Investment income for the years ended December 31, 2011 and 2010 was summarized as follows:
Dividends income
Impairment loss of available-for-sale financial assets, noncurrent
Impairment loss of goodwill
2011
2010
$ 46,066
(18,140)
(6,995)
$ 27,574
-
$ 20,931
$ 27,574
24. RELATED PARTY TRANSACTIONS
The names and relationship of related parties were summarized as follows:
Related Party
Relationship with the Company
Walsin Lihwa Corporation (“Walsin Lihwa”)
Kunshan Walsin Color Electronics & Plastics Co.,
Ltd. (“Walsin Color-KS)
Walsin Color Co., Ltd.
Hannstar Color Shanghai Electronics & Plastic Co.,
Ltd.
WTC’s 18.11% stockholder as of December 31, 2011
49% investee of POE-BVI as of December 31, 2011
29.14% investee of WTC as of December 31, 2011
19.97% investee of WTC as of December 31, 2011
A subsidiary of Walsin Color Co., Ltd.
(Continued)
- 41 -
Related Party
Relationship with the Company
Winbond Electronics Corp.
Global Brands Manufacturing Co., Ltd.
Dynamic Skyline Ltd.
Walton Advanced Engineering, Inc. (“Walton
Advanced”)
Hannstar Board Tech (Jiang Yin) Corp.
Up First Investment Limited
CMKC (HK) Limited
Walton Advanced Engineering (Suzhou), Inc.
(“Walton-SZ”)
Hannstar Display Corporation (“Hannstar Display”)
Hannstar Union Co., Ltd.
Walton Chaintech Corp.
Info-Tek Corporation
Related party in substance
(Concluded)
Major transactions with related parties were summarized as follows:
Sales
Years Ended December 31
2011
2010
Others
$ 142,639
$
44,646
The selling prices to related parties were similar to the selling prices to third parties.
Rental Expense
2011
2010
Walsin Lihwa
Others
$ 13,927
3,709
$ 10,934
3,708
$ 17,636
$ 14,642
Rental expense was based on market rate and the Company determined that the terms of payment were at
arm’s length.
Notes and Accounts Receivable
December 31
2011
Others
$
2010
9,948
$ 22,234
Other Receivables
December 31
2011
Others
$ 27,369
- 42 -
2010
$
9,904
Other receivable included receivable from related parties for financial activities and sale of equipment,
materials, etc.
Due from Related Company
Due from related company for the year ended December 31, 2011 was as follows:
Related Party
Highest
Balance
Ending
Balance
Walsin Color-KS
$ 201,541
$ 201,541
2011
Interest
Receivable
$
Interest
Income
330
$
Interest Rate
3,169
6.56
Payables on Equipment and Other Payables
December 31
2011
Others
$
2010
3,703
$
2,762
Payable on equipment and other payables include payable for purchase of equipment and receipts
(payments) under custody.
Property Transactions
Acquisitions of property, plant and equipment from related parties for the years ended December 31, 2011
and 2010 were summarized as follows:
Related Party
Items
Hannstar Union Co., Ltd.
Other equipment, construction in process
and prepayment for equipments
Machinery and equipment and other
equipment
Machinery and equipment and other
equipments
Walton Advanced
Walsin Color Co., Ltd.
2011
$
2010
857
$
761
120
-
-
10
620
Purchase prices of machinery equipment and other equipment were based on carrying value.
Stock Transactions
Sales of stock of Hannstar to related parties for the year ended December 31, 2010 were summarized as
follows:
Related Party
Global Brands
Manufacturing Co., Ltd.
Items
Info-Technology Corporation
Selling Price
2010
Book Value
Gain
$ 90,499
$ 71,143
$ 19,356
As of December 31, 2010, the unrealized profit of $6,253 thousand from intercompany stock transactions
was included in deferred unrealized profit.
- 43 -
Guarantees
WTC had guaranteed the borrowings of its subsidiaries.
Please see Note 26-b for details.
Compensation of Directors, Supervisors and Management Personnel
2011
Remuneration
Salaries, incentives and special compensation
Bonuses
$
2010
2,095
30,799
433
$ 17,899
46,758
2,543
$ 33,327
$ 67,200
25. PLEDGED ASSETS
As of December 31, 2011 and 2010, the following assets had been pledged as collateral or security deposit
to meet the requirements of customs authorities and suppliers:
Financial Statement Classification
Pledged Asset
2011
2010
Other assets - refundable deposits
Time deposits
$ 55,353
$ 41,477
26. COMMITMENTS AND CONTINGENCIES
a. Letters of credit
As of December 31, 2011 and 2010, outstanding letters of credit of the Company were summarized as
follows:
Unit: Dollars
2011
U.S. dollars
New Taiwan dollars
Japanese Yen
Euros
$
17,830,000
-
2010
$ 20,977,895
41,234,000
5,400,000
43,500
b. Loan guarantees
As of December 31, 2011 and 2010, WTC had guaranteed the following borrowings of its subsidiaries:
Unit: Thousand
2011
DG
WTHC-HK
KAMAYA
US$ 11,000
10,000
17,670
2010
US$
6,000
10,000
17,225
c. WTC signed a construction contract amounting to $318,800 thousand with Fu Tai Construction Co. in
September 2007 and had paid $318,481 thousand as of December 31, 2011. The amount of $318,800
thousand was reported as buildings and improvements.
- 44 -
27. OTHERS
Fair Value of Financial Instruments
The fair values of nonderivative and derivative financial instruments as of December 31, 2011 and 2010
were summarized as follows:
Nonderivative Financial Instruments
Assets
Cash and cash equivalents
Financial assets at fair value through
profit or loss - current
Held-to-maturity financial assets current
Notes receivable
Notes receivable from related parties
Accounts receivable
Accounts receivable from related
parties
Other receivables
Other receivables from related
parties
Long-term equity investments at
equity method
Available-for-sale financial assets noncurrent
Financial assets carried at cost noncurrent
Liabilities
Short-term loans
Notes payable
Accounts payable
Payable on equipment
Other payables
Current portion of long-term debt
Bonds payable
Long-term debt
Long-term payable
Guarantee deposits received
Derivative Financial Instruments
Forward exchange contract (financial
assets at fair value through profit or
loss - current)
Foreign exchange swap (financial
liabilities at fair value through profit
or loss - current)
Embedded derivatives of convertible
bonds (financial liabilities at fair
value through profit or loss noncurrent)
Interest rate swap contract (financial
liabilities at fair value through profit
or loss - current)
2011
Carrying Value
Fair Value
2010
Carrying Value
Fair Value
$ 3,879,024
$ 3,879,024
$ 9,627,139
$ 9,627,139
79,184
79,184
-
-
23,993
151,892
1
3,923,639
23,993
151,892
1
3,923,639
244,633
2,029
11,014,045
244,633
2,029
11,014,045
9,947
85,461
9,947
85,461
20,205
515,573
20,205
515,573
229,240
595,025
229,240
595,025
9,904
-
9,904
-
2,641,789
1,600,614
5,239,426
4,408,729
675,367
675,367
1,032,790
1,032,790
172,240
74,570
74,570
171,999
84,250
84,250
1,592,691
192,639
1,018,496
603,211
1,404,679
419,683
5,297,035
5,741
81,522
1,592,691
192,639
1,018,496
603,211
1,404,679
419,683
5,297,035
5,741
81,522
3,843,314
700,848
5,173,028
1,095,456
2,447,752
1,500,000
917,158
14,347,879
172,568
3,843,314
700,848
5,173,028
1,095,456
2,447,752
1,500,000
921,083
14,347,879
172,568
2011
Carrying Value
Fair Value
$
-
-
$ 38,584
$ 38,584
-
-
4,920
4,920
-
-
6,958
6,958
-
-
2,172
2,172
- 45 -
$
2010
Carrying Value
Fair Value
Methods and assumptions used to estimate the fair values of financial instruments were as follows:
a. The carrying amounts of the following short-term financial instruments approximate their fair values
because of their short maturities: Cash and cash equivalents, notes and accounts receivable, notes
payable, short-term bank loans and other financial instruments.
b. Fair values of financial instruments designated as at FVTPL and available-for-sale are based on their
quoted prices in an active market. For those instruments with no quoted market prices, their fair
values are determined using valuation techniques incorporating estimates and assumptions consistent
with those generally used by other market participants to price financial instruments.
Fair values of derivatives are based on their quoted prices in an active market. For those derivatives
with no quoted market prices, their fair values are determined using valuation techniques incorporating
estimates and assumptions consistent with those generally used by other market participants to price
financial instruments.
c. Held-to-maturity financial assets are based on their quoted prices in an active market. For those
instruments with no quoted market prices, their fair values are determined using valuation techniques
incorporating estimates and assumptions consistent with those generally used by other market
participants to price financial instruments.
d. Long-term equity investment at equity method do not have quoted prices in an active market and entail
an unreasonably high cost to obtain verifiable fair value, thus the fair value was based on the net asset
value per share in the financial report as of the balance sheet date verified and certified by an
independent accountant.
e. Financial assets carried at cost are investments in unquoted shares, which have no quoted prices in an
active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair
value is presented.
f. Bonds payable are based on their quoted prices in an active market.
Fair values of financial assets and liabilities, based on quoted market prices or valuation techniques,
were as follows:
Quoted Market Prices
December 31
2011
2010
Assets
Financial assets at fair value
through profit or loss - current
Marketable equity securities
Stock index funds
Forward exchange contracts
Held-to-maturity financial
assets - current
Available-for-sale financial
assets - noncurrent
Liabilities
Financial liabilities at fair value
through profit or loss - current
Forward exchange swap
$
61,940
17,244
-
$
Valuation Techniques
December 31
2011
2010
-
$
-
$
38,584
-
-
23,993
-
675,367
1,032,790
-
-
-
-
-
(4,920)
(Continued)
- 46 -
Quoted Market Prices
December 31
2011
2010
Financial liabilities at fair value
through profit or loss noncurrent
Embedded derivatives of
convertible bonds
Hedging derivative liabilities current
Interest rate swap contract
$
-
$
Valuation Techniques
December 31
2011
2010
-
-
$
-
-
$
(6,958)
(2,172)
(Concluded)
Nominal Amount
December 31, 2010
Financial Instruments
Forward exchange contract
Foreign exchange swap
Nominal Amount
(In Thousands)
US$
US$
US$
US$
US$
US$
US$
5,920
2,000
3,280
76,100
1,000
10,000
1,000
Signing Date
Maturity Date
2008.06.30
2011.03.25
2008.08.23
2011.03.25
2009.03.25
2011.03.25
2010.08.05-2010.12.22 2011.01.04-2011.12.23
2010.12.15
2011.01.10
2010.04.21
2011.04.25
2010.11.05
2011.01.31
Credit Risk
The counterparties to the contracts above are all commercial or investment banks or broker or third-parties
with high credit ratings; thus, credit risks are considered insignificant.
Market Price Risk
The Company measured market price risk of financial instruments for trading purposes by market value,
and set up the loss limitations according to the acceptable risk.
The gain or loss of financial instruments for non-trading purposes derived from the fluctuation of interest
rate or exchange rate is to be offset by the loss or gain on the hedged item attributable to the risk being
hedged and thus, the market risk is insignificant.
Liquidity Risk, Cash Flow Risk and Forecasted Cash Flow Risk
The Company has the ability to meet its financial obligations; thus, liquidity risks virtually do not exist.
Forward rates for forward contracts are fixed; thus, cash flow risks are insignificant. In addition, the
possibility that the Company’s forward exchange contracts cannot be sold at a reasonable price in the
market is remote; thus, liquidity risk is low.
- 47 -
The Type, Purpose and Strategy of the Derivative Financial Instruments
Type
Purpose
Strategy
Interest rate swap
Forward exchange contracts
Foreign exchange swap
Embedded derivatives of convertible bonds
Hedging
Trading
Trading
Trading
(See below)
-
The Company signed the rate exchange contract with the bank. The major purpose of the contract is to
hedge the risk of exposed interest rate in financial activity. The Company’s strategy is to hedge the
majority of the cash flow risk. The Company used fixed interest rate as hedging instrument in exchange
contract and evaluated the hedge periodically.
Net foreign exchange gains related to forward exchange contract were of $33,102 thousand and $70,256
thousand, respectively, for the years ended December 31, 2011 and 2010.
28. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND
LIABILITIES
The significant foreign-currency financial assets and liabilities as of December 31, 2011 and 2010 were
Unit:
2011
Exchange
Rate
Foreign
Currencies
New Taiwan
Dollars
Foreign Currencies/New Taiwan Dollars in Thousand
Foreign
Currencies
2010
Exchange
Rate
New Taiwan
Dollars
Financial assets
Monetary items
USD
EUR
Japanese Yen
Hong Kong dollars
Renminbi
Singapore dollars
Malaysian dollars
Nonmonetary items
Renminbi
Long-term equity
investments at equity
method
Renminbi
$
325,438
158
732,689
327,198
628,591
21
1,771
30.2750
39.1707
0.3903
3.8966
4.7986
23.3154
9.5309
-
-
32,878
$
9,852,635
6,189
285,969
1,274,960
3,016,357
490
16,879
$
497,343
2,541
1,157,571
264,347
668,689
2,738
10,202
29.1300
38.9491
0.3583
3.7471
4.4203
22.7294
9.4517
$ 14,487,602
98,970
414,758
990,535
2,955,806
62,233
96,426
-
7,317
4.4203
32,343
4.7986
157,768
37,382
4.4203
165,240
287,547
360
3,867,597
12,680
192,205
3,228
30.2750
39.1707
0.3903
3.8966
4.7986
9.5309
8,705,485
14,101
1,509,523
49,409
922,315
30,766
478,398
316
3,240,371
94,865
779,800
520
10,644
29.1300
38.9491
0.3583
3.7471
4.4203
22.7294
9.4517
13,935,734
12,308
1,161,025
355,469
3,446,950
11,819
100,604
-
-
-
74
29.1300
2,156
Financial liabilities
Monetary items
USD
EUR
Japanese Yen
Hong Kong dollars
Renminbi
Singapore dollars
Malaysian dollars
Nonmonetary items
U.S. dollars
- 48 -
29. OPERATING SEGMENT FINANCIAL INFORMATION
Business Segments
The Company’s reportable segments under SFAS No. 41 are as follows:
A segment - passive component
B segment - passive component
C segment - printed circuit board
a. Segment revenue and results
The analysis of the Company’s revenue and results from continuing operations by reportable segment
was as follows:
The Company’s operating segment information for the years ended December 31, 2011 and 2010 was
as follows:
A Segment
Adjustment
and
B Segment
C Segment
Elimination
Net sales
Cost of sale
Gross profit
Operating expenses
Operating income (loss)
Nonoperating income and gain
Nonoperating expenses and
losses
$ 13,352,642
(12,752,894)
599,748
(1,571,688)
(971,940)
223,693
$ 2,485,991
(2,171,979)
314,012
(312,428)
1,584
148,251
$ 10,023,064
(9,256,852)
766,212
(700,888)
65,324
323,669
(261,538)
(91,910)
(240,841)
Income (loss) before income tax
$ (1,009,785)
A Segment
$
57,925
$
148,152
$
(759,328)
772,384
13,056
5,693
18,749
(53,705)
$ 15,932,530
(13,182,390)
2,750,140
(1,791,053)
959,087
503,588
$ 3,253,796
(2,620,722)
633,074
(319,848)
313,226
71,331
$ 21,999,455
(19,508,759)
2,490,696
(1,531,851)
958,845
446,815
(266,347)
(66,067)
(410,218)
Income (loss) before income tax
$ 1,196,328
$
318,490
$
995,442
All intercompany transactions had been eliminated upon consolidation.
- 49 -
$ 25,102,369
(23,409,341)
1,693,028
(2,579,311)
(886,283)
641,908
$
(34,956)
Adjustment
and
B Segment
C Segment
Elimination
Net sales
Cost of sale
Gross profit
Operating expenses
Operating income (loss)
Nonoperating income and gain
Nonoperating expenses and
losses
Total
$
$
(594,289)
$
(838,664)
Total
(978,740)
1,008,520
29,780
8,130
37,910
(235,273)
$ 40,207,041
(34,303,351)
5,903,690
(3,634,622)
2,269,068
786,461
(23,183)
(765,815)
(220,546)
$ 2,289,714
b. Segment assets and liabilities
Segment assets
December 31, 2011
Adjustment
and
Elimination
A Segment
B Segment
C Segment
Total
Notes and account receivable
Inventories
Investments
Intangible assets
Other assets
$ 2,734,863
3,570,081
3,280,200
1,216,785
10,801,929
4,566,859
8,757,491
177,636
699,439
$ 1,144,161
544,718
547,403
132,178
2,368,460
30,188
1,033,300
14,923
152,189
$
-
$
(29,320)
3,429
(25,891)
(1,107,651)
(319)
(25,069)
$ 3,879,024
4,085,479
3,827,603
1,352,392
13,144,498
3,489,396
9,790,472
192,559
826,559
Total assets
$ 25,003,354
$ 3,599,060
$
-
$ (1,158,930)
$ 27,443,484
Adjustment
and
Elimination
Total
December 31, 2010
A Segment
B Segment
C Segment
Notes and account receivable
Inventories
Investments
Intangible assets
Other assets
$ 2,250,830
3,685,272
3,368,823
593,192
9,898,117
4,582,187
8,933,096
195,619
646,066
$
870,239
749,820
532,645
68,633
2,221,337
131,718
880,862
14,544
283,644
$ 6,506,070
6,931,275
1,750,362
654,227
15,841,934
4,955,180
12,219,212
168,221
132,851
$
(85,455)
(47,870)
(133,325)
(3,224,870)
(171,240)
125,609
(12,439)
$ 9,627,139
11,280,912
5,651,830
1,268,182
27,828,063
6,444,215
21,861,930
503,993
1,050,122
Total assets
$ 24,255,085
$ 3,532,105
$ 33,317,398
$ (3,416,265)
$ 57,688,323
Adjustment
and
Elimination
Total
Segment liabilities
December 31, 2011
A Segment
B Segment
C Segment
Short-term loans
Notes and accounts payable
Income tax payable
Other payables
Long-term debt
Reserves
Other liabilities
$ 1,208,198
968,402
4,257
1,723,810
499,773
4,404,440
5,302,776
17,341
352,502
$
384,493
299,065
11,273
305,141
23,876
1,023,848
13,734
6,996
$
-
$
(56,332)
(21,061)
(77,393)
-
$ 1,592,691
1,211,135
15,530
2,007,890
523,649
5,350,895
5,302,776
31,075
359,498
Total liabilities
$ 10,077,059
$ 1,044,578
$
-
$
(77,393)
$ 11,044,244
- 50 -
December 31, 2010
A Segment
B Segment
Adjustment
and
Elimination
C Segment
Total
Short-term loans
Notes and accounts payable
Income tax payable
Other payables
Long-term debt
Reserves
Other liabilities
$ 1,150,018
1,298,350
79,314
1,700,071
1,571,427
5,799,180
2,466,747
17,341
321,223
$
302,952
344,150
26,224
282,426
16,507
972,259
13,734
9,146
$ 2,390,344
4,251,979
68,185
1,583,900
19,559
8,313,967
12,805,248
15,653
150,269
$
(20,603)
(23,189)
4,920
(38,872)
(40,220)
$ 3,843,314
5,873,876
173,723
3,543,208
1,612,413
15,046,534
15,271,995
46,728
440,418
Total liabilities
$ 8,604,491
$
995,139
$ 21,285,137
$
(79,092)
$ 30,805,675
c. Revenue from major products and services
The Company’s revenue from continuing operations by major products and services was as follows:
2011
2010
Multilayer ceramic capacitors
Chip resistors
Printed circuit
Others
$
7,886,741
3,955,977
10,023,064
3,236,587
$ 25,102,369
$
9,747,970
4,661,009
21,999,455
3,798,607
$ 40,207,041
d. Geographical information
The Company operates in two principal geographical areas - Asia and America. The Company’s
revenue from continuing operations from external customers and information about its noncurrent
assets by geographical location are detailed below.
Revenue from External
Customers
2011
2010
Asia
America
Europe
Noncurrent Assets
2011
2010
$ 19,849,579
4,577,028
675,762
$ 29,758,922
9,487,216
960,903
$ 10,260,649
13,498
-
$ 22,859,210
9,251
-
$ 25,102,369
$ 40,207,041
$ 10,274,147
$ 22,868,461
Noncurrent assets excluded those classified as financial instruments, deferred tax assets and
post-employment benefit assets.
- 51 -
e. Information about major customers
Individual customers which accounted for more than 10% of total consolidated revenue for the years
ended December 31, 2011 and 2010 were as follows:
Customer A
Customer B
2011
Amount
%
2010
Amount
%
$
-
-
$
6,833,898
5,544,141
17
14
$
-
-
$ 12,378,039
31
30. PRE-DISCLOSURE FOR ADOPTION OF INTERNATIONAL FINANCIAL REPORTING
STANDARDS
Under Rule No. 0990004943 issued by the Financial Supervisory Commission (FSC) on February 2, 2010,
the Company’s pre-disclosure information on the adoption of International Financial Reporting Standards
(IFRSs) was as follows:
a. On May 14, 2009, the FSC announced the “Framework for Adoption of International Financial
Reporting Standards by Companies in the ROC.” In this framework, starting 2013, companies with
shares listed on the TSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market
should prepare their financial statements in accordance with the Guidelines Governing the Preparation
of Financial Reports by Securities Issuers, International Financial Reporting Standards, International
Accounting Standards, Interpretations as well as related guidance translated by the ARDF and issued by
the FSC. To comply with this framework, the Company has set up a project team and made a plan to
adopt the IFRSs. Leading the implementation of this plan is Mr. Tsai, Tsung-Lin. The main contents
of the plan, anticipated schedule and status of execution as of December 31, 2011 were as follows:
Plan Item
Responsible Division
Plan Progress
1) Establish the IFRSs taskforce
IFRSs taskforce and accounting division Finished
2) Set up a work plan for IFRSs
adoption
3) Complete the identification of
GAAP differences and impact
4) Complete the identification of
consolidated entities under IFRSs
5) Evaluate optional exemptions
under IFRS based on IFRS 1
6) Complete modification to the IT
systems
IFRSs taskforce and IT division
Finished
7) Complete modification to the
internal controls
IFRSs taskforce and internal audit
division
Finished
8) Determine IFRSs accounting
policies
(Continued)
- 52 -
Plan Item
9) Select optional exemptions under
IFRS based on IFRS 1
Responsible Division
Plan Progress
10) Complete the preparation of
opening date balance sheet under
IFRSs
IFRSs taskforce and accounting division In progress according
to the plan
11) Prepare comparative financial
information under IFRSs for
2012
IFRSs taskforce and accounting division
12) Complete modification to the
relevant internal controls
(including financial reporting
process and information systems)
IFRSs taskforce and accounting division In progress according
to the plan
-
(Concluded)
b. As of December 31, 2011, the material differences between the existing accounting policies and the
accounting policies to be adopted under IFRSs were as follows:
Accounting Issues
Description of Differences
Allowance for sales returns and others
Under ROC GAAP, provisions for estimated sales returns
and others are recognized as a reduction in revenue in
the period the related revenue is recognized based on
historical experience. Allowance for sales returns
and others is recorded as a deduction in accounts
receivable. Under IFRSs, the allowance for sales
returns and others is a present obligation with
uncertain timing and an amount that arises from past
events and is therefore reclassified as provisions
(classified under current liabilities) accordingly.
Classifications of deferred income tax
asset/liability and valuation allowance
1) Under ROC GAAP, a deferred tax asset or liability is
classified as current or noncurrent in accordance with
the classification of its related asset or liability.
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 either current or
noncurrent based on the expected length of time
before it is realized or settled. Under IFRSs, a
deferred tax asset or liability is classified as
noncurrent asset or liability.
2) In addition, under ROC GAAP, valuation allowance
is provided to the extent, if any, that it is more likely
than not that deferred income tax assets will not be
realized. Under IFRSs, deferred tax assets are only
recognized to the extent that it is probable that there
will be sufficient taxable profits and the valuation
allowance account is not used.
(Continued)
- 53 -
Accounting Issues
Employee benefits
Description of Differences
1) Under ROC GAAP, it is not allowed to recognize
actuarial gains and losses from defined benefit plans
directly to equity; instead, actuarial gains and losses
should be accounted for under the corridor approach
which resulted in the deferral of gains and losses.
Under IFRSs, the Company will recognize actuarial
gains and losses immediately in full in the period in
which they occur, as other comprehensive income.
The subsequent reclassification to earnings is not
permitted.
2) Under ROC GAAP, unrecognized net transition
obligation and unrecognized actuarial losses should
be amortized by the straight-line method or corridor
approach over the employee’s remaining service
period. Under IFRSs, unrecognized net transition
obligation should be included in unappropriated
earnings.
3) Under ROC GAAP, compensated absences are
recognized as salary expense when earned by
employees. Under IFRSs, accumulating
compensated absences are recognized as salary
expense when the employees render services that
increase their entitlement to future compensated
absences.
The classification of reserve for land value
increment tax
Under ROC GAAP, reserve for land value increment tax
is classified under long-term liabilities. Under IFRSs,
reserve for land value increment tax is classified as
deferred tax liability according to its nature.
The classification of idle assets
Under ROC GAAP, idle assets are classified under other
assets. Under IFRSs, idle assets are classified as
property, plant and equipment according to their
nature.
The classification of land use rights
Under ROC GAAP, land use rights are classified under
intangible assets. Under IFRSs, land use rights are
classified as long-term prepaid rents according to their
nature.
A change in investor’s ownership interest in Under ROC GAAP, a decrease in the investor’s
associate resulting from the issuance of
proportionate share in the net assets of its investee
new shares by the associate without
resulting from its subscription for additional shares of
losing significant influence
stock issued by the investee at a rate different from its
existing equity ownership in the investee is adjustment
to capital surplus. Under IFRSs, it should be treated
as a deemed disposal.
(Concluded)
- 54 -
c. The Company has prepared the above assessments in accordance with (a) the 2010 version of the IFRSs
translated by the ARDF and issued by the FSC and (b) the Guidelines Governing the Preparation of
Financial Reports by Securities Issuers amended and issued by the FSC on December 22, 2011. These
assessments may be changed as the FSC may issue new rules governing the adoption of IFRSs, and as
other laws and regulations may be amended to comply with the adoption of IFRSs. Actual results may
differ from these assessments.
- 55 -

Walsin Technology Corporation and Subsidiaries

Transcription

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