Walsin Technology Corporation

Transcription

Financial Statements for the
Years Ended December 31, 2011 and 2010 and
Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders
We have audited the accompanying balance sheets of Walsin Technology Corporation (the
“Company”) as of December 31, 2011 and 2010, and the related statements of income, changes in
stockholders’ equity, and cash flows for the years then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits. The Company’s long-term equity investments of
NT$641,407 thousand and NT$596,558 thousand (3.01% and 2.92% of total assets of the Company)
as of December 31, 2011 and 2010, respectively, and total investment (loss) income of
NT$(147,055) thousand and NT$117,645 thousand (17.00% and 11.03% of (loss) income before
income tax) for the years ended December 31, 2011 and 2010, respectively, were based on the
financial statements audited by other independent auditors. Accordingly, our opinion, insofar as it
relates to these investment-related 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 financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of the other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of Walsin
Technology Corporation as of December 31, 2011 and 2010, and the results of its operations and its
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.
-1-
We have also audited the consolidated financial statements of the Company and its subsidiaries for
the years ended December 31, 2011 and 2010 (not presented herewith) on which we have
expressed a modified unqualified opinion with an explanatory paragraph in our report dated March
21, 2012.
March 21, 2012
Notice to Readers
The accompanying financial statements are intended only to present the 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 financial statements are those generally accepted and
applied in the Republic of China.
For the convenience of readers, the auditors’ report and the accompanying 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 financial statements shall prevail. Also, as stated in Note 2 to the financial statements,
the additional footnote disclosures that are not required under generally accepted accounting
principles were not translated into English.
-2-
WALSIN TECHNOLOGY CORPORATION
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 asset at fair value through profit or loss, current (Notes 2
and 5)
Notes receivable (Notes 2 and 6)
Notes receivable from related parties (Notes 2, 6 and 22)
Accounts receivable (Notes 2 and 6)
Accounts receivable from related parties (Notes 2, 6 and 22)
Other receivables
Other receivables from related parties (Note 22)
Inventories (Notes 2 and 7)
Deferred income tax assets - current (Notes 2 and 21)
Other current assets
Total current assets
$
2010
Amount
%
339,843
2
48,938
42,674
597,735
796,826
14,405
168,243
802,458
48,992
38,369
2,898,483
$
%
320,282
2
3
4
1
4
-
48,429
2,029
528,497
846,606
60,781
147,437
924,411
113,993
66,487
3
4
1
4
1
-
14
3,058,952
15
CURRENT LIABILITIES
Short-term loans (Note 13)
Accounts payable
Accounts payable to related parties (Note 22)
Income tax payable (Notes 2 and 21)
Payables on equipment (Note 22)
Other payables (Notes 14 and 22)
Current portion of long-term debt (Note 15)
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES
Long-term debt (Note 15)
RESERVE FOR LAND VALUE INCREMENT TAX (Notes 2 and 12)
INVESTMENTS
Long-term equity investments at equity method (Notes 2 and 8)
Available-for-sale financial assets - noncurrent (Notes 2 and 9)
Financial assets carried at cost - noncurrent (Notes 2 and 10)
Total investments
PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 11)
Cost
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)
Other intangible assets
OTHER ASSETS (Notes 2 and 12)
Idle assets
Guarantee deposits paid
Deferred charges
Deferred income tax assets - noncurrent
Other assets - others
Total other assets
TOTAL
2011
Amount
LIABILITIES AND STOCKHOLDERS’ EQUITY
13,630,838
571,943
169,330
64
2
1
12,182,219
836,480
169,330
60
4
1
14,372,111
67
13,188,029
65
OTHER LIABILITIES
Guarantee deposits received
Deferred credit (Note 2)
Total other liabilities
Total liabilities
3,025,145
6,432,016
8,272
159,386
574,720
10,199,539
(6,675,421)
(47,000)
151,765
14
30
1
3
48
(32)
1
2,367,727
6,108,510
8,974
144,382
543,460
9,173,053
(5,990,925)
473,371
11
30
1
3
45
(29)
2
3,628,883
17
3,655,499
18
9,021
-
4,826
-
138,823
27,531
5,364
107,000
99,504
1
1
-
144,260
26,803
5,270
235,000
95,115
1
1
-
378,222
2
506,448
2
$ 21,286,720
100
$ 20,413,754
100
STOCKHOLDERS’ EQUITY
Capital stock
Common stock (Note 17)
Advance receipts for common stock (Note 17)
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 18)
Legal reserve
(Accumulated deficit) unappropriated earnings
Cumulative translation adjustments (Note 2)
Unrealized valuation gain or loss on financial instruments (Note 9)
Unrealized revaluation increment
Treasury stock - 2011: zero; 2010: 18,951 thousand shares (Notes 2
and 19)
Total stockholders’ equity
TOTAL
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated March 21, 2012)
-3-
$
2010
Amount
%
931,468
219,470
60,204
1,012
250,367
505,860
23,304
4
1
1
3
-
1,991,685
$
%
735,241
321,206
67,611
35,602
154,993
613,451
1,500,000
23,783
4
2
1
3
7
-
9
3,451,887
17
4,550,000
22
1,500,000
7
17,341
-
17,341
-
3,061
-
-
81,323
1
3,061
-
81,323
1
6,562,087
31
5,050,551
25
6,900,634
-
32
-
6,639,888
6,639
32
-
5,701,589
9,961
244,284
78,055
1,487,077
27
1
7
5,698,500
13,195
244,284
82,002
1,487,077
28
1
1
7
95,257
(542,961)
1,095,554
(347,838)
3,021
(2)
5
(1)
-
952,566
235,214
69,672
3,021
5
1
-
-
-
(68,855)
-
14,724,633
69
15,363,203
75
$ 21,286,720
100
$ 20,413,754
100
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
%
%
$ 7,079,661
100
$ 8,402,285
100
6,427,526
90
7,198,270
85
GROSS PROFIT BEFORE REALIZED
(UNREALIZED) INTERCOMPANY PROFIT
652,135
10
1,204,015
15
REALIZED (UNREALIZED) INTERCOMPANY
PROFIT
80,300
1
GROSS PROFIT
732,435
11
1,137,527
14
OPERATING EXPENSES
Selling
General and administrative
Research and development
225,263
118,693
272,074
3
2
4
258,635
195,002
294,210
3
2
4
616,030
9
747,847
9
116,405
2
389,680
5
905
-
787
-
41,019
5,895
102
2,131
19,614
1
-
719,578
24,832
8,533
39,286
6,500
22,429
9
1
-
69,666
1
821,945
10
66,838
1
71,439
1
854,564
37,000
21,452
71,161
12
1
1
50,601
23,019
1
-
1,051,015
15
COSTS OF SALES
Total operating expenses
OPERATING INCOME
NONOPERATING INCOME AND GAINS
Interest income
Investment income recognized under equity method
(Notes 2 and 8)
Dividend income
Gain on disposal of assets
Gain on sale of investments, net
Foreign exchange gain, net
Reversal of impairment loss
Others
Total nonoperating income and gains
NONOPERATING EXPENSES AND LOSSES
Interest expense
Investment loss recognized under equity method
(Notes 2 and 8)
Foreign exchange loss, net
Impairment loss
Valuation loss on financial assets
Others
Total nonoperating expenses and losses
-4-
(66,488)
(1)
145,059
2
(Continued)
STATEMENTS OF INCOME
(In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)
2011
Amount
(LOSS) INCOME BEFORE INCOME TAX
$
%
(864,944)
(12)
(192,398)
(3)
$ (1,057,342)
(15)
INCOME TAX EXPENSE (Notes 2 and 21)
NET (LOSS) INCOME
2010
Amount
$ 1,066,566
$
13
(114,000)
(2)
952,566
11
2011
BASIC (LOSS) EARNINGS PER SHARE (NEW
TAIWAN DOLLARS; Notes 2 and 17)
%
2010
Before
Income
Tax
After
Income
Tax
Before
Income
Tax
After
Income
Tax
$ (1.26)
$ (1.54)
$
1.56
$
1.39
$
1.55
$
1.39
DILUTED EARNINGS PER SHARE (NEW TAIWAN
DOLLARS; Notes 2 and 17)
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:
NET (LOSS) INCOME
BASIC (LOSS) EARNINGS PER SHARE
(NEW TAIWAN DOLLARS)
2011
Before
After Income
Income Tax
Tax
2010
Before
After Income
Income Tax
Tax
$
(868,178)
$ (1,060,576)
$ 1,066,566
$(1.26)
$(1.54)
$1.55
$1.38
$1.54
$1.38
DILUTED EARNINGS PER SHARE (NEW
TAIWAN DOLLARS)
$
952,566
-5-
(Concluded)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Capital Stock
Issued and
Advance
Outstanding
Receipts for
Common Stock Common Stock
BALANCE, JANUARY 1, 2010
Transfer of special reserve to accumulated
deficit (Note 18)
Offset of accumulated deficit (Note 18)
Employee stock warrants converted into
common stock (Note 17)
Treasury stock transferred to employees
(Note 19)
Changes in the Company's common shares held
by subsidiaries (Note 19)
Unrealized valuation gain or loss on
available-for-sale financial assets
Unrealized valuation gain or loss on investee's
Unrealized valuation gain or loss on derivative
financial liability for cash flow hedging
Change in equity in investee's net assets
Cumulative translation adjustments on
long-term equity investments
Net income for 2010
BALANCE, DECEMBER 31, 2010
Appropriations and distributions (Note 18)
Legal reserve
Stock dividends
Cash dividends
Employee stock warrants converted into
common stock (Note 17)
Changes in the Company's common shares held
by subsidiaries (Note 19)
Unrealized valuation gain or loss on
Unrealized valuation gain or loss on investee's
Change in equity in investee's net assets
Cumulative translation adjustments on
long-term equity investments
Cash dividends to subsidiaries
Sale of the Company's stock held by
subsidiaries (Note 19)
Net loss for 2011
BALANCE, DECEMBER 31, 2011
$ 6,638,023
$
From
Share Issuance
in Excess of
Par
Treasury Stock
Transactions
-
$ 5,696,878
1,993
-
-
-
-
1,865
6,639
1,622
-
-
-
-
-
-
-
$
270,307
Retained Earnings
Long-term
Equity
Investments at
Equity Method
$
Capital
Surplus
from Business
Combination
Legal Reserve
71,380
$ 1,487,077
-
-
-
-
-
-
11,202
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,639,888
257,196
3,550
$
Capital Surplus
Gain on
Disposal
of Property,
Plant and
Equipment
214,278
$
(214,278)
208,097
$
(208,097)
-
(448,398)
Cumulative
Translation
Adjustments
$ 1,014,362
Unrealized
Valuation Gain
or Loss on
Financial
Instruments
$
71,244
Unrealized
Revaluation
Increment
$
3,021
Treasury Stock
$
(108,853)
Total
$ 15,119,409
208,097
240,301
-
-
-
-
-
-
-
-
-
-
-
10,126
-
-
-
-
-
-
39,551
50,753
-
-
-
-
-
-
-
447
447
-
-
-
-
-
-
8,799
-
-
8,799
-
-
-
-
-
-
-
(39,406)
-
-
(39,406)
-
-
10,622
-
-
-
-
-
29,035
-
-
-
29,035
10,622
-
-
-
-
-
-
-
952,566
(779,148)
-
-
-
-
(779,148)
952,566
6,639
5,698,500
13,195
244,284
82,002
1,487,077
-
-
952,566
235,214
69,672
3,021
-
-
-
-
-
-
95,257
-
-
(95,257)
(257,196)
(85,732)
-
-
-
-
3,089
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58,805
58,805
(6,639)
(26,023)
$
Special Reserve
Unappropriated
Earnings
(Accumulated
Deficit)
(68,855)
15,363,203
(85,732)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(283,801)
-
-
(283,801)
-
-
-
-
-
-
-
-
-
-
(133,709)
-
-
-
(133,709)
(3,947)
-
-
-
83
-
-
-
-
-
-
860,340
-
-
-
-
860,340
83
-
-
-
-
-
-
-
-
(1,057,342)
-
-
-
10,050
-
-
$ 5,701,589
78,055
$ 1,487,077
(542,961)
$ 1,095,554
$ 6,900,634
$
(3,317)
$
9,961
$
244,284
(3,947)
$
-6-
$
95,257
$
-
$
$
(347,838)
$
3,021
$
-
6,733
(1,057,342)
$ 14,724,633
STATEMENTS OF CASH FLOWS
2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by
operating activities
Depreciation and amortization
Valuation loss on financial assets
(Realized) unrealized intercompany profit
Investment loss (income) recognized under equity method
Compensation cost of treasury stock transferred to employees
Net gain on disposal of assets
Gain on sale of investments, net
Cash dividends from equity-accounted investees
Impairment loss (reversal of impairment loss) on assets
Net changes in operating assets and liabilities
Financial assets at fair value through profit or loss - 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
Accounts payable
Accounts payable to related parties
Income tax payable
Other payables
Other current liabilities
Net cash provided by operating activities
2010
$ (1,057,342)
Net cash used in investing activities
841,392
66,488
(719,578)
11,084
(8,533)
(39,286)
131,815
(6,500)
(70,386)
5,755
2,029
(69,238)
49,780
46,376
(20,806)
121,953
93,119
128,000
2,733
(101,736)
(7,407)
(34,590)
(107,591)
(479)
43,892
(598)
62,019
446,442
13,284
(14,346)
(180,480)
(18,886)
171,000
(12,266)
(181,343)
(113,232)
32,531
107,817
(10,802)
1,574,480
(1,603,500)
13,076
129,384
(819,572)
(728)
(430,570)
234,588
(541,322)
(687)
7,003
(19,264)
14,154
(507,262)
(2,293,601)
-7-
952,566
774,076
21,452
(80,300)
854,564
(5,895)
(102)
68,641
37,000
649,606
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in long-term equity investments at equity method
Proceeds from capital return on long-term equity investments
Proceeds from disposal of property, plant and equipment
Cash paid for acquisition of property, plant and equipment
Increase in guarantee deposits paid
Proceeds from disposal of long-term equity investments at equity
method
Increase in available-for-sale financial assets - noncurrent
Proceeds from disposal of available-for-sale financial assets noncurrent
$
179,582
(1,051,517)
(Continued)
2011
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Decrease in short-term bills payable
Increase in long-term debt
Proceeds from transfer of treasury stock to employees
Increase (decrease) in guarantee deposits received
Proceeds from employee stock warrant converted into common stock
Cash dividends paid
$
Net cash provided by (used in) financing activities
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Property, plant and equipment transfer to deferred charges
Property, plant and equipment transfer to idle assets
Property, plant and equipment transfer to intangible assets
Changes of equity in the investee's net assets
Translation adjustments on long-term equity investments
Unrealized valuation gain or loss on available-for-sale financial assets
Unrealized valuation gain or loss on derivative financial liability for
cash flow hedging
Unrealized valuation gain or loss on investee's available-for-sale
financial assets
Changes in the Company's common shares held by subsidiaries
Cash dividends to subsidiaries transferred to capital surplus
Transfer of current portion of long-term debt to current liabilities
Adjustments to stockholders' equity due to sale of the Company's stock
held by subsidiaries
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year
Interest (excluding capitalized interest)
Income tax
-8-
196,227
1,550,000
3,061
(85,732)
$
1,663,556
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, END OF YEAR
2010
(750,949)
(34,997)
500,000
39,669
(4,065)
10,126
(240,216)
19,561
282,747
320,282
37,535
$
339,843
$
320,282
$
$
$
$
$
$
3,347
7,902
7,896
(3,947)
860,340
(283,801)
$
$
$
$
$
$
2,094
12,783
362
10,622
(779,148)
8,799
$
29,035
$
$
$
$
$
(133,709)
58,805
83
-
$
(39,406)
$
447
$
$ 1,500,000
$
6,733
$
$
$
64,908
33,988
$
$
-
64,747
2,438
(Continued)
2011
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
$
$
914,946
2010
$
582,000
154,993
114,315
(250,367)
(154,993)
819,572
$
541,322
-9-
(Concluded)
NOTES TO FINANCIAL STATEMENTS
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
Walsin Technology Corporation (the “Company”) 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, the Company 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, the Company established a branch in Kaohsiung to research, develop, produce and sell new
products such as chip resistors, RF (radio frequency) devices and high-frequency inductors and, in 2006,
the Company established a branch in Taichung to produce disc capacitors and new products. The
Company closed its operations in the Taichung Branch in August 2009. The Company’s common stock
began to be traded in Taiwan’s over-the-counter (OTC) market on November 21, 1997. Later, the
Company’s stock ceased to be OTC traded and became listed on the Taiwan Stock Exchange on September
17, 2001. As of December 31, 2011 and 2010, the Company had 1,513 and 1,899 employees,
respectively. The major stockholder, Walsin Lihwa Corporation, held 18.11% ownership interest in the
Company as of December 31, 2011. The Company’s head office is located at 566-1, Kao-shi Road,
Yang-Mei, Taoyuan.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in conformity with the Guidelines Governing the Preparation
of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business
Accounting, and accounting principles generally accepted in the Republic of China (“ROC”).
For readers’ convenience, the accompanying 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.
Significant accounting policies are summarized as follows:
Foreign Currencies
The 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;
Shareholders’ 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 shareholders’ equity. Such exchange differences are recognized in
profit or loss in the year in which the foreign operations are disposed of.
- 10 -
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.
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 shareholders’ equity if the changes in fair value are recognized in shareholders’ 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 shareholders’ equity.
Accounting Estimates
Under above guidelines, law 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
- 11 -
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.
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; and open-end mutual funds - at net asset values.
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 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 date.
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.
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 indicate 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.
- 12 -
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.
If the Company owns directly and indirectly more than 50% equity interest in an investee or can exercise
control over an investee, equity in earnings or losses of the investee is recognized on the basis of the
investee’s financial statements for the same reporting period as that of the Company.
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.
When the Company’s share in losses of an investee over which the Company has control exceeds its
investment in the investee, unless the other stockholders of the investee have assumed legal or constructive
obligations and have demonstrated the ability to make payments on behalf of the investee, the Company has
to bear all of the losses in excess of the capital contributed by stockholders of the investee. The credit
balance on the book value of the long-term equity investment is treated as a liability on the balance sheet.
If the investee subsequently reports profits, such profits are first attributed to the Company to the extent of
the excess losses previously borne by the Company.
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.
The Company’s controllable investees are included in the consolidated financial statements.
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.
- 13 -
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.
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 useful lives as follows:
Other equipment
3 to 50 years
3 to 6 years
5 years
3 to 5 years
Lower of 3 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.
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.
Deferred Charges
Deferred charges are stated at cost and amortized on a straight-line basis over their maturity periods.
- 14 -
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.
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
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.
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 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 purchase 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.
- 15 -
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as
income tax in the year the shareholders approve to retain the earnings.
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 (“ARDF”). The
Company adopted 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 if
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.
- 16 -
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.
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 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.
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
Cash equivalents - reverse sell agreements collateralized by bonds
Time deposit
$
1,073
51,069
3,219
31,832
71,000
181,650
$ 339,843
- 17 -
2010
$
1,073
53,884
22,619
62,706
180,000
-
$ 320,282
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 23).
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
2010
Financial assets held for trading
Domestic quoted companies
Stock index funds
$ 40,316
8,622
$
-
$ 48,938
$
-
6. 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
$
Accounts receivable
Related parties
Notes receivable
Accounts receivable
42,674
42,674
623,756
(26,021)
597,735
$
48,429
48,429
554,280
(25,783)
528,497
$ 640,409
$ 576,926
$
$
796,826
796,826
$ 796,826
- 18 -
2010
2,029
2,029
846,606
846,606
$ 848,635
Factored accounts receivable were as follows:
(Unit: US$ in Dollars; NT$ in Thousands)
Year Ended December 31, 2010
Counterparties
Receivable Sold
at Year Beginning
Far Eastern International
Bank
Far Eastern International
Bank
NT$
NT$
Note 1:
Note 2:
Note 3:
Note 4:
Receivable Sold
Amounts
Collected
Receivable Sold
at Year-end
70,937
(Note 2)
26,496
NT$ 164,543
(Note 3)
123,997
NT$ 235,480
(Note 4)
150,493
NT$
97,433
NT$ 288,540
NT$ 385,973
NT$
-
NT$
-
-
Interest Rates
on Advances
Received
(%)
Advances
Received at
Year-end
NT$
-
-
-
-
Credit Line
NT$
-
-
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.
Pursuant to the factoring agreements, losses from commercial disputes (such as sales returns and discounts)
shall be borne by the Company, while losses from credit risk shall be borne by the banks.
7. 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
$ 255,271
10,196
124,630
250,074
132,673
29,614
$ 168,105
15,304
141,868
379,016
150,238
69,880
$ 802,458
$ 924,411
As of December 31, 2011 and 2010, the allowance for inventory devaluation was $104,095 thousand and
$129,693 thousand, respectively.
The cost of inventories recognized as cost of goods sold in 2011 and 2010 was $6,427,526 thousand and
$7,198,270 thousand, respectively, which included a net gain of $33,876 thousand and $4,816 thousand,
respectively, due to (the reversal) write-downs of inventories, loss from disposal of inventory, income from
scrap sales and (gain) loss on physical inventories.
- 19 -
8. 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
Original
Investment
Cost
2010
Carrying
Value
Ownership
Percentage
Carrying
Value
Ownership
Percentage
712,236
1,566,277
$ 1,107,651
2,111,313
42.90
19.97
$ 1,107,372
1,810,169
43.27
19.99
879,837
566,489
100.00
620,917
100.00
9,124,282
379,386
12,662,018
-
9,472,678
372,707
13,630,838
-
91.44
29.14
$ 12,662,018
$ 13,630,838
Listed companies
Prosperity Dielectrics Co., Ltd.
(PDC)
Hannstar Board Corp. (Hannstar)
$
Unlisted companies
Pan Overseas (B.V.I.) Investment
(POE-BVI)
Gallatown Developments Limited
(Gallatown)
Walsin Color Co., Ltd. (WC)
Accounted as treasury stock
8,247,636
464,980
12,251,074
(68,855)
91.13
29.14
$ 12,182,219
As of December 31, 2011 and 2010, market values of listed companies determined by the closing prices at
December 31, 2011 and 2010 were $1,900,513 thousand and $4,118,714 thousand, respectively.
The Company’s long-term equity investments, which were $641,407 thousand and $596,558 thousand as of
December 31, 2011 and 2010 respectively, and total investment (loss) income which were $(147,055)
thousand and $117,645 thousand for the years ended December 31, 2011 and 2010 respectively, were based
on the financial statements audited by other independent auditors.
Investment (loss) income recognized under equity method for the years ended December 31, 2011 and 2010
was summarized as follows:
2011
PDC
Hannstar
POE-BVI
Gallatown
WC
$
2010
27,935
128,984
(103,608)
(870,095)
(37,780)
$ 124,154
143,916
38,108
383,302
30,098
$ (854,564)
$ 719,578
PDC manufactures and sells electric capacitors, resistors and semiconductor chip, and its stock is listed on
the Taiwan’s over-the-counter (OTC) market. As of December 31, 2011 and 2010, the Company owned
42.90% (79,843,715 PDC shares) and 43.27% (72,418,569 PDC shares) ownership interest in PDC,
respectively.
Hannstar manufactures and sells printed circuit boards, and its stock is listed on the Taiwan’s Stock
Exchange. As of December 31, 2011 and 2010, the Company owned 19.97% (91,464,788 Hannstar
shares) and 19.99% (88,116,367 Hannstar shares) ownership interest in Hannstar, respectively. On June
10, 2011, the Company had not taken control of Hannstar by losing the majority of the board of directors in
Hannstar’s provisional stockholders’ convention. But the Company still has significant influence over
Hannstar; thus, the investment was accounted for by the equity method in 2011 as before.
- 20 -
POE-BVI was incorporated in the British Virgin Islands as a 100% subsidiary of the Company.
investment holding company.
It is an
Gallatown was incorporated in the Cayman Islands as a subsidiary of the Company. It is an investment
holding company. The Company and some of its subsidiaries wholly owned Gallatown as of
December 31, 2011 and 2010. In 2011, the Company’s direct ownership percentage of Gallatown
increased from 91.13% to 91.44%.
The major operation of WC before 2008 were 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.
9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - NONCURRENT
Available-for-sale financial assets - noncurrent as of December 31, 2011 and 2010 were summarized as
follows:
Walton Advanced Electronics Ltd.
Gigabyte Technology Co., Ltd.
Walsin Lihwa Corp.
Walton Chaintech Corporation
Unrealized valuation (loss) profit of available-for-sale financial
assets - noncurrent
2011
2010
$ 462,517
232,124
82,071
19,264
$ 462,517
232,124
82,071
-
(224,033)
$ 571,943
59,768
$ 836,480
As of December 31, 2011 and 2010, the market values of listed companies were determined by the closing
price at December 31, 2011 and 2010.
10. FINANCIAL ASSETS CARRIED AT COST
Financial assets carried at cost as of December 31, 2011 and 2010 were summarized as follows:
2011
Elcon International Co., Ltd.
Ta Cheng Investment Co., Ltd.
Euroc Venture Capital Corp.
Parawin Venture Capital Corp.
HannSpree Inc.
Original
Investment
Cost
Carrying
Value
$
$
18,819
150,100
14,430
15,000
35,000
$ 233,349
2010
150,100
9,230
10,000
-
$ 169,330
Ownership
Percentage
9.40
7.23
2.50
1.50
-
Carrying
Value
$
150,100
9,230
10,000
-
Ownership
Percentage
9.40
7.23
2.50
1.50
-
$ 169,330
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.
- 21 -
11. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 2011 and 2010 were summarized as follows:
Cost
Other equipment
Construction in progress and
prepayments for equipment
2011
Accumulated
Accumulated
Depreciation
Impairment
$ 3,025,145
6,432,016
8,272
159,386
574,720
$ 1,009,509
5,024,214
7,429
143,762
490,507
151,765
-
$ 10,351,304
$ 6,675,421
Carrying
Value
2010
Carrying
Value
-
$ 2,015,636
1,407,802
843
15,624
84,213
$ 1,505,537
1,588,760
1,220
4,454
82,157
47,000
104,765
473,371
47,000
$ 3,628,883
$ 3,655,499
$
$
For the year ended December 31, 2011, interest expense (before capitalized interest) was $69,671 thousand;
capitalized interest on asset construction amounted to $2,833 thousand; and the capitalized interest rates
range from 1.18% to 1.40%.
See Note 22 to the financial statements for property, plant and equipment with related parties.
12. OTHER ASSETS
Other assets as of December 31, 2011 and 2010 were summarized as follows:
2011
2010
$ 112,032
158,531
88,239
19,582
378,384
(146,522)
(93,039)
138,823
27,531
5,364
107,000
91,727
7,777
$ 112,032
158,531
94,653
44,180
409,396
(162,097)
(103,039)
144,260
26,803
5,270
235,000
94,532
583
$ 378,222
$ 506,448
Revaluation
Year
Revaluation
Increments
Reserve for
Land Value
Increment Tax
1993-2005
$ 22,804
$ 17,341
Idle assets
Land
Other equipment
Less:
Less:
Accumulated depreciation
Accumulated impairment
Deferred charges
Deferred tax asset - noncurrent (Note 21)
Prepaid pension (Note 16)
Other assets - other (Note 21)
The revaluation increments of idle assets over the years were as follows:
Land
- 22 -
13. SHORT-TERM LOANS
Short-term loans as of December 31, 2011 and 2010 were summarized as follows:
2011
Interest Rate %
Foreign-currency loans
1.4-2.2
2010
Interest Rate %
Amount
$ 931,468
0.6707-0.93
Amount
$ 735,241
14. OTHER PAYABLES
Other payables as of December 31, 2011 and 2010 were summarized as follows:
Accrued expenses
Bonuses payable to employees, directors and supervisors (Note 18)
Other payable
2011
2010
$ 490,411
15,449
$ 433,886
51,093
128,472
$ 505,860
$ 613,451
15. LONG-TERM DEBT
Long-term debts as of December 31, 2011 and 2010 were summarized as follows:
2011
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
December 29, 2010 to
December 21, 2013. The
authorized credit limit may be
used on revolving basis for a
period of three years from
principal is fully repayable upon
maturity; floating interest.
Hua Nan Bank
-
2010
Interest Rate %
Amount
$
Amount
-
1.600
$ 2,500,000
1.5710
500,000
1.350
200,000
1.4757
300,000
1.2326
300,000
(Continued)
- 23 -
2011
Interest Rate %
Taishin Bank
February 25, 2011 to February 25,
2014. The principal is fully
repayable upon maturity; floating
interest.
First Commercial Bank
interest.
Fubon Financial
interest.
Far Eastern International Bank
February 25, 2011 to January 24,
interest.
HSBC
May 27, 2011 to May 27, 2014.
The principal is fully repayable
upon maturity; floating interest.
China Development Industrial Bank
June 29, 2011 to June 29, 2014.
September 30, 2011 to
September 30, 2014. The
Unsecured loan repayable form
Chang Hwa Bank
June 30, 2011 to June 30, 2014.
Industrial Bank of Taiwan
June 30, 2011 to June 30, 2014.
1.5300
$
Amount
2010
Interest Rate %
Amount
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
-
-
1.6000
100,000
-
-
1.6590
200,000
-
-
1.5645-1.5687
400,000
-
-
(Continued)
- 24 -
2011
Interest Rate %
Land Bank
September 7, 2011 to
September 7, 2014 with the first
installment due on September 7,
2013, followed by semiannual
installment at 30% each and the
final 40% on September 7, 2014;
floating interest.
Chinatrust Bank
October 4, 2011 to July 31, 2014.
Less: Current portion
1.7008-1.7030
1.6490-1.6500
$
Amount
2010
Interest Rate %
300,000
-
300,000
-
-
$ 4,550,000
Amount
$
-
(1,500,000)
$ 1,500,000
(Concluded)
In August 2007, the Company entered into a syndicated credit facility with First Bank and other banks.
According to the terms of the loan contract, the Company 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 liability to 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 the Company’s annual and semiannual
consolidated audited financial statements for the years ended December 31, 2011 and 2010. On February
9, 2010, the Company obtained the banks’ consent to extend the date of loan maturity to February 2012 and
paid the principal in full in advance in May 2011.
The Company should maintain certain financial ratios in its audited annual and semiannual consolidated
financial statements during the loan term.
16. PENSION PLAN
The pension plan under the Labor Pension Act (LPA) is a defined contribution plan. Under the LPA, the
rate of the Company’s monthly contributions to employees’ individual pension accounts is at 6% of
monthly salaries and wages. The employees’ pension accounts are in the Bureau of Labor Insurance.
The related net pension costs were $37,936 thousand for 2011 and $34,177 thousand for 2010.
Under the Labor Standards Law, the Company has a defined benefit pension plan covering all eligible
employees. The benefits are calculated on the basis of the length of service and average monthly salaries
of the six months before retirement. The Company contributes amounts equal to 3% of total monthly
salaries and wages to a pension fund administered by the pension fund monitoring committee. The
pension fund is deposited in the Bank of Taiwan in the committee’s name. The fair value of the
Company’s plan assets was greater than the net periodic pension cost; thus, the Company had stopped
contributing to the fund deposited in Bank of Taiwan from December 1, 2010 to November 30, 2011.
- 25 -
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 loss
$
4,097
3,750
(4,933)
627
$
4,967
3,785
(4,765)
867
Net pension cost
$
3,541
$
4,854
Assumptions used in determining the actuarial present value of the projected benefit obligation as of
December 31, 2011 and 2010 were summarized as follows:
Weighted-average discount rate
Expected long-term rate of return on plan assets
Assumed rate of increase in future compensation levels
2011
2010
2.00%
2.00%
2.25%
2.00%
2.00%
2.50%
The Company has a defined benefit pension plan (the “Plan”) covering all eligible employees.
of the Plan as of December 31, 2011 and 2010 was summarized as follows:
2011
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
Plan assets in excess of projected benefit obligation
Unrecognized net loss
Prepaid pension cost (reported as other assets - other)
$
10,388
110,583
120,971
40,772
161,743
(248,430)
(86,687)
(5,040)
The status
2010
$
8,753
123,926
132,679
54,801
187,480
(246,673)
(59,193)
(35,339)
$ (91,727)
$ (94,532)
2011
2010
Authorized capital
Share (’000)
Par value
Capital
800,000
$
10
$ 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
17. CAPITAL STOCK
- 26 -
The Company’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 warrant 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, the Company shareholders’ meeting resolved to issue additional
capital stock of $257,196 thousand through stock dividend. Thus, as of December 31, 2011, the
Company’s paid-in capital had increased to $6,900,634 thousand, divided into 690,063,380 common shares
with NT$10 par value.
The Company’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, the Company’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
After
Tax
Tax
Basic loss per share - for common stock
$ (864,944)
Shares
(Denominator)
$ (1,057,342)
687,764,583
Loss Per Share
(In Dollars)
Before
After
Tax
Tax
$ (1.26)
$ (1.54)
2010
Amount (Numerator)
Before
After
Tax
Tax
Basic earnings per share - for common stock
Potential common shares with dilutive effect
Employee stock warrants
Bonus paid to employees
$ 1,066,566
Diluted earnings per shares
$ 1,066,566
$
$
Shares
(Denominator)
952,566
684,495,941
-
48,156
1,843,173
952,566
686,387,270
Earnings Per Share
(In Dollars)
Before
After
Tax
Tax
$
1.56
$
1.39
$
1.55
$
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.
- 27 -
18. RETAINED EARNINGS
Based on the ROC Company Law and the Company’s Articles of Incorporation, 10% of the Company’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.
The Company’s Articles of Incorporation also provide that profits of the Company may be distributed by
way of cash dividend and/or stock dividend. In the distribution of profits, the ratio for cash dividend shall
not exceed 50% of the total distribution. However, according to the capital budget of next year, the
Company 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.
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
$ -
The Company’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).
The Company’s stockholders approved the board of directors’ 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, the Company
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.
- 28 -
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, the Company’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 the Company’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, the Company had issued 4,000,000 units of the employee
stock warrants to the employees at the exercise price of $21.55 per unit.
The exercise price of these warrants mentioned above had been retroactively restated to $18.00 dollars per
share for the distribution of stock dividends issued over the years. The employee stock warrants issued by
the Company were exercised at market value; thus, there was no intrinsic value or compensation cost
recognized in 2011 and 2010.
The Company’s employee stock warrants and related information for the years ended December 31, 2011
and 2010 were summarized as follows:
2011
Weightedaverage
Exercise Price
(Dollars)
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
Units
(Thousand)
$ 18.70
-
-
(0.70)
$ 18.00
3,697.0
(369.0)
(541.5)
2,786.5
Weightedaverage
Exercise Price
(Dollars)
$ 18.70
$ 18.70
2,786.5
The information on the Company’s outstanding stock warrants as of December 31, 2011 was as follows:
Range of Exercise Price
(Dollars)
$18.70-$18.00
Outstanding Stock Warrants
WeightedWeightedaverage
average
Expected
Exercise
Units
Remaining
Price
(Thousands)
Years
(In Dollars)
2,575.5
0.98
- 29 -
$18.00
Exercisable Stock
Warrants
Weightedaverage
Exercise
Units
Price
(Thousands) (In Dollars)
2,575.5
$18.00
19. 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 the Company in the amount of $68,855 thousand in was
held by subsidiaries.
The shares held by the Company for granting to the employees should be transferred to employees within
three years from the date when the shares were bought. The employees of the Company and the
subsidiaries, in which the Company 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 the Company 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, a subsidiary, held 1,479,744 shares of the Company. In 2011, after the stock dividends were
received by PDC, 57,287 shares were added to treasury stock. Besides, after the sale of all 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 the Company’s common stock. Thus, the Company recorded
decrease in treasury stock in the amount of $48 thousand for the year ended December 31, 2011.
On June 10, 2011, the Company 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
the Company. As of June 10, 2011, 17,471,053 shares of the Company’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.
- 30 -
The Company 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.
20. 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
Costs
2011
Operating
Expenses
$451,841
44,964
27,520
103,734
669,326
3,287
$271,280
22,582
13,957
21,819
82,378
3,667
Function
Expense Item
Personnel expense
Salaries
Labor/health insurance
Pension cost
Others
Depreciation
Amortization
Total
Operating
Costs
2010
Operating
Expenses
$723,121
67,546
41,477
125,553
751,704
6,954
$518,313
44,722
26,282
133,781
733,436
3,535
$341,979
21,102
12,749
23,661
82,181
4,161
Total
$860,292
65,824
39,031
157,442
815,617
7,696
21. 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
$ (19,000)
212,000
(602)
Income tax expense, net
$ 192,398
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
Unrealized loss from inventory devaluation
Unrealized loss from disposal of inventory
Unrealized bad debt loss
Unrealized foreign exchange gain
$ 130,000
48,000
18,000
9,000
6,000
(5,000)
(Continued)
- 31 -
Unrealized loss from idle assets impairment
Unrealized loss from property, plant and equipment impairment
Net loss on equity investments
Unrealized profit from intercompany transactions
Others
Total deferred income tax asset
Less: Allowance
Deferred income tax assets, net
Deferred income tax assets - noncurrent
$
17,000
7,000
35,000
(3,000)
23,992
285,992
(130,000)
155,992
(107,000)
Deferred income tax assets - current
$
48,992
(Concluded)
Income tax benefit for the current year ended December 31, 2011 and income tax payable as of
December 31, 2011 were summarized as follows:
Income tax loss at statutory rate of 17% (rounded-off)
Tax effect on adjusting items:
Tax-exempt for five years
Valuation loss on financial instruments
Dividends income
Others
Statutory deduction of loss carryforwards
Income tax benefit for the current year
Provision for (reversal of) deferred income tax asset (liability)
Unrealized exchange gain
Reversal of loss from inventory devaluation
Reversal of loss from idle assets impairment
Unrealized loss from property, plant and equipment impairment
Unrealized bad debt loss
Unrealized profit from intercompany transactions
Other
Loss carryforwards as of December 31, 2011
Add: Prior year’s income tax payable
$ (147,041)
Income tax payable as of December 31, 2011
$
127,663
(2,040)
3,647
(6,973)
(1,256)
7,000
(19,000)
(7,000)
18,000
(4,000)
(1,000)
7,000
1,000
(14,000)
19,000
1,012
1,012
The withholding tax of $655 thousand as of December 31, 2011 was prior year’s income tax prepayment.
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 stock dividend in 2011
- 32 -
$ 75,679
$
$ (542,961)
12.58%
The Company’s investment tax credit and research and development expenditure tax credits as of
December 31, 2011 for income tax purposes were summarized as follows:
Investment Tax
Credit
Expiry Year
2012
2013
Research and
Development
Tax Credit
Total
Tax Credit
$
38,000
5,000
$
45,000
42,000
$
83,000
47,000
$
43,000
$
87,000
$ 130,000
Loss carryforwards as of December 31, 2011 for income tax purposes were summarized as follows:
Expiry Year
Amount
2019
$ 48,000
The Company’s income tax returns through 2008 had been approved by the tax authorities.
22. RELATED PARTY TRANSACTIONS
The related parties were summarized as follows:
Related Party
Relationship with the Company
Walsin Lihwa Corporation (“Walsin Lihwa”)
Gallatown Developments Limited (“Gallatown”)
Prosperity Dielectrics Co., Ltd. (PDC)
Hannstar Board Corp. (“Hannstar”)
Walsin Color Co., Ltd. (WC)
Walsin Technology Hong Kong Holding Ltd.
(WTHC-HK)
Walsin Technology Corporation (HK) Limited (WTC
(HK))
Walsin Passive Component Corp. (HK) (WPC)
Walsin Electronics (S) Pte. Ltd. (WES)
Walsin Technology Corporation U.S.A. (WTCA)
Walsin Technology Corporation (Japan) Limited
(WTCJ)
Kamaya Electric Co., Ltd. (“Kamaya”)
Kamaya Electric (M) Sdn. Bhd. (KM)
Kamaya Inc. (KI)
Kamaya Electric (HK) Ltd. (KHK)
- 33 -
The Company’s 18.11% stockholder as of
December 31, 2011
100% subsidiary indirectly as of December 31,
2011
42.90% subsidiary as of December 31, 2011
19.97% subsidiary as of December 31, 2011
29.14% equity-method investee as of
December 31, 2011
100% subsidiary of Gallatown as of
December 31, 2011
December 31, 2011
December 31, 2011
December 31, 2011
December 31, 2011
100% subsidiary of Gallatown (liquidated on
October 23, 2010)
99.42% subsidiary of Gallatown as of
December 31, 2011
100% subsidiary of Kamaya as of December 31,
2011
2011
2011
(Continued)
Related Party
Relationship with the Company
Dongguan Walsin Technology Electronics Co., Ltd.
(WTC (DG))
Hua Ying Technology (Chongqing) Co., Ltd.
Pan Overseas Electronic Co., Limited (Guang Zhou)
(POE-GZ)
Suzhou Walton Advanced Electronics Ltd. (WTC (SZ))
Hannstar Board Tech (Jiang Yin) Corp.
Hannstar Union Co., Ltd.
Walton Advanced Electronics Ltd. (Walton Advanced)
Walton Chaintech Corp.
Info-Tek Corporation
Global Brands Manufacture Limited
100% subsidiary of WTHC-HK as of
December 31, 2011
December 31, 2011
December 31, 2011
December 31, 2011
Related party in substance
(Concluded)
Significant transactions with related parties:
Sales
Years Ended December 31
2011
2010
WTC (HK)
WPC
PDC
Others
$ 2,715,523
820,574
142,188
88,205
$ 3,016,464
986,618
259,514
134,859
$ 3,766,490
$ 4,397,455
The selling prices to related parties are not significantly different from the selling prices to third parties.
The collection term for general sales is receipt in advance or 150 days after shipment. The collection term
for related parties is 90 days to 120 days after shipment. The accounts receivable from WTC (HK) and
WPC are collected in net amounts after offsetting with accounts payable in the current month and the
payment term changes from 90 days to 120 days retroactively.
Purchases
2011
2010
WTC (HK)
PDC
WPC
Others
$ 1,920,849
214,000
144,119
156,034
$ 2,212,519
315,946
221,144
160,341
$ 2,435,002
$ 2,909,950
The purchase prices from related parties are not significantly different from the purchase prices from third
parties. The payment term for general sales is payment in advance or 120 days after shipment. The
payment term to related parties is 90 days to 120 days after shipment. The accounts payable for PDC are
paid in net amounts in 90 days after offsetting with accounts receivable in the current month.
- 34 -
Rental Expense
2011
2010
Walsin Lihwa
Walton Advanced
Others
$ 12,338
3,164
668
$
9,345
3,164
1,678
$ 16,170
$ 14,187
Rental income from PDC was $3,692 thousand and $2,962 thousand for the years ended December 31,
2011 and 2010, respectively, recorded as deduction of rental expense.
Rental expense was based on market rate and the Company determined that the terms of payment were at
arm’s length.
Sales of Raw Materials and Supplies
2011
2010
WTC (HK)
PDC
WPC
$ 116,228
33,188
8,296
$ 171,031
9,233
13,677
$ 157,712
$ 193,941
Sales of raw materials and supplies are based on the selling price of material and supplies. The net gain
after deducting cost from the selling price is included in “others” under nonoperating income.
Notes Receivable
December 31
2011
Others
$
2010
-
$
2,029
Accounts Receivable
December 31
WTC (HK)
WPC
Others
- 35 -
2011
2010
$ 437,992
331,243
27,591
$ 563,269
244,169
39,168
$ 796,826
$ 846,606
Other Receivables
December 31
2011
WTC (HK)
PDC
WPC
Hannstar Board Tech (Jiang Yin) Corp.
Others
$
2010
86,239
21,641
11,437
10,245
38,681
$
$ 168,243
78,909
23,962
24,164
20,402
$ 147,437
Other receivable includes receivable from related parties for financial activities and sale of equipment,
materials, etc.
Accounts Payable
December 31
2011
KM
WTC (DG)
PDC
WTC (SZ)
2010
$ 28,033
14,290
9,467
8,414
$
6,464
12,634
19,288
29,225
$ 60,204
$ 67,611
Payables on Equipment and Other Payables
December 31
Others
2011
2010
$ 18,681
$ 30,748
Payables 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
Gallatown
Hannstar Union Co., Ltd.
Walton Advanced
Items
Construction in process and prepayment for
equipment
Other equipment, construction in process and
prepayment for equipment
2011
$
2010
5,838
$ 12,082
857
761
-
10
Purchase prices of machinery equipment and other equipment were based on carrying value.
- 36 -
Sales of property, plant and equipment to related parties for the years ended December 31, 2011 and 2010
were summarized as follows:
Related Party
Gallatown
PDC
Related Party
Gallatown
PDC
WPC
Items
Book Value
2011
Selling Price
Machinery and equipment,
construction in process and
Building, leasehold
improvements, construction
in process and prepayment
for equipment
$ 130,702
$ 128,264
95
298
$ 130,797
$ 128,562
Items
Book Value
2010
Selling Price
Machinery and equipment,
construction in process and
Building, leasehold
improvements, construction
in process and prepayment
for equipment
Other equipment
$ 218,347
$ 223,135
6,012
7,395
1,383
-
1
1
$ 224,359
$ 230,531
Gain (Loss)
$
(2,438)
203
$
(2,235)
Gain
$
$
4,788
6,172
Loan Guarantees
See Note 25.
Compensation of Directors, Supervisors and Management Personnel
2011
Remuneration
Salaries, incentives and special compensation
Bonuses
2010
$
360
6,819
-
$ 14,665
14,369
1,423
$
7,179
$ 30,457
23. PLEDGED ASSETS
As of December 31, 2011 and 2010, the following assets had been pledged as collateral or security deposit
for meeting requirements of customs authorities and suppliers.
Financial Statement
Classification
Pledged Asset
2011
2010
Refundable deposits
Certificates of deposit
$ 20,600
$ 20,600
- 37 -
24. COMMITMENTS AND CONTINGENCIES
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
Euros
$
2010
-
US$ 3,710,245
EUR 43,500
Loan Guarantees
As of December 31, 2011 and 2010, the Company had guaranteed the following borrowings of its related
parties:
Unit: Thousands
2011
WTC (DG)
WTHC - HK
KAMAYA
US$ 11,000
10,000
17,670
2010
US$
6,000
10,000
17,225
Contracts
WTC signed a construction contract amounting to $318,800 thousand with Fu Tai Construction Co. in
September 2007 and had paid $318,481 thousand and as of December 31, 2011. The amount of $318,800
thousand was reported as buildings and improvements.
25. OTHERS
a. Credit risk
The counterparties to the contracts above are all commercial or investment banks or broker with high
credit ratings; thus, credit risks are considered insignificant.
b. 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.
c. 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.
- 38 -
d. The type, purpose and strategy of the derivative financial instruments
Type
Interest rate swap
Purpose
Strategy
Hedging
(See below)
The Company signed the rate exchange contract with bank. The major purpose of the contract was to
hedge the risk of exposed interest rate in financial activity. As of December 31, 2010, the rate
exchange contract was settled. 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.
e. 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
Domestic quoted stocks
Stock index funds
Available-for-sales financial
assets - noncurrent
$
40,316
8,622
$
571,943
Valuation Techniques
December 31
2011
2010
-
$
836,480
-
$
-
-
f. Net foreign exchange gain on forward exchange contracts was $644 thousand in 2010.
g. Fair values of financial instruments
The fair values of nonderivative and derivative financial instruments as of December 31, 2011 and 2010
were summarized as follows:
2011
Carrying Value
Fair Value
2010
Carrying Value
Fair Value
Nonderivative financial instruments
Assets
Cash and cash equivalents
Financial assets at fair value through profit
or loss
Notes receivable
Notes receivable from related parties
Accounts receivable
Accounts receivable from related parties
Other receivable
Other receivable 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
Accounts payable
$
339,843
$
339,843
$
320,282
$
320,282
48,938
42,674
597,735
796,826
14,405
168,243
48,938
42,674
597,735
796,826
14,405
168,243
48,429
2,029
528,497
846,606
60,781
147,437
48,429
2,029
528,497
846,606
60,781
147,437
13,630,838
12,318,467
12,182,219
13,456,142
571,943
169,330
27,531
571,943
27,531
836,480
169,330
26,803
836,480
26,803
931,468
219,470
931,468
219,470
735,241
321,206
735,241
321,206
(Continued)
- 39 -
2011
Carrying Value
Fair Value
Accounts payable to related parties
Payable on equipment
Other payables
Current portion of long-term debt
Long-term debt
Guarantee deposits received
$
60,204
250,367
505,860
4,550,000
3,061
$
60,204
250,367
505,860
4,550,000
3,061
2010
Carrying Value
Fair Value
$
67,611
154,993
613,451
1,500,000
1,500,000
-
$
67,611
154,993
613,451
1,500,000
1,500,000
-
(Concluded)
Methods and assumptions used to estimate the fair values of financial instruments were as follows:
1) 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 and accounts payable, short-term bank loans and other financial instruments.
2) 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.
3) 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 price per share in the financial report verified and certified by an independent accountant issued
as at December 31, 2011 and 2010.
4) 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.
h. The significant foreign-currency financial assets and liabilities as of December 31, 2011 and 2010 were
Unit:
Foreign Currencies/New Taiwan Dollars in Thousands
2011
Exchange
Rate
New Taiwan
Dollars
Foreign
Currencies
85,350
77
17,071
30.275
39.1707
0.3903
$ 2,583,971
3,016
6,663
$
315,552
30.275
59,705
56
7,978
30.275
39.1707
0.3903
Foreign
Currencies
2010
Exchange
Rate
New Taiwan
Dollars
44,031
2,254
15,901
29.1300
38.9491
0.3583
$ 1,282,623
87,791
5,697
9,553,337
291,923
29.1300
8,503,717
1,807,569
2,194
3,114
36,757
110
6,341
29.1300
38.9491
0.3583
1,070,731
4,284
2,272
Financial assets
Monetary items
USD
EUR
JPY
Long-term equity
investments at
equity method
USD
$
Financial liabilities
Monetary items
USD
EUR
JPY
- 40 -
26. OPERATING SEGMENTS INFORMATION
The Company disclosed its operating segment information in the consolidated financial statements.
- 41 -

Walsin Technology Corporation

Transcription

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