HANNSTAR DISPLAY CORPORATION AND SUBSIDIARIES

Transcription

1 HANNSTAR DISPLAY CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT OF INDEPENDENT ACCOUNTANTS SEPTEMBER 30, 2018 AND For the convenience of readers and for information purpose only, 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. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors report and financial statements shall prevail.

2 REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE To the Board of Directors and Shareholders of Hannstar Co., Ltd. Introduction We have reviewed the accompanying consolidated balance sheets of Hannstar Display Corporation and its subsidiaries (the Group ) as of September 30, 2018 and 2017, and the related consolidated statements of comprehensive income for the three-month and nine-month periods ended September 30, 2018 and 2017, as well as the consolidated statements of changes in equity and of cash flows for the nine-month periods ended September 30, 2018 and 2017, and notes to the financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 Interim Financial Reporting as endorsed by the Financial Supervisory Commission. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews. Scope of Review Except as explained in the following paragraph, we conducted our reviews in accordance with the Statement of Auditing Standards No. 65 Review of Financial Information Performed by the Independent Auditor of the Entity in the Republic of China. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express such an audit opinion. Basis for Qualified Conclusion As explained in Notes 4(3) and 6(7), we did not review the financial statements of certain insignificant consolidated subsidiaries, which statements reflect total assets (including investments accounted for under equity method) of NT$8,924,300 thousand and NT$8,361,411 thousand, constituting 18% and 17% of the consolidated total assets, and total liabilities of NT$1,826,703 thousand NT$2,287,535 thousand, constituting 24% and 31% ~1~

3 of the consolidated total liabilities as of September 30, 2018 and 2017, respectively, and total comprehensive income (including share of profit and other comprehensive income of associates and joint ventures accounted for under equity method) of NT($80,121) thousand, NT$74,247 thousand, NT$190,912 thousand and NT$218,438 thousand, constituting (18%), 3%, 8% and 4% of the consolidated total comprehensive income for the three-month and nine-month periods ended September 30, 2018 and 2017, respectively. These amounts and the information disclosed in Note 13 were based solely on the unreviewed financial statements of these companies as of September 30, 2018 and Qualified Conclusion Except for the adjustments to the consolidated financial statements, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries (including investments accounted for under equity method) been reviewed by independent accountants, that we might have become aware of had it not been for the situation described above, based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of September 30, 2018 and 2017, and of its consolidated financial performance for the three-month and nine-month periods then ended and its consolidated cash flows for the ninemonth periods then ended in accordance with the Regulations Governing the Preparations of Financial Reports by Securities Issuers and International Accounting Standard 34, Interim Financial Reporting as endorsed by the Financial Supervisory Commission. Chen, Chin-Chang For and on behalf of PricewaterhouseCoopers, Taiwan November 7, 2018 Lin, Chun-Yao The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation. ~2~

4 CONSOLIDATED BALANCE SHEETS YEARS ENDED SEPTEMBER 30 (The balance sheets as of September 30, 2018 and 2017 are reviewed, not audited) Assets Notes September 30, 2018 AMOUNT % December 31, 2017 AMOUNT % September 30, 2017 AMOUNT % Current assets 1100 Cash and cash equivalents 6(1) $ 4,087,666 8 $ 4,891, $ 5,134, Financial assets at fair value 6(2) and 1136 through profit or loss - current 12(4) Current financial assets at 6(1)(4) 1, ,004-1,552 - amortised cost, net 13,320, Notes receivable, net 5,340-8,094-11, Accounts receivable, net 6(5) and 12(4) 1,775, ,134, ,156, Accounts receivable - related 7 and 12(4) parties 19,403-12,657-30, Other receivables 1210 Other receivables - related 7 136, , ,655 1 parties 918, , , X Inventory 6(6) 1,244, ,099, ,295, Other current financial assets 6(1) and 8 101,693-14,293, ,260, Other current assets, others 427, , , XX Current Assets 22,039, ,724, ,421, Non-current assets 1510 Financial assets at fair value through profit or loss - noncurrent 6(2) 14, Financial assets at fair value through other comprehensive 6(3) income - non-current 1,154, Available-for-sale financial 12(4) assets - non-current , , Non-current Financial assets at 6(4) and 7 amortised cost, net 3,433, Financial assets carried at cost 12(4) - non-current , , Bond investments without 7 and 12(4) active markets - non-current - - 3,433, ,433, Investments accounted for 6(7) under equity method 4,013, ,920, ,864, Property, plant and equipment 6(8) and 8 18,097, ,586, ,422, Investment property - net 6(9) 1,394, ,413, ,174, Intangible assets 6(10) 396, , , Deferred income tax assets 11,000-11,000-11, Prepayments for business 6(24) facilities 129, , , Non-current prepaid pension cost 63,107-62,348-76, Other non-current assets, others 6(23) 60,689-62,813-63,442-15XX Non-current assets 28,769, ,192, ,434, XXX Total assets $ 50,808, $ 49,916, $ 47,856, (Continued) ~3~

5 CONSOLIDATED BALANCE SHEETS YEARS ENDED SEPTEMBER 30 (The balance sheets as of September 30, 2018 and 2017 are reviewed, not audited) September 30, 2018 December 31, 2017 September 30, 2017 Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT % Current liabilities 2100 Short-term borrowings 6(11) $ 612,346 1 $ 1,048,603 2 $ 1,185, Financial liabilities at fair value 6(2) and through profit or loss - current 12(4) 12,145-3,529-8, Current contract liabilities 12(5) 85, Notes payable 48,999-53,245-36, Accounts payable 2,147, ,238, ,319, Payable on machinery and equipment 6(24) 1,447, , , Other payables, others 6(12) 2,291, ,557, ,249, Other payables - related parties 7 61, , , Current income tax liabilities 559, , , Provisions for liabilities - current 167, , , Other current liabilities, others 74, , ,051-21XX Current Liabilities 7,509, ,657, ,309, Non-current liabilities 2570 Deferred income tax liabilities 9,752-9,752-12, Other non-current liabilities 5,091-9,471-6,804-25XX Non-current liabilities 14,843-19,223-19,005-2XXX Total Liabilities 7,524, ,676, ,328, Share capital 6(14) 3110 Share capital - common stock 32,339, ,339, ,339, Capital surplus 6(15) 3200 Capital surplus 842, , ,099 2 Retained earnings 6(16) 3310 Legal reserve 1,609, , , Special reserve 72, , , Total unappropriated retained earnings 8,994, ,045, ,386, Other equity interest 3400 Other equity interest ( 573,300) ( 1) ( 72,442) - ( 125,411) - 3XXX Total equity 43,284, ,239, ,527, Significant contingent liabilities and unrecognised contract commitments 9 3X2X Total liabilities and equity $ 50,808, $ 49,916, $ 47,856, The accompanying notes are an integral part of these consolidated financial statements. ~4~

6 CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30 (Unaudited but reviewed) Three months ended September 30 Nine months ended September Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT % 4000 Sales revenue 6(17), 7 and 12(5) $ 4,101, $ 6,658, $ 13,676, $ 17,592, Operating costs 6(6)(20) ( 3,312,465 )( 81)( 3,879,058)( 58)( 10,106,188)( 74)( 10,835,258)( 61) 5900 Net operating margin 789, ,779, ,569, ,756, Unrealized loss from sales Net operating margin 789, ,779, ,569, ,757, Operating expenses 6(20) and Selling expenses ( 79,806 )( 2)( 144,178)( 2)( 280,937)( 2)( 473,676)( 3) 6200 General & administrative expenses ( 156,727 )( 3)( 212,229)( 3)( 549,862)( 4)( 659,041)( 4) 6300 Research and development expenses ( 202,128 )( 5)( 225,022)( 4)( 579,024)( 4)( 605,232)( 3) 6450 Impairment loss (impairment gain and reversal of impairment loss) determined in accordance with IFRS 9 ( 181 ) , Total operating expenses ( 438,842 )( 10)( 581,429)( 9)( 1,403,464)( 10)( 1,737,949)( 10) 6900 Operating profit 350, ,198, ,166, ,019, Non-operating income and expenses 7010 Other income 6(18) and 7 132, , , , Other gains and losses 6(19) 1,555 - ( 68,256)( 1)( 28,599) - 16, Finance costs ( 8,837 ) - ( 16,656) - ( 35,336)( 1)( 75,569) Share of loss of associates and joint ventures accounted for under equity method 6(7) 51,733 1 ( 55,188)( 1) 179,222 1 ( 35,611) Total non-operating revenue and expenses 176,958 4 ( 30,348) - 496, , Profit before income tax 527, ,167, ,662, ,172, Income tax expense 6(21) ( 54 ) - ( 113) - ( 433,760)( 3)( 135,172)( 1) 8200 Profit for the year $ 527, $ 2,167, $ 2,229, $ 5,037, (Continued) ~5~

7 CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30 (Unaudited but reviewed) Three months ended September 30 Nine months ended September Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT % Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8316 Unrealised gains from investments in equity instruments 6(3) measured at fair value through other comprehensive income ($ 30,139 )( 1) $ - - $ 18,184 - $ Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss ( 13,247 ) , Components of other comprehensive income that will not be reclassified to profit or loss ( 43,386 )( 1) , Components of other comprehensive income that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations ( 36,926 )( 1) 4,063-67,082 - ( 52,153) Unrealized gain (loss) on valuation of available-for-sale 12(4) financial assets - - ( 1,789) Share of other comprehensive income of associates and joint ventures accounted for uner equity method ,556 - ( 5,536) - 73, Components of other comprehensive income that will be reclassified to profit or loss ( 36,271 )( 1) 23,830-61,546-21, Total other comprehensive income for the year ($ 79,657 )( 2) $ 23,830 - $ 150,540 1 $ 21, Total comprehensive income for the year $ 447, $ 2,191, $ 2,379, $ 5,059, Profit (loss), attributable to: 8610 Owners of the parent $ 527, $ 2,167, $ 2,229, $ 5,037, Comprehensive income attributable to: 8710 Owners of the parent $ 447, $ 2,191, $ 2,379, $ 5,059, Basic earnings per share 6(22) 9750 Total basic earnings per share $ 0.16 $ 0.67 $ 0.69 $ Total diluted earnings per share $ 0.16 $ 0.66 $ 0.68 $ 1.53 The accompanying notes are an integral part of these consolidated financial statements. ~6~

8 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017 (Unaudited but reviewed) Notes Share capital - common stock Total capital surplus, additional paid-in capital Legal reserve Special reserve Equity attributable to owners of the parent Retained Earnings Other equity interest Total Unrealised gains (losses) from financial Total Financial assets measured at unappropriated statements fair value through retained earnings translation other (accumulated differences of comprehensive deficit) foreign operations income Unrealized gain or loss on availablefor-sale financial assets Hedging instrument gain (loss) on effective hedge of foreign operations net investment hedges Total equity For the nine-month period ended September 30, 2017 Balance at January 1, 2017 $ 32,339,339 $ 842,099 $ 621,594 $ 264,111 $ 3,165,572 $ 18,788 $ - $ 3,826 ($ 169,667 ) $ 37,085,662 Profit for the period/year ,037, ,037,395 Other comprehensive income(loss) ( 60,321 ) - 81,963-21,642 Total comprehensive income ,037,395 ( 60,321 ) - 81,963-5,059,037 Distribution of 2016 earnings 6(16) Legal reserve ,557 - ( 316,557 ) Reversal of special reserve ( 117,058 ) 117, Cash dividend paid ( 1,616,967 ) ( 1,616,967 ) Balance at September 30, 2017 $ 32,339,339 $ 842,099 $ 938,151 $ 147,053 $ 6,386,501 ($ 41,533 ) $ - $ 85,789 ($ 169,667 ) $ 40,527,732 For the nine-month period ended September 30, 2018 Balance at January 1, 2018 $ 32,339,339 $ 842,099 $ 938,151 $ 147,053 $ 8,045,768 ($ 84,878 ) $ - $ 182,103 ($ 169,667 ) $ 42,239,968 Retroactive application and retrospective restatement effect 12(4) ,042 - ( 469,295 ) ( 182,103 ) - 281,644 Balance at January 1 after adjustments 32,339, , , ,053 8,978,810 ( 84,878 ) ( 469,295 ) - ( 169,667 ) 42,521,612 Profit for the period ,229, ,229,119 Other comprehensive income ,546 88, ,540 Total comprehensive income ,229,119 61,546 88, ,379,659 Distribution of 2017 earnings 6(16) Legal reserve ,870 - ( 670,870 ) Reversal of special reserve ( 74,611 ) 74, Cash dividend paid ( 1,616,967 ) ( 1,616,967 ) Changes in equity of associates and joint ventures accounted for using equity method ( 191 ) ( 191 ) Balance at September 30, 2018 $ 32,339,339 $ 842,099 $ 1,609,021 $ 72,442 $ 8,994,512 ($ 23,332 ) ($ 380,301 ) $ - ($ 169,667 ) $ 43,284,113 The accompanying notes are an integral part of these consolidated financial statements. ~7~

9 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30 (Unaudited but reviewed) Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax $ 2,662,879 $ 5,172,567 Adjustments Adjustments to reconcile profit (loss) Provision for doubtful accounts (reversal of allowance) 12(4) - ( 378 ) (Reversal) loss of allowance for doubtful accounts ( 6,359 ) - Depreciation 6(20) 1,455,039 1,771,014 Amortisation 6(20) 24, ,587 Interest expense 35,336 75,569 Interest income 6(18) ( 189,824 ) ( 156,212 ) Dividend income 6(18) ( 28,512 ) ( 19,959 ) Net (gain) loss on disposal of property, plant and equipment ( 52 ) 21,871 Net gain on disposal of non-current assets held for sale 6(19) - ( 315,333 ) Share of profit of associates and joint ventures accounted for 6(7) under equity method ( 179,222 ) 35,611 (Realised) unrealised loss (gain) - intercompany ( 1 ) ( 444 ) Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through profit or loss - current 123,497 3,601 Financial assets at fair value through profit or loss - noncurrent 9,953 - Notes receivable 2,754 ( 5,825 ) Accounts receivable 359, ,621 Accounts receivable from related parties ( 86 ) 11,166 Other receivables 254, ,009 Other receivables from related parties ( 54,348 ) ( 46,378 ) Inventory ( 145,664 ) ( 181,856 ) Other financial assets current 65,964 ( 5,235,089 ) Other current assets ( 122,251 ) ( 48,212 ) Prepaid pension cost ( 759 ) ( 855 ) Changes in operating liabilities Financial liabilities at fair value through profit or loss - current 8,616 ( 11,236 ) Provisions for liabilities - current ( 47,458 ) - Notes payable ( 4,246 ) ( 18,121 ) Accounts payable ( 90,889 ) 61,238 Accounts payable to related parties - ( 612 ) Other payables ( 135,502 ) 68,617 Other payables to related parties ( 96,200 ) 47,927 Provisions for liabilities - current ( 12 ) ( 1,176 ) Other current liabilities ( 118,780 ) ( 82,849 ) Other non-current liabilities ( 4,380 ) ( 3,103 ) Cash inflow generated from operations 3,778,466 1,684,760 Income tax paid ( 115,972 ) ( 3,640 ) Net cash flows from operating activities 3,662,494 1,681,120 (Continued) ~8~

10 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30 (Unaudited but reviewed) Notes CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of non-current assets held for sale $ - $ 864,516 Acquisition of financial assets at fair value through other comprehensive income - non-current ( 25,594 ) - Acquisition of investments in debt instruments without active 7 market - ( 402,308 ) Decrease in current financial assets at amortised cost, net 805,228 - Acquisition of investments accounted for under equity method 6(7) ( 200,000 ) - Acquisition of property, plant and equipment 6(24) ( 3,026,915 ) ( 1,155,403 ) Proceeds from disposal of property, plant and equipment 1,338 18,230 Acquisition of intangible assets ( 194,359 ) ( 4,397 ) Other non-current assets 2,124 ( 11,361 ) Interest received 138,688 93,584 Dividends received 28,512 19,959 Net cash flows used in investing activities ( 2,470,978 ) ( 577,180 ) CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term loans ( 432,047 ) ( 392,524 ) Repayment of long-term debt - ( 100,000 ) Interest paid ( 39,546 ) ( 89,751 ) Cash dividends paid 6(16) ( 1,616,967 ) ( 1,616,967 ) Net cash flows used in financing activities ( 2,088,560 ) ( 2,199,242 ) Effects of changes in exchange rates 93,538 19,582 Net decrease in cash and cash equivalents ( 803,506 ) ( 1,075,720 ) Cash and cash equivalents at beginning of period 4,891,172 6,209,977 Cash and cash equivalents at end of period $ 4,087,666 $ 5,134,257 The accompanying notes are an integral part of these consolidated financial statements. ~9~