NAN YA PRINTED CIRCUIT BOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED INTERIM FINANCIAL STATEMENTS and 2014 (With Independent Accountants Review Report Thereon)
Independent Accountants Review Report To the Board of Directors Nan Ya Printed Circuit Board Corporation We have reviewed the accompanying consolidated interim balance sheets of Nan Ya Printed Circuit Board Corporation and subsidiaries as of and 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three-month and 2014. These consolidated interim financial statements are the responsibility of the management. Our responsibility is to issue the review report based on our reviews. Except for those stated in the third paragraph, we conducted our reviews in accordance with the Statement of Auditing Standards No. 36 Review of Financial Statements of the Republic of China. A review of interim financial statements consists principally of inquiries, comparisons, and analytical procedures. A review is substantially less in scope than an audit conducted in accordance with the Generally Accepted Auditing Standards, the objective of which is the expression of an opinion regarding the consolidated interim financial statements taken as a whole. Accordingly, we do not express such an opinion. As discussed in note 10, the consolidated interim financial statements of Formosa Petrochemical Corporation, an investment accounted for under the equity method, were reviewed by other auditors. Our reviews, insofar as it relates to the amounts included for Formosa Petrochemical Corporation, are based solely on the qualified review report of other auditors. The investments accounted for under the equity method were NT$670,023 thousand, NT$689,025 thousand, and NT$700,017 thousand, representing 1.62%, 1.59% and 1.62% of the consolidated total assets as of December 31, and March 31, 2014 respectively. Share of profit or loss of the associates and joint ventures accounted for under the equity method were NT$11,604 thousand and NT$10,992 thousand, representing 4.19% and 9.37% of the total consolidated comprehensive income for the three-month and 2014, respectively.
Based on our reviews and the review report of other auditors, except for the effects of the matters described in the third paragraph, we are not aware of any material modification or adjustments that should be made to the consolidated interim financial statements referred to above in order for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Accounting Standards No. 34, Interim Financial Reporting as endorsed by Financial Supervisory Commission of the Republic of China. KPMG Taipei, Taiwan (the Republic of China) May 12, 2014 Notes to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with the International Accounting Standards endorsed by the Financial Supervisory Commission of the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the independent accountants review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants review report and consolidated financial statements shall prevail.
Reviewed only, not audited in accordance with generally accepted auditing standards of and 2014 NAN YA PRINTED CIRCUIT BOARD CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, and 2014 (Expressed in thousands of New Taiwan Dollars) December 31, 2014 Assets Amount % Amount % Amount % December 31, 2014 Liabilities and Equity Amounts % Amounts % Amounts % Current assets: Cash and cash equivalents (note 6) $ 3,728,548 9 3,653,692 9 5,753,845 13 Available-for-sale financial assets-current (note 7and 21) 6,136,749 15 6,826,333 16 5,331,072 12 Notes and accounts receivable, net (note 8) 5,360,632 13 7,569,787 17 7,146,926 17 Accounts receivable-related parties (note 24) 31,068-15,746-2,272 - Other receivables (note 8) 309,242 1 110,465-118,590 - Other receivables-related parties (note 24) 571,849 1 589,455 1 694,315 2 Inventories, net (note 9) 3,574,586 9 3,445,384 8 3,323,735 8 Other current assets 125,603-222,805 1 152,684 - Total current assets 19,838,277 48 22,433,667 52 22,523,439 52 Non-current assets: Investments accounted for using the equity method (note 10) 670,023 2 689,025 2 700,017 2 Property, plant and equipment (note 11) 19,799,722 48 19,332,727 44 18,883,377 44 Intangible assets 58,399-53,377-51,703 - Deferred income tax assets 933,308 2 905,514 2 905,514 2 Other non-current assets 54,663-53,155-50,855 - Total non-current assets 21,516,115 52 21,033,798 48 20,591,466 48 Total assets $ 41,354,392 100 43,467,465 100 43,114,905 100 Current liabilities: Short-term loans (note 12) $ 933,786 2 858,785 2 791,509 2 Accounts payable 1,189,837 3 1,587,860 4 1,536,811 4 Accounts payable-related parties (note 24) 499,831 1 513,149 1 421,223 1 Other payables 1,186,956 3 1,349,325 3 1,380,274 4 Other payables-related parties (note 24) 105,997-168,809-86,858 - Current income tax liabilities 8,890-22,840-1,630 - Other current liabilities 112,747-118,773 1 129,842 - Current portion of long-term liabilities (note 13 and 21) 836,494 2 530,108 1 540,022 1 Total current liabilities 4,874,538 11 5,149,649 12 4,888,169 12 Non-current liabilities: Long-term loans (note 13 and 21) 1,311,502 3 1,191,984 3 951,916 2 Deferred income tax liabilities 1,079,023 3 1,181,999 3 1,200,733 3 Accrued pension liability 1,367,460 3 1,372,181 3 1,383,083 3 Guarantee deposits 49,909-73,550-69,137 - Total non-current liabilities 3,807,894 9 3,819,714 9 3,604,869 8 Total liabilities 8,682,432 20 8,969,363 21 8,493,038 20 Equity attributable to owners of parent (note 15 and 16): Capital stock 6,461,655 16 6,461,655 15 6,461,655 15 Capital surplus 21,838,065 53 21,910,181 50 21,916,582 51 Legal reserve 4,240,724 10 4,240,724 10 4,240,724 10 Special reserve 2,726,512 7 2,726,512 6 2,726,512 6 Accumulated deficit (1,165,420) (3) (1,617,175) (4) (1,607,136) (4) Other equity (1,429,576) (3) 776,205 2 883,530 2 Total equity attributable to owners of parent 32,671,960 80 34,498,102 79 34,621,867 80 Non-controlling interest - - - - - - Total equity 32,671,960 80 34,498,102 79 34,621,867 80 Total liabilities and equity $ 41,354,392 100 43,467,465 100 43,114,905 100 See accompanying notes to consolidated interim financial statements.
Reviewed only, not audited in accordance with generally accepted auditing standards NAN YA PRINTED CIRCUIT BOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME and 2014 (Expressed in thousands of New Taiwan Dollars, except for loss per share) March 31 2014 Amount % Amount % Operating revenues: Sales revenue $ 6,677,534 102 7,981,587 102 Less: Sales returns 66,207 1 85,417 1 Sales discounts and allowances 68,876 1 51,732 1 Operating revenues, net 6,542,451 100 7,844,438 100 Operating costs (note 9) 6,803,736 104 7,636,806 97 Gross (loss) profit, net (261,285) (4) 207,632 3 Operating expenses: Selling expense 171,278 3 158,714 2 Administrative expenses 291,049 4 285,700 4 Total operating expenses 462,327 7 444,414 6 Operating loss (723,612) (11) (236,782) (3) Non-operating income and expenses (note 10 and 19): Other income 40,423 1 28,824 - Other gains and losses 229,311 4 234,579 3 Finance costs (6,443) - (6,571) - Share of the profit or loss of associates and joint ventures accounted for using the equity method 11,604-10,992 - Total non-operating income and expenses 274,895 5 267,824 3 (Loss) income before income tax (448,717) (6) 31,042 - Less: income tax (benefit) expense (note 15) (64,257) (1) 21,003 - Net (loss) income (384,460) (5) 10,039 - Other comprehensive income (note 15 and 16 and 20): Exchange differences on translation of foreign financial statements 208,242 3 110,201 1 Unrealized gains on available-for-sale financial assets 488,440 7 15,858 - Less: income tax relating to components of other comprehensive income 35,401 1 18,734 - Other comprehensive income (net of tax) 661,281 9 107,325 1 Total comprehensive income $ 276,821 4 117,364 1 Net (loss) income attributable to: Owners of parent (384,460) (5) 10,039 - Non-controlling interests - - - - $ (384,460) (5) 10,039 - Comprehensive income attributable to: Owners of parent $ 276,821 4 117,364 1 Non-controlling interests - - - - $ 276,821 4 117,364 1 Basic loss per share (expressed in New Taiwan Dollars) (note 18) $ (0.59) 0.02 See accompanying notes to consolidated interim financial statements.
Reviewed only, not audited in accordance with generally accepted auditing standards NAN YA PRINTED CIRCUIT BOARD CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Equity and 2014 (Expressed in thousands of New Taiwan Dollars) Equity Attributable to Owners of Parent Capital stock Retained Earnings Other Equity Items Exchange Common stock Capital surplus Legal reserve Special reserve Accumulated income(deficit) differences on translation of foreign financial statements Unrealized (losses) gains on available-for-sale financial assets Owners of parent Non-controlling interests Total Equity Balance as of January 1, $ 6,461,655 21,845,183 4,240,724 2,726,512 (780,960) (251,292) (1,839,565) 32,402,257-32,402,257 Net loss for the three-month period ended - - - - (384,460) - - (384,460) (384,460) Net comprehensive income for the three-month period ended - - - - - 172,841 488,440 661,281-661,281 Total comprehensive income for the three-month period ended - - - - (384,460) 172,841 488,440 276,821-276,821 Share-based payment transactions (note 17) - (7,118) - - - - - (7,118) - (7,118) Balance as of $ 6,461,655 21,838,065 4,240,724 2,726,512 (1,165,420) (78,451) (1,351,125) 32,671,960-32,671,960 Balance as of January 1, 2014 $ 6,461,655 21,910,181 4,240,724 2,726,512 (1,617,175) 202,477 573,728 34,498,102-34,498,102 Net loss for the three-month period ended 2014 - - - - 10,039 - - 10,039-10,039 Net comprehensive income for the three-month period ended 2014 - - - - - 91,467 15,858 107,325-107,325 Total comprehensive income for the three-month period ended 2014 - - - - 10,039 91,467 15,858 117,364-117,364 Share-based payment transactions (note 17) - 6,401 - - - - - 6,401-6,401 Balance as of 2014 $ 6,461,655 21,916,582 4,240,724 2,726,512 (1,607,136) 293,944 589,586 34,621,867-34,621,867 See accompanying notes to consolidated interim financial statements.
Reviewed only, not audited in accordance with generally accepted auditing standards NAN YA PRINTED CIRCUIT BOARD CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flow and 2014 (Expressed in thousands of New Taiwan Dollars) periods ended March 31 2014 Cash flows from operating activities: Net (loss) income before income tax $ (448,717) 31,042 Adjustments for: Income and expenses not affecting cash flows Depreciation expense 775,204 746,885 Amortization expense 1,674 1,674 Reversal for bad debt expense (6,450) (4,174) Interest expenses 6,443 6,571 Interest income (11,004) (17,353) Compensation costs arising from share-based payments (7,118) 6,401 Share of profit associates and joint ventures accounted for using equity method (11,604) (10,992) (Gain) loss on disposal of property, plant and equipment, net (650) 527 Gain on disposal of investment (2,331) (21,408) Unrealized foreign currency exchange gain, net (72,461) (82,478) Unrealized loss on inventory market value decline of inventory 2,339 4,963 Total income and expenses not affecting cash flows 674,042 630,616 Changes in operating assets and liabilities: Changes in operating assets, net: Decrease in notes and accounts receivable (including related parties) 616,047 519,999 Increase in other receivables(including related parties) (16,435) (10,256) Decrease in inventories 217,947 116,102 Decrease in other current assets 140,250 70,121 Change in operating assets,net 957,809 695,966 Changes in operating liabilities, net: Decrease in accounts payable(including related parties) (201,154) (142,405) Decrease in other payables(including related parties) (533,670) (51,957) (Decrease) increase in other current liabilities (45,350) 11,069 Increase in accrued pension liabilities 4,486 10,902 Change in operating liabilities,net (775,688) (172,391) Total change in operating assets and liabilities 182,121 523,575 Total adjustments 856,163 1,154,191 Cash inflow generated from operations 407,446 1,185,233 Interest received 11,029 19,935 Interest paid (5,654) (5,653) Income tax paid (41,125) (42,552) Net cash provided by operating activities 371,696 1,156,963 Cash flows from investing activities: Increase in other receivables due from related parties (571,849) (104,860) Proceeds from disposal of available-for-sale financial assets 200,000 1,532,527 Acquisition of property, plant and equipment (418,449) (196,241) Proceeds from disposal of property, plant and equipment 715 2,486 Decrease in other non-current assets 2,312 2,300 Net cash (used in) provided by investing activities (787,271) 1,236,212 Cash flows from financing activities: Increase (decrease) in short-term loans 101,246 (67,276) Increase (decrease) in long-term loans 34,166 (261,236) Decrease in guarantee deposits received (28,401) (4,413) Net cash provided by (used in) financing activities 107,011 (332,925) Effect of exchange rate changes on cash and cash equivalents 80,390 39,903 (Decrease) increase in cash and cash equivalents (228,174) 2,100,153 Cash and cash equivalents at beginning of period 3,956,722 3,653,692 Cash and cash equivalents at end of period $ 3,728,548 5,753,845 See accompanying notes to consolidated interim financial statements.
Reviewed only, not audited in accordance with generally accepted auditing standards of and 2014 NAN YA PRINTED CIRCUIT BOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS and 2014 (All amounts are expressed in thousands of New Taiwan Dollars, except for per share information or unless otherwise specified) (1) Description of Business Nan Ya Printed Circuit Board Corporation (the Company ) was legally established with the approval by the Ministry of Economic Affairs on October 28, 1997, with registered address at 3F, No.201-36, Dunhua N. Rd., Songshan Dist., Taipei City, Taiwan. The Company and its subsidiaries (the Group ) main operating activities are primarily in the manufacturing and selling of printed circuit boards. (2) Approval date and procedures of the financial statements The consolidated interim financial statements as of 2014 were authorized for issue by the Board of Directors on May 12, 2014. (3) New standards and interpretations not yet adopted (a) Effect of the new issuances of or the amendments to IFRSs as endorsed by the Financial Supervisory Commissions R.O.C. ( FSC ) but not yet adopted by the Group. According to FSC No. 1030010325 issued on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market shall adopt the version of IFRS (not including IFRS 9, Financial instruments ) as endorsed by the FSC, in preparing the consolidated financial statements. The related new standards, interpretations and amendments are listed below: Description Effective date per IASB Limited Exemption from comparative IFRS 7 Disclosures for July 1, 2010 First-time adopters (amendment to IFRS 1) Severe hyperinflation and removal of fixed dates for first-time adopters July 1, 2011 (amendment to IFRS 1) Government loans(amendment to IFRS 1) January 1, Disclosure-transfer of financial assets(amendment to IFRS 7) July 1, 2011 Disclosure-Offsetting financial assets and financial January 1, liabilities(amendment to IFRS 7) IFRS 10, Consolidated financial statements January 1, (With January 1,2014 as the effective date for investment entities) IFRS 11, Joint agreements January 1,
2 Description Effective date per IASB IFRS 12, Disclosure of interests in other entities IFRS 13, Fair value measurement Presentation of items of other comprehensive income (amendment to IAS 1) Deferred tax: recovery of underlying assets (amendment to IAS 12) Employee benefits(amendment to IAS 19) Separate financial statements(amendment to IAS 27) Offsetting Financial Assets and Financial Liabilities (amendment to IAS 32 ) IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine January 1, January 1, July 1, 2012 January 1,2012 January 1, January 1, January 1,2014 January 1, The Group had assessed that the version of the IFRS may not have any significant impact on the consolidated financial statements except for the following: (i) IAS 19 Employee Benefits This standard mainly amended the following: I. Instead of the cost recognized as profit or loss consists of the interest cost on the defined obligation and expected return on plan assets, the net interest on the net defined benefit liability (asset) is determined by multiplying the net defined benefit liabilities (asset) by the discount rate. II. The actuarial gains and losses and unvested past service cost are immediately recognized as other comprehensive income (OCI) and profit or loss, respectively, in the reporting period in which these occur rather than using the corridor approach and recognizing over the average vesting period. III. The termination benefits is recognized as a liability and expense at the earlier of the date when the entity recognizes elated restructuring costs and the date when the entity can no longer withdraw the offer of the termination benefits. IV. More extensive disclosure requirements related to defined benefit plan.
3 (ii) IAS 1 Presentation of financial statements The standard amended the presentation of OCI, classified as items presented before tax to be shown separately for each of the two categories of OCI items. The amendments also require tax associated with items of OCI which presented before tax to be shown separately. The Group has to change the presentation of OCI according to that standard. (iii) IFRS 12 Disclosure of Interests in Other Entities It s a consolidated disclosure standard requiring a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated 'structured entities'. Disclosures are presented as a series of objectives, with detailed guidance on satisfying those objectives. (iv) IFRS 13 Fair Value Measurement The standard applies to IFRSs that require or permit fair value measurements or disclosures and provides a single IFRS framework for measuring fair value and requires disclosures about fair value measurement. (b) The new standards and amendments issued by the IASB that may have an impact to the consolidated financial statements not yet approved by the FSC. A summary of the new standards and amendments to IFRSs issued by the IASB that has not yet approved by the FSC are as following: New standards and amendments Effective date per IASB IFRS 9 Financial instruments IFRS 14 Regulatory Deferral Accounts IAS 19 Defined Benefit Plans: Employee Contributions IAS 36 Recoverable amount disclosures for non-financial assets IAS 39 Novation of Derivatives and Continuation of Hedge Accounting Not officially issue yet January 1, 2016 July 1, 2014 January 1, 2014 January 1, 2014 IFRIC 21 Levies January 1, 2014 The Group is currently evaluating the impact from the abovementioned standards and amendments to the Groups financial position and operating results. Any related impact will be disclosed when the evaluation is completed.
4 (4) Summary of Significant Accounting Policies (a) Statement of compliance The accompanying consolidated interim financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to the Regulations) and guidelines of IAS 34 Interim Financial Reporting which are endorsed by the FSC. These consolidated interim financial statements do not include all disclosures required for full annual consolidated financial statements under the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations as endorsed by the FSC (hereinafter referred to as IFRS endorsed by the FSC). Except as described below, the significant accounting policies adopted in the accompanying consolidated interim financial statements are the same as the consolidated financial statements as of and for the year ended December 31,. Please refer to Note 4 of the consolidated financial statements as of and for the year ended December 31, for the complete disclosures of significant accounting policies. (b) Basis of Consolidation The Regulations of consolidated interim financial statements are consistent with the consolidated financial statements as of and for the year ended December 31,. Please refer to Note 4 (c) of the consolidated financial statements as of and for the year ended December 31, for relevant information. (i) The subsidiaries included in the consolidated interim financial statements: Main Business Percentage of Direct Ownership Investor Subsidiary and Products.03.31.12.31 2014.03.31 description The company NPUC Customer sales promotion and 100% 100% 100% - other services The company NPHK Selling and investing in 100% 100% 100% - electronic products NPHK NPKC Producing and selling PCB 100% 100% 100% - (ii) All of Subsidiaries are listed in consolidated financial statements. (c) Income tax Tax expense in the interim financial statements is measured and disclosed according to paragraph B12 of IAS 34 Interim Financial Reporting.
5 Income tax expense for the year is best estimated by multiplying the pretax income for the interim reporting period with the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period. Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the applicable tax rate at time of realization or liquidation and recognized directly in equity or other comprehensive income as tax expense. (d) Employee benefits The pension cost in the condensed consolidated interim financial statements is calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the beginning between the ends of year. In the prior fiscal year, there was no material volatility of the market, material reimbursement and settlement or other material one-time events. (5) Key Sources of Significant Accounting Judgments, Estimation and Assumed Uncertainty The consolidated interim financial statements are prepared in conformity with IAS 34 Interim financial reporting as endorsed by the FSC, under which, management make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. In these consolidated interim financial statements, judgments and key sources of estimation uncertainty used by management in the application of critical accounting policies are expected to be consistent with those of Note 5 of the consolidated financial statements as of and for the year ended December 31,. (6) Cash and Cash Equivalents December 31, 2014 Cash on hand $ 22 13 80 Cash in bank 2,292,034 2,207,269 1,998,013 Cash equivalents short-term bills - 235,240 1,085,452 Cash equivalents bonds with a put option 1,436,492 1,211,170 2,673,300 Cash and cash equivalents reported in consolidated cash flow statement $ 3,728,548 3,653,692 5,753,845
6 (7) Financial Assets Financial assets consist of the following: December 31, 2014 Available-for-sale financial assets-current $ 6,136,749 6,826,333 5,331,072 December 31, 2014 Holding Holding Holding Amount share% Amount share% Amount share% Cost-method financial assets-non-current: Stock-Antig Technology Corporation $ - 5.48-5.48-5.48 Since there is no directly observable price for cost-method financial assets-stock held by the Group in active markets, the fair value of the cost-method financial assets-stock cannot be measured reliably. Therefore, cost-method financial assets-stock held by the Group are measured at cost. In 2008, the Group valuated the stock of Antig Technology Corporation and recognized an impairment loss amounting to $32,864 thousand, which was the total investment cost. The financial assets of the Group have not been collateralized or pledged. (8) Notes Receivables, Accounts receivables and other Receivables December 31, 2014 Account receivables $ 5,414,386 7,646,404 7,219,374 Other receivables 309,242 110,465 118,590 Less: allowance for doubtful accounts (53,754) (76,617) (72,448) $ 5,669,874 7,680,252 7,265,516 Overdue but unimpaired aging of account receivables, note receivables and other receivables of the Group were as followed: December 31, 2014 Overdue <60days $ 115,672 105,720 171,631 Overdue from 61days to 90days 2,353 9,302 230 Overdue from 91days to 120days - 4,644 3,239 Overdue from 121days to 1 year - 50,614 1,938 $ 118,025 170,280 177,038
7 Changes of allowance for doubtful accounts of accounts receivables, notes receivables and other receivables for the three-month and 2014 were as follows: Individually assessed impairment Collectively assessed impairment Total Beginning balance on January 1, $ - 60,194 60,194 Impairment loss reversed of account receivables and - (6,450) (6,450) notes receivables Effect of exchange rate - 10 10 Beginning balance on $ - 53,754 53,754 Individually assessed impairment Collectively assessed impairment Total Beginning balance on January 1,2014 $ - 76,617 76,617 Impairment loss reversed of account receivables and - (4,174) (4,174) notes receivables Effect of exchange rate - 5 5 Beginning balance on 2014 $ - 72,448 72,448 (9) Inventories, Net December 31, 2014 Finished goods $ 704,353 1,009,520 1,023,008 Work in progress 1,843,163 1,533,748 1,514,031 Raw materials 798,905 684,574 568,717 Supplies 228,165 217,542 217,979 $ 3,574,586 3,445,384 3,323,735 period ended and 2014, the recognized loss of reduction of price of inventory was $2,339 thousand and $4,963 thousand because of write-downs from inventories to net realizable value, reported as cost of goods sold. All of the inventories held by the Group were unpledged or collateralized as of December 31, and March 31 2014.
8 (10) Investment accounted for using the equity method The details of long-term equity investments as of reporting dates were as follows: December 31, 2014 Associates $ 670,023 689,025 700,017 Summary of shares of the profit or loss of associates attributable to the Group were as follows: 2014 Investment income attributable to the Group $ 11,604 10,992 None of the investment accounted for using the equity method was pledged as of December 31, and 2014. (11) Property, Plant and Equipment The cost and depreciation of the property, plant and equipment of the Group for the three-month and 2014: Building Machinery and equipment Vehicles Miscellaneous equipment Under construction Total Cost: Balance as of January 1, $ 3,778,920 38,242,579 14,524 3,991,772 842,795 46,870,590 Additions - 68,256-20,622 329,571 418,449 Disposals - (69,988) - (475) - (70,463) Reclassification 1,483 215,693 481 8,877 (226,534) - Reclassification to other receivables - (356) - - - (356) Impact by exchange rate change 31,889 261,176 51 2,879 15,295 311,290 Balance as of March 31, $ 3,812,292 38,717,360 15,056 4,023,675 961,127 47,529,510 Balance as of January 1, 2014 $ 3,866,091 39,795,949 15,810 4,003,110 1,431,750 49,112,710 Additions - 2,697-8,054 185,490 196,241 Disposals - (12,672) - (3,223) - (15,895) Reclassification - 282,059-445 (282,504) - Impact by exchange rate change 16,524 139,290 33 1,603 11,642 169,092 Balance as of March 31, 2014 $ 3,882,615 40,207,323 15,843 4,009,989 1,346,378 49,462,148 Accumulated depreciation: Balance as of January 1, $ 1,256,244 22,941,175 9,463 2,708,678-26,915,560 Depreciation for the year 42,295 668,981 251 63,677-775,204 Disposals - (69,963) - (435) - (70,398) Reclassification - (880) - 880 - - Reclassification to other receivables - (321) - - - (321) Impact by exchange rate change 11,501 96,177 26 2,039-109,743 Balance as of March 31, $ 1,310,040 23,635,169 9,740 2,774,839-27,729,788
9 Building Machinery and equipment Vehicles Miscellaneous equipment Under construction Total Balance as of January 1, 2014 $ 1,456,321 25,329,030 10,544 2,984,088-29,779,983 Depreciation for the year 42,130 642,701 215 61,839-746,885 Disposals - (9,658) - (3,224) - (12,882) Impact by exchange rate change 6,570 57,034 16 1,165-64,785 Balance as of March 31, 2014 $ 1,505,021 26,019,107 10,775 3,043,868-30,578,771 Carrying amounts: Balance as of January 1, $ 2,522,676 15,301,404 5,061 1,283,094 842,795 19,955,030 Balance as of March 31, $ 2,502,252 15,082,191 5,316 1,248,836 961,127 19,799,722 Balance as of January 1, 2014 $ 2,409,770 14,466,919 5,266 1,019,022 1,431,750 19,332,727 Balance as of March 31, 2014 $ 2,377,594 14,188,216 5,068 966,121 1,346,378 18,883,377 For capitalized interest, please refer to note 19. For disposal gains and losses, please refer to note 19. None of property, plant and equipments of the Group was pledged or collateralized as of December 31, and 2014. (12) Short term loans December 31, 2014 Unsecured bank loans $ 933,786 858,785 791,509 Unused quota $ - 142 - Range of interest rates 0.93%~1.85% 1.32%~2.00% 1.29%~2.24% (a) There were no significant issuance, repurchase and repayment of short-term borrowings of the Group for the three-month and 2014. Please refer to note 19 for interest expense. For the other relevant information, please refer to note 12 of the consolidated financial statements as of and for the year ended December 31,. (b) There were no assets pledged as collaterals for short-term borrowings of the Group to borrow bank loans.
10 (13) Long-term Loans Details of long-term loans of the Group were as follows: Currency Interest rate range Expiration Unused credit Amount Unsecured long-term bank loans USD 0.7971%~0.8205% $ - 836,494 Unsecured long-term bank loans USD 0.8505%~0.8633% 2016-1,284,616 Unsecured long-term bank loans USD 0.6605%~0.8659% 2014-26,886 Less: current portion 836,494 Total $ 1,311,502 December 31, Currency Interest rate range Expiration Unused credit Amount Unsecured long-term bank loans USD 0.6385%~0.8659% 2014 $ 314,462 14,974 Unsecured long-term bank loans USD 0.8256%~0.8633% 2014-515,134 Unsecured long-term bank loans USD 0.8256%~0.8633% 2015~2016-772,701 Unsecured long-term bank loans USD 1.66%~2.30% 2018 3,094,605 419,283 Less: current portion 530,108 Total $ 1,191,984 2014 Currency Interest rate range Expiration Unused credit Amount Unsecured long-term bank loans USD 0.6359%~0.6385% 2014 $ 320,362 15,255 Unsecured long-term bank loans USD 0.85%~1.70% 2014-262,383 Unsecured long-term bank loans USD 0.85%~1.70% 2015~2016-787,150 Unsecured long-term bank loans USD 1.66%~2.35% 2018 3,152,667 427,150 Less: current portion 540,022 Total $ 951,916 (a) Issuance and redemption of bank loans The redemption amounts of long-term borrowings for the three-month 2014 was $261,236 thousand. There were no significant issuance, repurchase and repayment for the three-month period ended. Please refer to note 19 for interest expense. For the other relevant information, please refer to note 13 of the consolidated financial statements as of and for the year ended December 31,. (b) There were no assets pledged as collaterals for long-term borrowings of the Group to borrow bank loans.
11 (14) Employee Benefits (a) Defined benefit plan Subsequent to December 31,, there is no apparent evidence of any material market volatility, material curtailment, reimbursement and settlement or other material one-time events. Therefore, pension cost in the consolidated interim financial statements is measured and disclosed according to the respective actuarial report for the years ended December 31, 2012 and. Recognition as expense of pension cost was as follows: 2014 Operating expense $ 12,821 14,386 Selling expense 412 411 Administrative expense 1,590 1,740 Total $ 14,823 16,537 (b) Defined contribution plan The pension costs that were contributed to Bureau of Labor Insurance were as follows: 2014 Operating expense $ 83,188 96,999 Selling expense 1,304 1,324 Administrative expense 6,854 7,277 Total $ 91,346 105,600
12 (15) Income Tax (a) The details of income tax (income) expense were as follows: 2014 Current income tax expense Generated in current period $ 8,973 1,667 Current income tax before prior period adjustments - 19,336 Deferred tax income Origination and reversal of temporary differences (73,230) - Income tax expense (income) of continuing operations $ (64,257) 21,003 (b) The details of income tax expense under other comprehensive income were as follows: 2014 Exchange differences in financial statements of foreign operations $ 35,401 18,734 (c) The Company is qualified for highly strategic industry and relevant tech service industry. Approved by the ROC tax authority, the Company is exempt from corporate profit tax for five years since the exempt date the Company chose. The information of approved exemption is as follows : Types No. Rewards Exempt term Expansion 09900070140 of 02.22.2010 BGA 2010.01.01-2014.12.31 Expansion 1001784030 of 01.16.2012 BGA.01.01-2017.12.31 (d) The Company s income tax returns have been examined by the ROC tax authority through 2012. The ROC Income Tax Act allows offset of net losses, as assessed by the tax authorities, against taxable income over a period of ten years for local tax reporting purposes. As of 2014, unused loss carry forward available to the Company were as follows: Year Unused loss carry forward Expiry year 2012(Approved) $ 2,750,143 2022 1,269,703 2023 Total $ 4,019,846
13 (e) Information related to intergraded income tax were as follows: December 31, 2014 (16) Equity Accumulated deficit before 1997 $ - - - Accumulated deficit after 1997 (1,165,420) (1,617,175) (1,607,136) $ (1,165,420) (1,617,175) (1,607,136) Imputation credit account $ 89,051 97,606 116,942 2012 (actual) (forecasted) Tax deduction ratio for earnings distribution to ROC residents - - Under the integrated income tax system, the above imputation credit account and creditable ratio were calculated according to the formal interpretation No.10204562810 issued by Taxation Administration, Ministry of Finance, R.O.C. on October 17,. Except as described below, the description of equity in the accompanying consolidated interim financial statements is not materially different from the consolidated interim financial statements as of and for the three-month period ended and 2014. Please refer to Note 16 of the financial statements as of and for the year ended December 31, for the related detail disclosures on equity. (a) Capital surplus The components of capital surplus were as follows: December 31, 2014 Paid-in capital in excess of par value $ 21,666,025 21,666,025 21,666,025 Exercise of employee stock options 171,917 244,033 250,434 Others 123 123 123 $ 21,838,065 21,910,181 21,916,582
14 (b) Retained earnings Earnings appropriation and distribution According to the Company s articles of incorporation, the Company s earnings from the current year should be used to pay income tax, offset prior-year deficits, set aside 10% of the remainder as legal reserve, provide a special reserve when necessary, and pay dividends. After the above-mentioned appropriation, the appropriation of the remainder (the distributable earnings after dividends), if any, plus the undistributed earnings from previous years should be proposed by the board of directors and is subject to the shareholders approval. The Company appropriates 0.1% to 1% of the distributable earnings after dividends as employees bonus, and records it as periodic expense in the current year. The Company distributes dividends in cash or stock. Fifty percent or more of the distributable earnings after deducting legal reserve and special reserve should be distributed as dividends, of which cash dividends should be the priority, and the total of earnings and capital surplus transferred to share capital should be no more than 50% of all dividends for the year. and 2014, the estimated employee bonus were $0 thousand and $80 thousand based on the distribution plan according to the Company s articles of incorporation, and the amount is reported under the operating cost and expense for the above periods. Because of the deficit in 2012, there were no employee bonus and dividend distributed by the board of directors to a stockholders meeting on June 18,. Whether to offset prior-year deficits will be proposed by the board of directors to a stockholders meeting on March 25, 2014. This information can be reviewed on the Website of the Taiwan Stock Exchange after the related meetings have been held. (c) Other equity Exchange differences on translation of financial statements for foreign operation Unrealized (loss) gain on available-for sale financial assets Balance, January 1, $ (251,292) (1,839,565) Exchange differences on translation(net of tax) 172,841 - Unrealized gain on available-for-sale financial assets - 488,440 Balance, $ (78,451) (1,351,125) Balance, January 1, 2014 $ 202,477 573,728 Exchange differences on translation(net of tax) 91,467 - Unrealized gain on available-for-sale financial assets - 15,858 Balance, 2014 $ 293,944 589,586
15 (17) Share-based Payment Transactions Except as described below, the Company believes that there was no material change on share-based payment transactions for the three-month and 2014. Please refer to Note 17of the consolidated financial statements as of and for the year ended December 31, for related detail disclosures on share-based payment transactions. The Company was authorized to issue 9,912 units and 1,588 units of employee stock options on June 23, 2009 and March 25, 2010, respectively, and each option entitles the holder to subscribe for one thousand common shares of the Company at the exercise price of $89 and $124.5, respectively. The Company transferred capital surplus to share capital on August 5, 2011, and adjusted the exercise price to NT$75.4 and NT$116. The Company distributed cash dividend on July 23, 2012, and adjusted the exercise price to NT$72.2 and NT$111.1, respectively. The grant was limited to formal employees of the Company. The options are exercisable at certain percentages after the second anniversary from the grant date, with 50%, 75%, and 100% of these stock options vested after the second, third, and fourth anniversary dates, respectively, and the options granted are valid for 8 years. The Company utilized the Black-Scholes option pricing model to value the stock options granted, and the main inputs to the valuation model were as follows: The 1 st batch 2009 of employee stock options The 2 nd batch 2010 of employee stock options Dividend rate - - Expected price volatility 42.89% 39.77% Risk-free interest rate 1.0102% 0.9584% Expected valid period (years) 5.375 5.375 Projected turnover rate 13.01% 23.43% The above details of transfer of employee stock options were as follows: Employee stock option plans Number of options (Units) March 31 2014 Number of Weighted-average options exercise price (Units) Weighted-average exercise price Outstanding at January 1 8,362 $ 79.59 8,362 79.59 Outstanding at March 31 8,362 79.59 8,362 79.59 Options exercisable at March 31 5,487 8,362
16 As of and 2014, the details of the Company s outstanding stock options accounted for as a compensatory plan were as follows: Range of exercise prices (NT$) Number of options Options outstanding Remaining period(years).03.31 Exercise price (NT$) Options exercisable Number of options Exercise price (NT$) $ 72.2 6,774 4.23 72.2 4,296 72.2 $ 111.1 1,588 4.99 111.1 1,191 111.1 Range of exercise prices (NT$) 2014. 03.31 Options outstanding Number of Remaining Exercise options period(years) price (NT$) Options exercisable Number of options Exercise price (NT$) $ 72.2 6,774 3.23 72.2 6,774 72.2 $ 111.1 1,588 3.99 111.1 1,588 111.1 (18) Earnings Per Share The basic earnings per share were calculated as follows: For the three-month For the three-month 2014 Net (loss)income attributable to equity shareholder s of the Company $ (384,460) 10,039 Weighted average number of ordinary shares outstanding 646,166 646,166 Basic earnings per share $ (0.59) 0.02 The stock options for the three-month and 2014 are not included in the calculation of weighted average number of ordinary shares because they were antidilutive. When calculating the dilution of stock options, the average market value is based on the market price of the Company s outstanding stock.
17 (19) Non-operating Income and Expenses (a) Other income The Group s other income were as follows: 2014 Interest income of bank deposits $ 11,004 17,353 Income from reversal of bad debt 6,450 4,174 Others 22,969 7,297 $ 40,423 28,824 (b) Other gains and losses The Group s other gains and losses were as follows: 2014 Foreign exchange gain $ 139,298 133,334 Gains (losses) on disposal of financial liabilities and investments Net gain on disposal of available-for-sale financial assets 2,331 21,408 Gains (losses) on disposal of property, plant and 650 (527) equipments Gains on disposal of materials and spoilages 102,009 86,658 Others (14,977) (6,294) $ 229,311 234,579 (c) Finance expenses The details of finance expenses were as follows: 2014 Interest expense $ 8,640 10,557 Less: capitalized interest (2,197) (3,986) Interest expense without capitalized interest $ 6,443 6,571
18 (20) Reclassified adjustments of the components of other comprehensive income The details of the reclassified adjustments of the components of other comprehensive income were as follows: 2014 Available-for-sale financial assets: Net change in fair value during the year $ 490,771 37,266 Net change in fair value reclassified as profit or loss (2,331) (21,408) Net change in fair value recognized into other comprehensive income $ 488,440 15,858 (21) Financial Instruments Except as described below, the Group believes that there was no material change with regard to the fair value and exposure risks of credit risk, liquidity risk and market risk on financial instruments since December 31,. Please refer to Note 21 of the consolidated financial statements as of and for the year ended December 31, for the related detail disclosures on financial instruments. (a) Currency risk The Group s exposure to significant foreign currency risk was as follows: December 31, 2014 Foreign New Foreign New Foreign currency (in thousands) Exchange rate Taiwan Dollars currency (in thousands) Foreign rate Taiwan Dollars currency (in thousands) Exchange rate New Taiwan Dollars Financial assets: Monetary items USD $ 190,846 29.8750 5,701,527 281,389 29.9500 8,427,598 254,602 30.5100 7,767,903 EUR 18 38.3380 685-41.2410-8 41.9300 316 JPY 5,147 0.3173 1,633 1,868 0.2846 532 1,744 0.2959 516 HKD 153 3.8301 586 153 3.8397 587 131 3.9115 511 CNY 293,121 4.7654 1,396,843 180,345 4.9121 885,873 185,059 4.9594 917,783 Financial liabilities Monetary items USD 117,595 29.8750 3,513,158 125,203 29.9500 3,749,833 109,347 30.5100 3,336,172 EUR 232 38.3380 8,897 7 41.2410 309-41.9300 - JPY 453,261 0.3173 143,820 466,998 0.2846 132,908 331,666 0.2959 98,140 HKD - 3.8301 - - 3.8397 - - 3.9115 - CNY 118,002 4.7654 562,328 76,281 4.9121 374,702 64,669 4.9594 320,717
19 The Group s exposure to foreign currency risk arises from the foreign currency exchange fluctuations on cash and cash equivalents, accounts receivables, other receivables, loans, accounts payables and other payables which are denominated in different foreign currencies. A 1% appreciation or depreciation of the NTD against the USD as of and 2014 would have decreased or increased the net income after tax by $18,163 thousand and $36,783 thousand for the three-month and 2014 respectively. This analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis. (b) Fair value and carrying amount Other than those listed below, the Group considers the carrying amounts of its financial assets and financial liabilities measured at amortized cost as a reasonable approximation of fair value:.03.31.12.31 2014.03.31 Carrying Carrying Carrying Amount Fair Value Amount Fair Value Amount Fair Value Financial assets Available-for-sale financial assets-current $ 6,136,749 6,136,749 6,826,333 6,826,333 5,331,072 5,331,072 Financial liabilities: Long-term loans (including current portion) 2,147,996 2,147,996 1,722,092 1,722,092 1,491,938 1,491,938 The table below analyzes the financial instruments carried at fair value by the levels in the fair value hierarchy. The different levels of fair value have been defined as follows: I. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. II. Level 2: Inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices). III. Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Level 1 Level 2 Level 3 Total Available-for-sale financial assets Domestic listed stocks and mutual funds $ 6,136,749 - - 6,136,749 December 31, Available-for-sale financial assets Domestic listed stocks and mutual funds $ 6,826,333 - - 6,826,333 2014 Available-for-sale financial assets Domestic listed stocks and mutual funds $ 5,331,072 - - 5,331,072 There was no transfer for the three-month and 2014.
20 (22) Financial Risk Management The Group believes that there were no material changes in financial risk management objective and policy since December 31,. Please refer to the detail disclosure on financial risk management in Note 22 of the consolidated financial statements as of and for the year ended December 31,. (23) Capital Management The Group believes that there were no material changes in capital management target, policy and procedure and in quantitative information adopted for capital management since December 31,. Please refer to Note 23 of the consolidated financial statements as of and for the year ended December 31, for the detail disclosure on capital management. (24) Related-party Transactions (a) Other related-party transactions (i) Sales to related parties Significant sales to related parties and the balance of accounts receivable were as follows: Sales 2014 Accounts receivables-related parties December 31, 2014 Affiliates $ 40,110 12,245 31,068 15,746 2,272 The normal credit term with the related parties above is collection before the 15th of the month following the sales month. Sales price is cost plus profit as quoted price. There is no collateral received among related parties accounts receivable and there is no need to estimate bad debt expense. (ii) Purchase from related parties Significant purchases from related parties and the balance of accounts payables were as follows: Sales 2014 Accounts receivables-related parties December 31, 2014 The parent company $ 339,026 335,082 144,646 160,471 138,949 Affiliates 631,864 450,974 355,185 352,678 282,274
21 The purchase price from related parties is not significantly different from that from non-related general parties. The normal credit term with the related parties above is collected before the 15th of the month following the purchase month, on open account 90 days, on open account 60 days and on the day following the day of approving payment. (iii) Property transactions The Group bought utilities from Nan Ya Electronic Materials (Kunshan) Co., Ltd. for the three month and 2014 amounted to $187,380 thousand and $211,714 thousand respectively. As of and 2014, there were unpaid payables for $105,997 thousand and $86,858 thousand respectively, reporting as other payables-related parties. (iv) Financing to related parties Financing to related parties were as follows: Highest balance 2014 other receivables-related parties December 31, 2014 Affiliates $ 571,849 1,289,442 571,849 589,455 694,315 (v) Guarantees The Group borrowed long-term loans from Bank of china with letter of comfort. Until paying off all the debts, the parent will supervise and urge actively the Group to maintain normal operation, to maintain well debt paying ability and to repay on time. The parent acted as a joint guarantor and assumed the joint responsibility of the Group s participating loan borrowed from Chang Hwa Commercial Bank. (vi) Lease contracts The Group signed lease contracts with NPC to rent the factory, which is located at No. 338, Sec. 1, Nankan Rd., Lujhu Township, Taoyuan County, the employees dormitories and the office in Taipei, etc. The operating lease reported as expense resulting from the above transactions for the three-month and 2014 were $40,037 thousand and $41,147 thousand respectively.
22 (b) Key Management Personnel Transactions (i) Key Management Personnel Compensation 2014 Short-term employee benefits $ 3,327 3,998 Share-based payments 162 162 $ 3,489 4,160 Please refer to note 17 for explanation related to share-based payment. (25) Pledged Properties: None. (26) Significant Commitments and Contingencies As of 2014, in addition to those described in the financial statements and accompanying notes, the commitments and contingencies of the company were as follows: (a) The balance of outstanding letters of credit for the importation of raw materials of the Group amounted to $301,533 thousand. (b) The guarantee for customs and guarantee for letters of credit were $61,000 thousand and $65,100 thousand respectively. (c) The Group s endorsement and guarantee amount due to bank line of credit was NT$1,049,544 thousand (US$34,400 thousand). (27) Significant Disaster Loss: None. (28) Significant Subsequent Event: None.