CHINA STEEL CORPORATION BALANCE SHEETS (In Thousands of New Taiwan Dollars, Except Par Value) (Reviewed, Not Audited) September 30 September 30 ASSETS Amount % Amount % LIABILITIES AND STOCKHOLDERS EQUITY Amount % Amount % CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents $ 12,911,650 6 $ 710,444 - Short-term bank loans and overdraft $ 8,534,101 4 $ 2,034,195 1 Short-term investments 26,301,355 12 32,096,706 16 Commercial paper payable 1,999,955 1 2,998,335 1 Notes receivable 1,724,042-595,313 - Notes payable 10,006 1 - - Accounts receivable net of allowance for doubtful accounts of $134 and $1,214 Accounts payable 3,144,458-2,280,022 1 thousand as of September 30, 2004 and 2003, respectively 2,577,210 1 1,974,314 1 Income tax payable 5,558,515 3 4,573,651 2 Other receivable 270,346-183,630 - Accrued expenses 6,421,560 3 5,312,039 3 Inventories 24,368,107 11 16,106,516 8 Bonds payable current portion - - 12,500,000 6 Deferred income tax assets 156,544-48,349 - Long-term bank loans current portion - - 845,080 - Pledged time deposits 4,200,000 2 6,600,000 3 Other 2,733,003 1 3,010,286 2 Other 175,846-292,771 - Total current liabilities 28,401,598 13 33,553,608 16 Total current assets 72,685,100 32 58,608,043 28 LONG-TERM LIABILITIES-NET OF CURRENT PORTION LONG-TERM INVESTMENTS Bonds 15,000,000 7 15,000,000 7 Long-term stock investments Bank loans 2,145,500 1 - - Equity method 37,944,463 17 35,389,927 17 Cost method 9,077,749 4 4,941,945 2 Total long-term liabilities 17,145,500 8 15,000,000 7 Total long-term stock investments 47,022,212 21 40,331,872 19 Prepayments for long-term stock investments - - 1,000,000 1 RESERVE FOR LAND VALUE INCREMENT TAX 3,370,813 1 3,370,813 2 Other 185,411-145,311 - OTHER LIABILITIES Total long-term investments 47,207,623 21 41,477,183 20 Deferred income tax liability 3,001,046 1 3,361,256 1 Deferred credits gain on intercompany transactions 1,409,956 1 1,405,040 1 PROPERTIES Land 7,146,632 3 7,146,632 3 Total other liabilities 4,411,002 2 4,766,296 2 Land improvements 4,275,382 2 4,316,764 2 Buildings and improvements 36,207,870 16 36,356,744 18 Total liabilities 53,328,913 24 56,690,717 27 Machinery and equipment 211,762,117 95 211,959,478 102 Transportation equipment 1,548,338 1 1,518,886 1 STOCKHOLDERS EQUITY Miscellaneous equipment 2,964,139 1 2,925,153 1 Capital stock authorized 10,600,000 thousand shares at NT$10 par value Total cost 263,904,478 118 264,223,657 127 Common issued 9,883,352 and 9,452,324 thousand shares as of September 30, Appreciation 17,820,235 8 18,319,960 9 2004 and 2003, respectively 98,833,518 45 94,523,237 46 Total cost and appreciation 281,724,713 126 282,543,617 136 Preferred issued 47,762 thousand shares 477,620-477,620 - Less: Accumulated depreciation 188,829,204 84 182,675,713 88 Total capital stock 99,311,138 45 95,000,857 46 92,895,509 42 99,867,904 48 Capital surplus 1,013,896-586,047 - Constructions in progress 6,706,011 3 3,379,302 2 Retained earnings 34,025,743 15 29,964,075 15 Current profit 36,932,531 17 27,649,252 13 Net properties 99,601,520 45 103,247,206 50 Other equity items Unrealized loss on investees long-term investments ( 467,346 ) - ( 525,595 ) - OTHER ASSETS Cumulative translation adjustments 65,444-94,416 - Rental assets 3,102,203 2 3,790,849 2 Investees unrecognized net loss on pension cost ( 21,652 ) - ( 15,647 ) - Refundable deposits 171,601-111,376 - Total other equity items ( 423,554 ) - ( 446,826 ) - Restricted assets-pledged time deposits 31,694-331,694 - Treasury stock 86,560 and 93,289 thousand shares as of September 30, 2004 Unamortized repair costs and others 248,214-605,529 - and 2003, respectively ( 1,140,712 ) ( 1 ) ( 1,272,242 ) ( 1 ) Total other assets 3,553,712 2 4,839,448 2 Total stockholders equity 169,719,042 76 151,481,163 73 TOTAL ASSETS $ 223,047,955 100 $ 208,171,880 100 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 223,047,955 100 $ 208,171,880 100-1 -
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CHINA STEEL CORPORATION STATEMENTS OF INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited) Amount % Amount % REVENUES $ 121,392,340 100 $ 96,228,074 100 COST OF REVENUES 75,481,732 62 62,153,446 65 GROSS PROFIT 45,910,608 38 34,074,628 35 UNREALIZED GAIN ON INTERCOMPANY TRANSACTION 2,090 - - - REALIZED GROSS PROFIT 45,908,518 38 34,074,628 35 OPERATING EXPENSES Selling 1,654,215 1 1,492,099 1 General and administrative 1,826,618 2 1,689,477 2 Research and development 756,337 1 684,124 1 Total operating expenses 4,237,170 4 3,865,700 4 OPERATING INCOME 41,671,348 34 30,208,928 31 NONOPERATING INCOME Interest 111,024-89,468 - Investment income under the equity method 5,191,563 4 4,540,183 5 Gain on disposal of investments 678,388 1 273,483 - Other 874,818 1 338,738 1 Total nonoperating income 6,855,793 6 5,241,872 6 NONOPERATING EXPENSES AND LOSSES Interest 775,071 1 1,059,302 1 Impairment loss on rental assets 594,000 1 - - Loss on disposal of assets 326,458-26,245 - Other 323,561-439,695 1 Total nonoperating expenses and losses 2,019,090 2 1,525,242 2 INCOME BEFORE INCOME TAX 46,508,051 38 33,925,558 35 INCOME TAX 9,575,520 8 6,276,306 6 NET INCOME $ 36,932,531 30 $ 27,649,252 29 (Continued)
Before After Before After Tax Tax Tax Tax EARNINGS PER SHARE Basic $ 4.74 $ 3.76 $ 3.46 $ 2.82 Diluted $ 4.72 $ 3.75 $ 3.45 $ 2.81 PRO FORMA INFORMATION-if the Corporation s shares held by subsidiaries had been accounted for as investments rather than treasury stock Net income $ 37,226,873 $ 27,807,418 Before After Before After Tax Tax Tax Tax Basic earnings per share based on weighted-average number of outstanding common shares amounting to 9,883,324 thousand and 9,877,067 thousand as of September 30, 2004 and 2003, respectively $ 4.73 $ 3.76 $ 3.44 $ 2.81 Diluted earnings per share based on weighted-average number of outstanding common shares amounting to 9,931,086 thousand and 9,924,829 thousand as of September 30, 2004 and 2003, respectively $ 4.71 $ 3.75 $ 3.43 $ 2.80
CHINA STEEL CORPORATION STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Nine months Ended September 30 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 36,932,531 $ 27,649,252 Depreciation 7,576,831 8,349,122 Amortization 247,491 252,334 Deferred income tax ( 349,922 ) ( 201,515 ) Reversal of provision for loss on doubtful accounts - ( 4,346 ) Impairment loss on rental assets 594,000 - Reversal of provision for loss on inventories ( 5,000 ) - Investment income under the equity method ( 5,191,563 ) ( 4,540,183 ) Loss on disposal of properties 326,458 26,245 Cash dividends from long-term investments under the equity method 3,354,496 1,633,784 Construction dividends from long-term investments under the cost method 15,616 - Gain on disposal of short-term investments ( 466,690 ) ( 269,563 ) Gain on disposal of long-term investments ( 211,698 ) ( 3,920 ) Unrealized gain of intercompany transactions 2,090 - Effect of exchange rate changes on foreign-currency long-term debts ( 79,800 ) 33,800 Changes in operating assets and liabilities Notes receivable ( 1,236,116 ) ( 216,871 ) Accounts receivable ( 1,526,468 ) ( 327,891 ) Inventories ( 5,130,345 ) ( 638,040 ) Other receivable ( 119,705 ) ( 69,591 ) Other current assets 266,439 ( 105,068 ) Notes payable 10,006 - Accounts payable 852,024 338,885 Accrued expense 531,736 516,853 Income tax payable ( 981,218 ) 843,129 Other current liabilities 312,563 164,408 Net cash provided by operating activities 35,723,756 33,430,824 CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in short-term investments 12,994,427 ( 12,075,807 ) Acquisition of properties ( 5,620,444 ) ( 3,802,809 ) Increase in long-term investments ( 1,672,097 ) ( 2,938,166 ) Proceeds from disposal of long-term investments 1,403,797 9,641 Decrease in pledged time deposits 700,000 - Increase in other assets ( 103,681 ) ( 31,848 ) Net cash provided by (used in) investing activities 7,702,002 ( 18,838,989 ) (Continued)
Nine months Ended September 30 CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term bank loans and overdraft $ 3,924,631 $ 1,224,507 Increase in commercial paper payable 300,741 1,999,988 Repayment of bonds payable ( 10,000,000 ) ( 6,700,000 ) Repayment of long-term bank loans ( 50,000 ) ( 2,223,765 ) Transfer of treasury stock to employees 434 1,807,066 Cash dividends ( 28,454,108 ) ( 13,013,564 ) Compensation to directors and supervisors ( 98,526 ) ( 44,589 ) Net cash used in financing activities ( 34,376,828 ) ( 16,950,357 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,048,930 ( 2,358,522 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,862,720 3,068,966 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,911,650 $ 710,444 SUPPLEMENTAL INFORMATION Interest paid $ 840,122 $ 1,176,217 Interest expense capitalized - ( 137,456 ) Interest paid $ 840,122 $ 1,038,761 Income tax paid $ 10,906,660 $ 5,634,692 PURCHASE OF PROPERTIES Purchase of properties $ 5,389,117 $ 4,053,865 Decrease (increase) in payable on properties purchased 231,327 ( 251,056 ) $ 5,620,444 $ 3,802,809 NONCASH FINANCING ACTIVITIES Current portion of long-term bank loans $ - $ 10,050,000