businessreport - s&t중공업 · -1-businessreport (periodno.48) period from january1,2010 to...
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Business Report
(Period No. 48)
Period
from January 1, 2010
to June 30, 2010
To: Financial Services Commission
Korea Exchange Aug. 13, 2010
Company NameS&T Dynamics Co., Ltd.
President & CEOPark, Jae-seok (Peter)
Head Office853-5 Woe-dong, Seongsan, Changwon, Gyeongnam,Korea
(Tel) 82-55-280-5000
(Website) http://hisntd.com
Prepared by: (Title) Director (Name) Jung, Woon-sik
(Tel. No) 82-55-280-5361
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I. Description of the Company
1. General description
a. Legal and commercial name of the company
중공업주식회사 The name of the company is "S&T " in Korean.
It is "S&T DYNAMICS CO., LTD" in English
It can be simply called "S&T DYNAMICS".
b. Brief history (Date of foundation and name change)
We were founded as Tongil Industrial Co., Ltd. (Yeohwa Shotgun Manufacturer)
on April 1, 1959, specializing in the manufacture and sale of machine tools
(such as CNC lathes), special devices, vehicle parts (power transmission
equipment) and other casts. After merging with Tongil Industrial Co., Ltd., it
changed the name to Tongil Co., Ltd., in February 1984. Then, it changed its
name to Seil Heavy Industries Co., Ltd in April 1991. The name was once
again changed to Tongil Heavy Industries Co., Ltd in April 1995 before
becoming S&T Dynamics Co., Ltd in June 2005. In addition, it was listed on
the Securities Market in the Korea Exchange.
c. Head Office's address, telephone no. and web site
Address: 853-5 Woe-dong, Seongsan-gu, Changwon City, Gyeongnam Province,
Korea
Tel. No : +82-55-280-5000
Web site: http://www.hisntd.com
d. Category of the company
We do not belong to the category of small and medium sized companies as of
the date of this report according to Article 2 of the Basic Act of Small and
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Medium Sized Companies and Article 3 of its Enforcement Decree.
e. Main businesses
We have been supplying defense products, vehicle power train products,
machine tools and casting material products using the technologies and
experiences we have accumulated for many years. As a new growth engine,
we have been developing and investing in wind power train, and aircraft power
train.
As for defense products, we supply automatic transmissions and firearms for
the defense industry and have participated in the development of new
equipment for modernization projects of the Korean Military.
The vehicle power train is the core part in the vehicles and includes
transmissions and axles for trucks and buses and construction heavy
equipment. We are supplying those parts through strict QA and our products
are recognized for their excellent quality and performance.
We manufacture machine tools such as large and medium sized vertical lathes,
gear machining tools, machining centers, gear cutting machines, lathes, milling
machines and grinding machines.
As for cast products, our vehicle parts, machine tool parts and heavy
equipment parts are well accepted as industrial materials and our aluminum
die-casting and aluminum ingot are well accepted in the market.
▶ For more detail, see II. businesses.
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f. Subsidiaries
The subsidiaries are as follows as of Jun. 30, 2010
Category
Subsidiaries Business field Remarks
Listedonexchange
S&T HoldingsHolding company, managementadvisory service
Domesticsubsidiaries
S&T CorporationAir cooling heat exchanger,waste heat recovery system,and denitrification equipment
S&T DynamicsVehicle parts, machine tools,defense equipment and castingproducts
S&T DaewooVehicle parts and defenseequipment
S&T MotorsManufacturing and sale ofmotorcycle
Unlisted onexchange
S&T Federation of SavingsBank
Financing
S&T Canberra Hotel Tour and hotel service
S&T SolutionInformation andtelecommunication
S&T Electronics Electronics parts for vehicle
KMJ-TECH Automotive parts
S&T AMT Automotive parts
Guanzhou S&T Co., Ltd. China Automotive parts Overseassubsidiaries
Senyang Jinbei-TongilAutomotive System Co., Ltd.
Automotive parts
Qingdao S&T Co, Ltd., China Automotive parts
S&T America Ltd Automotive parts
Yentai Daewoo PrecisionIndustries Co., Ltd. China
Automotive parts
Hyosung Motors America Inc Sale of motorcycle
S&T Polska Sp Automotive parts
S&T Daewoo AutomotiveComponents(Kunshan) Co., Ltd
Automotive parts
S&T Daewoo India Private Ltd Automotive parts
Jiangshu hwasung AutomotiveComponents Co., Ltd China
Automotive parts
S&T Automotive Mexico Automotive parts
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g. Credit rating
- The credit ratings for the last 5 years are as follows.
Date ofevaluation
Corporatecredit rating
Equivalentbond rating
Credit ratingcompany
Evaluationperiod
May 27. 2010 e-AA0 AA0SCI(Seoul credit &Information)
Periodic
Apr. 05. 2010 e-3+ A+KIS (Korea
Information Service)Periodic
Apr. 01. 2009 e-3+ A+ KIS Periodic
Apr. 24. 2008 e-3+ A+ KIS Periodic
Apr. 13. 2007 e-3- A- KIS Periodic
Apr. 19. 2006 e-4+ BBB+ KIS Periodic
Definition of corporate credit rating□
Credit ratingEquivalent
bond ratingDescription
Excell
ent
e-1 AAA
Best credit grade for commercial trading. The company
is well capable of coping with any change in corporate
environment.
e-2 AA
Excellent credit grade for commercial trading. The
company is properly capable of coping with any
change in corporate environment.
e-AA0 AA0
The company's general credit rating is excellent but
the company may be subject to future rapid business
environment changes.
Good
e-3 A
Good credit grade for commercial trading. The
company has limited capability of coping with any
change in corporate environment.
e-4 BBB
Good credit grade for commercial trading. The
company has the possibility of lowered transaction
stability according to management conditions and
worsened environment.
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Avera
ge
e-5 BB
Average credit grade for commercial trading. The
company has the possibility of lowered transaction
stability according to management conditions and
worsened environment.
e-6 B
Average credit grade for commercial trading. The
company has the high possibility of lowered transaction
stability according to management conditions and
worsened environment.
Inferio
r
e-7 CCC
Below average credit grade for commercial trading. The
company is expected to have lowered transaction
stability, requiring other companies to have cautious
approach.
e-8 CCVery low credit grade for commercial trading and low
stability in transaction.
Bad
e-9 CLowest credit grade for commercial trading and highly
likely to cause the transactional danger.
e-10 DCurrently causing the credit danger or put in equivalent
situation.
Reser
vedR R
Having the financial statements of less than year or
subject to the rapidly changing management
environment (such as in merger, assignment of
operation or change in business field), the company
has been reserved of its credit assessment by KIS.
Depending on the necessity of evaluator, the grade can be more segmented※
using +, 0, and -.
2. History of the company
a. Changes after foundation
Tongil Industrial Co., Ltd.
Apr. 1, 1959 Yeohwa Shotgun was founded.
Apr. 23, 1973Designated by the Government as a specialized manufacturer of
defense products.
May 6, 1975 Awarded a bronze industrial accomplishment prize.
Jun 5, 1978 Designated as a national corrective test institute.
Apr. 6, 1979 Designated as an important company for national mechanical fields.
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Jun 7, 1979Designated as Class 1 company in the fields of mechanical
accurateness.
May 1, 1980 Designated as a testing laboratory for Ministry of Defense.
Apr. 8, 1981 Designated as a steel company.
Sep. 20, 1981Designated as a company for development of new equipment.
(Domestic Product No. 1)
Nov. 19, 1982 Appointed as a critical company in the steel fields.
Nov. 30, 1982 Awarded a silver industrial accomplishment prize.
Apr. 22, 1983 Designated as a Class 1 company for quality control.
Dongyang Machinery Industrial Co., Ltd.
Aug. 31, 1962 Dongyang Gear Industrial Co., Ltd. was founded
Oct. 4, 1965 A plant for manufacturing transmission was permitted.
Apr. 15, 1967 Changed its name to Dongyang Machinery Industrial Co., Ltd.
Apr. 21, 1971 Received an investment from Bogner Warner of USA.
Apr. 21, 1971 Changed its name to Dongyang Warner.
June 28, 1971 Moved to new office (233-18 Jangsa-dong, Jongro-gu, Seoul)
June 23, 1972 Developed transmissions and axles for the first time in Korea.
Oct. 1, 1972 Moved to new office (6-ga Munrae-dong, Youngdeungpo-gu)
Sept. 8, 1975 Moved to new office (2-ga, Yangpyeong-dong, Youngdeungpo-gu)
Dec. 10, 1975 Bogner Warner sold its equity and left.
Feb. 18, 1976 Changed its name to Dongyang Machinery Industrial Co., Ltd.
July 8 1976 Started the public offering of its stocks.
July 7, 1979Designated as a company specialized in the manufacture of steering
devices.
Dec. 31, 1979 Completed its machinery plant in Changwon.
Aug. 22, 1981 Entered into a cooperative agreement with Korea Development Bank.
June 15, 1982 Established a R&D Lab.
Dec. 2, 1982The composition of main stockholders changed. (Tongil Industrial
Co., Ltd.)
Jan. 5, 1983Move the main office to new place (Youido-dong,
Youngdeungpo-gu.)
Jan. 1, 1984 Merged with Tongil Industrial Co., Ltd. (1 to 1)
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Tongil Co., Ltd.
Feb. 25, 1984 Changed its name to Tongil Co., Ltd.
Apr. 21, 1984Terminated with a cooperative agreement with Korea Development
Bank.
Nov. 15, 1986Awarded the Presidential Prize for dedication to tue development of
machinery tool industry.
Dec. 21, 1987Moved the office to new location (292-20 Dohwa-dong, Mapo-gu,
Seoul)
July 26, 1988 Established Seoul branch of R&D Center.
Seil Heavy Industries Co., Ltd.
Apr. 1, 1995 Changed its name to Seil Heavy Industries Co., Ltd.
Nov. 30, 1993 Awarded the industrial peace prize from the Ministry of Labor.
Tongil Heavy Industries Co., Ltd.
Apr. 1, 1995 Changed its name to Tongil Heavy Industries Co., Ltd.
Oct. 7, 1995 Acquired ISO 9001 certificate.
Jan. 30, 1996 Nominated as an exemplary business of CALS.
Dec. 1, 1996Nominated as a company sponsoring CIM task project for leading
technology in G-7.
Nov. 26, 1998 Acquired QS 9000 certificate.
Nov. 30, 1998 Become insolvent.
Dec. 5, 1998 Reduced the capital from 170.4 billion won to 11.3 billion won).
Dec. 23, 1998 Decided the preservation of the corporate asset by court.
Jan. 26, 1999 Nominated as a receiver for preservation of common property.
Apr. 23, 1999 Started the corporate restructuring process.
Apr. 23, 1999 Appointed with a receiver.
Feb. 1, 2000 Restructuring process is allowed by the Seoul District Court.
Feb. 24, 2000 Acquired a certificate of National Defense Quality Control.
Apr. 1, 2000 Moved to new place (371-36 Gasan-dong, Geumcheon-gu)
Apr. 3, 2000 Acquired CE certificate for machine tools.
Apr. 8, 2000 Reduced the capital from 11.3 billion won to 2 billion won.
June 19, 2000Increased the capital by converting loan to equity (from 2 billion
won to 96.7 billion won.)
May 19, 2001 Acquired KOLAS certificate. (national calibration institute)
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Apr. 7, 2002Largest stockholder is changed from Tongil Church Foundation to
Jung Gap-jin.
July 6, 2002Largest stockholder is changed from Jung Gap-jin to Korea
Development Bank.
July 11, 2002 Acquired KOLAS certificates. (international calibration institute)
July 26, 2002Largest stockholder is changed from Korea Development Bank to
KAMCO (Korea Asset Management Corporation).
Feb. 7, 2003The plan for change in corporate restructuring was permitted by the
Seoul District Court.
Mar. 15, 2003
Largest stockholder is changed from KAMCO to Samyoung Co., Ltd.
Stock split (from face value of 5,000 won to 500 won)
Change in capital (capital reduction by 25:1 and increase in capital)
from 102.5 billion to 80.7 billion won
Apr. 10, 2003Declared of the finishing of restructuring plan by the Seoul District
Court.
June 17, 2003 Moved to new location. (853-5 Oidong, Changwon, Gyeongnam
S&T Dynamics Co., Ltd.
July 3, 2005 Changed its name to S&T Dynamics Co., Ltd.
Nov. 3, 2005
Acquired several management system certifications (from DNV).
- ISO/TS 16949 , - ISO 9001
- ISO 14001, - OHSAS 18001
Mar. 24, 2006Consolidated the shares by changing face value from 500 won to
2,500 won
Nov. 29, 2006Acquired an aerospace quality management system (AS 9100) from
DNV.
June 24, 2008Redeemed 1 million shares, making the total number of outstanding
shares from 32,265,514 to 31,265,514.
Aug. 1, 2008Increased the capital by issuing new 627,871 shares, making the
number of total outstanding shares from 31,265,514 to 31,893,385.
Nov. 12, 2008
Increased the capital by acquiring S&T Brake Co. by issuing 338,315
new shares, making the number of total outstanding shares from
31,893,385 to 32,231,700
Jan. 30, 2009 Acquired the certificate of NADCAP for special aerospace process.
Feb. 1, 2009
Increased the capital by converting loans to equity issuance by
241,739, making the number of total outstanding shares from
31,231,739,514 to 32,473,439.
Nov. 25, 2009 Awarded Korea National Quality Award from President.
Mar. 3, 2010Awarded the faithful taxpayer prize from Ministry of Strategy and
Finance.
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b. Change of company names
Date of
changeBefore After Cause
Apr. 15, 1967 Dongyang Gear Industrial
Co., Ltd.
Dongyang Machinery
Industrial Co., Ltd.
Apr. 21, 1971Dongyang Machinery
Industrial Co., Ltd.
Dongyang Warner
Co., Ltd.
Feb. 18, 1976Dongyang Warner Co.,
Ltd.
Dongyang Machinery
Industrial Co., Ltd.
Feb. 25, 1984Dongyang Machinery
Industrial Co., Ltd.Tongil Co., Ltd.
Merged with
Tongil Industrial
Co., Ltd.
Apr. 1, 1991 Tongil Co., Ltd.Seil Heavy Industries
Co., Ltd.
Apr. 1, 1995Seil Heavy Industries
Co., Ltd.
Tongil Heavy
Industries Co., Ltd.
Jun. 3, 2005Tongil Heavy Industries
Co., Ltd.
S&T Dynamics Co.,
Ltd.
c. Mergers and others
- According to the resolution of the board of directors held on Sept. 2, 2008
and the merger contract entered into on Sept. 5, 2008, our merger and
acquisition with S&T Brake Co., Ltd., was fulfilled on Nov. 10, 2008.
d. Occurrence of important facts related to management activities
1) Capital decrease by redemption of shares with profits
According to the decision on the redemption of shares, we bought in 1,000,000
common shares from the stock exchange on Mar. 19, 2008 and retired them
on June 24, 2008.
2) Capital increase by converting loan to equity
We fully paid the loans and obligations in March 2003 when the receivership
was finished. So, we decided to convert the unpaid loans to equity as follows
as requested by the creditors.
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- Issuance of 627,871 common shares on Aug. 1, 2008 with the capital
increase of 1,569,677,500 won.
- Issuance of 241,739 common shares on Feb. 1, 2009 with the capital
increase of 604,347,500 won
3. Changes in capital
a. Changes in capital
The capital changed as follows.
(Unit: Korean Won, Number of shares )
Dateof
changeCategory
Shared redeemed or newly issued
Type QuantityFacevalue
Value pershare forissuance (orredemption)
Remarks
Aug. 1,2008
Conversion ofloan to equity
Commonstocks
7,784 2,500 62,500 -
Aug. 1,2008
Conversion ofloan to equity
Commonstocks
533,645 2,500 187,500 -
Aug. 1,2008
Conversion ofloan to equity
Commonstocks
86,442 2,500 312,500 -
Nov.12,2008
New issuance(to thirdparties)
Commonstocks
338,315 2,500 4,698
Issuanceof newstocks dueto M&A
Feb. 1,2009
Conversion ofloan to equity
Commonstocks
221,399 2,500 312,500 -
Feb. 1,2009
Conversion ofloan to equity
Commonstocks
20,340 2,500 187,500 -
b. Plan of capital change
According to Chapter 9 of our corporate restructuring change plan, the
expected number of shares to be issued due to the conversion of loan to
equity amounts to 91,932.
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4. Total number of shares
a. Total number of shares
As of Jul. 31, 2010 when this report was prepared, the number of authorized
shares is 240,000,000 while that of shares issued and outstanding is
32,473,439. We have not issued shares other than common stocks.
Category
Type of shares
RemarksCommonstocks
Preferredstocks
Total
. Total number of authorizedⅠshares
240,000,000 - 240,000,000
. Number of shares issued upⅡto now
44,143,176 - 44,143,176
. Number of shares redeemedⅢup to now
11,669,737 - 11,669,737
1. Capital decrease 10,669,737 - 10,669,737
2. Retirement with profit 1,000,000 - 1,000,000
3. Redemption of redeemableshares
- - -
4. Others - - -
. Number of shares issued andⅣoutstanding ( - )Ⅱ Ⅲ
32,473,439 - 32,473,439
. Number of treasury stocksⅤ 1,635,300 - 1,635,300
. Number of sharesⅥoutstanding ( - )Ⅳ Ⅴ
30,838,139 - 30,838,139
b. Acquisition and disposition of treasury stocks
According to Article 165-2 of the Capital Market Act, we disposed 211,450
shares due to the exercise of stock options by employees and we have the
treasury stocks of 1,635,300 in total as of July 31, 2010, the date of
preparation of this report. There is no other stock acquired as of the date of
this report.
(As of Jul. 31, 2010 (Unit: share)
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AcquisitionType ofstock
BeginningAcquisition (+)
Disposition (-)
Ending Remarks
Direct acquisitionaccording to Article165-2 of CapitalMarket Act
Commonstock
1,846,750 - 211,450 1,635,300
Indirect acquisitionthrough trustagreement, etc
Commonstock
- - - - -
TotalCommonstock
1,846,750 - 211,450 1,635,300
5. Voting rights
The number of shares issued up to now is 32,473,439, which is 13.5% of the
number of authorized shares. There are no stocks issued other than common
stocks and we have 1,635,300 treasury stocks. If the treasury stocks have no
voting rights, the number of common stocks having voting rights amounts to
30,838,139.
CategoryNumber ofshares
Remarks
Number of shares issued (A)Common stock 32,473,439
Preferred stock -
Number of shares having no votingrights (B)
Common stock 1,635,300
Preferred stock -
Number of shares whose voting rightsare restricted by related laws (C)
Common stock -
Preferred stock -
Number of shares whose voting rightshave been recovered (D)
Common stock -
Preferred stock -
Number of shares whose voting rightscan be exercised (E = A - B - C +D)
Common stock 30,838,139
Preferred stock -
(As of Jul. 31, 2010) (Unit: share)
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6. Dividends
a. Dividend policy
We have a stockholder oriented dividend policy by which a certain portion of
net profit is allocated to stockholders as decided at the general stockholders'
meeting according to the dividend provisions in our Article of Incorporation. As
for the dividends of the 2009 fiscal year, we have paid 200 won for every
share on March 5, 2010. In the future, we will continue to allocate our profit
to our shareholders as dividends taking into account both our reservation for
growth and the dividends to our shareholders.
[Articles of Incorporation]
Article 42 (Dividend from profit)
The dividend from profit can be done in cash or shares.①
If the dividend from profit is allocated in the form of shares and the②
company has issued shares other than common stock, the company can
allocate the other kinds of shares as dividend if it is decided at the general
stockholders' meeting.
The dividend described in shall be paid to stockholders or pledgees③ ①
registered on the stockholders' list at the end of the appropriate fiscal year.
Article 43 (Extinctive prescription of claims for dividends)
The rights for dividends become invalidated if they are exercised within 5①
years.
The dividends invalidated by this clause are reversed to the company.②
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b. Dividends for last 3 years
Dividends for last 3 years
CategoryPeriod 48first half
Period 47 Period 46
Face value per share (Won) 2,500 2,500 2,500
Net profit (Million Won) 29,439 41,790 32,058
Net profit per share (Won) 958 1,468 1,169
Total cash dividends (Million Won) - 6,125 4,148
Total stock dividends (Million Won) - - -
Dividend payout ratio (%) - 15 13
Cash dividendpayout ratio (%)
Common stock - 1.2 1.8
Preferred stock - - -
Stock dividendpayout ratio (%)
Common stock - - -
Preferred stock - - -
Cash dividend pershare (Won)
Common stock - 200 150
Preferred stock - - -
Stock dividendsper share (Share)
Common stock - - -
Preferred stock - - -
- Net profit per share: Net profit / Weighted average number of outstanding
common stocks
- The cash dividend payout ratio is calculated by dividing the cash dividend
per share by the average stock price based on the prices quoted at stock
markets for the last 7 days starting on the day prior to the second day
after the day when the stockholders' list is closed.
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II. Businesses
1. Businesses
We have been supplying defense products, vehicle power train products,
machine tools and casting material products using the technologies and
experiences we have accumulated for many years. As a new growth engine,
we have been developing and investing in wind power trains and aircraft
power trains.
As for defense products, we supply automatic transmissions and firearms for
the defense industry and have participated in the development of new
equipment for modernization projects of the Korean Military.
The vehicle power train is the core part in vehicles and includes transmissions
and axles for trucks and buses and heavy construction equipment. We are
supplying those parts through strict QA and our products are recognized for
their excellent quality and performance.
We manufacture machine tools such as large and medium sized vertical lathes,
gear machining tools, machining centers, gear cutting machines, lathes, milling
machines and grinding machines.
As for cast products, our vehicle parts, machine tool parts and heavy
equipment parts are well accepted as industrial materials and our aluminum
die-casting and aluminum ingot are well accepted in the market.
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a. Sale by business fields (Unit: Million Won)
Businessfields
ItemsSales
Remarks2010first half
2009first half
2008first half
Vehicleparts
Axle, transmission, brake and otherparts.
88,726 74,165 80,606 -
Machinetools
Lathe, milling machine, grindingmachine, CNC lathe, machiningcenter and others
22,016 16,183 20,448 -
OthersVehicle casting, machinery casting,aluminum ingot and defenserelated equipment
169,832 118,663 109,445 -
Total 280,574 209,011 210,499 -
b. Current situation by business field
Characteristics of businesses◎
1) Vehicle power train
(1) The quality, price and technology of vehicle parts affect the
competitiveness of the finished vehicle. The independent development of
vehicles is impossible without the independent design capability of vehicle
parts. Also, without the development of advanced parts the development of
the next-generation vehicle is almost impossible. In addition, the growth of
other industries is affected as they are closely related to automotive parts.
(2) The automotive parts manufacturing industry is composed of many levels of
vendors with the first level vendor supplying the parts to the manufacturer
of finished cars and second level vendors and third level vendors
supplying parts to first level vendors. Except for a few large parts
manufacturers, most vendors are small and inferior in terms of technology,
price, delivery and quality. On the other hand, the competitiveness of the
finished car manufacturers depends on the competitiveness of parts
suppliers, making close cooperative relations between them very important
in maintaining their competitiveness.
2) Machine tools
(1) The machine tools were originally meant to indicate the machines which
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cut or grind metal materials. However, recently the term has had wider
applications as more machine tools not using cutting or grinding have
appeared. This includes machines using electrical discharge, electrolysis
and ultrasonic waves.
(2) The machine tool industry is classified into the cutting process and forming
process. It can be applied to wider manufacturing industries such as cars,
aircraft and ships, enabling the creation of high values. In addition, it is
sensitive to investment trends in the manufacturing sector. As it is the
foundation of the general machine industry, electronics and electric
industries and telecommunication and semiconductor industries, it leads the
indicators of other industries. It is greatly affected by the automotive
industry.
(3) Most machine tool companies in Korea are small in terms of size and
profit. Because of the importance placed by domestic customers on price,
large or medium sized machine tool companies are introducing the
automation system and targeting the unmanned production system. In
addition, the main customers of machine tools are more concentrated in the
automotive part industry using the standard equipment. Due to globalization,
automotive manufacturers and automotive parts companies can buy machine
tools anywhere around the globe, making the market open to everyone.
3) Material industry
The casting industry is closely related to the automotive parts industry,
machine tool industry, industrial machinery field and others, contributing to the
industrial growth of a country. One of the functions of the casting industry is
to melt metal scraps and pig iron in electrical furnaces and put the molten
metal into the mold, which is made of molding sand. It is kept there for a
certain period of time in order to produce the materials required in many
industries. The casting of automotive parts requires a lot of high technology in
terms of tension, strength and precision as it is closely related to the safety
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of the vehicle. Accordingly, the casting sector for automotive parts leads the
casting industry for others in respect of quality and technology. In particular,
casting technology is very important in leading the materials for vehicle parts.
Growth of the industries◎
1) Vehicle power train
As the world's large car manufacturers merge with each other to enhance their
competitiveness to maximize benefits they get from the economy of scale, the
automotive parts industry is also progressing toward the global M&A trend,
making the automotive parts companies bigger in preparation for global
sourcing. In accordance with the world trend, domestic car makers are
increasing their global outsourcing and putting emphasis on the acquisition of
technology through cost reduction, quality improvement and R&D investment.
Although the sales volume of the automotive parts industry is increasing along
with the sales of finished vehicles, the hike in oil prices and commodities in
the world market is negatively affecting the bottom line of the industry. When
we consider the continuing trend of cost reduction and global outsourcing by
finished car manufacturers, it seems many companies that are not competitive
will be in trouble. Only the competitive automotive parts companies can survive
in the rapidly changing environment. Accordingly, the main task for the future
automotive parts industry is to have its own technology and expand exports to
overseas car makers.
2) Machine tools
The technology in the machine tool industry is moving in the direction of
innovations in high speed, high precision, high efficiency and eco-friendliness.
Moreover, as the various telecommunication functions through the opening and
networking of CNC technology are added, the industry has advanced to the
stage where machine tools located in remote places can be manipulated
through a total control system that is connected with design, sales and service
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information. Now the industries where machine tools are in high demand, such
as the automotive parts and molding sectors are showing recovery and the
investment is mainly put into shipbuilding, heavy equipment and wind power
industries. So, the domestic machine tool companies are trying to create new
demand by developing new products, thereby expanding their sales volume.
3) Material industry
The casting industry is the manufacturing sector of parts for vehicles, ship
engines, industrial machines and machine tools and will keep growing as long
as the demand from related industries keeps growing. The vehicle casting
parts industry is the one which is directly affected by sales trends of finished
car manufacturers. The demand for casting parts has shown rapid growth due
to increasing demand for new cars, but it has suffered from some consolidation
recently.
Characteristics of economic trends◎
1) Vehicle power train
Considering the expanding production of parts by finished car manufacturers in
foreign countries and the encroaching entry of import cars in the domestic
market as well as the hike in prices of commodities such as steels and raw
materials as well as the decrease in demand of commercial vehicles due to
high oil prices, we can assume that the market situation would be not be
bright in the future.
2) Machine tools
As the machine tools are often produced in small quantities, they are often
made by small sized companies. However, from the perspective of production
volume, a few large companies take a lion's share of the market. As the
industry is closely related to the economic trend of backward and forward
industries (machinery industry), it tends to easily be affected by the general
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economic trend. In addition, its trend goes forward in an economic downturn
and goes backward in economic recovery. The recent machine tool market
shows a stable and improving trend due to stable domestic growth in
automobile and IT industries and the recovering overseas arising from the
improving world economy.
3) Materials industry
This industry is significantly affected by the demand trend in manufacturing
industry and particularly automotive industry as well as changes in exchange
rate, oil price and raw material prices.
Competition factors◎
1) Defense products
The defense industry may be affected by the Government's decision on military
demand. But as the defense industry is generally related to the long term
supply contract, it is less susceptible to the short term fluctuation. We are
participating in the automatic transmission for K2 tank, development of next
generation heavy machine guns and CTA-Gun and the development of power
trains for the aerospace field.
2) Vehicle power train
The demand for vehicle parts is limited to the domestic finished car
manufacturers with their orders for specific sizes and models. Parts for
commercial vehicle in particular are greatly affected by the economic situation
in the construction industry. The domestic passenger car market in the first
half of 2010 increased 14.2% YoY due to the economic recovery, restored
consumer confidence and demand for new carsas well as increased potentials.
The commercial vehicle market size also increased 17% YoY due to the
increasing export and import transportation demand and the Government's
investment in construction. Supported by the economic recovery from the
- 22 -
recession in US and Western European countries and the recovering demand
for new cars in Latin and South America and Middle Eastern countries, as well
as the enhanced and improved quality of domestically manufactured cars, the
car export sector has shown a steady fast increase. Also, with the outsourcing
trend in the parts market by large overseas automobile manufacturers and their
increased entry into the domestic market, the parts manufacturers which have
advanced technologies and a variety of sales networks are expected to have
good performance as more global car makers plan to outsource their parts
from overseas suppliers. According to this trend, we are trying to develop
multi-staged transmissions for improved fuel efficiency and driving
convenience, and high power and high class products such as power trains for
high power vehicles such as low height buses and electric mid-size buses.
3) Machine tools
The machine tool industry is one of the main industries for national
competitiveness as it greatly affects other industries. Accordingly, as the
demand for machinery depends on investments in the machine and capital
investment, the demand for machine tools fluctuates with that of the machine
industry. The domestic machine tool markets in the first half of 2010 grew by
116% YoY. The increase was also caused by greater investments in facilities
by industries such as automobile, electrics, electronics and IT and advance
purchases by purchasers in preparation for a price increase. According to this
trend, the company will focus on super large machine tools including wind
power equipment, marine plants, ship parts and engines as well as medium and
large-sized vertical lathes.
4) Material parts
The casting business makes the main materials for vehicle castings, machine
tools, industrial machinery, ship and wind power plants and others and is
closely related to them. Accordingly, it is dependent on the demand from the
- 23 -
automotive industry and machine industry, which demand a lot of casting
volumes as basic materials as well as the capital investment. We are making
efforts to enter into new markets by developing high valued casting products
such as those for ships and heavy equipment as well as parts for power
generation facilities such as wind power plants.
New businesses◎
We have already decided to develop our own power train for wind power
plants by developing our own technology as a way to increase sales, which
will also be done by acquiring a new growth engine and by diversifying ranges
of businesses. We are now designing high tech power train products for gear
boxes(speed increasing device), pitch reduction gear and others. Through the
manufacture of prototypes and trial and evaluation and international
certification procedure, we are planning to supply them step by step, starting
with the 2 MW to 5 MW medium and large sized power train products for wind
power plants.
2. Key products and services
We are manufacturing and selling parts for commercial vehicles, machine tools,
casting products and defense related equipment. The composition of our sales
in the first half of 2010 is as follows in terms of the sales amount.
(Unit: million won )
Businesses
Sales Items Application TrademarksSalesamount
Composition (%)
Vehicleparts
Goodsandproducts
Axle, T/M and otherparts
VehicleOEM
production88,726 31.6
Machine tools
Goodsandproducts
Lathe, milling machine,grinding machine, CNClathe, machining centerand others
Industrialequipment
TIPL-410,ST-850
VD,TNV-40A,ST-25/35
22,016 7.9
OthersGoodsandproducts
Casting products anddefense products, etc
Vehicle andmachinetools, etc.
- 169,832 60.5
Total - - - 280,574 100.0
- 24 -
Price trends of key products (Unit: 1,000 won)□
- The above table was prepared based on the supply price for key products
by year.
- The cause of price change was mainly the change in raw materials and the
price is adjusted as agreed on with customers.
3. Main raw materials
a. Current key raw materials (Unit: Million Won)
BusinessesType ofpurchasing
Item ApplicationAmount
RemarksAmount
Composition
AutomotivepartsMachinetoolsCastings
Raw materialsBRG, steelplate
Manufacturingof products
140,538 97.2 -
SuppliesConsumabl
esManufacturingof products
4,080 2.8 -
Total 144,618 100.0 -
ItemsPeriod 48first half
Period 47 Period 46
Vehicleparts
Transmission
Hyundai BUS(V515-15) 2,011 2,011 2,011
Tata Daewoo CommercialVehicle (V524-10)
3,618 3,502 3,502
Daewoo Bus (V544-17) 1,872 1,872 1,750
Axle
Tata Daewoo CommercialVehicle (VT11-01)
3,276 3,019 3,019
Daewoo Bus (V342-07) 1,400 1,400 1,400
Ssangyong Motors(667-08)
231 231 231
Machinetools
Machining center (TNV-40A(S)) 90,000 90,000 88,000
NC lathes (ST-850VD) 255,000 255,000 250,000
General purpose lathe(T-410(1060)) 18,000 18,000 18,000
General purpose grinding machine(TGU-32(500))
40,000 40,000 40,000
General purpose milling machine(TMVH-2D)
32,000 32,000 32,000
Castings
FC (Castings for machine tools) 1.71 1.64 1.81
FCD(Castings for vehicle parts) 1.78 1.82 2.00
ADC 4.96 5.40 4.70
- 25 -
b. Changes in price of key raw materials (Unit: Won)
ItemsPeriod 48first half
Period 47 Period 46
Automotiveparts
Machine toolsCastings
CUP-BRG. EA 1,535 1,459 1,459
Round bars (SCM4) KG 1,500 1,400 1,580
Press rolled andcompressed scrap
KG 505 440 370
AL INGOT KG 1,892 1,687 2,011
- The objects for price were selected among the main raw materials for the
products based on the price as of June 30, 2010.
4. Production and equipment
a. Basis of production capacity and its calculation
(1) Production capacity (Unit: million won )
Businesses Items LocationPeriod 48first half
Period 47 Period 46 Period 45
Automotiveparts
Axle
Changwon
67,776 135,552 109,152 109,152
Transmission 42,132 84,264 84,264 84,264
Others 27,108 54,216 47,000 47,000
Subtotal 137,016 274,032 240,416 240,416
Machinetools
NC machine tools
Changwon
16,200 32,400 28,800 28,800
General purposemachine tools
14,400 28,800 28,800 28,800
Subtotal 30,600 61,200 57,600 57,600
Castings(ton)
Changwon 36,000 72,000 66,000 66,000
Others Changwon and Seoul 58,000 116,000 100,000 100,000
Total 261,616 523,232 464,016 464,016
- 26 -
(2) Calculation of production capacity
(a) Calculation method
Criteria①
Maximum production capacity : (16 hour/day) × (20 days/month) × 6 months.
Method of calculation (Unit: million won)②
Category Items Calculation criteria Production amount
Automotiveparts
Axle 11,296 mill/month ×6 month 67,776
Transmission 7,022mill/month ×6 month 42,132
Others 4,518mill/month ×6 month 27,108
Machinetools
CNC machine tools 2,700mill/month ×6 month 16,200
General purposemachine tools
2,400mill/month ×6 month 14,400
Castings (ton) 6,000mill/month ×6 month 36,000
Others 9,666.7mill/month ×6 month 58,000
(b) Average running time
BusinessesAverage dailyrunning hours
Averagemonthly running
days
Running daysin currentperiod
Running daysin currentperiod
Automotiveparts
2,217.4 20.3 122.0 270,528
Machine tools 198.1 20.3 122.0 24,164
Castings 77.1 20.3 122.0 9,411
Others 625.4 20.3 122.0 76,296
- 27 -
b. Production performance and operation rate
(1) Production performance (Unit: million won )
Businesses Items LocationPeriod 48first half
Period 47 Period 46
Automotiveparts
Axle
Changwon
42,515 74,700 88,587
Transmission 25,076 50,166 53,484
Others 11,095 67,824 23,737
Subtotal 78,686 192,690 165,808
Machinetools
NC machine tools
Changwon
12,451 28,144 26,603
General purposemachine tools
254 831 372
Others 308 690 638
Subtotal 13,013 29,665 27,613
Castings and others Changwon 110,216 122,913 130,555
Total 201,915 345,268 323,976
(2) Operation rate in the current period (Unit: hour)
BusinessesPossible annualrunning hour
Actual annualrunning hour
Average runningrate
Automotive parts 427,356 270,528 63.3%
Machine tools 36,531 24,164 66.1%
Castings 16,348 9,411 57.6%
Others 128,344 76,296 59.4%
Total 608,579 380,399 62.5%
c. Current production equipment
(1) Current production equipment
[Assets: Property, land, and equipment (Unit: million won)
- 28 -
AssetsOwnership
LocationAreaorset
Beginning bookvalue
ChangeDepreciation
Currentbookvalue
RemarksIncrea
seDecrease
Land S&TChangwon& Seoul
378,708㎡
352,787 0 0 0 352,787 -
Buildings
S&TChangwon& Seoul
233,397㎡
35,750 0 0 897 34,853 -
Structures
S&TChangwon& Seoul
371 5,218 56 0 257 5,017 -
Machinery
S&T Changwon 2,448 27,278 3,738 1,566 2,466 26,984 -
Vehicles
S&TChangwon& Seoul
118 314 112 0 84 342 -
Others S&TChangwon& Seoul
- 7,039 1,311 88 1,431 6,831 -
Total 428,386 5,217 1,654 5,135 426,814 -
- The company has head office at Woe-dong, Seongsan-gu and plant at
Daewon-dong, Uichang-gu, Changwon.
- The company has land of 378,708 , whose re-evaluation value amounts to㎡
352,787,000,000 won.
- The future expansion of production capability would be possible without
additional land. With no large scale investment expected, the company is
expecting enhanced price competitiveness in the future through cost
reduction.
d. Plan of purchasing new equipment (Unit: million won)
Location
Period ofinvestment
Objectsfor
investment
Investmenteffect
Totalinvestment
Investmentconductedup to now
Futureinvestment
Remarks
Changwonplant
Jan. 1, 2010-
Dec. 31, 2010
Buildingsandstructures
Extension ofservice period
500 56 444 -
Jan. 1, 2010-
Dec. 31, 2010
Machinery Improvementincompetitiveness and quality
6,000 3,738 2,262 -
Others 4,500 3,473 1,027 -
Total 11,000 7,267 3,733 -
- 29 -
- We plan to purchase production equipment and testing equipment according
to the development project of 1500 HP, KHP project and power train for a
wind power plant as well as to maintain the plant facilities.
5. Sales
a. Sales performance (Unit: million won)
Businesses SalesPeriod 48first half
Period 47 Period 46
Automotiveparts
Domestic 59,066 183,881 153,612
Export 29,660 35,450 37,290
Subtotal 88,726 219,331 190,902
Machine tools
Domestic 18,201 34,003 37,250
Export 3,815 11,666 3,845
Subtotal 22,016 45,669 41,095
Others
Domestic 159,033 175,176 176,133
Export 10,799 27,485 26,883
Subtotal 169,832 202,661 203,016
Total
Domestic 236,300 393,060 366,995
Export 44,274 74,601 68,018
Subtotal 280,574 467,661 435,013
b. Sales network and method
(1) Sales organization
(a) Sales organization :
Sales of automotive parts - Sales and customer service of automotive parts.
Machinery sales - Sales (including export) and customer services of machine
tools and their parts.
Special sales - Sales and export of defence related products.
- 30 -
Overseas sales - Export of automotive parts.
Sales of materials - Sale and export of casting products
(b) Agencies: Eleven for machine tools and eight for automotive parts
(2) Sales network
Businesses Sales network Composition Remarks
Automotive parts
Direct salesSales through agencies
Export
63.2%
3.4%
33.4%
Total 100.0%
Machine tools
Direct salesSales through agencies
Export
45.5%37.2% 17.3%
Total 100.0%
Casting products
Direct salesSales through agencies
Export
94.1% 0.0% 5.9%
Total 100.0%
(3) Terms of payment
(a) Automotive parts: cash or promissory note for payment within 3-4 months.
(b) Machine tools: sales through cash or promissory note.
(c) Casting products : cash or promissory note within 3 months.
c. Sales strategy
a) Vehicle power train
We plan to classify the advanced market by regions and industries. We also
plan to expand the market through invasion of global Big 3 car manufacturers'
markets, diversification of customers, expansion of global marketing,
cooperation with global car makers and reinforced cooperation with the group's
- 31 -
subsidiaries for global marketing, and common development of new products
with subsidiaries.
b) Machine tools
We plan to expand the sales volume through the selection of highly profitable
types of machine tools, increased sales promotion for key types of machine
tools, expansion into markets of large green industrial machine tools for wind
power plants and marine plants, entry into the specialized machine tools
market such as CNC gear machining devices, reinforced cooperative market
with subsidiaries and development of new foreign customers.
c) Materials parts
We plan to make every effort to enter into new markets by developing highly
profitable products such as those for ships or heavy equipment castings as
well as casting products for power generating plants such as wind power
plants.
6. Getting orders
The sales of our key products are dependent on the volume of short term
orders from car makers. As the change in demand from those industries and
changes in the economic situation are difficult to predict, we are not in a
position to check the order volume and remaining order volumes.
7. Market risks and risk management
a. Key market risks
The commercial vehicle market may be adversely affected by the hike in
prices of diesel fuel and raw materials. With the recession continuing across
the world, the possible stoppage of production by car makers due to strikes
(time off system and wage negotiations) can affect on our sales volume.
- 32 -
b. Risk management
We have tried to minimize the risk from exchange rate fluctuations and
realized stable management through improvement of financial structure and
predictable management. We have also adopted several exchange rate
management techniques such as collection of payment and change of the
currencies to minimize the exchange risks.
8. Trading of derivatives
a. Putback option
The Company, as a representative of S&T Consortium, and financial investor,
made a stock sales agreement with Woori Bank, which is the key creditor
bank of S&T Daewoo (former Daewoo Precision Co., Ltd.) for acquisition of
51% of common stocks (4,931,442 shares) and 100% of preferred stocks
(2,764,600) to purchase the S&T Daewoo Co., Ltd. As of the end of first half
year, the financial investor has the following rights of putback options.
Financial
investor
Number of
exercisable stocks
Exercisable
periodExercise price
KDB
Capital
966,949
common shares
from Sept.
13, 2009 to
Sept. 12,
2011
According to the consortium
agreement, the exercise price is
the per share acquisition price
(22,838 won) plus the annually
compounded interest of 3%.
On the other hand, the price of S&T Daewoo as of the end of this half year
was 27,950 won. The fair value of the putback options above as of the end of
the first half is 433,000,000 won (459 won per share).
9. R&D activities
a. Description of R&D activities
We have expanded the investment in engineering personnel in order to develop
the products related to the new growth engine such as the 1500 HP automatic
- 33 -
transmission, gear box for Korean helicopters (KHP), next generation heavy
machine guns and gear boxes for wind power plants. On top of that, we are
developing multi-stage transmission and axles for low height buses for the
improvement of fuel efficiency and the convenience of drivers. We are also
developing the transmissions and axles for the eco-friendly, no pollution
electric car and new commercial vehicles for OEM purchaser as well as the
medium and large sized vertical lathes.
b. R&D Organization
See the R&D organization chart
c. R&D expenses
The R&D expenses are as follows.
(Unit: million won)
AccountsPeriod 48first half
Period 47 Period 46 Remarks
Raw materials 717 3,666 2,811
Labor 1,053 2,706 2,872
Depreciation 405 717 115
Outsourcing fee 543 4,945 5,145
Others 139 1,506 3,496
Total in R&D expenses 2,857 13,540 14,439
Accounting
Sales and administrativeexpenses
- - -
Manufacturing costs 963 1,264 619
Development cost (intangibleassets)
1,894 12,276 13,820
R&D expenses/sales amount[R&D expenses÷Sales amount in current
period×100]1.02% 2.90% 3.32%
- 34 -
d. R&D performances
The recent R&D performances are as follows.
Proje
ct
Instit
uteExpected effects Products
Deve
o p m
e n t
o f
trans
missi
on
Intern
a l
R & D
cente
r
New development of T/M in
preparation for possible domestic
demand and export (OEM).
Mass production of all kinds of transmissions
for EURO-5 and export in compliance with
export requirements (OEM).
Development of T/M in preparation
for new car designed car
manufacturer (OEM).
Completion of the development of middle sized
(LB) proto and development of axles for heavy
duty engines
Entry into market for potential
items
Development of heavy duty multi speeds
transmission (9 speeds transmissions of: T19S9
and T16S & 12 speeds transmission of
T24S12)
Entry into new markets and
increase in sales
Development of transmission specific for 5 ton
truck and development of hybrid gear boxes
for speed increase and speed decrease
Deve
lopm
ent
of
axles
Intern
al
R&D
cente
r
New development of T/M in
preparation for possible domestic
demand and export (OEM).
Mass production of EURO-5 for all kinds of
vehicles and development of axles for heavy
equipment designed by John Deere
Development of T/M in preparation
for new car designed car
manufacturer (OEM).
Development of independent suspension axle
system for low height bus and SUV and mass
production of axles for heavy duty engines
Entry into market for potential
items
Development/mass production of bogie of light
rail, completion of development of Proto for
medium sized bus (LB) and development of
lateral and traverse axles.
Entry into new markets and
increase in sales
Development of axles and axle housing for
dump truck and tractor for export and
development of axles and speed reduction gear
box for electric bus
Deve
lopm
ent
of
mac
hine
tools
Intern
al
R&D
cente
r
Expansion of market shareDevelopment of large CNC vertical lathe
(ST-25/35VC, ST-40/50VC)
Improvement of processing
efficiency and market
competitiveness
Development of CNC vertical lathe
(ST-16/22V(M))
Domestic sales and localization of
imported products
Development of gear grinder (GHO-350A,
GSP-1000, SGM-3500)
- 35 -
10. Other requirements for investment decision making
a. Environment related restrictions
We are subject to environment-related laws and regulations (concerning
air/water and waste). Having acquired the international environment
certification of ISO14001 in Nov. 2005, we have complied with
environment-related laws and regulations. There are no specific matters
concerning the environment as of the date of submitting the business report.
- 36 -
III. Items related to finance
1. Financial summary (Unit: Million Won)
AccountPeriod 48first half
Period 47 Period 46 Period 45 Period 44
[Current assets] 366,806 386,273 273,664 250,831 174,695
Quick assetsㆍ 273,847 305,047 194,948 196,222 122,094
Inventoriesㆍ 92,959 81,226 78,716 54,609 52,601
[Non-current assets] 490,653 485,973 483,524 210,329 263,198
Investmentsㆍ 53,383 50,044 54,636 47,946 101,874
Property, plant andㆍequipment
426,814 428,386 426,875 148,837 146,830
Intangible assetsㆍ 4,971 2,939 1,105 1,249 5,067
Other non-currentㆍassets
5,485 4,604 908 12,297 9,427
Total assets 857,459 872,246 757,188 461,160 437,893
[Current liabilities] 184,972 226,130 168,866 162,551 148,792
[Non-currentliabilities]
88,703 84,822 90,745 39,992 63,180
Total liabilities 273,675 310,952 259,611 202,543 211,972
[Capital stock] 83,684 83,684 83,079 80,664 80,664
[Paid-in capital] 29,658 29,539 21,811 11,162 -
[Capital adjustment] (11,490) (12,800) (30,771) (19,167) (16,737)
[Accumulated othercomprehensiveincome]
219,141 221,450 221,678 (703) (1,874)
[Retained earnings] 262,791 239,421 201,779 186,661 163,868
Total capital 583,784 561,294 497,576 258,617 225,921
Sales 280,574 467,661 435,013 378,219 313,764
Operating income 31,384 50,162 36,040 25,291 20,543
Net income 29,439 41,790 32,057 26,249 27,943
Basic earnings perㆍshare (won)
958 1,468 1,169 901 993
Diluted earningsㆍper share (won)
944 1,427 1,118 864 973
- 37 -
2. Notes to financial information
a. Preparation criteria for preparing the financial information
1. Significant accounting policy
The Company prepares the consolidated financial statements in accordance
with generally accepted accounting principles in the Republic of Korea and
applied the same accounting policies that were adopted for the preparation of
financial statements as of Dec. 31, 2009.
The significant accounting policies followed by the Company in the preparation
of the accompanying consolidated financial statements are summarized below:
(1) Revenue recognition
The Company’s revenue categories consist of goods sold and services
rendered.
Revenue from the sale of goods is measured at the fair value of the
consideration received or receivable, net of returns and allowances, trade
discounts and volume rebates. Revenue is recognized when the significant risks
and rewards of ownership have been transferred to the buyer, recovery of the
consideration is probable, the associated costs and possible return of goods
can be estimated reliably, and there is no continuing Company involvement
with the goods.
Revenue from services provided is recognized by applying the percentage of
completion method when the amount of revenue, the costs incurred, the costs
to complete and stage of completion of the balance sheet date can be reliably
measured, and it is probable that future economic benefits will flow into the
Company.
(2) Allowance for doubtful accounts
Allowance for doubtful accounts is estimated based on an analysis of individual
accounts and past experience of collection and presented as a deduction from
trade accounts and notes receivable.
- 38 -
When the terms of trade accounts and notes receivable (the principal, interest
rate or term) are modified, either through a court order, such as a
reorganization, or by mutual formal agreement, resulting in a reduction in the
present value of the future cash flows due to the Company, the difference
between the carrying value of the relevant accounts and notes receivable and
the present value of the future cash flows is recognized as bad debt expense.
(3) Inventories
The costs of inventories are determined using the weighted average method
for products and goods or moving-weighted average for raw materials and
supplies while materials-in-transit are determined using the specific
identification method. Amounts of inventory are written down to net realizable
value due to losses occurring in the normal course of business and the
allowance is reported as a contra inventory account, while the related charge
is recognized in cost of goods sold. Gains and losses pertaining to physical
inventory adjustments are also included in cost of goods sold. Losses from
evaluation of inventories are deducted form the inventories. The recovery of
evaluation losses on inventories in current period of 637,551,000 won was
deducted from the cost of goods sold while the amount of 58,856,000 won in
the losses of evaluation on inventories in previous period was added to the
cost of goods sold.
(4) Investments in Securities
Upon acquisition, the Company classifies debt and equity securities (excluding
investments in affiliates and joint ventures) into the following categories:
held-to-maturity, available-for-sale or trading securities. This classification is
reassessed at each balance sheet date.
Investments in debt securities which the Company has the intent and ability to
hold to maturity are classified as held-to-maturity. Securities that are acquired
- 39 -
principally for the purpose of selling in the short term are classified as trading
securities. Investments not classified as either held-to-maturity or trading
securities are classified as available-for-sale securities.
A security is recognized initially at its acquisition cost, which includes the
market value of the consideration given and any other transaction costs. After
initial recognition, held-to-maturity securities are accounted for at amortized
costs in the balance sheet and trading and available for-sale securities are
accounted for at their fair values. However, non-marketable securities are
accounted for at their acquisition costs if their fair values cannot be reliably
estimated.
Trading securities are subsequently carried at fair value and indicated with the
quoted price as of the end of period of reporting. In cases where
non-marketable securities can reasonably be estimated with future cash flow
and has the credit rating assessed by an independent credit rating company, it
can be carried at fair value by discounting it with the proper discount rate in
consideration of the company's credit rating. The beneficiary's certificate which
is not marketable is carried at the fair value according to the quoted prices
posted by the fund operating company.
The unrealized gains and losses arising from changes in the fair value of
trading securities are recognized as the current income or fewer items while
cumulative unrealized gains and losses arising from changes in the fair value
of available-for-sale securities are recognized as accumulated other
comprehensive income (loss), net of tax, directly in equity. Held-to-maturity
investments are carried at amortized cost with interest income and expense
recognized in the income statement using the effective interest method.
- 40 -
Management reviews investments in securities whenever events or changes in
circumstances indicate that the carrying amount of the investments may not be
recoverable. Impairment losses are recognized as current income or losses
when the estimated recoverable amounts are less than the carrying amount and
it is not obviously evidenced that impairment is unnecessary.
Trading securities are presented as current assets. Available-for-sale
securities, which mature within one year from the balance sheet date or where
the likelihood of disposal within one year from the balance sheet date is
probable, are presented as current assets. Held-to-maturity securities, which
mature within one year from the balance sheet date, are presented as current
assets.
(5) Equity method investments
Investments in equity securities of companies, over which the Company has the
ability to exercise a significant influence, are recorded using the equity method
of accounting. Under the equity method, the Company records changes in its
proportionate ownership in the book value of the investee in current
operations, as current income or losses (equity method gains or losses), as
adjustments to retained earnings or adjustments to equity capital
(comprehensive gains or losses), depending on the nature of the underlying
change in the book value of the investee.
When the value of investment equity becomes 0due to the accumulated deficit
of investee, the application of equity method is stopped and the value of
investment equity is carried at zero. This is provided that the losses of the
investee are continued to be carried when the company has the investment
related assets over the investee such as preferred stock or long term
receivables.
- 41 -
The excess of the acquisition cost of an investment in an investee over the
Company’s share of the fair value of the identifiable net assets acquired is
amortized using the straight-line method over a period not exceeding 3 years.
When acquisition cost of investments in an investee is less than the Company’s
interest on the fair value of the identifiable net assets acquired, such
difference is recognized using the straight line method as a gain over the
weighted average period of useful lives of the depreciable and amortizable
non-monetary assets. The amount attributable to the non-depreciable assets is
recovered when they are disposed (or expended). Also, the Company’s interest
on the difference between fair value and carrying value of identifiable assets
and liabilities of an investee, at the time of acquisition, is depreciated or
reversed in accordance with accounting policies of related assets or liabilities
of an investee.
When applying the equity method by translating the financial statements of an
investee operating overseas, the Company applies (a) the foreign exchange
rate as of the Company’s period end date of reporting to the investee’s assets
and liabilities, (b) the foreign exchange rate as of the date on which the
Company acquired its equity interest in the investee to the Company’s share of
the investee’s equity interest. After translating into Korean Won, if there is the
difference between the total equity translated with the exchange rate on the
date of acquisition and the amount obtained by deducting liabilities from assets
translated with the exchange rate on the end of reporting period, the amount
relating to the Company’s share of the investee’s equity interest is accounted
for as accumulated other comprehensive income (loss).
The company recognized the amount reflected in the book among the amount
of losses and gains obtained during the transaction between the company and
the investee multiplied by the equity ratio as the unrealized losses or gains.
Any unrealized gains were deducted from the equity method applied investment
- 42 -
equity while the unrealized losses were added to the equity method applied
investment equity.
Unless the balance of equity method applied investments becomes zero and the
equity method is no longer applied, the company makes an accounting in a way
that the net profit and net assets in the financial statements of the holding
company are consistent with the holding company's equity over the net profit
and net assets in the consolidated financial statements as long as the investee
is the company's subsidiary.
(6) Property, Plant and Equipment
The acquisition cost of property, plant and equipment is comprised of its
purchase price or manufacturing costs and any other directly attributable costs
of bringing the assets to the working condition of its intended uses. In case
the assets were acquired through contribution in kind, gift or for free, their
fair values at the time of acquisition will be the fair value. The book value of
assets to be given shall be the fair value of the assets acquired if the assets
are acquired in exchange of the similar type of assets, while the fair value of
the assets to be given will be the fair value of the assets acquired when the
assets were acquired in exchange with the dissimilar types of assets. In this
case, if the fair value of the assets given is uncertain, the fair value of the
assets acquired will be the fair value of the assets acquired.
Expenditures that result in the enhancement of the value or extension of the
useful lives of the facilities involved are treated as additions to property, plant
and equipment while routine maintenance and repairs are expended as
incurred.
Depreciation is computed using the straight-line method, based on the
estimated useful lives of the assets as described below.
- 43 -
Assets Useful lives (year) Assets Useful lives (year)
Buildings 40 Vehicles 5
Structures 20 Tools 5
Machinery 8 Office supplies 5
The interest incurred on borrowings to finance the purchase of construction of
property, plants and equipment and manufacture of inventories are charged to
current income.
The Company assesses any possible recognition of impairment loss when there
is an indication that expected future economic benefits of a tangible asset are
considerably less than its carrying amount as a result of technological
obsolescence or rapid decline in market value. When it is determined that a
tangible asset may have been impaired and that its estimated total future cash
flows from continued use or disposal is less than its carrying amount, the
carrying amount of a tangible asset is reduced to its recoverable amount and
the difference is recognized as an impairment loss.
The company has adopted the reevaluation model according to the revision of
Article 5 (Property, plant and equipment) of Korean Accounting Standards and
applied it to the land to state its value at the fair value at the date of
reevaluation. If the book value of asset is increased due to reevaluation, the
increased value is charged to the Accumulated other comprehensive income.
However, if some of the increase is recognized as the gains before, it is
recognized as the current gains. On the other hand, if the value of assets is
decreased due to the reevaluation, the decreased amount is recognized as the
current losses. If some of the losses are related to the Accumulated other
comprehensive income related to the assets, it is deduced from accumulated
other comprehensive income. According to the interim measure, this accounting
change is gradually applied.
- 44 -
(7) Intangible assets
The costs incurred in relation to the development of new products and new
technologies are recognized as development costs or intangible assets only if it
is probable that future economic benefits that are attributable to the asset will
flow into the entity and the cost of the asset can be measured reliably. In
addition, the expenses related to research activities are charged to sales and
administrative expenses as the account of research expenses.
The development costs charged to the Intangible assets are amortized by
dividing the acquisition cost by 3 years with the residual value of 0 in a
straight line method, starting from the year end when the products related to
the intangible assets can be sold or used. The amortization expenses are
charged to cost of sales or sales and administrative expenses.
Except for the development costs, intangible assets are stated at cost, which
includes acquisition cost, production cost and other costs required to prepare
the asset for its intended use. Intangible assets are stated net of accumulated
amortization computed using the straight-line method and others over the
estimated useful lives as described below.
Category Useful lives
Intellectual property rights 5~10 years
Management assesses the potential impairment of intangible assets when there
is evidence that events or changes in circumstances have made the recovery
of an asset’s carrying value to be unlikely. The carrying value of the intangible
asset is reduced to the estimated realizable value, and an impairment loss is
recorded as a reduction in the carrying value of the related asset and charged
to current operations.
- 45 -
(8) Government subsidy
When the company is subsidized by the Government in acquiring assets, all
funds acquired prior to the acquisition of the assets are stated as a deduction
of other assets and when the related assets are acquired, are carried as the
deduction of the acquired asset.
When the subsidy is granted without meeting some requirements, the subsidy
which is directly related to the sales activities is carried as operating income.
If not, it is carried as non-operating income. If there are any expenses
opposite to it, it is set off with those specific expenses and then the rest is
carried as the current losses or gains.
(9) Accrued Severance Benefits
Employees and directors with at least one year of service are entitled to
receive a lump-sum payment upon termination of their employment with the
Company based on their length of service and rate of pay at the time of
termination. Accrued severance benefits represent the amount which would be
payable assuming all eligible employees and directors were to terminate their
employment as of the balance sheet date. The amount which is larger between
the accrued severance amounts and the amount calculated according to the
Basic Labor Act) are all carried as Accrued severance benefits.
The amount deposited into the severance insurance system which is assured of
paying it to employees is carried as deduction from the accrued severance
benefits.
In accordance with the National Pension Act, a certain portion of the accrued
severance benefits is deposited with the National Pension Fund and deducted
from the accrued severance benefits liability.
- 46 -
(10) Valuation of Receivables and Payables at Present Value
Receivables and payables arising from long-term installment transactions,
long-term cash loans (borrowings) and other similar loans (borrowings)
transactions are stated at present value, if the difference between nominal
value and present value is material. The difference between nominal value and
present value is presented as a present value discount. The present value
discount is amortized using the effective interest method, and the amortization
is included in interest expense or interest income.
When the interest rate and repayment period are changed unfavorably against
the creditor by composition proceedings, reorganization, or liquidation
procedures, or by mutual agreements and the difference between nominal value
and present value is material, the difference is expended using the allowance
for doubtful accounts. The difference between the nominal value and present
value is amortized using the effective interest method, and amortization is
included in interest income.
(11) Translation of foreign currency denominated assets and liabilities
The Company maintains its non-monetary foreign currency denominated assets
and liabilities at the exchange rate when they are borne or acquired. On the
other hand, the monetary foreign currency denominated assets and liabilities
are translated to Korean won using the exchange rate quoted by Seoul Money
Brokerage Services, Ltd. with the gains or losses from translation stated in the
income statement.
For overseas affiliates whose financial statements are prepared in foreign
currency, monetary assets and liabilities are translated at the exchange rate at
the period end date while non-monetary assets and liabilities are translated at
the historical exchange rate.
(12) Stock options
The stock option program allows the Company’s employees and other
- 47 -
customers to acquire shares of the Company for a specified price at specified
times. The Company values equity-settled stock options based on an option
pricing model where the fair value of stock options is measured based on the
fair value of goods or services provided or if not, the fair value of equity
instrument granted and then as an expense and capital adjustment over the
period in which the options vest. If the conditions of granted equity instrument
are too complex to measure its fair value at the date of measuring, its fair
value is measured using the intrinsic value and changes the estimates so that
it ultimately becomes consistent with the quantity of equity goods acquired.
In case of compensation cost for cash settled stock option, the fair value stock
option is measured based on the value of goods or service to be provided or
the liabilities to bear to recognize the compensation expense and liabilities.
The compensation cost for cash-settled stock options is measured each period
based on the current stock price and is recognized as an expense and a
liability over the service period.
(13) Provisions and Contingent Liabilities
A provision is a liability of uncertain timing or amount and shall be recognized
when all of the following conditions are met: 1) An entity has a present
obligation (legal or constructive) as a result of a past event; 2) It is probable
that an outflow of resources embodying economic benefits will be required to
settle the obligation; and 3) A reliable estimate can be made of the amount of
the obligation.
If there is a big difference between the nominal amount and the present value
of provision, the current value of provision is stated which is expected to be
required in order to perform an obligation.
(14) Income tax expense
The income tax expense is calculated by adding or deducting the change in
- 48 -
deferred tax assets or liabilities to and from the tax expenses to be paid.
Income tax expense is determined by adding or deducting the total income tax
and surtaxes to be paid for the current period and the changes in deferred
income tax assets or liabilities. Deferred tax is recognized on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profits. Deferred tax liabilities are generally recognized for all taxable
temporary differences with some exceptions and deferred tax assets are
recognized to the extent that it is probable that taxable profit will be available
against which the deductible temporary difference can be utilized. Deferred tax
assets and liabilities are classified as current or non-current based on the
classification of the related assets or liabilities for financial reporting and
according to the expected reversal date of the specific temporary difference if
they are not related to an asset or liability for financial reporting, including
deferred tax assets related to carry forwards.
(15) Use of estimates
Korea's generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at year-end and the
reported amounts of revenues and expenses during the year. Significant items
subject to such estimates and assumptions include useful lives, salvage values
and recovery of property, plant and equipment; recoverability of goodwill and
intangible assets; valuation allowances for receivables, inventories and
realization of deferred income tax assets and fair values of derivatives. Actual
results could differ materially from the estimates and assumptions used.
b. Mergers during last 3 years
The company decided at the board of directors meeting on Sept. 2, 2008 to
merge with S&T Brake Co. Ltd on Nov. 10, 2008 and submitted the merger
- 49 -
filing sheet (or security filing sheet or main report). The objective of the
merger is to actively cope with domestic and overseas management
environments, improve efficiency and get synergistic effect for long term value
improvement. As of the base date of the merger, the assets and liabilities
transferred from the acquired company are 7,099,000,000 won and
3,799,000,000 respectively.
c. Introduction to Korea International Financial Accounting Standard K-IFRS)
We plan to apply the Korea International Financial Reporting Standard (K-IFRS)
from the 2011 fiscal year in preparing financial statements. For this, we have
organized a special introduction team to find out its effect and the introduction
of new accounting system, and train concerned personnel about it. In addition,
we have regularly reported the introduction plan and current situation to the
board of directors and management. The detailed introduction plan and
progress are as follows.
Main activities Plan Progress
Operation of TFT
for introduction of
IFRS
Construction of cooperative
structure between
subsidiaries for the
introduction of successful
K-KFRS.
Final determination of the master
plan for introduction of IFRS in
June 2009 and start of TFT
activities in the 2nd half of 2009
Analysis of effect
of the
introduction of
IFRS and
establishment of
policy
Effect analysis and policy
establishment from the 2nd
half of 2010.
Preparation of accounting
regulation and manuals and
training of staff members
Since May 2010, the company has
been studying the effect of the
introduction of FRS supported by
an external advisory institute, and
educational sessions have been
conducted for employees on its
effect.
Construction of
IFRS system and
calculation of
financial
information based
on IFRS
Calculation of K-IFRS
system, financial
statements and additional
data (including comparative
data) by the 3rd quarter of
2010
The IFRS task force team well
understands the difference
between K-GAAP and K-IFRS. It
now reflects the effect of the
review of the current system and
its effect analysis on its financial
information.
- 50 -
If the company prepares the financial statements based on the current valid
K-IFRS as of Jun. 30, 2010, a significant difference from those based on the
current K-GAAP is expected to appear. The information below shows the
expected differences. These do not encompass all differences and they can be
subject to change after we conduct additional analysis in the future. In
addition, there are cases in which the detailed effect from significant
difference cannot be obtained.
Category K-IFRS K-GAAP
Payroll
for
employe
es
The expected severance
benefits are accrued and
calculated to the present
value payroll by using the
discount rate and actuarial
concept according to the
forecast and prediction
method.
Employees and directors with at least one
year of service are entitled to receive a
lump-sum payment upon termination of their
employment with the Company based on their
length of service and rate of pay at the time
of termination. Accrued severance benefits
represent the amount which would be payable
assuming all eligible employees and directors
were to terminate their employment as of the
balance sheet date.Property
, plant
and
equipme
nt
Evaluation of fair value or
deemed value
Dual adoption of acquisition cost and fair
value (re-evaluation)
Scope of
consolid
ation
The subsidiaries are
subject to consolidation
when the ownership over
them is over 50% and
they are actually
controlled by the
company.
If the company is not subject to Outside
Auditing Act on Stock Company, the company
does not need to prepare consolidated
financial statements.
d. Other notes
Period Description47
first half-
46 -45 The company applied the reevaluation model described in Article 5
(Property, plant and equipment) of revised accounting standard to get the
assets increase of 269,973,000,000 won and deferred corporate tax
liabilities and re-evaluation income of 59,394,000,000 won and
210,579,000,000 won respectively
- 51 -
IV. Opinion of Auditors
a. Auditors
The company is audited by Samjong KPMG Group.
Period 48 first half Period 47 first half Period 46 Period 45
Samjong KPMG Inc. Samjong KPMG Inc. Samjong KPMG Inc. Samjong KPMG Inc.
b. Audit procedure
I reviewed the balance sheets of S&T Dynamics Co, Ltd. (the Company) as of
June 30, 2010, and the related statements of income for 3months and 6 months
then ended, statement of changes in shareholders' equity and statements of
cash flows for 6 months 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.
I conducted our audits in accordance with auditing standards generally
accepted in the Republic of Korea. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The review was mainly
conducted by question and analysis procedure that it only provides a conviction
which is lower in quality than audit. Also as I did not perform an audit, I do
not express my auditor's opinion.
As a result of my review, I did not found out any evidence that the financial
statements above were prepared not in compliance with the Korea's generally
accepted accounting principle.
c. Auditor's opinion
I was reported that balance sheet as of the end of the half year of 2010,
- 52 -
income statements and statements of the appropriations of its retained earnings
and changes in its shareholders' equity and cash flow for 6 months then ended
were prepared in compliance with Korea's accounting audit standard. So, I
express that my opinion on the financial statements above for Period 47 and
46 is "Unqualified".
Period Auditor's opinion Description
48 first half - -
47 Unqualified -
46 Unqualified -
d. Auditing service agreements
The time and fee of the auditing service are as follows. The company did not
make any auditing service contract other than the one below.
(Unit: Korean Won)
Period Auditor Contents FeesRequired time(hours)
48first half
Samjong KPMGOutside accounting
audit75,000,000 350
47 Samjong KPMGOutside accounting
audit70,000,000 930
46 Samjong KPMGOutside accounting
audit60,000,000 906
- The fees are for a year.
d. Internal accounting control system
Based on their review, the auditors confirm that nothing came to their
attention that caused them to believe that the Management Report referred to
above is not fairly stated, in respect of significance, in accordance with the
IACS Framework.
- 53 -
V. Director's management diagnosis and analytical opinion
According to the Standard of Preparing Corporate Disclosure Form, the
company does not prepare V. Director's management diagnosis and analytical
opinion on the quarterly and half year reports.
VI. The company's internal organization such as board of directors
and subsidiaries
1. Board of directors
a. Description of board of directors
The board of directors as of the day when the business report is prepared is
composed of 4 directors (3 standing directors and 1 outside director). The
board of directors makes decisions on the main management policies. For
careers and job descriptions for each director, see Chapter 9 Officers.
b. Main agenda
The main agenda on the board of directors' meeting in the current period were
as follows.
No Date AgendaPassed orrejected
Outsidedirector
1 Jan.25,2010Approval of 2009 balance sheets andincome statements.
Passed Attended
2 Jan.26,2010 Cash dividends. Passed Attended
3 Feb.03,2010Call of No. 47 ordinary generalstockholders' meeting.
Passed Attended
4 Feb.24,2010Mnutes of ordinary general stockholders'meeting.
Passed Attended
5 Apr.29,2010Extension of validity period of letter ofcredit.
Passed Attended
c. Director's independence
- 54 -
The company discloses all information on directors if any directors (including
outside directors) are to be elected at the general meeting of stockholders so
that all can get independence from others. The disclosed information includes
who recommended the director, his relationship with the largest shareholder,
and his transaction with the company.
2. Auditing system
a. Auditing
The company has no auditing committee as of the date when the report is
submitted. One auditor (Mr. Choi, Hong-gyu) is in charge of auditing of the
company. He was elected through a resolution at a general meeting of
stockholders.
The auditor can supervise the director's works independently by attending the
board of directors and ask the related department to submit the related books
and document. If required, he can get a briefing on the company's
management, and can access the management information in the proper way.
For more details on the auditor, see Chapter 9 officers.
b. Main activities of auditor
The auditor has conducted the following activities.
No. Date AgendaPassed or
rejectedRemarks
1Jan.25,
2010
Aproval of 2009 balance sheets and
income statements.Passed -
2 Jan.26,2010 Cash dividends. Passed -
3 Feb.23,2010Call of No. 47 General Stockholders'
MeetingPassed -
4 Feb.24,2010Minutes of ordinary general stockholders'
meeting.Passed -
5 Apr.29,2010Extension of validity period of letter of
credit.Passed -
- 55 -
3. Exercise of voting rights by shareholders
There was no exercise of the right of minority shareholders' right and
management battle for control over the company during the period of
disclosure. For the exercise of the shareholder's voting right, see the Article
of Incorporation attached to the business report which is already disclosed.
4. Subsidiaries
a. Subsidiaries
1) The company is a subsidiary of S&T Group. As of Jun. 30, 2010, the S&T
Group has 5 listed companies and 17 non-listed companies.
Listed
companies (5)Unlisted companies (17)
S&T Holdings,
S&T Dyanamics,
S&T Corporation,
S&T Daewoo,
S&T Motors
S&T Federation of Savings Bank, S&T Canberra Hotel, S&T
Solution, S&T Electronics, KMJ-Tech, S&TAMT, Guanzhou S&T
Co., Ltd. China, Senyang Jinbei-Tongil Automotive System Co.,
Ltd., Qingdao S&T Co, Ltd., China, S&T America Ltd, Yentai
Daewoo Precision Industries Co, Ltd. China, Hyosung Motors
America Inc, S&T Polska Sp, S&T Daewoo Automotive
Components(Kunshan) Co., Ltd. S&T Daewoo India Private Ltd,
Jianshu hwasung Automotive Components Co., Ltd. China , S&T
Automotive Mexico.
2) The mutual investments between subsidiaries are as follows.
(Feb. 28, 2010) (Unit: %)
- 56 -
Holdingcompany
Subsidiary Share Remarks
S&THoldings
S&T Dyanamics 29.78%
S&T Daewoo 37.81%
S&T Corporation 32.32%
S&T Motors 33.44%
S&T Holdings 55.00%
S&TDynamics
S&T Daewoo 6.04%
S&T AMT 100.00%
Qingdao S&T Co, Ltd., China 100.00%
Senyang Jinbei-Tongil AutomotiveSystem Co., Ltd.
51.00%
Jiangshu HwasungmotiveComponents Co., Ltd. China
100.00% S&T AMT owns 100%.
S&TDaewoo
S&T Electronics 100.00%
KMJ-Tech 100.00%
Guanzhou S&T Co., Ltd. China 100.00%
S&T America Ltd 100.00%
Yentai Daewoo Precision industriesCo, Ltd. China
100.00%
S&T Polska Sp 100.00%
S&T Daewoo AutomotiveComponents(Kunshan) Co., Ltd.
100.00%
S&T Daewoo India Private Ltd 100.00%
S&T Automotive Mexico 100.00%
S&T Motors Hyosung Motors America Inc 80.00%Including equityowned by relatedparty
Choi,Pyeong-gyu
S&T Holdings 57.28%
S&T Federation of Savings Bank 100.00%
Canberra Tourism Co., Ltd. 95.55%Including equityowned by relatedparty
b. Investee
The company has invested in 9 companies including associates and others for
the purpose of investment and management control. The securities invested in
- 57 -
the company over which the company gets significant control are stated using
the equity method while others are classified into the available-for-sale
securities. The investments in other companies by the company are as follows
as of June 30, 2010.
[Jun. 30, 2010) (Unit: share, million won, %)
Company
Purposeofinvestment
Beginning balanceIncrease(decrease)
Endingbalance
Financialstate inlast fiscalyear
Quantity
Shares
Bookvalue
Acquisition(disposal)
Lossesandgainsfromevaluation
Quantity
Share
Bookvalue
Totalassets
Netincome
Quantity
Amount
DoosanCapitalCo., Ltd.
Tradingforprofit
1million
55,000
- - -1mill.
55,000
2,074,426
1,262
Kyungnam
Newspaper
〃1,738
0.07 6 - - -1,738
0.07
6 - -
KoreaAutoIndustries Corp.Association
〃 108 1.59 6 - - - 1081.59
6 - -
CapitalGoodsDeduction
Association
〃7,800
1.691,930
- - 297,800
3.11
1,959
- -
SsangyongMotors
"656,169
-4,921
-437,446
--1,859
218,723
0.63,062
1,388,474
-346,270
S&TDaewoo
Participation inmanagement
883,851
6.0421,537
- - 2,064883,851
6.04
23,601
707,839
8,822
- 58 -
S&T AMT "111,000
100 1,322 - - 317111,000
100
1,639
- -
QingdaoS&T Col,Ltd.,China
" - 100 - -3,817
-974 -100
2,843
- -
SenyangJinbei-TongilAutomotive
SystemCo., Ltd.
〃 - 5115,262
- - -61 - 5115,201
37,409
77
Total - -49,984
-437,446
3,817
-484 -53,317
-
- As Ssanyong Motors reduced its capital 3 to 1 ratio on Jan. 17, 2010, the
number of shares owned as of Feb. 28, 2010has changed from 656,169 to
218,723.
- Qingdao S&T Co., Ltd., China was subject to the equity method from the
current period. So, its shares were reclassified to equity investment, and the
losses on valuation of equity investment were computed.
- 59 -
VII. Stockholders
a. Shares owned by the largest shareholder and its special related parties
S&T Holdings and its special related parties own 30.18% of the company's
issued shares. S&T Holding, the largest shareholder, owns 9,670,441 with an
ownership percentage of 29.78% while Park Jae-seok and Hong, Young-gi
have80,007 and 48,702 respectively. The details are as follows.
(July. 31, 2010) (Unit: share, %)
Name
Relation
Kindofshare
Number of shares owned (portion)
Cause ofchange
BeginningIncrease
Decrease
Ending
Number ofsharesowned
Percentageofownership
Number ofsharesowned
Percentageofownership
Number ofsharesowned
Percentage ofownership
S&THoldings
Largestshareholder
Commonstock
9,670,441
29.78 - -9,670,4
4129.78 -
ParkJae-seok
Officer
Commonstock
80,000 0.25 - - 80,007 0.25
Purchasingthroughstock
exchange
Hong,Young-gi
Officer ofsubsidiary
Commonstock
18,152 0.06 30,550 - 48,702 0.15Exercising ofstock options
계Commonstock
9,768,600
30.09 30,550 -9,799,1
5030.18
- 60 -
b. Description of the largest shareholder
S&T Holdings, the largest shareholder is a holding company which has
controlling power over its subsidiaries. The largest shareholders are as follows
as of the end of the reporting period.
- Address (head office): 853-5 Oidong, Seongsan, Changwon, Gyeongnam
- It has 5 registered officers (3 inside directors, 1 outside director and 1
auditor) as follows.
Title (standing ornon-standing)
Name Career Job
Representativesdirector/chairman(Standing)
ChoiPyeong-gyu
Chairman of S&T Group.
Presiding directorin board of
director meeting(Representativedirector)
Director(standing)Park
Jae-seok
Representative director/president of S&T Dynamics.Co., Ltd
Management
Director(standing)
KimDo-hwan
Legal Team of WooriInvestment and Securities. - Lawyer
Planning
Outside director(non-standing)
Geum,Nan-sae
Director of GyeonggidoPhilharmonic Orchestra
Outside director
Auditor (standing)Kim,
Chi-geolLawyer Auditor
- The largest shareholder for S&T Holding as of June. 30, 2010 is Cho,
Pyeong-gyu who owns 57.28% of total equity with the related parties having
7.51%.
- As of December 31, 2009, the assets of S&T Holdings are 398,373,000,000
Won while its liabilities and stockholders' equity (stock equity) are
36,625,000,000 Won and 361,748,000,000 Won (7,662,000,000 Won)
respectively.
- The sales (sales revenues) in 2009 are 31,729,000,000 won while operating
income and net income are 21,542,000,000 won and 17,114,000,000 won
respectively.
- 61 -
c. Changes in largest shareholders
The changes in the equity of the largest shareholder are as follows.
(Unit: share, % )
Largestshareholder
Date of changeof equity
Number of sharesowned
Percentage ofownership
Remarks
S&T Holdings(including
related parties)
July. 07, 2010 9,799,150 30.18 -
Apr. 20, 2010 9,785,448 30.13 -
Dec. 23, 2009 9,768,600 30.08 -
July. 17, 2009 9,767,960 30.08 -
- The number of shares owned is prepared by including shares owned by the
largest shareholder and its related parties. For more details, see the shares
owned by the largest shareholder and its related parties.
d. Ownership of shares
1) Shareholders having 5% or more of the number of outstanding shares as of
Aug. 10, 2010 are as follows.
[ Aug. 10, 2010 ] (Unit: share, %)
No.Shareholder
s
Common stock Preferred stock Subtotal
Number ofsharesowned
Percentageof
ownership
Number ofsharesowned
Percentage ofownership
Number ofsharesowned
Percentage of
ownership
1
AllianzGlobalInvestorsKoreaLimited
3,467,563 10.68 - - 3,467,563 10.68
2NationalPensionFund
2,391,232 7.36 - - 2,391,232 7.36
3
UBS HanaAsset
Management Co., Ltd.
2,035,840 6.27 - - 2,035,840 6.27
Total 7,894,635 24.31 - - 7,894,635 24.31
- 62 -
- The number of shares owned by Samsung Asset Management was reduced
from 5.18% (1,683,127 shares) to 4.16% (1,349,684 shares) on Aug. 6, 2010.
Therefore, it was removed from the group of shareholders having shares of
5% or more.
e. Minority shareholders
The company's minority shareholders are as follows. (Dec. 31, 2009)
CategoryNumber ofshareholders
Percentageof number ofshareholders
Number ofshared owned
Percentage ofshareholders'ownership
Remarks
Total 5,808 99.67 13,047,107 40.18
Minorityshareholders(corporate)
362 6.21 8,327,242 25.64
Minorityshareholders(individual)
5,446 93.46 4,719,865 14.54
f. Stocks
The followings are about the stock options and other stock related works
specified in the Article of Incorporation.
Stock
option in
articles of
incorporati
on
Article 9 (Preemptive rights)
New shares to be issued by the Company shall be allocated to the①shareholders in proportion to their respective number of shares.
Notwithstanding the above Paragraph 1, new shares may be allocated to②persons other than shareholders in the following cases:
1. If the Company issues new shares or causes underwriters to underwritenew shares within 50% of the number of shares issued and outstandingshares.
2. If the Company issues new shares by public offering within 50% of thenumber of shares issued and outstanding shares according to Article165-6 of the Capital Market & Financial Investment Business Act.
3. If the Company allocates new shares preferentially to members of theEmployee Stock Ownership Association according to Article 165-7 of theCapital Market & Financial Investment Business Act.
4. If new shares are issued by the exercise of stock options in accordancewith Articles 340-2 and 542-3 of the Commercial Act.
5. If the Company issues new shares for the issuance of depositaryreceipts (DR) not exceeding 30% of the number of shares issued andoutstanding shares according to Article 165-16 of the Capital Market &Financial Investment Business Act.
- 63 -
6. If the Company issues new shares to the extent of 40% of the total
issued and outstanding shares, to foreign investors to obtain financing
urgently, or to induce technology there from, etc. according to the Foreign
Investment Promotional Act.
When the new shares are issued according to , 1, 2, 4 and 6. The③ ②
kinds and number of shares to be issued and the issue price.
If shareholders waive or lose their preemptive right to new shares issued④
or if there are fractional shares at the time of allocation of new shares,
such shares may be handled by a resolution of the Board of Directors.
Article 9-2 Preemptive Rights
The Company may grant stock options to its officers and employees①
(including officers and employees of related companies as specified in
Article 9 of the Enforcement Decree of Commercial Act) within 15% of the
number of shares issued and outstanding shares by a special resolution of
the general meeting of shareholders; provided, however, that the Company
may grant the stock options to its officers and employees (except for the
directors of the Company) by a resolution of the Board of Directors within
3% of the number of shares issued and outstanding shares.
When the stock options are granted by the resolution of the Board of
Directors, the granting shall be approved by a resolution of the general
shareholders' meeting held first after granting. If the stock options are
granted by a resolution of the board of directors or the general
shareholders' meeting, they could be granted in a way that the profit can
be related to the satisfaction of management target or the market index.
The persons to whom stock options may be granted are the officers②
and employees who have contributed or have the capacity to contribute to
the establishment, management, overseas business, technical innovation,
etc., of the Company
The shares to be issued to the officers or employees by the exercise of③
their stock options (in case the Company pays, either in cash or treasury
shares, the difference between the exercise price of stock options and the
market price, they refer to the shares which are the basis for such
calculation) shall be determined among the kinds of shares described in
Article 7 by a resolution of the general shareholders' meeting or the board
of directors meeting.
The stock options may be granted to officers and employees working at④
the company when they are granted. The stock options granted to one
officer or employee shall not exceed 5% of the number of shares issued.
The exercise price of the stock option for a share shall be more than⑤
either of the prices below.
1. In case when the new shares are issued, the larger price of
a. the real price of a share as of the day of granting of the stock option
b. the face value of a share.
- 64 -
resolution of the general shareholders' meeting held first after granting. If the
stock options are granted by a resolution of the board of directors or the
general shareholders' meeting, they could be granted in a way that the profit
can be related to the satisfaction of management target or the market index.
The persons to whom stock options may be granted are the officers and②
employees who have contributed or have the capacity to contribute to the
establishment, management, overseas business, technical innovation, etc., of
the Company
The shares to be issued to the officers or employees by the exercise of③
their stock options (in case the Company pays, either in cash or treasury
shares, the difference between the exercise price of stock options and the
market price, they refer to the shares which are the basis for such
calculation) shall be determined among the kinds of shares described in
Article 7 by a resolution of the general shareholders' meeting or the board
of directors meeting.
The stock options may be granted to officers and employees working at④
the company when they are granted. The stock options granted to one
officer or employee shall not exceed 5% of the number of shares issued.
The exercise price of the stock option for a share shall be more than⑤
either of the prices below.
1. In case when the new shares are issued, the larger price of
a. the real price of a share as of the day of granting of the stock option
b. the face value of a share.
2. When the treasury stock is given, the real price of a share as of the date
of granting.
The stock option can be exercised from the third year after date of⑥
resolution described in 1 above but within 7 years.
The person to whom a stock option is granted should have served the⑦
Company for at least two (2) years after the date of such resolution but
within 7 years.
However, if the person who is granted with stock options dies within 2 years
after the date of resolution described in 1 above or retires due to age limit
or resigns for reasons which are attributable to his/her own fault, he/she
can exercise the stock option within the exercise period.
The provision of Article 9-3 applies to new issues by the exercise of⑧
stock options as far as the profit dividend is concerned..
The Company may cancel the granting of stock options by a resolution⑨
of the Board of Directors in any of the following cases:
1. In case the option grantees voluntarily retire from their office
or leave the Company after the grant of stock options
2. In case the option grantees cause substantial damage to the
Company due to their willful misconduct or negligence;
- 65 -
3. The company is not in a position to accept the request for exercise
of stock option due to the bankruptcy or dissolution of the company.
4. In case any of the causes for cancellation set forth in the stock
option agreement occurs.
Article 9-3 Base date for dividend for new issues
When the company issues new shares due to the rights issue, bonus
issue or stock dividend, the new issues are presumed to have been
issued on the end date of the previous fiscal year as far as the
dividend is concerned.
Closing date Dec. 31Periodic general shareholders'
meetingwithin 3 months
Book Closure and
Record Datefrom Jan. 1 to Jan. 31 every year
Share certificates 8 types: 1 share, 5 shares, 10 shares, 50 shares, 100 shares,
500 shares, 1,000 shares and 10,000 shares.
Transfer Agent Korea Securities Depository
Special benefits to
stockholdersNone Public notice
Hankuk Economic
Newspaper
g. Stock price and turn over
(Unit: Won, share)
Kind Jan Feb Mar Apr May June
Commonstock
High 16,460 14,600 16,150 16,050 17,550 19,400
Low 13,650 12,550 14,000 14,000 14,500 15,850
Monthlyturnover
4,266,985 2,239,207 2,764,797 3,406,025 7,054,531 4,169,360
- 66 -
VIII. Officers and employees
1. Officers and employees
a. Officers
The company has 16 officers composed of 5 registered officers and 11
unregistered officers. The officers are as follows.
1) Officers
(Unit: share)
Title(standing ornon-standing)
Registration
Name
Dateofbirth
Career Job
Number ofshared owned
RemarksCommonstock
Preferredstock
Director(Standing)
Registered
ChoiPyeong-gyu
Sept.5,2952
- KyungheeUniversity - Emeritus doctorof Sejong University - Chairman of S&TC. - Chairman of S&TGroup.
Presidingdirector inboard ofdirectormeeting(chairman)
0 0 Appointedon
(Mar. 26,2003).
Extended onMar. 20,2009
Representativedirector(standing)
Registered
ParkJae-seok
Nov.27,1959
- Yonsei University - Daewoo Group. - Director of GreenCross Corp. - Vice president ofS&T Dynamics. Co.,Ltd.
C E O(President)
80,007 0 Appointedon Feb. 19,2005
(Extendedon Mar. 20,2009)
Director(standing)
Registered
KimDo-hwan
FEb. 7,1972
- SungkyunkwanUniversity - Legal Team ofWoori Investmentand Securities. - Lawyer
Insidedirector
0 0 Appointedon Mar. 20,2009
Auditor(standing)
Registered
Cho,Hong-gyu
Mar.15,1947
- Konkuk Univ. - Teacher ofChanguyeongJonghap HighSchool - Non-standingdirector ofSamyoung Co., Ltd.
Standingauditor
0 0 Appointedon Mar. 26,2003
(Extendedon Mar. 20,2009)
- 67 -
Outsidedirector(non-standing)
Registered
Ahn,Cheon-hak
Apr.20,1935
- Kyunghee Univ. - Managing directorof SsangyongCement - President ofSsangyong HeavyIndustries. - President ofHanjung Co., Ltd.
Outsidedirector
0 0 Appointedon Feb. 21,2004
(Extendedon Feb. 24,2010)
Executiveofficer(standing)
Unregistered
Kim,Young-deok
Aug.16,1953
- Doctor ofMechanicalEngieering, SeoulNational Univ. - National Defenseand Science Institute
C T O(Vice
president)
0 0 -
Executiveofficer(standing)
Unregistered
Hong,Ki-bong
Sept.21,1953
- Director of TongilHeavy Industries
Specialbusinessteam
(Executivedirector)
7,840 0 -
Executiveofficer(standing)
Unregistered
Choi,Jong-seong
Jan.17,1959.
- MechanicalEngineering, YonseiUniv. - Daewoo Motors
Leader invehicledept.
(managingdirector)
5,114 0 -
Executiveofficer(standing)
Unregistered
Kim,Su-yeop
May. 9,1956
- Yeungnam Univ. - Gen. manager ofTongil HeavyIndustry. Co. Ltd. - Leader in vehicledepartment of S&TDynamics
Leader inR&D dept.(director)
4,408 0 -
Executiveofficer(standing)
Unregistered
Kim,Gwon-jung
Mar. 3,1960
- Yonsei Univ. - Daewoo Telecom. - President ofTianjin DaewooTelecom.
Overseasbusiness(director)
3,470 0 -
Executiveofficer(standing)
Unregistered
Kim,Gyeong-seok
Oct.17,1959
- MechanicalEngineering ofHanyang Univ. - Rotem
R&D(director)
1,528 0 -
Executiveofficer(standing)
Unregistered
Lee,Gyeong-sik
Nov.26,1957
- MechanicalEngineering ofBusan National Univ. - Hyundai HeavyIndustries
R&D(director)
1,760 0 -
Executiveofficer(standing)
Unregistered
Lee,Young-gil
Nov. 6,1960
- MechanicalEngineering ofKyungnam Univ. - Gen. manager ofS&T Dynamics
OverseasbusinessP.M
(Director)
3,610 0 -
- 68 -
Executiveofficer(standing)
Unregistered
Jung,Un-sik
Jul.5,1952
- Changwon JuniorCollege - Director of S&TC - Director of S&TMotors
Financialplanning(Director)
1,578 0 -
Executiveofficer(standing)
Unregistered
Joh,Yong-man
Dec.19,1962
- Law Dept. ofKyungnam Univ. - General managerof S&T Dynamics.
H/R(Director)
0 0 -
Executiveofficer(standing)
Unregistered
Jung,Eun-sik
Aug.22,1960
- Mechanical Deptof Busan NationalUniv. - General mangerof S&T Dynamics
Mechanicaldept. P.M(Director)
0 0 -
- The number of shares owned is based on data as of July 31, 2010.
2) Officers working for other companies
Title Name Companies Remarks
ChairmanChoi
Pyeong-gyu
S&T HoldingsRepresentativedirector
S&T CorporationRepresentativedirector
S&T Daewoo Director
S&T Federation of Savings Bank Director
S&T Canberra Hotel Director
Senyang Jinbei-Tongil AutomotiveSystem Co., Ltd.
Director
S&T Electrics Director
Hyosung Motor America Inc Director
Representative director
ParkJae-seok
S&T Holdings Director
S&T Daewoo Director
Senyang Jinbei-Tongil AutomotiveSystem Co., Ltd.
Director
Qingdao S&T Co, Ltd., China Director
S&T Electrics Director
S&T Solution Director
DirectorKim
Do-hwan
S&T Holdings Director
S&T Corporation Director
S&T Motors Director
S&T AMT Auditor
- 69 -
b. Employees
The company has 1,186 employees as of June. 30, 2010. Their average
service year is 20.3 and their annual wage and average wage are as follows.
(Unit: person, 1,000 won)
Category
Number of employees Averageserviceyear
Totalannualwages
Averagewage pera person
Remarks
Administrative
Production
Others Total
Male 327 800 14 1,141 20.6 22,095,207 19,365
Female 29 14 2 45 12.4 610,642 13,570
Total 356 814 16 1,186 20.3 22,705,849 19,145
2. Remuneration for officers
a. Remuneration of officers
The limit of remuneration to be paid to the directors is determined by a
resolution of the general meeting of shareholders; it was 1 billion won for
directors in Period 48. The remunerations paid in Period 48 are as follows.
(Unit: won)
Category Total paymentLimit approved at thegeneral shareholders'
meeting
Averageremuneration
Remarks
Director 254,450,040
1,000,000,000
84,816,680 -
Outsidedirector
20,150,000 20,150,000 -
Auditor 57,450,000 150,000,000 57,450,000 -
- The above is based on the registered officers.
- 70 -
b. Granting and exercise of stock options
The company has granted stock options to its officers and employees 7 times
from July 28, 2004 to Feb. 18, 2006. As of Jul. 31, 2010, the company gave
2,570,500 shares due to the exercise of stock options by employees. The
unexercised number of shares amounts to 445,500. The detailed granting and
exercise of stock options are as follows.
Grantee
Status
Dateofgranting
Grantingmethod
Typeofstock
Change in number
Unexercised
Period ofexercise
Exercise priceGrante
dExercises
Cancelled
ParkJae-seok
Registeredofficer
Jul.28,2004
Treasurystock
Commonstock
40,000 2,600 037,40
0
July 28,2006 toJuly 27,2013
2,900
Hong,Ki-bong
Unregisteredofficer
Jul.28,2004
Treasurystock
Commonstock
20,000 2,600 017,40
0
July 28,2006 toJuly 27,2013
2,900
Kim,Su-yeop
Unregisteredofficer
Feb.21,2005
Treasurystock
Commonstock
20,000 5,800 014,20
0
Feb. 21,2007.to Feb.20,2014.
4,000
Kim,Gwon-jung
Unregisteredofficer
Feb.21,2005
Treasurystock
Commonstock
20,000 4,500 015,50
0
Feb. 21,2007.to Feb.20,2014.
4,000
Ahn,Cheon-hak
Registeredofficer
June3,2005
Treasurystock
Commonstock
20,000 2,300 017,70
0
Jun. 3,2007 toJun. 2,2014
5,100
[Base date: Jul. 31, 2010] (Unit: share, won)
- 71 -
Choi,Jong-seong
Unregisteredofficer
Feb.18,2006
Treasurystock
Commonstock
20,000 6,600 013,40
0
Feb. 18,2008 toFeb. 17,2015
6,100
JoGeon-heeand1,181others
- -Treasurystock
Commonstock
3,074,000
2,546,100
198,000
329,900
- -
Total - - -3,214,000
2,570,500
198,000
445,500
IX. Transaction with related parties
Non applicable
- 72 -
X. Matters required to protect investors
a. Progress of main management items
Dateoffiling
Title Description Progress
Apr.
15,
2009
Business
diversificatio
n by
independent
development
of power
train for
wind power
plant
Development◆
- Development and production of 750KW rotor hub
since 2008
- Development of 1.65~2 MW class gearbox
housing and cover as requested by companies in
Germany and Finland and sample products are
now under test.
- Advanced large machine tool for processing
wind power gear box is now under development
- Basic design and detailed design completed.
Products under development◆
- Main products: power trains for wind power
including gear box (speed increasing) for wind
power generation, pitch gear box, hydraulic braking
device, and heat exchanger.
- Method of development: our own design and
testing
- Plan to roll out new large power train products
of 2 MW to 5 MW in 2011.
Expected investment◆
- R&D and facility investment: 30 billion won
(stage by stage investment up to 2013)
Under
progress
- 73 -
b. Minute of general stockholders' meeting
Date AgendaPassed or
rejectedRemarks
General
stockhold
ers'
meeting
for
Period 47
(Feb. 24,
2010)
Agenda 1: Approval of financial statements
(Cash dividend of 200 won per share)
Agenda 2: Appointment of a director
(Mr. Ahn, Cheon-hak, outside director)
Agenda 3: Approval of remuneration limit for
directors ( from 500,000,000 won to 1 billion won)
Agenda 4: Approval of remuneration limit for
auditor (150,000,000 won the same as previous
period)
Passed as
proposed
General
stockhold
ers'
meeting
for
Period 46
(Mar. 20,
2009)
Agenda 1: Approval of financial statements
(Cash dividend of 150 won per share)
Agenda 2: Partial change in Articles of
Incorporation
Agenda 3: Approval of directors (Cho Pyeong-gyu,
Park Jae-seok and Kim Do-hwan)
Agenda 4: Appointment of auditor (Choi Hong-gyu)
Agenda 5: Approval of remuneration limit for
directors ( 500,000,000 the same as before)
Agenda 6: Approval of remuneration limit for
auditor (150,000,000 won the same as previous
period)
Passed as
proposed
General
stockhold
ers'
meeting
for
Period 45
(Feb. 29,
2008)
Agenda 1: Approval of financial statements
(Cash dividend of 150 won per share)
Agenda 2: Approval of directors (Hong Young-gi
and Ahn Cheon-hak)
Agenda 3: Approval of remuneration limit for
directors ( 500,000,000 the same as before)
Agenda 4: Approval of remuneration limit for
auditor (150,000,000 won the same as previous
period)
Passed as
proposed
- 74 -
c. Important lawsuits
As of the end of the period, the company is undergoing 5 proceedings of
lawsuits (1 case worth 20,000,000 won as a plaintiff and 5 cases worth
908,000,000 won as a defendant). How the lawsuits will end is unpredictable
for now.
Use of proceeds from public offerings
Category
Date ofdeposit
Amount ofdeposit
Planned application of fundaccording to filed sheet
Actual use of fund
- -- - -
- Non applicable
(Unit: won)
- 75 -
XI. financial statements
Balance Sheet
Accounts FY 2010 FY 2009 FY 2008
Assets
.Current AssetsⅠ 366,805,667,922 386,272,613,698 273,663,779,222
(1)Quick Assets 273,847,141,606 305,047,188,326 194,947,844,256
1.Cash and CashEquivalents 108,232,511,797 82,546,590,050 64,548,965,306
Government Subsidy for Cash and Cash Equivalents
(284,373,904) (61,539,250) (9,842,617)
2.Short-term Financial Instruments 18,300,000,000 84,300,000,000 14,380,898,426
3.Trade Receivable 141,743,673,420 131,314,671,352 122,062,189,106
Allowance for Doubtful Accounts for Trade Receivables
(12,725,786,741) (11,132,415,709) (11,391,084,317)
4.Other Receivables 3,672,620,531 4,034,058,381 125,939,293
Allowance for Doubtful Accounts for Other Receivables
(91,142,479) (54,206,326) (89,595,106)
5.Accrued Income 545,111,006 844,123,969 119,982,380
6.Advance Payments 10,299,914,610 11,326,670,830 2,515,940,907
7.Prepaid Expenses Total 1,465,273,197 294,975,946 517,069,791
8.Deferred Income Taxes Assets Current 2,689,340,169 1,634,259,083 2,167,381,087
(2)Inventories 92,958,526,316 81,225,425,372 78,715,934,966
1.Merchandises 1,029,400,000 0 21,000,000
2.Finished Goods 24,052,063,866 25,152,836,539 22,747,680,246
Allowance for Loss on Valuation of Finished Goods
0 0 (274,368,575)
3.Works in Process 30,219,810,759 27,756,575,108 26,417,823,451
As Of 06/30/2010
As Of 12/31/2009
As Of 12/31/2008
(Unit : Won)
- 76 -
Allowance for Loss on Valuation of Works in Process
0 0 (141,006,495)
4.Raw Materials 30,288,710,817 21,897,337,330 22,508,094,671
Allowance for Loss on Valuation of Raw Materials
0 0 (222,175,601)
5.Supplies 307,042,918 308,803,138 307,120,986
6.Goods in Transit 7,061,497,956 6,109,873,257 7,351,766,283
.Non-current AssetsⅡ 490,653,025,354 485,973,459,968 483,523,747,622
(1)Investment Assets 53,382,646,016 50,043,871,804 54,635,945,082
1.Long-term Financial Instruments 6,000,000 6,000,000 6,000,000
2.Long-term Investment in Securities 10,093,647,111 11,917,398,328 6,047,206,711
3.Equity Method Securities 43,282,998,905 38,120,473,476 48,582,738,371
(2)Property, Plant and Equipment 426,814,320,329 428,386,118,708 426,875,405,777
1.Land 352,787,496,000 352,787,496,000 352,787,496,000
2.Buildings 58,172,695,805 58,172,695,805 57,574,789,972
Accumulated Depreciation for Buildings (23,319,447,978) (22,422,455,426) (20,637,518,331)
3.Structures 12,178,111,597 12,121,611,597 11,760,008,597
Accumulated Depreciation for Structures (7,161,512,835) (6,904,544,081) (6,396,290,575)
4.Machinery 127,531,651,045 126,922,367,956 119,400,498,862
Accumulated Depreciation for Machinery(100,547,580,029
)(99,644,858,491) (95,450,869,522)
5.Vehicles 1,985,019,298 1,873,101,698 1,880,145,089
Accumulated Depreciation for Vehicles (1,643,206,691) (1,559,487,225) (1,449,685,490)
6.Tools 16,825,974,860 15,818,971,874 13,017,409,265
Accumulated Depreciation for Office Equipment
(11,466,625,352) (10,298,333,726) (8,087,894,624)
7.Office Equipment 4,100,022,906 3,878,185,806 3,572,890,556
Accumulated Depreciation for Tools (2,810,013,062) (2,547,941,296) (2,012,528,301)
8.Construction in Progress 0 0 188,854,218
9.Machinery in Transit for Property Plant and Equipment
57,601,791 65,175,243 603,967,087
10.Timberlands for Property Plant and Equipment
124,132,974 124,132,974 124,132,974
(3)Intangible Assets 4,970,744,871 2,938,755,667 1,104,704,607
1.Industrial Property Rights 37,015,796 35,229,973 20,353,635
- 77 -
2.Development Costs 4,893,373,254 2,999,663,827 1,179,508,355
Government Subsidy for Development Costs
(244,543,479) (96,138,133) (95,157,383)
3.Computer Software 284,899,300 0 0
(4)Other Non-current Assets 5,485,314,138 4,604,713,789 907,692,156
1.Long-term Trade Receivables 4,757,226,524 4,757,226,524 0
Allowance for Doubtful Accounts for Long-term Trade Receivables
(1,451,428,532) (1,600,557,891) 0
2.Deposits Provided 2,156,454,646 1,424,983,656 814,630,656
3.Others in Other Non-current Assets 23,061,500 23,061,500 93,061,500
Total Assets 857,458,693,276 872,246,073,666 757,187,526,844
Liabilities
.Current LiabilitiesⅠ 184,972,428,014 226,130,155,266 168,865,968,492
(1)Trade Payable 101,926,957,756 97,732,375,842 74,483,325,907
(2)Short-term Borrowings 10,000,000,000 60,000,000,000 45,000,000,000
(3)Other Payables 7,659,339,948 4,836,930,820 3,198,981,907
(4)Advance for Customers 45,971,905,911 45,337,096,026 24,026,971,097
(5)Withholdings 1,141,993,353 1,321,856,676 2,898,235,259
(6)Accrued Expenses 9,645,803,338 10,599,558,721 11,295,806,999
(7)Income Taxes Payable 8,626,427,708 6,302,337,181 6,816,966,345
(8)Current Portion df Long-term Other Payables
0 0 1,250,167,000
Present Value Discount for Other Payables 0 0 (104,486,022)
.Non-current LiabilitiesⅡ 88,702,755,365 84,822,174,360 90,745,418,802
(1)Long-term Other Payables 207,240,000 92,880,000 45,000,000
Present Value Discount for Long-term Borrowings
0 0 0
(2)Deposits Received for Non-current Liabilities
2,454,747,948 2,512,624,515 6,917,516,937
(3)Provisions for Retirement and Severance Benefits
33,477,316,686 32,224,337,986 32,965,388,015
Deposits for Retirement and Severance Benefits Long-term Liabilities
(19,868,450) (1,835,621,498) (20,564,757)
Transfer to National Pension Fund (505,267,200) (540,674,700) (650,893,380)
(4)Deferred Income Taxes Liabilities Non-current
53,088,586,381 52,368,628,057 51,488,971,987
Total Liabilities 273,675,183,379 310,952,329,626 259,611,387,294
- 78 -
StockHolders' Equity
.Capital StockⅠ 83,683,597,500 83,683,597,500 83,079,250,000
(1)Common Stock 83,683,597,500 83,683,597,500 83,079,250,000
.Capital SurplusⅡ 29,658,444,770 29,539,350,637 21,811,623,187
(1)Additional Paid-in Capital 7,486,189,361 7,486,189,361 6,515,468,981
(2)Other Capital Surplus 22,172,255,409 22,053,161,276 15,296,154,206
1.Gains on Sale of Treasury Stock 11,361,632,074 11,610,868,660 4,287,921,529
2.Other Capital Surplus 10,810,623,335 10,442,292,616 11,008,232,677
.Capital AdjustmentsⅢ (11,490,352,682) (12,800,186,126) (30,771,387,456)
(1)Treasury Stock in Capital Adjustments (12,687,946,482) (14,308,417,676) (35,473,708,556)
(2)Debt to be Swapped for Equity in Other Capital Adjustments
520,417,300 520,417,300 2,080,743,600
(3)Stock Options in Other Capital Adjustments
677,176,500 987,814,250 2,621,577,500
Ⅳ.Accumulated Other Comprehensive Income
219,140,933,098 221,450,299,520 221,677,671,859
(1)Gains on Valuation of Available for Sale Securities in Capital Adjustments
0 1,279,529,892 0
(2)Losses on Valuation of Available for Sale Securities in Capital Adjustments
(170,604,625) 0 0
(3)Gains on Valuation of Equity Method Securities
9,972,797,074 9,591,955,286 11,098,857,517
(4)Losses on Valuation of Equity Method Securities
(1,240,073,693) 0 0
(5)New Account for Accumulated Other Comprehensive Income
210,578,814,342 210,578,814,342 210,578,814,342
.Retained Earnings or Accumulated DeficitⅤ 262,790,887,211 239,420,682,509 201,778,981,960
(1)Appropriated Retained Earnings for Statutory Reserve
2,528,000,000 1,915,000,000 1,500,000,000
(2)Retained Earnings Before Appropriations or Accumulated Deficit Before Disposition on Balance Sheet
260,262,887,211 237,505,682,509 200,278,981,960
Total Stockholders Equity 583,783,509,897 561,293,744,040 497,576,139,550
Total Liabilities and Stockholders Equity 857,458,693,276 872,246,073,666 757,187,526,844
- 79 -
Income Statement
From 01/01/2010 To 06/30/2010
From 01/01/2009 To 06/30/2009
From 01/01/2009 To 12/31/2009
From 01/01/2008 To 12/31/2008
(Unit : Won)
Accounts
FY 2010 FY 2009
FY 2009 FY 2008
3 Months 6 Months 3 Months 6 Months
.Sales RevenueⅠ153,875,46
6,385280,573,544
,359112,039,559
,089209,010,789
,133467,661,410
,336435,012,986
,525
1.Sales Revenue of Finished Goods
135,446,143,174
248,444,671,145
103,567,215,767
193,548,078,248
419,212,867,934
385,008,160,251
2.Sales Revenue of Merchandises
18,429,323,211
32,128,873,214
8,472,343,32215,462,710,
88548,448,542,
40250,004,826,
274
Ⅱ.Costs of Goods and Services Sold
129,614,416,508
238,164,322,486
93,225,400,700
175,095,103,972
399,798,734,727
380,909,368,644
1.Cost of Finished Goods Sold112,102,80
7,680207,403,344
,55085,202,075,
438160,340,051
,849352,763,068
,261332,102,968
,919
A.Beginning Inventory of Finished Goods
31,018,147,482
25,152,836,539
24,448,813,599
22,747,680,246
22,747,680,246
11,469,993,833
B.Cost of Finished Goods103,318,62
0,392201,915,732
,06181,255,413,
213153,410,900
,358345,267,992
,951323,976,096
,472
C.Transfer from Other Accounts
2,265,294,0785,909,577,8
562,281,053,8
747,100,754,3
3812,494,369,
46020,875,425,
624
D.New Account for Cost of Finished Goods Sold
0 0 0 0 0 859,066,288
E.Transfer to Other Accounts(447,190,40
6)(1,522,738,0
40)(895,161,04
1)(1,031,238,8
86)(2,594,137,8
57)(2,329,933,0
52)
F.Ending Inventory of Finished Goods
(24,052,063,866)
(24,052,063,866)
(21,888,044,207)
(21,888,044,207)
(25,152,836,539)
(22,747,680,246)
2.Cost of Merchandises Sold17,511,608,
82830,760,977,
9368,023,325,2
6214,755,052,
12347,035,666,
46648,806,399,
725
A.Beginning Inventory of Merchandises
135,500,000
0 292,670,000 21,000,000 21,000,000 33,080,000
B.Cost of Merchandises Purchased
18,466,461,858
31,951,183,866
8,229,106,06215,241,395,
48347,391,599,
59749,284,723,
145
- 80 -
C.Transfer to Other Accounts(60,953,030
)(160,805,93
0)(269,880,80
0)(278,773,36
0)(376,933,13
1)(490,403,42
0)
D.Ending Inventory of Merchandises
(1,029,400,000)
(1,029,400,000)
(228,570,000)(228,570,00
0)0 (21,000,000)
.Gross Profit or LossⅢ24,261,049,
87742,409,221,
87318,814,158,
38933,915,685,
16167,862,675,
60954,103,617,
881
Ⅳ.Selling and Administrative Expenses
6,033,801,51011,025,379,
4076,365,966,3
6610,992,781,
35217,700,935,
70418,063,337,
767
1.Salaries and Wages1,462,355,1
172,924,919,8
801,072,321,2
152,565,679,4
105,263,160,3
505,080,229,3
08
2.Retirement and Severance Benefits
115,878,294479,696,155 80,373,056 240,572,956 477,453,398 433,251,795
3.Employee Benefits194,052,60
1405,558,859 116,860,950 232,231,260 468,729,244 453,295,760
4.Travel Expenses 79,108,544 145,973,006 84,157,295 177,889,888 327,122,930 354,904,411
5.Freight Expenses464,905,32
6934,684,246 377,163,358 715,718,155
1,604,959,3311,760,722,6
40
6.Export Expenses628,229,26
41,119,195,2
32453,698,912 757,598,563
1,914,033,1451,100,052,7
35
7.Commissions388,323,53
7731,311,531 432,905,323 971,441,913
2,064,054,3171,128,820,2
74
8.Communication Expenses 14,845,201 30,858,028 14,669,554 31,392,614 64,523,854 53,840,031
9.Utility Expenses 12,707,437 80,033,436 0 52,109,623 84,772,600 101,647,595
10.Taxes and Dues 40,146,549 66,031,246 31,808,814 67,848,002 172,331,590 241,841,603
11.Rental Expenses 11,428,560 18,496,200 7,853,080 15,518,780 30,652,490 22,517,800
12.Depreciation 29,705,559 58,602,446 28,896,810 57,793,613 115,586,229 117,151,779
13.Repair Expenses 43,445,910 51,895,278 4,492,800 7,995,300 35,306,830 104,254,538
14.Insurance Premiums 47,770,580 111,227,697 239,756,328 308,434,329 461,537,628 486,231,472
15.Entertainment Expenses228,772,47
7573,783,649 88,911,273 201,236,536 777,187,635 458,289,893
16.Advertising Expenses564,403,97
6653,476,704 186,253,438 266,598,438 603,576,278 632,622,251
17.Supply Expenses 6,743,601 16,296,380 7,360,937 11,552,717 22,789,285 19,188,622
- 81 -
18.Vehicle Maintenance Expenses
24,630,929 45,923,933 11,817,128 19,939,788 60,534,925 48,114,716
19.Overseas Marketing Expenses
371,389,001576,063,334 284,143,185 474,693,374 964,874,258 771,188,992
20.Warranty Expenses263,454,80
5471,308,808 125,248,965 221,452,427 527,486,854 543,069,691
21.Publication Expenses 20,279,425 91,484,758 18,883,355 41,966,755 129,722,634 69,999,154
22.Electronic Data Processing Expenses for Selling and Administrative Expenses
896,819 1,577,275 776,546 1,141,092 2,354,276 5,224,731
23.Compensations Expenses Associated with Stock Options
0 0 0 0 0 3,911,916
24.Expenses of Allowance for Doubtful Accounts
1,017,423,2571,429,328,7
382,692,104,5
233,540,057,0
591,505,931,5
774,057,065,3
61
25.Miscellaneous Expenses 2,312,013 3,962,133 2,071,229 5,624,320 13,526,365 12,852,589
26.concil 592,728 3,690,455 3,438,292 6,294,440 8,727,681 3,048,110
.Operating Income or LossⅤ18,227,248,
36731,383,842,
46612,448,192,
02322,922,903,
80950,161,739,
90536,040,280,
114
.Non-Operating RevenuesⅥ4,715,848,0
0210,604,060,
3832,676,238,1
158,478,557,9
4014,198,690,
27920,200,944,
702
1.Interest Income714,583,89
71,592,798,3
41677,481,723
1,368,223,4743,261,189,6
122,773,240,6
40
2.Dividend Income 0 28,360,600 0 91,337,800 91,337,800 250,000,000
3.Rental Income600,844,08
21,183,060,5
52437,258,816 932,460,806
2,023,226,2472,037,162,2
29
4.Gains on Foreign Currency Translation
967,692,008637,297,767 0 267,501,290 129,733,831
2,453,392,874
5.Gains on Foreign Currency Transactions
676,621,229769,249,360 290,133,875
2,335,095,5482,808,492,2
067,651,685,3
42
6.Recovery of Impairment Losses on Available for Sale Securities in Investment Assets
03,817,129,1
630 0 0 0
7.Gains on Valuation of Equity Method Securities
832,705,3341,322,600,6
88213,755,219 231,954,451 91,312,969 0
8.Gains on Sale of Investment Securities for Non-Operating Revenues
0 0 0 0 0 10,148,600
- 82 -
9.Gains on Sale of Property, Plant and Equipment
146,817,768146,817,768 96,728,000 249,567,000 257,562,000
1,188,509,900
10.Gains on Sale of Equity Method Securities
0 0 01,467,448,1
001,467,448,1
000
11.Gain on Sale of Trading Securities
0 0 0 0 01,669,137,5
88
12.Reversal of Allowance for Doubtful Accounts
1,151,333 0 0 0 35,388,780 0
13.Miscellaneous Income775,432,35
11,106,746,1
44960,880,482
1,534,969,4714,032,998,7
342,167,667,5
29
.Non-Operating ExpensesⅦ1,633,719,8
433,882,343,8
283,779,295,7
926,312,729,1
2712,341,100,
46410,335,484,
932
1.Interest Expenses152,876,71
2369,128,765 816,799,588
1,869,152,5963,573,861,3
593,142,820,4
68
2.Losses on Foreign Currency Transactions
326,420,940893,937,075 823,359,064 953,231,303
2,004,447,835616,188,047
3.Donations116,000,00
0131,000,000 0 0 23,190,000 30,000,000
4.Losses on Foreign Currency Translation
0 919,058,020 756,432,076 147,779,5781,131,098,5
04745,781,983
5.Losses on Valuation of Equity Method Securities
295,414,191681,386,805 984,475,309
2,335,048,8782,110,020,5
53532,683,861
6.Other Allowance for Doubtful Accounts
36,936,153 0 0 0 32,250,927
7.New Account for Non-Operating Expenses
0 0 0 14,741,580 14,741,5804,021,787,9
50
8.Losses on Sale of Trading Securities
0 0 0 0 0 29,816,199
9.Miscellaneous Losses743,008,00
0850,897,010 398,229,755 992,775,192
3,483,740,6331,184,155,4
97
Ⅷ.Income Loss Before Income Taxes Expenses
21,309,376,526
38,105,559,021
11,345,134,346
25,088,732,622
52,019,329,720
45,905,739,884
.Income Taxes ExpensesⅨ4,666,228,8
618,666,513,6
632,404,726,3
654,959,353,7
8710,229,649,
17113,848,088,
000
.Net Income or LossⅩ16,643,147,
66529,439,045,
3588,940,407,9
8120,129,378,
83541,789,680,
54932,057,651,
884
XI.Earnings or Losses Per Share
1.Basic Earnings or Net Loss Per Share
541Won 958Won 317Won 719Won 1,468Won 1,169Won
2.Diluted Earnings or Losses Per Share
533Won 944Won 308Won 694Won 1,427Won 1,118Won
- 83 -
Statement of Appropriation of Retained Earnings Statement of
Disposition of Accumulated Deficit
From 01/01/2009 To 12/31/2009
From 01/01/2008 To 12/31/2008
From 01/01/2007 To 12/31/2007
(Unit : Won)
Accounts FY 2009 FY 2008 FY 2007
.Retained Earnings BeforeⅠAppropriations or Accumulated
Deficit Before Disposition
237,505,682,509 200,278,981,960 185,592,626,746
1.Unappropriated Retained Earnings
or Undisposed Accumulated Deficit
from Beginning Year
195,716,001,960 180,842,196,646 159,343,378,584
2.Retirement of Treasury Stock 0 -12,620,866,570 0
3.Net Income or Loss 41,789,680,549 32,057,651,884 26,249,248,162
.Subtotal of Retained EarningsⅡBefore Appropriation
237,505,682,509 200,278,981,960 185,592,626,746
.Appropriations of RetainedⅢEarnings
6,738,337,800 4,562,980,000 4,750,430,100
1.Legal Reserves in Statement of
Appropriation Retained Earnings613,000,000 415,000,000 432,000,000
2.Dividends 6,125,337,800 4,147,980,000 4,318,430,100
A.Cash Dividends 6,125,337,800 4,147,980,000 4,318,430,100
Dividends Per Share and Dividend
Rate Per Share200 150 150
.Disposition of DeficitⅣ
.Unappropriated Retained EarningsⅤor Undisposed Accumulated Deficit
Carried over to Subsequent Year
230,767,344,709 195,716,001,960 180,842,196,646
- 84 -
Statement of Cash Flows
From 01/01/2010 To 06/30/2010
From 01/01/2009 To 06/30/2009
From 01/01/2009 To 12/31/2009
From 01/01/2008 To 12/31/2008
(Unit : Won)
AccountsFY 2010
Semi-annualFY 2009Semi-annual
FY 2009 FY 2008
.Cash Flows from Operating ActivitiesⅠ 19,676,191,107 41,408,870,755 53,997,384,028 29,053,278,064
1.Net Income or Loss 29,439,045,358 20,129,378,835 41,789,680,549 32,057,651,884
2.Additions of Expenses of Non-Cash Transactions
10,990,578,299 12,376,950,670 20,343,677,142 24,305,300,824
A.Depreciation 5,134,971,336 4,863,179,367 10,029,881,990 8,804,144,261
B.Losses on Foreign Currency Translation
303,505,582 146,886,385 831,272,905 268,054,089
C.Expenses of Allowance for Doubtful Accounts
1,429,328,738 3,540,057,059 1,505,931,577 4,057,065,361
D.Expenses of Allowance for Other Doubtful Accounts
36,936,153 0 0 32,250,927
E.Losses on Sale of Trading Securities 0 0 0 29,816,199
F.Amortization of Intangible Assets 34,807,734 40,725,963 81,916,181 656,149,628
G.Interest Expenses 0 52,243,011 0 200,239,648
H.Losses on Valuation of Equity Method Securities
681,386,805 2,335,048,878 2,110,020,553 532,683,861
I.Retirement and Severance Benefits 3,369,641,951 1,384,068,427 5,769,912,356 5,699,196,984
J.Compensation Expenses Associated with Stock Options
0 0 0 3,911,916
K.New Account for Additions of Expenses of Non-Cash Transactions
0 14,741,580 14,741,580 4,021,787,950
3.Deduction of Revenues of Non-Cash (5,952,053,851) (2,187,631,930) (1,980,717,442) (4,893,148,128)
- 85 -
Transactions
A.Gains on Foreign Currency Translation
637,145,632 238,662,379 129,005,593 2,025,352,040
B.Gains on Sale of Property, Plant and Equipment
146,817,768 249,567,000 257,562,000 1,188,509,900
C.Gains on Sale of Long-Term Investment Securities
0 0 0 10,148,600
D.Gains on Sale of Trading Securities 0 0 0 1,669,137,588
E.New Account for Deduction of Revenues of Non-Cash Transactions
28,360,600 0 0 0
F.Recovery of Impairment Losses on Available for Sale Securities in Investment Assets
3,817,129,163 0 0 0
G.Gains on Valuation of Equity Method Securities
1,322,600,688 231,954,451 91,312,969 0
H.Gains on Sale of Equity Method Securities
0 1,467,448,100 1,467,448,100 0
I.Reversal of Allowance for Doubtful Accounts
0 0 35,388,780 0
4.Changes in Assets and Liabilities from Operating Activities
(14,801,378,699) 11,090,173,180 (6,155,256,221) (22,416,526,516)
A.Decrease or Increase in Trade Receivables
(10,094,214,757) 5,908,231,256 (9,511,150,854) (6,827,688,530)
B.Decrease or Increase in Other Receivables
361,437,850 (710,391,304) (3,908,119,088) 1,216,974,867
C.Decrease or Increase in Accrued Revenues
299,012,963 (100,502,893) (724,141,589) 284,739,766
D.Decrease or Increase in Advance Payments
1,026,756,220 235,436,744 (8,810,729,923) (707,273,444)
E.Decrease or Increase in Prepaid Expenses
(1,170,297,251) (906,534,008) 222,093,845 (196,840,494)
F.Decrease or Increase in Curret Portion of Deferred Income Taxes Assets
(1,055,081,086) (927,297,435) 533,122,004 593,388,697
G.Decrease or Increase in Inventories (12,764,572,622) (10,456,524,138) (7,939,211,120) (23,407,398,187)
H.Decrease or Increase in Long-term Trade Receivables
0 0 (5,366,986,160) 0
I.Decrease or Increase Other Operating Assets
0 70,000,000 0 0
- 86 -
J.Increase or Decrease in Trade Payables
4,193,434,653 (8,301,579,204) 23,251,168,573 5,475,865,522
K.Increase or Decrease in Other Payables
2,822,409,128 1,494,102,387 1,637,948,913 (208,885,995)
L.Increase or Decrease in Advances from Customers
634,809,885 29,442,612,638 21,310,124,929 7,962,889,250
M.Increase or Decrease in Accrued Expenses
(953,755,383) 723,322,921 (696,248,278) (201,006,605)
N.Increase or Decrease in Income Taxes Payable
2,324,090,527 689,262,412 (514,629,164) (1,673,216,346)
O.Increase or Decrease in Withholdings (164,950,388) (915,276,973) (1,576,378,583) 1,674,327,331
P.Increase Decrease Withholdings Quarantee Deposits
(57,876,567) (4,802,630,464) (4,404,892,422) (1,935,098,141)
Q.Increase or Decrease in Deferred Income Taxes Liabilities
62,920,832 (210,911,467) (1,441,426,858) (11,516,154,363)
R.Decrease or Increase in Deferred Income Taxes Assets
0 0 0 10,783,174,283
S.Payment for Retirement and Severance Benefit
(2,116,663,251) (146,233,292) (6,510,962,385) (4,135,746,991)
T.Increase or Decrease in National Pension Fund
35,407,500 0 110,218,680 60,998,900
U.Decrease or Increase Deposits for Retirement Severance Benefits
1,815,753,048 5,086,000 (1,815,056,741) (5,816,236)
V.New Account for Changes in Assets and Liabilities from Operating Activities
0 0 0 346,240,200
.Cash Flows from Investing ActivitiesⅡ 60,816,848,561 (20,410,299,365) (74,998,082,689) 23,661,587,795
1.Cash Inflows from Investing Activities 84,372,378,723 67,191,986,900 7,718,000,450 61,096,783,994
A.Proceeds from Sale of Short-term Financial Instruments
84,200,000,000 59,481,986,450 0 23,045,344,779
B.Decrease in Short-term Loans 0 0 0 89,390,733
C.Proceeds from Sale of Long-term Investment Securities
0 0 0 47,974,000
D.Proceeds from Sale of Trading Securities
0 0 0 16,489,590,782
- 87 -
E.Decrease in Deposits Provided 23,380,000 0 0 3,000,000
F.Proceeds from Sale of Land 0 0 0 1,169,750,000
G.Proceeds from Sale of Machinery 148,998,723 244,180,000 245,680,000 179,713,363
H.Proceeds from Sale of Vehicles 0 5,400,000 11,900,000 1,710,337
I.Proceeds from Sale of Office Equipment
0 0 0 2,000,000
J.Proceeds from Sale of Equity Method Securities
0 7,460,420,450 7,460,420,450 20,068,310,000
2.Cash Outflows from Investing Activities
(23,555,530,162) (87,602,286,265) (82,716,083,139) (37,435,196,199)
A.Purchase of Short-term Financial Instruments
18,200,000,000 81,701,088,024 69,919,101,574 0
B.Purchase of Long-term Investment Securities
0 945,502,800 4,229,769,117 20,070,000
C.Purchase of Trading Securities 0 0 0 14,850,269,393
D.Purchase of Equity Method Securities 0 0 0 7,592,972,350
E.Increase in Deposits Provided 754,850,990 421,753,000 540,353,000 75,000,000
F.Purchase of Buildings 0 0 362,000,000 542,988,000
G.Purchase of Structures 56,500,000 55,000,000 361,603,000 742,645,006
H.Purchase of Machinery 1,139,798,000 1,705,841,970 2,305,844,500 7,842,239,000
I.Purchase of Vehicles 111,917,600 0 48,524,184 112,079,963
J.Purchase of Tools 921,404,500 554,666,400 1,913,918,131 1,989,886,840
K.Purchase of Office Equipment 226,237,100 108,426,250 305,295,250 1,152,718,545
L.Increase Machinery in Transit for Property Plant and Equipment
78,025,034 1,735,824,326 756,255,527 1,834,833,377
M.Purchase of Construction in Progress 0 57,451,615 57,451,615 72,526,463
N.Purchase of Industrial Property Rights 4,521,000 4,155,000 19,006,000 4,327,000
- 88 -
O.Purchase of Development Costs 1,762,381,938 312,576,880 1,896,961,241 602,640,262
P.Purchase of Computer Software 299,894,000 0 0 0
.Cashflows from Financing ActivitiesⅢ (55,029,952,575) 14,946,390,275 38,946,626,772 (38,850,908,604)
1.Cash Inflows from Financing Activities 1,095,385,225 54,094,370,275 44,285,287,750 45,659,058,150
A.Proceeds from Short-term Borrowings 0 50,000,000,000 15,000,000,000 45,000,000,000
B.Increase in Long-term Other Payables
114,360,000 0 92,880,000 0
C.Exercise of Stock Options 981,025,225 0 0 659,058,150
D.Proceeds from Sale of Treasury Stock
0 4,094,370,275 29,192,407,750 0
2.Cash Outflows from Financing Activities
(56,125,337,800) (39,147,980,000) (5,338,660,978) (84,509,966,754)
A.Payments in Dividends 6,125,337,800 4,147,980,000 4,147,980,000 4,318,430,100
B.Repayments of Short-term Borrowings
50,000,000,000 35,000,000,000 0 55,083,049,294
C.Purchase of Treasury Stock 0 0 0 23,858,319,360
D.Decrease in Current Portion df Long-term Other Payables
0 0 1,145,680,978 1,250,168,000
E.Repayments of Long-term Other Payables
0 0 45,000,000 0
Ⅳ.Increase in Other Cash and Cash Equivalents
0 0 0 29,012,649
Ⅴ.Decrease in Other Cash and Cash Equivalents
0 0 0 0
Ⅵ.Increase or Decrease in Cash and Cash Equivalents
25,463,087,093 35,944,961,665 17,945,928,111 13,892,969,904
Ⅶ.Cash and Cash Equivalent at Beginning
82,485,050,800 64,548,965,306 64,539,122,689 50,646,152,785
.Cash and Cash Equivalent at EndⅧ 107,948,137,893 100,493,926,971 82,485,050,800 64,539,122,689
- 89 -
Statement of Changes in Equity
From 01/01/2010 To 06/30/2010
From 01/01/2009 To 06/30/2009
From 01/01/2008 To 12/31/2008
From 01/01/2009 To 12/31/2009
(Unit : Won)
AccountsCapitalStock
CapitalSurplus
CapitalAdjustments
Accumulated Other
Comprehensive Income
RetainedEarnings orAccumulated Deficit
Total Equity
2009.01.01 (beginning)83,079,250,
00021,811,623,
187(30,771,387,
456)221,677,671
,859201,778,981
,960497,576,139,5
50
1.Dividends (4,147,980,0
00)(4,147,980,000
)
2.Retained Earnings AfterAppropriations
197,631,001
,960493,428,159,5
50
3.Sale of Treasury Stock 21,165,290,
880
21,165,290,880
4.Gains(Loss) on Sale ofTreasury Stock
7,322,947,1
31 7,322,947,131
5.Debt to be Swapped for Equityin Other Capital Adjustments
604,347,500 970,720,380(1,560,326,3
00) 14,741,580
6.Stock option (1,633,763,2
50)
(1,633,763,250)
7.Gains on Valuation of EquityMethod Securities
(1,506,902,2
31) (1,506,902,231
)
8.Losses on Valuation ofAvailable for Sale Securities
1,279,529,8
92 1,279,529,892
9.New Account for TotalEquity(3)
(565,940,06
1) (565,940,061)
10.Net Income or Loss 41,789,680,
54941,789,680,54
9
2009.12.31 (end)83,683,597,
50029,539,350,
637(12,800,186,
126)221,450,299
,520239,420,682
,509561,293,744,0
40
2008.01.01 (beginning)80,663,785,
00011,161,546,
083(19,166,573,
966)(702,827,68
2)186,660,626
,746258,616,556,1
81
1.Dividends (4,318,430,1
00)(4,318,430,100
)
2.New Account for TotalEquity(5)
12,620,866,
570 (12,620,866,
570)
3.Retained Earnings AfterAppropriations
169,721,330
,076254,298,126,0
81
4.Sale of Treasury Stock 1,486,707,5
84 1,486,707,584
- 90 -
5.Gains(Loss) on Sale ofTreasury Stock
(457,929,52
7) (457,929,527)
6.Debt to be Swapped for Equityin Other Capital Adjustments
1,569,677,5004,114,068,1
50(1,661,957,7
00) 4,021,787,950
7.Stock option (192,110,58
4) (192,110,584)
8.Gains on Valuation of EquityMethod Securities
11,096,576,
941 11,096,576,94
1
9.New Account for Total Equity (23,858,319,
360)
(23,858,319,360)
10.Increase Paid in Capital andCapital Surplus
845,787,5002,401,400,8
31 3,247,188,331
11.New Account for TotalEquity(3)
4,592,537,6
50 4,592,537,650
12.Losses on Valuation of EquityMethod Securities
705,108,258 705,108,258
13.New Account for TotalEquity(7)
210,578,814
,342 210,578,814,3
42
14.Net Income or Loss 32,057,651,
88432,057,651,88
4
2008.12.31 (end)83,079,250,
00021,811,623,
187(30,771,387,
456)221,677,671
,859201,778,981
,960497,576,139,5
50
2009.01.01 (beginning)83,079,250,
00021,811,623,
187(30,771,387,
456)221,677,671
,859201,778,981
,960497,576,139,5
50
1.Dividends (4,147,980,0
00)(4,147,980,000
)
2.Retained Earnings AfterAppropriations
197,631,001
,960493,428,159,5
50
3.Sale of Treasury Stock 6,419,506,6
32 6,419,506,632
4.Gains(Loss) on Sale ofTreasury Stock
(768,889,88
8) (768,889,888)
5.Debt to be Swapped for Equityin Other Capital Adjustments
604,347,500 970,720,380(1,560,326,3
00) 14,741,580
6.Stock option (1,310,769,7
50)
(1,310,769,750)
7.Gains on Valuation of EquityMethod Securities
1,706,137,1
69 1,706,137,169
8.New Account for TotalEquity(3)
702,120,691 702,120,691
9.Net Income or Loss 20,129,378,
83520,129,378,83
5
2009.06.30 (end)83,683,597,
50022,715,574,
370(27,222,976,
874)223,383,809
,028217,760,380
,795520,320,384,8
19
2010.01.01 (beginning)83,683,597,
50029,539,350,
637(12,800,186,
126)221,450,299
,520239,420,682
,509561,293,744,0
40
1.Dividends (6,125,337,8
00)(6,125,337,800
)
- 91 -
2.Retained Earnings AfterAppropriations
233,295,344
,709555,168,406,2
40
3.New Account for TotalEquity(8)
56,497,144 56,497,144
4.Sale of Treasury Stock 1,620,471,1
94 1,620,471,194
5.Gains(Loss) on Sale ofTreasury Stock
(249,236,58
6) (249,236,586)
6.Stock option (310,637,75
0) (310,637,750)
7.Gains on Valuation of EquityMethod Securities
380,841,788 380,841,788
8.New Account for TotalEquity(6)
368,330,719 368,330,719
9.Losses on Valuation ofAvailable for Sale Securities
(1,240,673,6
93) (1,240,073,693
)
10.Losses on Valuation of EquityMethod Securities
(1,450,134,5
17) (1,450,134,517
)
11.Net Income or Loss 29,439,045,
35829,439,045,35
8
2010.06.30 (end)83,683,597,
50029,789,360,
392(11,490,352,
682)219,140,933
,098262,790,887
,211583,783,509,8
97
- 92 -
XII. Supplementary schedules
2. Consolidated financial statements
- See the attached half-year report forthe notes to the financial statements.
3. Allowance for doubtful accounts
a. Allowance for doubtful accounts
(1) Allowance for doubtful accounts for the recent 3 years
(Unit: won)
Period Accounts Total receivablesAllowance fordoubtful account
Rate of allowancefor doubtful accountto total receivables
48firsthalf
Trade receivables 146,500,899,944 14,177,215,273 9.68%
Other receivables 3,672,620,531 91,142,479 2.48%
Total 150,173,520,475 14,268,357,752 9.50%
47
Trade receivables 136,071,897,876 12,732,973,600 9.36%
Other receivables 4,034,058,381 54,206,326 1.34%
Total 140,105,956,257 12,787,179,926 9.13%
46
Trade receivables 122,062,189,106 11,391,084,317 9.33%
Other receivables 125,939,293 89,595,106 71.14%
Total 122,188,128,399 11,480,679,423 9.40%
- 93 -
(2) Changes in allowance for doubtful account for the last 3 years
(Unit: million won)
CategoryPeriod48
first half
Period47
Period46
1. Beginning balance of allowances for doubtfulaccounts
12,787 11,481 6,965
2. Net allowances for doubtful accounts ( ± )①-② ③ - 165 -
Written off receivables① - 165 -
Recovery of written off receivables② - - -
Others③ - - -
3. Allowances for doubtful accounts 1,481 1,471 4,516
4. Ending balance of allowances for doubtfulaccounts
14,268 12,787 11,481
(3) Policy of setting allowance for doubtful accounts related to trade
receivables.
The company sets the allowance for doubtful accounts for the balance of trade
receivables as of the balance sheet date taking into consideration the individual
analysis method and past recovery performances.
a) Based on the balance of trade receivables.
1% for trade receivables unpaid for 1 to 6 months.
10% for trade receivables unpaid for the last to 12 months.
50% for trade receivables unpaid for the last 1 year to 2 years.
100% for trade receivables unpaid for 2 years or longer.
b) Based on the recoverableness of individual receivables.
- 94 -
(4) Trade receivables as of the end of reporting period by unpaid period
(Unit: million won)
Category6 monthsor less
Longer than 6months butnot exceeding1 year
Exceeding 1year but notexceeding 2years
Exceeding2 years
Total
Amounts
Generaltransaction
89,752 10,570 5,000 11,481 116,803
Transactionwith relatedparties
23,717 1,937 2,608 1,436 29,698
Total 113,469 12,507 7,608 12,917 146,501
Composition 77.45 8.54 5.19 8.82 100.00
4. Inventories and inspections
(1) Inventories by business for the last 3 years
(Unit: million won)
Businesses AccountsPeriod 48first half
Period 47 Period 46 Remarks
Automotiveparts
Goods - - -
Products 4,902 4,734 4,329
Work inprocess
9,753 8,949 10,126
Raw materials 10,331 9,602 9,958
Supplies 183 188 198
Goods in transit 543 509 3,057
Subtotal 25,712 23,982 27,668
Machinetools
Goods 1,029 - 21
Products 5,080 6,529 3,529
Work inprocess
4,145 3,711 3,597
Raw materials 4,066 3,894 4,417
Supplies 1 1 1
Goods in transit - 157 414
Subtotal 14,321 14,292 11,979
- 95 -
Castingproducts
Goods - - -
Products 6,845 3,927 3,994
Work inprocess
641 737 452
Raw materials 3,424 2,379 3,364
Supplies - - -
Goods intransit
153 100 1
Subtotal 11,063 7,143 7,811
Others
Goods - - -
Products 7,225 9,962 10,622
Work inprocess
15,681 14,359 12,102
Raw materials 12,468 6,022 4,547
Supplies 123 120 108
Goods intransit
6,365 5,344 3,879
Subtotal 41,862 35,808 31,258
Total
Goods 1,029 - 21
Products 24,052 25,152 22,474
Work inprocess
30,220 27,756 26,277
Raw materials 30,289 21,897 22,286
Supplies 307 309 307
Goods intransit
7,061 6,110 7,351
Subtotal 92,958 81,225 78,716
Inventory to asset ratio (%)[Inventory ÷ ending assets
× 100]10.84% 9.31% 10.40%
Inventory turnover[Annual cost of sales ÷{(Beginning inventory +ending inventory)÷2}]
5.47 5.00 5.71
- 96 -
(2) Inventories
The company has its own property control team and the team surveys the
periodic property at the end of every month. Outside auditors are present for
the property survey which is conducted as of the end of every fiscal year.
Accordingly, as the company does not conduct the half-year property survey
in presence of outside auditors, the carrying value on the books as of the end
of the half-year is used for half-year financial statements.
Confirmation by expert【 】
1. Confirmation by expert
- N/A
2. Relation with expert
- N/A