Samsung Engineering Co., Ltd. Non-Consolidated Financial Statements December 31, 2008 and 2007 Samsung Engineering Co., Ltd
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Samsung Engineering Co., Ltd. Non-consolidated Financial Statements December 31, 2008 and 2007 Samsung Engineering Co., Ltd. Index December 31, 2008 and 2007 Page(s) Report of Independent Auditors ................................................................................... 1 - 2 Non-Consolidated Financial Statements Balance Sheets................................................................................................................ 3 - 4 Statements of Income...................................................................................................... 5 - 6 Statements of Appropriations of Retained Earnings ......................................................... 7 Statements of Changes in Shareholders’ equity............................................................... 8 - 9 Statements of Cash Flows ............................................................................................... 10 - 11 Notes to the Non-Consolidated Financial Statements ...................................................... 12 - 55 Report of Independent Accountants' Review of Internal Accounting Control System ....................................................... 56 Report on the Operations of the Internal Accounting Control System .................................................................. 57 A member firm of www.samil.com LS Yongsan Tower 191 Hangangno 2-ga, Yongsan-gu Seoul 140-702, KOREA (Yongsan P.O. Box 266, 140-600) Report of Independent Auditors To the Shareholders and Board of Directors of Samsung Engineering Co., Ltd. We have audited the accompanying non-consolidated balance sheets of Samsung Engineering Co., Ltd. (the “Company”) as of December 31, 2008 and 2007, and the related non-consolidated statements of income, appropriations of retained earnings, changes in shareholders' equity and cash flows for the years then ended, expressed in Korean won. 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. We conducted our audits in conformity 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of Samsung Engineering Co., Ltd. as of December 31, 2008 and 2007, and the results of its operations, the changes in its retained earnings, the changes in its shareholders' equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea. Samil PricewaterhouseCoopers is the Korean member firm of the PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 1 Without qualifying our opinion, we draw your attention to Note 14 to the accompanying non- consolidated financial statements, in which as discussed, the amount of Company’s obligation arising from the suit filed by Samsung Motors Inc.’s creditors is uncertain as of date of this report. Accordingly, the ultimate effect of this matter on the Company’s financial statements can not be reasonably determined. The amounts expressed in U.S. dollars, provided solely for the convenience of the reader and have been translated on the basis set forth in Note 3 to the accompanying non-consolidated financial statements. Accounting principles and auditing standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations, changes in its shareholders’ equity and cash flows in conformity with accounting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, the procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those who are informed about Korean accounting principles or auditing standards and their application in practice. Seoul, Korea February 16, 2009 This report is effective as of February 16, 2009, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 2 Samsung Engineering Co., Ltd. Non-Consolidated Balance Sheets December 31, 2008 and 2007 (In millions of Korean won, in thousands of US dollars (Note 3)) 2008 2007 2008 2007 Assets Current assets Cash and cash equivalents ￦ 137,588 ￦ 274,150 $ 109,457 $218,098 Short-term financial instruments (Note 4) 373,667 345,574 297,269 274,920 Current portions of held-to-maturity securities (Note 7) 1,236 2,814 983 2,239 Trade accounts and notes receivable, net of allowance for doubtful accounts (Notes 5) 577,134 326,631 459,136 259,849 Other accounts and notes receivable, net of allowance for doubtful accounts (Note 5) 20,306 39,912 16,154 31,751 Inventories 11,431 - 9,094 - Currency forwards (Note 14) 20,102 7,111 15,992 5,657 Accrued income 12,770 9,326 10,159 7,419 Advanced payments, net of allowance for doubtful accounts 104,388 36,017 83,045 28,654 Prepaid construction expenses 5,321 14 4,233 11 Prepaid expenses 37,889 31,170 30,144 24,797 Short-term deferred income tax assets 1,877 (Note 22) 5,809 2,360 4,621 Others - 42 - 35 Total current assets 1,307,641 1,075,121 1,040,287 855,307 Long-term available-for-sale securities (Note 6) 51,858 52,648 41,256 41,884 Held-to-maturity securities (Note 7) 4,317 4,519 3,434 3,595 Equity-method investments (Note 8) 53,852 24,953 42,842 19,851 Property, plant and equipment, net of accumulated depreciation (Note 9) 182,526 163,883 145,208 130,376 Intangible assets, net of accumulated amortization (Note 10) 3,557 4,048 2,830 3,220 Long-term deposits 75,369 51,907 59,960 41,295 Other non-current assets 729 819 578 652 Total other assets 372,208 302,777 296,108 240,873 Total assets ￦1,679,849 ￦1,377,898 $1,336,395 $1,096,180 3 Samsung Engineering Co., Ltd. Non-Consolidated Balance Sheets December 31, 2008 and 2007 (In millions of Korean won, in thousands of US dollars (Note 3)) 2008 2007 2008 2007 Liabilities and Shareholders' Equity Trade accounts and notes payable ￦ 366,636 ￦ 252,107 $ 291,675 $ 200,563 Other accounts and notes payable 60,222 53,069 47,909 42,219 Currency forwards (Note 14) 11,293 40 8,984 32 Advances from customers (Note 15) 459,216 389,435 365,327 309,813 Accrued expenses (Notes 12 and 13) 3,558 11,208 2,831 8,917 Income taxes payable (Note 22) 46,590 30,765 37,065 24,475 Provision for construction losses (Note 13) 50,221 15,740 39,953 12,522 Others 17,043 26,906 13,558 21,403 Total current liabilities 1,014,779 779,270 807,302 619,944 Guarantee deposits received 51,494 54,789 40,967 43,587 Long-term accrued expenses, net (Notes 12 and 13) 6,331 2,421 5,036 1,926 Accrued severance benefits, net (Note 11) 22,503 12,705 17,903 10,109 Provision for construction warranties (Note 13) 14,904 8,649 11,856 6,880 Long-term deferred income tax liabilities (Note 22) 8,039 6,709 6,395 5,337 Total liabilities 1,118,050 864,543 889,459 687,783 Commitments and contingencies (Note 14) Shareholders' equity Capital stock Common stock (Note 16) 200,000 200,000 159,109 159,109 Capital surplus Paid-in capital in excess of par value 56,624 56,624 45,047 45,047 Capital adjustments Treasury stock (Note 18) (153,430) (57,609) (122,062) (45,831) Loss on disposal of treasury stock (350) (408) (278) (324) Stock options (Note 20) 70 346 56 275 Accumulated other comprehensive income (Note 19) 12,292 9,316 9,779 7,411 Retained earnings (Note 17) 446,593 305,086 355,285 242,710 Total shareholders’ equity 561,799 513,355 446,936 408,397 Total liabilities and shareholders' equity ￦1,679,849 ￦1,377,898 $1,336,395 $1,096,180 The accompanying notes are an integral part of these financial statements. 4 Samsung Engineering Co., Ltd. Non-Consolidated Statements of Income Years ended December 31, 2008 and 2007 (In millions of Korean won, in thousands of US dollars (Note 3)) 2008 2007 2008 2007 Sales (Note 15) ￦2,635,598 ￦1,878,161 $2,096,737 $1,494,161 Cost of sales (Note 15) 2,243,115 1,533,655 1,784,499 1,220,091 Gross profit 392,483 344,506 312,238 274,070 Selling and administrative expenses (Note 28) 262,602 217,866 208,912 173,322 Operating income 129,881 126,640 103,326 100,748 Non-operating income Interest income 35,813 22,661 28,491 18,028 Dividend income 932 777 741 618 Commission income 7,454 7,510 5,930 5,974 Gain on foreign currency transactions 133,441 11,870 106,158 9,443 Gain on foreign currency translation (Note 21) 30,033 5,653 23,893 4,497 Gain on currency forwards transactions 8,943 4,342 7,114 3,454 Gain on valuation of currency forwards (Note 14) 19,662 6,968 15,642 5,544 Gain on valuation of equity-method investments (Note 8) 39,469 26,862 31,399 21,370 Reversal of allowance for doubtful accounts - 3,012 - 2,396 Rental income 3,870 3,706 3,079 2,949 Reversal of provision for construction Warranties 109 1,435 86 1,141 Others 1,038 3,106 827 2,471 280,764 97,902 223,360 77,885 5 Samsung Engineering Co., Ltd.