Annual Report 2013 _ Vibrant Like the vibrant beat of music
Distinctive Through our distinctive design
Reliable As a reliable and trustworthy partner
A Different Beat We share a different beat of the future of mobility, driving towards a new era of growth around the world
03 Contents
Despite a challenging business environment in 2013, Kia Motors cemented its prominent position 06 Financial Highlights Our Performance Our Future in the global automotive market, recording sales of 2.83 million units, up about 4% over the 07 Business Highlights 26 Domestic Business Performance 52 Corporate Social Responsibility previous year. In addition to our sales accomplishments, we made significant achievements in 08 2013 at a Glance 28 Overseas Business Performance 54 Research & Development quality management, design management and sustainable management. We are becoming a truly 14 Chairman’s Message 32 Global Awards List 60 Global R&D Network global brand in terms of our economic, environmental and social values, and we will continue to 16 Vice Chairman’s Message 62 Eco-friendly Models Our Strengths make every effort to become a leader in the automotive industry. 18 Group Core Values 63 Concept Cars 38 Design Management 19 Company Vision 42 Branding 64 Financial Review 20 Corporate History 44 Marketing 128 Product Line-up 46 2013 New Models 130 Global Network 132 Board of Directors KIA MOToRS Annual Report 2013 04 05 2012 at a Glance
Financial Highlights Business Highlights
2013 2012 2011 2010 2009 2013 2012 2011 2010 2009
Consolidated Statement of Financial Position* Global Retail Sales (Unit: Thousand units) (KRW in millions)
Total Assets 36,182,040 32,398,314 30,255,179 26,275,144 25,962,876 Total 2,746 2,709 2,478 2,088 1,651 Cash Items (Liquidity) 6,346,643 4,270,539 3,934,169 2,914,146 2,792,286 Korea 458 481 492 483 411 Current Assets 13,472,386 11,139,430 11,075,187 9,763,671 11,208,990 Overseas 2,289 2,228 1,986 1,605 1,239 Total Liabilities 15,927,245 15,550,252 16,745,469 16,027,027 18,658,782 Short-term Debt 1,640,958 1,404,947 3,104,071 3,585,210 3,752,210 Current Liabilities 10,806,238 10,000,239 11,421,924 11,627,539 12,910,209 Sales by Region Long-term Debt 1,698,194 2,471,132 2,503,230 2,755,446 6,192,950 (Unit: % / Thousand units) 16.7 Total Debt 3,339,152 3,876,079 5,607,300 6,340,656 9,945,160 31.6 Korea US China Europe* Rest of World Net Debt (3,007,491) (394,460) 1,673,132 3,426,510 7,152,874 Total Stockholders’ Equity 20,254,795 16,848,062 13,509,709 10,248,117 7,304,094 458
Total Liabilities & Stockholders’ Equity 36,182,040 32,398,314 30,255,179 26,275,144 25,962,876 535 Portion (%) Liability-to-Equity Ratio 78.6% 92.3% 124.0% 156.4% 255.5% 19.5 547 2,746 Debt-to-Equity Ratio 16.5% 23.0% 41.5% 61.9% 136.2% Total 338 Net Debt-to-Equity Ratio (14.8%) (2.3%) 12.4% 33.4% 97.9% 868 Consolidated Statement of Income* 12.3 19.9 (KRW in millions) * Europe = EU+EFTA countries
Revenue 47,597,897 47,242,933 43,190,942 35,826,955 29,257,392 Cost of Sales 37,511,941 36,536,005 33,138,961 27,905,367 22,769,058 Cost of Sales (%) 78.8% 77.3% 76.7% 77.9% 77.8% Sales by Plant 11.1 Gross Profit 10,085,956 10,706,928 10,051,981 7,921,588 6,676,148 (Unit: % / Thousand units) Operating Profit 3,177,100 3,522,251 3,499,088 2,369,852 1,195,206 Korea US China Slovakia Margin (%) 6.7% 7.5% 8.1% 6.6% 4.1% 19.3 Pretax Profit 4,828,576 5,164,056 4,721,650 3,323,048 1,220,714 1,598 Portion (%) Net Profit 3,817,059 3,864,704 3,519,236 2,698,331 1,020,632 369 2,827 56.5 Margin (%) 8.0% 8.2% 8.1% 7.5% 3.5% 547 Total
Consolidated Statement of Cash Flows* 313 (KRW in millions) 13.1 Cash Flows from Operating Activities 4,776,593 4,345,425 4,745,189 5,272,537 4,306,926 Cash Flows from Investing Activities (3,513,940) (2,842,577) (2,630,548) (2,296,053) (1,739,819) Cash Flows from Financing Activities (791,207) (1,810,114) (1,440,956) (3,343,298) (1,796,307) Production by Plant 11.1 Cash and Cash Equivalents, Beginning of Year 1,903,309 2,304,169 1,615,879 2,001,225 1,268,631 (Unit: %, Thousand units) Net Increase (Decrease) 407,955 (400,860) 688,290 (385,346) 1,032,510 Korea US China Slovakia Cash and Cash Equivalents, End of Year 2,311,264 1,903,309 2,304,169 1,615,879 2,301,141 1,599 19.5 Credit Rating 369 Portion (%) KIS AA+ AA+ AA AA AA- 2,832 56.4 Domestic 551 Total KOREA Rating AA+ AA+ AA AA AA- Moody’s Baa1 Baa1 Baa2 Baa3 Baa3 313 Overseas S&P BBB+ BBB+ BBB BBB BBB- 13.0
* Consolidated data based on K-GAAP for 2009 and K-IFRS for 2010-2013
KIA MOToRS Annual Report 2013 06 07 Financial Highlights•Business Highlights Sales by plant (Unit: Thousand units)
2013 1,598 1,229 2,827
2012 1,589 1,131 2,720
2011 1,581 957 2,538
2010 1,400 730 2,130
2009 1,142 392 1,534 Globality Korea Overseas
In 2013, despite sluggish domestic demand and a slow recovery in the 2013 1,599 1,233 2,832 global economy, Kia Motors saw growth of 4% in both production and 2012 1,586 1,138 2,724 sales. Kia Motors is becoming an ever more global company, with a steady 2011 1,584 959 2,543 rise in the percentage of production and sales coming from overseas. 2010 1,417 722 2,139
2009 1,137 394 1,531
Korea Overseas
Production by plant (Unit: Thousand units)
KAMTI O oRS Annual Report 2013 08 09 2013 at a Glance Operating Profit* (Unit: KRW in billions)
2013 6.7 3,177
2012 7.5 3,522
2011 8.1 3,499
2010 6.6 2,370
2009 4.1 1,195 Profitability Operating Profit % of Revenue
In 2013, Kia Motors’ operating and net profits stood at KRW 3,177 billion and KRW 2013 8.0 3,817 3,817 billion, respectively. These figures are slightly down on last year, but they 2012 8.2 3,865 also suggest that Kia Motors is maintaining a stable business position despite the 2011 8.1 3,519 difficult global environment and unfavorable exchange rates. 2010 7.5 2,698
2009 3.5 1,021
Net Profit % of Revenue
Net Profit* (Unit: KRW in billions)
* Consolidated data based on K-GAAP for 2009 and K-IFRS for 2010-2013
KIA MOToRS Annual Report 2013 10 11 2013 at a Glance 2016 Become a “global tier-1 green brand”
2015 Begin full-fledged implementation of eco initiatives
2014 Lay eco groundwork for corporate eco initiatives
2013 • Developed eco guideline for the implementation of green strategy 2012 Established basic strategy • Established integrated eco for Kia’s eco brand marketing strategy to enhance Sustainability Eco Marketing Roadmap brand value
2011 Kia wants to be a leader in the future of sustainable mobility; this means • Established a global social CSR Roadmap contribution system and related emphasizing social and environmental values as well as financial performance. execution strategies 2012 Built two bases in Tanzania • Established a system for We are therefore building a strong brand through a number of social contributions identifying and implementing and Malawi programs and eco-friendly marketing activities. 2013 • Built four bases in Tanzania, Malawi and Mozambique 2014-2015 Operated support programs for • Add two bases every year, starting selected local communities • with Tanzania and Ethiopia in 2014 Volunteer work undertaken • Increase participation in CSR activities by staff groups • by Kia staff around the world 2016- • Build a network to help local • Conduct a project in collaboration communities become financially with an external stakeholder independent • Expand the geographical reach of our overseas projects beyond Africa
KIA MOToRS Annual Report 2013 12 13 2013 at a Glance Chairman’s Message
In 2013, Kia Motors achieved continued growth despite a challenging business environment at home and abroad. Our worldwide market presence has further increased, with total global sales of 2.83 million units, up about 4% over the previous year.
The global economy has experienced fierce competition, especially given the overall low growth environment, and uncertainties have increased due to transformations in the industrial landscape resulting from technological convergence. As such, Kia Motors will look to our continued evolution so that in 2014 we can prepare ourselves for the next phase of growth.
Our responses to the changing business environment at home and abroad will be rapid and flexible. As such, we will enhance our organizational efficiencies and dynamics by fortifying our global business operations and management systems. We will also improve our business structure and our mid-to-long- term growth strategies so that we may focus on developing more innovative products and advanced technologies.
In particular, the fuel efficiency and safety of our products will be further improved, and more investments will be made into innovative technologies, including eco-friendly cars and smart cars in which the latest cutting-edge technologies will converge. We will also focus on hiring the very best people. By creating new jobs through these investments, we will also contribute to the nation’s efforts to establish a ‘creative economy’.
2014 will be a milestone year for Kia Motors – one that is full of progress and driven by our people and their aspirations along with our passion for the future. We will continue to take major Thank you. strides forward guided by our passion and a commitment to sustainable growth. Mong-Koo Chung Chairman
KIA MOToRS Annual Report 2013 14 15 Chairman’s Message Vice Chairman’s Message
Distinguished shareholders, Even while we face these challenges, Kia will seek to become a true market-leading, global company through transformation and innovation. 2013 was a year in which Kia Motors looked to the future while dealing Following the completion of our third plant in China this year, our global effectively with domestic and global challenges. production capacity will increase to 3 million units within 10 years, up Our commitment to quality management has continued to bear fruit, from one million in 2004. Accordingly, we have set 2014 as the year of with Kia Motors ranking fifth out of 21 mainstream brands in the 2013 strengthening our competitiveness in order to establish the management Initial Quality Study released by J.D. Power & Associates, a U.S.-based systems to produce 3 million units globally. In line with this, there will be We will strive to become market intelligence agency. This result is our highest ranking to date. a stronger focus on customer-centric management, medium- and long- Furthermore, since the Kia Soul’s ‘Honorable Mention’ in the Product term growth drivers and sustainable management. Design category at the red dot Design Awards in 2009, we have gone on a top-tier carmaker through We will strive to make the Kia customer experience a truly exclusive one to win numerous design accolades over the last five years. Meanwhile, by improving all customer contact points, establishing creative sales our mobile apps for Sportage and Carens (Rondo) also were by the global management, excellence and service programs, and putting into place comprehensive customer red dot awards in the Communication category, confirming the design management systems. Our customers’ emotional experience with the competitiveness of both our products and our customer contact points. in design, and a commitment Kia brand will make Kia an increasingly trusted and valuable purchase Kia appreciates that our customers experience our brand and products decision. to the environment. using all five senses, and so we have introduced the concept of ‘sensory Meanwhile, a wide range of new models will be launched to cater to branding’, using far more than just the sense of vision. In this spirit, we customer needs, and we will expand our global production and sales released our brand song, ‘Advent of the Kians’, and developed a ‘Kia strategies. This will enable us to flexibly respond to the global economic Fragrance’. environment and maintain stable profitability. In addition, there will be a We also solidified our collaborative labor-management relationship in focus on fuel efficiency, IT and eco-friendly technologies in order to build 2013 by successfully introducing a day-time two-shift system at our the highest levels of product competitiveness. domestic production sites, thus significantly improving our productivity. While preemptively responding to external changes in the business This has also contributed to our increased brand value, which grew by environment, we will improve our management system internally by 17% to USD 4.8 billion, thereby placing Kia among the ranks of the top embodying innovation. We will also develop globally competitive talent 100 global brands for two years in a row. Kia was also recognized for in line with our plans for future development, and boost our health, the very first time as being one of the ’50 Best Global Green Brands’ that safety and environment (HSE) activities to meet global standards, respect the environment and people. thereby strengthening our socially responsible management. As a result of these diverse activities, total sales reached 2.83 million Our target for this year is to grow into a globally renowned brand, with units, up 4% over the previous year, with record-high revenues of KRW sales of 2.96 million units for a 5% increase compared to 2013. 47,597.9 billion. With an operating income of KRW 3,177.1 billion and net income of KRW 3,817.1 billion, our annual income exceeded KRW 3 Distinguished shareholders, trillion for the third consecutive year despite intense competition and the negative impact of foreign exchange rates. 2014 will usher in a new era for Kia Motors, as we progress towards becoming a top-tier carmaker with a production and sales system to I would like to extend my heartfelt gratitude for your support and accommodate 3 million vehicles annually. Our staff’s unyielding passion encouragement over the past year that have enabled us to achieve for innovation will enable Kia to become a global industry leader, and these significant milestones. we will do our utmost to repay your steadfast support by achieving our targets for the year ahead. Valued shareholders, I ask for your continued consideration and encouragement, and wish The global business environment is expected to remain difficult this year, you and your families good health and happiness. with economic uncertainties in some regions forecasted to worsen. We can expect slower growth in emerging countries including China, further Thank you. tapering of quantitative easing in the U.S., continued weakness of the Japanese Yen, and a continued fall in the Korean won exchange rate. Furthermore, car imports into Korea will continue to expand, especially from Japan, and foreign carmakers will look to make an aggressive push into the Korean market.
Hyoung-Keun Lee Vice Chairman
KIA MOToRS Annual Report 2013 16 17 Vice Chairman’s Message Group Core Values Company Vision
The management philosophy of the Hyundai Motor By formulating and sharing our mid- to long-term Group is the foundation upon which we strive to achieve business strategy, ‘VISION 2016’, Kia Motors is ensuring our corporate vision. No matter how great an idea may company-wide participation in enhancing innovative be, it has no value if it is not upheld and practiced. customer value.
Our core values are practical principles that guide us in fulfilling our management philosophy in day- Every year, we carry out a multi-dimensional and objective evaluation of the company’s current to-day business. True to our management philosophy and core values, the Hyundai Motor Group will position and then overhaul the management policies and strategic tasks of VISION 2016. In 2014, cultivate its global competency by putting customers first, embracing every opportunity for greater we will focus on eight major strategic tasks, which are based on three key axes of strengthening challenge, creating a corporate culture based on communication and collaboration, and empowering customer-oriented management, reinforcing long-term growth engines, and strengthening the individuals to achieve their full potential. foundation for sustainable management.
We refuse to be We create synergy We promote a customer- complacent, embracing through a sense of driven corporate every opportunity for greater ‘togetherness’ that is fostered Kia Vision culture by providing challenge, and are confident by mutual communication impeccable service with in achieving our goals with and cooperation within 2016 all values centered on our unwavering passion and the company and with our customers. ingenious thinking. business partners.
Value Innovation
Strengthen customer- Reinforce long-term Strengthen foundation for oriented management growth engine sustainable management
1. Achieve core/future technology competence 5. Provide differentiated customer 2. Innovate production efficiency experiences We believe the future of our We respect the diversity 3. Elevate quality level 6. Strengthen global portfolio strategy organization lies in the hearts of cultures and customs, 4. Enhance brand stature based on 7. Enhance management system and capabilities of individual aspire to be the world’s distinct brand identity 8. Build basis for sustainable growth members and will help them best at what we do, develop their potential by and strive to become creating a corporate culture a respected global Create differentiated competitiveness that respects talent. corporate citizen. to achieve global sales of 3 million units
KIA MOToRS Annual Report 2013 18 19 Group Core Values•Company Vision Corporate History
2002 04 Surpassed 10 million units in cumulative production
1 1 Tianlima mass-produced at Kia Motors’ Chinese plant / Kia’s 10 millionth vehicle 1973 06 Sohari Plant opened produced / Sorento introduced in China / Regal introduced 08 Launch of Brisa, Korea’s first passenger car 2003 03 Sales in the U.S. surpass 10 million units 2011 03 Optima (K5) won ‘Best of the Best’ red 2013 1975 05 First export of completely built cars 2005 03 Kia’s 5 millionth vehicle for export dot Design Award, a first for a Korean produced automotive company / Cumulative export 1981 08 Bongo, Korea’s first multi-purpose volume surpassed 10 million units 2013 01 Optima (K5) selected as the International 2006 10 Groundbreaking ceremony for U.S. plant car, introduced Car of the Year / Sponsorship contract for held in Georgia, U.S.A. 1 1 Picanto (Morning) won the iF Product the Australian Open Tennis Championships 1987 03 Pride passenger car produced Design Award 2007 04 Construction of Slovakia plant completed extended through to 2018 1989 07 Hwasung factory completed 1 2 Mass-production commenced at 02 All-new Forte (Cerato) five-door and Cross Yancheng 2nd Plant, China GT concept CUV introduced at the 2013 2011 ~ 2012 Chicago Auto Show
1970’s ~ 1980’s 03 pro_cee’d GT and cee’d GT premiered in Geneva / Kia’s compact models win four ’ 2001 ~ 2010 Best of the Best‘ distinctions at the red dot Design Awards / Kia KND-7 concept car shown at the Seoul Motor Show / All- new Cerato (Forte) Koup, All-new Soul and refreshed Optima (K5) premiered at the 2013 New York Auto Show
04 Concept car for Kia’s joint venture in China introduced
06 Sponsored the 2013 Kia World Extreme Games / Ranked 37th on Interbrand’s 2013 2008 06 Completion of Kia Design Center America 2012 01 Launched USD 13 million ‘Green Light Project’ Best Global Green Brands list 1 1 Design Management Award received 02 Won awards in four areas in Kelley Blue 07 Cumulative production Georgia, USA plant from Korean Design Awards Book’s 5-Year Cost to Own Award reached one million units 1990’s ~ 2000 2009 03 Soul received the Korean auto 03 Picanto (Morning) and Rio (Pride) won red 08 Completed the ‘Green Light Center’ in Malawi industry’s first red dot Design Award / dot Design Awards / Launched the K3 Koup in Korea ‘EcoDynamics’ green brand launched 1992 10 Kia Motors America (KMA) established 06 Construction began on third China plant with 09 All-new Carens MPV premiered at the 1 2 Venga received iF Design Awards 300,000-unit annual capacity / Kia Motors Frankfurt Motor Show / Six Kia models 1993 07 World’s first compact SUV, Sportage, selected as the ‘Best Car Manufacturer’ in ranked 1st in the China Automobile Customer introduced 2010 02 Construction of Georgia plant in the U.S. the U.K. completed Satisfaction Index, China’s most prestigious 1995 02 Kia Motors Europe (KME) established 07 Kia Motors won the world’s top three design customer survey 03 Venga honored with red dot Design awards – red dot Design Award, if Design 1998 01 Carnival (Sedona), Korea’s first minivan, 10 Served as official sponsor of the 2013 FIFA Award / Progressive, urban-style Award, IDEA Award introduced Sportage CUV launched / Sponsorship U-20 World Cup / Kia Fragrance introduced of the Union of European Football 08 New Kia cee’d acclaimed for exterior and 11 Accumulated production volume of Hyundai Associations (UEFA) extended to 2017 interior design at Automotive Brand Awards 1940’s ~ 1960’s Motor and Kia Motors reached 80 million 06 Gwangju plant awarded Plant Quality 10 Kia Motors entered the ranks of Interbrand’ units / Three Hyundai and Kia models won Award from J.D. Power s ‘Top 100 Best Global Brands’ top prizes at the Residual Value Awards / 1944 12 Kyungsung Precision Industries K900 made U.S. premiere at the 2013 LA 07 Sportage ranked first in the U.S. in Ltd. founded Auto Show terms of residual value 1952 03 Production of Korea’s first bicycle 1 2 Optima (K5) and Sportage won the (‘Samcheonri’) iF Product Design Award / Annual 1962 01 Korea’s first truck, the K-360, production and sales surpassed 2 million introduced units per year
KIA MOToRS Annual Report 2013 20 21 Corporate History
Our Performance Driving a Vibrant Future
KIA MOToRS Annual Report 2013 22 23 Our Performance Kia Motors sold about 2.8 million vehicles in the domestic and overseas markets in 2013, up 4% from the previous year. This was thanks to improved sales strategies and the consistent strengthening of the Kia brand in the global market. Sales revenue reached the highest level in company history at KRW 47,597.9 billion, while operating income was KRW 3,177.1 billion, meaning that profits have now Thousands of vehicles sold in 2013 KRW billion of revenue in 2013 exceeded KRW 3 trillion for three consecutive years.
KIA MOToRS Annual Report 2013 24 25 Our Performance Domestic Business Performance
Domestic sales volume declined Domestic Sales Challenging Market, Good Results slightly in 2013 due to sluggish (Unit: Thousand units) In 2013, the domestic car market was difficult, with demand. However, the Morning stagnant demand and increasing competition from import 2013 458 (Picanto) remained the best-selling brands. compact car in Korea, the K-series 2012 481 Nevertheless, Kia Motors strived to overcome these continued to see an upswing in challenges by improving the product competitiveness of its flagship models and introducing two new models, sales, and our eco-friendly car 2011 492 Carens (Rondo) and Soul. Despite these efforts, however, line-up was further expanded. domestic sales totaled about 458,000 units, down 4.8% year-on-year.
However, Kia Motors was able to maintain a market share of about 30%, thus upholding its leading position in Korea. 93,641 units of the Morning (Picanto) were sold, making New Opportunities, New Growth it the best-selling compact car in Korea for the sixth year in a row. Our compact K3 family was also expanded to The domestic car market is expected to remain include a sedan, hatchback, and diesel offering which led challenging again in 2014, especially as imported car to total K3 sales of 51,369 units. Meanwhile, 62,665 units brands are likely to implement aggressive price reduction of the K5 (Optima) and 24,999 units of the K7 (Cadenza) policies due to FTA (Free Trade Agreement) tariff cuts. were sold, proving again the popularity of the K-series. Kia However, a recovery in the domestic economy should help Motors also released hybrid versions of the refreshed K5 consumer sentiment. A new generation of the Carnival (Optima) and K7 (Cadenza) in line with its position as a (Sedona) MPV will be introduced for the first time in eight leading eco-friendly car company. years, and we also expect good performance from the next generation Sorento, which will be launched in the second half of 2014.
In April 2014, Kia will release the Soul EV, a highly efficient, high-performance electric vehicle based on Kia Motors’ design icon, the Soul. The key parts are all produced domestically, which will result in competitive pricing. The Soul EV will feature a unique design, outstanding performance, and strong price competitiveness, and is Domestic Market Share therefore expected to be an important part of the electric (Unit: %) car market.
With these bright prospects for the year ahead, Kia has set a domestic sales target of 480,000 units for 2014, a year-on-year increase of 4.9%. To reach this target, Kia will pay close attention to any changes in the business environment, take pre-emptive measures in any crisis 29.8 situation, strengthen sales and marketing, and enhance 2013 brand image. By turning the current challenges into opportunities for new growth, Kia will be able to expand its share of the domestic market and profitability.
KIA MOToRS Annual Report 2013 26 27 Our Performance Domestic Business Performance Overseas Business Performance
2013 was the year of ‘Global Kia’. Continuing Our Global Growth Kia Motors strengthened its global 2013 was challenging for Kia Motors in terms of overseas competitiveness by increasing the sales, mainly because of the persistently slow global percentage of production that takes economy and an unfavorable movement in exchange place outside Korea, by continuing rates in the second half of the year. In addition, Japanese competitors gained market share on the back of new to increase overseas sales, and by model launches and promotions. further improving the Kia brand in Despite these obstacles, Kia Motors’ overseas sales in the world market. 2013 reached 2,288,643 units, up 2.7% year-on-year. Global sales of the Rio (Pride) and Sportage reached around 471,000 units and 389,000 units, respectively, helping to drive the overall increase in worldwide sales. The Cerato/Forte (K3), which was released in the fourth quarter of 2012, sold 262,000 units and contributed to the growth in total sales volume.
By region, Kia sales reached an unprecedented high in China which has emerged as Kia’s largest market. Helped by an aggressive expansion of the dealer network, sales amounted to 547,000 in 2013, up 13.8% year-on-year. Monthly sales of the K2 and K3 both exceeded 10,000 units, and increasing demand for SUVs led to strong sales of the Sportage. In the U.S., we sold 535,000 units, a decrease of 4.0% year-on-year. In Europe, however, sales volume was roughly stable at around 339,000 units thanks to the launch of the Carens (Rondo) and increased sales of the Slovakia-produced Sportage and cee’d. There also was a positive sales trend in other markets such as Russia, Africa, and Middle East with 1.9% growth year-on-year.
Global Market Share Overseas Retail Sales (Unit: %) (Unit: Thousand units)
2013 2,289
2012 2,228 3.4 2011 1,986 2013
KIA MOToRS Annual Report 2013 28 29 Our Performance Overseas Business Performance Being Local is Being Global In the U.S., we are continuing to differentiate the Kia brand New Era of Global Manufacturing through targeted marketing strategies. As a result, the Kia Motors actively implements a global management Soul and Optima (K5) are both recording monthly average We expect the global economy to improve in 2014, but system, putting into place production and sales strategies sales of more than 10,000 units. ALG (Automotive Lease new car launches and increased sales promotion activities based on analyses of consumer preferences in each Guide), which evaluates the residual value of used cars, by our competitors in global markets, especially given the individual country. These localization strategies are named the Soul the grand prize winner for residual value weak Yen and strong Korean Won, will result in intensifying embedded throughout our entire business process, and in the small MPV and subcompact utility vehicle category competition. are driving Kia Motors’ sustained growth in the global in its 2014 Residual Value Awards. ALG gives this award Even with these challenges, 2014 will be a very important market. in consideration of quality, marketability, brand awareness, year for Kia Motors in the global market. With the We began the introduction of localized models in 2006 and sales strategies to determine a vehicle’s expected construction of our third plant in China, which has an with the launch of the cee’d, a model created specifically value after a certain period of time/mileage. The Soul annual production capacity of 300,000, Kia Motors’ total for the European market, which prefers practical small is the first Kia car to receive this award. By establishing global production capacity will reach almost three million cars. The cee’d has enjoyed great popularity in Europe, high residual values, one of the most important purchase just a decade after reaching one million in 2004. 2014 will leading to the release of wagon and three-door versions. factors for US consumers, Kia Motors has proven its high be Kia’s year to boost our competitiveness and establish The cee’d accounts for approximately 24% of Kia Motors’ product quality and competitiveness. In addition, the Soul a business that will support production and sales of three sales in Europe. With designs specifically customized for ranked first in the Sub-Compact CUV category of the Initial million units globally. Change and innovation will drive our European consumers, the cee’d plays a significant role in Quality Study released by J.D. Power & Associates, with growth as an advanced, global company. enhancing Kia’s brand value in Europe. Kia Motors taking fifth place in the overall brand rankings. The Optima (K5) and Sportage were also ranked first in In addition, we will further strengthen our focus on Auto Pacific’s Vehicle Satisfaction Awards. qualitative growth with a ‘value pricing’ strategy and build the foundations to enable us to achieve our business plan In addition to releasing models that are optimized for targets. We will increase the sale of localized models, and individual markets, we are also expanding localized launch new cars and new versions of current models as production and establishing global R&D centers with part of our on-going efforts to improve profitability. local research personnel. Our plant in Georgia, U.S. produced 263,000 units of the Optima (K5) and Sorento last year, along with units of the Santa Fe for our sister company Hyundai Motor, for a total annual production of 369,000vehicles. Our plant in Slovakia produced 313,000 units of the Venga, cee’d, and Sportage, while our plants in China produced 551,000 units of the Sportage, K2, and K3. In addition, Kia Motors’ third plant in China started production in January 2014. It is located in Yancheng, Jiangsu Province, and has an annual production capacity of 300,000 units. This means that Kia Motors has the capacity to produce more than 740,000 finished cars annually in China alone. We are therefore now in a strong position to increase sales in the rapidly-growing Chinese market. All in all, production at overseas plants grew by 4% year-on-year in 2013.
KIA MOToRS Annual Report 2013 30 31 Our Performance Overseas Business Performance Global Awards List
International Car of the Year 1st Place in China Automobile red dot Design Award 10 Best Interiors Most Improved 5-Star NHTSA Rating Road & Travel Magazine, USA, January 2013 Customer Satisfaction Index red dot, Germany, March 2013 WARDSAUTO, USA, April 2013 Total 4X4 Magazine, UK, January 2013 NHTSA, USA, December 2013 China Association for Quality, China, Safest Car Best New Compact Sedan 5-Star Safety Rating Car of the Year September 2013 Folksam, Sweden, September 2013 Cars.com, USA, December 2013 NHTSA, USA, September 2013 All-Ukrainian Contest “Car of the Year 2013 in Ukraine”, Ukraine, January 2013 5-Star ANCAP Safety Rating Best SUV Over $40,000 ANCAP, Australia, August 2013 Drive, Australia, November 2013 red dot Design Award Most Satisfying Mid-Size Car red dot, Germany, March 2013 AutoPacific, USA, June 2013 Best New Compact Sedan red dot Design Award Initial Quality Study Award Cars.com, USA, December 2013 5-Star Safety Rating red dot, Germany, March 2013 J. D. Power and Associates, USA, Euro NCAP, Europe, September 2013 June 2013 Best Estate Car Car of the Year Best MPV Coolest Cars Under $18K Diesel Car Magazine, UK, May 2013 Car of the Year Russia, Russia, May 2013 Scottish Car of the Year Awards, Best Fleet Car Scotland, October 2013 Kelly Blue Book, USA, June 2013 Initial Quality Study Award The Fleet Magazine, Poland, April 2013 1st Place in China Automobile ALG Residual Value Award Customer Satisfaction Index J.D. Power and Associates, USA, ALG, USA, November 2013 China Association for Quality, China, June 2013 September 2013 5-Star NHTSA Rating iF Product Design Award Most Satisfying Compact NHTSA, USA, December 2013 iF Design Award, Germany, January 2013 Crossover SUV The Hottest New Cars For 2014 Driver’s Choice Award for Best AutoPacific, USA, June 2013 Forbes Magazine, USA, July 2013 Subcompact Car red dot Design Award, 1st Place in China Automobile Motorweek, USA, February 2013 Best of the Best Red dot, Germany, March 2013 Customer Satisfaction Index China Association for Quality, China, September 2013 Best Large Saloon 5-Star NHTSA Rating Wheels Magazine, UAE, January 2013 NHTSA, USA, December 2013
KIA MOToRS Annual Report 2013 32 33 Our Performance Global Awards List Our Strengths Design the Distinctive Future
KIA MOToRS Annual Report 2013 3424 3525 Our Strengths To Kia, design means more than simply the outward appearance of our cars. Kia’s definition of design involves delivering unique value to customers while achieving innovative results through creative thinking, which is enabled by breaking away from conventions across all areas of management. USD million brand value
KIA MOToRS Annual Report 2013 36 37 Our PStrerformaengthsnce Design Management
Kia has established a unique design philosophy and applied it across all of our activities, from design and production to sales and communication with customers, thereby strengthening our brand Design - Visualizing Our Strengths
identity. Customers recognize design as a unique strength of the Kia Motors brand, and our outstanding designs have also received recognition from influential foreign media and at many design award competitions. This acknowledgement Worldwide Recognition for Kia Design is a result of the complete commitment we made to design management in 2006 and the efforts since then to In 2009, the Soul won an Honorable Mention in the Product enhance brand value through design. Design category at the red dot Design Awards, becoming the first Korean model to achieve this honor. At the 2013 A key factor in our design philosophy, ‘the simplicity of red dot Design Awards, 4,662 products were entered by the straight line’, is simple, understated beauty. In 2008, 1,865 companies from 54 countries in the Product Design the Soul became the first model to feature our family look, category, and the Kia pro_cee’d won ‘Best of the Best’ which has been interpreted from a global perspective by despite the fierce competition while the Rondo (Carens), our design network that spans Korea, Europe and the US. cee’d, and cee’d SW (Sportswagon) were chosen as The Kia family look has continued to evolve and is creating Winners. Kia Motors has now had a winning vehicle at a strong impression of Kia’s identity in the global market the red dot Design Awards for five straight years, and 10 that is distinct from other brands. models have received a red dot Award.
In 2009, the Venga became the first model from Kia Motors to receive an iF Design Award. The Optima (K5) and Sportage received recognition in 2010, the Picanto (Morning) in 2011, and the pro_cee’d in 2012, ensuring wins in four consecutive years. The Soul then received an iF Design Award in January 2014, demonstrating once again that Kia’s family look is being widely recognized for its excellence.
In 2012, with the Rio (Pride) receiving an award at the IDEA Design Awards, Kia has now earned recognition from the world’s top three design award competitions – a true ‘grand slam’.
KIA MOToRS Annual Report 2013 38 39 Our Strengths Design Management Design Awards
In addition to product designs, our excellence in design for communications materials has been well recognized. Our website was completely revamped in early 2013 and subsequently won ‘Best In Class’ at the Interactive Media Awards run by the US-based Interactive Media Council in October. In addition, our mobile app for the Optima (K5) was the winner in the Mobile Application category for Communication Design at the 2012 iF Design Awards. These results are a clear sign of our efforts to bolster March 2013 December 2011 March 2010 design and enhance brand value at all customer contact pro_cee’d Picanto (Morning) Mobile App Venga points. 2013 red dot Design Awards iF Design Award 2010 red dot Design Awards Best of the Best (Product Design) Winner (Communication Design) Winner (Product Design)
Design: A Way of Innovative Thinking Carens (Rondo) 2013 red dot Design Awards November 2011 December 2009 Our accomplishments in design were enabled by Winner (Product Design) Picanto (Morning) Venga extending Kia’s concept of design to all aspects of cee’d iF Product Design Award iF Product Design Award management, not just visual elements. It has enabled Winner (Transportation) Winner (Transportation) us to innovate within our corporate culture and establish 2013 red dot Design Awards a working environment that encourages designers Winner (Product Design) and all other staff to engage in flexible and creative cee’d Sportswagon March 2011 March 2009 thinking. Design will continue to be a major strength of 2013 red dot Design Awards Optima (K5) Soul the Kia Motors brand as well as an important element Winner (Product Design) 2011 red dot Design Awards 2009 red dot Design Awards in our corporate identity. It will open new horizons for The first ‘Best of the Best’ designation for a Honorable Mention (Product Design) management and deliver new experiences to customers. Korean automotive brand (Product Design) June 2012 Rio (Pride) Mobile App Sportage November 2008 2011 red dot Design Awards 2012 red dot Design Awards Kia Motors Winner (Product Design) Best of the Best (Communication) Korea Design Award, Korea’s most prestigious design award December 2010 Presidential Award (Corporate Sector) March 2012 Picanto (Morning) Sportage iF Product Design Award 2012 red dot Design Awards Winner (Transportation) Winner (Product Design)
Rio (Pride) Optima (K5) iF Product Design Award 2012 red dot Design Awards Winner (Transportation) Winner (Transportation) Good Design Award, the most prestigious design award in the U.S. Winner (Transportation)
Sportage Good Design Award Winner (Transportation)
KIA MOToRS Annual Report 2013 40 41 Our Strengths Design Management Branding
Kia Motors is a young, dynamic Brand Value Rapid Growth in Global Reputation A Different Beat (Unit: USD million) automotive brand that draws In 2013, Interbrand, the world’s top brand consulting In 2012, Kia Motors established its brand identity, ‘A
worldwide attention through 2013 4,708 company, selected Kia Motors as the 83rd most Different Beat’, embodying the unique values that we competitive brand in the world, an improvement over our aim to deliver to the world. ‘A Different Beat’ consists of comprehensive brand activities 2012 4,089 position in 2012 when we first entered the ranks of the three specific characteristics – ‘vibrant’, ‘distinctive’, and that move the hearts of an ever world’s top 100 brands in 87th place. Our brand value ‘reliable’. ‘Vibrant’ means delivering customer experiences growing number of customers. 2011 2,732 reached USD 4.7 billion in 2013 for a year-on-year increase that inspire through a challenging spirit, a positive attitude, of 15%. and proven abilities. ‘Distinctive’ refers to enriching the customer experience through unique products and Also in 2013, Kia Motors made its very first entry into designs, and the most cutting-edge technology. ‘Reliable’ Interbrand’s “Best Global Green Brands 50”, debuting shows that Kia Motors is a responsible automotive brand, in 37th place. This significant achievement reaffirms the one that makes no compromises in performance, safety, recognition we have received in the development of eco- convenience or quality, as well as being a company friendly vehicles and green production processes. that contributes to society and the well-being of the environment. Consistency of the Kia Brand
Because Kia Motors sells its products in countries all around the world, it is very important to deliver a consistent brand image. In January 2013, we integrated our homepage into a single address, www.kia.com, after previously having different website addresses for each country. This has improved customer convenience and digital accessibility. We have also been executing corporate advertisements and campaigns using the ‘A Different Beat’ concept in countries across the globe since 2012.
Kia’s unique identity is also featured in spaces where we meet directly with customers. One example is the ‘Red Cube’ concept for our showrooms that features Kia’s red corporate identity color and a clean, modern design to improve customer satisfaction. A new roadshow concept developed in 2013 that gives consumers a chance to experience our vehicles will be more widely executed starting in 2014.
KIA MOToRS Annual Report 2013 42 43 Our Strengths Branding Marketing
We are expanding customer Sensing Kia Getting Excited with Kia
contact points through new and Most companies mainly focus on sight when it comes to Kia’s official sponsorship contract with FIFA dates back efficient communication channels sensory branding, despite the fact that consumers have to 2007, and as an official FIFA Partner we sponsored to deliver Kia’s brand identity in needs in other areas such as hearing, smell, touch, and 2010 FIFA World Cup South Africa™ and will sponsor taste. However, Kia Motors is striving to appeal to all five the 2014 FIFA World Cup Brazil™, 2018 FIFA World Cup different ways. senses in its branding activities in order to emotionally Russia™, and 2022 FIFA World Cup Qatar™. In June communicate the Kia brand identity. 2013, in conjunction with Hyundai Motor Company, we provided around 500 vehicles for the FIFA Confederations In March 2013, Kia introduced Kia brand identity song, Cup Brazil 2013™. And during the 2014 FIFA World Cup ‘Advent of the Kians’, composed by world renowned Brazil™, Kia’s logo will get the attention of sports fans and composer Eric Serra. It has been used at various customer Entertained by Kia viewers from all around the world. touch points such as motor shows, dealer showrooms and Our marketing endeavors aim to provide customers with so on. In October 2013, the Kia Fragrance was released. In addition, we extended our agreement to sponsor enjoyable and surprising encounters with the Kia brand. In It was developed in collaboration with the renowned the Australian Open, one of the four tennis grand slam February 2014, we aired a TV advertisement featuring the perfumer Antoine Lie reflecting Kia’s brand identity. Kia tournaments, in January 2013. We first became the major K900 during the Super Bowl, which was seen by more than Fragrance has been developed in three forms (eau de sponsor in 2002, and now our sponsorship will run through 100 million viewers. The famous actor Laurence Fishburne toilette, car air freshener and room air freshener) to allow to 2018. Kia Motors has become the longest-running spoke lines from the film ‘The Matrix’ to emphasize customers to experience the Kia scent in various settings. major sponsor in the history of this prestigious event, and the luxuriousness of the K900. The advertisement was each year we provide around 100 official vehicles to the In 2014, Kia developed ‘The Rise of Surprise’ sound considered a great success. event organizers which is increasing our brand exposure, signature as part of our sonic branding initiatives. It will be especially in Asia-Pacific and Europe. In 2013, we launched a global promotion for the all-new showcased at various customer touch points such as a Carens in connection with ‘The Croods’, a 3D animated mobile phone ringtone, on our website, as an App access We look forward to continue supporting athletes and major feature film produced by DreamWorks Animation. The tone, and as a waiting tone for our customer service sports events around the world to increase the awareness campaign video shows The Croods family going on an call center. It will be also applied to our products as the of the dynamic Kia brand. epic adventure while riding in a Carens. The video was welcome and goodbye sound and warning alerts. shown in movie theaters and on the Internet, including on Kia will continue to expand sensory branding to YouTube, and exceeded more than 10 million views. enhance brand value and further strengthen emotional communication with our customers. Playing Kia
Kia Motors is using new channels such as smartphones and tablet PCs to get closer to younger customers. In 2013, we rolled out ‘K-Racer’, a mobile racing game that features Kia’s 12 major models as characters, including the Ray and Optima (K5). We also developed ‘Kia Motion’, a video production application that enables users to collect mobile phone pictures and turn them into a video with various visual effects and music. The videos can then be shared via SNS.
We communicate regularly with customers across the world through our official blog, Twitter, and Facebook page. When we release new models, we roll out applications that reflect that model’s characteristics. We aim to be an industry leader in digital marketing by introducing unique and innovative contents.
KIAMO TOrS Annual Report 2013 44 45 Our Strengths Marketing 2013 New Models
Carens (Rondo) Soul Optima (K5) Sportage The Stylish Family Car for Modern Life Totally Transformed – More Stylish Ahead of Its Time Everlasting Impression Than Ever The all-new Carens (Rondo) is designed for families with a The refreshed Optima (K5) is the first Korean mid-size sedan The Sportage was named the joint winner in the Sub-Compact dynamic lifestyle. It features more space for passengers, The Soul has become an icon for Kia Motors, demonstrating to use front LED fog lamps. The radiator grille was made more CUV category in the 2013 Initial Quality Study from J.D. Power more storage room, sleek aerodynamics, and a dramatic cab- the excellence of our designs. It was first released in 2008, and dynamic and agile, further upgrading the already innovative and has been well-received in the global market. Its exterior forward design. Improvements have been made both to style has now evolved with a more unique and refined appearance. design of the previous model. Despite additional features and showcases chrome-lined bumpers and radiator grille, along and practicality. Essential safety features were applied to all The all-new Soul is the outcome of 44 months of research and enhanced performance, the Optima is still offered at a very with high-gloss fog lamp housings, resulting in a greater sense models, including VSM (Vehicle Stability Management), TPMS an investment of about KRW 240 billion. On the outside, the reasonable price, which strengthens its position in the Korean of sophistication. With such attention to detail, the Sportage is (Tire Pressure Monitoring System), and six airbags, resulting in design of the previous Soul was developed further by adding market when compared to imported vehicles. expected to be a leader in the small SUV market. the highest level of safety in the class. It earned top marks in creative styling elements for enhanced sophistication. It also the ‘2013 New Car Safety Assessment’ of the Korean New Car offers new technology not usually offered by vehicles in this Assessment Program. class including advanced Smart Parking Assist System, Lane Departure Warning System, and Flex Steer, which allows a driver to change steering characteristics according to their preferences.
K900 Experience New Luxury
The K900 was unveiled at the LA Auto Show in November 2013. It is the first rear-wheel drive sedan to be released by Kia Motors in North America. The K900 brings together superb craftsmanship and materials, along with intuitive and advanced technology. The 5000cc V8 Tau engine has been engineered especially for US consumers and produces 420 horsepower, while the V6 delivers 311 horsepower. With its elegant design and high specifications, the K900 will strengthen Kia’s brand image in North America.
KIA MOToRS Annual Report 2013 46 47 Our Strengths 2013 New Models Our Future A Better Way To Go
KIA MOToRS Annual Report 2013 48 49 Our Future ‘A Better Way to Go’ is a slogan that reflects the destination for Kia Motors’ CSR (Corporate Social Responsibility) activities. To put this slogan into practice, we have defined our CSR values as: Mobility, the essential duty of an automaker, which we define as ‘the realization of the universal right to mobility’; and Challenge, defined as ‘providing opportunities to take on challenges’ to make a better life. Based on these values, we are examining our present CSR Number of staff who participated Number of hours that Kia staff spent on in CSR activities in 2013 CSR activities in 2013 initiatives and expanding their scope and scale to create a better future for humanity.
KIA MOToRS Annual Report 2013 50 51 Our PFuerformature nce Corporate Social Responsibility
Kia Motors enhances life through Green Light Project Programs for Potential cars, which have evolved to become Launched in Africa in 2012, the ‘Green Light Project’ is Kia Motors has in place many programs to help the a vital part of daily life, and is our most important CSR program. In just two years, one younger generation, including children, teenagers and committed to the highest levels Green Light Center and five schools have been built, and college students. Since 2005, we have participated in the of social responsibility so that the two more centers and a school will open in 2014. The SLOW campaign organized by SAFIA (Korean Association Green Light Project is a community development program of Safety Communities). This campaign is designed to global community can enjoy more aimed at helping those with limited access to educational, encourage children to take all necessary and effective balanced growth. medical, and cultural facilities. After we determine the right road safety measures. Children receive safety education, geographical area for project implementation, we look and areas near elementary schools and kindergartens are at what the residents in that area need most, and then designated as school zones to ensure that drivers drive build either a school or Green Light Center. Each project with more caution. Relevant experts have been offering is targeted to be completed in five years once the area safety consulting since 2012, which entails ascertaining becomes self-reliant. the risk factors in each school zone and addressing the issues identified with local governments.
The EcoDynamics Expedition is a program whereby Green Trip teenagers and their college student mentors form teams to Green Trip is a CSR program that Kia Motors implements carry out eco-friendly activities. Teams that complete their in Korea. It involves providing vehicles to the disabled activities successfully get an opportunity to take part in and the mobility impaired. Rather than simply providing the Global Eco Camp, and visit the UNEP (United Nations a means of mobility, we are providing opportunities for Environment Programme) headquarters in Nairobi, Kenya cultural experiences through traveling, thus helping to to undertake eco-friendly technical volunteer activities. reduce the sense of physical distance as well as emotional In 2013, Kia Motors began to help college students distance. We launched the program in central Korea in develop creative ideas and put those ideas into practice. 2012, and expanded it in 2013 to cover other regions We have chosen 20 clubs and plan to provide consulting including the southeastern region of the nation. Around and training for volunteer programs in 2014. 5,150 disabled persons and family members enjoyed a trip through this program. We plan to expand the program In November 2013, we held a CSR contest in which to the southwestern region in 2014. college students submitted research papers and project proposals on how they envision Kia’s social contributions and practical measures for the execution of their proposed projects. As a result of this competition, five student CSR teams were rewarded with funding and future support. We have also implemented the Soul Bicycle Support Project to increase interest among college students in environmental issues. We have provided 700 Soul bicycles to nine universities.
KIA MOToRS Annual Report 2013 52 53 Our Future Corporate Social Responsibility Research & Development
Kia Motors invests in R&D R&D Investment Expanding R&D Investment HEV (Hybrid Electric Vehicle) and the development of new (Unit: KRW billion) We are constantly increasing our R&D investments to HEVs use two power sources, an internal combustion technology to ensure our ensure the sustainable growth of both our company engine and an electric motor, to maximize engine long-term growth and enable 2013 1,431 and the industry as a whole. In 2013, we made R&D efficiency and minimize carbon emissions. Kia Motors’ investments totaling KRW 1.43 trillion for a year-on-year proprietary parallel hybrid system has a simple structure us to become a leader in the 2012 1,159 increase of 23.5%. We also created an R&D system – an engine clutch is installed between the engine and automotive market of the future. whereby our technology research centers in Europe the electric motor to enable driving in electric vehicle (EV) 2011 1,440 and the U.S. collaborate in great depth with Hyundai mode, resulting in outstanding fuel economy and power Motor Group’s Technology Research Institute in Korea. performance. About 10,000 experts now concentrate their efforts on In 2013, Kia Motors released the premium Cadenza (K7) researching automobile technology. Hybrid 700h which boasts outstanding fuel economy of 16.0 km/ℓ, and the Optima (K5) Hybrid 500h with fuel economy of 16.8 km/ℓ. Our hybrid line-up now ranges Focusing on Sustainable Mobility from mid-size to semi large-size vehicles, and reinforces Kia Motors is preparing for the eco-friendly vehicle market the image of Kia as a leading eco-friendly vehicle of the future by developing proprietary systems and manufacturer. acquiring source technologies that will enable us to realize the future of sustainable mobility. We use common parts EV (Electric Vehicle) for our key major systems where appropriate, and place great emphasis on R&D into eco-friendly vehicles. This Unlike a hybrid vehicle, which uses carbon-based fuel as enables us to provide competitive vehicles, irrespective of one of its power sources, an EV is powered by electric product model or geographical region. energy alone; it therefore produces no emissions and no direct CO2. We have developed a high-efficiency motor for EVs that delivers as much power performance as gasoline- EcoDynamics Line-up powered vehicles, and with improved fuel economy by EcoDynamics is the eco-friendly brand that brings together increasing efficiency and minimizing losses, maximum all the best of Kia Motors’ green technologies. Launched power output is 50 KW (68 horsepower) and maximum in 2009, and comprised of the term ‘Eco’ from ecology torque is 17.0 kg·m (167 N·m). In December 2011, we and economy along with dynamics which embodies our released the Ray EV, our very first EV, which was named brand identity, EcoDynamics reflects our commitment to as a ‘Top 10 Technology’ at the Top 10 Green Awards making sustainable mobility a part of the value of our cars. co-hosted by the Ministry of Knowledge Economy and We introduced EcoDynamics with the release of the Forte the Korea Institute of Energy Technology Evaluation and Hybrid in 2009, followed by the Optima (K5) Hybrid and Planning. In 2014, we plan to release the Soul EV in Korea Ray EV in 2011. We have also been running a Mohave as well as in Europe and North America, thus building the hydrogen FCEV (Fuel Cell Electric Vehicle) pilot program foundations of a real market for electric vehicles. since 2008. By releasing hybrid versions of the Cadenza (K7) and refreshed Optima (K5) in 2013, we are expanding the base of the Korean eco-friendly vehicle market.
KIA MOToRS Annual Report 2013 54 55 Our Future Research & Development PHEV (Plug-in Hybrid Electric Vehicle) A cquiring the Green Vehicles Footprint Verification Gasoline Engines: Turbo, GDI & CVVL
A PHEV has a larger capacity battery than an HEV and can The 2012 Ray turbo model uses the Kappa 1.0 turbo be recharged using a regular home electric socket. When engine and has 36%, 46%, and 5% better maximum the battery charge drops below a certain threshold while output, torque, and fuel economy, respectively, than its the vehicle is being driven, the vehicle moves into hybrid 2011. 04 Optima (K5) predecessor. The three-cylinder Kappa engine also emits Hybrid mode, in which both the engine and the electric motor run, less CO2 but boasts higher output than the existing four- thus enabling longer journeys. In Kia’s case, we use a 2.0 cylinder engine, thanks to a reduction in size and weight. GDI gasoline-powered engine and a high voltage lithium- We made the components lighter for less NVH (Noise, ion polymer battery with an output of more than 50 kW. Vibration and Harshness) while improving their rigidity This long-distance PHEV will help to further establish Kia’s to help to deliver a quieter driving experience. Turbo credentials in the green car market. technology has also been used to enhance performance. Ray EV 2011. 12 GDI (Gasoline Direct Injection) technology injects fuel FCEV (Fuel Cell Electric Vehicle) directly into the cylinders for greater fuel efficiency. When a GDI engine is combined with turbo technology, An FCEV is powered by fuel cells that produce electricity Greater Energy Efficiency it is possible to downsize engines, with displacement through the chemical reaction between hydrogen and the Optima (K5) A key aim of next-generation automobile technology is being reduced while performance is enhanced. We have oxygen in the air. The only emission from an FCEV is water, 2013. 12 Hybrid, Cadenza to increase energy efficiency against a backdrop of the developed a full line-up of GDI engines for all vehicle making it a genuinely eco-friendly car that can tackle the (K7) Hybrid steady strengthening of fuel economy regulations by classes, ranging from the Lambda engine for full-sized twin challenges of environmental degradation and energy governments across the globe in an effort to tackle climate vehicles – Kia Quoris/K900 (K9), Cadenza (K7) – and depletion. change. We are focusing on developing products that offer the Theta engine for mid-sized vehicles – Optima (K5), In 2009, we succeeded in developing the Mohave FCEV, maximum energy efficiency by making the engine smaller, Sorento, Sportage – to the Gamma engine for compacts which features a 115 kW fuel cell stack, among the best developing continuously variable transmissions, reducing – Forte/Cerato (K3), Soul. We plan to complete engine Soul EV 2014 in the world, and a next-generation energy storage device the weight of the vehicle body, adopting aerodynamic downsizing through the phased expansion of the use of called a super-capacitor. The Mohave FCEV can travel designs that minimize air resistance, using ultra-low turbo GDI engines. up to 685 km on a single charge, and has a maximum friction tires, and employing a system that limits idling. We A car is powered by the force of the combustion generated speed of 160 km/h. It also satisfies all US collision are applying the results of these efforts across our product when fuel and air meet. We therefore conduct research safety requirements. The Mohave FCEV’s outstanding line-up. into technologies that enable more effective control of fuel durability and technology were proven with the successful and air to boost performance and efficiency. Our efforts completion of the 2,655-km US Hydrogen Road Tour 2009 to improve fuel injection include reducing the number of organized by the U.S. Department of Energy. Engine Downsizing and Diesel Engines cylinders and developing GDI engines. The technology We have succeeded in localizing 99% of fuel cell system- Engine downsizing involves decreasing engine used to inject air efficiently, another critical aspect of related technologies, and we are now focusing on displacement or the number of cylinders in order to powering a car, is dubbed CVVL (Continuous Variable additional technology development to further increase improve fuel economy. But reducing engine displacement Valve Lift). In 2012, we developed the Nu CVVL engine by system efficiency. also decreases engine output and torque performance. In optimizing air intake, resulting in better performance and addition, decreasing the number of cylinders may increase fuel economy. We have since used this engine in the 2013 noise and vibration. We are therefore applying direct Optima (K5). injection and turbo technologies to improve performance, strengthening stiffeners, modifying component structures, and using various other technologies to ensure a quiet driving experience. In 2012, we successfully developed a proprietary CVVL technology that enhances engine efficiency while maintaining displacement size. We are focusing on research to expand and enhance the performance of our diesel line-up, especially with the emergence of diesel engines as a dominant trend in the green car market.
KA I MotoRS Annual Report 2013 56 57 Our Future Re search & Development Diesel Engines: CRDi, DPF & LP EGR Other Technologies for Increased We also use aerodynamic designs to minimize fuel Fuel Economy consumption caused by air resistance and surface friction. In Europe, diesel cars account for more than 50% of all We also use tires with low rolling resistance to minimize vehicles on the road. In the U.S., the diesel market is Kia Motors has developed a gear-free CVT (Continuously surface friction. The 2012 Cerato/Forte (K3) has a drag expanding, with growing recognition of diesel vehicles Variable Transmission), which results in better fuel resistance of only 0.27 cd thanks to its streamlined design, as eco-friendly cars, which is a change in the previous economy, and it is now being used selectively on certain and features low friction tires which have 10% lower rolling negative image of diesel cars. Korea is also seeing models. We have applied the Kappa CVT, developed in resistance. increased demand for diesel cars, thanks to the eco- 2012, to the Picanto (Morning) and the Ray, enhancing fuel friendliness of diesel engines. The new generation of economy by around 5-6% over that of previous models. ISG (Idle Stop & Go) automatically shuts down the diesels maintains the classic diesel advantage of good engine when the car comes to a halt and then restarts it Another important factor for fuel economy is a lighter fuel economy but generates significantly fewer emissions, when the car begins to move, thus minimizing idling and vehicle body. We are making considerable efforts to go which is why they are called ‘clean diesels’. Kia Motors’ improving fuel economy by around 10%. We offer manual lightweight, applying lighter yet more durable materials U2 diesel engine for city cars and R and S2 diesel engines transmission ISG in the cee’d and Venga, our flagship and changing molding techniques. We plan to expand for RVs employ CRDi (Common Rail Direct injection) models in Europe, as well as in the Picanto (Morning) and the use of ultra-high strength steel from 20% in our mid- technology, which involves precision, high-pressure fuel Sportage. In the Korean market, we first applied automatic size line-up in 2012 to at least 50% by 2015, which will injection via electronic control. Vehicles powered by these transmission ISG and CVT ISG in the 2011 Forte, followed contribute to a weight reduction of over 10 kg for each diesel engines have 20-30% better fuel economy and by the Picanto (Morning), Ray, Rio (Pride), Soul, all-new vehicle. around 20% lower CO2 emissions than gasoline-powered Forte/Cerato (K3), and Optima (K5). vehicles.
The atmospheric pollutants generated in fuel combustion have been a problem for diesels, which emit carbon monoxide (CO), hydrocarbons (HC), particulate matters (PM), and nitrogen oxides (NOx). Among them, more than 90% of CO, HC, and PM can be removed through the DOC (Diesel Oxidation Catalysts) and the DPF (Diesel Particulate Filter). In Europe, emissions of PM and NOx are regulated by the Euro-V standards, and Euro-VI with 56% tougher NOx restrictions will go into effect in 2014. Korea has strict emission regulations in place, modeled after those in Europe.
To treat NOx, which the DPF cannot filter, we developed the LP (Low Pressure) EGR System and the LNT (Lean NOx Trap) in 2012. The LP EGR re-circulates and combusts exhaust gases that have not been fully combusted, cutting NOx emissions by over 60% and improving engine combustion efficiency which also enhances fuel economy. In July 2012, we launched the LP EGR-equipped Sorento, which meets Euro-VI standards, and we plan to expand the application of EGR to the Sportage and other models.
KIA MOToRS Annual Report 2013 58 59 Our Future Research & Development Global R&D Network
Hyundai·Kia Motors R&D Center California Proving Ground Europe Technical Center/ Hyundai Design Center Europe • Location: Hwaseong, Gyeonggi-do The California Proving Ground plays a key role in • Size: 3,470,000 m2 developing vehicles for the North American market. Working with our local subsidiary • Facilities: Engineering Design Building, This is where performance and endurance tests that oversees product planning, sales Design Center, Powertrain R&D Center, are conducted on all Kia vehicles sold in the U.S. and and marketing in Europe, the Europe Wind Tunnel, Proving Ground, etc. locally developed parts. Technical Center is strengthening our regional sales capabilities. • Location: Mojave Desert, California, U.S. • Size: Ground area - 17.52 million m2 (4,329 acres) / • Location: Russelsheim, Germany Japan R&D Center 8 test tracks / Total length: 116 km (72 miles) • Facilities: Technical and Design Center Located close to Tokyo, the Japan R&D Center focuses on developing the latest Kia Design Center Europe electronic and hybrid technologies. America Design & Technical Center Situated within Kia Motors’ European • Location: Yokohama, Japan headquarters, the Kia Design Center • Facilities: Technical and Design Center The America Design & Technical Europe is boosting Kia’s design Center undertakes research into capabilities in Europe. concept cars and the development of mass- • Location: Frankfurt, Germany production cars suitable for the US market. Facility: Design Center • • Location: Irvine, California, U.S. (Design Center) • Location: Chino, California, U.S. (Technical Center) • Facilities: Design Studio and Technical Center
America Technical Center
The America Technical Center plays a central role in R&D within the U.S. and is connected with the America Design & Technical Center and Proving Ground in California.
Central Advanced Research & • Location: Superior Township, Engineering Institute Michigan, U.S. • Facilities: Technical Center • Location: Uiwang, Gyeonggi-do • Size: 17,058 m2 • Facilities: Dry & Clean room, HMI Lab, Nano-Materials Lab, Autonomous Driving Control Lab, Venture Plaza, etc. China R&D Center
India R&D Center Construction on the China R&D Center commenced in Kia Design Center America February 2013 to develop cars localized for the Chinese The India R&D Center in Hyderabad Boasting world-class facilities and personnel, the market, which is rapidly becoming one of the largest and supports the design and evaluation of Kia Design Center America is the birthplace of fastest-growing car markets. The construction of the automobiles, with a particular focus on innovative models under the Kia label. developing localized products. China R&D Center is progressing very well on its 1,840,000 ㎡ building site, and the finished Center will soon serve as • Location: Irvine, California, U.S. Eco-Technology Research Institute • Location: Hyderabad, India an R&D hub to expand the Hyundai Motor Company and • Facilities: Design & Remodeling Studio, Painting Facilities: Technical Center • • Location: Yongin, Gyeonggi-do Kia Motors presence in China. Facilities, New Model Presentation Room, Visual • Size: 29,519 m2 Presentation Room, etc. • Location: Yantai, China • Facilities: Hydrogen Fueling Station, Fuel • Facilities: Technical Center Cell Endurance Tester, ELV Dismantling System, etc.
KIA MOToRS Annual Report 2013 60 61 Eco-Friendly Models Concept Cars
Eco- Concept friendly Optima (K5) Hybrid Provo Concept Cars Models Green Light for Eco-friendliness Be Provocative!
The Optima (K5) Hybrid is Kia Motors’ first gasoline hybrid mid-size This three-door hatchback points to the future of high-performance, high- sedan. Its fuel efficiency is one of the best in Korea, and the best in class compact cars. It showcases Kia Motors’ young and dynamic design its class. It features a sophisticated and distinctive style, excellent identity, and then combines that design identity with great sophistication. acceleration and low noise, as well as top-level eco-friendliness. Its On the exterior, the vehicle has air vents that resemble airplane engines, world-leading green technology and performance are the outcome of and the air intakes at the front and rear are designed to reflect the look of the ‘parallel hard-type hybrid system’ independently developed by Kia racing cars, emphasizing the high-performance image of this concept. Motors. The Optima (K5) Hybrid 2013 is offered at a reasonable price, The strong styling lines were adopted to deliver a sense of power and resulting in excellent product competitiveness. Also, its fuel efficiency speed. This concept car offers outstanding power performance, with a was improved to become the highest in its class. maximum output of 251 horsepower, thanks to the 7-speed DCT (Double Clutch Transmission) and a hybrid system that combines a 1.6 Turbo GDI engine with an electric motor.
Cadenza (K7) Hybrid Niro Concept Hybrid at Its Finest Sleek in Black
Kia Motors released the Cadenza (K7) Hybrid 700h in December 2013 The Niro is the 10th concept car to be created by the Kia Design Center to expand its hybrid line-up in the domestic market. The Cadenza Europe located in Frankfurt, Germany. This small crossover model targets (K7) Hybrid 700h is a premium semi large-size hybrid car that offers the European market. It sports a refined exterior, a compact chassis, excellent fuel efficiency of 16.0km/ℓ, as well as quietness and comfort, Kia Motors’ unique tiger-nose grille, and wide headlamps. The ‘butterfly’ all at a reasonable price. Its fuel efficiency is not only better than doors, which are usually found only in supercars, increase the sense of gasoline models in the same class, but also better than many compact sophistication. cars, even though it offers the power performance and comforts of a semi large-size car.
Soul Electric Vehicle
In April 2014, Kia Motors unveiled the Soul EV, which is based on the all-new Soul. The Soul EV is the company’s second mass-produced electric vehicle. Thanks to Kia’s advanced technologies, it features driving distance of 148 km per recharge, maximum output of 81.4 KW (111 ps), and maximum torque of 29 kgf·m (285 N·m). Recharging takes 4 hours and 20 minutes using a slow charger, but only 24 minutes using a quick charger (100kW grade). Kia Motors will release the Soul EV in Korea, then in Europe and North America, thus making a substantial contribution to the establishment of a real market for electric vehicles.
KIA MOToRS Annual Report 2013 62 63 Our Future Eco-Friendly Models & Concept Cars Independent Auditors’ Report Financial
Review Based on a report originally issued in Korean
The Board of Directors and Stockholders Kia Motors Corporation:
We have audited the accompanying consolidated statements of financial position of Kia Motors Corporation and its subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income and comprehensive income, changes in equity and cash flows for the years then ended. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the 65 Independent Auditors’ Report Company as of December 31, 2013 and 2012, and its financial performance and its cash flows for the years then ended, in accordance with 66 Consolidated Statements of Financial Position Korean International Financial Reporting Standards.
68 Consolidated Statements of Income Without qualifying our opinion, we draw attention to the following: 69 Consolidated Statements of Comprehensive Income The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally 70 Consolidated Statements of Changes in Equity accepted and applied in other countries. Accordingly, this report is for use by those knowledgeable about Korean auditing standards and their 72 consolidated Statements of Cash Flows application in practice. 73 notes to the Consolidated Financial Statements
KPMG Samjong Accounting Corp. Seoul, Korea March 7, 2014
This report is effective as of March 7, 2014, 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 consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
KIA MOToRS Annual Report 2013 64 65 Financial Review Independent Auditors’ Report KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Financial Position
As of December 31, 2013 and 2012 (In millions of won) (In millions of won)
Note 2013 2012 Note 2013 2012
Assets Liabilities
Cash and cash equivalents 5, 30 ₩ 2,311,264 1,903,309 Accounts and notes payable - trade 30, 31 ₩ 5,192,589 4,998,445 Short-term financial instruments 5, 30 4,035,379 2,367,230 Short-term borrowings 14, 30 876,376 1,109,825 Accounts and notes receivable - trade 30, 31 2,072,818 1,801,731 Accounts and notes payable - other 30 1,763,692 1,713,988 Accounts and notes receivable - other 30 468,210 562,767 Advances received 179,600 240,015 Advance payments 30,571 67,542 Accrued expenses 30 1,119,919 921,097 Prepaid income taxes 52,401 5,444 Income taxes payable 259,772 144,767 Inventories 6 4,331,367 4,222,950 Current portion of long-term debt and bonds 14, 30 758,648 289,412 Other current assets 7, 13, 30 170,376 208,457 Provisions – current 17 617,969 531,838 Total current assets 13,472,386 11,139,430 Other current liabilities 15, 30 37,673 50,852 Long-term financial instruments 5, 30 294,377 58,990 Total current liabilities 10,806,238 10,000,239 Long-term available-for-sale financial assets 7, 30 1,237,107 1,606,358 Bonds 14, 30 1,081,778 1,520,811 Long-term accounts and notes receivable - trade 30 1,662 2,675 Long-term debt 14, 18, 30 604,968 934,160 Investments in associates and joint ventures 8 9,197,720 7,876,179 Long-term advances received 43,086 41,447 Property, plant and equipment, net 4, 9, 14 9,777,005 9,721,198 Net defined benefit liabilities 16 171,914 21,451 Investment property, net 4, 10 50,254 51,434 Provision for other long-term employee benefits 214,238 224,864 Intangible assets, net 4, 11, 12 1,715,739 1,524,001 Provisions 17 1,422,824 1,302,510 Guarantee deposits 30 162,190 166,463 Deferred tax liabilities 26 1,484,205 1,380,163 Deferred tax assets 26 171,023 123,622 Other non-current liabilities 15, 30 97,994 124,607 Other non-current assets 13, 30 102,577 127,964 Total non-current liabilities 5,121,007 5,550,013 Total non-current assets 22,709,654 21,258,884 Total liabilities 15,927,245 15,550,252 Total assets ₩ 36,182,040 32,398,314 Equity
See accompanying notes to the consolidated financial statements. Common stock 19 2,139,317 2,139,317 Capital surplus 1,560,650 1,560,650 Retained earnings 20 16,301,812 12,663,024 Accumulated other comprehensive income 7, 19 101,976 334,031 Other 19 151,040 151,040 Total equity 20,254,795 16,848,062 Total liabilities and equity ₩ 36,182,040 32,398,314
See accompanying notes to the consolidated financial statements.
KIA MOToRS Annual Report 2013 66 67 Financial Review Consolidated Statements of Financial Position KIA MOTORS CORPORATION AND SUBSIDIARIES KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Income Consolidated Statements of Comprehensive Income
For the years ended December 31, 2013 and 2012 (In millions of won, except earnings per share information) For the years ended December 31, 2013 and 2012 (In millions of won)
Note 2013 2012 2013 2012
Sales 4, 31 ₩ 47,597,897 47,242,933 Profit for the year ₩ 3,817,059 3,864,704 Cost of sales 27, 31 (37,511,941) (36,536,005) Other comprehensive income (loss) for the year (net of tax): Gross profit 10,085,956 10,706,928 Items that will not be reclassified subsequently to profit or loss: Selling expenses 23, 27 (4,411,711) (4,845,860) Defined benefit plan remeasurements 74,281 (155,817) General and administrative expenses 23, 27 (2,497,145) (2,338,817) Change in remeasurements of associates 10,688 (28,394) Operating profit 3,177,100 3,522,251 Total items that will not be reclassified subsequently to profit or loss 84,969 (184,211) Share of profits of associates and joint ventures, gain on 8 1,319,585 1,414,080 Items that may be reclassified subsequently to profit or loss: disposal, and impairment loss Change in fair value of available-for-sale financial assets 5,902 179,405 Finance income 24, 30 455,275 402,795 Change in fair value of available-for-sale financial assets (149,301) (52,363) Finance costs 24, 30 (139,442) (211,145) reclassified to profit or loss Other income 25 377,188 417,339 Effective portion of changes in fair value of cash flow hedges - 5,543 Change in capital adjustments - decrease in gain of equity Other expenses 25 (361,130) (381,264) (8,249) (50,526) method accounted investments Profit before income taxes 4,828,576 5,164,056 Change in capital adjustments - increase in loss of equity (35,952) (41,224) Income tax expense 26 (1,011,517) (1,299,352) method accounted investments Foreign currency translation difference (44,455) (150,058) Profit for the year ₩ 3,817,059 3,864,704 Total items that may be reclassified subsequently to profit or loss (232,055) (109,223) Profit attributable to owners of the Parent Company 3,817,059 3,864,687 Other comprehensive loss for the year, net of income tax (147,086) (293,434) Profit attributable to non-controlling interests - 17 Total comprehensive income for the year ₩ 3,669,973 3,571,270 Earnings per share Attributable to owners of the Parent Company 3,669,973 3,571,253 Basic earnings per share in won 21 ₩ 9,425 9,546 Attributable to non-controlling interests - 17 Diluted earnings per share in won 21 ₩ 9,425 9,545 See accompanying notes to the consolidated financial statements. See accompanying notes to the consolidated financial statements.
KIA MOToRS Annual Report 2013 68 69 Financial Review Consolidated Statements of Income•Consolidated Statements of Comprehensive Income KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Equity
For the years ended December 31, 2013 and 2012 (In millions of won) (In millions of won)
Attributable to owners of Parent Company Attributable to owners of Parent Company
Accumulated Accumulated other Non- other Non- Common Capital Retained comprehensive controlling Common Capital Retained comprehensive controlling stock surplus earnings income (loss) Other interests Total stock surplus earnings income (loss) Other interests Total
Balance at January 1, 2012 ₩ 2,132,452 1,557,966 9,224,715 443,254 151,334 (11) 13,509,710 Balance at January 1, 2013 ₩ 2,139,317 1,560,650 12,663,024 334,031 151,040 - 16,848,062 Comprehensive income Comprehensive income (net of tax): (net of tax): Profit for the year - - 3,864,687 - - 17 3,864,704 Profit for the year - - 3,817,059 - - - 3,817,059 Change in unrealized fair value of Change in unrealized fair value of - - - 179,405 - - 179,405 - - - 5,902 - - 5,902 available-for-sale financial assets available-for-sale financial assets Change in fair value of available- Change in fair value of available- for-sale financial assets - - - (52,363) - - (52,363) for-sale financial assets - - - (149,301) - - (149,301) reclassified to profit or loss reclassified to profit or loss Effective portion of changes in fair Change in capital adjustments - - - - 5,543 - - 5,543 value of cash flow hedges decrease in gain of equity method - - - (8,249) - - (8,249) Change in capital adjustments - accounted investments decrease in gain of equity method - - - (50,526) - - (50,526) Change in capital adjustments - accounted investments increase in loss of associates - - - (35,952) - - (35,952) and joint ventures Change in capital adjustments - Defined benefit plan increase in loss of associates - - - (41,224) - - (41,224) - - 74,281 - - - 74,281 and joint ventures remeasurements Defined benefit plan Change in remeasurements - - (155,817) - - - (155,817) - - 10,688 - - - 10,688 remeasurements of associates Change in remeasurements Foreign currency translation - - (28,394) - - - (28,394) - - - (44,455) - - (44,455) of associates difference Foreign currency translation Total comprehensive income - - - (150,058) - - (150,058) - - 3,902,028 (232,055) - - 3,669,973 difference (net of tax) Total comprehensive income Transactions with owners and - - 3,680,476 (109,223) - 17 3,571,270 (net of tax) other, recorded directly in equity: Transactions with owners and Dividends - - (263,240) - - - (263,240) other, recorded directly in equity: Balance at December 31, 2013 ₩ 2,139,317 1,560,650 16,301,812 101,976 151,040 - 20,254,795 Dividends - - (242,167) - - - (242,167) See accompanying notes to the consolidated financial statements. Exercise of stock warrants 6,865 2,684 - - (294) - 9,255 Acquisition of non-controlling interests - - - - - (6) (6) Total transactions with owners and 6,865 2,684 (242,167) - (294) (6) (232,918) other, recorded directly in equity Balance at December 31, 2012 ₩ 2,139,317 1,560,650 12,663,024 334,031 151,040 - 16,848,062
See accompanying notes to the consolidated financial statements.
KIA MOToRS Annual Report 2013 70 71 Financial Review Consolidated Statements of Changes in Equity KIA MOTORS CORPORATION AND SUBSIDIARIES KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Notes to the Consolidated Cash Flows Financial Statements For the years ended December 31, 2013 and 2012
For the years ended December 31, 2013 and 2012 (In millions of won)
Note 2013 2012 1. General Description of Parent Company and Subsidiaries Cash flows from operating activities (a) Organization and description of the Company Cash generated from operations 28 ₩ 5,051,324 5,153,910 Kia Motors Corporation (the “Parent Company”), one of the leading motor vehicle manufacturers in Korea, was established in Interest received 189,032 136,171 December 1944 under the laws of the Republic of Korea to manufacture and sell a range of passenger cars, recreational vehicles Interest paid (106,408) (156,640) and other commercial vehicles in the domestic and international markets. The Parent Company owns and operates three principal automobile production sites: the Sohari factory, the Hwasung factory and the Kwangju factory. Dividends received 430,336 377,337 The shares of the Parent Company have been listed on the Korea Exchange since 1973. As of December 31, 2013, the Parent Income tax paid (787,691) (1,165,353) Company’s largest shareholder is Hyundai Motor Company, which holds 33.88 percent of the Parent Company’s stock. Net cash provided by operating activities 4,776,593 4,345,425 The consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Company”) and Cash flows from investing activities the Company’s interest in associates and joint ventures. Proceeds from sale of investments in associates 7,266 - (b) Consolidated subsidiaries Proceeds from sale of long-term available-for-sale - 123,397 Details of consolidated subsidiaries as of December 31, 2013 are summarized as follows: financial assets Proceeds from sale of property, plant and equipment 157,714 122,050 Subsidiary Location Business Percentage of ownership
Proceeds from sale of intangible assets 610 2,877 Exclusive importer and distributor Kia Motors America, Inc. (KMA) U.S.A. 100.00% of motor vehicles and parts Purchase of short-term financial instruments, net (1,548,149) (737,230) Kia Motors Manufacturing Georgia, Inc. (KMMG)(*1) U.S.A. Manufacturing and sale of vehicles and parts 100.00% Acquisition of investments in associates (89,200) (147,299) Exclusive importer and distributor Kia Canada Inc. (KCI)(*2) Canada 100.00% Acquisition of long-term available-for-sale financial assets (24) (273,669) of motor vehicles and parts Kia Motors Deutschland GmbH (KMD) Germany ” 100.00% Acquisition of property, plant and equipment (1,192,372) (1,574,649) Kia Motors Europe GmbH (KME) Germany Holding company 100.00% Acquisition of intangible assets (551,550) (326,768) Exclusive importer and distributor Kia Motors Polska Sp.z.o.o. (KMP)(*3) Poland 100.00% Purchase of long-term financial instruments, net (355,387) (37,957) of motor vehicles and parts Kia Motors Slovakia s.r.o. (KMS) Slovakia Manufacturing and sale of vehicles and parts 100.00% Collection of loans and others 57,152 6,671 Exclusive importer and distributorof motor Kia Motors Sales Slovensko s.r.o. (KMSs)(*4) Slovakia 100.00% Net cash used in investing activities (3,513,940) (2,842,577) vehicles and parts Kia Motors Belgium (KMB)(*4) Belgium ” 100.00% Cash flows from financing activities Kia Motors Czech s.r.o. (KMCZ)(*4) Czech ” 100.00% Paid-in-capital increase - 9,407 Kia Motors UK Ltd. (KMUK)(*4) England ” 100.00% Dividends paid (263,240) (242,167) Kia Motors Austria GmbH (KMAS)(*4) Austria ” 100.00% Repayment of short-term borrowings and long-term debt (421,251) (464,822) Kia Motors Hungary K.f.t (KMH)(*4) Hungary ” 100.00% Repayment of bonds (100,000) (1,108,143) Kia Motors Iberia (KMIB)(*4) Spain ” 100.00% Repayment of current portion of financial lease liabilities (5,860) (5,546) Kia Motors Sweden AB (KMSW)(*4) Sweden ” 100.00% Kia Motors France SAS (KMF)(*4) France 100.00% Acquisition of non-controlling interests - (6) ” Kia Motors Nederland BV (KMNL)(*4) Netherlands ” 100.00% Cash flows from other financing activities (856) 1,163 Kia Motors Company Italy S.r.l (KMIT)(*4) Italy ” 100.00% Net cash used in financing activities (791,207) (1,810,114) Kia Motors Russia LLC (KMR)(*5) Russia ” 100.00% Impact on foreign currency exchange rates on cash (63,491) (93,594) Kia Motors Australia Pty Ltd. (KMAU) Australia ” 100.00% and cash equivalents Kia Motors New Zealand Pty Ltd. (KMNZ)(*6) New Zealand ” 100.00% Net increase (decrease) in cash and cash equivalents 407,955 (400,860) (*1) 100.00% owned by KMA Cash and cash equivalents at January 1 1,903,309 2,304,169 (*2) 17.47% owned by KMA (*3) 100.00% owned by KMD Cash and cash equivalents at December 31 ₩ 2,311,264 1,903,309 (*4) 100.00% owned by KME (*5) 80.00% owned by KME and 20.00% owned by KMD (*6) 100.00% owned by KMAU See accompanying notes to the consolidated financial statements.
KIA MOToRS Annual Report 2013 72 73 Financial Review Consolidated Statements of Cash Flows • Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(c) Financial information of subsidiaries Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the Financial information of significant subsidiaries (before eliminating intra-group transaction) as of and for the years ended December 31, next fiscal year are included in the following notes: 2013 and 2012 are summarized as follows: · Note 16 : Employee Benefits (i) Financial information as of and for the year ended December 31, 2013 · Note 17 : Provisions (In millions of won) · Note 18 : Commitments and Contingencies Company Total assets Total liabilities Sales Net income · Note 26 : Income Tax Expense
KMA ₩ 3,275,282 2,474,823 12,869,946 532,610 (e) Fair value measurement KMMG 1,984,718 1,256,690 8,073,095 207,923 A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non- financial assets and liabilities. KMS 2,767,738 1,572,813 6,464,346 335,564 The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that KMR 772,588 414,746 4,187,462 170,430 has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as (ii) Financial information as of and for the year ended December 31, 2012 (In millions of won) broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value Company Total assets Total liabilities Sales Net income hierarchy in which such valuations should be classified.
KMA ₩ 2,847,423 2,275,194 12,699,059 386,712 (f) Changes in accounting policies KMMG 2,077,148 1,345,709 7,771,212 206,090 (i) Amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ KMS 2,636,049 1,591,732 5,675,685 225,141 The Company has retrospectively applied the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since January 1, 2013. The amendments require presenting in other comprehensive income on the basis of whether they are potentially reclassifiable KMR 815,037 310,153 4,268,189 295,920 to profit or loss subsequently (reclassification adjustments). The consolidated statements of comprehensive income for the year ended December 31, 2012 is restated.
(ii) Amendments to K-IFRS No. 1019, ‘Employee Benefits’ 2. Basis of Preparation The Company has applied the amendments to K-IFRS No. 1019, ‘Employee Benefits’ since January 1, 2013. The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets (a) Statement of compliance based on the rate used to discount the defined benefit obligation. The amendments to K-IFRS No. 1019 are not applied retrospectively, The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”) as the Company believes that the impact on prior period financial statements is immaterial. as prescribed in the Act on External Audit of Corporations in the Republic of Korea. (iii) Amendments to K-IFRS No. 1107, ‘Disclosures-Offsetting Financial Assets and Financial Liabilities’ As a result of the amendments to K-IFRS No. 1107, the Company has expanded its disclosures about the offsetting of financial assets (b) Basis of measurement and financial liabilities (see Note 30(g)). The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statements of financial position: (iv) K-IFRS No. 1110, ‘Consolidated Financial Statements’ The Company adopted K-IFRS No. 1110, ‘Consolidated Financial Statements’ since January 1, 2013. As a result, the Company has · Available-for-sale financial assets are measured at fair value changed its accounting policy with respect to determining whether it has control over and consequently whether it consolidates its · Liabilities for defined benefit plans are recognized at the net of total present value of defined benefit obligations less the fair value of investees. K-IFRS No. 1110 introduces a new control model that is applicable to all investees; among other things, it requires the plan assets consolidation of an investee if the Company controls the investee on the basis of de facto circumstances. The adoption of K-IFRS No.1110 does not result in any change to the Company’s consolidation scope. (c) Functional and presentation currency (v) K-IFRS No. 1111, ‘Joint Arrangements’ The consolidated financial statements are presented in Korean won, which is the Parent Company’s functional currency and the The Company adopted K-IFRS No. 1111, ‘Joint Arrangements’ since January 1, 2013. The standard classifies joint arrangements into currency of the primary economic environment in which the Company operates. two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture (d) Use of estimates and judgments is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of The preparation of the consolidated financial statements in conformity with K-IFRS requires management to make judgments, the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income revenues and expenses) in relation to its interest in the arrangement in accordance with relevant K-IFRSs applicable to the particular and expenses. Actual results may differ from these estimates. assets, liabilities, revenues and expenses. The standard requires a joint venture to recognize an investment and to account for that Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the investment using the equity method. In Accordance with K-IFRS No. 1111, The Company has re-evaluated its involvement in its only period in which the estimates are revised and in any future periods affected. joint arrangement and has reclassified the investment from jointly controlled entity to joint venture. Notwithstanding the reclassification,
KIA MOToRS Annual Report 2013 74 75 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
the investment continues to be recognized by applying the equity method and there has been no impact on the recognized assets, As of the acquisition date, non-controlling interests in the acquiree are measured as the non-controlling interests’ proportionate share liabilities and comprehensive income of the Company. of the acquiree’s identifiable net assets.
(vi) K-IFRS No. 1112, ‘Disclosure of Interests in Other Entities’ The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of The Company adopted K-IFRS No. 1112, ‘Disclosure of Interests in Other Entities’ since January 1, 2013. The standard brings together the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and the acquiree and the equity interests issued by the acquirer. However, any portion of the acquirer’s share-based payment awards unconsolidated structured entities. The standard requires the disclosure of information about the nature, risks and financial effects of exchanged for awards held by the acquiree’s employees that is included in consideration transferred in the business combination shall these interests (see note 8). be measured in accordance with the method described above rather than at fair value.
(vii) K-IFRS No. 1113, ‘Fair Value Measurement’ Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include finder’s fees; advisory, The Company adopted K-IFRS No. 1113, ‘Fair Value Measurement’ since January 1, 2013. The standard defines fair value and a single legal, accounting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining framework for fair value, and requires disclosures about fair value measurements (see note 30). an internal acquisitions department; and costs of registering and issuing debt and equity securities. Acquisition-related costs, other than those associated with the issue of debt or equity securities, are expensed in the periods in which the costs are incurred and the services are received. The costs to issue debt or equity securities are recognized in accordance with K-IFRS No.1032 Financial Instruments: Presentation and K-IFRS No.1039 Financial Instruments: Recognition and Measurement. 3. Significant Accounting Policies The significant accounting policies applied by the Company in preparation of its consolidated financial statements are included Goodwill Goodwill derived from business combinations occurred is as the fair value of the consideration transferred including the below. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial recognized amount of any non-controlling interest in the acquiree, less the net recognized amount of the identifiable assets acquired statements except those as disclosed in note 2(f). and liabilities assumed, all measured as of the acquisition date. When the excess is negative, bargain purchase gain is immediately recognize in statements of income for the period. Goodwill is subsequently measured at cost less accumulated impairment losses.
(a) Basis of consolidation Acquisition of non-controlling interests is accounted for intercompany transaction, and related goodwill is not recognized. Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of the other entity so as to obtain benefits from its activities. The existence and effect of potential voting (c) Associates and joint ventures rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. The An associate is an entity in which the Company has significant influence, but not control, over the entity’s financial and operating policies. financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. the date that control ceases. Joint ventures are those entities over whose activities the Company has joint control, established by contractual agreement, and If a member of the Company uses accounting policies other than those adopted in the consolidated financial statements for like require unanimous consent for strategic financial and operating decisions. transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements. The investment in an associate and joint venture is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss and changes in equity of the associate and joint venture after the date of Intra-group transactions Intra-group balances and transactions, and any unrealized income and expenses arising from intra- acquisition. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are group transactions, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if eliminated in preparing the consolidated financial statements. Intra-group losses recognized as expense if intra-group losses indicate intra-group losses indicate an impairment that requires recognition in the consolidated financial statements. an impairment that requires recognition in the consolidated financial statements.
Non-controlling interests Non-controlling interests in a subsidiary are accounted for separately from the Company’s If an associate and joint venture uses accounting policies different from those of the Company for like transactions and events in similar ownership interests in a subsidiary. Each component of net profit or loss and other comprehensive income is attributed to the owners of circumstances, appropriate adjustments are made to its financial statements in applying the equity method. the Company and non-controlling interest holders, even when the allocation reduces the non-controlling interest balance below zero. When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, Changes in the Company’s ownership interest in a subsidiary Changes in the Company’s ownership interest in including any long-term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the a subsidiary that do not result in a loss of control are accounted for as equity transactions with owners in their capacity as owners. Company has an obligation or has to make payments on behalf of the investee for further losses. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. The difference between the consideration and the adjustments made to non-controlling interest is recognized directly in equity attributable to the (d) Cash and cash equivalents owners of the Company. Cash and cash equivalents comprised of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (b) Business combination Business combination A business combination is accounted for by applying the acquisition method, unless it is a combination (e) Inventories involving entities or businesses under common control. Inventories are measured at the lower of cost or net realizable value. The cost of inventories is determined based on the specific Each identifiable asset and liability is measured at its acquisition-date fair value except for below: identification method for materials-in-transit and moving-average method for all other inventories, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. - Only those contingent liabilities assumed in a business combination that are a present obligation and can be measured reliably are recognized - Deferred tax assets or liabilities are recognized and measured in accordance with K-IFRS No. 1012 Income Taxes When inventories are sold, the carrying amount of those inventories is recognized as cost of goods sold in same period as the related - Employee benefit arrangements are recognized and measured in accordance with K-IFRS No.1019Employee Benefits revenue. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized
KIA MOToRS Annual Report 2013 76 77 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an (g) Non-derivative financial liabilities increase in net realizable value, are recognized as a reduction in the amount of inventories recognized as an expense in the period in The Company classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial which the reversal occurs. liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Company recognizes financial liabilities in the consolidated statements of financial position when the Company becomes a party to the (f) Non-derivative financial assets contractual provisions of the financial liability. The Company recognizes and measures non-derivative financial assets by the following four categories: financial assets at fair value Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Company financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at recognizes financial assets in the consolidated statements of financial position when the Company becomes a party to the contractual fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, provisions of the instrument. transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred. Upon initial recognition, non-derivative financial assets are measured at their fair value plus, in the case of a financial asset not at fair Other financial liabilities Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss value through profit or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance. are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus Financial assets at fair value through profit or loss A financial asset is classified as financial assets are classified transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, at amortized cost using the effective interest method. transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair The Company derecognizes a financial liability from the consolidated statements of financial position when it is extinguished (i.e. when value, and changes therein are recognized in profit or loss. the obligation specified in the contract is discharged, cancelled or expires). Held-to-maturity investments A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Company has the positive intention and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent (h) Derivative financial instruments, including hedge accounting to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method. Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in therein are either recognized in profit or loss or, when the derivatives are designated in a hedging relationship and the hedge is an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest determined to be an effective hedge, other comprehensive income. method except for loans and receivables of which the effect of discounting is immaterial. (i) Hedge accounting Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are The Company holds derivative contracts to manage foreign exchange risk. The Company designated derivatives as hedging designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments instruments to hedge the foreign currency risk of highly probable forecasted transactions (a cash flow hedge). or loans and receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged effect, recorded in other comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the of such unquoted equity instruments are measured at cost. When a financial asset is derecognized, the cumulative gain or loss hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting previously recognized in other comprehensive income is reclassified from equity to profit or loss. Dividends on an available-for-sale the changes in the cash flows of the respective hedged items during the period for which the hedge is designated. equity instrument are recognized in profit or loss when the Company’s right to receive payment is established. Cash flow hedge When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated Derecognition of financial assets The Company derecognizes a financial asset when the contractual rights to the cash with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. is created or retained by the Company is recognized as a separate asset or liability. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation If the Company retains substantially all the risks and rewards of ownership of the transferred financial assets, the Company continues is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has to recognize the transferred financial assets and recognizes financial liabilities for the consideration received. been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction Offsetting between financial assets and financial liabilities Financial assets and financial liabilities are offset occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized and the net amount is presented in the consolidated statements of financial position only when the Company currently has a legally immediately in profit or loss. enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle (ii) Other derivative financial instruments the liability simultaneously. Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.
KIA MOToRS Annual Report 2013 78 79 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(i) Impairment of financial assets Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is with the carrying amount of property, plant and equipment and are recognized in profit or loss. objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after The estimated useful lives of the Company’s property, plant and equipment are as follows: the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can Useful lives (years) be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Buildings and structures 20 – 40 Machinery and equipment 3 – 15 If financial assets have objective evidence that they are impaired, impairment losses should be measured and recognized. Dies, molds and tools 5 Financial assets measured at amortized cost An impairment loss in respect of a financial asset measured at amortized Vehicles 5 cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted Other equipment 5 at the asset’s original effective interest rate. If it is not practicable to obtain the instrument’s estimated future cash flows, impairment losses would be measured by using prices from any observable current market transactions. The Company can recognize impairment Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The losses directly or establish a provision to cover impairment losses. If, in a subsequent period, the amount of the impairment loss change is accounted for as a change in an accounting estimate. decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss shall be reversed either directly or by adjusting (k) Borrowing costs an allowance account. The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part Financial assets carried at cost If there is objective evidence that an impairment loss has occurred on an unquoted equity of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a instrument that is not carried at fair value, the amount of the impairment loss is measured as the difference between the carrying substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured or otherwise amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are similar financial asset. Such impairment losses shall not be reversed. not qualifying assets.
Available-for-sale financial assets When a decline in the fair value of an available-for-sale financial asset has been (l) Intangible assets recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment even though the impairment losses. financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale is not be reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was assets from the date that they are available for intended use. The residual value of intangible assets is zero. However, as useful lives of recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss. intangible assets are not foreseeable to the periods over which memberships are expected to be available for use, this intangible asset is determined as having indefinite useful lives and not amortized. (j) Property, plant and equipment The estimated useful lives of the Company’s intangible assets for the current and comparative periods are as follows: Property, plant and equipment are initially measured at cost. The cost of property, plant and equipment includes expenditures arising Estimated useful lives (years) directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of Industrial property rights 5, 10 dismantling and removing the item and restoring the site on which it is located. Software 5
Subsequent to initial recognition, an item of property, plant and equipment is carried at its cost less any accumulated depreciation and Development costs (*) any accumulated impairment losses. Country club membership and golf club membership Indefinite
(*) Capitalized development costs are amortized over the useful life considering the life cycle of the developed products. Subsequent costs are recognized in the carrying amount of property, plant and equipment at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The costs of the day-to-day servicing are recognized in profit or loss as incurred. Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine Property, plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant as changes in accounting estimates. compared to the total cost of property, plant and equipment is depreciated over its separate useful life.
KIA MOToRS Annual Report 2013 80 81 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
Research and development Expenditures on research activities, undertaken with the prospect of gaining new scientific or The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic technical knowledge and understanding, is recognized in profit or loss as incurred. Development expenditures are capitalized only if basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other term and its useful life. The Company reviews to determine whether the leased asset may be impaired. development expenditures are recognized in profit or loss as incurred. (p) Government grants Subsequent expenditures Subsequent expenditures are capitalized only when they increase the future economic benefits Government grants are not recognized unless there is reasonable assurance that the Company will comply with the grant’s conditions embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and and that the grant will be received. Government grants whose primary condition is that the Company purchase, construct or otherwise brands, are recognized in profit or loss as incurred. acquire long-term assets are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense. (m) Investment property Property held for the purpose of earning rentals or benefiting from capital appreciation is classified as investment property. Investment Other government grants which are intended to compensate the Company for expenses incurred are deducted from related costs over property is measured initially at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is the periods in which the Company recognizes the related costs as expenses. Government grants which are intended to give immediate carried at depreciated cost less any accumulated impairment losses. financial support to the Company with no future related costs are recognized as government grant income in profit or loss.
(n) Impairment of non-financial assets (q) Employee benefits The carrying amounts of the Company’s non-financial assets, other than assets arising from employee benefits, inventories and Short-term employee benefits Short-term employee benefits are employee benefits that are due to be settled within 12 deferred tax assets, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any months after the end of the period in which the employees render the related service. When an employee has rendered service to the such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by to be paid in exchange for that service. comparing their recoverable amount to their carrying amount. Other long-term employee benefits Other long-term employee benefits include employee benefits that are settled beyond The Company estimates the recoverable amount of an individual asset. If it is impossible to measure the individual recoverable amount 12 months after the end of the period in which the employees render the related service, and are calculated at the present value of the of an asset, then the Company estimates the recoverable amount of cash-generating unit (“CGU”). The recoverable amount of an asset amount of future benefit that employees have earned in return for their service in the current and prior periods, less the fair value of any or a CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying an pre-tax related assets. The present value is determined by discounting the expected future cash flows using the interest rate of high-quality discount rate that reflect current market assessments of the time value of money and the risks specific to the asset or CGU for which corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or a CGU. currency in which the benefits are expected to be paid. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise. An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss. Retirement benefits: defined benefit plans The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment discounting that amount and deducting the fair value of any plan assets. loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits (o) Leases available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value The Company classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where of economic benefits, consideration is given to any applicable minimum funding requirements. the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding classified as operating leases. In case of financial leases, at the commencement of the lease term, the Company recognizes as interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the finance assets and finance liabilities in its consolidated statements of financial position, the lower amount of the fair value of the leased net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account are added to the amount recognized as an asset. Also, minimum lease payments are apportioned between the finance charge and the any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant expense and other expenses related to defined benefit plans are recognized in profit or loss. periodic rate of interest on the remaining balance of the liability. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.
KIA MOToRS Annual Report 2013 82 83 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
In addition, employees of KMA are eligible to participate, upon meeting certain service requirement, in the profit sharing retirement plan (u) Revenue and defined benefit pension plan under the Internal Revenue Code 401(k) in the United States. KMA and employees of KMA paid each Revenue from sale of goods or the use by others of the Company assets is measured at the fair value of the consideration received or contributions during the period in which the employees render the related service. receivable, net of trade discounts, volume rebates and cash incentives to the customers.
(r) Provisions Revenue from sales of vehicles, service parts and other related products is recognized when the Company has transferred to the buyer the significant risk and rewards of ownership of the goods, the Company retains neither continuing managerial involvement to the Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable degree usually associated with ownership nor effective control over the goods sold, the amount of revenue can be measured reliably, that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be of the amount of the obligation. incurred in respect of the transaction can be measured reliably. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best The Company accounts for sales of goods and services under Q Point Program as transactions multiple revenue generation activities estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the or deliverables. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the award expected future cash flows. credits (“Q Points”) and the other components of the sale. The amount allocated to the Q Points is estimated by reference to the fair Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement value of the points for which they could be sold separately. Such amount is deferred and revenue is recognized only when the Q Points shall be recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. are redeemed and the Company has fulfilled its obligations rather than the initial point of sales of goods and services. The reimbursement is treated as a separate asset. Rental income from investment property is recognized in profit or loss on straight-line basis over the term of the lease. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. (v) Finance income and finance costs
A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income except for warranty data and a weighting of all possible outcomes against their associated probabilities. dividend from investment in associates, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognized in profit or loss. Interest income is A provision shall be used only for expenditures for which the provision was originally recognized. recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. (s) Foreign currency Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and losses on hedging instruments Transactions in foreign currencies are translated to the respective functional currencies of the Company entities at exchange rates that are recognized in profit or loss. Interest expense of borrowings is recognized as it accrues in profit or loss, using the effective at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional interest method. currency using the reporting date’s exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. (w) Income taxes Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the date of the transaction. extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on a financial liability Current tax Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in other or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable comprehensive income. Also, foreign currency differences arising on settlement of Monetary assets and liabilities are recognized in profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, profit or loss. which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items The assets and liabilities of foreign operations are translated to presentation currency at exchange rates at the reporting date. The from the accounting profit. income and expenses of foreign operations are translated to presentation currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income. Deferred tax Deferred tax is recognized, using the asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax liability (t) Equity capital is recognized for all taxable temporary differences. A deferred tax asset is recognized for all deductible temporary differences to the Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are extent that it is probable that taxable profit will be available against which they can be utilized. However, deferred tax is not recognized recognized as a deduction from equity, net of any tax effects. for the following temporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit or loss When the Company repurchases its share capital, the amount of the consideration paid is recognized as a deduction from equity nor taxable income. and classified as treasury shares. The profits or losses from the purchase, disposal, reissue, or retirement of treasury shares are not recognized as current profit or loss. If the Company acquires and retains treasury shares, the consideration paid or received is directly recognized in equity.
KIA MOToRS Annual Report 2013 84 85 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, 4. Geographic and Other Information associates and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of The Company is engaged in manufacturing and sales of vehicles and parts, leasing of vehicles and rendering vehicle maintenance the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Company services. Leasing income and maintenance services are insignificant to total sales. Revenue information for each product and service recognizes a deferred tax asset for all deductible temporary differences arising from investments in subsidiaries and associates, to the is not available and management believes the cost to develop such information would be excessive. Consequently revenue amounts extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against for each product and service is not disclosed. which the temporary difference can be utilized. (a) The following tables provide information of sales by geographic locations based on the location of customers and non-current assets The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces the carrying amount to the as of and for the year ended December 31, 2013: extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax (In millions of won) asset to be utilized. Domestic North America Europe Other region Adjustment Consolidation amount Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized External sales ₩ 17,325,792 17,090,431 12,360,058 821,616 - 47,597,897 or the liability is settled, based on tax laws that have been enacted or substantively enacted by the end of the reporting period. The Property, plant and equipment, 9,079,840 1,174,659 1,229,526 5,269 53,704 11,542,998 measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in intangible assets and other which the Company expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities. (b) The following tables provide information of sales by geographic locations based on the location of customers and non-current assets Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, as of and for the year ended December 31, 2012: and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis. (In millions of won)
Domestic North America Europe Other region Adjustment Consolidation amount (x) Earnings per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing External sales ₩ 17,734,873 16,799,524 11,797,175 911,361 - 47,242,933 the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding Property, plant and equipment, 8,745,685 1,297,834 1,214,199 6,362 32,553 11,296,633 during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary intangible assets and other shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all potential dilutive ordinary shares. 5. Cash, Cash Equivalents and Restricted Financial Instrument (y) Operating segments (a) Cash and cash equivalents as of December 31, 2013 and 2012 are summarized as follows: An operating segment is a component of the Company that: 1) engages in business activities from which it may earn revenues (In millions of won) and incur expenses, including revenues and expenses that relate to transactions with other components of the Company, 2) whose 2013 2012 operating results are reviewed regularly by the Company’s chief operating decision maker (‘CODM’) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. Cash on hand ₩ 477 321 Deposits with financial institutions 2,310,787 1,902,988 Management has determined that the CODM of the Company is the CEO. The CODM does not receive and therefore does not review ₩ 2,311,264 1,903,309 discrete financial information for any component of the Company. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic and product revenue information are provided in note 4 to the (b) Financial instruments which are restricted in use for as of December 31, 2013 and 2012 are summarized as follows: consolidated financial statements. (In millions of won)
(z) New standards and interpretations not yet adopted 2013 2012
The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Win-Win cooperation deposits ₩ 27,000 27,000 Company for annual periods beginning after January 1, 2013, and the Company has not early adopted them. Management believes Guarantee deposits 10 13 the impact of the amendments on the Company’s consolidated financial statements is not significant. Green mold fund 20,000 20,000
(i) K-IFRS No.1032, ‘Financial Instruments: Presentation’ Other deposits 31,954 3,384 The amendments clarified the application guidance related to ‘offsetting a financial asset and a financial liability’. The amendment is ₩ 78,964 50,397 mandatorily effective for periods beginning on or after January 1, 2014 with earlier application permitted.
KIA MOToRS Annual Report 2013 86 87 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
6. Inventories (b) Changes in fair value of available-for-sale financial assets for the years ended December 31, 2013 and 2012 are summarized as follows: (In millions of won) Inventories as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) 2013 2012
2013 2012 Balance at January 1 ₩ 730,334 562,732
Finished goods ₩ 3,099,839 2,744,556 Changes in unrealized gain 7,786 236,683 Merchandise 42,715 190,924 Realized in profit or loss upon disposal (196,967) (69,081) Semi-finished goods 445,778 468,067 Balance at December 31 before taxes 541,153 730,334 Work-in-process 196,921 161,086 Income tax effect (130,959) (176,741) Raw materials 332,201 441,756 Balance at December 31 ₩ 410,194 553,593 Supplies 145,397 105,165 Materials-in-transit 68,516 111,396 (c) The Company has provided 1,500 units (carrying amount: ₩ 593 million) of the Korea Defense Industry Association (“KDIA”), which are ₩ 4,331,367 4,222,950 included in long-term available-for-sale financial assets for a performance guarantee on a contract.
7. Available-for-sale Financial Assets 8. Investments in Associates and Joint Ventures (a) Details of investments in associates and joint ventures as of December 31, 2013 and 2012 are summarized as follows: (a) Available-for-sale financial assets as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) (In millions of won) 2013 2012 Company Percentage of ownership Acquisition Cost 2013 2012 Percentage of Company ownership Acquisition Cost Carrying amount Acquisition Cost Carrying amount Marketable securities Hyundai Mobis Co., Ltd.(*1) 16.88% ₩ 215,012 3,288,988 215,012 2,775,505 Hyundai WIA Corporation 14.20% ₩ 237,510 694,260 632,143 Hyundai Steel Company (*1, 4) 19.78% 618,000 2,566,364 245,153 2,092,416 Hyundai Hysco Co., Ltd. (*1) 15.65% 63,794 148,172 570,610 Hyundai Engineering & Construction Co., Ltd.(*1) 5.23% 746,234 762,700 746,234 755,953 HMC Investment Securities Co., Ltd. (*2) 3.68% 25,939 10,584 15,319 Hyundai Powertech Co., Ltd. 37.58% 172,576 344,798 172,576 310,230 SeAH Besteel Corp. 0.00% 20 45 50 327,263 853,061 1,218,122 Hyundai Card Co., Ltd.(*1) 11.48% 147,960 271,642 147,960 251,943 Hyundai Dymos Inc. 45.37% 89,438 261,013 89,438 225,631 Non-marketable securities(*3) EUKOR Car Carriers Inc.(*1) 8.00% 19,565 99,070 19,565 85,178 WIA Automotive Engine (Shang-dong) Company 18.00% 47,332 47,332 47,332 Hyundai AMCO Co., Ltd.(*1) 19.99% 10,067 129,764 10,067 112,375 Hyundai Capital America 15.00% 316,590 316,590 321,330 Hyundai Partecs Co., Ltd. 31.00% 12,400 20,576 12,400 19,952 Other 19,494 19,494 19,574 383,416 383,416 388,236 Hyundai Autoever Systems Co., Ltd. 20.00% 1,000 44,487 1,000 37,134 Donghee Auto Co., Ltd. 35.10% 10,530 14,556 10,530 12,950 Debt securities TRW Steering Co., Ltd. 29.00% 8,952 1,124 8,952 2,215 Subordinate securities 8,000 8,000 - Kia Tigers Co., Ltd.(*2) 100.00% 20,300 - 20,300 - Other 630 630 - Hyundai NGV Co., Ltd. 24.39% 250 1,653 250 250 8,630 8,630 - ₩ 719,309 1,245,107 1,606,358 Haevichi Resort Co., Ltd. 40.00% 8,520 22,962 8,520 19,852 Hyundai Autron Co., Ltd. 20.00% 20,116 19,212 20,116 18,690 (*1) Hyundai Steel Company merged with the Cold-Rolled Coil Division spun off from Hyundai Hysco Co., Ltd. which resulted in disposal of this available-for-sale financial assets in the amount of ₩ 372,847 million for the year ended December 31, 2013. Beijing Dymos Transmission Co., Ltd. 24.08% 22,790 58,113 22,790 58,334 (*2) The Company recognized impairment loss of investment in HMC Investment Securities Co., Ltd. amounting to ₩ 15,355 million since the fair value significantly goes below historical China Millennium Corporations 30.30% 27,185 21,852 27,185 19,505 cost for the year ended December 31, 2013. (*3) Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured are measured at cost. Hyundai Motor Group China Ltd. 30.00% 19,671 93,526 9,211 60,391
KIA MOToRS Annual Report 2013 88 89 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(In millions of won) (c) Changes in investment in associates and joint ventures for the year ended December 31, 2013 are summarized as follows:
2013 2012 (In millions of won) Percentage of Company ownership Acquisition Cost Carrying amount Acquisition Cost Carrying amount Equity profit Other Other Beginning Acquisition or loss on capital Dividends Increase Ending Yanji Kia Motors A/S and Repair(*2) 100.00% 1,792 1,792 1,792 1,792 Company balance (Disposition) investment movement received (decrease) balance
Hyundai Powertech (Shangdong) Co., Ltd. 25.00% 28,894 41,981 28,894 29,179 Hyundai Mobis Co., Ltd. ₩ 2,775,505 - 542,969 1,725 (31,211) - 3,288,988 Dongfeng Yueda Kia Motors Co., Ltd.(*3) 50.00% 348,522 888,208 274,134 751,146 Hyundai Steel Company 2,092,416 372,847 111,369 (1,188) (9,080) - 2,566,364 Hyundai Motor Manufacturing Russia LLC 30.00% 129,229 220,314 129,229 208,581 Hyundai Engineering & Construction Co., Ltd. 755,953 - 15,560 (5,897) (2,916) - 762,700 Kia Japan Co., Ltd. - - - 33,197 7,831 Hyundai Powertech Co., Ltd. 310,230 - 33,055 1,513 - - 344,798 Innocean Worldwide Americas, LLC 30.00% 557 4,818 557 5,619 Hyundai Card Co., Ltd. 251,943 - 18,736 963 - - 271,642 Hyundai Information System North America 30.00% 1,911 2,554 1,911 2,476 Hyundai Dymos Inc. 225,631 - 37,103 (1,721) - - 261,013 Sewon America, Inc. 40.00% 15,090 8,092 15,090 8,985 EUKOR Car Carriers Inc. 85,178 - 20,792 (1,537) (5,363) - 99,070 Hyundai Capital Services UK Ltd.(*3) 10.00% 7,814 7,561 3,462 2,066 Hyundai AMCO Co., Ltd. 112,375 - 27,674 (2,290) (7,995) - 129,764 ₩ 2,704,375 9,197,720 2,275,525 7,876,179 Hyundai Partecs Co., Ltd. 19,952 - 624 - - - 20,576 (*1) Though the Company’s ownership is below 20%, the Company has significant influence on the financial and operating policy decisions. Hyundai Autoever Systems Co., Ltd. 37,134 - 9,141 (188) (1,600) - 44,487 (*2) Though the Company has 100% of the ownership, equity method is applied because management believes that difference between consolidation and applying equity method is immaterial. Donghee Auto Co., Ltd. 12,950 - 1,606 - - - 14,556 (*3) The Company classified Dongfeng Yueda Kia motors Co., Ltd. and Hyundai Capital Services UK Ltd. as joint ventures since the Company has the right to the net assets established by contractual agreement. TRW Steering Co., Ltd. 2,215 - (1,086) (5) - - 1,124 (*4) Hyundai Steel Company merged with Cold-Rolled Coil Division which was spun off from Hyundai Hysco Co., Ltd. resulting an increase of ₩ 372,847 million in investments in associ- Kia Tigers Co., Ltd. (*1) ------ates for the year ended December 31, 2013. Hyundai NGV Co., Ltd. 250 - 1,403 - - - 1,653 (b) Fair value of marketable securities of associates companies as of December 31, 2013 and 2012 are summarized as follows: Haevichi Resort Co., Ltd. 19,852 - 3,110 - - - 22,962 (In millions of won) Hyundai Autron Co., Ltd. 18,690 - 438 84 - - 19,212
2013 2012 Beijing Dymos Transmission Co., Ltd. 58,334 - 8,503 1,160 (9,884) - 58,113 China Millennium Corporations 19,505 - 2,558 (211) - - 21,852 Hyundai Mobis Co., Ltd. ₩ 4,821,346 4,730,997 Hyundai Motor Group China Ltd. 60,391 10,460 23,470 (795) - - 93,526 Hyundai Steel Company 1,989,142 1,594,406 Yanji Kia Motors A/S and Repair(*2) 1,792 - - - - - 1,792 Hyundai Engineering & Construction Co., Ltd. 353,993 408,230 Hyundai Powertech (Shangdong) Co., Ltd. 29,179 - 13,590 (788) - - 41,981 Dongfeng Yueda Kia Motors Co., Ltd. 751,146 74,388 370,935 6,498 (314,759) - 888,208 Hyundai Motor Manufacturing Russia LLC 208,581 - 62,784 (17,882) (33,169) - 220,314 Kia Japan Co., Ltd.(*3) 7,831 (7,831) - - - - - Innocean Worldwide Americas, LLC 5,619 - 1,957 - (2,744) (14) 4,818 Hyundai Information System North America 2,476 - 676 - (566) (32) 2,554 Sewon America, Inc. 8,985 - (235) (648) - (10) 8,092 Hyundai Capital Services UK Ltd. 2,066 4,352 1,112 - - 31 7,561 ₩ 7,876,179 454,216 1,307,844 (21,207) (419,287) (25) 9,197,720
(*1) The Company discontinued the application of the equity method for investment in associates of Kia Tigers Co., Ltd. due to the carrying amount of Company’s share being reduced to zero as of December 31, 2013. (*2) These investments in associates are recorded at cost as management believe that the effect of applying the equity method of accounting for investments is immaterial. (*3) Kia Japan Co., Ltd. was completely liquidated during the year ended December 31, 2013 and the Company recognized gain on disposal of investment in associates of ₩ 11,741 million.
KIA MOToRS Annual Report 2013 90 91 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(d) Changes in investment in associates and joint ventures for the year ended December 31, 2012 are summarized as follows: (e) Financial information of associates and joint ventures as of and for the year ended December 31, 2013 are summarized as follows: (In millions of won) (In millions of won)
Equity profit Other Other Beginning or loss on capital Dividends Other Ending Total Total Operating Net income comprehensive Company balance Acquisition investment movement received decrease balance Company assets liabilities Sales income (loss) income
Hyundai Mobis Co., Ltd. ₩ 2,286,137 - 562,022 (43,907) (28,747) - 2,775,505 Hyundai Mobis Co., Ltd. ₩ 34,430,309 14,237,123 34,198,594 2,924,404 3,396,421 3,338,291 Hyundai Steel Company 1,940,532 - 169,888 (8,924) (9,080) - 2,092,416 Hyundai Steel Company 29,520,275 16,155,592 13,532,755 762,603 709,399 699,058 Hyundai Engineering & Construction Co., Ltd. 752,578 - 11,696 (5,405) (2,916) - 755,953 Hyundai Engineering & Construction Co.,Ltd. 14,733,212 9,530,137 13,938,287 792,870 569,644 467,293 Hyundai Powertech Co., Ltd. 266,352 - 46,538 (2,660) - - 310,230 Hyundai Powertech Co., Ltd. 2,084,031 1,165,303 3,273,053 154,029 93,526 98,060 Hyundai Card Co., Ltd. 224,501 - 27,291 151 - - 251,943 Hyundai Card Co., Ltd. 11,520,878 9,154,730 2,527,511 219,956 163,210 169,868 Hyundai Dymos Inc. 188,148 - 40,359 (2,876) - - 225,631 Hyundai Dymos Inc. 1,457,200 881,109 1,604,118 52,358 87,153 82,749 EUKOR Car Carriers Inc. 74,208 - 21,360 (5,000) (5,390) - 85,178 EUKOR Car Carriers Inc. 2,754,268 1,515,899 2,594,605 264,134 258,005 242,977 Hyundai AMCO Co., Ltd. 88,023 - 32,537 1,809 (9,994) - 112,375 Hyundai AMCO Co., Ltd. 1,772,984 1,121,940 3,407,082 254,341 138,136 127,238 Hyundai Partecs Co., Ltd. 18,714 - 1,238 - - - 19,952 Hyundai Partecs Co., Ltd. 134,817 68,443 48,256 3,924 2,012 2,012 Hyundai Autoever Systems Co., Ltd. 31,582 - 8,613 (1,061) (2,000) - 37,134 Hyundai Autoever Systems Co., Ltd. 482,880 260,073 1,033,866 54,255 45,867 44,827 Donghee Auto Co., Ltd. 11,674 - 1,276 - - - 12,950 Donghee Auto Co., Ltd. 151,060 109,590 203,741 7,160 5,100 5,100 TRW Steering Co., Ltd. 3,213 - (1,006) 8 - - 2,215 TRW Steering Co., Ltd. 29,698 25,823 78,526 (4,661) (4,181) (4,172) Kia Tigers Co., Ltd(*1) ------Kia Tigers Co., Ltd 4,306 4,977 30,627 (1,035) (96) (96) Hyundai NGV Co., Ltd.(*2) 250 - - - - - 250 Hyundai NGV Co., Ltd. 14,539 7,762 26,820 808 698 698 Haevichi Resort Co., Ltd. 2,868 - 16,976 8 - - 19,852 Haevichi Resort Co., Ltd. 329,981 272,576 65,025 9,361 9,962 9,962 Hyundai Autron Co., Ltd. - 20,116 (1,109) (317) - - 18,690 Hyundai Autron Co., Ltd 198,875 102,911 644,339 1,736 3,643 4,064 Beijing Dymos Transmission Co., Ltd. 64,575 - 8,260 (3,233) (11,268) - 58,334 Beijing Dymos Transmission Co., Ltd. 374,412 133,079 417,225 43,752 35,313 35,313 China Millennium Corporations 18,921 - 1,768 (1,184) - - 19,505 China Millennium Corporations 91,922 18,413 27,852 10,640 8,588 8,588 Hyundai Motor Group China Ltd. 84,248 - 27,051 (2,963) (47,945) - 60,391 Hyundai Motor Group China Ltd. 475,892 149,745 1,830,188 68,951 66,577 66,577 Yanji Kia Motors A/S and Repair(*2) 1,792 - - - - - 1,792 Hyundai Powertech (Shangdong) Co., Ltd. 719,311 537,456 1,287,527 72,132 54,362 54,362 Hyundai Powertech (Shangdong) Co., Ltd. 19,552 10,959 238 (1,570) - - 29,179 Dongfeng Yueda Kia Motors Co., Ltd. (*) 4,345,805 2,551,706 9,041,489 1,010,464 759,553 759,553 Dongfeng Yueda Kia Motors Co., Ltd. 546,535 112,762 381,169 (36,056) (253,264) - 751,146 Hyundai Motor Manufacturing Russia LLC 1,293,992 615,614 2,750,925 282,040 209,710 209,710 Hyundai Motor Manufacturing Russia LLC 133,293 - 79,556 (4,268) - - 208,581 Innocean Worldwide Americas, LLC 200,297 176,118 225,905 14,676 14,781 14,781 Kia Japan Co., Ltd.(*3) 34,128 - (2,652) (2,694) - (20,951) 7,831 Hyundai Information System North America 31,849 21,530 202,494 3,379 3,447 3,447 Innocean Worldwide Americas, LLC 4,278 - 2,456 - (688) (427) 5,619 Sewon America, Inc. 275,897 254,367 388,223 3,696 (585) (585) Hyundai Information System North America 2,521 - 574 (2) (411) (206) 2,476 Hyundai Capital Services UK Ltd. (*) 1,215,030 1,139,443 54,145 14,544 11,100 11,100 Sewon America, Inc. 10,768 - (1,068) - - (715) 8,985 Hyundai Capital Services UK Ltd. - 3,462 - - - (1,396) 2,066 (*) The additional financial information on joint ventures is summarized as follows: (In millions of won) ₩ 6,809,391 147,299 1,435,031 (120,144) (371,703) (23,695) 7,876,179 Cash and (*1) The Company discontinued the application of the equity method for investment in Kia Tigers Co., Ltd. due to the carrying amount of Company’s share being reduced to cash Financial Interest Interest Income tax zero as of December 31, 2012. Company equivalents liabilities Depreciation income expense expense (*2) These investments in associates are recorded at cost as management believe that the effect of applying the equity method of accounting for investments is immaterial. (*3) The Company recognized impairment loss of investment in Kia Japan Co., Ltd., amounting to ₩ 20,951 million for the year ended December 31, 2012. Dongfeng Yueda Kia Motors Co., Ltd. ₩ 291,366 442,205 726,261 7,845 5,457 248,787 Hyundai Capital Services UK Ltd. 24,212 1,131,374 - 105 - 3,421
KIA MOToRS Annual Report 2013 92 93 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(f) Financial information of associates and joint ventures as of and for the year ended December 31, 2012 is summarized as follows: (g) Financial information of significant associates and joint ventures allocated based on a percentage of ownership as of and for the year (In millions of won) ended December 31, 2013 is summarized as follows: (In millions of won) Other Total Total Operating Net income comprehensive Based on Company assets liabilities Sales income (loss) income The Company’s Company’s Net assets ownership ownership Intra-group Acquisition Ending Hyundai Mobis Co., Ltd. ₩ 30,046,996 13,007,282 30,789,019 2,906,385 3,542,013 3,288,520 Company (*) percentage percentage Goodwill transaction Adjustments balance Hyundai Steel Company 22,951,387 13,120,460 14,146,369 871,816 796,397 754,207 Hyundai Mobis Co., Ltd. ₩ 19,331,856 16.88% 3,262,309 29,519 (2,840) - 3,288,988 Hyundai Engineering & Construction Co.,Ltd. 12,734,943 7,989,596 13,324,821 760,408 556,372 452,530 Hyundai Steel Company 13,189,695 19.78% 2,608,358 - (41,994) - 2,566,364 Hyundai Powertech Co., Ltd. 2,018,579 1,192,978 2,954,852 133,764 122,786 111,347 Hyundai Engineering & 4,890,852 5.23% 255,913 284,338 - 224,449 762,700 Construction Co.,Ltd. Hyundai Card Co., Ltd. 11,254,564 9,060,022 2,477,968 233,277 208,125 195,607 Dongfeng Yueda Kia Motors Co., Ltd. 1,794,099 50.00% 897,050 - (8,842) - 888,208 Hyundai Dymos Inc. 1,173,305 675,284 1,403,474 78,336 75,162 64,095 (*) Excluded proportionate share of non-controlling interests in net assets of associates and joint ventures. EUKOR Car Carriers Inc. 2,497,136 1,432,406 2,867,224 329,911 323,517 251,874 Hyundai AMCO Co., Ltd. 1,885,523 1,322,056 3,346,079 217,286 164,566 170,421 (h) Unrecognized share of loss in investment in associate and joint ventures due to discontinuing the use of the equity method as of and Hyundai Partecs Co., Ltd. 115,893 51,531 51,464 7,137 5,174 5,174 for the year ended December 31, 2013 is summarized as follows: Hyundai Autoever Systems Co., Ltd. 447,411 261,499 921,057 49,860 43,391 38,307 (In millions of won)
Donghee Auto Co., Ltd. 155,055 118,161 203,066 6,787 3,397 3,397 2013 Accumulated TRW Steering Co., Ltd. 42,585 34,944 97,431 (3,237) (2,901) (2,905) Kia Tigers Co., Ltd ₩ 96 667 Kia Tigers Co., Ltd 4,048 4,618 27,522 (704) 118 118 Haevichi Resort Co., Ltd. 344,943 295,313 59,814 9,221 9,617 7,450 Hyundai Autron Co., Ltd 159,428 66,073 234,608 (9,687) (5,695) (7,279) Beijing Dymos Transmission Co., Ltd. 389,012 146,763 402,184 47,806 34,301 34,301 9. Property, Plant and Equipment China Millennium Corporations 90,745 26,373 2,175 7,804 5,837 5,837 (a) Details of property, plant and equipment as of December 31, 2013 and 2012 are summarized as follows: Hyundai Motor Group China Ltd. 466,286 243,563 2,024,713 127,969 103,914 103,914 (In millions of won) Hyundai Powertech (Shangdong) Co., Ltd. 511,393 390,329 474,358 5,542 3,018 3,018 2013 2012 Accumulated Accumulated Dongfeng Yueda Kia Motors Co., Ltd. (*) 3,336,008 1,836,893 7,832,537 877,661 720,158 720,158 Acquisition depreciation and Carrying Acquisition depreciation and Carrying Hyundai Motor Manufacturing Russia LLC 1,438,402 799,564 2,854,941 305,321 263,066 263,066 cost impairment losses amount cost impairment losses amount Kia Japan Co., Ltd. 7,951 120 125 (1,082) (23,643) (23,643) Land ₩ 2,684,696 - 2,684,696 2,873,184 - 2,873,184 Innocean Worldwide Americas, LLC 149,330 126,600 233,213 14 13,927 13,927 Buildings 2,630,937 (749,964) 1,880,973 2,446,751 (656,698) 1,790,053 Hyundai Information System North America 34,269 24,489 144,422 2,731 2,818 2,818 Structures 576,239 (299,412) 276,827 554,877 (278,734) 276,143 Sewon America, Inc. 302,898 280,474 326,763 5,847 (2,670) (2,670) Machinery and equipment 5,932,999 (2,746,757) 3,186,242 5,554,954 (2,403,385) 3,151,569 Hyundai Capital Services UK Ltd. (*) 596,671 576,006 11,639 (18,628) (14,393) (14,393) Dies, molds and tools 3,082,527 (2,353,705) 728,822 2,808,557 (2,128,296) 680,261 Vehicles 158,407 (54,581) 103,826 147,822 (43,322) 104,500 (*) Additional financial information of joint ventures is summarized as follows: Other equipment 423,198 (248,764) 174,434 378,456 (226,693) 151,763 (In millions of won) Construction-in-progress 741,185 - 741,185 693,725 - 693,725 Cash and ₩ 16,230,188 (6,453,183) 9,777,005 15,458,326 (5,737,128) 9,721,198 cash Financial Interest Interest Income tax Company equivalents liabilities Depreciation income expense expense
Dongfeng Yueda Kia Motors Co., Ltd. ₩ 114,101 104,922 615,242 7,955 23,487 154,294 Hyundai Capital Services UK Ltd. 21,932 572,540 - 88 - 4,236
KIA MOToRS Annual Report 2013 94 95 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(b) Details of changes in property, plant and equipment for the year ended December 31, 2013 are summarized as follows: (e) The capitalized borrowing costs and capitalization interest rate for the years ended December 31, 2013 and 2012 are summarized as (In millions of won) follows: (In millions of won) Beginning Ending balance Acquisition Disposal(*1) Depreciation Reclassification Other(*4) balance (*2) 2013 2012
Land ₩ 2,873,184 2,670 (192,328) - 1,626 (456) 2,684,696 Capitalized borrowing costs(*) ₩ 18,452 8,820 Buildings 1,790,053 3,445 (10,641) (92,879) 187,039 3,956 1,880,973 Capitalization interest rate 2.61% 1.44%
Structures 276,143 1,008 (5,355) (24,740) 29,003 768 276,827 (*) Including borrowing costs that were capitalized in respect of development cost ₩ 6,073 million in 2013 (2012: ₩ 1,393 million). Machinery and equipment (*3) 3,151,569 30,555 (26,440) (379,071) 401,068 8,561 3,186,242 Dies, molds and tools 680,261 38,314 (4,715) (261,325) 273,797 2,490 728,822 Vehicles 104,500 20,296 (23,219) (28,274) 31,199 (676) 103,826 10. Investment Property Other equipment 151,763 44,771 (1,920) (51,693) 28,707 2,806 174,434 (a) Details of investment property as of December 31, 2013 and 2012 are summarized as follows: Construction-in-progress 693,725 1,001,093 (1,143) - (952,439) (51) 741,185 (In millions of won) 9,721,198 1,142,152 (265,761) (837,982) - 17,398 9,777,005 ₩ 2013 2012 (*1) The net amount of loss on sale of property, plant and equipment is ₩ 38,110 million for the year ended December 31, 2013. Accumulated Accumulated (*2) The Company cumulatively received ₩ 218,065 million government grants as of December 31, 2013 through investment agreement with Slovakia government. The grants are de- Acquisition depreciation and Carrying Acquisition depreciation and Carrying ducted in calculating the carrying amount of the asset. cost impairment loss amount cost impairment loss amount (*3) Finance lease assets are included. Land ₩ 21,151 - 21,151 20,828 - 20,828 (*4) Other increase (decrease) is mainly related to foreign currency translation impact. Buildings 34,436 (5,333) 29,103 34,951 (4,345) 30,606
(c) Details of changes in property, plant and equipment for the year ended December 31, 2012 are summarized as follows: ₩ 55,587 (5,333) 50,254 55,779 (4,345) 51,434
(In millions of won) (b) Changes in investment property for the year ended December 31, 2013 are summarized as follows: Beginning Ending balance Acquisition Disposal Depreciation Reclassification Other(*) balance (In millions of won)
Beginning balance Depreciation Other Ending balance Land ₩ 2,907,187 - (77,257) - 54,465 (11,211) 2,873,184 Buildings 1,763,907 17,889 (10,284) (86,499) 148,058 (43,018) 1,790,053 Land ₩ 20,828 - 323 21,151 Structures 264,901 3,011 (468) (24,451) 36,662 (3,512) 276,143 Buildings 30,606 (1,092) (411) 29,103 Machinery and equipment 2,801,833 48,875 (21,136) (356,188) 733,569 (55,384) 3,151,569 ₩ 51,434 (1,092) (88) 50,254 Dies, molds and tools 547,675 86,192 (344) (215,373) 289,851 (27,740) 680,261 Vehicles 84,314 17,721 (26,243) (26,120) 56,997 (2,169) 104,500 (c) Changes in investment property for the year ended December 31, 2012 are summarized as follows: Other equipment 115,451 42,792 (3,013) (42,366) 44,913 (6,014) 151,763 (In millions of won)
Construction-in-progress 699,117 1,365,596 - - (1,364,515) (6,473) 693,725 Beginning balance Depreciation Other Ending balance ₩ 9,184,385 1,582,076 (138,745) (750,997) - (155,521) 9,721,198 Land ₩ 21,995 - (1,167) 20,828 (*) Other increase (decrease) mainly related to foreign currency translation impact. Buildings 34,105 (1,123) (2,376) 30,606 ₩ 56,100 (1,123) (3,543) 51,434 (d) As of December 31, 2013, KMS has a purchase commitment for plant expansion in connection of which, KMS acquired property, plant, and equipment amounting EUR 22,110 thousand.
KIA MOToRS Annual Report 2013 96 97 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(d) The amount recognized in profit or loss from investment property for the years ended December 31, 2013 and 2012 are summarized as (b) Details of changes in intangible assets for the year ended December 31, 2013 are summarized as follows: follows: (In millions of won) (In millions of won) Beginning Impairment Ending 2013 2012 balance Acquisition Disposal Amortization losses Other balance
Rental income ₩ 5,295 5,770 Development costs ₩ 1,343,557 509,139 - (328,685) - (58) 1,523,953 Operating expense 728 1,930 Industrial property rights 30,024 3,112 - (11,753) - 34 21,417 Software 53,866 29,076 - (21,481) - (224) 61,237 (e) Land and buildings held for the purpose of earning rentals are classified as investment property. In addition, the fair value of investment Other 60,366 16,296 (720) (331) (2,672) (97) 72,842 property doesn’t differ from its book value significantly as of December 31, 2013. ₩ 1,487,813 557,623 (720) (362,250) (2,672) (345) 1,679,449
(c) Details of changes in intangible assets for the year ended December 31, 2012 are summarized as follows: 11. Goodwill (In millions of won) (a) Changes in goodwill for the years ended December 31, 2013 and 2012 are summarized as follows: Beginning Impairment Ending balance Acquisition Disposal Amortization losses Other balance (In millions of won)
2013 2012 Development costs ₩ 1,327,275 293,340 - (276,414) - (644) 1,343,557 Industrial property rights 42,749 2,412 - (13,117) - (2,020) 30,024 Balance at January 1 ₩ 36,188 36,287 Software 50,438 27,312 (188) (21,857) - (1,839) 53,866 Other increase (decrease) 102 (99) Other 60,528 5,097 (2,812) (336) (2,910) 799 60,366 Balance at December 31 ₩ 36,290 36,188 ₩ 1,480,990 328,161 (3,000) (311,724) (2,910) (3,704) 1,487,813
(b) Goodwill is allocated to each CGU (Cash Generating Unit) that is expected to benefit from each operating unit. The Company (d) Details of research and development expenditures for the years ended December 31, 2013 and 2012 are summarized as follows: estimated the recoverable amount of CGU as its value in use calculated by discounting the future cash flows to be generated on the (In millions of won) basis of business plan approved by CEO in five years. Cash flows expected to be generated after five years were estimated within the 2013 2012 scope of not to exceed long term average growth rate of industry. No impairment loss is recognized as a result of the impairment tests in 2013 and 2012. Capitalized development costs ₩ 509,139 293,340 Test expenses (manufacturing costs) 169,164 173,689 Test expenses (selling and administrative expenses) 563,270 560,070 12. Intangible Assets ₩ 1,241,573 1,027,099 (a) Details of intangible assets except for goodwill as of December 31, 2013 and 2012 are summarized as follows: (In millions of won)
2013 2012 Accumulated Accumulated Acquisition amortization and Carrying Acquisition amortization and Carrying cost impairment losses amount cost impairment losses amount
Development costs ₩ 3,032,179 (1,508,226) 1,523,953 2,523,333 (1,179,776) 1,343,557 Industrial property rights 71,022 (49,605) 21,417 68,582 (38,558) 30,024 Software 194,581 (133,344) 61,237 167,305 (113,439) 53,866 Membership(*) 70,245 (10,534) 59,711 64,127 (8,322) 55,805 Other 14,163 (1,032) 13,131 5,980 (1,419) 4,561 ₩ 3,382,190 (1,702,741) 1,679,449 2,829,327 (1,341,514) 1,487,813
(*) Membership has indefinite useful lives and it has been tested for impairment annually by comparing its recoverable amount to its carrying amount.
KIA MOToRS Annual Report 2013 98 99 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
13. Other Assets (b) Long-term debt Other assets as of December 31, 2013 and 2012 are summarized as follows: Long-term debt in local currency as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) (In millions of won)
2013 2012 Lender Annual interest rate 2013 2012
Other current assets: Facility loans Korea Development Bank 4.09% ₩ 130,000 130,000 Accrued income ₩ 73,758 100,636 Nong Hyup Bank 4.23% 70,000 70,000 Prepaid expenses 71,580 56,367 200,000 200,000 Deposits provided 2,163 6,275 Less : current portion of long-term borrowing - - Short-term loans 357 43,311 ₩ 200,000 200,000 Held-to-maturity investments - 1,706 Short-term available-for-sale financial assets 8,000 - Long-term debt in foreign currency as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) Other 14,518 162 Lender Annual interest rate 2013 2012 ₩ 170,376 208,457
Other non-current assets: General loans ING Bank and others 0.93~2.75% ₩ 270,830 369,884 Held-to-maturity investments ₩ - 17,049 Deutsche Bank Slovakia and others 0.54~3.57% 270,293 357,260 Facility loans and others Long-term accounts and notes receivable - other 77,588 105,887 Citi Bank Korea 2.28~2.29% 196,087 196,532 Long-term prepaid expenses 1,601 2,657 737,210 923,676 Long-term advanced payments 7,822 2,371 Less : current portion of long-term borrowing (332,242) (189,516) Finance lease receivables 15,566 - ₩ 404,968 734,160 ₩ 102,577 127,964 (c) The Company has pledged its land, buildings, machinery and equipments in the amount of ₩ 425,982 million in aggregate as of December 31, 2013 as assessed by lenders as collateral for long-term debt in local currency. 14. Borrowings (d) Bonds (a) Short-term borrowings Bonds as of December 31, 2013 and 2012 are summarized as follows: Short-term borrowings as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) (In millions of won) Due Annual interest rate 2013 2012 Lender Annual interest rate 2013 2012 Unsecured public debentures 2014.9.1~2017.11.24 4.02~6.80% ₩ 510,000 610,000 Usance bills Korea Exchange Bank and others 0.44~1.11% ₩ 133,941 166,900 Unsecured foreign debentures 2014.2.25~2016.2.25 1.84~2.14% 474,885 481,995 Trade bills(*) Korea Development Bank and others 0.41~2.85% 742,435 942,925 Foreign public debentures 2016.6.14 3.63% 527,650 535,550 ₩ 876,376 1,109,825 1,512,535 1,627,545 (*) The Company did not derecognize outstanding trade accounts and notes receivable transferred to the financial institutions and recognized the transaction as borrowings from financial institution. Less : discounts on debentures (4,351) (6,838) Less : current portion of long-term borrowing (426,406) (99,896) ₩ 1,081,778 1,520,811
KIA MOToRS Annual Report 2013 100 101 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
15. Other Liabilities (c) The components of retirement benefit costs for the years ended December 31, 2013 and 2012 are summarized as follows: (In millions of won) Other liabilities as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) 2013 2012
2013 2012 Current service costs ₩ 251,570 201,105 Other current liabilities: Interest costs, net 791 11,221 Unearned income ₩ 11,207 7,482 ₩ 252,361 212,326 Dividends payable 24 24 Guarantee received 2,158 3,113 (d) The principal actuarial assumptions used as of December 31, 2013 and 2012 are summarized as follows:
Finance lease liabilities - current 5,934 5,710 2013 2012 Other 18,350 34,523 Discount rate 4.50% 3.94% ₩ 37,673 50,852 Rate of inflation 3.00% 3.00% Other non-current liabilities: Rate of future salary growth (including rate of inflation) 5.00% 5.00% Leasehold deposits received ₩ 18,103 19,693 Long-term unearned income 403 - (e) Changes in present value of defined benefit obligations for the years ended December 31, 2013 and 2012 are summarized as follows: Long-term accounts and notes payable - other 5,018 1,928 (In millions of won) Liability for payment guarantee 1,349 124 2013 2012 Finance lease liabilities 11,448 16,161 Long-term accrued expenses 61,673 86,701 Balance at January 1 961,535 948,871 ₩ 97,994 124,607 Current service costs 251,570 201,105 Interest costs 37,588 37,737 Remeasurements of: Net actuarial gains(losses) of the effect of 16. Employee Benefits (770) (890) financial assumptions change (a) Details of net defined benefit liabilities as of December 31, 2013 and 2012 are summarized as follows: Net actuarial gains(losses) of the effect of (In millions of won) (82,013) 135,651 demographic assumptions change 2013 2012 Other 3,902 62,292
Defined benefit plan: Increase (decrease) due to transference between affiliates (1,999) 214 Present value of defined benefit obligations ₩ 1,154,866 961,535 Benefit paid by the plan (14,947) (423,445) Fair value of plan assets (982,952) (940,084) Balance at December 31 1,154,866 961,535 Net defined benefit liabilities ₩ 171,914 21,451 (f) Changes in fair value of plan assets for the years ended December 31, 2013 and 2012 are summarized as follows: (b) The components of plan assets as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) (In millions of won) 2013 2012
2013 2012 Balance at January 1 ₩ 940,084 674,271 Time deposits and others ₩ 982,952 940,084 Return on plan assets 36,797 26,516 Remeasurements (2,774) 300 Contribution paid into the plan 17,000 470,000 Transference between affiliates, net 114 129 Benefit paid by the plan (8,269) (231,132) Balance at December 31 ₩ 982,952 940,084
KIA MOToRS Annual Report 2013 102 103 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(g) Sensitivity analysis of defined obligations from changes of assumptions for the year ended December 31, 2013 is summarized as follows: (d) The Company is involved in several claims, litigations for alleged damages and product liabilities, which arose in the ordinary course of (In millions of won) business, as of December 31, 2013. Management is of the opinion that foregoing lawsuits and claims will not have a material adverse
2013 effect on the Company’s financial position and results of operations since the likelihood of unfavorable outcome is not probable nor
1% Up 1% Down amounts can be reliably estimated. In addition, on December 18, 2013, the Supreme Court of Korea made a ruling regarding the scope of Ordinary Wage which could be the basis for overtime payment, allowance for night work and others. As of December 31, 2013, Discount rate ₩ (142,639) 170,273 management cannot reliably estimate the potential impacts, if any, on the Company’s financial position, financial performance and Rate of salary growth 170,074 (145,033) cashflows.
(e) In connection with long-term debt guaranteed by Hyundai Motor America, Inc. and Mobis America, Inc., Kia Motors Manufacturing Georgia, Inc. (KMMG) should pay guarantor fees calculated at a rate of 0.15% per annum on the outstanding debt balance of KMMG 17. Provisions which should be paid biannually. The Company provides general warranty to the ultimate consumer for each product sold and accrues warranty expense at the time of (f) As of December 31, 2013, KMMG entered into an agreement with the West Point Development Authority and Troup Country sale based on the history of actual claims. Also, the Company accrues potential expenses, which may occur due to replacement of Development Authority to issue up to USD 2,700,000 thousand of taxable revenue bonds for a term through December 1, 2022, to fund parts or voluntary recalls pending as of the end of the reporting period. the purchase of building, machinery and equipment Other provision are comprised of provision related to loss on lawsuits.
Changes in provisions for the years ended December 31, 2013 and 2012 are summarized as follows: (In millions of won) 19. Equity (a) The number of shares to issue, the number of shares issued and the par value of a share of the Parent Company are 820,000,000 2013 2012 shares, 405,363,347 shares and ₩ 5,000 as of December 31, 2013, respectively. Provision of Other Provision of Other warranty for sale provision Total warranty for sale provision Total The Parent Company retired 10 million and 12.5 million shares of treasury stock on July 2, 2003 and May 28, 2004, respectively. Due to Balance at January 1 ₩ 1,802,983 31,365 1,834,348 1,643,068 32,093 1,675,161 these stock retirements, the aggregate par value of issued shares differs from the common stock amount. Increase 1,050,494 641 1,051,135 1,040,461 4,029 1,044,490 (b) Accumulated other comprehensive income and loss as of December 31, 2013 and 2012 are summarized as follows: Usage (835,862) (383) (836,245) (830,845) (3,907) (834,752) (In millions of won) Other decrease(*) (6,359) (2,086) (8,445) (49,701) (850) (50,551) 2013 2012 Balance at December 31 ₩ 2,011,256 29,537 2,040,793 1,802,983 31,365 1,834,348 Thereof current ₩ 612,312 5,657 617,969 528,405 3,433 531,838 Gain on valuation of available-for-sale financial assets ₩ 410,194 553,593 Thereof non-current ₩ 1,398,944 23,880 1,422,824 1,274,578 27,932 1,302,510 Change in capital adjustments - increase in gain of 111,759 120,008 equity method accounted investments, net of tax of nil Change in capital adjustments - increase in loss of Changes in provisions for the years ended December 31, 2013 and 2012 are summarized as follows, continued: (171,983) (136,031) (*) Other decrease is mainly related to foreign currency translation impact. equity method accounted investments, net of tax of nil Foreign currency translation difference, net of tax of nil (247,994) (203,539) ₩ 101,976 334,031 18. Commitments and Contingencies (c) Other equity as of December 31, 2013 and 2012 are summarized as follows: (a) The Company provides guarantees for certain customers’ financing relating to long-term installment sales. The oustanding amount for (In millions of won) which the Company has provided guarantees to the respective financial institutions is ₩ 8,367 million as of December 31, 2013. These 2013 2012 guarantees are covered by insurance contracts in which the Company is the beneficiary of the claim amount if the customer defaults.
(b) As of December 31, 2013, one certificate deposit of ₩ 1,369 million has been provided as collateral to Korea Defense Industry Association Gain on retirement of capital stock ₩ 119,859 119,859 (“KDIA”) for a performance guarantee on a contract. Other capital surplus 55,613 55,613 Treasury stock (24,432) (24,432) (c) The Company provides guarantees for employees relating to borrowings to acquire shares of the Parent Company. The outstanding ₩ 151,040 151,040 amount for which the Company has provided collective guarantees to the Korea Securities Finance Corporation is ₩ 298,591 million as of December 31, 2013. Management is of the opinion that afore mentioned guarantees will not have a material adverse effect on the Company’s credit risk since the Company has pledged its acquired shares as collateral for the borrowings.
KIA MOToRS Annual Report 2013 104 105 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
20. Retained Earnings (b) Diluted earnings per share (In won, except number of shares) (a) Retained Earnings as of December 31, 2013 and 2012 are summarized as follows: (In millions of won) 2013 2012
2013 2012 Profit attributable to owners of the Parent Company ₩ 3,817,059,084,178 3,864,686,750,500
Legal reserve ₩ 123,900 97,400 Adjustment: Interest expense of bond with warrant - 808,737,528 Voluntary reserve 10,042,411 8,351,171 Adjusted profit for the year ₩ 3,817,059,084,178 3,865,495,488,028 Unappropriated retained earnings 6,135,501 4,214,453 Adjusted weighted-average number of common shares outstanding 404,985,231 404,985,231 ₩ 16,301,812 12,663,024 Diluted earnings per share ₩ 9,425 9,545
Diluted earnings per share are calculated by dividing net income, as adjusted assuming all potentially dilutive warrants have been (b) Changes in retained earnings for the years ended December 31, 2013 and 2012 are summarized as follows: exercised, by the weighted-average number of common shares outstanding and common equivalent shares outstanding. The (In millions of won) adjustment represents interest expense if the warrants were exercised, net of tax amount. 2013 2012 (c) Basic and diluted earnings per share are the same for the year ended December 31, 2013 since there are no dilutive potential ordinary Balance at January 1 ₩ 12,663,024 9,224,715 shares as of December 31, 2013. Profit attributable to owners of the Parent Company 3,817,059 3,864,687 Dividends (263,240) (242,167)
Defined benefit plan remeasurements 74,281 (155,817) 22. Dividends Change in remeasurements of associates 10,688 (28,394) (a) Details of dividends for the years ended December 31, 2013 and 2012 are summarized as follows: Balance at December 31 ₩ 16,301,812 12,663,024 (In millions of won, except shares and par value)
2013 2012
Number of shares issued 405,363,347 405,363,347 21. Earnings per Share Number of treasury stock (378,116) (378,116) Details of calculating earnings per share for the years ended December 31, 2013 and 2012 are as follows: Number of dividend shares 404,985,231 404,985,231 (a) Basic earnings per share Par value per share ₩ 5,000 5,000 (In won, except number of shares) Dividends as a percentage of par value 14% 13% 2013 2012 Dividend amount ₩ 283,489 263,240
Profit attributable to owners of the Parent Company ₩ 3,817,059,084,178 3,864,686,750,500 (b) Dividends payout ratio for the years ended December 31, 2013 and 2012 are summarized as follows: Weighted-average number of common shares outstanding(*) 404,985,231 404,838,423 (In millions of won, except for ratio) Earnings per share ₩ 9,425 9,546 2013 2012 (*) The weighted-average number of common equivalent shares are calculated by average outstanding period, and treasury stock is not included in the number of common equivalent shares. Dividend amount ₩ 283,489 263,240 Profit attributable to owners of the Parent Company 3,817,059 3,864,687 Dividend payout ratio 7.43% 6.81%
(c) Dividend yield ratio for the years ended December 31, 2013 and 2012 are summarized as follows: (In won, except for ratio)
2013 2012
Dividend per share ₩ 700 650 Market price as of year end 56,100 56,500 Dividend yield ratio 1.25% 1.15%
KIA MOToRS Annual Report 2013 106 107 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
23. Selling, General and Administrative Expense 24. Finance Income and Finance costs Details of selling, general and administrative expenses for the years ended December 31, 2013 and 2012 are as follows: Details of finance income and finance costs for the years ended December 31, 2013 and 2012 are summarized as follows: (In millions of won) (In millions of won)
2013 2012 2013 2012
Selling expenses: Finance income Advertising ₩ 1,227,916 1,282,854 Interest income ₩ 172,623 168,957 Sales promotion 794,527 1,009,858 Gain on foreign currency transaction 35,239 74,266 Warranty expenses 1,050,494 1,040,461 Gain on foreign currency translation 24,042 94,925 Freight 299,982 416,369 Dividends income 11,049 5,634 Overseas marketing and export expenses 1,038,792 1,096,318 Gain on sale of available-for-sale financial assets (*) 212,322 59,013 4,411,711 4,845,860 ₩ 455,275 402,795 General and administrative expenses: Salaries 667,469 617,928 (*) The Company recognized gain on disposal of available-for-sale financial assets amounting ₩ 212,322 million (Accumulative other comprehensive income) of Hyundai Hysco Co., Ltd in connection to the merger of Hyundai Steel Company and the Cold-Rolled Coil Division spun off from Hyundai Hysco Co., Ltd for the year ended December 31, 2013.
Bonus 297,713 289,985 (In millions of won) Retirement and severance benefits cost 71,324 61,590 2013 2012 Accrual for other long-term employee benefits 6,475 7,675 Other employee benefits 153,096 141,878 Finance costs Travel 41,741 44,636 Interest expense ₩ 89,673 156,808 Communications 16,576 15,799 Loss on foreign currency transaction 25,682 51,083 Utilities 16,707 15,898 Loss on foreign currency translation 8,535 3,052 Taxes and dues 22,972 25,057 Loss on sale of available-for-sale financial assets 1 202 Rent 58,168 55,290 Impairment loss of available-for-sale financial assets 15,355 - Depreciation 84,289 72,424 Loss on sale of held-to-maturity investments 196 - Amortization 20,266 18,626 ₩ 139,442 211,145 Bad debt expenses 86 846 Repairs and maintenance 24,486 22,040 Insurance premium 11,160 13,093 25. Other Income and Expense Entertainment expense 5,363 5,735 (a) Other income for the years ended December 31, 2013 and 2012 are summarized as follows: Maintenance fee for vehicles 29,305 27,845 (In millions of won)
Supplies and stationery 10,706 11,695 2013 2012 Information fees 2,327 2,498 Rent ₩ 13,422 13,394 Education and training 32,144 28,164 Foreign exchange transaction gain 179,020 205,674 Commissions and fees 321,820 282,713 Foreign exchange translation gain 22,609 20,770 Test expenses 563,270 560,070 Gain on sale of property, plant and equipment 10,990 17,501 Others 39,682 17,332 Gain on sale of intangible assets - 180 2,497,145 2,338,817 Reversal of allowance for doubtful accounts 1,359 337 ₩ 6,908,856 7,184,677 Other income 149,788 159,483 ₩ 377,188 417,339
KIA MOToRS Annual Report 2013 108 109 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(b) Other expense for the years ended December 31, 2013 and 2012 are summarized as follows: (c) Reconciliation of effective tax rate for the years ended December 31, 2013 and 2012 are as follows: (In millions of won) (In millions of won)
2013 2012 2013 2012
Foreign exchange transaction loss ₩ 208,381 203,764 Profit before income taxes ₩ 4,828,576 5,164,056 Foreign exchange translation loss 18,491 17,666 Income tax using statutory tax rates (*) 1,356,277 1,208,553 Loss on disposal of accounts and notes receivable - trade 1,142 769 Adjustment for: Donation 27,138 22,092 Non-taxable income (170,302) (70,899) Loss on sale of property, plant and equipment 49,100 34,196 Non-deductible expense 131,371 55,487 Loss on sale of intangible assets 110 303 Tax credits (401,376) (248,451) Impairment loss of intangible assets 2,672 2,910 Tax effect for gains/losses on investment 204,000 346,312 Loss on inventory scrap - 23,568 in subsidiaries and associates Other expenses 54,096 75,996 Others (78,453) 8,350 ₩ 361,130 381,264 Income tax expenses ₩ 1,011,517 1,299,352 Effective tax rate 20.95% 25.16%
(*) Calculated by multiplying each nation’s statutory tax rate of nations and profit before income taxes on each separate financial statements. 26. Income Tax Expense (d) The Company set off a deferred tax asset against a deferred tax liability of the same taxable entity if, and only if, they relate to income (a) The component of income tax expense for the years ended December 31, 2013 and 2012 are as follows: taxes levied by the same taxation authority and the entity has a legally enforceable right to set off current tax assets against current tax (In millions of won) liabilities. 2013 2012 (e) Details of changes in deferred tax assets and liabilities for the year ended December 31, 2013 are as follows: Current tax expense ₩ 932,809 997,765 (In millions of won) Origination and reversal of temporary differences 56,641 294,171 Other Income tax recognized in other comprehensive income 22,067 7,416 Beginning balance Profit or loss comprehensive income Ending balance Total income tax expense ₩ 1,011,517 1,299,352 Allowance for doubtful accounts ₩ 20,185 (2,839) - 17,346 Bad debts write-off 59,880 - - 59,880 (b) Income tax benefit recognized directly in other equity and other comprehensive income for the years ended December 31, 2013 and Accrued expenses 245,193 (24,712) - 220,481 2012 are as follows: (In millions of won) Provision of warranty for sale 321,770 47,215 - 368,985 Provision of other long-term employee benefits 53,842 (2,474) - 51,368 2013 2012 Annual leaves 22,786 3,171 - 25,957 Current tax: Revaluated land (366,868) 7,537 - (359,331) Defined benefit plan remeasurements ₩ (23,715) 49,746 Depreciation (271,842) 8,099 - (263,743) Deferred income tax: Investment in subsidiaries and associates (1,196,352) (204,000) - (1,400,352) Loss (gain) on valuation of available-for-sale financial assets 45,782 (40,560) Gains/Losses on sales of investment assets and others (76,843) 19,671 - (57,172) Gain on valuation of derivative instruments - (1,770) Valuation of available-for-sale financial assets (176,741) - 45,782 (130,959) 45,782 (42,330) Operating loss carryforward 2,390 (2,138) - 252 Income tax recognized directly in other comprehensive income ₩ 22,067 7,416 Others 106,059 48,047 - 154,106 ₩ (1,256,541) (102,423) 45,782 (1,313,182) Income tax related to defined benefit plan remeasurements, gains/losses on valuation of available-for-sale financial assets and gains/ losses on valuation of derivative instruments were recognized in other comprehensive income.
KIA MOToRS Annual Report 2013 110 111 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(f) Details of changes in deferred tax assets and liabilities for the year ended December 31, 2012 are as follows: 27. Classification of Expenses by Nature (In millions of won) Details of expenses by nature for the years ended December 31, 2013 and 2012 are summarized as follows: Other (In millions of won) Beginning balance Profit or loss comprehensive income Ending balance 2013 2012 Allowance for doubtful accounts ₩ 18,853 1,332 - 20,185 Changes in inventories ₩ (151,297) 110,551 Bad debts write-off 59,880 - - 59,880 Raw material and merchandise consumed 31,711,333 31,114,554 Accrued expenses 139,702 105,491 - 245,193 Employee benefits 3,910,451 3,635,792 Provision of warranty for sale 291,501 30,269 - 321,770 Other employee benefits 626,206 609,717 Provision of other long-term employee benefits 47,746 6,096 - 53,842 Depreciation and amortization 1,201,324 1,063,844 Annual leaves 20,498 2,288 - 22,786 Overseas marketing and export expenses 1,061,139 1,113,871 Revaluated land (372,219) 5,351 - (366,868) Sales promotion 795,287 1,010,506 Depreciation (325,292) 53,450 - (271,842) Warranty expenses 1,050,494 1,040,461 Investment in subsidiaries and associates (850,040) (346,312) - (1,196,352) Commissions and fees 1,006,899 709,494 Gains/Losses on sales of investment assets and others (97,031) 20,188 - (76,843) Test expenses 732,434 733,759 Valuation of derivative instruments 1,770 - (1,770) - Advertising 1,227,916 1,282,854 Valuation of available-for-sale financial assets (136,181) - (40,560) (176,741) Freight 326,120 442,634 Operating loss carryforward 36,576 (34,186) - 2,390 Rent 59,824 57,547 Carryforwards of unused tax credits 119,012 (119,012) - - Utilities 303,557 291,391 Others 82,855 23,204 - 106,059 Repairs and maintenance 128,218 126,126 ₩ (962,370) (251,841) (42,330) (1,256,541) Others 430,892 377,581 ₩ 44,420,797 43,720,682 (g) As of December 31, 2013 the amounts of total temporary differences related to investments of subsidiaries and associates which deferred tax assets and liabilities were not recognized, are ₩ 443,672 million and ₩ 2,121,689 million, respectively.
KIA MOToRS Annual Report 2013 112 113 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
28. Cash Flows (In millions of won) (a) Details of cash flows from operating for the years ended December 31, 2013 and 2012 are summarized as follows: 2013 2012 (In millions of won) 1,945,301 2,109,384 2013 2012 Changes in assets and liabilities: Profit for the year ₩ 3,817,059 3,864,704 Accounts and notes receivable - trade ₩ (273,770) 365,104 Adjustments for: Accounts and notes receivable - other 22,129 (59,962) Depreciation 839,074 752,120 Advance payments 36,971 (13,049) Amortization 362,250 311,724 Inventories (80,758) 50,682 Other long term employee benefits 46,376 28,812 Other current assets (14,988) (17,841) Retirement and severance benefits 252,361 212,326 Other non-current assets 4,119 4,874 Warranty expenses 1,050,494 1,040,461 Accounts and notes payable - trade 189,659 173,558 Loss on foreign currency translations 27,026 20,718 Accounts and notes payable - other 119,992 (28,407) Interest expense 89,673 156,808 Advances received 9,519 4,416 Loss on sale of property, plant and equipment 49,100 34,196 Accrued expenses 204,951 119,511 Impairment loss of available-for-sale financial assets 15,355 - Payment of warranty expenses (835,862) (830,845) Income tax expense 1,011,517 1,299,352 Payment of long-term employee benefits (35,112) (12,344) Loss on scrap and impairment of inventory - 23,568 Payment of retirement benefits (14,947) (423,445) Gain on foreign currency translations (46,651) (115,695) Other current liabilities (13,402) (1,218) Interest income (172,623) (168,957) Transfer of retirement benefit (1,999) 214 Dividends income (11,049) (5,634) Benefit plan assets (8,845) (238,997) Gain on sale of property, plant and equipment (10,990) (17,501) Other non-current liabilities (18,693) 87,571 Gain on investment in associates, net (1,319,585) (1,414,080) (711,036) (820,178) Gain on sale of available-for-sale financial assets (212,322) (59,013) Cash generated from operations ₩ 5,051,324 5,153,910 Others (24,705) 10,179 (b) Significant non-cash investing and financing activities for the year ended December 31, 2013 are as follows: (In millions of won)
2013
Change in advances received in connection to disposal of property, plant and equipment ₩ (69,937) Change in accounts and notes payable - other in connection to acquisition of property, (62,599) plant and equipment Reclassification from investments in available-for-sale financial assets to associates 372,847
KIA MOToRS Annual Report 2013 114 115 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
29. Finance Risk Management 30. Risk Management of Financial Instruments The Company’s activities are exposed to a variety of financial risks: credit risk, liquidity risk and market risk (comprised of foreign (a) Credit and counterparty risk exchange risk and interest rate risk). The treasury department monitors and manages the financial risk arising from the Company’s (i) Exposure to credit and counterparty risk underlying operations in accordance with the risk management policies and procedures authorized by the board of directors. The carrying amount of financial assets means maximum exposure in respect of credit and counterparty risk. The maximum exposure as of December 31, 2013 and 2012 are as follows: (a) Credit risk (In millions of won) Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company has transacted with customers before evaluating on their credit rating and have their collaterals to control 2013 2012
customers on default. Cash and cash equivalents (*) ₩ 2,310,787 1,902,988 Short-term financial instruments 4,035,379 2,367,230 (b) Liquidity risk Accounts and notes receivable - trade 2,072,818 1,801,731 Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that Accounts and notes receivable - other 468,210 485,696 are settled by delivering cash or another financial asset. Management believes the Company maintains adequate sources of liquidity Other current assets 98,796 152,090 to settle short-term financial liabilities. In addition, based on periodic analysis of expected cash outflows, the Company also considers Long-term financial instruments 294,377 58,990 other alternatives, including seeking additional external financing or disposition of financial instruments for investment purpose, to Long-term available-for-sale financial assets 1,237,107 1,606,358 mitigate liquidity risk. Long-term accounts and notes receivable - trade 1,662 2,675 (c) Market risk Guarantee deposits 162,190 166,463 Market risk is the risk of fluctuations in fair value of financial instrument and future cash flow by changes of market price. The purpose Other non-current assets 93,154 122,936 for managing market price is to optimize profits, while manage and control on exposure to market risk within acceptable limits. ₩ 10,774,480 8,667,157
(i) Foreign exchange risk (*) Cash on hand is excluded. The Company is exposed to foreign exchange risk arising from high proportion of export in sales amount, which is denominated in (ii) Loss on impairment foreign currencies. The Company’s primary exposure is to the US dollar and Euro and the Company manages to minimize financial The carrying amount of trade account and notes receivable and other receivable based on by maturity as of December 31, 2013 and risk on fluctuations in foreign exchange in order to stabilize operating activities. The Company consistently evaluates on various foreign 2012 are as follows: exchange risk according to the Company’s own guideline for foreign exchange and transaction policy. If necessarily, the Company may (In millions of won) enter into foreign currency forwards contracts to hedge its foreign currency risk and strictly limit on speculative transaction. 2013 2012
(ii) Interest rate risk Accounts and Other Accounts and Other The Company’s asset and liability is exposed to interest rate risk on deposits and loans. In order to minimize actual Interest cost, the notes receivable-trade receivable (*) notes receivable-trade receivable (*) Company continuously monitors current status of market interest rate, make a prediction on market data and reviews on method for Not overdue ₩ 1,958,343 691,216 1,500,279 806,588 borrowing and joining financial instruments on deposit. Also, the Company’s management monitors the level of interest rates and Past due less than 3 month 84,981 39,860 260,421 80,463 maintains the balance of borrowings at variable rates and fixed rates. Past due 4~ 6 month 3,962 21,973 19,123 6,471 Past due 7~12 month 23,296 1,220 43,142 17,481 (d) Management of capital risk Past due over 12 month 104,931 47,043 100,836 21,868 The fundamental goal of capital management is to maintain on financial structure. As for this to be maintained, the Company use debt ₩ 2,175,513 801,312 1,923,801 932,871 ratio as indicator of capital management. The debt ratio is calculated as total liability divided by total equity. (*) Other receivables are comprised of other accounts and notes receivables, long-term other accounts and notes receivables, accrued income, short-term loans and guarantee deposits.
KIA MOToRS Annual Report 2013 116 117 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
Changes in allowance for doubtful trade accounts and notes receivable and other receivables for the years ended December 31, 2013 (ii) Aggregate maturities of the Company’s financial liabilities, including estimated interest, as of December 31, 2012 are summarized and 2012 are summarized as follows: as follows: (In millions of won) (In millions of won)
2013 2012 Within 1 year 1~5 years Over 5 years Total Accounts and Other Accounts and Other notes receivable-trade receivable notes receivable-trade receivable Accounts and notes payable - trade ₩ 4,998,445 - - 4,998,445 Accounts and notes payable - other 1,713,988 - - 1,713,988 Balance at January 1 ₩ 119,395 24,603 126,119 25,315 Collection of written-off amount 146 - 163 7,055 Accrued expenses 921,097 - - 921,097 Write-off (18,434) (7,410) (852) (8,052) Bonds 156,263 1,628,081 - 1,784,344 Impairment loss 86 - 846 - Borrowings 1,345,932 927,726 343,875 2,617,533 Reversal of allowance for doubtful accounts (1,178) (181) (167) (172) Financial lease liabilities 6,581 17,208 - 23,789 Others 1,018 34 (6,714) 457 Other current liabilities 3,137 - - 3,137 Balance at December 31 ₩ 101,033 17,046 119,395 24,603 Other non-current liabilities - 108,446 - 108,446 ₩ 9,145,443 2,681,461 343,875 12,170,779 (b) Liquidity risk
(i) Aggregate maturities of the Company’s financial liabilities, including estimated interest, as of December 31, 2013 are summarized as (c) Foreign exchange risk
follows: The Company’s capital and income (loss) would have been increased or decreased, if the foreign exchange rate against USD and EUR (In millions of won) were higher. The Company assumes that interest rate fluctuates 10% at year ended period. Also, the Company assumes that others Within 1 year 1~5 years Over 5 years Total variables such as interest rate are not changed by sensitive analysis. The Company analyzed by the same method as used for last period Accounts and notes payable - trade ₩ 5,192,589 - - 5,192,589 and details for the effect on income before taxes are summarized as follows: Accounts and notes payable - other 1,763,692 - - 1,763,692 (In millions of won)
Accrued expenses 1,119,919 - - 1,119,919 2013 2012 Bonds 471,904 1,140,048 - 1,611,952 10% Up 10% Down 10% Up 10% Down Borrowings 1,265,176 675,399 23,717 1,964,292 Financial lease liabilities 6,567 16,266 - 22,833 USD ₩ (131,830) 131,830 (154,569) 154,569 Other current liabilities 2,182 - - 2,182 EUR 16,016 (16,016) 983 (983) Other non-current liabilities - 86,143 - 86,143
₩ 9,822,029 1,917,856 23,717 11,763,602 (d) Interest rate risk
Sensitivity analysis of interest expenses and interests income from changes of interests rate for the years ended December 31, 2013 and 2012 are as summarized as follows: (In millions of won)
2013 2012
100 bps Up 100 bps Down 100 bps Up 100 bps Down
Interest income ₩ 23,110 (23,110) 19,023 (19,023) Interest expense 10,762 (10,762) 11,756 (11,756)
KIA MOToRS Annual Report 2013 118 119 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(e) Fair value (ii) Interest rates used for determining fair value The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting (i) Fair value and carrying amount date plus an adequate credit spread. The interest rates used as of December 31, 2013 and 2012 are summarized as follows: Details of fair value and carrying amount of financial assets and liabilities by category as of December 31, 2013 and 2012 are summarized as follows: 2013 2012 (In millions of won) Debts and bonds 2.93% 3.08% 2013 2012
Carrying amount Fair value Carrying amount Fair value (iii) Fair value hierarchy Loans and receivables: Fair value measurement classified by fair value hierarchy as of December 31, 2013 are summarized as follows: Cash and cash equivalents ₩ 2,311,264 2,311,264 1,903,309 1,903,309 (In millions of won) Short-term financial instruments 4,035,379 4,035,379 2,367,230 2,367,230 Level 1 Level 2 Level 3 Total Account and notes receivable - trade 2,072,818 2,072,818 1,801,731 1,801,731 Available-for-sale financial assets: Account and note receivable - other 468,210 468,210 485,696 485,696 Marketable securities ₩ 853,061 - - 853,061 Long-term account and notes receivable - trade 1,662 1,662 2,675 2,675 (*) Financial assets and liabilities carried at fair value by each valuation method are defined as follows: Other financial assets 640,517 640,517 481,724 481,724 - Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities ₩ 9,529,850 9,529,850 7,042,365 7,042,365 - Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or in indirectly - Level 3: input for the asset or liability that are not based on observable market data Available-for-sale financial assets: Short-term available-for-sale financial assets ₩ 8,000 8,000 - - (f) Income and expense by financial instruments category for the years ended December 31, 2013 and 2012 are summarized as follows: Long-term available-for-sale financial assets 1,237,107 1,237,107 1,606,358 1,606,358 (In millions of won) ₩ 1,245,107 1,245,107 1,606,358 1,606,358 2013 2012 Held-to-maturity investments: Other Other Held-to-maturity investments ₩ - - 18,755 18,755 Finance Finance comprehensive Finance Finance comprehensive income costs income income costs income Liabilities recognized by amortized cost: Loans and receivables ₩ 206,961 25,078 - 197,688 46,142 - Accounts and notes payable - trade ₩ 5,192,589 5,192,589 4,998,445 4,998,445 Available-for- sale financial assets 223,371 15,356 (143,399) 64,647 202 127,042 Accounts and notes payable - other 1,763,692 1,763,692 1,713,988 1,713,988 Held-to-maturity investments 901 196 - 895 - - Bonds 1,508,184 1,450,395 1,620,707 1,652,202 Liabilities recognized by amortized cost 24,042 98,812 - 139,565 164,801 - Debt 1,813,586 1,839,613 2,233,501 2,228,179 Derivative financial instruments - - - - - 5,543 Financial lease liabilities 17,382 17,382 21,871 21,871 ₩ 455,275 139,442 (143,399) 402,795 211,145 132,585 Other financial liabilities 1,206,895 1,206,895 1,032,556 1,032,556 ₩ 11,502,328 11,470,566 11,621,068 11,647,241 (g) Offsetting financial assets and financial liabilities
The Company measured the fair value of financial instruments as follows: (i) Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2013 are summarized as follows: - The fair value of available-for-sale financial assets traded within the market is measured at the closing bid price quoted at the end of (In millions of won) Related amounts not set off the reporting period. Gross amounts Gross amounts of recognized Net amounts - The fair value of the derivatives is the present value of the difference between contractual forward price and future forward price of recognized financial of financial Financial Cash collateral Net financial assets liabilities set off assets instruments received amount discounted during the remaining period of the contract, from present to contractual maturity. Accounts and notes receivables - ₩ 512,720 397,744 114,976 74 1,114 113,788 The fair value of current receivables is close to their carrying amounts. In addition, the fair value of other financial instruments is determined trade, and other as the present value of estimated future cash flows discounted at the current market interest rate. As of December 31, 2013, there isn’t any significant business climate and economic environment changes affecting the fair value of financial assets and liabilities.
KIA MOToRS Annual Report 2013 120 121 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(ii) Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2013 31. Transactions and Balances with Related Companies are as follows: (a) Significant transactions (In millions of won) (i) Significant transactions which occurred in the normal course of business with related companies for the year ended December 31, Related amounts not set off Gross amounts 2013 are summarized as follows: Gross amounts of recognized Net amounts of recognized financial assets of financial Financial Cash collateral Net (In millions of won) financial liabilities set off liabilities instruments received amount Revenues Expenses Short-term borrowings ₩ 742,435 - 742,435 742,435 - - Relation Company Sales Other Total Purchases Other Total Accounts and notes payables - 2,400,731 397,744 2,002,987 1,114 74 2,001,799 trade, and other Hyundai Motors Company ₩ 287,785 7,770 295,555 479,510 527,319 1,006,829 Total ₩ 3,143,166 397,744 2,745,422 743,549 74 2,001,799 Hyundai Mobis Co., Ltd. 53,639 3,338 56,977 3,627,047 3,180 3,630,227 Hyundai Powertech Co., Ltd. 5,275 41,546 46,821 337,757 1,055 338,812
(iii) Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2012 Hyundai Dymos Inc. 57 292 349 366,511 1,426 367,937 are as follows: Hyundai AMCO Co., Ltd. - 650 650 126,478 99,965 226,443 (In millions of won) EUKOR Car Carriers Inc. - 574 574 - 425,433 425,433 Related amounts not set off Gross amounts Donghee Auto Co., Ltd. 85 13 98 203,065 701 203,766 Gross amounts of recognized Net amounts Significant of recognized financial liabilities of financial Financial Cash collateral Net Hyundai Motor Group China Ltd. 651,925 34 651,959 2 13,958 13,960 financial assets set off assets instruments received amount influence Associates Dongfeng Yueda Kia Motors Co., Ltd. 395,298 22,710 418,008 1,270 - 1,270 Accounts and notes receivables - ₩ 383,380 363,105 20,275 - 945 19,330 Hyundai Motor Manufacturing Russia LLC 7,764 - 7,764 1,050,448 - 1,050,448 trade, and other Mobis Alabama, LLC 2,806 6,768 9,574 1,972,042 22,273 1,994,315 Mobis Parts America, LLC 147,854 - 147,854 371,944 - 371,944 (iv) Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2012 Mobis Slovakia s.r.o. 40,493 6,212 46,705 1,405,070 6,039 1,411,109 are as follows: (In millions of won) Powertech America, Inc. 139 4,783 4,922 459,613 - 459,613 Sewon America, Inc. - 3 3 315,683 1,255 316,938 Related amounts not set off Gross amounts Gross amounts of recognized Net amounts Other 5,931 30,353 36,284 528,807 255,675 784,482 of recognized financial assets of financial Financial Cash collateral Net Hyundai Glovis Co., Ltd. 93,231 24,706 117,937 1,845,053 538,682 2,383,735 financial liabilities set off liabilities instruments received amount Hyundai WIA Corporation 700 33,650 34,350 2,558,668 9,675 2,568,343 Short-term borrowings ₩ 942,925 - 942,925 942,925 - - Hyundai Capital Services Inc. 280,048 1,169 281,217 488 136 624 Accounts and notes payables – 1,951,476 363,105 1,588,371 945 - 1,587,426 Other trade, and other Hyundai Motor America 1,816,726 - 1,816,726 - 27,838 27,838 related Total ₩ 2,894,401 363,105 2,531,296 943,870 - 1,587,426 companies Hyundai Motor Manufacturing Czech s.r.o. 610,740 6,776 617,516 120,799 838 121,637 Hyundai Motor Manufacturing Alabama, LLC - 328 328 668,017 1,357 669,374 Hyundai Auto Canada Corp. 608,609 - 608,609 2 15,089 15,091 Other 16,925 6,649 23,574 1,661,011 484,125 2,145,136 ₩ 5,026,030 198,324 5,224,354 18,099,285 2,436,019 20,535,304
KIA MOToRS Annual Report 2013 122 123 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(ii) Significant transactions which occurred in the normal course of business with related companies for the year ended December 31, (b) Account balances 2012 are summarized as follows: (i) Account balances with related companies as of December 31, 2013 summarized as follows: (In millions of won) (In millions of won) Revenues Expenses Relation Company Receivables Payables Relation Company Sales Other Total Purchases Other Total Trade Other Total Trade Other Total Hyundai Motors Company ₩ 197,390 43,602 240,992 458,269 374,812 833,081 Hyundai Motors Company ₩ 29,274 32,038 61,312 124,188 286,124 410,312 Hyundai Mobis Co., Ltd. 44,995 2,626 47,621 3,595,858 11,219 3,607,077 Hyundai Mobis Co., Ltd. 4,949 675 5,624 718,190 12,516 730,706 Hyundai Powertech Co., Ltd. 5,163 2,198 7,361 232,273 - 232,273 Hyundai Powertech Co., Ltd. - 1,205 1,205 66,674 1,228 67,902 Hyundai Dymos Inc. - 210 210 236,110 100 236,210 Hyundai Dymos Inc. 5 152 157 74,242 1,634 75,876 Hyundai AMCO Co., Ltd. - 618 618 227,183 72,385 299,568 Hyundai AMCO Co., Ltd. - 1 1 56,729 35,123 91,852 EUKOR Car Carriers Inc. - 537 537 - 422,409 422,409 EUKOR Car Carriers Inc. - - - - 37,961 37,961 Donghee Auto Co., Ltd. 54 - 54 203,066 34 203,100 Donghee Auto Co., Ltd. - - - 26,740 720 27,460 Significant Hyundai Motor Group China Ltd. 594,431 - 594,431 4 14,127 14,131 Significant influence Hyundai Motor Group China Ltd. 57,844 - 57,844 - 1,499 1,499 influence Associates Dongfeng Yueda Kia Motors Co., Ltd. 359,098 8,591 367,689 1,095 - 1,095 Associates Dongfeng Yueda Kia Motors Co., Ltd. 14,101 2 14,103 364 574 938 Hyundai Motor Manufacturing Russia LLC 7,808 - 7,808 1,123,564 - 1,123,564 Hyundai Motor Manufacturing Russia LLC 341 3,601 3,942 107,096 - 107,096 Mobis Alabama, LLC 298 5,771 6,069 1,887,581 16,497 1,904,078 Mobis Alabama, LLC 147 989 1,136 125,547 - 125,547 Mobis Parts America, LLC 1,741 - 1,741 169,904 - 169,904 Mobis Parts America, LLC 239 - 239 28,356 - 28,356 Mobis Slovakia s.r.o. 4,109 47,489 51,598 1,295,342 1,033 1,296,375 Mobis Slovakia s.r.o. - - - 110,145 - 110,145 Powertech America, Inc. 94 2,149 2,243 482,511 - 482,511 Powertech America, Inc. 11 273 284 28,197 - 28,197 Sewon America, Inc. - 2 2 304,835 23,410 328,245 Sewon America, Inc. - - - 20,147 - 20,147 Other 4,591 5,319 9,910 442,499 227,801 670,300 Other 12,294 5,056 17,350 63,734 53,153 116,887 Hyundai Glovis Co., Ltd. 49,233 30,844 80,077 1,852,346 581,514 2,433,860 Hyundai Glovis Co., Ltd. 7,989 1,338 9,327 377,671 54,065 431,736 Hyundai WIA Corporation 806 3,394 4,200 2,728,035 8,226 2,736,261 Hyundai WIA Corporation - 7,129 7,129 466,496 25,020 491,516 Hyundai Capital Services Inc. 327,718 20,406 348,124 387 4,845 5,232 Hyundai Capital Services Inc. - 40,286 40,286 45 1,278 1,323 Other Hyundai Motor America 1,615,617 966 1,616,583 38 14,538 14,576 Other related Hyundai Motor America 108,432 - 108,432 - 3,989 3,989 related companies Hyundai Motor Manufacturing Czech s.r.o. 597,766 6,738 604,504 97,696 1,069 98,765 companies Hyundai Motor Manufacturing Czech s.r.o. 35,316 19,448 54,764 - 16,246 16,246 Hyundai Motor Manufacturing Alabama, LLC - 2,163 2,163 548,242 2,412 550,654 Hyundai Motor Manufacturing Alabama, LLC - 25 25 39,326 356 39,682 Hyundai Auto Canada Corp. 568,612 61 568,673 9 5,258 5,267 Hyundai Auto Canada Corp. 36,872 - 36,872 - 4,903 4,903 Other 11,370 10,038 21,408 1,699,183 491,541 2,190,724 Other 2,326 17,389 19,715 212,998 90,445 303,443 ₩ 4,390,894 193,722 4,584,616 17,586,030 2,273,230 19,859,260 ₩ 310,140 129,607 439,747 2,646,885 626,834 3,273,719
KIA MOToRS Annual Report 2013 124 125 Financial Review Notes to the Consolidated Financial Statements KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(ii) Account balances with related companies as of December 31, 2012 summarized as follows: (c) Significant transactions which occurred in funding with related companies for the years ended December 31, 2013 and 2012 are (In millions of won) summarized as follows: (In millions of won) Receivables Payables Relation Company 2013 2012 Trade Other Total Trade Other Total
Hyundai Motors Company ₩ 58,291 28,533 86,824 147,585 155,534 303,119 Involvement in paid-in capital increase of associates ₩ 89,200 147,299 Hyundai Mobis Co., Ltd. 1,738 1,826 3,564 738,358 16,502 754,860 Hyundai Powertech Co., Ltd. - 1,533 1,533 41,948 92,890 134,838 (d) Executive compensation of the Parent Company for each of the following categories for the years ended December 31, 2013 and 2012 Hyundai Dymos Inc. - 123 123 48,329 1,060 49,389 are summarized as follows: (In millions of won) Hyundai AMCO Co., Ltd. - - - 83,503 78,997 162,500 2013 2012 EUKOR Car Carriers Inc. - 9 9 - 24,201 24,201 Donghee Auto Co., Ltd. - - - 30,705 1,062 31,767 Compensation Significant Hyundai Motor Group China Ltd. 52,225 - 52,225 1 1,918 1,919 Salaries ₩ 47,378 52,425 influence Associates Dongfeng Yueda Kia Motors Co., Ltd. 9,375 22,995 32,370 73 4,275 4,348 Retirement and severance benefits 11,898 10,731 Hyundai Motor Manufacturing Russia LLC 218 3,576 3,794 113,591 - 113,591 Total 59,276 63,156 Mobis Alabama, LLC 26 453 479 122,543 - 122,543 Mobis Parts America, LLC 142 - 142 16,785 - 16,785 (e) Details of guarantee which the Company has provided for related companies as of December 31, 2013 are summarized as follows: Mobis Slovakia s.r.o. 2,382 413 2,795 83,829 138 83,967 (In thousands of foreign currency) Powertech America, Inc. 9 255 264 29,473 - 29,473 Relative Company Type of borrowings Lender Period Amount Sewon America, Inc. - - - 19,693 - 19,693 Associates Hyundai Card Co., Ltd. Guarantee GE Capital 2012.9.24 ~ 2015.1.9 USD 15,000 Other 30,667 6,530 37,197 83,466 62,232 145,698 Hyundai Glovis Co., Ltd. 1,078 1,541 2,619 325,283 47,377 372,660 Hyundai WIA Corporation 49 1,284 1,333 502,503 51,460 553,963 32. Date of Authorization for issue Hyundai Capital Services Inc. 2 49,796 49,798 99 6,157 6,256 Other Hyundai Motor America 111,149 - 111,149 - 1,222 1,222 The consolidated financial statements were authorized for issue on January 24, 2014, at the Board of Directors meeting, and it is related expected to be submitted for approval on March 21, 2014, at the general meeting of stockholders. companies Hyundai Motor Manufacturing Czech s.r.o. 31,385 27,409 58,794 27,312 - 27,312 Hyundai Motor Manufacturing Alabama, LLC - 176 176 43,394 211 43,605 Hyundai Auto Canada Corp. 32,993 - 32,993 7 867 874 Other 1,633 78,324 79,957 268,668 76,364 345,032 ₩ 333,362 224,776 558,138 2,727,148 622,467 3,349,615
The Company has financial instruments managed by HMC Investment Securities Co., Ltd. amounting ₩ 240,000 million, which is one of the other related company as of December 31, 2013.
KIA MOToRS Annual Report 2013 126 127 Financial Review Notes to the Consolidated Financial Statements Product Line-up
Dynamic Intelligence Reliable Multi-Player Ahead of Its Time Everlasting Impression The Stylish Family Car for Modern Life
This is the first Kia Motors product that utilizes the Stylish, durable, sophisticated. The Carnival cuts Innovation, a sporty stance, and style with The Sportage is a stylish CUV that was first Completely refurbished with an all-new eye- company’s newly-developed large-sedan platform. a classy figure as the only MPV that truly finds the confident individuality are the characteristics of the unveiled in 1993 and has been evolving ever catching body shell, the Carens combines the The Cadenza is best known for its luxurious right mix between luxury and convenience – and Optima, Kia’s most popular sedan. A passionate since. It was designed for both a dynamic urban muscle of an SUV with the roominess of an MPV. styling, in which ‘light’ and ‘lines’ boldly stand out, it’s also a pure joy to drive. Kia innovation brings mid-size car that loves the road, Optima is life and outdoor activities. It features a smart Outfitted with a robust bumper, elegant side while its top-end power performance provides an you the modern fusion of a high-end sedan and grandiose when you want it to be, but sporty and exterior, a panoramic sunroof, and a sound moldings and expansive hood, Carens’ creative exhilarating driving experience. The current model multi-purpose utility vehicle. fun when you feel like dressing down. system with six speakers. It has made driving adaptation of an MPV face with sporty SUV styling sports innovations such as improved safety and an entertaining experience. It also delivers cues is complemented by a larger wheelbase to comfort features with reduced road noise. outstanding levels of safety, with its six airbags offer a total package that will stop the competition and Electronic Stability Control (ESC) system. in its tracks.
(4-Door, 5-Door)
Experience New Luxury A Gift of True Innovation A Gift of True Innovation Inspiring Performance The Versatile New Venga All in Small
The Kia Quoris is a premium rear-wheel drive luxury The Cerato Koup is a two-door model that stands The Cerato is a next-generation compact sedan Inspired by the harsh beauty of the desert, the The Venga is designed exclusively for the The moment you take the wheel of the Picanto sedan with state-of-the-art features that enhance apart from its sister sedan thanks to its dynamic with diverse cutting-edge features complementing Mohave has the power to tame nature’s furies. European market. We began with the observation your eyes will widen and your pulse will quicken. overall product quality. A sense of ‘modern classic’ and sporty looks, optimal size befitting a coupé its sophisticated and dynamic design. Redefining Designed in our labs and tested in the wild, the that other companies’ MPVs sacrificed too much From sassy styling to comfort and safety features, dignity has been added while maintaining Kia’s body style, top-notch engine performance and the very best in automobile design, its bold, Mohave is a full-size SUV for drivers who refuse style with their singular focus on functionality. We Kia has thought of everything. Picanto is an young and dynamic design identity. An innovative safety, and numerous cutting-edge convenience coupé-like proportions and eye catching lines and to stay within the lines. We invite you to push its applied Kia’s signature grille to the front profile, eye-catcher – a well-dressed, sporty ride that rear seat entertainment system features 9.2-inch features. A sense of beauty and speed come curves exude brisk acceleration and effortless capabilities to the limit and see why the Mohave expanded the window coverage and carved out a perfectly balances cutting-edge design, technical dual monitors while the Around View Monitor together based on the concept of ‘simplicity of the fluidity of motion. Along with its beautiful exterior has truly earned its name. panoramic sunroof to flood the cabin with natural innovation and the pure, simple joy of driving. provides a 360-degree, bird’s eye image of the straight line’. styling, the Cerato features superb performance light. The result is a new-concept city styled MPV car’s position on the road. It offers a comfortable and power as well as a smooth and stable ride that showcases the innovation and inspiration and pleasant ride, while touting a thrilling maximum and uncompromised safety. driving Kia’s success. output of 334 ps and the maximum torque of 40.3 kg·m thanks to the V6 3.8 GDI engine and 8-speed (3-Door, 4-Door, 5-Door) automatic transmission.
Taot lly Transformed – A Talented Compact Live More Life Prestige Reborn More Stylish Than Ever Rio doesn’t just stand out from the competition, it cee’d is an all-around delight – an experience Sorento is built for urban living but created by We take extra care with each revision of the Soul stands out – period. Its exterior cuts a jaunty, fun- that challenges all preconceptions. Built for the designers who have drawn on their deep-seated because it defines what we have achieved as a loving profile. On the inside, you are immersed senses, cee’d springs forward in a lively color understanding of off-road driving. While it features design-centered company. The latest Soul features in a private oasis that soothes your senses. Rio palette that commands attention. But once you a dynamic design that enhances city life, the the addition of ambient touches to its signature carries you away in its calm embrace, enveloping get behind the wheel, you will feel yourself melting Sorento is a robust, masculine and capable off- look and luxurious convenience features, such you in a private, personal space. The five-door into a finely-crafted cockpit that removes all stress road vehicle. Its modern design, comfort factor two-tone exterior color schemes and ventilated model is a particularly excellent combination of from the rigors of daily driving. and sophisticated feel on the road encourage you front seats, to expand Soul’s commercial appeal. value, sophistication and practicality, giving it to look beyond traditional capabilities. broad market appeal.
K TIA MO oRS Annual Report 2013 128 129 Financial Review Product Line-up Global Network
Overseas Kia Motors Manufacturing Georgia Kia Motors Slovakia Dongfeng Yueda Kia Motors Co, Ltd (DYK) Plants (North America) (Europe) (China)
Overseas America Technical Center Europe Technical Center India Technical Center China Technical Center Japan Technical Center R&D Centers (North America) (Europe) (Asia Pacific) (Asia Pacific) (Asia Pacific)
18 27
21 20 17 26 19 32 12 24 29 16 11 37 21 24 14 22 23 15 25
31 13 2 34 33 12 30 10 36 9 28 1
3 7
35
4
8
5 6
Overseas Sales Subsidiaries & Regional HQs Overseas R&D Centers
North America 1 Kia Motors America, Inc. (KMA) Europe 11 Kia Motors Europe (KME) Europe 25 Kia Motors Sales Slovensko (KMSS) North America 31 America Technical Center 2 Kia Canada Inc. (KCI) 12 Kia Motors Deutschland (KMD) 26 Regional H.Q. / Eastern Europe & CIS 13 Kia Motors Iberia (KMIb) 27 Kia Motors Russia (KMRus) Europe 32 Europe Technical Center Central & South 3 Regional H.Q. / Central & South America (Miami Office) 14 Kia Motors France (KMF) America 15 33 Japan Technical Center Kia Motors Italy (KMIt) Asia Pacific 4 Regional H.Q. / Asia (Kuala Lumpur Office) 16 Kia Motors Belgium (KMBl) 34 China Technical Center Asia/Pacific Overseas Plants 5 Kia Motors Australia PTY LTD (KMAu) 17 Kia Motors Polska (KMP) 35 India Technical Center 6 Kia Motors New Zealand Limited (KMNZ) 18 Kia Motors Sweden (KMSw) North America 28 Kia Motors Manufacturing Georgia 19 Kia Motors Nederland (KMNl) 7 Regional H.Q. / Middle East & Africa (Dubai Office) 20 Kia Motors UK (KMUK) Middle East & Europe 29 Kia Motors Slovakia Overseas Design Centers Africa 8 Kia Motors Corporation South Africa 21 Kia Motors Ireland (KMIe) 22 Kia Austria (KMAs) 36 Kia Design Center America China 30 Dongfeng Yueda Kia Motors Co, Ltd (DYK) 9 Kia Motors (China) 23 Kia Motors Hungary (KMH) 37 Kia Design Center Europe China • No. 1 Plant • No. 2 Plant • No. 3 Plant 10 Dongfeng Yueda Kia Motors Co, Ltd (DYK) 24 Kia Motors Czech (KMCz)
KIA MOToRS Annual Report 2013 130 131 Financial Review Global Network Board of Directors
Hyoung-Keun Lee • Currently, Vice Chairman, Kia Motors Corp.
• (Former) President, Kia Motors Corp.
Sam-Ung Lee • Currently, President, Kia Motors Corp.
• (Former) Vice President, Kia Motors Corp.
Han-Woo Park • Currently, Executive Vice President, Kia Motors Corp.
• (Former) Executive Vice President, Hyundai Motor Company
Euisun Chung • Currently, Vice Chairman, Hyundai Motor Corp.
• (Former) President, Kia Motors Corp.
Sang-Gu Nam • Currently, Chair-Professor of Business Administration at Gachon University
• (Former) Private Sector Chairperson of the Financial Services Commission
Hyun-Kook Hong • Currently, Vice Chairman, Gaduk Tax Consulting Associates
• (Former) Auditor of NTS (National Tax Service)
Keon-Soo Shin • Currently, Attorney at Law, KCL (Kim, Choi & Lim)
• (Former) Chief Prosecutor of Seoul High Prosecutor’s Office
Won-Jun Kim • Currently, Advisor at Kim & Chang Law Firm
• (Former) Executive Director of Market Oversight at the Fair Trade Commission
Doo-Hee Lee • Currently, Dean of Business School at Korea University
• (Former) President of APAIE (Asia-Pacific Association for International Education)
Contact Information
For more information on Kia Motors, please visit www.kia.com / www.kmcir.com
KIA MOToRS Annual Report 2013 132 Kia Motors Corporation
12 Heolleung-ro, Seocho-gu, Seoul, 137-938, Korea