UMC(UMC) - 2024 Q1 - Quarterly Report

Report of Independent Auditors Auditor's Conclusion Ernst & Young concluded UMC's Q1 2024 and 2023 consolidated financial statements fairly present its financial position, performance, and cash flows, based on a review engagement - The auditors expressed a qualified conclusion, finding no material modifications needed for the consolidated financial statements to conform with endorsed accounting standards[6] - The auditors' conclusion on certain equity method investments relies solely on reports from other independent auditors, as they did not review those financial statements[8] Impact of Investments Reviewed by Other Auditors (As of March 31, 2024) | Metric | Amount (NT$ million) | % of Consolidated Total | | :--- | :--- | :--- | | Equity Method Investment Balance | 29,288 | 5.16% of Total Assets | | Share of Profit/Loss | 1 | 0.01% of Pre-tax Income | | Share of Other Comprehensive Income | 241 | 1.31% of Total Comprehensive Income | Consolidated Financial Statements Consolidated Balance Sheets As of March 31, 2024, total assets increased to NT$567.1 billion, liabilities decreased to NT$188.8 billion, and equity rose to NT$378.2 billion Key Balance Sheet Items (in thousands of NT$) | Account | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Total Current Assets | 205,162,356 | 216,797,392 | 241,967,215 | | Total Non-Current Assets | 361,910,230 | 342,389,535 | 307,663,899 | | Total Assets | 567,072,586 | 559,186,927 | 549,631,114 | | Total Current Liabilities | 88,403,119 | 99,014,733 | 105,885,984 | | Total Non-Current Liabilities | 100,441,417 | 100,593,622 | 88,195,067 | | Total Liabilities | 188,844,536 | 199,608,355 | 194,081,051 | | Total Equity | 378,228,050 | 359,578,572 | 355,550,063 | Consolidated Statements of Comprehensive Income Q1 2024 operating revenues slightly increased to NT$54.6 billion, but gross profit decreased to NT$16.9 billion, and net income attributable to parent fell to NT$10.5 billion Key Income Statement Items (in thousands of NT$) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating Revenues | 54,632,099 | 54,209,447 | | Gross Profit | 16,899,430 | 19,224,440 | | Operating Income | 11,664,501 | 14,480,698 | | Net Income | 10,429,595 | 16,384,547 | | Net Income (attributable to parent) | 10,456,142 | 16,183,002 | Earnings Per Share (in NT$) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Basic EPS | 0.84 | 1.31 | | Diluted EPS | 0.83 | 1.28 | Consolidated Statements of Changes in Equity Total equity increased from NT$359.6 billion to NT$378.2 billion in Q1 2024, primarily driven by NT$18.4 billion in total comprehensive income Changes in Equity for Q1 2024 (in thousands of NT$) | Item | Amount | | :--- | :--- | | Balance as of January 1, 2024 | 359,578,572 | | Net income for the period | 10,429,595 | | Other comprehensive income for the period | 7,954,208 | | Total comprehensive income | 18,383,803 | | Share-based payment transaction | 275,572 | | Other changes | (9,907) | | Balance as of March 31, 2024 | 378,228,050 | Consolidated Statements of Cash Flows Q1 2024 operating cash flow was NT$20.8 billion, investing activities used NT$29.9 billion, and financing used NT$6.4 billion, resulting in a NT$13.1 billion net cash decrease Summary of Cash Flows (in thousands of NT$) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 20,819,871 | 26,964,199 | | Net Cash Used in Investing Activities | (29,914,635) | (29,586,209) | | Net Cash Provided by (Used in) Financing Activities | (6,438,908) | 1,347,089 | | Net Decrease in Cash and Cash Equivalents | (13,122,355) | (1,984,319) | - The primary use of cash in investing activities was the acquisition of property, plant, and equipment, totaling NT$28.5 billion in Q1 2024[23] Notes to Consolidated Financial Statements General Information and Accounting Policies UMC, a semiconductor wafer foundry incorporated in 1980, prepared its financial statements under IFRS endorsed by the R.O.C. FSC, applying all effective standards - United Microelectronics Corporation (UMC), a full-service semiconductor wafer foundry incorporated in May 1980, is listed on the TWSE and NYSE[25] - The consolidated financial statements adhere to R.O.C. Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 "Interim Financial Reporting" as endorsed by the FSC[39] - The company is evaluating the potential impact of IFRS 18 "Presentation and Disclosure in Financial Statements", effective January 1, 2027, which is not yet endorsed by the FSC[38] Contents of Significant Accounts This note details significant accounts, including NT$119.4 billion cash, NT$30.2 billion net accounts receivable, and NT$34.6 billion net inventories as of March 31, 2024, along with other financial details Financial Assets and Liabilities As of March 31, 2024, cash and equivalents were NT$119.4 billion, with NT$18.1 billion in FVTPL assets, NT$36.3 billion in bonds payable, and NT$21.6 billion in long-term loans Cash and Cash Equivalents (in thousands of NT$) | Category | March 31, 2024 | | :--- | :--- | | Checking and savings accounts | 47,369,157 | | Time deposits | 70,492,163 | | Repurchase agreements | 1,563,725 | | Total | 119,431,260 | Bonds Payable (in thousands of NT$) | Category | March 31, 2024 | | :--- | :--- | | Unsecured domestic bonds payable | 31,000,000 | | Unsecured exchangeable bonds payable | 5,757,373 | | Less: Discounts & Current Portion | (12,176,391) | | Net Bonds Payable (Non-current) | 24,580,982 | - The company holds unsecured exchangeable bonds due in 2026, convertible into common shares of NOVATEK MICROELECTRONICS CORPORATION[96][98] Operational Assets and Investments Net accounts receivable increased to NT$30.2 billion, inventories decreased to NT$34.6 billion, and PP&E grew to NT$254.1 billion with equity method investments at NT$46.8 billion Key Operational Assets (in thousands of NT$) | Asset | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Accounts Receivable, Net | 30,206,711 | 29,237,550 | | Inventories, Net | 34,593,276 | 35,712,558 | | Investments (Equity Method) | 46,793,606 | 45,406,511 | | Property, Plant and Equipment | 254,135,871 | 239,123,248 | - The fair value of listed equity method investments was NT$55.8 billion as of March 31, 2024, significantly exceeding their NT$20.6 billion carrying amount[66] Equity and Share-Based Payments As of March 31, 2024, UMC had 12.53 billion shares issued, proposed a NT$3.00 cash dividend for 2023, and recognized NT$275 million in Q1 2024 share-based compensation costs - The Board proposed a NT$3.00 cash dividend per share for 2023 earnings, a decrease from NT$3.60 paid for 2022[117] - The company issued 27 million shares of restricted stock to employees in December 2023 as part of its compensation plan[123] - Q1 2024 share-based compensation costs totaled NT$275 million for restricted stock and NT$11 million for stock appreciation rights[127][128] Revenue, Expenses, and Earnings Per Share Q1 2024 wafer sales were NT$51.5 billion, with Taiwan (35%) and USA (25%) as largest markets; basic EPS was NT$0.84 based on NT$10.5 billion net income Revenue by Geography for Q1 2024 | Region | Revenue (NT$ million) | % of Total | | :--- | :--- | :--- | | Taiwan | 19,361 | 35.4% | | USA | 13,768 | 25.2% | | China (incl. HK) | 7,489 | 13.7% | | Korea | 7,265 | 13.3% | | Europe | 4,477 | 8.2% | | Japan | 2,273 | 4.2% | Basic Earnings Per Share Calculation for Q1 2024 | Item | Amount | | :--- | :--- | | Net income attributable to parent (thousands NT$) | 10,456,142 | | Weighted-average ordinary shares (thousand) | 12,414,088 | | Basic EPS (NT$) | 0.84 | Related Party Transactions Q1 2024 operating revenues from associates totaled NT$680 million, with an additional NT$534 million investment in FARADAY, and key management compensation amounted to NT$605 million - Operating revenues from associates increased to NT$680 million in Q1 2024 from NT$562 million in Q1 2023[164] - The company acquired 1.72 million shares in FARADAY TECHNOLOGY CORP. for NT$534 million during a Q1 2024 capital increase[166] Key Management Personnel Compensation (in thousands of NT$) | Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Short-term employee benefits | 492,162 | 587,360 | | Share-based payment | 111,683 | 137,450 | | Total | 604,659 | 725,739 | Assets Pledged as Collateral As of March 31, 2024, NT$13.8 billion in assets were pledged as collateral, primarily buildings (NT$4.5 billion) and machinery and equipment (NT$5.9 billion), securing long-term loans Pledged Assets by Type (Carrying Amount, in thousands of NT$) | Asset Type | March 31, 2024 | | :--- | :--- | | Refundable Deposits | 3,160,800 | | Buildings | 4,503,806 | | Machinery and equipment | 5,860,455 | | Right-of-use assets | 269,888 | | Total | 13,794,959 | Contingencies and Subsequent Events Legal proceedings with Micron Technology, Inc. were settled with no material financial effect, and a 7.2 magnitude earthquake on April 3, 2024, had no material operational or financial impact - The company settled all worldwide legal proceedings with Micron Technology, Inc., with the recorded fine having no material ongoing financial or operational effect[172][174] - As of March 31, 2024, the company had unrecognized construction contract commitments of approximately NT$26.6 billion for operational expansion[172] - A 7.2 magnitude earthquake on April 3, 2024, had no material impact on the company's operations, finances, or business, with normal resumption of activities[177] Financial Instruments and Risk Management The company manages market, credit, and liquidity risks, with a 15.51% debt-to-capital ratio as of March 31, 2024, and a 10% NTD appreciation would decrease profit by NT$817 million - The company's primary financial risk exposures include foreign currency, interest rate, equity price, credit, and liquidity risks[179][181] - A 10% appreciation of the NTD against the USD would decrease profit for the three-month period by NT$817 million[184] Capital Structure Ratios | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Net Debt (NT$ million) | 69,413 | 67,055 | 22,247 | | Total Capital (NT$ million) | 447,641 | 426,633 | 377,797 | | Debt to Capital Ratio | 15.51% | 15.72% | 5.89% | Additional Disclosures and Segment Information Additional Disclosures This section provides supplementary information required by the R.O.C. Securities and Futures Bureau, covering financing, guarantees, securities, asset transactions, and related party details - The report includes additional disclosures required by Taiwanese regulations, covering guarantees, securities holdings, and investments in Mainland China[233][235] Operating Segment Information The company operates as a single operating segment: wafer fabrication, with consolidated financial statements representing this core activity of manufacturing chips based on customer designs - UMC has determined it operates as a single operating segment, which is wafer fabrication[234]