Overview | ||||
Business | ||||
Financial Information | ||||
Auditors Opinion | ||||
Management Structure | ||||
Shares | ||||
Employees | ||||
Transactions with Interested Parties | ||||
Other Relevant Matters | ||||
Attachment: Korean GAAP Non-consolidated Financial Statements |
1. | Information and communication business | |
2. | Handset sales and lease business | |
3. | New media business | |
4. | Advertisement business | |
5. | Communication sales business | |
6. | Personal property and real property lease business | |
7. | Research and technology development related to Clause 1 through 4 | |
8. | Overseas business and trading business related to Clause 1 through 4 | |
9. | Manufacturing and distribution business related to Clause 1 through 4 | |
10. | Tourism | |
11. | Other businesses related to the above |
(1) | Date of Incorporation |
| March 29, 1984 (date of shareholders meeting for the incorporation): Incorporated as Korea Mobile Communications Service Co., Ltd. (Authorized capital: Won 500 million / Paid-in capital: Won 250 million) |
(2) | Location of Headquarters |
| 22 Dohwa-dong, Mapo-gu, Seoul (July 11, 1988) | ||
| 16-49 Hangang-ro 3-ga, Yongsan-gu, Seoul (November 19, 1991) | ||
| 267 Namdaemun-ro 5-ga, Jung-gu, Seoul (June 14, 1995) | ||
| 99 Seorin-dong, Jongro-gu, Seoul (December 20, 1999) | ||
| 11, Euljiro 2-ga, Jung-gu, Seoul (December 13, 2004) |
(1) | Target: Shinsegi Communication Co., Ltd. |
| Date: January 13, 2002 | ||
| Registration: January 16, 2002 |
(2) | Target: SK IMT Co., Ltd. |
| Date: May 1, 2003 | ||
| Registration: May 7, 2003 |
(1) | Cancellation of Treasury Stock |
Pursuant to the resolutions of the Companys board of directors dated July 28, 2006 and August 31, 2006, the Company acquired 491,000 shares of the Companys common stock (at a purchase price of Won92,518,373,000) between August 1 and August 14, 2006 and 592,000 shares of the Companys common stock (at a purchase price of Won 116,559,060,000) between September 4 and September 27, |
1
2006, respectively, and cancelled such shares of treasury stock as of August 17 and September 29, 2006, respectively. |
On July 28, 2006, the Companys board of directors approved a resolution to pay an interim dividend as follows: |
| Dividend amount: Won 1,000 per share (Total amount: Won 73,713,657,000) | ||
| Market dividend rate: 0.5% | ||
| Record date: June 30, 2006 | ||
| Dividend payment date: August 16, 2006 |
(As of September 30, 2006) | (Unit: shares) |
Share type | ||||||||||||||||
Classification | Common shares | | Total | Remarks | ||||||||||||
I. Total number of issuable shares |
220,000,000 | | 220,000,000 | | ||||||||||||
II. Total number of shares issued to date |
89,278,946 | | 89,278,946 | | ||||||||||||
III. Total number of shares retired to date |
8,085,235 | | 8,085,235 | | ||||||||||||
1. Capital reduction |
| | | | ||||||||||||
2. Share cancellation |
8,085,235 | | 8,085,235 | | ||||||||||||
3. Redeemed shares |
| | | | ||||||||||||
4. Others |
| | | | ||||||||||||
IV. Total number of shares (II-III) |
81,193,711 | | 81,193,711 | | ||||||||||||
V. Number of treasury shares |
8,563,054 | | 8,563,054 | | ||||||||||||
VI. Number of shares outstanding (IV-V) |
72,630,657 | | 72,630,657 | |
(As of September 30, 2006) | (Unit: Won, shares) |
Capital (total face value) | Price per share | |||||||||||||||||||||||||||
Capital amount | Total amount of | Capital/ | Capital/ | |||||||||||||||||||||||||
in financial | Total number of | distributed | Par value | Total number of | Number of distributed | |||||||||||||||||||||||
statements | issued shares | shares | per share | issued shares | shares | |||||||||||||||||||||||
Classification | Type | (a) | (IV of A×b) | (VI of A×b ) | (b) | (a / IV of A.) | (a / VI of A.) | |||||||||||||||||||||
Registered |
Common shares | 44,639,473,000 | 40,596,855,500 | 36,315,328,500 | 500 | 549.8 | 614.6 | |||||||||||||||||||||
Total |
44,639,473,000 | 40,596,855,500 | 36,315,328,500 | 500 | 549.8 | 614.6 |
(1) | Status of Acquisition and Disposition of Treasury Shares |
2
Amount at the | Amount at the end | |||||||||||||||||||||||
Acquisition method | Type of share | beginning of period | Acquisition (+) | Disposition (-) | Retirement (-) | of period | ||||||||||||||||||
Direct acquisition
pursuant to Article
189-2 (1) of the
relevant Act |
Common share Preferred share |
4,697,735 |
1,083,000 |
99,361 |
1,083,000 |
4,598,374 |
||||||||||||||||||
Direct acquisition
based on causes other
than those stipulated
in Article 189-2 (1)
of the relevant Act |
Common share Preferred share |
77,970 |
|
|
|
77,970 |
||||||||||||||||||
Sub-total |
Common share Preferred share |
4,775,705 |
1,083,000 |
99,361 |
1,083,000 |
4,676,344 |
||||||||||||||||||
Indirect acquisition
through trust and
other agreements |
Common share Preferred share |
3,886,710 |
|
|
|
3,886,710 |
||||||||||||||||||
Total |
Common share Preferred share |
8,662,415 |
1,083,000 |
99,361 |
1,083,000 |
8,563,054 |
||||||||||||||||||
* Of the 4,676,344 shares of treasury stocks directly acquired based on causes other than those provided in Article 189-2 (1) of the relevant Act, 1,685,816 shares were deposited with the Korea Securities Depository as of September 30, 2006 for any exchange of the Companys overseas exchangeable bonds. |
D. | Employee Stock Ownership Program |
(1) | Transactions with the Employee Stock Ownership Program |
a) | On August 23, 1999, the Company lent Won 118.6 billion of purchase funds for employee stock ownership to the Employee Stock Ownership Program, and the Employee Stock Ownership Program re-lent the amount to the Companys employees in accordance with its internal allotment standards. |
| Terms of the loan: 10-year installment repayment plan following a three-year grace period | ||
| The loan is deducted from wages for each individual to repay the Employee Stock Ownership Program, and is subsequently repaid to the company. |
b) | Repayment amount during the first to the third quarter of 2006: Won 5,986,736,183 |
| Details of the loan repayment |
(As of September 30, 2006) | (Unit: in thousand Won) |
Classification | Amount | Remarks | ||||||
Initial loan amount |
118,577,755 | Lent on August 23, 1999 to 3,540 persons | ||||||
Accumulated repayment amount |
109,978,284 | Including Won 5.99 billion repaid during the first to the third quarter of 2006 | ||||||
Balance |
8,599,471 | Full repayment by June 2010 |
3
Balance at the beginning | Balance at the end | |||||||||||
Account classification | Types of share | of period | of period | |||||||||
E.S.O.P. account |
| | | |||||||||
Member account |
Common share | 297,246 | 211,493 |
* As the relevant law requires an immediate transfer of the shares directly purchased by the employees to the account of the individual purchasers, the Company transfers and holds the employees stocks in separate individual accounts within the program once the number of shares for each individual member is determined. |
(As of September 30, 2006) | (Unit: shares) |
Classification | Number of shares | Remarks | ||||||||||
Total outstanding shares (A) |
Common share | 81,193,711 | | |||||||||
Preferred share | | |||||||||||
Number of shares without voting right (B) |
Common share | 8,563,054 | Treasury shares | |||||||||
Preferred share | | |||||||||||
Shares with restricted voting right under
the Stock Exchange Act and other laws (C) |
Common share | | | |||||||||
Shares with reestablished voting
right (D) |
| | | |||||||||
The number of shares with exercisable voting right |
Common share | 72,630,657 | | |||||||||
(E = A - B - C + D) |
Preferred share | |
4
(Unit: in million Won except per share value) | ||||||||||||||
Year ended December 31, | ||||||||||||||
Classification | 2006(Half year) | 2005 | 2004 | |||||||||||
Par value per share |
500 | 500 | 500 | |||||||||||
Current net income |
710,498 | 1,871,380 | 1,494,852 | |||||||||||
Net income per share |
9,648 | 25,421 | 20,307 | |||||||||||
Income available for distribution as dividend |
712,210 | 1,930,626 | 1,377,007 | |||||||||||
Total cash dividend |
73,714 | 662,529 | 758,227 | |||||||||||
Total stock dividend |
| | | |||||||||||
Percentage of cash dividend to available income (%) |
10.4 | 35.4 | 50.7 | |||||||||||
Cash dividend yield ratio (%) |
Common share | 0.5 | 4.9 | 5.2 | ||||||||||
Preferred share | | | | |||||||||||
Stock dividend yield ratio
(%) |
Common share | | | | ||||||||||
Preferred share | | | | |||||||||||
Cash dividend per share |
Common share | 1,000 | 9,000 | 10,300 | ||||||||||
Preferred share | | | | |||||||||||
Stock dividend per share |
Common share | | | | ||||||||||
Preferred share | | | |
5
(Unit: 1,000 persons) | ||||||||||||||||||||||||||
As of September 30, |
||||||||||||||||||||||||||
Classification | 2006 | End of 2005 | End of 2004 | End of 2003 | End of 2002 | End of 2001 | ||||||||||||||||||||
Penetration rate (%) | 82.0 | 79.4 | 75.9 | 70.1 | 67.9 | 60.9 | ||||||||||||||||||||
Number of subscribers |
SK Telecom | 20,032 | 19,530 | 18,783 | 18,313 | 17,220 | 11,867 | |||||||||||||||||||
Shinsegi Communication | | | | | | 3,312 | ||||||||||||||||||||
PCS | 19,671 | 18,812 | 17,803 | 15,279 | 15,123 | 13,867 | ||||||||||||||||||||
Total | 39,703 | 38,342 | 36,586 | 33,592 | 32,342 | 29,046 |
(Unit: %) | ||||||||||||||||
As of | ||||||||||||||||
Classification | September 30, 2006 | 2005 | 2004 | 2003 | ||||||||||||
Mobile phone |
50.5 | 50.9 | 51.3 | 54.5 |
(As of September 30, 2006) | (Unit: %) |
Classification | SK Telecom | KTF | LG Telecom | |||||||||
Market share |
50.5 | 32.2 | 17.4 |
(2) | New Business Contents and Prospects |
a) | Expansion of U.S. market operations through commencement of Helio service |
| Resolution for capital investment regarding Mobile Virtual Network Operator (MVNO) service in the U.S. (January 26, 2005) | ||
| Investment amount: US$220 million (From 2005 to 2007) | ||
| Investment method: Establishment of a joint venture with EarthLink, which is one of the three major Internet service providers in the U.S. | ||
| Service provided: MVNO (Mobile Virtual Network Operator) |
| Subscriber recruitment and service provision based on service facilities and fee plans |
6
| Combination of the Companys mobile communications business capabilities and data service technology with the local customer base, marketing infrastructure and brand power of EarthLink | ||
| Planning to provide additional services related with music, games and messaging for target customers |
b) | Commencement of Commercial High Speed Downlink Packet Access (HSDPA) Service (May 16, 2006) |
| Building on an advanced WCDMA network for data transmission, improve the Companys long-term growth base through the development of new products with strong visual components (such as video phones and other video content) and the expansion of global roaming services; | ||
| Planning to increase customer preference for HSDPA by capturing the early adopter and heavy user markets and to raise awareness of HSDPA as a premium service; | ||
| Nationwide HSDPA network expected to be completed in the first half of 2007. |
c) | Commencement of Commercial Wireless Broadband (WiBro) Service (June 30, 2006) |
| On January 20, 2005, the Company, along with Korea Telecom, obtained rights to the WiBro business following the review of the Information and Communications Policy Review Committee | ||
| Currently servicing six HotZone areas in the Korea University, Shinchon, Hanyang University, Myungdong and Euljiro areas in Seoul; | ||
| Plan to expand HotZone service and to introduce partial flat rate plans in light of various customers different usage patterns. |
(Unit: in million Won, %) | ||||||||||
Business field | Sales type | Item | Major trademarks | Sales amount (ratio) | ||||||
Information and
communication |
Services | Mobile phone | June, NATE and others | 7,800,540 (98.85%) | ||||||
Others | Others | 90,637 (1.15%) |
Quarter ended | ||||||||||||||
Item | September 30, 2006 | During 2005 | During 2004 | |||||||||||
Mobile phone
(Based on |
Basic fee (per month) | 13,000 | 13,000 | 13,000 | ||||||||||
standard
call charge) |
Service fee (per 10 seconds) | 20 | 20 | 20 |
* Caller ID service became free of charge beginning January 2006. |
7
(Unit: Won 100 million) | ||||||||||||||||||||
Investment | Subject of | Total | Amount already |
Future | ||||||||||||||||
Business field | Classification | period | investment | Investment effect | investments | invested | investment | |||||||||||||
Network/Common |
Upgrade/ New installation |
2006 | Network, systems and others | Capacity increase and quality improvement; systems improvement | 16,000 | 7,195 | 8,805 |
* Amount already invested is the cumulative amount expended through the quarter ended September 30, 2006. |
(Unit: Won 100 million) | ||||||||||||||||||||||||
Expected investment amount | Expected investment for each year | |||||||||||||||||||||||
Business field | Asset type | Amount | 2006 | 2007 | 2008 | Investment effect | ||||||||||||||||||
Network/Common |
Network, systems and others | 8,805 | 8,805 | N/A | N/A | Upgrades to the existing services and provision of new services | ||||||||||||||||||
Total |
8,805 | 8,805 | N/A | N/A | |
* The expected investment amount of Won 880.5 billion is the future investment amount for 2006, which is the total investment amount for 2006 less the cumulative amount expended through the quarter ended September 30, 2006. |
(1) | FX Swap |
a) | Purpose of Contracts: Currency Exchange Risk Hedging | ||
b) | Contract Terms | ||
| Cross Currency Swap |
(As of September 30, 2006) | (Unit: in million Won) | |||||||||||||||
Income/loss on | ||||||||||||||||
Contract amount | Contract party | Contract date | Proceeds payment method | valuation | ||||||||||||
US$125 million |
Citibank | March 23, 2004 | Exchange on the date immediately preceding the principal and interest payment date | (37,063 | ) | |||||||||||
US$125 million |
Credit Suisse | March 23, 2004 | Same as above | (38,336 | ) | |||||||||||
US$50 million |
BNP Paribas | March 23, 2004 | Same as above | (14,783 | ) | |||||||||||
Total: US$300
million |
| | | (90,182 | ) |
8
(As of September 30, 2006) | (Unit: in million Won) | |||||||||||||||
Contract amount | Contract party | Contract date | Proceeds payment method | Income on valuation | ||||||||||||
US$100 million |
Credit Suisse | May 27, 2004 | Exchange before principal payment date | (21,798 | ) | |||||||||||
US$300 million |
Hana Bank | June 30, 2006 | Payment of US Dollars and receipt of Korean Won on July 5, 2007 | 4,358 | ||||||||||||
US$140 million |
Shinhan Bank | |||||||||||||||
US$140 million |
Woori Bank | |||||||||||||||
US$140 million |
Korea Exchange Bank | |||||||||||||||
US$140 million |
Citibank | |||||||||||||||
US$140 million |
Barclays Capital |
(2) | Interest Rate Swap |
a) | Purpose of Contracts: Interest Rate Risk Hedging | ||
b) | Contract Terms | ||
| IRS |
(As of September 30, 2006) | (Unit: in million Won) | |||||||||||||||
Income/loss on | ||||||||||||||||
Contract amount | Contract party | Contract date | Proceeds payment method | valuation | ||||||||||||
2,000 |
Shinhan Bank | June 28, 2006 | Fixing of interest payment date/ exchange of floating interest rate |
(2,747 | ) |
9
(Unit: in thousand Won) | ||||||||||||||||||
Quarter ended | ||||||||||||||||||
Category | September 30, 2006 | 2005 | 2004 | Remarks | ||||||||||||||
Raw material |
106,872 | 234,889 | 255,320 | | ||||||||||||||
Labor |
27,359,460 | 35,191,759 | 36,026,539 | | ||||||||||||||
Depreciation |
98,926,079 | 121,335,301 | 122,097,858 | | ||||||||||||||
Commissioned service |
62,880,554 | 86,536,635 | 85,646,995 | | ||||||||||||||
Others |
21,646,814 | 41,730,732 | 39,951,341 | | ||||||||||||||
Total R&D costs |
210,919,779 | 285,029,316 | 283,978,053 | | ||||||||||||||
Accounting |
Sales and administrative expenses | 202,995,538 | 273,223,885 | 272,290,385 | | |||||||||||||
Development expenses (Intangible assets) | 7,924,241 | 11,805,431 | 11,687,668 | | ||||||||||||||
R&D cost / sales amount ratio
(Total R&D costs / Current sales
amount×100) |
2.67 | % | 2.81 | % | 2.93 | % | |
(Unit: in million Won) | ||||||||||||||||||||
Beginning | New | Reduction from | Ending | |||||||||||||||||
Source of procurement | balance | procurement | repayment | balance | Remarks | |||||||||||||||
Bank |
| 200,000 | | 200,000 | | |||||||||||||||
Insurance company |
| | | | | |||||||||||||||
Merchant banking |
| | | | | |||||||||||||||
Loan specialty financial
company |
| | | | | |||||||||||||||
Mutual savings bank |
| | | | | |||||||||||||||
Other financial institutions |
24,543 | | 10,889 | 13,654 | | |||||||||||||||
Total procurement from
financial institutions |
24,543 | 200,000 | 10,889 | 213,654 | | |||||||||||||||
Corporate bond (public
offering) |
2,500,000 | 200,000 | 350,000 | 2,350,000 | | |||||||||||||||
Corporate bond (private
offering) |
| | | | | |||||||||||||||
Paid-in capital increase
(public offering) |
| | | | | |||||||||||||||
Paid-in capital increase
(private offering) |
| | | | |
10
(Unit: in million Won) | ||||||||||||||||||||
Beginning | New | Reduction from | Ending | |||||||||||||||||
Source of procurement | balance | procurement | repayment | balance | Remarks | |||||||||||||||
Asset-backed
securitization
(public offering) |
| | | | | |||||||||||||||
Asset-backed
securitization
(private offering) |
| | | | | |||||||||||||||
Others |
| | | | | |||||||||||||||
Total procurement
from capital market |
2,500,000 | 200,000 | 350,000 | 2,350,000 | | |||||||||||||||
Borrowings from
shareholder,
officer and
affiliated company |
| | | | | |||||||||||||||
Others |
| | | | | |||||||||||||||
Total |
2,524,543 | 400,000 | 360,889 | 2,563,654 | |
* Overseas procurement |
(Unit: in million Won) | ||||||||||||||||||||
Reduction in | ||||||||||||||||||||
Beginning | repayment and | Ending | ||||||||||||||||||
Procurement source | balance | New procurement | others | balance | Remarks | |||||||||||||||
Financial institutions |
| | | | | |||||||||||||||
Overseas securities (Corporate bonds) |
303,900 | | 20,340 | 283,560 | Exchange rate adjustment | |||||||||||||||
Overseas securities
(shares and others) |
385,885 | | 21,576 | 364,309 | Stock conversion | |||||||||||||||
Asset-backed
securitization |
| | | | | |||||||||||||||
Others |
| | | | | |||||||||||||||
Total |
689,785 | | 41,916 | 647,869 | |
Subject of | Credit rating entity | |||||||
Credit rating date | valuation | Credit rating | (Credit rating range) | Evaluation classification | ||||
March 12, 2004 |
Corporate bond | AAA | Korea Ratings | Current valuation | ||||
March 15, 2004 |
Corporate bond | AAA | National Information on Credit Evaluation, Inc. | Current valuation | ||||
April 23, 2004 |
Corporate bond | AAA | Korea Investors Service, Inc. | Current valuation |
11
Subject of | Credit rating entity | |||||||
Credit rating date | valuation | Credit rating | (Credit rating range) | Evaluation classification | ||||
April 23, 2004 |
Corporate bond | AAA | Korea Ratings | Current valuation | ||||
December 6, 2004 |
Corporate bond | AAA | Korea Investors Service, Inc. | Current valuation | ||||
December 6, 2004 |
Corporate bond | AAA | National Information on Credit Evaluation, Inc. | Current valuation | ||||
March 11, 2005 |
Corporate bond | AAA | Korea Investors Service, Inc. | Current valuation | ||||
March 11, 2005 |
Corporate bond | AAA | Korea Ratings | Current valuation | ||||
March 14, 2005 |
Corporate bond | AAA | Korea Ratings | Regular valuation | ||||
June 14, 2005 |
Corporate bond | AAA | National Information on Credit Evaluation, Inc. | Regular valuation | ||||
June 13, 2006 |
Corporate bond | AAA | National Information on Credit Evaluation, Inc. | Regular valuation | ||||
June 21, 2006 |
Corporate bond | AAA | Korea Ratings | Regular valuation | ||||
June 22, 2006 |
Corporate bond | AAA | Korea Investors Service, Inc. | Regular valuation | ||||
September
1st, 2006 |
Corporate bond | AAA | National Information on Credit Evaluation, Inc. | Current valuation | ||||
September
1st,
2006 |
Corporate bond | AAA | Korea Ratings | Current valuation | ||||
September
1st,
2006 |
Corporate bond | AAA | Korea Investors Service, Inc. | Current valuation |
*Rating definition: | AAA The certainty of principal and interest payment is at the highest level with extremely low investment risk, and is stable in that there is no influence of any environmental change under reasonable expectation conditions. |
Credit rating entity | Evaluation | |||||||
Credit rating date | Subject of valuation | Credit rating | (Credit rating range) | classification | ||||
January 26, 2004 |
CP | A1 | National Information on Credit Evaluation, Inc. | Regular valuation | ||||
June 8, 2004 |
CP | A1 | National Information on Credit Evaluation, Inc. | Current valuation | ||||
June 11, 2004 |
CP | A1 | Korea Ratings | Current valuation | ||||
June 11, 2004 |
CP | A1 | Korea Investors Service, Inc. | Current valuation | ||||
June 13, 2005 |
CP | A1 | Korea Investors Service, Inc. | Current valuation | ||||
June 14, 2005 |
CP | A1 | National Information on Credit Evaluation, Inc. | Current valuation | ||||
June 16, 2005 |
CP | A1 | Korea Ratings | Current valuation | ||||
June 13, 2006 |
CP | A1 | Korea Investors Service, Inc. | Current valuation | ||||
June 21, 2006 |
CP | A1 | National Information on Credit Evaluation, Inc. | Current valuation | ||||
June 22, 2006 |
CP | A1 | Korea Ratings | Current valuation |
*Rating definition: | A1 Timely repayment capability is at the highest level with extremely low investment risk, and is stable in that there is no influence of any environmental change under reasonable expectation conditions. |
12
Credit rating | Credit rating company | |||||||
Date of credit rating | Subject of valuation | of securities | (Credit rating range) | Evaluation type | ||||
June 14, 2005
|
Issuer Rating | A | Fitch (England) | Current valuation | ||||
July 14, 2005
|
Global Bonds | A2 | Moodys (U.S.A.) | Current valuation | ||||
July 14, 2005
|
Exchangeable Bonds | A2 | Moodys (U.S.A.) | Current valuation | ||||
July 27, 2005
|
Global Bonds | A | S&P (U.S.A.) | Current valuation | ||||
July 27, 2005
|
Exchangeable Bonds | A | S&P (U.S.A.) | Current valuation |
(Unit: in million Won) | ||||||||||||||||||||
Quarter ended | ||||||||||||||||||||
September 30, | Year ended December 31, | |||||||||||||||||||
Classification | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Current assets |
4,121,627 | 4,172,485 | 3,854,345 | 3,460,706 | 2,746,991 | |||||||||||||||
Quick assets |
4,104,736 | 4,166,500 | 3,843,384 | 3,452,682 | 2,736,273 | |||||||||||||||
Inventory |
16,891 | 5,985 | 10,961 | 8,024 | 10,718 | |||||||||||||||
Fixed assets |
10,882,707 | 10,349,191 | 10,166,360 | 9,915,253 | 9,974,227 | |||||||||||||||
Investments |
3,341,456 | 2,366,760 | 2,112,488 | 1,763,359 | 3,132,330 | |||||||||||||||
Tangible assets |
4,371,898 | 4,595,884 | 4,605,253 | 4,551,626 | 4,451,548 | |||||||||||||||
Intangible assets |
3,169,353 | 3,386,547 | 3,448,619 | 3,600,268 | 2,390,350 | |||||||||||||||
Total assets |
15,004,334 | 14,521,676 | 14,020,705 | 13,375,959 | 12,721,218 | |||||||||||||||
Current liabilities |
2,927,373 | 2,747,268 | 2,859,711 | 4,231,974 | 4,015,859 | |||||||||||||||
Fixed liabilities |
3,392,550 | 3,516,528 | 4,033,902 | 3,202,147 | 3,168,412 | |||||||||||||||
Total liabilities |
6,319,923 | 6,263,796 | 6,893,613 | 7,434,121 | 7,184,271 | |||||||||||||||
Capital |
44,639 | 44,639 | 44,639 | 44,639 | 44,576 | |||||||||||||||
Capital surplus |
2,963,880 | 2,966,198 | 2,983,166 | 2,915,964 | 2,884,385 | |||||||||||||||
Surplus from
share issuance |
2,915,887 | 2,915,887 | 2,915,887 | 2,915,964 | 2,884,385 | |||||||||||||||
Other capital
surplus |
47,993 | 50,311 | 67,279 | | | |||||||||||||||
Income surplus |
7,565,455 | 7,269,861 | 6,156,708 | 5,140,349 | 4,897,099 | |||||||||||||||
Capital adjustment |
(1,889,564 | ) | (2,022,817 | ) | (2,057,422 | ) | (2,159,114 | ) | (2,289,112 | ) | ||||||||||
Total capital |
8,684,410 | 8,257,881 | 7,127,091 | 5,941,838 | 5,536,948 | |||||||||||||||
Sales |
7,891,177 | 10,161,129 | 9,703,681 | 9,520,244 | 8,634,049 |
13
(Unit: in million Won) | ||||||||||||||||||||
Quarter ended | ||||||||||||||||||||
September 30, | Year ended December 31, | |||||||||||||||||||
Classification | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
Operation income |
2,045,510 | 2,653,570 | 2,359,581 | 3,080,660 | 2,683,676 | |||||||||||||||
Ordinary income |
1,650,637 | 2,554,613 | 2,115,778 | 2,714,194 | 2,179,993 | |||||||||||||||
Current net income |
1,167,300 | 1,871,380 | 1,494,852 | 1,942,750 | 1,511,278 |
* | See the attached Korean GAAP Non-consolidated Financial Statements. |
Quarter ended | ||||||
September 30, 2006 | September 30, 2005 | 2005 | 2004 | |||
Deloitte Anjin LLC
|
Deloitte Anjin LLC | Deloitte Anjin LLC | Deloitte Hana Anjin LLC |
Term | Auditors opinion | Issues noted | ||
Quarter ended September 30, 2006 | Appropriate | | ||
Quarter ended September 30, 2005 | Appropriate | | ||
Year ended December 31, 2005 | Appropriate | | ||
Year ended December 31, 2004 | Appropriate | |
(Unit: in thousand Won) | ||||||||||||
Term | Auditors | Contents | Fee | Total hours | ||||||||
Quarter ended
September 30, 2006
|
Deloitte Anjin LLC | Semi-annual review Quarterly review Non-consolidated financial statements audit Consolidated financial statements audit |
656,000 | 7,637 | ||||||||
Year ended December
31, 2005
|
Deloitte Anjin LLC | Semi-annual review Quarterly review Non-consolidated financial statements audit Consolidated financial statements audit |
447,000 | 5,177 | ||||||||
Year ended December
31, 2004
|
Deloitte Hana Anjin LLC | Semi-annual review Quarterly review Non-consolidated financial statements audit Consolidated financial statements audit |
360,000 | 4,808 |
14
(Unit: in thousand Won) | ||||||||||
Term | Contract date | Service provided | Service period | Fee | ||||||
Quarter ended
September 30, 2006
|
April 30, 2006 | Tax consulting | 7 days | 45,000 | ||||||
July 26, 2006 | Financial consulting | 7 days | 40,000 | |||||||
Year ended
December 31, 2005
|
February 4, 2005 | Advisory service regarding the set up of
the internal control
|
9 days | 46,080 | ||||||
March 30, 2005 | Form 20-F for the year ended December 31,
2003
|
10 days | 20,200 | |||||||
Response to the U.S. S.E.C. comments
regarding the Form 6-K including the U.S.
GAAP consolidated financial statements for
the six months ended June 30, 2004
|
||||||||||
March 31, 2005 | Tax
adjustment for the year ended December 31, 2004
|
7 days | 24,920 | |||||||
April 15, 2005 | Tax consulting | 3 days | 5,000 | |||||||
April 29, 2005 | Tax consulting | 7 days | 19,000 | |||||||
June 1, 2005 | 2004 English audit | 20 days | 86,000 | |||||||
July 18, 2005 | Tax consulting | 5 days | 13,500 | |||||||
December 31, 2005 | Tax consulting | All year (100 hours) | 10,000 | |||||||
Year ended
December 31, 2004
|
March 2, 2004 | Consulting on the issuance of overseas
unsecured debenture
|
17 days | 49,500 | ||||||
March 30, 2004 | Tax adjustment for the year ended December
31, 2003 |
5 days | 22,650 | |||||||
April 1, 2004 | Financial due diligence | 6 days | 6,100 | |||||||
April 10, 2004 | Thailand tax consulting | 4 days | 12,000 | |||||||
April 14, 2004 | Consulting on issuance of overseas
exchangeable bond
|
15 days | 48,800 | |||||||
May 10, 2004 | Indonesia tax consulting | 4 days | 9,600 | |||||||
September 30, 2004
|
U.S. GAAP Consolidated Audit (yearly basis)
|
20 days | 86,000 | |||||||
September 30, 2004
|
U.S. GAAP Consolidated Audit (Semi-annual
basis)
|
30 days | 114,000 | |||||||
October 15, 2004 | Consulting on internal control | 50 days | 171,000 | |||||||
recommendations |
15
a) | Authority of the board of directors under Article 7 of the Regulations of the Board of Directors |
| Convocation of shareholders meeting and submission of agenda | ||
| Prior approval of financial statements | ||
| Decisions on issuance of new shares | ||
| Long-term borrowings, issuance of corporate bonds and redemptions | ||
| Capital transfer of reserves | ||
| Election of CEO and representatives | ||
| Appointment of executive directors | ||
| Establishment, transfer or closure of branches | ||
| Enactment of and revision to the Regulations for the Board of Directors | ||
| Annual business plan and budgeting | ||
| Approval of investments of Won 15 billion or above | ||
| Planned budget increases and changes for investments or Won 15 billion or above | ||
| Diversification into new businesses | ||
| Investments and joint ventures of Won 15 billion or above (excluding matters subject to prior approval by independent non-executive directors) |
16
| Establishment of subsidiaries | |||
| Guarantees of Won 15 billion or above (excluding matters subject to prior approval by independent non-executive directors) | |||
| Transactions undertaken with related parties equal to or above the lesser of an amount equivalent to 10% of capital or Won 10 billion, and any material changes to such transactions in accordance with the Anti-trust Law and Fair Trade Act | |||
| Enactment of and amendment to the Internal Trading Procedures | |||
| Other matters considered necessary by the Board of Directors and those requiring Board of Directors approval under applicable laws |
b) | Reporting items under Article 7.2 of the Regulations of the Board of Directors |
| The representative director must report the following to the Board of Directors within two months after the date of occurrence: |
| Results for the six months ended June 30 of each year | |||
| Execution of investments between Won 5 billion and Won 15 billion | |||
| New investments and joint ventures under Won 15 billion | |||
| Acquisition of non-operational fixed assets | |||
| Disposition of fixed assets of Won 15 billion or above | |||
| Matters related to guarantees of under Won 15 billion | |||
| Internal trading not subject to approval by the Board of Directors | |||
| Matters delegated to the representative director that the Board of Directors requires to be reported |
a) | On February 16, 2006, through the convocation of the shareholders meeting, information on candidates Kim Yong Woon and Lim Hyun Jin was publicly disclosed. | ||
b) | There was no nomination by the shareholders. |
Meeting | Date | Agenda | Approval | |||
264th(the first meeting of 2006) |
January 23, 2006 | Financial statements for the year ended December 31, 2005 |
Approved as proposed | |||
Annual business report for the year ended December 31, 2005 |
Approved as proposed | |||||
Organization of Independent non-executive Director Nomination Committee |
Approved as proposed | |||||
Amendment of regulation for the Compensation Review Committee |
Amendment to be proposed to the Board of Directors in April, 2006 |
17
Meeting | Date | Agenda | Approval | |||
265th (the second meeting of 2006) |
February 14, 2006 | Convocation of the 22nd General Meeting of
Shareholders |
Approved as proposed | |||
266th (the third meeting of 2006) |
March 31, 2006 | Election of committee members |
Approved as proposed | |||
Amendment of regulations for the Compensation Review Committee |
Approved after amendment | |||||
267th (the fourth meeting of 2006) |
April 26, 2006 | Election of committee member for the Compensation Review Committee |
Approved as proposed | |||
Establishment of the Service &Technology Center (STC) |
Approved as proposed | |||||
Exercise of the iHQ call option |
Approved as proposed | |||||
268th (the fifth meeting of 2006) |
May 26, 2006 | Issuance of overseas convertible bonds and approval of related treasury stock disposition plan, as amended |
Approved as proposed | |||
269th (the sixth meeting of 2006) |
June 20, 2006 | Acquisition of China Unicom convertible bonds |
Approved as proposed | |||
Long-term borrowings |
Approved as proposed | |||||
270th (the seventh meeting of 2006)
|
July 28, 2006 | Interim dividends
|
Approved as proposed | |||
Acquisition of the Companys
common stock for cancellation
|
Approved as proposed | |||||
Establishment of Global
Committee and election of members
|
Approved after amendment | |||||
Issuance of corporate bonds and
long-term borrowings
|
Approved as proposed | |||||
271th (the eighth meeting of 2006) |
August 31, 2006 | Acquisition of the Companys common stock for cancellation |
Approved as proposed | |||
Expansion of WCDMA investment |
Approved as proposed | |||||
Construction of TD-SCDMA Test-bed and investment for development of related services |
Approved as proposed | |||||
272th (the ninth meeting of 2006) |
September 29, 2006 | Report on activities in July and August 2006 |
| |||
273th (the tenth meeting of 2006) |
October 27, 2006 | Issuance of corporate bonds |
Approved as proposed |
18
(4) | Committee Structure and Activities of the Board of Directors | |||||
a) | Independent non-executive Director Nomination Committee | |||||
¾ | Organization |
Members | ||||
Number of Persons | Company Directors | Independent non-executive Directors | ||
4
|
Jung Nam Cho, Sung Min Ha | Jae Seung Yoon, Sang Jin Lee |
¾ | Activities |
Meeting | Date | Number of Attendees | Details | |||
Election of the Chairman: Jung Nam Cho | ||||||
7th Meeting (the first meeting of 2006) | February 14, 2006 | 3 persons/4 persons | 22nd General Meeting of
Shareholders: Nomination of Independent
non-executive director candidates |
|||
Yong Woon Kim, Hyun Jin Lim |
* The Independent Non-executive Director Nomination Committee is a committee established under the provisions of the Articles of Incorporation.
b) | Compensation Review Committee | |||||
¾ | Organization |
Members | ||||
Number of Persons | Company Directors | Independent non-executive Directors | ||
7 persons
|
| Dae Sik Kim, Yong Woon Kim, Dae Kyu Byun, Seung Taik Yang, Jae Seung Yoon, Sang Jin Lee, Hyun Jin Lim |
¾ | Activities |
Meeting | Date | Number of Attendees | Details | |||
The first meeting of 2006
|
May 25, 2006 | 7 persons/ 7 persons | Election of chairman | |||
The second meeting of 2006
|
June 20, 2006 | 5 persons/ 7 persons | Discussion of operation of the Compensation Review Committee | |||
The third meeting of 2006
|
July 27, 2006 | 7 persons/ 7 persons | same as above | |||
The fourth meeting of 2006
|
August 30, 2006 | 7 persons/ 7 persons | same as above | |||
The fifth meeting of 2006
|
October 26, 2006 | 6 persons/ 7 persons | same as above |
19
* | The Compensation Review Committee is a committee established by the resolution of the Board of Directors. |
c) | Capex Review Committee |
| Organization |
Members | ||||
Number of Persons | Company Directors | Independent non-executive Directors | ||
5 persons
|
Lee Bang Hyung | Byon Dae Kyu, Yang Seung Taek, Yoon Jae Seung, Lee Sang Jin |
| Activities |
Meeting | Date | Number of Attendees | Details | |||
The first meeting of 2006
|
February 13, 2006 | 4 persons/5 persons | Additional report on the
investment plan for 2006 |
|||
The second meeting of
2006
|
April 25, 2006 | 4 persons/5 persons | Establishment of the Service &
Technology Center |
|||
Exercise of the iHQ call option |
||||||
The third meeting of 2006
|
April 26, 2006 | 4 persons/5 persons |
Election of chairman |
|||
Approval of plans for investment
in contents business and
restrictions thereof |
||||||
The fourth meeting of
2006
|
August 30, 2006 | 5 persons/5 persons | Construction of TD-SCDMA
Test-bed and investment for
development of related services |
|||
Expansion of WCDMA investment |
* | The Capex Review Committee is a committee established by the resolution of the Board of Directors. |
d) | Global Committee |
| Organization |
Members | ||||
Number of Persons | Company Directors | Independent non-executive Directors | ||
4 persons
|
Ha Sung Min | Kim Dae Sik, Byon Dae Kyu, Lee Sang Jin |
| Activities |
Meeting | Date | Number of Attendees | Details | |||
The first meeting of 2006
|
July 27, 2006 | 4 persons/ 4 persons | Report on Vietnam
(S-Fone) and United
States (HELIO)
operations |
|||
Discussion on
operation of
Globalization Committee |
||||||
The second meeting of 2006
|
September 28, 2006 | 4 persons/ 4 persons |
Election of chairman |
20
* | The Global Committee is a committee established by the resolution of the Board of Directors. |
e) | Audit Committee: See B. Audit System below. |
* | The Audit Committee is a committee established under the provisions of the Articles of Incorporation. |
(1) | Establishment and Organization of the Audit Committee |
a) | The Audit Committee is composed of three or more directors. However, independent non-executive directors must account for 2/3 or more, and the members are elected by the resolution of the Board of Directors each year. | ||
b) | The Audit Committee is convened when deemed necessary by the chairman or is requested by two or more of the committee members. | ||
c) | The quorum for resolution is majority attendance with majority consent of the attending members. |
(2) | Authority of the Audit Committee |
(3) | Members of the Audit Committee |
(4) | Major Activities of the Audit Committee |
Meeting | Date | Agenda | Approval | Remarks | ||||
The first meeting of 2006
|
January 20, 2006 | Report on operation of internal accounting
controls
|
| | ||||
The second meeting of 2006
|
February 13, 2006 | Audit report for the year ended December 31, 2005
|
Approved as proposed | | ||||
Evaluation of internal accounting controls
|
Approved as proposed |
21
Meeting | Date | Agenda | Approval | Remarks | ||||
The third meeting of 2006
|
February 27, 2006 | Auditors opinion on the internal audit system
|
Approved as proposed | |||||
Management audit schedule for 2006
|
| | ||||||
Proposal for the election of outside auditor for
2006-2008 period |
| |||||||
The fourth meeting of 2006
|
March 8, 2006 | Election of outside auditor for 2006-2008 period
|
Approved as proposed | | ||||
The fifth meeting of 2006
|
April 25, 2006 | Election of chairman
|
Approved as proposed | |||||
Remuneration for outside auditor
|
Approved as proposed | | ||||||
Collective re-approval of outside auditors
service schedule for 2006
|
Approved as proposed | |||||||
Management report
|
| |||||||
The sixth meeting of 2006
|
May 25, 2006 | Report on issuance of overseas convertible bonds
and approval of related treasury stock disposition
plan, as amended
|
| | ||||
The seventh meeting of 2006
|
June 20, 2006 | Audit report for 2005 US GAAP financial statements
|
| | ||||
The eighth meeting of 2006
|
July 5, 2006 | Report on operation of Ethics Counseling Center
|
||||||
Report on activities relating to the prevention
of ethical issues |
| | ||||||
Report on the Companys current operations
|
||||||||
The ninth meeting of 2006
|
July 27, 2006 | Interim dividend plan
|
||||||
Plan to acquire the Companys common stock for
cancellation |
| | ||||||
Management audit results for the first half of
2006 |
||||||||
The tenth meeting of 2006
|
August 30, 2006 | Plans for issuance of corporate bonds and
long-term borrowings
|
||||||
Plan to acquire the Companys common stock for
cancellation |
| | ||||||
Report on the Companys current operations |
||||||||
The eleventh meeting of 2006
|
October 26, 2006 | Report on status of internal accounting controls
|
||||||
Plan for issuance of corporate bonds |
| | ||||||
Report on the Companys current operations |
22
(1) | Use of the Cumulative Voting System |
a) Pursuant to the Articles of Incorporation, the cumulative voting system was first introduced in the General Meeting of Shareholders in 2003. | ||
b) Articles of Incorporation |
| Article 32 (3) (Election of Directors): Cumulative voting under Article 382-2 of the Commercial Code will not be applied for the election of directors. | ||
| Article 4 of the 12th Supplement to the Articles of Incorporation (Interim Regulation): Article 32 (3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general shareholders meeting of 2003. |
(Unit: in million Won) | ||||||||||||||
Total amount | ||||||||||||||
approved by the | ||||||||||||||
Meeting of | Average payment | |||||||||||||
Classification | Total payment | Shareholders | per person | Remarks | ||||||||||
Company directors (4 persons)
|
4,026 | 12,000 | 1,007 | | ||||||||||
Independent non-executive directors (8 persons) |
460 | 63 | Including members of the Audit Committee (4 persons) |
23
(2) | Granting and Exercise of Stock Options |
(As of September 30, 2006) | (Unit: in thousand Won, shares) | |||||||||||||||||||||
Amount | ||||||||||||||||||||||
Grant | Method of | Type of | Changes | not | Exercise | Exercise | Final | |||||||||||||||
Grantees | Relationship | date | grant | shares | Granted | Exercised | Cancelled | exercised | period | price | price | |||||||||||
Cho Jung Nam |
Registered officer | March 8, 2002 | Distribution of treasury or new shares | Common stock | 6,150 | | | 6,150 | Within two years following the third year after the date of grant (March 8, 2002) | 267 | 215 | |||||||||||
Kim Young Jin |
| March 8, 2002 | " | Common stock | 790 | | | 790 | " | " | " | |||||||||||
Kim Sin Bae |
Registered officer | March 8, 2002 | " | Common stock | 1,650 | | | 1,650 | " | " | " | |||||||||||
Ha Sung Min |
Registered officer | March 8, 2002 | " | Common stock | 690 | | | 690 | " | " | " | |||||||||||
Lee Sang Jin |
Registered officer | March 8, 2002 | " | Common stock | 1,000 | | | 1,000 | " | " | " | |||||||||||
Kim Dae Sik |
Registered officer | March 8, 2002 | " | Common stock | 1,000 | | | 1,000 | " | " | " | |||||||||||
Nam Sang Ku |
Registered officer | March 8, 2002 | " | Common stock | 1,000 | | | 1,000 | " | " | " | |||||||||||
Sung Ki Jung |
| March 8, 2002 | " | Common stock | 1,000 | | | 1,000 | " | " | " | |||||||||||
Byon Dae Kyu |
Registered officer | March 8, 2002 | " | Common stock | 1,000 | | | 1,000 | " | " | " | |||||||||||
Yoon Jae Seung |
Registered officer | March 8, 2002 | " | Common stock | 1,000 | | | 1,000 | " | " | " | |||||||||||
Lee Bang Hyung |
Registered officer | March 8, 2002 | " | Common stock | 1,620 | | | 1,620 | " | " | " | |||||||||||
Kim Dae Ki and 58 others |
| March 8, 2002 | " | Common stock | 48,830 | | | 48,830 | " | " | " | |||||||||||
Sub-total |
| | | | 65,730 | | | 65,730 | | | | |||||||||||
Total |
| | | | 65,730 | | | 65,730 | | | |
24
(1) | Summary of Corporate Group |
(2) | Capital Investments between Affiliated Companies |
(As of September 30, 2006) | * Based on common shares |
Invested companies | ||||||||||||||||||||||||||||||||
Investing company | SK Corporation | SK Networks | SK Telecom | SK Chemicals | SKC | SK E&C | SK Shipping | SK Securities | ||||||||||||||||||||||||
SK Corporation |
40.64 | % | 21.75 | % | 44.37 | % | 72.13 | % | ||||||||||||||||||||||||
SK Networks |
1.34 | % | 0.02 | % | 17.71 | % | 22.71 | % | ||||||||||||||||||||||||
SK Telecom |
||||||||||||||||||||||||||||||||
SK Chemicals |
58.03 | % | ||||||||||||||||||||||||||||||
SKC |
3.39 | % | 10.16 | % | 12.41 | % | ||||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||||||
SK Shipping |
||||||||||||||||||||||||||||||||
SK Securities |
||||||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||||||
SK C&C |
11.16 | % | ||||||||||||||||||||||||||||||
SK incheon oil |
||||||||||||||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||||||||||||||
SK Telink |
||||||||||||||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||||||||||||||
SK E&S |
||||||||||||||||||||||||||||||||
SK Communications |
||||||||||||||||||||||||||||||||
iHQ |
||||||||||||||||||||||||||||||||
WiderThan |
||||||||||||||||||||||||||||||||
Total affiliated |
||||||||||||||||||||||||||||||||
companies |
11.16 | % | 40.64 | % | 23.09 | % | 3.39 | % | 44.37 | % | 58.05 | % | 100.00 | % | 35.12 | % |
25
Invested companies | ||||||||||||||||||||||||||||||||
Investing companies | Walkerhill | SK E&S | SK Gas | SK C&C | DOPCO | Cheongju Gas | Gumi Gas | Pohang Gas | ||||||||||||||||||||||||
SK Corporation |
51.00 | % | 32.38 | % | ||||||||||||||||||||||||||||
SK Networks |
9.68 | % | 15.00 | % | 4.61 | % | ||||||||||||||||||||||||||
SK Telecom |
30.00 | % | ||||||||||||||||||||||||||||||
SK Chemicals |
0.25 | % | ||||||||||||||||||||||||||||||
SKC |
7.50 | % | ||||||||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||||||
SK Shipping |
||||||||||||||||||||||||||||||||
SK Securities |
||||||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||||||
SK C&C |
||||||||||||||||||||||||||||||||
SK incheon oil |
5.23 | % | ||||||||||||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||||||||||||||
SK Telink |
||||||||||||||||||||||||||||||||
Busan City Gas | ||||||||||||||||||||||||||||||||
SK E&S |
45.53 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||||||||||||||||
SK Communications |
||||||||||||||||||||||||||||||||
iHQ |
||||||||||||||||||||||||||||||||
WiderThan |
||||||||||||||||||||||||||||||||
Total affiliated companies | 17.43 | % | 51.00 | % | 45.53 | % | 45.00 | % | 42.23 | % | 100.00 | % | 100.00 | % | 100.00 | % |
Invested companies | ||||||||||||||||||||||||||||||||
Investing companies | Daehan City Gas |
Daehan Engineering |
SK Sci-tech | SK Capital | K-Power | SK NJC | SK Telink | Busan City Gas |
||||||||||||||||||||||||
SK Corporation |
65.00 | % | ||||||||||||||||||||||||||||||
SK Networks |
||||||||||||||||||||||||||||||||
SK Telecom |
100.00 | % | 90.77 | % | ||||||||||||||||||||||||||||
SK Chemicals |
50.00 | % | 60.00 | % | ||||||||||||||||||||||||||||
SKC |
||||||||||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||||||
SK Shipping |
||||||||||||||||||||||||||||||||
SK Securities |
||||||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||||||
SK C&C |
||||||||||||||||||||||||||||||||
SK incheon oil |
||||||||||||||||||||||||||||||||
Daehan City Gas |
100.00 | % | 7.84 | % | ||||||||||||||||||||||||||||
SK Telink |
||||||||||||||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||||||||||||||
SK E&S |
40.00 | % | 40.00 | % | ||||||||||||||||||||||||||||
SK Communications |
||||||||||||||||||||||||||||||||
iHQ |
||||||||||||||||||||||||||||||||
WiderThan |
||||||||||||||||||||||||||||||||
Total
affiliated companies |
40.00 | % | 100.00 | % | 50.00 | % | 100.00 | % | 65.00 | % | 60.00 | % | 90.77 | % | 47.84 | % |
26
Invested companies | ||||||||||||||||||||||||||||||||
Stellar | Jeonnam | Gangwon City | Iksan City | Iksan | OK Cashbag | Chungnam | SK | |||||||||||||||||||||||||
Investing companies | Shipping | Gas | Gas | Iksan City Gas | Energy | Service | City Gas | Wyverns | ||||||||||||||||||||||||
SK Corporation |
89.18 | % | ||||||||||||||||||||||||||||||
SK Networks |
||||||||||||||||||||||||||||||||
SK Telecom |
3.86 | % | 99.99 | % | ||||||||||||||||||||||||||||
SK Chemicals |
||||||||||||||||||||||||||||||||
SKC |
||||||||||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||||||
SK Shipping |
80.82 | % | ||||||||||||||||||||||||||||||
SK Securities |
||||||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||||||
SK C&C |
||||||||||||||||||||||||||||||||
SK incheon oil |
||||||||||||||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||||||||||||||
SK Telink |
||||||||||||||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||||||||||||||
SK E&S |
100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||||||||||||||
SK Communications |
||||||||||||||||||||||||||||||||
iHQ |
||||||||||||||||||||||||||||||||
WiderThan |
||||||||||||||||||||||||||||||||
Total
affiliated companies |
80.82 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 93.04 | % | 100.00 | % | 99.99 | % |
27
Invested companies | ||||||||||||||||||||||||||||
Investing companies | Infosec | MRO Korea | WiderThan | SK Communications | SK Telesys | Innoace | AirCROSS | |||||||||||||||||||||
SK Corporation |
||||||||||||||||||||||||||||
SK Networks |
51.00 | % | ||||||||||||||||||||||||||
SK Telecom |
10.10 | % | 86.45 | % | 14.25 | % | 38.10 | % | ||||||||||||||||||||
SK Chemicals |
||||||||||||||||||||||||||||
SKC |
20.63 | % | 77.13 | % | ||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||
SK Shipping |
||||||||||||||||||||||||||||
SK Securities |
||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||
SK C&C |
48.14 | % | ||||||||||||||||||||||||||
SK incheon oil |
||||||||||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||||||||||
SK Telink |
1.19 | % | ||||||||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||||||||||
SK E&S |
||||||||||||||||||||||||||||
SK Communications |
||||||||||||||||||||||||||||
iHQ |
||||||||||||||||||||||||||||
WiderThan |
7.50 | % | 42.86 | % | ||||||||||||||||||||||||
Total affiliated companies | 68.77 | % | 51.00 | % | 10.10 | % | 87.64 | % | 77.13 | % | 21.75 | % | 80.95 | % |
Invested companies | ||||||||||||||||||||||||||||||||
Dongshin | ||||||||||||||||||||||||||||||||
Investing companies | Encar network | Global C&I | Oil chain | Pharmaceutical | Paxnet | TU Media | SK Utis | SK CTA | ||||||||||||||||||||||||
SK Corporation |
50.00 | % | 50.00 | % | 50.00 | % | ||||||||||||||||||||||||||
SK Networks |
||||||||||||||||||||||||||||||||
SK Telecom |
50.00 | % | 65.90 | % | 29.58 | % | ||||||||||||||||||||||||||
SK Chemicals |
40.14 | % | 60.00 | % | ||||||||||||||||||||||||||||
SKC |
||||||||||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||||||
SK Shipping |
||||||||||||||||||||||||||||||||
SK Securities |
40.00 | % | ||||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||||||
SK C&C |
||||||||||||||||||||||||||||||||
SK incheon oil |
||||||||||||||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||||||||||||||
SK Telink |
||||||||||||||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||||||||||||||
SK E&S |
||||||||||||||||||||||||||||||||
SK Communications |
||||||||||||||||||||||||||||||||
iHQ |
||||||||||||||||||||||||||||||||
WiderThan |
||||||||||||||||||||||||||||||||
Total affiliated companies | 50.00 | % | 90.00 | % | 50.00 | % | 40.14 | % | 65.90 | % | 29.58 | % | 60.00 | % | 50.00 | % |
28
Invested companies | ||||||||||||||||||||||||||||
Investing companies | Seoul Records | In2Gen | Independence | SK Petrochemical | SK Mobile Energy | SKC Media | SK Incheon Oil | |||||||||||||||||||||
SK Corporation |
88.34 | % | 90.63 | % | ||||||||||||||||||||||||
SK Networks |
||||||||||||||||||||||||||||
SK Telecom |
60.00 | % | ||||||||||||||||||||||||||
SK Chemicals |
45.03 | % | 100.00 | % | ||||||||||||||||||||||||
SKC |
11.66 | % | 100.00 | % | ||||||||||||||||||||||||
SK E&C |
||||||||||||||||||||||||||||
SK Shipping |
||||||||||||||||||||||||||||
SK Securities |
||||||||||||||||||||||||||||
Walkerhill |
||||||||||||||||||||||||||||
SK C&C |
67.78 | % | ||||||||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||||||||||
SK Telink |
||||||||||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||||||||||
SK Capital |
||||||||||||||||||||||||||||
SK E&S |
||||||||||||||||||||||||||||
Jeonnam City Gas |
||||||||||||||||||||||||||||
Gangwon City Gas |
||||||||||||||||||||||||||||
WiderThan |
||||||||||||||||||||||||||||
Total affiliated companies | 60.00 | % | 45.03 | % | 67.78 | % | 100.00 | % | 100.00 | % | 100.00 | % | 90.63 | % |
29
Invested companies | ||||||||||||||||||||
Investing companies | iHQ | YTN Media | I Film Co. | NTREEV Soft | SK I-Media | |||||||||||||||
SK Corporation |
||||||||||||||||||||
SK Networks |
||||||||||||||||||||
SK Telecom |
34.28 | % | ||||||||||||||||||
SK Chemicals |
||||||||||||||||||||
SKC |
||||||||||||||||||||
SK E&C |
||||||||||||||||||||
SK Shipping |
||||||||||||||||||||
SK Securities |
||||||||||||||||||||
Walkerhill |
||||||||||||||||||||
SK Gas |
||||||||||||||||||||
SK C&C |
40.00 | % | ||||||||||||||||||
SK incheon oil |
||||||||||||||||||||
Daehan City Gas |
||||||||||||||||||||
SK Telink |
||||||||||||||||||||
Busan City Gas |
||||||||||||||||||||
SK E&S |
||||||||||||||||||||
SK Communications |
60.00 | % | ||||||||||||||||||
IHQ |
51.42 | % | 45.00 | % | 51.00 | % | ||||||||||||||
WiderThan |
||||||||||||||||||||
Total affiliated companies |
34.28 | % | 51.42 | % | 45.005 | 51.00 | % | 100.00 | % |
30
(As of September 30, 2006) | (Unit: share, %) |
Number of shares owned (equity rate) | ||||||||||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | Cause | ||||||||||||||||||||||||||||
Types of | Number of | Ownership | Number of | Number of | Number of | Ownership | of | |||||||||||||||||||||||||
Name | Relationship | shares | shares | ratio | shares | shares | shares | ratio | change | |||||||||||||||||||||||
SK Corporation |
Parent company | Common stock | 17,663,127 | 21.47 | | | 17,663,127 | 21.75 | | |||||||||||||||||||||||
SK Networks |
Affiliated company | Common stock | 1,085,325 | 1.32 | | | 1,085,325 | 1.34 | | |||||||||||||||||||||||
Tae Won Choi |
Officer of affiliated company | Common stock | 100 | 0.00 | | | 100 | 0.00 | | |||||||||||||||||||||||
Shin Won Choi |
Officer of affiliated company | Common stock | 700 | 0.00 | | | 700 | 0.00 | | |||||||||||||||||||||||
Shin Bae Kim |
Director | Common stock | 1,270 | 0.00 | | | 1,270 | 0.00 | | |||||||||||||||||||||||
Dae Kyu Byun |
Director | Common stock | 50 | 0.00 | | | 50 | 0.00 | | |||||||||||||||||||||||
Jae
Seung Yoon |
Director | Common stock | 200 | 0.00 | | | 200 | 0.00 | | |||||||||||||||||||||||
Bang Hyung Lee |
Director | Common stock | 1,630 | 0.00 | | 1,230 | 400 | 0.00 | | |||||||||||||||||||||||
Sung Min Ha |
Director | Common stock | 738 | 0.00 | | | 738 | 0.00 | | |||||||||||||||||||||||
Total |
Common stock | 18,753,140 | 22.79 | | 1,230 | 18,751,910 | 23.10 | | ||||||||||||||||||||||||
Preferred stock | 0 | 0 | | | 0 | 0 | ||||||||||||||||||||||||||
Total |
18,753,140 | 22.79 | | 1,230 | 18,751,910 | 23.10 |
31
(As of September 30, 2006) | (Unit: share, %) |
Common share | Preferred share | Sub-total | ||||||||||||||||||||||||
Number of | Ownership | Number of | Ownership | Number of | Ownership | |||||||||||||||||||||
Rank | Name (title) | shares | ratio | shares | ratio | shares | ratio | |||||||||||||||||||
1 |
Citibank ADR | 22,330,137 | 27.50 | | | 22,330,137 | 27.50 | |||||||||||||||||||
2 |
SK Corporation | 17,663,127 | 21.75 | | | 17,663,127 | 21.75 | |||||||||||||||||||
3 |
SK Telecom | 8,563,054 | 10.55 | | | 8,563,054 | 10.55 | |||||||||||||||||||
Total |
48,556,318 | 59,80 | | | 48,556,318 | 59.80 |
(As of June 30, 2006) | ||||||||||||||||||||
Number of | Number of | |||||||||||||||||||
Classification | shareholders | Ratio (%) | shares | Ratio (%) | Remarks | |||||||||||||||
Total minority
shareholders |
20,018 | 99.95 | 30,266,748 | 36,78 | | |||||||||||||||
Minority
shareholders
(corporate) |
953 | 4.75 | 12,596,711 | 15.31 | | |||||||||||||||
Minority
shareholders
(individual) |
19,065 | 95.19 | 17,670,037 | 21.47 | | |||||||||||||||
Largest shareholder |
1 | 0.00 | 17,663,127 | 21.47 | | |||||||||||||||
Major shareholders |
| | | | | |||||||||||||||
Other shareholders |
8 | 0.03 | 34,346,836 | 41.74 | | |||||||||||||||
Other shareholders
(corporate) |
6 | 0.02 | 10,995,387 | 13.36 | | |||||||||||||||
Other shareholders
(individual) |
2 | 0.00 | 23,351,449 | 28.38 | | |||||||||||||||
Total |
20,027 | 100.00 | 82,276,711 | 100.00 | |
32
(Unit: Won, shares) |
September | ||||||||||||||||||||||||||||
Types | 2006 | August 2006 | July 2006 | June 2006 | May 2006 | April 2006 | ||||||||||||||||||||||
Common share |
Highest | 205,500 | 202,500 | 205,000 | 234,000 | 237,500 | 225,000 | |||||||||||||||||||||
Lowest | 189,000 | 179,000 | 188,500 | 193,000 | 207,500 | 188,500 | ||||||||||||||||||||||
Monthly transaction volume |
4,634,645 | 5,158,605 | 3,069,172 | 4,301,579 | 3,653,171 | 5,258,280 |
New York Stock Exchange | (Unit: US$, ADR) |
September | ||||||||||||||||||||||||||||
Types | 2006 | August 2006 | July 2006 | June 2006 | May 2006 | April 2006 | ||||||||||||||||||||||
Depository receipt |
Highest | 24.16 | 22.43 | 23.75 | 26.75 | 27.70 | 26.70 | |||||||||||||||||||||
Lowest | 22.20 | 21.14 | 21.87 | 22.54 | 24.91 | 23.31 | ||||||||||||||||||||||
Monthly transaction volume |
15,993,800 | 18,427,807 | 15,287,500 | 25,627,800 | 23,618,694 | 16,620,193 |
(As of September 30, 2006) | (Unit: persons, in million Won) |
Number of employees | ||||||||||||||||||||||||||||||||
Office | Total | Average | ||||||||||||||||||||||||||||||
managerial | Production | Average | quarterly | wage per | ||||||||||||||||||||||||||||
Classification | positions | positions | Others | Total | service year | wage | person | Remarks | ||||||||||||||||||||||||
Male |
3,741 | | | 3,741 | 9.6 | 170,937 | 45.7 | | ||||||||||||||||||||||||
Female |
534 | | | 534 | 8.0 | 20,297 | 38.0 | | ||||||||||||||||||||||||
Total |
4,275 | | | 4,275 | 9.4 | 191,234 | 44.7 | |
33
(Unit: in million Won) |
Name | Account | Change details | Accrued | |||||||||||||||||||||||||
(Corporate name) | Relationship | category | Beginning | Increase | Decrease | Ending | interest | Remarks | ||||||||||||||||||||
SK Wyverns |
Affiliated company | Long-term and short-term loans | 5,857 | | 575 | 5,282 | 356 | |
(Unit: in million Won) |
Name | Details | |||||||||||||||||||||||
(Corporate name) | Relationship | Types of Investment | Beginning | Increase | Decrease | Ending | Note | |||||||||||||||||
SLD Telecom, Pte.
Ltd. |
Affiliated company | Common share | 93,987 | 97,285 | | 191,272 | | |||||||||||||||||
SKT U.S.A. Holdings |
Affiliated company | Common share | 123,214 | 75,499 | | 198,713 | | |||||||||||||||||
SK Mobile |
Affiliated company | Common share | | 10,322 | | 10,322 | | |||||||||||||||||
SKT-HP Fund |
Affiliated company | Common share | 6,415 | | 6,415 | | ||||||||||||||||||
iHQ |
Affiliated company | Common share | 14,440 | 27,352 | | 41,792 | ||||||||||||||||||
Cyworld Japan Co.,
Ltd. |
Affiliated company | Common share | 1,309 | 1,832 | | 3,141 | ||||||||||||||||||
China STC |
Affiliated company | Common share | | 1,343 | | 1,343 | ||||||||||||||||||
Total |
239,365 | 213,633 | 6,415 | 446,583 | |
34
(Unit: in thousand won) | ||||||||||||||||
Transfer details | ||||||||||||||||
Amount | ||||||||||||||||
Name | Transfer | Transfer | Transfer (out) | Transfer (in) | ||||||||||||
(Corporate name) | Relationship | Objective | purpose | date | amount | amount | Remarks | |||||||||
EnCar Network
|
Affiliated company | 12 vehicles | Disposition of surplus vehicles | January to June 2006 |
| 120,819 | | |||||||||
Total | | 120,819 |
2. | Transactions with Shareholders (excluding the largest shareholder and others), Officers, Employees and other Interested Parties |
(Unit: in million Won) | ||||||||||||||||||||||||||
Account | Change details | Accrued | ||||||||||||||||||||||||
Name (Corporate name) | Relationship | category | Beginning | Increase | Decrease | Ending | interest | Remarks | ||||||||||||||||||
A1 and others
|
Agency | Long-term and short-term loans | 62,776 | 74,783 | 76,533 | 61,026 | 10 | |
* Overseas investment companies |
(Unit: in million Won) | ||||||||||||||||||||
Name | Account | Change details | ||||||||||||||||||
(Corporate name) | Relationship | category | Beginning | Increase | Decrease | Ending | Accrued interest | Remarks | ||||||||||||
DSS Mobile Com.
(India)
|
Overseas Investment company |
Long-term loans | 18,887 | | | 18,887 | | Payment guarantee |
35
B. | Equity Investments |
(Unit: in million Won) | ||||||||||||||||||||||||
Details | ||||||||||||||||||||||||
Name (Corporate name) | Relationship | Types of Investment | Beginning | Increase | Decrease | Ending | Remarks | |||||||||||||||||
Flarion
Technologies, Inc.
|
Affiliated party | Convertible preferred share |
3,638 | | 3,638 | | | |||||||||||||||||
Qualcomm, Inc.
|
Affiliated party | Common share | | 2,756 | | 2,756 | | |||||||||||||||||
Mobile Welcome Co.
|
Affiliated party | Common share | 1,000 | | 1,000 | | | |||||||||||||||||
Cyper Casting
|
Affiliated party | Common share | | 141 | | 141 | ||||||||||||||||||
Total | 4,638 | 2,897 | 4,638 | 2,897 | |
Date of | ||||||
Disclosure in | ||||||
Korea | Title | Report | Reports status | |||
October 26, 2001
|
Resolution on trust agreement for the acquisition of treasury shares and others | 1. Signatories:
Shinhan Bank, Hana Bank, Cho Hung Bank, Korea Exchange Bank 2. Contract amount: Won 1,300 billion 3. Purpose: to increase shareholder value |
1. On December 24,
2003, cash surplus
amount from the
existing trust
agreement was
partially reduced
(Won 318 billion). 2. On September 24, 2004, the Board of Directors extended the term of the specified monetary trust agreement for 3 years. 3. As of March 31, 2006, the balance of specified monetary trust for treasury shares was Won 982 billion. |
36
2. | Summary Minutes of the Shareholders Meeting |
Date | Agenda | Resolution | ||
Meeting of Shareholders for
the year ended
December 31, 2005
(March 10, 2006)
|
1. Approval of the financial statements for
the year ended December 31, 2005 2. Amendment of the Articles of Incorporation 3. Remuneration limit for Directors 4. Election of Directors (Election of Independent non-executive directors as Audit Committee members) |
Approved (Cash
dividend, Won 8,000 per share) Approved (Addition of business objective: travel business) Approved (Won 12 billion) Approved (Kim Yong Woon and Im Hyun Jin) |
3. | Contingent Liabilities | |
A. | Material Legal Proceedings | |
(1) | Action Seeking to Vacate Judgment of the Intellectual Property Tribunal Nullifying Patent Registration Related to Caller Ring Service |
a) | Parties to the litigation: Park Won Sup (plaintiff) vs. the Company (defendant) | ||
b) | Overview: Mr. Park Won Sup (the representative director of Ad Ring Systems Co., Ltd.) claimed that certain technology the Company uses to provide the caller ring service infringed upon his patent rights, and the Company sought an administrative action to nullify Mr. Parks patent rights in the Intellectual Property Tribunal. The Tribunal upheld the nullification of Mr. Parks patent rights and Mr. Park appealed the decision. | ||
c) | Progress: The Patent Court dismissed plaintiffs claim (September 2005), after which the plaintiff appealed. | ||
d) | Impact on business: In the event that the case is decided against the Company, there is a risk of material future royalty obligations. However, given the progress of the proceedings, the estimated impact should not be large; however, the actual impact may differ depending on future events. |
(2) | Actions for the Cancellation of the International Registration for Satellite Network |
(3) | Actions for the Cancellation of Key Communication Business Licenses and Allotment of Satellite DMB Frequency |
37
d) | Impact on business: The Company plans to provide full support to MIC in the action although no significant impact to the Companys business is expected; however, the actual impact may differ depending on future events. |
38
39
40
41
42
Translation into U.S. dollars | ||||||||||||||||
Korean won | (Note 2) | |||||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(In millions) | (In thousands) | |||||||||||||||
ASSETS |
||||||||||||||||
CURRENT ASSETS : |
||||||||||||||||
Cash and cash equivalents (Notes 2 and 11) |
331,520 | 151,766 | $ | 350,444 | $ | 160,429 | ||||||||||
Short-term financial instruments |
121,467 | 73,062 | 128,401 | 77,233 | ||||||||||||
Trading securities (Notes 2 and 3) |
483,114 | 745,360 | 510,691 | 787,907 | ||||||||||||
Current portion of long-term investment securities
(Notes 2 and 3) |
125 | | 132 | | ||||||||||||
Accounts receivable trade, net of allowance for
doubtful accounts of |
1,575,379 | 1,607,596 | 1,665,305 | 1,699,362 | ||||||||||||
Short-term loans, net of allowance for doubtful
accounts of |
58,889 | 64,150 | 62,251 | 67,812 | ||||||||||||
Accounts receivable other, net of allowance for
doubtful accounts of |
1,319,083 | 1,333,238 | 1,394,379 | 1,409,342 | ||||||||||||
Inventories (Note 2) |
16,891 | 5,986 | 17,855 | 6,328 | ||||||||||||
Prepaid expenses |
125,177 | 101,274 | 132,322 | 107,055 | ||||||||||||
Current deferred income tax assets, net (Notes 2 and 16) |
67,637 | 61,152 | 71,498 | 64,643 | ||||||||||||
Currency swap (Notes 2 and 23) |
4,358 | | 4,607 | | ||||||||||||
Advanced payments and other |
17,987 | 28,901 | 19,014 | 30,550 | ||||||||||||
Total Current Assets |
4,121,627 | 4,172,485 | 4,356,899 | 4,410,661 | ||||||||||||
NON-CURRENT ASSETS : |
||||||||||||||||
Property and equipment, net (Notes 2, 6, 10, 20 and 21) |
4,371,898 | 4,595,883 | 4,621,457 | 4,858,227 | ||||||||||||
Intangible assets, net (Notes 2 and 7) |
3,169,353 | 3,386,547 | 3,350,267 | 3,579,859 | ||||||||||||
Long-term investment securities (Notes 2 and 3) |
1,855,225 | 1,203,333 | 1,961,126 | 1,272,022 | ||||||||||||
Equity securities accounted for using the equity method
(Notes 2 and 4) |
1,246,803 | 925,904 | 1,317,974 | 978,757 | ||||||||||||
Long-term loans, net of allowance for doubtful
accounts of |
12,502 | 14,204 | 13,216 | 15,015 | ||||||||||||
Guarantee deposits, net of allowance for doubtful
accounts of |
117,262 | 122,846 | 123,956 | 129,858 | ||||||||||||
Long-term deposits and other (Note 18) |
109,663 | 100,474 | 115,922 | 106,210 | ||||||||||||
Total Non-Current Assets |
10,882,706 | 10,349,191 | 11,503,918 | 10,939,948 | ||||||||||||
TOTAL ASSETS |
15,004,333 | 14,521,676 | $ | 15,860,817 | $ | 15,350,609 | ||||||||||
43
Translation into U.S. dollars | ||||||||||||||||
Korean won | (Note 2) | |||||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(In millions) | (In thousands) | |||||||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||
CURRENT LIABILITIES : |
||||||||||||||||
Accounts payable (Notes 11 and 21) |
1,044,347 | 971,558 | $ | 1,103,961 | $ | 1,027,017 | ||||||||||
Income tax payable |
270,024 | 366,579 | 285,438 | 387,504 | ||||||||||||
Accrued expenses (Notes 2 and 22) |
328,269 | 362,178 | 347,007 | 382,852 | ||||||||||||
Dividend payable |
294 | 298 | 311 | 315 | ||||||||||||
Withholdings |
297,810 | 205,060 | 314,810 | 216,765 | ||||||||||||
Current portion of long-term debt, net (Notes 2, 8 and 10) |
946,823 | 809,490 | 1,000,870 | 855,698 | ||||||||||||
Current portion of subscription deposits (Note 9) |
15,769 | 14,875 | 16,669 | 15,724 | ||||||||||||
Advanced receipts and other |
24,037 | 17,230 | 25,409 | 18,214 | ||||||||||||
Total Current Liabilities |
2,927,373 | 2,747,268 | 3,094,475 | 2,904,089 | ||||||||||||
LONG-TERM LIABILITIES : |
||||||||||||||||
Bonds payable, net (Notes 2 and 8) |
2,094,360 | 2,314,208 | 2,213,911 | 2,446,309 | ||||||||||||
Long-term borrowings (Note 8) |
200,000 | | 211,416 | | ||||||||||||
Subscription deposits (Note 9) |
21,666 | 23,770 | 22,903 | 25,127 | ||||||||||||
Long-term payables other, net of present value
discount of |
514,244 | 591,587 | 543,598 | 625,356 | ||||||||||||
Obligations under capital lease (Notes 2 and 10) |
3,397 | 10,204 | 3,591 | 10,786 | ||||||||||||
Accrued severance indemnities, net (Notes 2 and 21) |
24,847 | 64,029 | 26,265 | 67,684 | ||||||||||||
Non-current deferred income tax liabilities, net (Notes 2 and 16) |
392,128 | 409,715 | 414,512 | 433,103 | ||||||||||||
Long-term currency swap (Notes 2 and 23) |
111,980 | 73,450 | 118,372 | 77,643 | ||||||||||||
Long-term interest rate swap (Notes 2 and 23) |
2,747 | | 2,904 | | ||||||||||||
Guarantee deposits received and other (Note 21) |
27,181 | 29,565 | 28,733 | 31,252 | ||||||||||||
Total Long-Term Liabilities |
3,392,550 | 3,516,528 | 3,586,205 | 3,717,260 | ||||||||||||
Total Liabilities |
6,319,923 | 6,263,796 | 6,680,680 | 6,621,349 | ||||||||||||
STOCKHOLDERS EQUITY : |
||||||||||||||||
Capital stock (Notes 1 and 12) |
44,639 | 44,639 | 47,187 | 47,187 | ||||||||||||
Capital surplus (Notes 2 and 12) |
2,963,880 | 2,966,198 | 3,133,066 | 3,135,516 | ||||||||||||
Retained earnings (Note 13) : |
||||||||||||||||
Appropriated |
6,679,235 | 5,470,701 | 7,060,502 | 5,782,982 | ||||||||||||
Before appropriations |
886,220 | 1,799,160 | 936,808 | 1,901,860 | ||||||||||||
Capital adjustments : |
||||||||||||||||
Treasury stock (Note 14) |
(2,023,624 | ) | (2,047,105 | ) | (2,139,137 | ) | (2,163,959 | ) | ||||||||
Unrealized gains (losses) on valuation of long-term
investment securities, net (Notes 2, 3 and 16) |
89,739 | (42,134 | ) | 94,862 | (44,539 | ) | ||||||||||
Equity in capital adjustments of affiliates, net (Notes 2, 4 and 16) |
64,353 | 77,119 | 68,025 | 81,521 | ||||||||||||
Loss on valuation of currency swap, net (Notes 2, 16 and 23) |
(21,287 | ) | (14,178 | ) | (22,502 | ) | (14,987 | ) | ||||||||
Loss on valuation of interest rate swap, net (Notes 2, 16 and 23) |
(1,991 | ) | | (2,105 | ) | | ||||||||||
Stock options (Notes 2,15 and 21) |
3,246 | 3,480 | 3,431 | 3,679 | ||||||||||||
Total Stockholders Equity |
8,684,410 | 8,257,880 | 9,180,137 | 8,729,260 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
15,004,333 | 14,521,676 | $ | 15,860,817 | $ | 15,350,609 | ||||||||||
44
Korean won | Translation into U.S. dollars (Note 2) | |||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||||
Three months | Nine months | Three months | Nine months | Three months | Nine months | Three months | Nine months | |||||||||||||||||||||||||
ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | |||||||||||||||||||||||||
(In millions) | (In thousands) | |||||||||||||||||||||||||||||||
OPERATING REVENUE (Notes 2 and 21) |
2,712,531 | 7,891,177 | 2,595,485 | 7,534,571 | $ | 2,867,369 | $ | 8,341,625 | $ | 2,743,642 | $ | 7,964,663 | ||||||||||||||||||||
OPERATING EXPENSES (Notes 2 and 21) |
||||||||||||||||||||||||||||||||
Labor cost (Note 21) |
(100,339 | ) | (320,169 | ) | (98,112 | ) | (295,684 | ) | (106,067 | ) | (338,445 | ) | (103,712 | ) | (312,562 | ) | ||||||||||||||||
Commissions paid |
(806,258 | ) | (2,397,787 | ) | (747,222 | ) | (2,176,985 | ) | (852,281 | ) | (2,534,659 | ) | (789,875 | ) | (2,301,253 | ) | ||||||||||||||||
Depreciation and amortization (Notes 2, 6, 7 and 10) |
(383,545 | ) | (1,057,068 | ) | (379,392 | ) | (1,080,445 | ) | (405,438 | ) | (1,117,408 | ) | (401,049 | ) | (1,142,119 | ) | ||||||||||||||||
Network interconnection |
(207,954 | ) | (712,292 | ) | (238,966 | ) | (697,319 | ) | (219,825 | ) | (752,951 | ) | (252,607 | ) | (737,124 | ) | ||||||||||||||||
Leased line |
(99,339 | ) | (296,950 | ) | (98,252 | ) | (290,309 | ) | (105,010 | ) | (313,901 | ) | (103,860 | ) | (306,881 | ) | ||||||||||||||||
Advertising |
(68,453 | ) | (206,116 | ) | (67,234 | ) | (189,587 | ) | (72,360 | ) | (217,882 | ) | (71,072 | ) | (200,409 | ) | ||||||||||||||||
Research and development (Note 2) |
(51,539 | ) | (153,294 | ) | (51,772 | ) | (149,236 | ) | (54,481 | ) | (162,044 | ) | (54,727 | ) | (157,755 | ) | ||||||||||||||||
Rent |
(47,948 | ) | (141,588 | ) | (43,814 | ) | (130,897 | ) | (50,685 | ) | (149,670 | ) | (46,315 | ) | (138,369 | ) | ||||||||||||||||
Frequency usage |
(40,174 | ) | (118,484 | ) | (38,555 | ) | (116,288 | ) | (42,467 | ) | (125,247 | ) | (40,756 | ) | (122,926 | ) | ||||||||||||||||
Repair |
(34,844 | ) | (97,785 | ) | (33,671 | ) | (80,175 | ) | (36,833 | ) | (103,367 | ) | (35,593 | ) | (84,752 | ) | ||||||||||||||||
Cost of goods sold |
(11,666 | ) | (24,286 | ) | (4,323 | ) | (8,678 | ) | (12,332 | ) | (25,672 | ) | (4,570 | ) | (9,173 | ) | ||||||||||||||||
Other |
(102,352 | ) | (319,848 | ) | (123,239 | ) | (320,183 | ) | (108,193 | ) | (338,106 | ) | (130,274 | ) | (338,459 | ) | ||||||||||||||||
Sub-total |
(1,954,411 | ) | (5,845,667 | ) | (1,924,552 | ) | (5,535,786 | ) | (2,065,974 | ) | (6,179,352 | ) | (2,034,410 | ) | (5,851,782 | ) | ||||||||||||||||
OPERATING INCOME |
758,120 | 2,045,510 | 670,933 | 1,998,785 | 801,395 | 2,162,273 | 709,232 | 2,112,881 | ||||||||||||||||||||||||
OTHER INCOME : |
||||||||||||||||||||||||||||||||
Interest income (Note 3) |
12,917 | 49,275 | 12,521 | 35,830 | 13,654 | 52,088 | 13,236 | 37,875 | ||||||||||||||||||||||||
Dividends |
4,969 | 20,345 | 5,076 | 21,506 | 5,253 | 21,506 | 5,366 | 22,734 | ||||||||||||||||||||||||
Commissions (Note 21) |
9,261 | 27,220 | 7,295 | 23,369 | 9,790 | 28,774 | 7,711 | 24,703 | ||||||||||||||||||||||||
Equity in earnings of affiliates (Notes 2 and 4) |
14,415 | 47,831 | 22,318 | 40,484 | 15,238 | 50,561 | 23,592 | 42,795 | ||||||||||||||||||||||||
Foreign exchange and translation gains (Note 2) |
288 | 2,332 | 861 | 1,384 | 304 | 2,465 | 910 | 1,463 | ||||||||||||||||||||||||
Reversal of allowance for doubtful accounts |
| | | 428 | | | | 452 | ||||||||||||||||||||||||
Gain on disposal of investment assets |
2,494 | 4,963 | 176,053 | 177,010 | 2,636 | 5,246 | 186,103 | 187,114 | ||||||||||||||||||||||||
Gain on disposal of property, equipment and
intangible assets |
302 | 1,056 | 140 | 744 | 319 | 1,116 | 148 | 786 | ||||||||||||||||||||||||
Gain on transaction and valuation of
currency swap (Notes 2 and 23) |
4,930 | 4,358 | 1,669 | 4,314 | 5,211 | 4,607 | 1,764 | 4,560 | ||||||||||||||||||||||||
Other |
13,686 | 35,930 | 6,506 | 26,045 | 14,468 | 37,981 | 6,877 | 27,533 | ||||||||||||||||||||||||
Sub-total |
63,262 | 193,310 | 232,439 | 331,114 | 66,873 | 204,344 | 245,707 | 350,015 | ||||||||||||||||||||||||
45
Korean won | Translation into U.S. dollars (Note 2) | |||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||||
Three months | Nine months | Three months | Nine months | Three months | Nine months | Three months | Nine months | |||||||||||||||||||||||||
ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | |||||||||||||||||||||||||
(In millions) | (In thousands) | |||||||||||||||||||||||||||||||
OTHER EXPENSES : |
||||||||||||||||||||||||||||||||
Interest and discounts |
(61,744 | ) | (178,534 | ) | (59,588 | ) | (191,520 | ) | $ | (65,268 | ) | $ | (188,725 | ) | $ | (62,989 | ) | $ | (202,452 | ) | ||||||||||||
Donations |
(20,960 | ) | (42,479 | ) | (13,358 | ) | (31,076 | ) | (22,156 | ) | (44,904 | ) | (14,121 | ) | (32,850 | ) | ||||||||||||||||
Foreign exchange and translation losses (Note 2) |
(1,197 | ) | (2,637 | ) | (344 | ) | (1,068 | ) | (1,265 | ) | (2,788 | ) | (364 | ) | (1,129 | ) | ||||||||||||||||
Loss on transaction and valuation of currency swap
(Notes 2 and 23) |
| (8,553 | ) | | | | (9,041 | ) | | | ||||||||||||||||||||||
Equity in losses of affiliates (Notes 2 and 4) |
(55,762 | ) | (112,054 | ) | (20,326 | ) | (57,524 | ) | (58,945 | ) | (118,450 | ) | (21,486 | ) | (60,808 | ) | ||||||||||||||||
Loss on disposal of investment assets |
(489 | ) | (3,194 | ) | (1 | ) | (63 | ) | (517 | ) | (3,376 | ) | (1 | ) | (67 | ) | ||||||||||||||||
Loss on disposal of property, equipment and
intangible assets |
(1,385 | ) | (15,019 | ) | (498 | ) | (3,982 | ) | (1,464 | ) | (15,876 | ) | (526 | ) | (4,209 | ) | ||||||||||||||||
Special severance indemnities (Note 2) |
| (144,021 | ) | | | | (152,242 | ) | | | ||||||||||||||||||||||
Other |
(33,910 | ) | (81,692 | ) | (19,666 | ) | (57,176 | ) | (35,846 | ) | (86,356 | ) | (20,789 | ) | (60,440 | ) | ||||||||||||||||
Sub-total |
(175,447 | ) | (588,183 | ) | (113,781 | ) | (342,409 | ) | (185,461 | ) | (621,758 | ) | (120,276 | ) | (361,955 | ) | ||||||||||||||||
ORDINARY INCOME |
645,935 | 1,650,637 | 789,591 | 1,987,490 | 682,807 | 1,744,859 | 834,663 | 2,100,941 | ||||||||||||||||||||||||
INCOME BEFORE INCOME TAXES |
645,935 | 1,650,637 | 789,591 | 1,987,490 | 682,807 | 1,744,859 | 834,663 | 2,100,941 | ||||||||||||||||||||||||
PROVISION FOR INCOME TAXES (Notes 2 and 16) |
(189,133 | ) | (483,337 | ) | (201,713 | ) | (564,085 | ) | (199,930 | ) | (510,927 | ) | (213,227 | ) | (596,285 | ) | ||||||||||||||||
NET INCOME |
456,802 | 1,167,300 | 587,878 | 1,423,405 | $ | 482,877 | $ | 1,233,932 | $ | 621,436 | $ | 1,504,656 | ||||||||||||||||||||
NET INCOME PER SHARE (In Korean won and U.S. dollars) (Note 17) |
6,231 | 15,875 | 7,986 | 19,336 | $ | 6,587 | $ | 16,781 | $ | 8,442 | $ | 20,440 | ||||||||||||||||||||
DILUTED NET INCOME PER SHARE (In Korean won and U.S. dollars) (Note 17) |
6,135 | 15,641 | 7,849 | 19,024 | $ | 6,485 | $ | 16,534 | $ | 8,297 | $ | 20,110 | ||||||||||||||||||||
46
Korean won | Translation into U.S. dollars (Note 2) | |||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||||
Three months | Nine months | Three months | Nine months | Three months | Nine months | Three months | Nine months | |||||||||||||||||||||||||
ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | |||||||||||||||||||||||||
(In millions) | (In thousands) | |||||||||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES : |
||||||||||||||||||||||||||||||||
Net income |
456,802 | 1,167,300 | 587,878 | 1,423,405 | $ | 482,877 | $ | 1,233,932 | $ | 621,436 | $ | 1,504,656 | ||||||||||||||||||||
Expenses not involving cash payments : |
||||||||||||||||||||||||||||||||
Provision for severance indemnities |
6,866 | 33,710 | 10,563 | 29,137 | 7,258 | 35,634 | 11,166 | 30,800 | ||||||||||||||||||||||||
Depreciation and amortization |
416,780 | 1,155,994 | 409,075 | 1,168,603 | 440,571 | 1,221,981 | 432,426 | 1,235,310 | ||||||||||||||||||||||||
Allowance for doubtful accounts |
17,897 | 47,479 | 31,906 | 66,781 | 18,919 | 50,189 | 33,727 | 70,593 | ||||||||||||||||||||||||
Foreign translation loss |
712 | 1,237 | | 63 | 753 | 1,308 | | 67 | ||||||||||||||||||||||||
Loss on transaction and valuation of currency swap |
| 8,553 | | | | 9,041 | | | ||||||||||||||||||||||||
Equity in losses of affiliates |
55,762 | 112,054 | 20,326 | 57,524 | 58,945 | 118,450 | 21,486 | 60,808 | ||||||||||||||||||||||||
Loss on disposal of investment assets |
489 | 3,194 | 1 | 63 | 517 | 3,376 | 1 | 67 | ||||||||||||||||||||||||
Loss on disposal of property, equipment and
intangible assets |
1,385 | 15,019 | 498 | 3,982 | 1,464 | 15,876 | 526 | 4,209 | ||||||||||||||||||||||||
Amortization of discounts on bonds and other |
12,082 | 36,513 | 12,128 | 37,095 | 12,771 | 38,598 | 12,821 | 39,212 | ||||||||||||||||||||||||
Sub-total |
511,973 | 1,413,753 | 484,497 | 1,363,248 | 541,198 | 1,494,453 | 512,153 | 1,441,066 | ||||||||||||||||||||||||
Income not involving cash receipts : |
||||||||||||||||||||||||||||||||
Foreign translation gain |
(93 | ) | (312 | ) | (93 | ) | (96 | ) | (98 | ) | (330 | ) | (98 | ) | (101 | ) | ||||||||||||||||
Reversal of allowance for doubtful accounts |
| | | (428 | ) | | | | (452 | ) | ||||||||||||||||||||||
Equity in earnings of affiliates |
(14,415 | ) | (47,831 | ) | (22,318 | ) | (40,484 | ) | (15,238 | ) | (50,561 | ) | (23,592 | ) | (42,795 | ) | ||||||||||||||||
Gain on disposal of investment assets |
(2,494 | ) | (4,963 | ) | (176,053 | ) | (177,010 | ) | (2,636 | ) | (5,246 | ) | (186,103 | ) | (187,114 | ) | ||||||||||||||||
Gain on disposal of property, equipment and
intangible assets |
(302 | ) | (1,056 | ) | (140 | ) | (744 | ) | (319 | ) | (1,116 | ) | (148 | ) | (786 | ) | ||||||||||||||||
Gain on transaction and valuation of currency swap |
(4,929 | ) | (4,358 | ) | (1,668 | ) | (4,314 | ) | (5,210 | ) | (4,607 | ) | (1,763 | ) | (4,562 | ) | ||||||||||||||||
Other |
| (1,532 | ) | | | | (1,620 | ) | | | ||||||||||||||||||||||
Sub-total |
(22,233 | ) | (60,052 | ) | (200,272 | ) | (223,076 | ) | (23,501 | ) | (63,480 | ) | (211,704 | ) | (235,810 | ) | ||||||||||||||||
47
Korean won | Translation into U.S. dollars (Note 2) | |||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||||
Three months | Nine months | Three months | Nine months | Three months | Nine months | Three months | Nine months | |||||||||||||||||||||||||
ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | |||||||||||||||||||||||||
(In millions) | (In thousands) | |||||||||||||||||||||||||||||||
Changes in assets and liabilities related to
operating activities : |
||||||||||||||||||||||||||||||||
Accounts receivable trade |
( |
) | ( |
) | ( |
) | ( |
) | ($78,413 | ) | ($3,462 | ) | ($24,169 | ) | ($79,871 | ) | ||||||||||||||||
Accounts receivable other |
(12,775 | ) | 9,315 | (79,074 | ) | (39,107 | ) | (13,504 | ) | 9,847 | (83,588 | ) | (41,339 | ) | ||||||||||||||||||
Inventories |
(8,944 | ) | (10,425 | ) | (2,512 | ) | (3,030 | ) | (9,455 | ) | (11,020 | ) | (2,655 | ) | (3,203 | ) | ||||||||||||||||
Prepaid expenses |
19,361 | 48,332 | 3,885 | 6,529 | 20,466 | 51,091 | 4,107 | 6,902 | ||||||||||||||||||||||||
Advanced payments and other |
1,507 | 10,895 | (2,528 | ) | (25,508 | ) | 1,593 | 11,517 | (2,672 | ) | (26,964 | ) | ||||||||||||||||||||
Accounts payable |
129,442 | 73,094 | 36,047 | (380,162 | ) | 136,831 | 77,266 | 38,105 | (401,863 | ) | ||||||||||||||||||||||
Income taxes payable |
(61,051 | ) | (107,008 | ) | (88,650 | ) | (25,216 | ) | (64,536 | ) | (113,116 | ) | (93,710 | ) | (26,655 | ) | ||||||||||||||||
Accrued expenses |
(127,816 | ) | (33,909 | ) | 58,058 | 114,689 | (135,112 | ) | (35,845 | ) | 61,372 | 121,236 | ||||||||||||||||||||
Withholdings |
3,392 | 92,750 | (5,955 | ) | 54,288 | 3,586 | 98,044 | (6,295 | ) | 57,387 | ||||||||||||||||||||||
Current portion of subscription deposits |
314 | 893 | 371 | 1,202 | 332 | 944 | 392 | 1,271 | ||||||||||||||||||||||||
Advance receipts and other |
4,044 | 6,989 | (28,004 | ) | (16,757 | ) | 4,275 | 7,388 | (29,603 | ) | (17,714 | ) | ||||||||||||||||||||
Deferred income taxes |
(25,021 | ) | (60,630 | ) | (16,028 | ) | 4,347 | (26,449 | ) | (64,091 | ) | (16,943 | ) | 4,595 | ||||||||||||||||||
Severance indemnity payments |
(869 | ) | (257,989 | ) | (3,402 | ) | (17,937 | ) | (919 | ) | (272,716 | ) | (3,596 | ) | (18,961 | ) | ||||||||||||||||
Deposits for group severance indemnities
and other deposits |
41 | 183,685 | 1,998 | 9,624 | 43 | 194,171 | 2,112 | 10,173 | ||||||||||||||||||||||||
Dividends received from affiliate |
| 1,318 | | 600 | | 1,393 | | 634 | ||||||||||||||||||||||||
Sub-total |
(152,554 | ) | (45,965 | ) | (148,658 | ) | (391,996 | ) | (161,262 | ) | (48,589 | ) | (157,143 | ) | (414,372 | ) | ||||||||||||||||
Net Cash Provided by Operating Activities |
793,988 | 2,475,036 | 723,445 | 2,171,581 | 839,312 | 2,616,316 | 764,742 | 2,295,540 | ||||||||||||||||||||||||
48
Korean won | Translation into U.S. dollars (Note 2) | |||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||||
Three months | Nine months | Three months | Nine months | Three months | Nine months | Three months | Nine months | |||||||||||||||||||||||||
ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | |||||||||||||||||||||||||
(In millions) | (In thousands) | |||||||||||||||||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES : |
||||||||||||||||||||||||||||||||
Cash inflows from investing activities : |
||||||||||||||||||||||||||||||||
Decrease in short-term financial instruments, net |
62,298 | | | | $ | 65,854 | $ | | $ | | $ | | ||||||||||||||||||||
Decrease in trading securities, net |
440,219 | 262,246 | | | # | 465,348 | 277,216 | | | |||||||||||||||||||||||
Decrease in current portion of long-term investment
securities |
| | | 3,600 | | | | 3,805 | ||||||||||||||||||||||||
Collection of short-term loans |
21,584 | 80,292 | 20,009 | 51,495 | 22,816 | 84,875 | 21,151 | 54,434 | ||||||||||||||||||||||||
Proceeds from sales of long-term investment securities |
190,876 | 304,621 | 2,271 | 3,985 | 201,772 | 322,010 | 2,401 | 4,212 | ||||||||||||||||||||||||
Proceeds from sales of equity securities accounted
for using the equity method |
| 5,079 | 290,979 | 290,979 | | 5,369 | 307,589 | 307,589 | ||||||||||||||||||||||||
Decrease in guarantee deposits |
4,227 | 24,526 | 7,194 | 125,021 | 4,468 | 25,926 | 7,605 | 132,158 | ||||||||||||||||||||||||
Decrease in other non-current assets |
1,195 | 9,970 | 10,729 | 26,944 | 1,263 | 10,539 | 11,341 | 28,483 | ||||||||||||||||||||||||
Proceeds from disposal of property and equipment |
469 | 2,283 | 488 | 18,948 | 496 | 2,413 | 516 | 20,030 | ||||||||||||||||||||||||
Proceeds from disposal of intangible assets |
68 | 124 | | 53 | 72 | 131 | | 56 | ||||||||||||||||||||||||
Sub-total |
720,936 | 689,141 | 331,670 | 521,025 | 762,089 | 728,479 | 350,603 | 550,767 | ||||||||||||||||||||||||
Cash outflows for investing activities : |
||||||||||||||||||||||||||||||||
Increase in short-term financial instruments, net |
| (48,405 | ) | (7,339 | ) | (24,942 | ) | | (51,168 | ) | (7,758 | ) | (26,366 | ) | ||||||||||||||||||
Increase in trading securities, net |
| | (10,030 | ) | (34,976 | ) | | | (10,603 | ) | (36,973 | ) | ||||||||||||||||||||
Extension of short-term loans |
(22,022 | ) | (73,942 | ) | (8,172 | ) | (52,136 | ) | (23,279 | ) | (78,163 | ) | (8,638 | ) | (55,112 | ) | ||||||||||||||||
Acquisition of long-term investment securities |
(957,200 | ) | (960,250 | ) | | (12,615 | ) | (1,011,839 | ) | (1,015,063 | ) | | (13,335 | ) | ||||||||||||||||||
Acquisition of equity securities accounted for using
the equity method |
(67,746 | ) | (213,634 | ) | (101,425 | ) | (208,569 | ) | (71,613 | ) | (225,829 | ) | (107,215 | ) | (220,475 | ) | ||||||||||||||||
Extension of long-term loans |
(4,917 | ) | (7,902 | ) | (852 | ) | (2,397 | ) | (5,198 | ) | (8,353 | ) | (901 | ) | (2,534 | ) | ||||||||||||||||
Increase in guarantee deposits and other non-current
assets |
(17,789 | ) | (110,129 | ) | (25,676 | ) | (66,908 | ) | (18,805 | ) | (116,415 | ) | (27,142 | ) | (70,726 | ) | ||||||||||||||||
Acquisition of property and equipment |
(283,309 | ) | (714,441 | ) | (412,654 | ) | (777,921 | ) | (299,481 | ) | (755,223 | ) | (436,209 | ) | (822,327 | ) | ||||||||||||||||
Acquisition of intangible assets |
(10,165 | ) | (15,815 | ) | (12,670 | ) | (136,690 | ) | (10,745 | ) | (16,718 | ) | (13,393 | ) | (144,493 | ) | ||||||||||||||||
Sub-total |
(1,363,148 | ) | (2,144,518 | ) | (578,818 | ) | (1,317,154 | ) | (1,440,960 | ) | (2,266,932 | ) | (611,859 | ) | (1,392,341 | ) | ||||||||||||||||
Net Cash Used in Investing Activities |
(642,212 | ) | (1,455,377 | ) | (247,148 | ) | (796,129 | ) | (678,871 | ) | (1,538,453 | ) | (261,256 | ) | (841,574 | ) | ||||||||||||||||
49
Korean won | Translation into U.S. dollars (Note 2) | |||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||||
Three months | Nine months | Three months | Nine months | Three months | Nine months | Three months | Nine months | |||||||||||||||||||||||||
ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | ended September 30 | |||||||||||||||||||||||||
(In millions) | (In thousands) | |||||||||||||||||||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES : |
||||||||||||||||||||||||||||||||
Cash inflows from financing activities : |
||||||||||||||||||||||||||||||||
Issuance of bonds |
197,362 | 197,362 | | 193,683 | $ | 208,628 | $ | 208,628 | $ | | $ | 204,739 | ||||||||||||||||||||
Proceeds from long-term borrowings |
| 200,000 | | | | 211,416 | | | ||||||||||||||||||||||||
Increase in
guarantee deposits received and other |
65 | 1,241 | 1,706 | 22,257 | 69 | 1,312 | 1,803 | 23,527 | ||||||||||||||||||||||||
Sub-total |
197,427 | 398,603 | 1,706 | 215,940 | 208,697 | 421,356 | 1,803 | 228,266 | ||||||||||||||||||||||||
Cash outflows for financing activities : |
||||||||||||||||||||||||||||||||
Repayment of short-term borrowings |
| | (300,000 | ) | (200,000 | ) | | | (317,125 | ) | (211,416 | ) | ||||||||||||||||||||
Repayment of current portion of long-term debt |
(3,400 | ) | (10,889 | ) | | (500,000 | ) | (3,594 | ) | (11,511 | ) | | (528,541 | ) | ||||||||||||||||||
Repayment of bonds |
(350,000 | ) | (350,000 | ) | (369,979 | ) | (369,979 | ) | | | ||||||||||||||||||||||
Payment of dividends |
(73,879 | ) | (662,815 | ) | (73,623 | ) | (758,153 | ) | (78,096 | ) | (700,650 | ) | (77,826 | ) | (801,430 | ) | ||||||||||||||||
Decrease in facility deposits |
(692 | ) | (2,103 | ) | (1,100 | ) | (6,838 | ) | (732 | ) | (2,223 | ) | (1,163 | ) | (7,228 | ) | ||||||||||||||||
Acquisition of treasury stock |
(209,077 | ) | (209,077 | ) | | | (221,012 | ) | (221,012 | ) | | | ||||||||||||||||||||
Other |
(1,762 | ) | (3,624 | ) | (550 | ) | (17,127 | ) | (1,863 | ) | (3,829 | ) | (581 | ) | (18,105 | ) | ||||||||||||||||
Sub-total |
(638,810 | ) | (1,238,508 | ) | (375,273 | ) | (1,482,118 | ) | (675,276 | ) | (1,309,204 | ) | (396,695 | ) | (1,566,720 | ) | ||||||||||||||||
Net Cash Used in Financing Activities |
(441,383 | ) | (839,905 | ) | (373,567 | ) | (1,266,178 | ) | (466,579 | ) | (887,848 | ) | (394,892 | ) | (1,338,454 | ) | ||||||||||||||||
NET INCREASE IN CASH
AND CASH EQUIVALENTS |
(289,607 | ) | 179,754 | 102,730 | 109,274 | (306,138 | ) | 190,015 | 108,594 | 115,512 | ||||||||||||||||||||||
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE PERIOD |
621,127 | 151,766 | 119,510 | 112,966 | 656,582 | 160,429 | 126,332 | 119,414 | ||||||||||||||||||||||||
CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD |
331,520 | 331,520 | 222,240 | 222,240 | $ | 350,444 | $ | 350,444 | $ | 234,926 | $ | 234,926 | ||||||||||||||||||||
50
1. | GENERAL |
Percentage of | ||||||||
Number of shares | total shares issued (%) | |||||||
SK Group |
18,748,522 | 23.09 | ||||||
POSCO Corp. |
2,341,569 | 2.88 | ||||||
Institutional investors and other minority shareholders |
51,540,566 | 63.48 | ||||||
Treasury stock |
8,563,054 | 10.55 | ||||||
81,193,711 | 100.00 | |||||||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
51
b. | Adoptions of New Statements of Korea Accounting Standards (SKAS) |
c. | Cash Equivalents |
d. | Allowance for Doubtful Accounts |
e. | Inventories |
f. | Securities (Excluding securities accounted for using the equity method of accounting) |
52
g. | Equity Securities Accounted for Using the Equity Method |
h. | Property and Equipment |
53
i. | Intangible Assets |
j. | Convertible Bonds |
k. | Discounts on Bonds |
l. | Valuation of Long-term Payables |
m. | Provisions, Contingent Liabilities and Contingent Assets |
54
| Possible obligations related to past events, for which the existence of a liability can only be confirmed upon occurrence of uncertain future event or events outside the control of the Company. | |
| Present obligations arising out of past events or transactions, for which i) a disbursement of economic resources to fulfill such obligations is not probable or ii) a disbursement of economic resources is probable, but the related amount cannot be reasonably estimated. |
n. | Accrued Severance Indemnities |
o. | Accounting for Employee Stock Option Compensation Plan |
55
p. | Accounting for Leases |
q. | Research and Development Costs |
r. | Accounting for Foreign Currency Transactions and Translation |
s. | Derivative Instruments |
t. | Revenue Recognitions |
56
u. | Income Tax |
v. | Handset Subsidiaries to Long-term Mobile Subscribers |
w. | Reclassifications |
December 31, 2005 | ||||||||||||||||
September 30, 2006 | Fair value and | |||||||||||||||
Acquisition cost | Fair value | Carrying amount | carrying amount | |||||||||||||
Beneficiary certificates |
483,114 | 483,114 | 483,114 | 745,360 | ||||||||||||
57
September 30, 2006 | December 31, 2005 | |||||||
Available-for-sale equity securities |
841,446 | 907,069 | ||||||
Available-for-sale debt securities |
1,013,904 | 296,264 | ||||||
Total |
1,855,350 | 1,203,333 | ||||||
Less : current portion |
(125 | ) | | |||||
Long-term portion |
1,855,225 | 1,203,333 | ||||||
Number of | Percentage | Acquisition | ||||||||||||||||||||||||||
shares at | (%) at | cost at | Fair value at | Carrying amount | ||||||||||||||||||||||||
September | September | September | September | September | December | |||||||||||||||||||||||
30, 2006 | 30, 2006 | 30, 2006 | 30, 2006 | 30, 2006 | 30, 2006 | |||||||||||||||||||||||
(Investments in listed companies) |
||||||||||||||||||||||||||||
Digital Chosunilbo Co., Ltd. |
2,890,630 | 7.8 | 5,781 | 4,437 | 4,437 | 5,796 | ||||||||||||||||||||||
hanarotelecom incorporated. |
11,045,000 | 4.8 | 121,677 | 77,204 | 77,204 | 56,440 | ||||||||||||||||||||||
KRTnet Corporation
(Formerly Korea Radio
Wave Basestation
Management) |
234,150 | 4.4 | 1,171 | 2,365 | 2,365 | 2,646 | ||||||||||||||||||||||
POSCO |
2,481,310 | 2.8 | 332,662 | 607,921 | 607,921 | 501,225 | ||||||||||||||||||||||
Comas Interactive Co.,
Ltd. (Formerly INNOTG
Co., Ltd.) |
59,473 | 0.4 | 1,695 | 70 | 70 | 83 | ||||||||||||||||||||||
eXtended Computing
Environment Co., Ltd. |
133,333 | 3.3 | 10 | 917 | (Note a) | 917 | 10 | |||||||||||||||||||||
Sub-total |
462,996 | 692,914 | 692,914 | 566,200 | ||||||||||||||||||||||||
(Investments in non-listed companies) | ||||||||||||||||||||||||||||
LG Powercomm Co.,
Ltd. (Formerly
Powercomm Co., Ltd.) |
7,500,000 | 5.0 | 240,243 | 77,130 | (Note b) | 77,130 | 77,130 | |||||||||||||||||||||
Japan MBCO |
54,000 | 7.3 | 27,332 | (Note c) | 27,332 | 27,332 | ||||||||||||||||||||||
Eonex Technologies Inc. |
144,000 | 12.6 | 3,600 | (Note c) | 4,593 | 4,593 | ||||||||||||||||||||||
The Korea Economic Daily |
2,585,069 | 13.8 | 13,964 | (Note c) | 13,964 | 13,964 | ||||||||||||||||||||||
Others |
119,313 | (Notes c and d) | 22,075 | 22,815 | ||||||||||||||||||||||||
Sub-total |
404,452 | 145,094 | 145,834 | |||||||||||||||||||||||||
(Investments in funds) |
||||||||||||||||||||||||||||
Korea IT Fund |
| (Note e) | | 190,000 | ||||||||||||||||||||||||
Others |
3,438 | (Note c) | 3,438 | 5,035 | ||||||||||||||||||||||||
Sub-total |
3,438 | 3,438 | 195,035 | |||||||||||||||||||||||||
Total |
870,886 | 841,446 | 907,069 | |||||||||||||||||||||||||
58
(Note a)
|
Common stocks of extended Computing Environment Co., Ltd. were listed on the Korea Securities Dealers Automated Quotation during the three months ended September 30, 2006. | |
(Note b)
|
The Company recorded its investments in common stock of LG
Powercomm Co., Ltd. at its fair value, which was estimated by
an outside professional valuation company using the present
value of expected future cash flows and the unrealized loss
on valuation of investments amounting to |
|
(Note c)
|
As a reasonable estimate of fair value could not be made, the investment is stated at acquisition cost. The investment in common stock of Eonex Technologies Inc. was reclassified to available-for-sale securities from equity securities accounted for using the equity method during 2003, as the Companys ownership in such investees decreased to less than 20% and the Company no longer exercises significant influence. Such securities were transferred to available-for-sale securities at the carrying amount valued using the equity method of accounting prior to the reclassification. | |
(Note d)
|
Due to the impairment of the Companys investments in common
stock of TeleMerc.com, the Company recorded impairment loss
on such investments of |
|
(Note e)
|
The investment in Korea IT Fund was reclassified to equity securities accounted for using the equity method during the nine months ended September 30, 2006 as the Company has the ability to exercise significant influence on the investee. |
Available-for-sale debt securities as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won): |
Acquisition cost | Carrying amount | |||||||||||||
as of September | September 30, | December 31, | ||||||||||||
Maturity | 30, 2006 | 2006 | 2005 | |||||||||||
Public bonds |
(Note a) | 1,888 | 1,888 | 1,590 | ||||||||||
Currency stabilization bonds |
(Note b) | | | 294,674 | ||||||||||
Convertible bonds of Real Telecom
Co., Ltd. (Note c) |
March, 2007 | 10,656 | | | ||||||||||
Convertible bonds of China Unicom
Ltd. (Note d) |
July, 2009 | 957,055 | 1,012,016 | | ||||||||||
Total |
969,599 | 1,013,904 | 296,264 | |||||||||||
Less current portion |
(125 | ) | (125 | ) | | |||||||||
Long-term available-for-sale debt securities |
969,474 | 1,013,779 | 296,264 | |||||||||||
The interest income incurred from available-for-sale debt securities for the nine months ended
September 30, 2006 and 2005 were |
59
(Note a) | The maturities of public bonds as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won): |
Maturity | September 30, 2006 | December 31, 2005 | ||||||
Within one year |
125 | | ||||||
After one year but within five years |
1,763 | 1,229 | ||||||
After five years but within ten years |
| 361 | ||||||
1,888 | 1,590 | |||||||
(Note b) | The maturities of currency stabilization bonds as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won): |
Maturity | September 30, 2006 | December 31, 2005 | ||||||
After one year but wthin five years |
| 294,674 | ||||||
(Note c) | The convertible bonds of Real Telecom Corp. with a principal
amount of |
(Note d) | On July 5, 2006, the Company purchased zero coupon convertible bonds of China Unicom Ltd. with maturity of three years and principal amount of US$1,000,000,000 for US$1,000,000,000. Such convertible bonds have initial conversion price of US$1.111426 per share of common stock of China Unicom Ltd. The bond holders may redeem their notes at 102.82% of the principal amount on July 5, 2008 (2 years from the issuance date). The conversion right may be exercised during the period from July 5, 2007 to June 29, 2009 and the number of common shares to be converted as of September 30, 2006 is 899,745,075 shares. Unless either previously redeemed or converted, the notes are redeemable at 104.26% of the principal amount at maturity. The Company recorded the convertible bonds of China Unicom Ltd. at its fair value, which was estimated by an outside professional valuation company using Cox, Ross & Rubinstein Model (1979) and discount rate of 5.9138%. |
60
For the nine months ended September 30, 2006 | ||||||||||||||||
Transferred | ||||||||||||||||
to | ||||||||||||||||
Beginning | Increase/ | realized | Ending | |||||||||||||
balance | (decrease) | gain (loss) | balance | |||||||||||||
Available-for-sales equity securities: |
||||||||||||||||
Digital Chosunilbo Co., Ltd. |
14 | ( 1,358 | ) | | ( 1,344 | ) | ||||||||||
hanarotelecom incorporated |
(65,237 | ) | 20,764 | | (44,473 | ) | ||||||||||
KRTnet Corporation |
1,475 | (281 | ) | | 1,194 | |||||||||||
POSCO |
168,563 | 106,696 | | 275,259 | ||||||||||||
Comas Interactive Co., Ltd. |
(1,611 | ) | (13 | ) | | (1,624 | ) | |||||||||
eXtended Computing Environment Co., Ltd. |
| 907 | | 907 | ||||||||||||
LG Powercomm Co., Ltd. |
(163,113 | ) | | | (163,113 | ) | ||||||||||
Eonex Technologies Inc. |
2,011 | | | 2,011 | ||||||||||||
Currency stabilization bonds |
(218 | ) | 895 | (677 | ) | | ||||||||||
Convertible bonds of China Unicom Ltd. |
| 54,961 | | 54,961 | ||||||||||||
Sub-total |
(58,116 | ) | 182,571 | (677 | ) | 123,778 | ||||||||||
Less tax effect |
15,982 | (50,207 | ) | 186 | (34,039 | ) | ||||||||||
Total |
(42,134 | ) | 132,364 | (491 | ) | 89,739 | ||||||||||
For the nine months ended September 30, 2005 | ||||||||||||||||
Transferred to | ||||||||||||||||
Beginning | Increase/ | realized | Ending | |||||||||||||
balance | (decrease) | gain (loss) | balance | |||||||||||||
Available-for-sales equity securities: |
||||||||||||||||
Digital Chosunilbo Co., Ltd. |
( 3,758 | ) | 1,532 | | (2,226 | ) | ||||||||||
hanarotelecom incorporated |
(50,657 | ) | (10,382 | ) | | (61,039 | ) | |||||||||
KRTnet Corporation |
1,007 | 73 | | 1,080 | ||||||||||||
POSCO |
131,343 | 116,621 | | 247,964 | ||||||||||||
Comas Interactive Co., Ltd. |
(1,543 | ) | (100 | ) | | (1,643 | ) | |||||||||
SINJISOFT Corporation |
460 | | (460 | ) | | |||||||||||
Cowon System, Inc. |
| 491 | | 491 | ||||||||||||
LG Powercomm Co., Ltd. |
(168,678 | ) | | | (168,678 | ) | ||||||||||
Eonex Technologies Inc. |
2,011 | | | 2,011 | ||||||||||||
WiderThan Co., Ltd. |
(27 | ) | | | (27 | ) | ||||||||||
Sub-total |
(89,842 | ) | 108,235 | (460 | ) | 17,933 | ||||||||||
Less tax effect |
| (4,932 | ) | | (4,932 | ) | ||||||||||
Total |
(89,842 | ) | 103,303 | (460 | ) | 13,001 | ||||||||||
61
September 30, 2006 | Carrying Amount | |||||||||||||||||||||||
Ownership | ||||||||||||||||||||||||
Number | percentage | Acquisition | Net asset | September | December | |||||||||||||||||||
of shares | (%) | cost | value | 30, 2006 | 31,2005 | |||||||||||||||||||
Pantech Co., Ltd. |
25,570,306 | 22.7 | 26,309 | 44,438 | 44,929 | 55,634 | ||||||||||||||||||
SK Capital Co., Ltd. |
10,000,000 | 100.0 | 50,000 | 37,506 | 37,506 | 37,501 | ||||||||||||||||||
SK Communications Co., Ltd. |
7,844,454 | 86.4 | 175,441 | 153,564 | 173,208 | 158,170 | ||||||||||||||||||
SK Telink Co., Ltd. |
943,997 | 90.8 | 5,296 | 82,629 | 82,629 | 70,863 | ||||||||||||||||||
SK C&C Co., Ltd. |
300,000 | 30.0 | 19,071 | 213,799 | 218,365 | 198,251 | ||||||||||||||||||
SK Wyverns Baseball Club Co., Ltd. |
199,997 | 100.0 | 1,000 | | | | ||||||||||||||||||
STIC Ventures Co., Ltd. |
1,600,000 | 21.9 | 8,000 | 8,379 | 8,379 | 8,308 | ||||||||||||||||||
Paxnet Co., Ltd. |
5,590,452 | 65.9 | 26,563 | 11,373 | 28,805 | 27,372 | ||||||||||||||||||
Global
Credit & Information Co., Ltd. |
300,000 | 50.0 | 2,410 | 2,649 | 3,245 | 3,276 | ||||||||||||||||||
TU Media Corp. |
12,922,266 | 29.6 | 64,611 | 12,252 | 13,088 | 32,393 | ||||||||||||||||||
Aircross Co., Ltd. |
600,000 | 38.1 | 300 | 966 | 966 | 970 | ||||||||||||||||||
WiderThan Co., Ltd. |
2,000,000 | 10.1 | 1,000 | 11,503 | (Note a) | 11,503 | 12,827 | |||||||||||||||||
IHQ, Inc. |
13,000,000 | 34.3 | 41,793 | 14,739 | 40,846 | 13,935 | ||||||||||||||||||
Seoul Records, Inc. |
9,582,321 | 60.0 | 27,874 | 23,345 | 26,403 | 27,242 | ||||||||||||||||||
Harex Info Tech, Inc. |
225,000 | 21.2 | 3,375 | 1,128 | 2,267 | 2,568 | ||||||||||||||||||
SK Mobile |
42.5 | 10,322 | 6,217 | (Note b) | 9,090 | | ||||||||||||||||||
SLD Telecom PTE. Ltd. |
180,476,700 | 73.3 | 191,273 | 125,778 | 126,168 | 55,358 | ||||||||||||||||||
Skytel Co., Ltd. |
1,756,400 | 28.6 | 2,159 | 4,852 | 4,852 | 4,872 | ||||||||||||||||||
SK China Company Ltd. |
28,160 | 20.7 | 3,195 | 1,571 | 485 | 483 | ||||||||||||||||||
SK Telecom China Co., Ltd. |
6,150,000 | 100.0 | 7,340 | 6,564 | 6,564 | 6,927 | ||||||||||||||||||
ULand Company Ltd. |
14,100,100 | 70.1 | 17,511 | 4,057 | 8,623 | 12,564 | ||||||||||||||||||
SK Telecom USA Holdings, Inc. |
1,000 | 100.0 | 198,713 | 113,997 | (Note c) | 113,997 | 103,751 | |||||||||||||||||
SK Telecom International, Inc. |
1,099 | 100.0 | 17,467 | 24,978 | 24,978 | 25,957 | ||||||||||||||||||
SK USA, Inc. |
49 | 49.0 | 3,184 | 3,352 | 3,352 | 3,353 | ||||||||||||||||||
Korea IT Fund |
63.3 | 190,000 | 195,569 | (Note d) | 195,569 | | ||||||||||||||||||
Centurion IT Investment Association |
37.5 | 3,000 | 3,076 | 3,076 | 3,635 | |||||||||||||||||||
1st Music Investment Fund of SK-PVC |
69.3 | 6,925 | 6,995 | 6,995 | 6,990 | |||||||||||||||||||
2nd Music Investment Fund of SK-PVC |
79.3 | 7,925 | 7,966 | 7,966 | 7,966 | |||||||||||||||||||
SK-KTB Music Investment Fund |
74.3 | 14,850 | 15,248 | 15,248 | 14,999 | |||||||||||||||||||
IMM Cinema Fund |
48.4 | 12,000 | 11,944 | 11,944 | 11,884 | |||||||||||||||||||
SKT-HP Ventures, LLC. |
| | | | 5,272 | |||||||||||||||||||
Other investments in affiliates |
16,257 | | (Note e) | 15,757 | 12,583 | |||||||||||||||||||
Total |
1,155,164 | 1,246,803 | 925,904 | |||||||||||||||||||||
62
(Note a)
|
Effective January 1, 2005, the investment in common stock of WiderThan Co., Ltd. was reclassified to equity securities accounted for using the equity method. Although the Companys ownership in WiderThan Co., Ltd. is less than 20%, the Company exercises significant influences on the selection of directors and the investee has significant transactions with the Company. | |
(Note b)
|
On March 31 2006, the Company acquired 42.5% interests of common stock of SK Mobile from Pantech Co., Ltd. and others. | |
(Note c)
|
In 2005, the Company incorporated SK Telecom USA Holdings, Inc. with an investment of US$122 million in order to invest in and manage Helio, Inc., a joint venture company in the Untied States of America, which was established in order to provide wireless telecommunication services in the United States of America. In addition, the Company invested an additional US$78.5 million in SK USA Holdings, Inc. for the nine months ended September 30, 2006 (See Note 24). | |
(Note d)
|
The investment in Korea IT Fund was reclassified to equity securities accounted for using the equity method for the nine months ended September 30, 2006 as the Company has ability to exercise significant influence on the investee. | |
(Note e)
|
As allowed under Korean GAAP, investments in equity securities of SK Telecom Europe Limited and others were not accounted for using the equity method of accounting, as changes in the Companys portion of stockholders equity of such investees were not expected to be material. |
63
For the nine months ended September 30, 2006 | ||||||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||||||
Equity in | capital surplus | Other | ||||||||||||||||||||||||||||||
Beginning | earnings | and capital | Dividend | increase | Ending | |||||||||||||||||||||||||||
balance | Acquisition | (losses) | adjustments | received | (decrease) | balance | ||||||||||||||||||||||||||
Pantech Co., Ltd. |
(Note a) | 55,634 | | (12,654 | ) | 1,949 | | | 44,929 | |||||||||||||||||||||||
SK Capital Co., Ltd. |
(Note b) | 37,501 | | 5 | | | | 37,506 | ||||||||||||||||||||||||
SK Communications Co., Ltd |
(Note a) | 158,170 | | 13,079 | 1,959 | | | 173,208 | ||||||||||||||||||||||||
SK Telink Co., Ltd. |
(Note a) | 70,863 | | 11,729 | 37 | | | 82,629 | ||||||||||||||||||||||||
SK C&C Co., Ltd. |
(Notes a and c) | 198,251 | | 17,234 | 3,870 | (990 | ) | | 218,365 | |||||||||||||||||||||||
SK Wyverns Baseball
Club Co., Ltd. |
(Note b) | | | | | | | | ||||||||||||||||||||||||
STIC Ventures Co., Ltd. |
(Note b) | 8,308 | | 71 | | | | 8,379 | ||||||||||||||||||||||||
Paxnet Co., Ltd. |
(Note a) | 27,372 | | 1,178 | 255 | | | 28,805 | ||||||||||||||||||||||||
Global Credit & Information
Co., Ltd. |
(Note b) | 3,276 | | (31 | ) | | | | 3,245 | |||||||||||||||||||||||
TU Media Corp. |
(Note a) | 32,393 | | (19,305 | ) | | | | 13,088 | |||||||||||||||||||||||
Aircross Co., Ltd. |
(Note b) | 970 | | (4 | ) | | | | 966 | |||||||||||||||||||||||
WiderThan Co., Ltd. |
(Notes b and d) | 12,827 | | (500 | ) | (54 | ) | | (770 | ) | 11,503 | |||||||||||||||||||||
IHQ, Inc. |
(Notes a and d) | 13,935 | 27,352 | (2,332 | ) | 793 | | 1,098 | 40,846 | |||||||||||||||||||||||
Seoul Records, Inc. |
(Note a) | 27,242 | | (839 | ) | | | | 26,403 | |||||||||||||||||||||||
Harex Info Tech, Inc. |
(Note b) | 2,568 | | (301 | ) | | | | 2,267 | |||||||||||||||||||||||
SK Mobile |
(Note a) | | 10,322 | (1,117 | ) | (115 | ) | | | 9,090 | ||||||||||||||||||||||
SLD Telecom PTE Ltd. |
(Note a) | 55,358 | 97,285 | (11,816 | ) | (14,659 | ) | | | 126,168 | ||||||||||||||||||||||
Skytel Co., Ltd. |
(Notes b and c) | 4,872 | | 111 | 197 | (328 | ) | | 4,852 | |||||||||||||||||||||||
SK China Company Ltd. |
(Note b) | 483 | | 2 | | | | 485 | ||||||||||||||||||||||||
SK Telecom China Co., Ltd. |
(Note a) | 6,927 | | (301 | ) | (62 | ) | | | 6,564 | ||||||||||||||||||||||
ULand Company Limited. |
(Note a) | 12,564 | | (4,967 | ) | 1,026 | | | 8,623 | |||||||||||||||||||||||
SK Telecom USA Holdings, inc. |
(Note a) | 103,751 | 75,499 | (57,197 | ) | (8,056 | ) | | | 113,997 | ||||||||||||||||||||||
SK Telecom International, Inc. |
(Note a) | 25,957 | | 695 | (1,674 | ) | | | 24,978 | |||||||||||||||||||||||
SK USA, Inc. |
(Note b) | 3,353 | | (75 | ) | 74 | | | 3,352 | |||||||||||||||||||||||
Korea IT Fund |
(Notes a and e) | | | 3,395 | 2,174 | | 190,000 | 195,569 | ||||||||||||||||||||||||
Centurion IT Investment
Association |
(Note b) | 3,635 | | (615 | ) | 56 | | | 3,076 | |||||||||||||||||||||||
1st Music Investment
Fund of SK-PVC |
(Note b) | 6,990 | | 5 | | | | 6,995 | ||||||||||||||||||||||||
2nd Music Investment
Fund of SK-PVC |
(Note b) | 7,966 | | | | | | 7,966 | ||||||||||||||||||||||||
SK-KTB Music Investment Fund |
(Note a) | 14,999 | | 249 | | | | 15,248 | ||||||||||||||||||||||||
IMM Cinema Fund |
(Note a) | 11,884 | | 60 | | | | 11,944 | ||||||||||||||||||||||||
SKT-HP Ventures, LLC |
(Note f) | 5,272 | | 18 | | | (5,290 | ) | | |||||||||||||||||||||||
Total |
913,321 | 210,458 | (64,223 | ) | (12,230 | ) | (1,318 | ) | 185,038 | 1,231,046 | ||||||||||||||||||||||
Less six months ended
June 30, 2006 |
145,888 | (22,876 | ) | (13,852 | ) | (1,318 | ) | (597 | ) | |||||||||||||||||||||||
Three months ended
September 30, 2006 |
64,570 | (41,347 | ) | 1,622 | ( | ) | 185,635 | |||||||||||||||||||||||||
64
(Note a)
|
Investments were recorded using the equity method of accounting based on unaudited and unreviewed financial statements as of and for the nine months ended September 30, 2006 In order to verify the reliability of such unaudited and unreviewed financial statements, the Company has performed the following procedures and found no significant errors: |
i) | obtained the signature from the chief executive officer of the equity method investee asserting that the unaudited and unreviewed financial statements are accurate | |||
ii) | checked whether the major transactions identified by the Company, including public disclosures, were appropriately reflected in the unaudited and unreviewed financial statements | |||
iii) | performed an analytical review on the unaudited and unreviewed financial statements |
(Note b)
|
Investments in equity securities are carried using the equity method of accounting based on the financial statements as of December 31, 2005 as information as of September 30, 2006 was not available and the change in the Companys portion of stockholders equity of the investee for the nine months ended September 30, 2006 was immaterial. | |
(Note c)
|
The Company received dividends from SK C&C Co., Ltd. and Skytel Co., Ltd. and the corresponding amount was deducted from the carrying amount of equity method securities. | |
(Note d)
|
Other increase (decrease) in investments in equity securities of WiderThan Co., Ltd. and IHQ, Inc. represent gains (losses) on disposal of investments in equity securities, which have resulted from the dilution of the Companys ownership as a result of investees sale of their unissued shares to third parties. | |
(Note e)
|
Other increase in investments in Korea IT Fund is the carrying amount transferred from available-for-sale equity securities. | |
(Note f)
|
Investment was fully liquidated due to dissolution of SKT-HP Ventures, LLC for the nine months ended September 30, 2006. |
65
For the nine months ended September 30, 2005 | ||||||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||||||
Equity in | capital surplus | |||||||||||||||||||||||||||||||
Beginning | earnings | and capital | Dividend | Other increase | Ending | |||||||||||||||||||||||||||
balance | Acquisition | (losses) | adjustments | received | (decrease) | balance | ||||||||||||||||||||||||||
SKY Teletech Co., Ltd. |
190,896 | | (15,338 | ) | 108 | | (115,478 | ) | 60,188 | |||||||||||||||||||||||
SK Capital Co., Ltd. |
(Note a) | 34,891 | | | | | | 34,891 | ||||||||||||||||||||||||
SK Communications Co., Ltd |
143,096 | | 8,494 | (797 | ) | | | 150,793 | ||||||||||||||||||||||||
SK Telink Co., Ltd. |
56,182 | | 13,228 | 32 | | | 69,442 | |||||||||||||||||||||||||
SK C&C Co., Ltd. |
201,353 | | 13,359 | 16,468 | (600 | ) | | 230,580 | ||||||||||||||||||||||||
SK Wyverns Baseball
Club Co., Ltd. |
| | (3,904 | ) | | | | | ||||||||||||||||||||||||
STIC Ventures Co., Ltd. |
(Note a) | 7,321 | | (284 | ) | 441 | | | 7,478 | |||||||||||||||||||||||
Paxnet Co., Ltd. |
25,244 | | 1,510 | | | | 26,754 | |||||||||||||||||||||||||
Global
Credit & Information
Co., Ltd. |
(Note a) | 3,054 | | (31 | ) | | | | 3,023 | |||||||||||||||||||||||
TU Media Corp. |
34,607 | | (18,788 | ) | (4 | ) | | | 15,815 | |||||||||||||||||||||||
Aircross Co., Ltd. |
(Note a) | 944 | | (4 | ) | | | | 940 | |||||||||||||||||||||||
IHQ, Inc. |
| 14,440 | 166 | (10 | ) | | | 14,596 | ||||||||||||||||||||||||
Seoul Records, Inc. |
| 27,874 | 209 | | | | 28,083 | |||||||||||||||||||||||||
SLD Telecom PTE Ltd. |
59,804 | | (5,235 | ) | (442 | ) | | | 54,127 | |||||||||||||||||||||||
Skytel Co., Ltd. |
(Note a) | 3,633 | | 88 | (8 | ) | | | 3,713 | |||||||||||||||||||||||
SK China Company Ltd. |
(Note a) | 803 | | 35 | (8 | ) | | | 830 | |||||||||||||||||||||||
SK Telecom China Co., Ltd. |
(Note a) | 9,212 | | 178 | (178 | ) | | | 9,212 | |||||||||||||||||||||||
ULand Company Limited |
| 17,511 | (3,128 | ) | 2,098 | | | 16,481 | ||||||||||||||||||||||||
SK Telecom USA Holdings, Inc. |
| 123,214 | (10,535 | ) | 3,235 | | | 115,914 | ||||||||||||||||||||||||
SK Telecom International, Inc. |
(Note a) | 21,995 | | 3,048 | (62 | ) | | | 24,981 | |||||||||||||||||||||||
SK USA, Inc. |
(Note a) | 3,184 | | 168 | (297 | ) | | | 3,055 | |||||||||||||||||||||||
Centurion IT Investment
Association |
(Note a) | 3,205 | | (277 | ) | | | | 2,928 | |||||||||||||||||||||||
SKT-QC Wireless Development
Fund |
(Note a) | 5,145 | | 1 | | | | 5,146 | ||||||||||||||||||||||||
SKT-HP Ventures, LLC |
(Note a) | 5,284 | | | (3 | ) | | | 5,281 | |||||||||||||||||||||||
Total |
809,853 | 183,039 | (17,040 | ) | 20,573 | (600 | ) | (115,478 | ) | 884,251 | ||||||||||||||||||||||
Less six months ended
June 30, 2005 |
97,878 | (19,031 | ) | (10,158 | ) | (600 | ) | | ||||||||||||||||||||||||
Three months ended
September 30, 2005 |
85,161 | 1,991 | 30,731 | | (115,478 | ) | ||||||||||||||||||||||||||
(Note a)
|
Investments in equity securities are carried using the equity method of accounting based on the financial statements as of December 31, 2004 as information as of September 30, 2005 was not available and the change of the Companys portion of shareholders equity of the investee for the nine months ended September 30, 2005 was not expected to be material. |
66
For the nine months ended September 30, 2006 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
balance | Increase | Amortization | balance | |||||||||||||
Pantech Co., Ltd. |
793 | | (32 | ) | 761 | |||||||||||
SK Communications Co., Ltd. |
23,814 | | (1,048 | ) | 22,766 | |||||||||||
SK C&C Co., Ltd. |
4,870 | | (304 | ) | 4,566 | |||||||||||
Paxnet Co., Ltd. |
18,237 | | (805 | ) | 17,432 | |||||||||||
Global Credit & Information Co., Ltd. |
628 | | (31 | ) | 597 | |||||||||||
TU Media Corp. |
993 | | (157 | ) | 836 | |||||||||||
IHQ, Inc. |
6,267 | 21,948 | (2,108 | ) | 26,107 | |||||||||||
Seoul Records, Inc. |
3,670 | | (612 | ) | 3,058 | |||||||||||
Harex Info Tech, Inc. |
1,402 | | (263 | ) | 1,139 | |||||||||||
SK Mobile |
| 3,192 | (319 | ) | 2,873 | |||||||||||
SLD Telecom PTE. Ltd. |
406 | | (16 | ) | 390 | |||||||||||
ULand Company Ltd. |
3,628 | 1,131 | (193 | ) | 4,566 | |||||||||||
Total |
64,708 | 26,271 | (5,888 | ) | 85,091 | |||||||||||
Less six months ended
June 30, 2006 |
4,252 | (3,201 | ) | |||||||||||||
Three months ended
September 30, 2006 |
22,019 | ( |
2,687 | ) | ||||||||||||
For the nine months ended September 30, 2005 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
balance | Increase | Amortization | balance | |||||||||||||
Pantech Co., Ltd. |
3,287 | (2,155 | ) | (100 | ) | 1,032 | ||||||||||
SK Communications Co., Ltd. |
24,622 | | (459 | ) | 24,163 | |||||||||||
SK C&C Co., Ltd. |
5,276 | | (304 | ) | 4,972 | |||||||||||
Paxnet Co., Ltd. |
19,310 | | (805 | ) | 18,505 | |||||||||||
Global Credit & Information Co., Ltd. |
670 | | (31 | ) | 639 | |||||||||||
IHQ, Inc. |
| 7,401 | (185 | ) | 7,216 | |||||||||||
Seoul Records, Inc. |
| 4,078 | (51 | ) | 4,027 | |||||||||||
SLD Telecom PTE. Ltd. |
428 | | (17 | ) | 411 | |||||||||||
ULand Company Ltd. |
| 3,922 | (245 | ) | 3,677 | |||||||||||
Total |
53,593 | 13,246 | (2,197 | ) | 64,642 | |||||||||||
Less six months ended
June 30, 2005 |
7,401 | (1,169 | ) | |||||||||||||
Three months ended
September 30, 2005 |
5,845 | (1,028 | ) | |||||||||||||
67
For the nine months ended September 30, 2006 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Subsidiary | balance | Increase | Decrease | balance | ||||||||||||
Pantech Co., Ltd. |
| 270 | | 270 | ||||||||||||
SK Communications Co., Ltd. |
4,016 | | (894 | ) | 3,122 | |||||||||||
SK China Company Ltd. |
1,086 | | | 1,086 | ||||||||||||
Total |
5,102 | 270 | (894 | ) | 4,478 | |||||||||||
Less: six months ended
June 30, 2006 |
270 | (686 | ) | |||||||||||||
Three months ended
September 30, 2006 |
| (208 | ) | |||||||||||||
For the nine months ended September 30, 2005 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Subsidiary | balance | Increase | Decrease | balance | ||||||||||||
SK Communications Co., Ltd. |
| 3,688 | | 3,688 | ||||||||||||
SK China Company Ltd. |
1,206 | | (120 | ) | 1,086 | |||||||||||
Total |
1,206 | 3,688 | (120 | ) | 4,774 | |||||||||||
Less: six months ended
June 30, 2005 |
3,688 | (120 | ) | |||||||||||||
Three months ended
September 30, 2005 |
| | ||||||||||||||
Market price | Number of | |||||||||||
per share | shares owned by | |||||||||||
(In Korean won) | the Company | Market price | ||||||||||
Pantech Co., Ltd. |
5,500 | 25,570,306 | 140,637 | |||||||||
WiderThan Co., Ltd. |
15,832 | 2,000,000 | 31,664 | |||||||||
IHQ, Inc. |
7,800 | 13,000,000 | 101,400 | |||||||||
Seoul Records, Inc. |
3,870 | 9,582,321 | 37,084 |
68
Total | Total | Net | ||||||||||||||
assets | liabilities | Revenue | income (loss) | |||||||||||||
Pantech Co., Ltd. |
1,121,241 | 927,201 | 1,001,528 | (55,161 | ) | |||||||||||
SK Communications Co., Ltd. |
243,204 | 57,108 | 132,364 | 17,780 | ||||||||||||
SK Telink Co., Ltd. |
136,491 | 45,844 | 141,993 | 14,324 | ||||||||||||
SK C&C Co., Ltd. |
1,661,359 | 948,694 | 681,075 | 58,578 | ||||||||||||
Paxnet Co., Ltd. |
22,305 | 4,445 | 23,591 | 2,956 | ||||||||||||
TU Media Corp. |
355,953 | 314,536 | 60,080 | (64,561 | ) | |||||||||||
IHQ, Inc. |
71,675 | 26,644 | 37,401 | (2,775 | ) | |||||||||||
Seoul Records, Inc. |
46,182 | 7,273 | 19,820 | (355 | ) | |||||||||||
SK Mobile |
16,301 | 1,674 | 796 | (2,814 | ) | |||||||||||
SLD Telecom PTE Ltd. |
228,689 | 57,141 | | (14,999 | ) | |||||||||||
SK Telecom China Co., Ltd. |
6,843 | 279 | 11,450 | (23 | ) | |||||||||||
ULand Company Limited |
7,640 | 1,856 | 5,285 | (6,301 | ) | |||||||||||
SK Telecom USA Holdings, Inc. |
154,079 | 40,081 | | (56,572 | ) | |||||||||||
SK Telecom International, Inc. |
26,301 | 1,324 | 9,279 | 1,196 | ||||||||||||
Korea IT Fund |
308,794 | | 14,494 | 3,043 | ||||||||||||
SKT-KTB Music Investment Fund |
20,637 | 81 | 445 | 341 | ||||||||||||
IMM Cinema Fund |
24,685 | 2 | 336 | 122 |
5. | LOANS TO EMPLOYEES |
September 30, 2006 | December 31, | |||||||||||||||
Short-term | Long-term | Total | 2005 | |||||||||||||
Loans to employees stock ownership association |
2,327 | 6,271 | 8,598 | 14,586 | ||||||||||||
Loans to employees for housing and other |
78 | 221 | 299 | 433 | ||||||||||||
Total |
2,405 | 6,492 | 8,897 | 15,019 | ||||||||||||
6. | PROPERTY AND EQUIPMENT |
Useful lives | ||||||||||||
(years) | September 30, 2006 | December 31, 2005 | ||||||||||
Land |
| 462,587 | 461,513 | |||||||||
Buildings and structures |
30,15 | 1,480,719 | 1,477,838 | |||||||||
Machinery |
6 | 10,748,336 | 10,376,529 | |||||||||
Vehicles |
4 | 20,669 | 20,442 | |||||||||
Other |
4 | 833,281 | 807,534 | |||||||||
Construction in progress |
| 396,038 | 264,309 | |||||||||
13,941,630 | 13,408,165 | |||||||||||
Less accumulated depreciation |
(9,569,732 | ) | (8,812,282 | ) | ||||||||
Property and equipment, net |
4,371,898 | 4,595,883 | ||||||||||
69
For the nine months ended September 30, 2006 | ||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||
balance | Acquisition | Disposal | Transfer | Depreciation | balance | |||||||||||||||||||
Land |
461,513 | 7 | (344 | ) | 1,411 | | 462,587 | |||||||||||||||||
Buildings and structures |
1,145,497 | 1,969 | (607 | ) | 1,755 | (41,596 | ) | 1,107,018 | ||||||||||||||||
Machinery |
2,429,564 | 8,755 | (1,704 | ) | 487,220 | (791,570 | ) | 2,132,265 | ||||||||||||||||
Vehicles |
2,786 | 994 | (113 | ) | | (1,286 | ) | 2,381 | ||||||||||||||||
Other |
292,214 | 423,457 | (13,548 | ) | (369,599 | ) | (60,915 | ) | 271,609 | |||||||||||||||
Construction in progress |
264,309 | 279,259 | | (147,530 | ) | | 396,038 | |||||||||||||||||
Total |
4,595,883 | 714,441 | (16,316 | ) | (26,743 | ) | (895,367 | ) | 4,371,898 | |||||||||||||||
Less six months ended
June 30, 2006 |
431,132 | (14,730 | ) | (15,896 | ) | (567,954 | ) | |||||||||||||||||
Three months ended
September 30, 2006 |
283,309 | (1,586 | ) | (10,847 | ) | (327,413 | ) | |||||||||||||||||
For the nine months ended September 30, 2005 | ||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||
balance | Acquisition | Disposal | Transfer | Depreciation | balance | |||||||||||||||||||
Land |
463,656 | 719 | (504 | ) | 1,503 | | 465,374 | |||||||||||||||||
Buildings and structures |
1,163,070 | 7,663 | (782 | ) | 18,531 | (41,216 | ) | 1,147,266 | ||||||||||||||||
Machinery |
2,585,118 | 13,697 | (17,901 | ) | 368,028 | (820,928 | ) | 2,128,014 | ||||||||||||||||
Vehicles |
4,030 | 753 | (116 | ) | 70 | (1,626 | ) | 3,111 | ||||||||||||||||
Other |
251,377 | 500,868 | (2,718 | ) | (267,494 | ) | (59,621 | ) | 422,412 | |||||||||||||||
Construction in progress |
138,002 | 254,221 | | (149,255 | ) | | 242,968 | |||||||||||||||||
Total |
4,605,253 | 777,921 | (22,021 | ) | (28,617 | ) | (923,391 | ) | 4,409,145 | |||||||||||||||
Less six months ended
June 30, 2005 |
365,267 | (21,189 | ) | (19,972 | ) | (595,955 | ) | |||||||||||||||||
Three months ended
September 30, 2005 |
412,654 | (832 | ) | (8,645 | ) | (327,436 | ) | |||||||||||||||||
7. | INTANGIBLE ASSETS |
September, 2006 | December 31, 2005 | |||||||||||||||||||||||
Acquisition | Accumulated | Carrying | Acquisition | Accumulated | Carrying | |||||||||||||||||||
cost | amortization | amounts | cost | amortization | amounts | |||||||||||||||||||
Goodwill |
2,335,532 | (611,144 | ) | 1,724,388 | 2,335,532 | (514,648 | ) | 1,820,884 | ||||||||||||||||
Frequency use rights |
1,384,433 | (279,115 | ) | 1,105,318 | 1,384,433 | (200,141 | ) | 1,184,292 | ||||||||||||||||
Software development costs |
229,121 | (183,559 | ) | 45,562 | 221,913 | (160,657 | ) | 61,256 | ||||||||||||||||
Computer software |
521,966 | (267,670 | ) | 254,296 | 489,807 | (210,050 | ) | 279,757 | ||||||||||||||||
Other |
107,717 | (67,928 | ) | 39,789 | 103,974 | (63,616 | ) | 40,358 | ||||||||||||||||
4,578,769 | (1,409,416 | ) | 3,169,353 | 4,535,659 | (1,149,112 | ) | 3,386,547 | |||||||||||||||||
70
For the nine months ended September 30, 2006 | ||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||
balance | Increase | Decrease | Transfer | Amortization | balance | |||||||||||||||||||
Goodwill |
1,820,884 | | | | (96,496 | ) | 1,724,388 | |||||||||||||||||
Frequency use rights |
1,184,292 | | | | (78,974 | ) | 1,105,318 | |||||||||||||||||
Software development costs |
61,256 | | | 7,208 | (22,902 | ) | 45,562 | |||||||||||||||||
Computer software |
279,757 | 12,019 | (1 | ) | 20,189 | (57,668 | ) | 254,296 | ||||||||||||||||
Other |
40,358 | 3,796 | (53 | ) | 275 | (4,587 | ) | 39,789 | ||||||||||||||||
Total |
3,386,547 | 15,815 | (54 | ) | 27,672 | (260,627 | ) | 3,169,353 | ||||||||||||||||
Less six months ended
June 30, 2006 |
5,650 | (20 | ) | 17,053 | (171,260 | ) | ||||||||||||||||||
Three months ended
September 30, 2006 |
10,165 | (34 | ) | 10,619 | (89,367 | ) | ||||||||||||||||||
For the nine months ended September 30, 2005 | ||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||
balance | Increase | Decrease | Transfer | Amortization | balance | |||||||||||||||||||
Goodwill |
1,949,546 | | | | ( |
) | 1,853,050 | |||||||||||||||||
Frequency use rights |
1,163,319 | 117,380 | | | (72,305 | ) | 1,208,394 | |||||||||||||||||
Software development costs |
100,579 | 35 | | | (31,023 | ) | 69,591 | |||||||||||||||||
Computer software |
190,744 | 17,804 | (3 | ) | 29,364 | (39,735 | ) | 198,174 | ||||||||||||||||
Other |
44,431 | 1,471 | (214 | ) | 600 | (5,653 | ) | 40,635 | ||||||||||||||||
Total |
3,448,619 | 136,690 | (217 | ) | 29,964 | (245,212 | ) | 3,369,844 | ||||||||||||||||
Less six months ended
June 30, 2005 |
124,020 | (203 | ) | 20,763 | (163,573 | ) | ||||||||||||||||||
Three months ended
September 30, 2005 |
12,670 | (14 | ) | 9,201 | (81,639 | ) | ||||||||||||||||||
Amount | Description | Residual useful lives | ||||||
Goodwill
|
1,724,388 | Goodwill related to acquisition of Shinsegi Telecomm, Inc. | 13 years and 6 months | |||||
IMT license
|
988,094 | Frequency use rights relating to W-CDMA Service | (Note a) | |||||
WiBro license
|
110,331 | WiBro Service | (Note b) | |||||
DMB license
|
6,893 | DMB Service | 9 years and 9 months |
71
(Note a)
|
Amortization of the IMT license commenced when the Company started its commercial IMT 2000 service in December 2003, using the straight-line method over the estimated useful life (13 years) of the IMT license which expires in December 2016. | |
(Note b)
|
The Company purchased the WiBro license from MIC on March 30, 2005. The license period is seven years from the purchase date. Amortization of the WiBro license commenced when the Company started its commercial WiBro services on June 30, 2006 using the straight line basis over the remaining useful life. |
8. | BONDS PAYABLE AND LONG-TERM BORROWINGS |
Annual | ||||||||||||||||
interest | September 30, | December 31, | ||||||||||||||
Maturity year | rate (%) | 2006 | 2005 | |||||||||||||
Domestic general bonds |
2006 | 5.0 6.0 | 450,000 | 800,000 | ||||||||||||
|
2007 | 5.0 6.0 | 700,000 | 700,000 | ||||||||||||
|
2008 | 5.0 | 300,000 | 300,000 | ||||||||||||
|
2009 | 5.0 | 300,000 | 300,000 | ||||||||||||
|
2010 | 4.0 | 200,000 | 200,000 | ||||||||||||
|
2011 | 3.0 | 200,000 | 200,000 | ||||||||||||
|
2016 | 5.0 | 200,000 | | ||||||||||||
Dollar denominated bonds
(US$300,000) |
2011 | 4.25 | 283,560 | 303,900 | ||||||||||||
Convertible bonds (US$311,030) |
2009 | | 364,309 | 385,885 | ||||||||||||
Total |
2,997,869 | 3,189,785 | ||||||||||||||
Less discounts on bonds |
(30,185 | ) | (40,016 | ) | ||||||||||||
conversion right adjustments |
(48,973 | ) | (65,219 | ) | ||||||||||||
Add long-term accrued interest |
23,421 | 24,808 | ||||||||||||||
Net |
2,942,132 | 3,109,358 | ||||||||||||||
Less portion due within one year |
(847,772 | ) | (795,150 | ) | ||||||||||||
Long-term portion |
2,094,360 | 2,314,208 | ||||||||||||||
72
Final | Annual interest | September 30, | December 31, | |||||||
Lender | maturity year | rate (%) (Note) | 2006 | 2005 | ||||||
Long-term floating rate discount bill
|
Shinhan Bank | June 29, 2011 | 91 days CD yield + 0.25% |
9. | SUBSCRIPTION DEPOSITS |
73
Long-term subscription deposits held as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won except deposit per subscriber amounts): |
Deposit | ||||||||||||
Service type | per subscriber | September 30, 2006 | December 31, 2005 | |||||||||
Cellular |
200,000 | 21,666 | 23,770 | |||||||||
The Company offers existing and new cellular subscribers the option of obtaining credit insurance from Seoul Guarantee Insurance Company (SGIC) in lieu of the subscription deposits. Existing subscribers who elect this option are refunded their subscription deposits. As a result, the balance of subscription deposits has been decreasing. | ||
10. | LEASES | |
The Company acquired certain computer equipment and software from SK C&C Co., Ltd. and succeeded certain capital lease agreements between SK C&C Co., Ltd. and HP Financial Service. Details of capital lease assets acquired and liabilities assumed from SK C&C Co., Ltd. as of and for the nine months ended September 30, 2006 and as of and for the year ended December 31, 2005 are as follows (In millions of Korean won): |
September 30, 2006 | December 31, 2005 | |||||||||
Acquisition cost |
Office equipment | 16,096 | 16,919 | |||||||
Computer software | 7,609 | 7,625 | ||||||||
23,705 | 24,544 | |||||||||
Accumulated depreciation |
Office equipment | 6,802 | 744 | |||||||
Computer software | 1,268 | 127 | ||||||||
8,070 | 871 | |||||||||
Carrying amounts |
Office equipment | 9,294 | 16,175 | |||||||
Computer software | 6,341 | 7,498 | ||||||||
15,635 | 23,673 | |||||||||
Depreciation expenses |
Office equipment | 6,197 | 744 | |||||||
Computer software | 1,142 | 127 | ||||||||
7,339 | 871 | |||||||||
The Companys minimum future lease payments as of September 30, 2006 are as follows (In millions of Korean won): |
Annual lease payments | Interest | Principal | ||||||||||
October 2006 ~ September 2007 |
10,758 | ( |
) | 10,257 | ||||||||
October 2007 ~ September 2008 |
3,467 | (70 | ) | 3,397 | ||||||||
Total |
14,225 | ( |
) | 13,654 | ||||||||
Less: portion due within one year |
(10,257 | ) | ||||||||||
Capital lease liabilities |
3,397 | |||||||||||
74
11. | MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES | |
The details of monetary assets and liabilities denominated in foreign currencies (except for bonds payable denominated in foreign currencies described in Note 8) as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won, thousands of U.S. dollars, thousands of HK dollars, thousands of Japanese yen, thousands of Great Britain pounds, thousands of Singapore dollars, thousands of Swiss Franc and thousands of Euros, thousands of Chinese yuan, thousands of Canada dollars): |
September 30, 2006 | December 31, 2005 | |||||||||||||||
Foreign | Korean won | Foreign | Korean won | |||||||||||||
currencies | equivalent | currencies | equivalent | |||||||||||||
Cash and cash equivalents |
US$ | 1,179 | 1,115 | US$ | 4,175 | 4,229 | ||||||||||
|
| | EUR | 3 | 3 | |||||||||||
Accounts receivable trade |
US$ | 18,242 | 17,242 | US$ | 9,390 | 9,512 | ||||||||||
|
EUR | 248 | 298 | EUR | 248 | 298 | ||||||||||
Accounts receivable other |
US$ | 4,113 | 3,888 | US$ | 3,364 | 3,408 | ||||||||||
Guarantee deposits |
US$ | 17 | 16 | JPY | 16,156 | 139 | ||||||||||
|
JPY | 21,536 | 173 | | | |||||||||||
22,732 | 17,589 | |||||||||||||||
Accounts payable |
US$ | 12,188 | 11,520 | US$ | 15,633 | 15,836 | ||||||||||
|
JPY | 32,758 | 263 | JPY | 8,498 | 73 | ||||||||||
|
HK$ | 136 | 16 | HK | 254 | 33 | ||||||||||
|
GBP | 58 | 102 | GBP | 453 | 792 | ||||||||||
|
SG$ | 12 | 7 | SG$ | 22 | 13 | ||||||||||
|
EUR | 580 | 696 | EUR | 504 | 604 | ||||||||||
|
CNY | 2 | 1 | CHF | 19 | 15 | ||||||||||
|
CA$ | 354 | 301 | | | |||||||||||
12,906 | 17,366 | |||||||||||||||
12. | CAPITAL STOCK AND CAPITAL SURPLUS | |
The Companys capital stock consists entirely of common stock with a par value of |
September 30, 2006 | December 31, 2005 | |||||||
Authorized shares |
220,000,000 | 220,000,000 | ||||||
Issued shares |
81,193,711 | 82,276,711 | ||||||
Outstanding shares, net of treasury stock |
72,630,657 | 73,614,296 |
75
Significant change in capital stock and capital surplus for the nine months ended September 30, 2006 and for the year ended December 31, 2005 are as follows (In millions of Korean won except for share data): |
Number of | ||||||||||||
shares | ||||||||||||
Issued | Capital stock | Capital surplus | ||||||||||
At January 1, 2005 |
82,276,711 | 44,639 | 2,983,166 | |||||||||
Deferred tax liabilities deducted
from capital surplus (Note a) |
| | (18,501 | ) | ||||||||
Transferred from stock options in
capital adjustment (Note b) |
| | 1,533 | |||||||||
At December 31, 2005 |
82,276,711 | 44,639 | 2,966,198 | |||||||||
Consideration for conversion right (Note c) |
| | (2,728 | ) | ||||||||
Transferred from stock options in
capital adjustment (Note d) |
| | 234 | |||||||||
Gains on disposal of treasury stock (Note e) |
| | 176 | |||||||||
Retirement of treasury stock (Note f) |
(1,083,000 | ) | | | ||||||||
September 30, 2006 |
81,193,711 | 44,639 | 2,963,880 | |||||||||
(Note a)
|
The tax effects of consideration for conversion rights, which resulted in temporary differences, were deducted directly from related components of stockholders equity, pursuant to adoption of SKAS No. 16 for the year ended December 31, 2005. | |
(Note b)
|
During the year ended December 31, 2005, the exercisable
period for the stock options representing 17,800 shares, of
which recognized compensation costs were |
|
(Note c)
|
During the nine months ended September 30, 2006, the
convertible bonds with a face value of US$18,420,000 were
converted and the capital surplus amount (in connection with
the related conversion rights) decreased by |
|
(Note d)
|
During the nine months ended September 30, 2006, the
exercisable period for the stock options representing 43,390
shares, of which recognized compensation costs were |
|
(Note e)
|
In relation to the conversion of convertible bonds, 99,361
shares of treasury stock were issued and |
|
(Note f)
|
The Company retired 491,000 shares and 592,000 shares of treasury stock on August 17, 2006 and September 29, 2006, respectively, and reduced retained earnings before appropriation in accordance with Korean Commercial laws. |
76
13. | RETAINED EARNINGS | |
Retained earnings as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won): |
September 30, 2006 | December 31, 2005 | |||||||
Appropriated |
6,679,235 | 5,470,701 | ||||||
Before appropriations |
886,220 | 1,799,160 | ||||||
7,565,455 | 7,269,861 | |||||||
The details of appropriated retained earnings as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won): |
September 30, 2006 | December 31, 2005 | |||||||
Legal reserve |
22,320 | 22,320 | ||||||
Reserve for improvement of financial structure |
33,000 | 33,000 | ||||||
Reserve for loss on disposal of treasury stock |
477,182 | 477,182 | ||||||
Reserve for research and manpower development |
880,595 | 822,061 | ||||||
Reserve for business expansion |
5,266,138 | 4,116,138 | ||||||
Total |
6,679,235 | 5,470,701 | ||||||
a. | Legal Reserve | |
The Korean Commercial Code requires the Company to appropriate as a legal reserve at least 10% of cash dividends for each accounting period until the reserve equals 50% of outstanding capital stock. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to capital stock. | ||
b. | Reserve for Improvement of Financial Structure | |
The Financial Control Regulation for listed companies in Korea requires that at least 10% of net income (net of accumulated deficit), and an amount equal to net gain (net of related income taxes, if any) on the disposal of property and equipment be appropriated as a reserve for improvement of financial structure until the ratio of stockholders equity to total assets reaches 30%. The reserve for improvement of financial structure may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to capital stock. | ||
c. | Reserves for Loss on Disposal of Treasury Stock and Research and Manpower Development | |
Reserves for loss on disposal of treasury stock and research and manpower development were appropriated in order to recognize certain tax deductible benefits through the early recognition of future expenditures for tax purposes. These reserves will be reversed from appropriated retained earnings in accordance with the relevant tax laws. Such reversal will be included in taxable income in the year of reversal. | ||
d. | Reserve for Business Expansion | |
The reserve for business expansion is voluntary and was approved by the board of directors and stockholders. |
77
14. | TREASURY STOCK | |
Upon issuances of stock dividends and new common stock, and the merger with Shinsegi Telecomm,
Inc. and SK IMT Co., Ltd., the Company acquired fractional shares totaling 77,970 shares for
|
||
On August 17, 2006, the Company retired 491,000 shares of treasury stock, which were acquired by
the Company during the period from August 1, 2006 through August 14, 2006 for |
||
On September 29, 2006, the Company retired 592,000 shares of treasury stock, which were acquired
by the Company during the period from September 4, 2006 through September 27, 2006 for |
||
In connection with the retired treasury stocks discussed above, the Company reduced its retained
earnings before appropriations by |
||
15. | STOCK OPTIONS | |
On March 17, 2000, March 16, 2001 and March 8, 2002, in accordance with the approval of its
stockholders or its board of directors, the Company granted stock options to its management,
representing 17,800 shares at an exercise price of |
||
The value of stock options granted is determined using the Black-Scholes option-pricing model,
without considering the volatility factor in estimating the value of its stock options, as
permitted under Korean GAAP. The following assumptions are used to estimate the fair value of
options granted in 2000, 2001 and 2002; risk-free interest rate of 9.1% for 2000, 5.9% for 2001
and 6.2% for 2002; expected life of three years for 2000, 2001 and 2002; expected dividend of
|
Recognized | Recognized | |||||||||||||||||||||||||||
compensation cost | compensation cost | Stock options in | ||||||||||||||||||||||||||
Total | for the three months | for the nine months | capital adjustment | |||||||||||||||||||||||||
Compensation | ended September 30, | ended September 30, | September 30, | December 31, | ||||||||||||||||||||||||
Grant date | cost | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||
March 17, 2000(Note a) |
1,533 | | | | | | | |||||||||||||||||||||
March 16, 2001(Note b) |
234 | | | | | | 234 | |||||||||||||||||||||
March 8, 2002 |
3,246 | | | | 180 | 3,246 | 3,246 | |||||||||||||||||||||
5,013 | | | | 180 | 3,246 | 3,480 | ||||||||||||||||||||||
78
(Note a)
|
During the year ended December 31, 2005, the exercisable
period expired for stock options representing 17,800 shares,
for which the Company had recognized compensation cost of
|
|
(Note b)
|
During the nine months ended September 30, 2006, the
exercisable period expired for stock options representing
43,820 shares, for which the Company had recognized
compensation cost of |
For the three months ended September 30, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Pro forma ordinary income (In millions of Korean won) |
645,935 | 789,591 | 553,022 | |||||||||
Pro forma ordinary income per share
(In Korean won) |
6,231 | 7,986 | 5,367 | |||||||||
Pro forma net income (In millions of Korean won) |
456,802 | 587,878 | 395,088 | |||||||||
Pro forma net income per share (In Korean won) |
6,231 | 7,986 | 5,367 |
For the nine months ended September 30, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Pro forma ordinary income (In millions of Korean won) |
1,650,637 | 1,987,193 | 1,632,891 | |||||||||
Pro forma ordinary income per share
(In Korean won) |
15,875 | 19,332 | 15,557 | |||||||||
Pro forma net income (In millions of Korean won) |
1,167,300 | 1,423,107 | 1,145,248 | |||||||||
Pro forma net income per share (In Korean won) |
15,875 | 19,332 | 15,557 |
16. | INCOME TAX |
a. | Details of income tax expense | ||
Income tax expenses for the nine months ended September 30, 2006 and 2005 consist of the following (In millions of Korean won): |
2006 | 2005 | |||||||
Current |
544,033 | 559,738 | ||||||
Deferred (Note a) |
(60,696 | ) | 4,347 | |||||
Income tax expenses |
483,337 | 564,085 | ||||||
Less: six months ended June 30, |
(294,204 | ) | (362,372 | ) | ||||
Three months ended September 30, |
189,133 | 201,713 | ||||||
79
(Note a) | Changes in net deferred tax liabilities for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won): |
2006 | 2005 | |||||||
Ending balance of net deferred tax liabilities |
324,490 | 377,423 | ||||||
Beginning balance of net deferred tax liabilities |
(348,563 | ) | (323,096 | ) | ||||
Adjustment to the beginning net deferred income
tax liabilities based on tax return filed |
10,453 | 8,536 | ||||||
Tax effect of temporary differences charged
or credited directly to related components of
stockholders equity |
(47,076 | ) | (58,516 | ) | ||||
(60,696 | ) | 4,347 | ||||||
b. | Reconciling items between accounting income and taxable income | |
Reconciling items between accounting income and taxable income for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won): |
2006 | 2005 | |||||||
(Temporary Differences) |
||||||||
Additions: |
||||||||
Allowance for doubtful accounts |
149,075 | 117,877 | ||||||
Accrued interest income prior period |
3,931 | 4,423 | ||||||
Reserves for research and manpower development |
141,000 | 98,600 | ||||||
Reserves for loss on disposal of treasury stock |
177,675 | | ||||||
Equity in losses of affiliates |
64,373 | 117,488 | ||||||
Unrealized loses on valuation of long-term investment securities |
47,442 | 9,411 | ||||||
Accrued expenses |
15,300 | 5,586 | ||||||
Depreciation |
40,973 | 11,977 | ||||||
Loss on impairment of other assets |
1,488 | 8,115 | ||||||
Loss on valuation of currency swap |
4,195 | | ||||||
Loss on valuation of currency swap (capital adjustments) |
9,807 | 23,845 | ||||||
Accrued severance indemnities |
23,960 | 17,443 | ||||||
Deposits for severance indemnities |
148,610 | 9,686 | ||||||
Consideration of conversion right |
16,246 | 12,642 | ||||||
Other |
45,319 | 8,597 | ||||||
Sub-total |
889,394 | 445,690 | ||||||
Deductions: |
||||||||
Reserves for research and manpower development |
(135,000 | ) | (97,500 | ) | ||||
Allowance for doubtful accounts prior period |
(124,184 | ) | (59,612 | ) | ||||
Depreciation prior period |
(14,867 | ) | (59,360 | ) | ||||
Accrued interest income |
(7,287 | ) | (7,061 | ) | ||||
Equity in earnings of affiliates |
| (40,484 | ) | |||||
Unrealized gains on valuation of long-term investment securities |
(229,335 | ) | (116,725 | ) | ||||
Accrued expenses |
(21,906 | ) | (12,282 | ) | ||||
Accrued severance indemnities |
(155,633 | ) | (9,686 | ) | ||||
Deposits for severance indemnities |
(3,424 | ) | (17,443 | ) | ||||
Loss on impairment of other assets prior period |
(5,109 | ) | (21,070 | ) | ||||
Loss on disposal of property, equipment |
(38,656 | ) | | |||||
Gain on valuation of currency swap |
| (4,314 | ) | |||||
Gain on valuation of currency swap (capital adjustments) |
| (23,845 | ) | |||||
Other |
(8,606 | ) | (35,219 | ) | ||||
Sub-total |
(744,007 | ) | (504,601 | ) | ||||
Total Temporary Differences |
145,387 | (58,911 | ) | |||||
(Permanent
Differences) |
328,066 | 281,935 | ||||||
Total |
473,453 | 223,024 | ||||||
80
c. | Change in cumulative temporary differences and deferred tax liabilities | |
Changes in cumulative temporary differences for the nine months ended September 30, 2006 and 2005 and deferred tax assets and liabilities as of September 30, 2006 and 2005 are as follows (In millions of Korean won): | ||
For the nine months ended September 30, 2006 |
January 1, | Increase | Decrease | September 30, | |||||||||||||
Description | 2006 | (Note a) | (Note a) | 2006 | ||||||||||||
Current: |
||||||||||||||||
Allowance for doubtful accounts |
122,561 | 129,119 | 124,184 | 127,496 | ||||||||||||
Accrued interest income |
(3,931 | ) | (3,987 | ) | (3,931 | ) | (3,987 | ) | ||||||||
Accrued expenses |
61,967 | 15,514 | 21,906 | 55,575 | ||||||||||||
Other |
189,548 | 10,710 | 4,834 | 195,424 | ||||||||||||
Total |
370,145 | 151,356 | 146,993 | 374,508 | ||||||||||||
Temporary differences unlikely to be realized |
(147,774 | ) | | (19,219 | ) | (128,555 | ) | |||||||||
Total current cumulative temporary differences-net |
222,371 | 151,356 | 127,774 | 245,953 | ||||||||||||
Current deferred tax assets-net (Note b) |
61,152 | 67,637 | ||||||||||||||
Non-current: |
||||||||||||||||
Property and equipment |
( |
196,446 | ) | 12,228 | 10,964 | ( |
195,182 | ) | ||||||||
Loss on impairment of long-term investment securities |
108,145 | | | 108,145 | ||||||||||||
Loss on impairment of other long-term assets |
7,461 | | 5,973 | 1,488 | ||||||||||||
Reserves for research and manpower development |
(768,000 | ) | (135,000 | ) | (141,000 | ) | (762,000 | ) | ||||||||
Reserves for loss on disposal of treasury stock |
(474,081 | ) | | (177,675 | ) | (296,406 | ) | |||||||||
Equity in (earnings) losses of affiliates |
(5,025 | ) | 56,156 | 328 | 50,803 | |||||||||||
Equity in capital adjustment of affiliates |
(109,468 | ) | | (10,862 | ) | (98,606 | ) | |||||||||
Unrealized loss on valuation of long-term
investment securities |
58,116 | 219 | 182,113 | (123,778 | ) | |||||||||||
Accrued severance indemnities |
148,465 | 24,106 | 155,633 | 16,938 | ||||||||||||
Deposits for severance indemnities |
(148,465 | ) | (3,568 | ) | (148,610 | ) | (3,423 | ) | ||||||||
Loss on valuation of currency swap |
13,244 | 4,195 | | 17,439 | ||||||||||||
Loss on valuation of currency swap (capital
adjustment) |
19,554 | 9,807 | | 29,361 | ||||||||||||
Loss on valuation of interest rate swap
(capital adjustment) |
| 2,747 | | 2,747 | ||||||||||||
Considerations for conversion right |
(67,279 | ) | | (3,762 | ) | (63,517 | ) | |||||||||
Other |
(10,647 | ) | 60,117 | (1,911 | ) | 51,381 | ||||||||||
Total |
(1,424,426 | ) | 31,007 | (128,809 | ) | (1,264,610 | ) | |||||||||
Temporary differences unlikely to be realized |
(65,447 | ) | (97,197 | ) | (1,336 | ) | (161,308 | ) | ||||||||
Total non-current cumulative temporary differences-net |
( |
1,489,873 | ) | ( |
66,190 | ) | ( |
130,145 | ) | ( |
1,425,918 | ) | ||||
Total non-current deferred tax liabilities-net (Note b) |
( |
409,715 | ) | ( |
392,128 | ) | ||||||||||
(Note a) | These changes include adjustment to reflect the change in accumulated temporary differences based on the prior year tax return. |
(Note b) | The tax rate used in measuring deferred tax assets and liabilities is 27.5%. |
81
For the nine months ended September 30, 2005 |
January 1, | Increase | Decrease | September 30, | |||||||||||||
Description | 2005 | (note b) | (note b) | 2005 | ||||||||||||
Current : |
||||||||||||||||
Allowance for doubtful accounts |
59,622 | 117,867 | 59,612 | 117,877 | ||||||||||||
Accrued interest income |
(7,796 | ) | (3,688 | ) | (4,423 | ) | (7,061 | ) | ||||||||
Other |
235,000 | 5,079 | 17,206 | 222,873 | ||||||||||||
Total |
286,826 | 119,258 | 72,395 | 333,689 | ||||||||||||
Temporary differences unlikely to be realized (note a) |
(128,555 | ) | (128,555 | ) | ||||||||||||
Total current cumulative temporary differences-net |
158,271 | 205,134 | ||||||||||||||
Current deferred tax assets-net (note c) |
43,525 | 56,412 | ||||||||||||||
Non-current : |
||||||||||||||||
Property and equipment |
(127,822 | ) | (44,551 | ) | 5,924 | (178,297 | ) | |||||||||
Loss on impairment of long-term investment securities |
106,752 | (400 | ) | | 106,352 | |||||||||||
Loss on impairment of other long-term assets |
21,070 | 8,116 | 21,070 | 8,116 | ||||||||||||
Reserves for research and manpower development |
(709,467 | ) | (97,500 | ) | (98,600 | ) | (708,367 | ) | ||||||||
Reserves for loss on disposal of treasury stock |
(474,081 | ) | | | (474,081 | ) | ||||||||||
Equity in (earnings) losses of affiliates |
(89,441 | ) | 79,291 | | (10,150 | ) | ||||||||||
Equity in capital adjustment of affiliates |
| (144,730 | ) | | (144,730 | ) | ||||||||||
Unrealized loss on valuation of long-term
investment securities |
| (17,933 | ) | | (17,933 | ) | ||||||||||
Accrued severance indemnities |
139,524 | 14,057 | 9,686 | 143,895 | ||||||||||||
Deposits for severance indemnities |
(139,524 | ) | (14,057 | ) | (9,686 | ) | (143,895 | ) | ||||||||
Loss on valuation of derivative instruments |
15,789 | | 4,313 | 11,476 | ||||||||||||
Loss on valuation of derivative instruments
-capital adjustment |
| 25,607 | | 25,607 | ||||||||||||
Considerations for conversion right |
| (67,279 | ) | | (67,279 | ) | ||||||||||
Other |
(122,004 | ) | 254,690 | 144,112 | (11,426 | ) | ||||||||||
Total |
(1,379,204 | ) | ( |
4,689 | ) | 76,819 | (1,460,712 | ) | ||||||||
Temporary differences unlikely to be realized (note a) |
46,038 | (116,869 | ) | |||||||||||||
Total non-current cumulative temporary differences-net |
( |
1,333,166 | ) | ( |
1,577,581 | ) | ||||||||||
Total non-current deferred tax liabilities-net (note c) |
( |
366,621 | ) | ( |
433,835 | ) | ||||||||||
(note a) | Through 2004, the tax effects of temporary differences, which are unlikely to be realized, and temporary differences directly adjusted to capital surplus or capital adjustments, such as net unrealized loss on valuation of long-term investment securities, were excluded in determining the net deferred tax assets or liabilities. However, effective January 1, 2005, pursuant to adoption of SKAS No. 16, Income Taxes, temporary differences are presented on a gross basis, including temporary differences which are unlikely to be realized. In addition, tax effects of temporary differences related to adjustments made directly to capital surplus or capital adjustments are included in determining the net deferred tax assets or liabilities. |
(note b) | These changes include adjustment to reflect the change in accumulated temporary differences based on the prior year tax return. |
(note c) | The statutory tax rate used in measuring deferred tax asset and liabilities is 27.5%. |
82
Deferred tax assets and liabilities before offsetting each other are as follows (In millions of Korean won): |
September 30, 2006 | December 31, 2005 | |||||||
Deferred tax assets |
|
149,393 | |
192,044 | ||||
Deferred tax liabilities |
(473,884 | ) | (540,607 | ) | ||||
Deferred tax assets (liabilities), net |
( |
324,491 | ) | ( |
348,563 | ) | ||
Current, net |
|
67,637 | |
61,152 | ||||
Non-current, net |
( |
392,128 | ) | ( |
409,715 | ) | ||
d. | Deferred tax assets (liabilities) added to (deducted from) capital surplus or capital adjustments | |
Deferred tax assets (liabilities) added to (deducted from) capital surplus or capital adjustments as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won): |
September 30, 2006 | December 31, 2005 | |||||||
Gains on disposal of treasury stock |
( |
30,226 | ) | ( |
30,576 | ) | ||
Considerations for conversion right |
(17,467 | ) | (18,502 | ) | ||||
Unrealized loss on valuation of long-term investment
securities |
(34,039 | ) | 15,982 | |||||
Equity in capital adjustment of affiliates, net |
(34,242 | ) | (32,350 | ) | ||||
Loss on valuation of currency swap |
8,074 | 5,377 | ||||||
Loss on valuation of interest rate swap |
755 | | ||||||
Total |
( |
107,145 | ) | ( |
60,069 | ) | ||
e. | Effective tax rate | |
Effective tax rates for the three months and nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won): |
For the | For the | |||||||||||||||
three months ended | nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Income before income tax |
|
645,935 | |
789,591 | |
1,650,637 | |
1,987,490 | ||||||||
Income tax expenses |
189,133 | 201,713 | 483,337 | 564,085 | ||||||||||||
Effective tax rate |
29.28 | % | 25.55 | % | 29.28 | % | 28.38 | % | ||||||||
83
17. | NET INCOME AND ORDINARY INCOME PER SHARE | |
The Companys net income and ordinary income per share amounts for the three months and nine months ended September 30, 2006 and 2005 are computed as follows (In millions of Korean won, except for per share income per share): | ||
Net income and ordinary income per share |
For the | For the | |||||||||||||||
three months ended | nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net income and ordinary income |
456,802 | 587,878 | 1,167,300 | 1,423,405 | ||||||||||||
Weighted average number of common
shares outstanding |
73,314,653 | 73,614,296 | 73,531,415 | 73,614,296 | ||||||||||||
Net income and ordinary income per share |
6,231 | 7,986 | 15,875 | 19,336 | ||||||||||||
Net income and ordinary income per share for the year ended December 31, 2005 were |
||
The weighted average number of common shares outstanding for the three months and nine months ended September 30, 2006 and 2005 is calculated as follows: |
Number of | Weighted | Weighted | ||||||||||
shares | number of days | number of shares | ||||||||||
For the three months ended September 30, 2006 |
||||||||||||
Outstanding common stocks at July 1, 2006 |
82,276,711 | 92/92 | 82,276,711 | |||||||||
Treasury stocks at July 1, 2006 |
(8,563,054 | ) | 92/92 | (8,563,054 | ) | |||||||
Retirement of treasury stock (Note a) |
(1,083,000 | ) | 34 / 92 (Note a) | (399,004 | ) | |||||||
Total |
72,630,657 | 73,314,653 | ||||||||||
For the nine months ended September 30, 2006 |
||||||||||||
Outstanding common stocks at January 1, 2006 |
82,276,711 | 273/273 | 82,276,711 | |||||||||
Treasury stocks at January 1, 2006 |
(8,662,415 | ) | 273/273 | (8,662,415 | ) | |||||||
Conversion of convertible bonds into
treasury stock (Note b) |
99,361 | 142 / 273 (Note b) | 51,582 | |||||||||
Retirement of treasury stock (Note a) |
(1,083,000 | ) | 34 / 273 (Note a) | (134,463 | ) | |||||||
Total |
72,630,657 | 73,531,415 | ||||||||||
(Note a) | The Company retired treasury stocks which were acquired on two different dates during the nine months ended September 30, 2006, and weighted number of shares was calculated considering each transaction date. |
(Note b) | Treasury stocks were used to settle the conversion of the convertible bonds on several different dates during the nine months ended September 30, 2006 and weighted number of shares was calculated considering each transaction date. |
84
Number of | Weighted | Weighted | ||||||||||
shares | number of days | number of shares | ||||||||||
For the three months ended September 30, 2005 |
||||||||||||
Issued common stocks at July 1, 2005 |
82,276,711 | 92/92 | 82,276,711 | |||||||||
Treasury stocks at July 1, 2005 |
(8,662,415 | ) | 92/92 | (8,662,415 | ) | |||||||
Total |
73,614,296 | 73,614,296 | ||||||||||
For the nine months ended September 30, 2005 |
||||||||||||
Issued common stocks at January 1, 2005 |
82,276,711 | 273/273 | 82,276,711 | |||||||||
Treasury stocks at January 1, 2005 |
(8,662,415 | ) | 273/273 | (8,662,415 | ) | |||||||
Total |
73,614,296 | 73,614,296 | ||||||||||
Diluted net income and ordinary income per share amounts for the three months and nine months ended September 30, 2006 and 2005 are computed as follows (In millions of Korean won, except for share data): | ||
Diluted net income and ordinary income per share |
For the | For the | |||||||||||||||
three months ended | nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Adjusted net income and ordinary income |
460,152 | 591,305 | 1,177,231 | 1,433,099 | ||||||||||||
Adjusted weighted average number of
common shares outstanding |
75,000,469 | 75,332,996 | 75,265,373 | 75,332,996 | ||||||||||||
Diluted net income and ordinary income
per share |
6,135 | 7,849 | 15,641 | 19,024 | ||||||||||||
Diluted net income and ordinary income per share for the year ended December 31, 2005 are
|
||
Adjusted net income and ordinary income per share and the adjusted weighted average number of common shares outstanding for the three months and nine months ended September 30, 2006 and 2005 are calculated as follows (In millions of Korean won, except for share data): |
For the | For the | |||||||||||||||
three months ended | nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net income and ordinary income |
456,802 | 587,878 | 1,167,300 | 1,423,405 | ||||||||||||
Effect of stock options (Note a) |
| | | | ||||||||||||
Effect of convertible bonds (Note b) |
3,350 | 3,427 | 9,931 | 9,694 | ||||||||||||
Adjusted net income and ordinary income |
460,152 | 591,305 | 1,177,231 | 1,433,099 | ||||||||||||
85
For the | For the | |||||||||||||||
three months ended | nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Weighted average number of
common shares outstanding |
73,314,653 | 73,614,296 | 73,531,415 | 73,614,296 | ||||||||||||
Effect of stock options (Note a) |
| | | | ||||||||||||
Effect of convertible bonds (Note b) |
1,685,816 | 1,718,700 | 1,733,958 | 1,718,700 | ||||||||||||
Adjusted weighted average number of
common shares outstanding |
75,000,469 | 75,332,996 | 75,265,373 | 75,332,996 | ||||||||||||
(Note a) | For the three months and nine months ended September 30, 2006 and 2005, the outstanding stock options did not have a dilutive effect because the exercise price exceeded the average market price of common stock for the three months and nine months ended September 30, 2006 and 2005 and for the year ended December 31, 2005, respectively. |
(Note b) | The effect of convertible bonds increased net income related to interest expenses that would not have incurred, and increase in the weighted average number of common shares outstanding related to common shares that would have been issued, assuming that the conversion of convertible bonds was made at the beginning of the period. |
18. | RESTRICTED DEPOSITS |
a. | At September 30, 2006, the Company has restricted guarantee deposits for its checking accounts
totaling |
||
b. | The Company entered into a contract with First Data Corporation to sell the investment in common
stock of KPMS Corporation, which was held by the Company and accounted for as available-for-sale
securities. At September 30, 2006, certain portion of proceeds from sales of such investment
totaling |
19. | INTERIM DIVIDENDS |
In accordance with the resolution of the Companys board of directors dated July 28, 2006, the Company declared and paid cash dividends during the three months ended September 30, 2006 based on outstanding number of common shares at June 30, 2006 as follows (in millions of Korean won except for per share data) : |
Number of shares | ||||||||||||
outstanding as of June 30, 2006 | Par value per share | Dividend ratio | Dividends | |||||||||
73,713,657 |
500 | 200 | % | 73,714 |
20. | INSURANCE | |
As of September 30, 2006, certain Companys assets are insured with local insurance companies as follows (In millions of Korean won and thousands of U.S. dollars): |
Insured | Risk | Carrying value | Coverage | |||||||||
US$ | 58,115 | |||||||||||
Property and equipment |
Fire and comprehensive liability | 3,335,730 | 7,255,411 | |||||||||
In addition, the Company carries directors and officers liability coverage insurance totaling
|
86
21. | RELATED PARTY TRANSACTIONS |
Ownership | Types of | |||||
Type | Company | percentage (%) | business | |||
Parent company |
SK Corporation | 22.8 (Note a) | Manufacturing and selling petrochemicals | |||
Subsidiary |
SK Capital Co., Ltd. | 100 | In arrangement to commence the business | |||
" |
SK Telink Co., Ltd. | 90.8 | Telecommunication service | |||
" |
SK Communications Co., Ltd. | 86.5 | Internet website services | |||
" |
SK Wyverns Baseball Club Co., Ltd. | 100.0 | Business related sports | |||
" |
Global Credit & Information Co., Ltd. | 50.5 | Credit and collection services | |||
" |
PAXNet Co., Ltd. | 65.9 | Internet website services | |||
" |
Seoul Records, Inc. | 60.0 | Release of music disc | |||
" |
SLD Telecom PTE Ltd. | 73.3 | Telecommunication service | |||
" |
SK Telecom China Co., Ltd. | 100.0 | Telecommunication service | |||
" |
U-Land Company Ltd | 70.1 | Telecommunication service | |||
" |
IHQ, Inc. | 34.3 | Entertainment management | |||
" |
SK Telecom USA Holdings, Inc. | 100.0 | Telecommunication service | |||
" |
SK Telecom International Inc. | 100.0 | Telecommunication service | |||
" |
Centurion IT Investment Association | 37.5 | Investment association | |||
" |
The First Music Investment Fund of SK-PVC | 69.3 | Investment association | |||
" |
The Second Music Investment Fund of SK-PVC | 79.3 | Investment association | |||
" |
SK-KTB Music Investment Fund | 74.3 | Investment association | |||
" |
IMM Cinema Fund | 48.4 | Investment association | |||
" |
Cyworld, Inc. | 100.0 (Note b) | Internet website services | |||
" |
Cyworld Japan Co., Ltd. | 100.0 | Internet website services | |||
" |
SK Cyberpass Inc. | 70.5 (Note b) | Telecommunication service | |||
" |
Masoolpiri | 51.4 (Note b) | Film production | |||
" |
YTN Media Inc., | 51.4 (Note b) | Broadcasting program production | |||
" |
Ntreev Soft Co., Ltd | 51.0 (Note b) | Game program production | |||
" |
Ifilm Co., Ltd. | 45.0 (Note b) | Film production | |||
" |
IHQ USA, Inc. | 100.0 (Note b) | Surveying marketing information | |||
" |
SK Telecom Europe Ltd. | 100.0 | Wireless telecommunication related business | |||
" |
SK Telecom Advanced Tech & Service Center | 100.0 | Research & Development | |||
" |
Cyworld Europe GmbH | 50.2 (Note b) | Internet Website services |
(Note a) | The ownership percentage represents parent companys ownership over the Company. |
(Note b) | The ownership percentage represents subsidiaries ownership over their subsidiaries, in which the Company has no direct investment. |
87
For the three months ended September 30, 2006 | For the nine months ended September 30, 2006 | |||||||||||||||||||||||
Purchases of | Commissions | Commissions | Purchases of | Commissions | Commissions | |||||||||||||||||||
property and | paid and | earned and | property and | paid and | earned and | |||||||||||||||||||
equipment | other expenses | other income | equipment | Other expenses | other income | |||||||||||||||||||
Parent Company: |
||||||||||||||||||||||||
SK Corporation |
5 | 9,274 | 1,663 | 859 | 25,233 | 6,759 | ||||||||||||||||||
Subsidiaries: |
||||||||||||||||||||||||
SK Communications Co., Ltd. |
40 | 10,884 | 541 | 51 | 30,984 | 1,949 | ||||||||||||||||||
Global
Credit & Information Co., Ltd. |
| 10,043 | 292 | | 26,413 | 927 | ||||||||||||||||||
PAXNet Co., Ltd. |
| 1,726 | 322 | | 6,539 | 1,176 | ||||||||||||||||||
SK Telink Co., Ltd. |
| 2,684 | 4,268 | | 10,998 | 12,724 | ||||||||||||||||||
Others |
8 | 5,656 | 2 | 12 | 17,828 | 2 | ||||||||||||||||||
Equity Method Investees: |
||||||||||||||||||||||||
WiderThan Co., Ltd. |
374 | 29,795 | 9 | 1,341 | 77,791 | 981 | ||||||||||||||||||
Helio, LLC. |
| | 15,123 | | | 28,044 | ||||||||||||||||||
SK C&C Co., Ltd. |
41,493 | 68,729 | 1,770 | 87,269 | 210,607 | 5,637 | ||||||||||||||||||
TU Media Corp. |
| 414 | 14,500 | 573 | 1,055 | 36,394 | ||||||||||||||||||
Others |
950 | 5,845 | 297 | 3,896 | 13,153 | 7,641 | ||||||||||||||||||
Others : |
||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. |
76,868 | 2,224 | 520 | 123,072 | 3,299 | 1,911 | ||||||||||||||||||
SK Networks Co., Ltd. |
821 | 118,703 | 3,049 | 2,705 | 336,834 | 8,514 | ||||||||||||||||||
Innoace Co., Ltd. |
3,010 | 579 | 49 | 4,394 | 3,445 | 156 | ||||||||||||||||||
SK Telesys Co., Ltd. |
49,920 | 1,020 | 758 | 133,659 | 2,187 | 1,807 | ||||||||||||||||||
Others |
147 | 3,100 | 920 | 176 | 6,351 | 2,269 | ||||||||||||||||||
Total |
173,636 | 270,676 | 44,083 | 358,007 | 772,717 | 116,891 | ||||||||||||||||||
For the three months ended September 30, 2005 | For the nine months ended September 30, 2005 | |||||||||||||||||||||||
Purchases of | Commissions | Commission | Purchases of | Commissions | Commission | |||||||||||||||||||
property and | paid and | and | property and | paid and | and | |||||||||||||||||||
equipment | other expenses | other income | equipment | Other expenses | other income | |||||||||||||||||||
Parent Company: |
||||||||||||||||||||||||
SK Corporation |
457 | 10,741 | 1,309 | 927 | 33,814 | 5,478 | ||||||||||||||||||
Subsidiaries: |
||||||||||||||||||||||||
SK Communications Co., Ltd. |
31 | 12,428 | 186 | 157 | 31,338 | 671 | ||||||||||||||||||
Global
Credit & Information Co., Ltd. |
| 9,585 | 292 | | 25,547 | 766 | ||||||||||||||||||
PAXNet Co., Ltd. |
| 2,664 | 766 | | 12,050 | 1,773 | ||||||||||||||||||
SK Telink Co., Ltd. |
| 3,179 | 4,592 | | 9,587 | 11,745 | ||||||||||||||||||
Others |
| 3,601 | | 576 | 17,632 | 976 | ||||||||||||||||||
Equity Method Investees: |
||||||||||||||||||||||||
WiderThan Co., Ltd. |
1,547 | 24,948 | 209 | 6,109 | 70,821 | 241 | ||||||||||||||||||
SK C&C Co., Ltd. |
39,182 | 80,173 | 1,990 | 67,239 | 223,272 | 6,232 | ||||||||||||||||||
TU Media Corp. |
| 908 | 8,337 | | 1,009 | 17,142 | ||||||||||||||||||
Others |
7 | 4,276 | 540 | 97 | 11,065 | 898 | ||||||||||||||||||
Others: |
||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. |
61,591 | 2,220 | 524 | 111,738 | 2,814 | 1,420 | ||||||||||||||||||
SK Networks Co., Ltd. |
6,499 | 108,260 | 2,284 | 7,626 | 313,404 | 9,505 | ||||||||||||||||||
Innoace Co., Ltd. |
3,363 | 379 | 55 | 8,009 | 1,495 | 165 | ||||||||||||||||||
SK Telesys Co., Ltd. |
78,415 | 863 | 106 | 145,219 | 2,400 | 296 | ||||||||||||||||||
Others |
1,001 | 3,161 | 583 | 1,288 | 6,394 | 1,650 | ||||||||||||||||||
Total |
192,093 | 267,386 | 21,773 | 348,985 | 762,642 | 58,958 | ||||||||||||||||||
88
As of September 30, 2006 | ||||||||||||||||||||||||
Guarantee | ||||||||||||||||||||||||
Accounts | Short-term | Long-term | Guarantee | Accounts | deposits | |||||||||||||||||||
receivable | loans | loans | deposits | payable | received | |||||||||||||||||||
Parent Company: |
||||||||||||||||||||||||
SK Corporation. |
860 | | | 291 | 5,308 | 6,174 | ||||||||||||||||||
Subsidiaries: |
||||||||||||||||||||||||
SK Communications Co., Ltd. |
1,062 | | | | 6,420 | 3,681 | ||||||||||||||||||
SK Wyverns Baseball Club Co., Ltd. |
276 | 575 | 4,707 | | | | ||||||||||||||||||
Global
Credit & Information Co., Ltd. |
5 | | | | 3,446 | | ||||||||||||||||||
PAXNet Co., Ltd. |
147 | | | | 1,005 | | ||||||||||||||||||
SK Telink Co., Ltd. |
930 | | | | 853 | 826 | ||||||||||||||||||
Equity Method Investees: |
||||||||||||||||||||||||
WiderThan Co., Ltd. |
12 | | | | 4,953 | | ||||||||||||||||||
SK C&C Co., Ltd. |
214 | | | | 49,153 | 346 | ||||||||||||||||||
Helio, LLC. |
15,096 | | | | | | ||||||||||||||||||
Others |
7,850 | | | | 4,865 | 3,242 | ||||||||||||||||||
Others: |
||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. |
183 | | | | 676 | 942 | ||||||||||||||||||
SK Networks Co., Ltd. |
940 | | | 113 | 37,651 | 2,967 | ||||||||||||||||||
Innoace Co., Ltd. |
20 | | | | 1,082 | 2,291 | ||||||||||||||||||
SK Telesys Co., Ltd. |
11 | | | | 37,340 | | ||||||||||||||||||
Others |
683 | | | 900 | 1,569 | | ||||||||||||||||||
Total |
28,289 | 575 | 4,707 | 1,304 | 154,321 | 20,469 | ||||||||||||||||||
As of December 31, 2005 | ||||||||||||||||||||||||
Guarantee | ||||||||||||||||||||||||
Accounts | Short-term | Long-term | Guarantee | Accounts | deposits | |||||||||||||||||||
receivable | loans | loans | deposits | payable | received | |||||||||||||||||||
Parent Company: |
||||||||||||||||||||||||
SK Corporation |
1,643 | | | 1,307 | 6,767 | 6,174 | ||||||||||||||||||
Subsidiaries: |
||||||||||||||||||||||||
SK Communications Co., Ltd. |
195 | | | | 5,891 | 3,681 | ||||||||||||||||||
SK Wyverns Baseball Club Co., Ltd. |
527 | 1,150 | 4,706 | | | | ||||||||||||||||||
Global
Credit & Information Co., Ltd. |
70 | | | | 6,533 | | ||||||||||||||||||
PAXNet Co., Ltd. |
401 | | | | 2,077 | | ||||||||||||||||||
SK Telink Co., Ltd. |
436 | | | | 1,179 | 514 | ||||||||||||||||||
Others |
2 | | | | 2,755 | 70 | ||||||||||||||||||
Equity Method Investees: |
||||||||||||||||||||||||
WiderThan Co., Ltd. |
4 | | | | 17,398 | | ||||||||||||||||||
SK C&C Co., Ltd. |
91 | | | | 174,884 | 346 | ||||||||||||||||||
Helio, LLC. |
11,914 | | | | | | ||||||||||||||||||
Others |
6,048 | | | | 4,154 | 3,062 | ||||||||||||||||||
Others: |
||||||||||||||||||||||||
SK Engineering & Construction Co., Ltd. |
97 | | | | 21,326 | 942 | ||||||||||||||||||
SK Networks Co., Ltd. |
1,760 | | | 113 | 20,465 | 2,700 | ||||||||||||||||||
Innoace Co., Ltd. |
| | | | 6,100 | 2,138 | ||||||||||||||||||
SK Telesys Co., Ltd. |
3 | | | | 65,496 | | ||||||||||||||||||
Others |
223 | | | 900 | 7,495 | | ||||||||||||||||||
Total |
23,414 | 1,150 | 4,706 | 2,320 | 342,520 | 19,627 | ||||||||||||||||||
89
The Company considers registered directors who have substantial roles and responsibility for planning, operating, and controlling of the business as key management, and the considerations given to the key management for the three months and the nine months ended September 30, 2006 are as follows(In millions of Korean won): |
For the three months ended | For the nine months ended | |||||||||||||||||||||||
September 30, 2006 | September 30, 2006 (Note) | |||||||||||||||||||||||
Severance | Severance | |||||||||||||||||||||||
Payee | Payroll | indemnities | Total | Payroll | indemnities | Total | ||||||||||||||||||
12 Registered directors
(including outside directors) |
507 | 136 | 643 | 3,687 | 799 | 4,486 | ||||||||||||||||||
(Note) | Compensation for an ex-outside director who resigned during the three months ended June 30, 2006 is included. |
In addition, on March 8, 2002, the Company granted stock options to its nine key members of
the management, representing 15,110 shares at an exercise price of |
22. | PROVISION FOR MILEAGE POINTS | |
The Company, for its marketing purposes, grants certain mileage points (Rainbow Points) to its subscribers based on their usage of the Companys services. Rainbow Points provision was provided based on the historical usage experience and the Companys marketing policy. Such provision was recorded as accrued expenses and details of change in the provisions for such mileage points for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won): |
September 30, 2006 | September 30, 2005 | |||||||
(Note a) | (Note a) | |||||||
Beginning balance |
52,172 | 61,596 | ||||||
Increase |
9,679 | 9,065 | ||||||
Decrease |
(9,381 | ) | (12,403 | ) | ||||
Ending balance |
52,470 | 58,258 | ||||||
(Note a) | Beginning and ending balances for the nine months ended September 30, 2006 are stated at their discounted values in accordance with SKAS No. 17 and beginning and ending balances for the nine months ended September 30, 2005 are stated at their nominal values. |
Rainbow Points expire after 5 years; thus, all unused points are expired on their fifth anniversary. |
The expected year when unused Rainbow Points as of September 30, 2006 are expected to be used and the respective estimated monetary amount to be paid in a given year are as follows (In millions of Korean won): |
Estimated amount to be paid | ||||||||
Expected usage for the year ended September 30, |
In nominal value (Note b) | Current value (Note b) | ||||||
2007 |
26,532 | 25,311 | ||||||
2008 |
15,870 | 14,443 | ||||||
2009 |
8,452 | 7,340 | ||||||
2010 |
4,364 | 3,615 | ||||||
2011 |
2,228 | 1,761 | ||||||
Ending balance |
57,446 | 52,470 | ||||||
(Note b) | The above expected year of the usage and the current value of the estimated amount to be paid are estimated based on historical usage experience. |
90
23. | DERIVATIVE INSTRUMENTS |
a. | Currency swap contract to which the cash flow hedge accounting is applied | ||
The Company has entered into a fixed-to-fixed cross currency swap contract with Citibank, BNP
Paribas and Credit Suisse First Boston International to hedge the foreign currency risk of
unguaranteed U.S. dollar denominated bonds with face amounts totaling
US$300,000,000 at
annual fixed interest rate of 4.25% issued on April 1, 2004. As of September 30, 2006, in
connection with unsettled foreign currency swap contract to which the cash flow hedge
accounting is applied, an accumulated loss on valuation of derivatives amounting to |
|||
b. | Currency swap contract to which the cash flow hedge accounting is not applied | ||
The Company has entered into a fixed-to-fixed cross currency swap contract with Credit
Suisse First Boston International to hedge foreign currency risk of unguaranteed U.S. dollar
denominated convertible bonds with face amounts of US$329,450,000 issued on May 27, 2004.
In connection with unsettled fixed-to-fixed cross currency swap contract to which the cash
flow hedge accounting is not applied, loss on valuation of currency swap of |
|||
In addition, the company has entered into a fixed-to-fixed cross currency swap contract with
Hana Bank, Korea Exchange Bank, Woori Bank, Shinhan Bank, Citibank and Barclays Bank to
hedge foreign currency risk of unguaranteed U.S. dollar denominated convertible bonds issued
by China Unicom which was acquired on July 5, 2006. In connection with unsettled
fixed-to-fixed cross currency swap contract to which the cash flow hedge accounting is not
applied, gain on valuation of currency swap of |
|||
c. | Interest rate swap | ||
The Company has entered into a floating-to-fixed interest rate swap contract with Shinhan
Bank to hedge the interest rate risk of floating rate discounted bill with face amounts
totaling |
|||
As of September 30, 2006, fair values of above derivatives recorded in long-term liabilities and details of derivative instruments as of September 30, 2006 are as follows (In thousands of U.S. dollars and millions of Korean won): |
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Fair value | ||||||||||||||||||
Designated | ||||||||||||||||||
Face | Duration | as cash | Not | |||||||||||||||
Type | Hedged item | Amount | of contract | flow hedge | designated | Total | ||||||||||||
Current assets: |
||||||||||||||||||
Fix-to-fixed cross currency swap |
U.S. dollar denominated
convertible bond issued by
China Unicom
|
US1,000,000 | July 5, 2006 ~ July 5, 2007 |
| 4,358 | 4,358 | ||||||||||||
| 4,358 | 4,358 | ||||||||||||||||
Non-current liabilities: |
||||||||||||||||||
Fix-to-fixed cross currency swap |
U.S. dollar denominated bonds
|
US$300,000 | March 23, 2004 ~ April 1, 2011 |
90,182 | | 90,182 | ||||||||||||
Fix-to-fixed cross currency swap |
U.S. dollar denominated
convertible bond
|
US$100,000 | May 27, 2004 ~ May 27, 2009 |
| 21,798 | 21,798 | ||||||||||||
90,182 | 21,798 | 111,980 | ||||||||||||||||
Floating-to-fixed Interest rate swap |
Long-term floating rate discounted bill |
June 29, 2006 ~ June 29, 2010 |
2,747 | | 2,747 | |||||||||||||
92,929 | 21,798 | 114,727 | ||||||||||||||||
24. | COMMITMENTS | |
In accordance with the resolution of the Companys board of directors dated January 26, 2005, the Company and EarthLink, Inc., an internet service provider in the United States of America, agreed to establish Helio, LLC., a joint venture company, in the United States of America in February 2005 in order to provide wireless telecommunication service across the United States of America. The Company, via SK Telecom USA Holdings, Inc., its wholly-owned subsidiary in the United States of America, has invested US$200.5 million from 2005 through September 30, 2006 and will additionally invest US$19.5 million through 2007 to maintain a 50% equity interest in the joint venture company. Helio, LLC. launched cellular voice and data services extensively across the United States of America in May 2006, by renting networks from network operators throughout the United States of America also known as partial mobile virtual network operator (MVNO) system. |
25. | STATEMENTS OF CASH FLOWS | |
The statements of cash flows are prepared using the indirect method and significant non-cash transactions for the three months and nine months ended September 30, 2006 are as follows (In millions of Korean won): |
For the three months | For the nine months | |||||||
ended September 30, 2006 | ended September 30, 2006 | |||||||
Conversion of convertible bonds |
| 21,575 | ||||||
Retirement of treasury stock |
209,077 | 209,077 |
There was no significant non-cash transaction for the three months and nine months ended September 30, 2005. |
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26. | SUBSEQUENT EVENTS | |
The Company is expected to sell 2,000,000 shares of WiderThan Co., Ltd. held by the Company, representing 10.10% of the total outstanding common stock of WiderThan Co., Ltd., for US$34.1 million (US$17.05 per share), to RealNetworks, Inc., a U.S.A. company, on October 31, 2006. |
93
94
SK Telecom Co., Ltd. |
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(Registrant) | |||
By: /s/ Tae Jin Park | |||
(Signature) | |||
Name: | Tae Jin Park | ||
Title: | Vice President |