China Airlines, Ltd. And Subsidiaries
China Airlines, Ltd. and SubsidiariesConsolidated Financial Statements for theSix Months Ended June 30, 2019 and 2018 andIndependent Auditors’ Review Report
INDEPENDENT AUDITORS’ REVIEW REPORTThe Board of Directors and the ShareholdersChina Airlines, Ltd.IntroductionWe have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. and itssubsidiaries (the “Group”) as of June 30, 2019 and 2018, the related consolidated statements ofcomprehensive income for the three-month periods ended June 30, 2019 and 2018 and for thesix-month periods ended June 30, 2019 and 2018, the consolidated statements of changes in equityand cash flows for the six-month periods then ended, and the related notes to the consolidatedfinancial statements, including a summary of significant accounting policies (collectively referredto as the “consolidated financial statements”). Management is responsible for the preparation andfair presentation of the consolidated financial statements in accordance with the RegulationsGoverning the Preparation of Financial Reports by Securities Issuers and International AccountingStandard 34 “Interim Financial Reporting” endorsed and issued into effect by the FinancialSupervisory Commission of the Republic of China. Our responsibility is to express a conclusion onthe consolidated financial statements based on our reviews.We did not review the financial statements of some subsidiaries included in the consolidatedfinancial statements of the Group, but such statements were reviewed by other auditors. Ourconclusion, insofar as it relates to the amounts included in the consolidated financial statements forthese subsidiaries, is based solely on the report of other auditors. The total assets of thesesubsidiaries were NT 13,872,020 thousand and NT 5,347,586 thousand, which constituted 4.73%and 2.33% of the consolidated total assets as of June 30, 2019 and 2018, and the total revenue wasNT 4,905,056 thousand and NT 4,426,054 thousand, which constituted 5.89% and 5.46% of theconsolidated total revenues for the six-month periods ended June 30, 2019 and 2018.Scope of ReviewExcept as explained in the following paragraph, we conducted our reviews in accordance with theStatement of Auditing Standard No. 65 “Review of Financial Information Performed by theIndependent Auditor of the Entity”. A review of consolidated financial statements consists ofmaking inquiries, primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially less in scope than anaudit and consequently does not enable us to obtain assurance that we would become aware of allsignificant matters that might be identified in an audit. Accordingly, we do not express an auditopinion.Basis for Qualified ConclusionAs disclosed in Notes 13 and 14 to the consolidated financial statements, the financial statements ofsome non-significant subsidiaries included in the consolidated financial statements referred to inthe first paragraph and some investments accounted for using the equity method were not reviewed.As of June 30, 2019 and 2018, the combined total assets of these non-significant subsidiaries wereNT 23,284,052 thousand and NT 17,281,673 thousand, respectively, representing 7.94% and-1-
7.53%, respectively, of the consolidated total assets, and combined total liabilities of thesenon-significant subsidiaries were NT 12,332,446 thousand NT 6,607,113 thousand, respectively,representing 5.24% and 3.88%, respectively, of the consolidated total liabilities; for thethree-month periods and for the six-month periods ended June 30, 2019 and 2018, the amounts ofthe combined comprehensive income of these non-significant subsidiaries were NT 332,113thousand, NT 379,330 thousand, NT 557,817 thousand and NT 547,921 thousand, respectively,representing (67.52%), 93.69%, (79.31%) and 103.59%, respectively, of the consolidated totalcomprehensive income. As of June 30, 2019 and 2018, the aforementioned investments accountedfor using the equity method were NT 2,367,567 thousand and NT 2,349,376 thousand,respectively; and for the three-month periods ended and for the six-month periods ended June 30,2019 and 2018, the amounts of the Group’s share of the profit of such investments accounted forusing the equity method were NT 87,895 thousand, NT 82,104 thousand, NT 157,799 thousandand NT 163,819 thousand, respectively.Qualified ConclusionBased on our reviews, except for the adjustments, if any, as might have been determined to benecessary had the financial statements of the non-significant subsidiaries and investmentsaccounted for by using the equity method as described in the preceding paragraph been reviewed,nothing has come to our attention that caused us to believe that the accompanying consolidatedfinancial statements do not present fairly, in all material respects, the consolidated financialposition of the Group as of June 30, 2019 and 2018, its consolidated financial performance for thethree-month periods ended June 30, 2019 and 2018 and for the six-month periods ended June 30,2019 and 2018, and its consolidated cash flows for the six-month periods then ended in accordancewith the Regulations Governing the Preparation of Financial Reports by Securities Issuers andInternational Accounting Standard 34 “Interim Financial Reporting” endorsed and issued intoeffect by the Financial Supervisory Commission of the Republic of China.The engagement partners on the reviews resulting in this independent auditors’ review report areHuang, Jui Chan and Cheng, Shiuh Ran.Deloitte & ToucheTaipei, TaiwanRepublic of ChinaAugust 7, 2019Notice to ReadersThe accompanying consolidated financial statements are intended only to present the consolidatedfinancial position, financial performance and cash flows in accordance with accounting principlesand practices generally accepted in the Republic of China and not those of any other jurisdictions.The standards, procedures and practices to review such consolidated financial statements arethose generally applied in the Republic of China.For the convenience of readers, the independent auditors’ review report and the accompanyingconsolidated financial statements have been translated into English from the original Chineseversion prepared and used in the Republic of China. If there is any conflict between the Englishversion and the original Chinese version or any difference in the interpretation of the two versions,the Chinese-language independent auditors’ review report and consolidated financial statementsshall prevail.-2-
CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In Thousands of New Taiwan Dollars)June 30, 2019(Reviewed)AmountASSETSCURRENT ASSETSCash and cash equivalents (Notes 4, 6 and 33)Financial assets at fair value through profit or loss - current (Notes 4, 7 and 33)Financial assets at amortized cost (Notes 4, 9 and 33)Financial assets for hedging - current (Notes 4 and 33)Notes and accounts receivable, net (Notes 4, 5, 10 and 33)Notes and accounts receivable - related parties (Notes 33 and 34)Other receivables (Note 33)Current tax assets (Notes 4 and 28)Inventories, net (Notes 4 and 11)Noncurrent assets held for sale (Notes 4 and 12)Other assets - current (Notes 6 and 18)%June 30, 2018(Reviewed)Amount% 29,38737,1238,220,6672,709,37381331 ,19118,9488,654,71046,1544,147,882112442 2,39884177,309,02277179,680,99078 293,121,547100 230,136,582100 229,494,984100Total current assetsNONCURRENT ASSETSFinancial assets at fair value through other comprehensive income - noncurrent (Note 4, 8 and 33)Investments accounted for using the equity method (Notes 4 and 14)Property, plant and equipment (Notes 4, 5, 15 and 35)Right-of-use assets (Notes 4, 21 and 35)Investment properties (Notes 4 and 16)Other intangible assets (Notes 4 and 17)Deferred income tax asset (Notes 4, 5 and 28)Other assets - noncurrent (Notes 18, 21, 33, 35 and 36)Total noncurrent assetsTOTALDecember 31, 2018(Audited)Amount%LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Notes 19 and 33)Short-term bills payable (Note 19)Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 33)Financial liabilities for hedging - current (Notes 3, 4, 21 and 33)Notes and accounts payable (Note 33)Notes and accounts payable - related parties (Notes 33 and 34)Contract liabilities - current (Notes 4, 5 and 23)Other payables (Notes 22 and 33)Current tax liabilities (Notes 4 and 28)Lease liabilities - current (Notes 3, 4, 21 and 25)Provisions - current (Notes 4, 5, 24 and 33)Bonds payable and put options of convertible bonds - current portion (Notes 4, 20 and 33)Loans and debts - current portion (Notes 19, 33 and 35)Capital lease obligations - current portion (Notes 4, 21 and 33)Other current liabilities (Note 33) -Total noncurrent liabilities165,394,373Total liabilitiesTotal current liabilitiesNONCURRENT LIABILITIESFinancial liabilities for hedging - noncurrent (Notes 3, 4, 21 and 33)Bonds payable - noncurrent (Notes 4, 20 and 33)Loans and debts - noncurrent (Notes 19, 33 and 35)Contract liabilities - noncurrent (Notes 4 and 23)Provisions - noncurrent (Notes 4, 24 and 33)Deferred tax liabilities (Notes 4 and 28)Lease liabilities - non-current (Notes 3, 4, 21 and 35)Capital lease obligations - noncurrent (Notes 4, 21, 33 and 35)Accrued pension costs (Notes 4, 5 and 25)Other noncurrent liabilities (Note 33)EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 20 and 26)Share capitalCapital surplusRetained earnings (accumulated deficits)Legal reserveSpecial reserveUnappropriated retained earnings (accumulated deficits)Total retained earnings (accumulated deficits)Other equityTreasury (207,080)(200,614)(43,372)Total equity attributable to owners of the CompanyNON-CONTROLLING INTERESTS (Note 26)Total equityTOTALThe accompanying notes are an integral part of the consolidated financial statements.(With Deloitte & Touche auditors’ review report dated August 7, 2019)-3-- 351,923118,8101,144,9281,615,66158,223(43,372)11- ,744,737157,774,5562060,047,0842659,375,38126 293,121,547100 230,136,582100 229,494,984100
CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share)(Reviewed, Not Audited)For the Three Months Ended June 3020192018Amount%AmountFor the Six Months Ended June 3020192018Amount%Amount%%REVENUE (Notes 4, 27 and 34) 42,892,312100 41,275,835100 83,297,660100 81,010,862100COSTS (Notes 4, 11, 17, 21, 24,25, 27, 28 and 0GROSS OPERATING EXPENSES(Notes 4, 25 and 79-288,524-(170,434)-(298,968)(1 )(236,875)-(357,670)-(844,417)(2 )(350,509)(1 )(1,720,248)(2 )(666,061)(1 )87,895-82,104--163,819-(754,333)(2 )(411,074)(1 )(2 )(571,388)(1 )(181,813)(1 1223,897-(290,890)(1 )210,8671(437,766)(1 ATING PROFITNON-OPERATING INCOMEAND EXPENSESOther income (Note 27)Other gains and losses(Notes 12, 15 and 27)Finance costs (Notes 27and 33)Share of the profit of associatesand joint ventures (Note 14)Total non-operatingincome and expensesPROFIT (LOSS) BEFOREINCOME TAXINCOME TAX (BENEFIT)EXPENSE (Notes 4 and 28)NET INCOME (LOSS) FORTHE PERIODOTHER COMPREHENSIVEINCOME (LOSS)Items that will not bereclassified subsequently toprofit or loss:Gain on hedging instrumentssubject to basis adjustmentUnrealized gain oninvestments in equityinstruments designated asat fair value through othercomprehensive incomeIncome tax relating to itemsthat will not bereclassified subsequentlyto profit or loss (Note )
CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share)(Reviewed, Not Audited)For the Three Months Ended June 3020192018Amount%AmountItems that may be reclassifiedsubsequently to profit orloss:Exchange differences ontranslating foreignoperations (Notes 4and 26)Gain on hedging instrumentsnot subject to basisadjustment (Notes 4, 21,26 and 33)Income tax relating to itemsthat may be reclassifiedsubsequently to profit orloss (Note 28) NET INCOME (LOSS)ATTRIBUTABLE TO:Owners of the CompanyNon-controlling interestsTOTAL COMPREHENSIVEINCOME (LOSS)ATTRIBUTABLE TO:Owners of the CompanyNon-controlling interestsEARNINGS (LOSSES) PERSHARE (NEW TAIWANDOLLARS; Note 30)BasicDiluted- %61,282- 26,046- 04,525-(201,017)-194,022-(265,562)-126,174- (491,907)(1 ) 404,8891 (703,328)(1 ) 528,9321 (442,759)151,869(1 )- 63,442147,4251 (686,463)248,697(1 )- 188,934213,824- (290,890)(1 ) 210,8671 (437,766)(1 ) 402,758- (641,416)149,509(1 )- 258,718146,1711- (953,773)250,445(1 )- 313,346215,5861- (491,907)(1 ) 404,8891 (703,328)(1 ) 528,9321Other comprehensiveincome (loss) for theperiod, net of incometaxTOTAL COMPREHENSIVEINCOME (LOSS) FOR THEPERIOD2,370For the Six Months Ended June 3020192018Amount%Amount (0.08) (0.08) 0.01 0.01 (0.13) (0.13) 0.03 0.03The accompanying notes are an integral part of the consolidated financial statements.(With Deloitte & Touche auditors’ review report dated August 7, 2019)(Concluded)-5-
CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)Equity Attributable to Owners of the CompanyRetained EarningsShare CapitalBALANCE AT JANUARY 1, 2018Effect of retrospective application andretrospective restatement 54,709,846Capital Surplus 799,999Legal Reserve 206,092Special Reserve -UnappropriatedEarnings(AccumulatedDeficits) ssuance of convertible bonds-409,978---Basis adjustment to gain on hedging instruments-----Appropriation of 2017 earningsLegal reserveSpecial reserveCash dividends - 0.2181820086--145,831-118,810-Net profit for the six months ended June 30,2018----Other comprehensive income for the six monthsended June 30, 2018, net of income tax---Total comprehensive income for the six monthsended June 30, 2018--Cash dividends from subsidiaries paid tonon-controlling interests-Non-controlling interests arising from acquisitionof subsidiaries-BALANCE AT JANUARY 1, 2018 ASRESTATEDExchangeDifferences onTranslatingForeign Operations (34,986 )Unrealized Gain(Loss) onAvailable-for-saleFinancial Assets -1,774Other EquityUnrealized Gain onFinancial Assets atFair ValueThrough OtherComprehensiveIncome (1,774 )-Cash Flow Hedges (74,429 )Gain (Loss) onHedgingInstruments -Treasury Shares (43,372 ) 57,023,237 Total Equity2,134,282 5642,35174,429(74,429 )-42,351-(74,429 -82,435-313,346215,586528,932-----------(171,019 )(171,019 )-----------565,888565,888(34,986 )(145,831 )(118,810 )(1,193,670 )-Non-controllingInterestsTotal(43,372 )(1,193,670 )-(1,193,670 )BALANCE AT JUNE 30, 2018 54,709,846 1,209,977 351,923 118,810 188,996 (8,084 ) - 57,426 - 45,122 (43,372 ) 56,630,644 2,744,737 59,375,381BALANCE AT JANUARY 1, 2019 54,209,846 1,241,214 351,923 118,810 1,144,928 (9,664 ) - 42,619 - 25,268 (43,372 ) 57,081,572 2,965,512 60,047,084Appropriation of 2018 earningsLegal reserveSpecial reserveCash dividends - 0.20960737--114,493-Net profit (loss) for the six months ended June30, 2019----Other comprehensive loss for the six monthsended June 30, 2019, net of income tax----Total comprehensive income (loss) for the sixmonths ended June 30, 2019----Cash dividends from subsidiaries paid tonon-controlling interests----Loss of control of subsidiaries----BALANCE AT JUNE 30, 2019 54,209,846 1,241,214 466,416(105,843 )- 12,967(114,493 )105,843(1,136,278 )------(1,136,278 )-(1,136,278 )(686,463 )------(686,463 )248,697(437,766 )19,706-(1,214 )-(285,802 )-(267,310 )1,748(265,562 )19,706-(1,214 )-(285,802 )-(953,773 )250,445(703,328 )--------(416,438 )(416,438 )-8,368-105---8,473(24,957 )(16,484 )-(686,463 ) (686,463 ) 18,410The accompanying notes are an integral part of the consolidated financial statements.(With Deloitte & Touche auditors’ review report dated August 7, 2019)-6- - 41,510 - (260,534 ) (43,372 ) 54,999,994 2,774,562 57,774,556
CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)For the Six Months EndedJune 3020192018CASH FLOWS FROM OPERATING ACTIVITIESIncome (loss) before income taxAdjustments to reconcile net cash generated from (used in) operatingactivities:Depreciation expensesAmortization expensesBad-debt expenseNet (gain) loss on fair value changes of financial assets andliabilities held for tradingInterest incomeDividend incomeShare of profit of associates and joint venturesLoss (gain) on disposal of property, plant and equipmentLoss (gain) on disposal of noncurrent assets held for sale(Gain) loss on disposal of investmentsLoss on inventory and property, plant and equipmentImpairment loss recognized on property, plant and equipment andnoncurrent assets held for saleNet (gain) loss on foreign currency exchangeFinance costsRecognition of provisionsAmortization of unrealized gain on sale-leasebacksChanges in operating assets and liabilitiesFinancial assets mandatorily classified as at fair value through profitor lossFinancial assets and liabilities held for tradingNotes and accounts receivableAccounts receivable - related partiesOther receivablesInventoriesFinancial assets at amortized costOther current assetsNotes and accounts payableAccounts payable - related partiesOther payablesContract liabilitiesProvisionsOther current liabilitiesAccrued pension liabilitiesOther liabilitiesCash generated from operationsInterest received-7- 6,700)(157,799)(5,458)10,462(7,656)381,788 7)456,73867,721(1,018,619
China Airlines, Ltd. Introduction We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. and its subsidiaries (the “Group”) as of June 30, 2019 and 2018, the related consolidated statements of comprehe
Unless the context otherwise requires, the following terms should have the following meanings in this report: Company, CSA, China Southern Airlines China Southern Airlines Company Limited Group China Southern Airlines Company Limited and its subsidiaries CSAH China Southern Air Holding Limited Company Xiamen Airlines Xiamen Airlines Company Limited Guizhou Airlines Guizhou Airlines Company Limited
6 INTERI EPOR 2019 DEFINITIONS SACM Southern Airlines Culture and Media Co., Ltd. SPV Special Purpose Vehicles exclusively set up by China Southern Airlines and its subsidiaries for leased aircraft American Airlines American Airlines, Inc. Sichuan Airlines Sichuan Airlines Corporation Limited PRC The People’s Republic of China CSRC China Securities Regulatory Commission
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2 ANNUAL EPORT 2018 DEFINITIONS Unless the context otherwise requires, the following terms should have the following meanings in this report: Company, CSA, China Southern Airlines China Southern Airlines Company Limited Group China Southern Airlines Company Limited and its subsidiaries CSAH China Southern Air Holding Limite
DEFINITIONS Definitions Unless the context otherwise requires, the following terms should have the following meanings in this report: Company, CSA, China Southern Airlines China Southern Airlines Company Limited Group China Southern Airlines Company Limited and its subsidiaries CSAH China Southern Air Hold
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