SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2010
LG Display Co., Ltd.
(Translation of Registrants name into English)
20 Yoido-dong, Youngdungpo-gu, Seoul 150-721, The Republic of Korea
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrants home country), or under the rules of the home country exchange on which the registrants securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrants security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ¨ No x
(From January 1, 2009 to December 31, 2009)
THIS IS A TRANSLATION OF THE ANNUAL REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SUPERVISORY COMMISSION.
IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.
UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A NON-CONSOLIDATED BASIS IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN KOREA, OR KOREAN GAAP, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES IN THIS DOCUMENT.
Contents
1. | Company | 3 | ||||
A. | Name and Contact Information | 3 | ||||
B. | Domestic Credit Rating | 3 | ||||
C. | Capitalization | 4 | ||||
D. | Voting Rights | 5 | ||||
E. | Dividends | 5 | ||||
2. | Business | 6 | ||||
A. | Business Overview | 6 | ||||
B. | Industry | 6 | ||||
C. | New Business | 8 | ||||
3. | Major Products and Raw Materials | 10 | ||||
A. | Major products in 2009 | 10 | ||||
B. | Average selling price trend of major products | 10 | ||||
C. | Major raw materials | 11 | ||||
4. | Production and Equipment | 11 | ||||
A. | Production capacity and calculation | 11 | ||||
B. | Production performance and utilization ratio | 11 | ||||
C. | Investment plan | 12 | ||||
5. | Sales | 12 | ||||
A. | Sales performance | 12 | ||||
B. | Sales route and sales method | 12 | ||||
6. | Market Risks and Risk Management | 13 | ||||
A. | Market Risks | 13 | ||||
B. | Risk Management | 14 | ||||
7. | Derivative Contracts | 14 | ||||
A. | Derivative Instruments | 14 | ||||
B. | Hedge of fair value | 14 | ||||
C. | Hedge of cash flows | 15 | ||||
D. | Realized gains and losses | 16 | ||||
8. | Major Contracts | 16 | ||||
9. | Research & Development | 17 | ||||
A. | Summary of R&D Expense | 17 | ||||
B. | R&D Achievements | 17 | ||||
10. | Customer Service | 26 |
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11. | Intellectual property | 26 | ||||
12. | Environmental Matters | 27 | ||||
13. | Financial Information | 28 | ||||
A. | Financial highlights (Based on Non-consolidated, Korean GAAP) | 28 | ||||
B. | Financial highlights (Based on Consolidated, Korean GAAP) | 29 | ||||
C. | Status of equity investment | 30 | ||||
14. | Audit Information | 31 | ||||
A. | Audit Service | 31 | ||||
B. | Non-audit Service | 31 | ||||
15. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 31 | ||||
A. | Risk relating to Forward-looking Statements | 31 | ||||
B. | Financial Condition and Results of Operations | 32 | ||||
16. | Board of Directors | 35 | ||||
A. | Independence of directors | 35 | ||||
B. | Members of the board of directors | 36 | ||||
C. | Committees of the board of directors | 37 | ||||
17. | Information Regarding Shares | 37 | ||||
A. | Total number of shares | 37 | ||||
B. | Shareholder list | 37 | ||||
18. | Directors and Employees | 38 | ||||
A. | Directors | 38 | ||||
B. | Employees | 39 | ||||
19. | Subsequent Event | 39 |
Attachment: | 1. Korean GAAP Non-consolidated Financial Statements | |
2. Korean GAAP Consolidated Financial Statements |
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A. Name and Contact Information
The name of our company is EL-GI DISPLAY CHUSIK HOESA, which shall be written in English as LG Display Co., Ltd.
Our principal executive offices are located at West Tower, LG Twin Towers, 20 Yoido-dong, Youngdungpo-gu, Seoul, Republic of Korea, 150-721, and our telephone number at that address is +82-2-3777-0978. Our website address is http://www.lgdisplay.com.
Subject |
Month of rating |
Credit rating |
Rating agency (Rating range) | |||
Commercial Paper | January 2006 | A1 | National Information & Credit Evaluation, Inc. (A1 ~ D) | |||
June 2006 | A1 | |||||
December 2006 | A1 | |||||
June 2007 | A1 | |||||
December 2007 | A1 | |||||
September 2008 | A1 | |||||
December 2008 | A1 | |||||
| ||||||
June 2006 | A1 | Korea Investors Service, Inc. (A1 ~ D) | ||||
January 2007 | A1 | |||||
June 2007 | A1 | |||||
December 2007 | A1 | |||||
September 2008 | A1 | |||||
Corporate Debenture | June 2006 | AA- | National Information & Credit Evaluation, Inc. (AAA ~ D) | |||
December 2006 | A+ | |||||
June 2007 | A+ | |||||
September 2008 | A+ | |||||
July 2009 | AA- | |||||
October 2009 | AA- | |||||
| ||||||
June 2006 | AA- | Korea Investors Service, Inc. (AAA ~ D) | ||||
January 2007 | A+ | |||||
June 2007 | A+ | |||||
September 2008 | A+ | |||||
July 2009 | AA- | |||||
December 2009 | ||||||
| ||||||
October 2009 | AA- | Korea Ratings, Inc. (AAA ~ D) | ||||
December 2009 |
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(1) Change in Capital Stock (as of December 31, 2009)
(Unit: Won, Share) | ||||||
Date |
Description |
Change in number of common shares |
Face amount per share | |||
July 23, 2004 |
Offering* |
33,600,000 | 5,000 | |||
September 8, 2004 |
Follow-on offering** |
1,715,700 | 5,000 | |||
July 27, 2005 |
Follow-on offering*** |
32,500,000 | 5,000 |
* | ADSs offering: 24,960,000 shares (US$30 per share, US$15 per ADS) |
Initial public offering in Korea: 8,640,000 shares ((Won)34,500 per share)
** | ADSs offering: 1,715,700 shares ((Won)34,500 per share) pursuant to the exercise of greenshoe option by the underwriters |
*** | ADSs offering: 32,500,000 shares (US$42.64 per share, US$21.32 per ADS) |
(2) Convertible Bonds (as of March 12, 2010)
(Unit: US$, Share) | ||||
Item |
Content | |||
Issuing date | April 18, 2007 | |||
Maturity (Redemption date after put option exercise) |
April 18, 2012 (April 18, 2010) | |||
Face Amount | US$550,000,000 | |||
Offering method | Public offering | |||
Conversion period | Convertible into shares of common stock during the period from April 19, 2008 to April 3, 2012 | |||
Conversion price | (Won)48,075 per share* | |||
Conversion status | Number of shares already converted | None | ||
Number of convertible shares | 10,680,811 shares if all are converted* | |||
Remarks | - Registered form - Listed on Singapore Exchange |
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* | Conversion price was adjusted from (Won)49,070 to (Won)48,760 and the number of convertible shares was adjusted from 10,464,234 to 10,530,762 following the approval by the shareholders of a cash dividend of (Won)750 per share at the annual general meeting of shareholders on February 29, 2008. Conversion price was further adjusted from (Won)48,760 to (Won)48,251 and the number of shares issuable upon conversion was adjusted from 10,530,762 to 10,641,851 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 13, 2009. Conversion price was further adjusted from (Won)48,251 to (Won)48,075 and the number of shares issuable upon conversion was adjusted from 10,641,851 to 10,680,811 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 12, 2010. |
D. Voting rights (as of December 31, 2009)
(Unit: share) | ||
Description |
Number of shares | |
1. Shares with voting rights [A-B] |
357,815,700 | |
A. Total shares issued |
357,815,700 | |
B. Shares without voting rights |
| |
2. Shares with restricted voting rights |
| |
Total number of shares with voting rights [1-2] |
357,815,700 |
At the annual general meeting of shareholders on March 12, 2010, our shareholders approved a cash dividend of (Won)500 per share of common stock.
Dividends during the recent three fiscal years
Description |
2009 | 2008 | 2007 | |||
Par value (Won) |
5,000 | 5,000 | 5,000 | |||
Net income (loss) (Million Won) |
1,067,947 | 1,086,896 | 1,344,027 | |||
Earnings (Loss) per share (Won) |
2,985 | 3,038 | 3,756 | |||
Total cash dividend amount (Million Won) |
178,908 | 178,908 | 268,362 | |||
Total stock dividend amount (Million Won) |
| | | |||
Cash dividend payout ratio (%) |
16.8 | 16.5 | 20.0 | |||
Cash dividend yield (%) |
1.3 | 2.2 | 1.6 | |||
Stock dividend yield (%) |
| | | |||
Cash dividend per share (Won) |
500 | 500 | 750 | |||
Stock dividend per share (Share) |
| | |
* | Earnings per share is calculated based on par value of (Won)5,000 per share. |
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* | Earnings per share is calculated by dividing net income by weighted average number of common stock. |
* | Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common stock during the one-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends. |
We were incorporated in February 1985 under the laws of the Republic of Korea. LG Electronics and LG Semicon transferred their respective LCD business to us in 1998, and since then our business has been focused on the research, development, manufacture and sale of display panels applying technologies such as TFT-LCD, LTPS-LCD and OLED.
As of December 31, 2009, we operated fabrication facilities and module facilities in Paju and Gumi, Korea, an OLED facility in Gumi, Korea and a LCD research center in Paju, Korea. We have also established sales subsidiaries in the United States, Europe and Asia.
As of December 31, 2009, our business consisted of (i) the manufacture and sale of LCD panels, (ii) the manufacture and sale of OLED panels and (iii) the manufacture and sale of television sets that utilize our LCD panels. Because our OLED business represents only an extremely small part of our overall business, only our LCD business has been categorized as a reporting business segment. In addition, because our television sales business is operated by our affiliated company, we have not categorized our television sales business as a separate reporting business segment.
Financial highlights by business (based on non-consolidated, Korean GAAP)
(Unit: In billions of Won) | ||
2009 |
LCD business | |
Sales Revenue |
20,119 | |
Gross Profit |
1,821 | |
Operating Profit |
1,001 |
(1) Industry characteristics and growth potential
| TFT-LCD technology is one of the widely used technologies in the manufacture of flat panel displays and the demand for flat panel displays is growing. The flat panel display industry is characterized by entry barriers due to rapidly evolving technology, capital-intensive characteristics, and the significant investments required to achieve economies of scale, among other factors. There is intense competition between the players within the industry and production capacity in the industry, including ours, is being continually increased. |
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| The demand for LCD panels for notebook computers and desktop monitors has grown, to a degree, in tandem with the growth in the information technology industry. The demand for LCD panels for television sets has been growing as digital broadcasting is becoming more common and as LCD television has come to play an important role in the digital display market. In addition, markets for small- to medium-sized LCD panels, such as mobile phones, P-A/V, medical applications, automobile navigation systems and e-books, among others, have shown continued growth. |
| The average selling prices of LCD panels may continue to decline with time irrespective of general business cycles as a result of, among other factors, technology advancements and cost reductions. |
(2) Cyclicality
| The TFT-LCD business is highly cyclical. In spite of the increase in demand for products, this industry has experienced periodic volatility caused by imbalances between supply and demand due to capacity expansion within the industry. |
| Intense competition and expectations of demand growth may lead panel manufacturers to invest in manufacturing capacity on similar schedules, resulting in a surge in capacity when production is ramped up at new fabrication facilities. |
| During such surges in capacity growth, the average selling prices of display panels may decline. Conversely, demand surges and fluctuations in the supply chain may lead to price increases. |
(3) Market Condition
| The TFT-LCD industry is highly competitive due largely to additional capacity expansion driven by TFT-LCD panel makers. |
| Most TFT-LCD panel makers are located in Asia. |
a. Korea: LG Display, Samsung Electronics (including a joint venture between Samsung Electronics and Sony Corporation), Hydis Technologies
b. Taiwan: AU Optronics, Chi Mei Optoelectronics, CPT, Hannstar etc.
c. Japan: Sharp, IPS-Alpha, etc.
d. China: SVA-NEC, BOE-OT, etc.
(4) Market shares
| Our worldwide market share for large-sized TFT-LCD panels (10-inch or larger) based on revenue is as follows: |
2009 | 2008 | 2007 | |||||||
Panels for Notebook Computers |
30.3 | %** | 29.6 | %** | 28.5 | % | |||
Panels for Monitors |
23.9 | % | 17.7 | % | 15.6 | % | |||
Panels for Televisions |
24.4 | % | 19.4 | % | 22.0 | % | |||
Total |
25.2 | % | 20.6 | % | 20.4 | % |
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* | Source: DisplaySearch February 2010 |
** | Includes panels for netbooks. |
(5) Competitiveness
| Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, successful and timely investment and product development, cost competitiveness, success in marketing to our end-brand customers, component and raw material supply costs, foreign exchange rates and general economic and industry conditions. |
| In order to compete effectively, it is critical to be cost competitive and maintain stable and long-term relationships with customers which will enable us to be profitable even in a buyers market. |
| A substantial portion of our sales is attributable to a limited number of end-brand customers and their designated system integrators. The loss of these end-brand customers, as a result of customers entering into strategic supplier arrangements with our competitors or otherwise, would result in reduced sales. |
| Developing new products and technologies that can be differentiated from those of our competitors is critical to the success of our business. It is important that we take active measures to protect our intellectual property internationally by obtaining patents and undertaking monitoring activities in our major markets. It is also necessary to recruit and retain experienced key managerial personnel and skilled line operators. |
| We reinforced our position as a leader in LCD technology by developing an ultra slim LCD module for 47-inch LCD televisions that is sturdy and provides high-quality images, a large three-dimensional multi-vision LCD panel which does not require special viewing glasses, one of the worlds most energy efficient LCD panels for 32-inch LCD televisions that uses less than 1 watt per inch, a 47-inch digital photo television which can utilize its standby power to display digital pictures and the worlds first Trumotion 480Hz LCD panel which refreshes 480 frames per second to substantially decrease afterimage and provide viewers with high-quality images that cause less eye fatigue. |
| Moreover, we formed strategic alliances or entered into long-term sales contracts with major global firms such as Dell, Hewlett Packard and Kodak of the United States and Japans Toshiba, among others, to secure customers and expand partnerships for technology development. In January 2009, we entered into a long term supply agreement with Apple Inc. to supply display panels to Apple Inc. for five years. |
| In October 2007, we decided to invest in an 8th generation fabrication facility (P8) to expand our production capacity in line with the growing large-sized LCD television market. The construction of P8 has been completed and mass production at P8 commenced in March 2009. In July 2008, we decided to invest in a 6th generation fabrication facility (P6E) to expand our production capacity. The construction of P6E has been completed and mass production at P6E commenced in April 2009. |
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| We also plan to strengthen our market position in future display technologies by accelerating the development of flexible display technologies and leading the LED backlight LCD market. |
| In order to facilitate a cooperative purchasing relationship with HannStar Display Corporation (HannStar), a company that manufactures TFT-LCD panels in Taiwan, in February 2008, we purchased 180 million shares of preferred stock of HannStar at a purchase price of NT$3,170,250,000. The preferred shares mature in three years and are convertible into shares of common stock of HannStar. |
| We are making an effort to increase our competitiveness by forming cooperative relationships with suppliers and purchasers of our products. As part of this effort, in June 2008, we purchased 2,037,204 shares of AVACO Co., Ltd., which produces sputters, a core equipment for LCD production, at a purchase price of (Won)6.2 billion and in May 2008, we purchased 1,008,875 shares of TLI Inc., which produces core LCD panel components such as timing controllers and driver integrated circuits, at a purchase price of (Won)14.1 billion. In July 2008, we purchased 6,850,000 shares of common stock of New Optics Ltd. at a purchase price of (Won)9.7 billion. In addition, in February 2009, we purchased 3,000,000 shares of common stock of ADP Engineering Co., Ltd. at a purchase price of (Won)6.3 billion. In May 2009, we purchased 6,800,000 shares of common stock of Wooree LED Co., Ltd. at a purchase price of (Won)11.9 billion. In November 2009, we purchased 34,125,061 shares of common stock of RPO Inc. at a purchase price of US$12.3 million. In November 2009, we purchased TWD212.5 million in convertible bonds from Everlight Electronics Co., Ltd. In addition, in December 2009, we purchased 420,000 global depositary receipts of Prime View International Co., Ltd. at a purchase price of US$9.9 million. By promoting strategic relationships with equipment and parts suppliers, which enables us to obtain a stable source of supply of equipment and parts at competitive prices, we have strengthened our competitive position in the LCD business. |
| In July 2008, we and Skyworth-RGB Electronics Co., Ltd. founded a research and development joint venture corporation with a registered capital of CNY 50 million in China. |
| In October 2008, we established a joint venture company with AmTRAN Technology Co., Ltd., a Taiwan corporation. The joint venture company will supply both parties with TFT-LCD modules and TFT-LCD televisions. Through the establishment of this joint venture, we are able to further expand our customer base by securing a long-term stable panel dealer. It also allows us to produce LCD modules and LCD television sets in a single factory, which enables us to provide our customers with products that are competitive both in terms of technology and price. |
| We are making an effort to strengthen our competitiveness in the solar cell business, which is emerging as a future growth engine. As part of this effort, in June 2009, we purchased 933,332 shares of common stock of Dynamic Solar Design Co., Ltd. at a purchase price of (Won)6.1 billion. Dynamic Solar Design Co., Ltd. produces equipment for the solar cell business. |
| As part of our strategy to expand our production capacity overseas, in November 2009, we signed an investment agreement and a joint venture agreement with the City of Guangzhou, China, to build an eighth-generation panel fabrication facility in China. |
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| In December 2009, certain LG affiliates and we entered into a joint venture investment agreement and established a joint venture company, Global OLED Technology LLC, for purposes of managing the patent assets relating to OLED technology that we acquired from Eastman Kodak Company in December 2009. We invested (Won)72.3 billion in return for a 49% equity interest in the joint venture company. |
| In December 2009, we invested (Won)1.8 billion and acquired a 30.6% limited partnership interest in LB Gemini New Growth Fund No.16. Under the limited partnership agreement, we have agreed to invest a total amount of (Won)30 billion in the fund. By becoming a limited partner of this fund, our aim is to seek direct investment opportunities as well as to receive benefits from the indirect investment. |
| In July 2009, in order to expand our back-end module assembly capacity for liquid crystal display production, we entered into a stock purchase agreement with LG Electronics Inc. and LG Electronics (China) Co., Ltd. to purchase all of the shares of LG Electronics (Nanjing) Plasma Co., Ltd. at a purchase price of (Won)3.5 billion. Pursuant to the terms of such transaction, in December 2009, we acquired all of the equity interests of LG Electronics (Nanjing) Plasma Co., Ltd. |
3. Major Products and Raw Materials
We manufacture TFT-LCD panels, of which a significant majority is exported overseas.
(Unit: In billions of Won) | |||||||||||
Business area |
Sales types |
Items (Market) |
Specific use |
Major trademark |
Sales (%) | ||||||
TFT-LCD |
Product/ Service/ Other Sales | TFT-LCD (Overseas) |
Panels for Notebook Computer, Monitor, Television, etc | LG Display | 19,172 (95.3% | ) | |||||
TFT-LCD (Korea*) |
Panels for Notebook Computer, Monitor, Television, etc | LG Display | 947 (4.7% | ) | |||||||
Total |
20,119 (100% | ) |
* | Including local export. |
** | Period: January 1, 2009 ~ December 31, 2009. |
B. Average selling price trend of major products
The average selling prices of LCD panels have decreased due to oversupply for LCD panels. The average selling prices of LCD panels are expected to continue to fluctuate due to imbalances in the supply and demand for LCD panels.
(Unit: US$ / m2) | ||||||||
Description |
2009 Q4 | 2009 Q3 | 2009 Q2 | 2009 Q1 | ||||
TFT-LCD panel |
809 | 833 | 739 | 669 |
* | Semi-finished products in the cell process have been excluded. |
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** | Quarterly average selling price per square meter of net display area shipped |
*** | On a consolidated basis |
Prices of major raw materials depend on fluctuations in supply and demand in the market as well as on change in size and quantity of raw materials due to the increased production of large-sized panels.
(Unit: In billions of Won) | |||||||||||||
Business area |
Purchase |
Items |
Specific use |
Purchase price |
Ratio (%) |
Suppliers | |||||||
TFT-LCD | Raw Materials | Glass | LCD panel manufacturing |
3,592 | 26.73 | % | Samsung Corning Precision Glass Co., Ltd., Nippon Electric Glass Co., Ltd., etc. | ||||||
Backlight |
3,681 | 27.39 | % | Heesung Electronics Ltd., etc. | |||||||||
Polarizer |
1,836 | 13.67 | % | LG Chem., etc. | |||||||||
Others |
4,328 | 32.21 | % | - | |||||||||
Total |
13,437 | 100 | % | - |
* | Period: January 1, 2009 ~ December 31, 2009 |
A. Production capacity and calculation
(1) Calculation method of production capacity
Year: Maximum monthly input capacity during the year x number of months (12 months).
(2) Production capacity
(Unit : 1,000 Glass sheets) | ||||||||||
Business area |
Items | Business place | 2009 | 2008 | 2007 | |||||
TFT-LCD |
TFT-LCD | Gumi, Paju | 15,003 | 12,492 | 11,544 |
B. Production performance and utilization ratio
(1) Production performance
(Unit: 1,000 Glass sheets) | ||||||||||
Business area |
Items | Business place | 2009 | 2008 | 2007 | |||||
TFT-LCD |
TFT-LCD | Gumi, Paju | 12,860 | 11,042 | 10,182 |
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(2) Utilization Ratio
(Unit: Hours) | |||||||
Business place (area) |
Available working hours of 2009 |
Actual working hours of 2009 |
Average utilization ratio |
||||
Gumi (TFT-LCD) |
8,760 (24 hours x 365 days) |
8,707 (24 hours x 362.8 days) |
99.4 | % | |||
Paju (TFT-LCD) |
8,760 (24 hours x 365 days) |
8,748 (24 hours x 364.5 days) |
99.9 | % |
In connection with our strategy to expand our TFT-LCD production capacity, we estimate that we will incur capital expenditures of approximately (Won)4 trillion, on a consolidated basis, for the expansion of existing production lines and the construction of new facilities. Such amount is subject to change depending on business conditions and market environment.
(Unit: In billions of Won) | ||||||||||||
Business area |
Sales types | Items (Market) | 2009 | 2008 | 2007 | |||||||
TFT-LCD |
Products, etc. | TFT-LCD | Overseas | 19,172 | 14,801 | 13,137 | ||||||
Korea* | 947 | 1,064 | 1,026 | |||||||||
Total | 20,119 | 15,865 | 14,163 |
* | Includes local export. |
B. Sales route and sales method
(1) Sales organization
| As of December 31, 2009, each of our IT Business Unit, Television Business Unit and Mobile/OLED Business Unit had individual sales and customer support functions. |
| Sales subsidiaries in the United States, Germany, Japan, Taiwan, Singapore and China (Shanghai and Shenzhen) perform sales activities and provide local technical support to customers. |
(2) Sales route
One of the following:
| LG Display HQ g Overseas subsidiaries (USA/Germany/Japan/Taiwan/Singapore/China (Shanghai and Shenzhen)), etc. g System integrators, Branded customers g End users |
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| LG Display HQ g System integrators, Branded customers g End users |
(3) Sales methods and sales terms
| Direct sales and sales through overseas subsidiaries, etc. Sales terms are subject to change depending on the fluctuation in the supply and demand of LCD panels |
(4) Sales strategy
| To secure stable sales to major personal computer makers and the leading consumer electronics makers globally |
| To increase sales of premium notebook computer products, to strengthen sales of the larger size and high-end monitor segment and to lead the large and wide LCD television market including in the category of full-high definition 120Hz television monitors |
| To diversify our market in the mobile business segment, including products such as mobile phone, P-A/V, automobile navigation systems, e-book, aircraft instrumentation and medical diagnostic equipment, etc. |
(5) Purchase Orders
| Customers generally place purchase orders with us one month prior to delivery. Our customary practice for procuring orders from our customers and delivering our products to such customers is as follows: |
| Receive order from customer (overseas sales subsidiaries, etc.) g Headquarter is notified g Manufacture product g Ship product (overseas sales subsidiaries, etc.) g Sell product (overseas sales subsidiaries, etc.) |
6. Market Risks and Risk Management
Our industry continues to experience steady declines in the average selling prices of display panels irrespective of cyclical fluctuations in the industry, and our margins would be adversely impacted if prices decrease faster than we are able to reduce our costs.
The TFT-LCD industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel makers in Korea, Taiwan, China and Japan. Our main competitors in the industry include Samsung Electronics, Infovision, Hydis Technologies, AU Optronics, Chi Mei Optoelectronics, Chunghwa Picture Tubes, HannStar, Innolux, SVA-NEC, BOE-OT, Sharp, Hitachi, TMDisplay, Mitsubishi, Sony and IPS-Alpha.
Our ability to compete successfully depends on factors both within and outside our control, including product pricing, performance and reliability, successful and timely investment and product development, success or failure of our end-brand customers in marketing their brands and products, component and raw material supply costs, and general economic and industry conditions. We cannot provide assurance that we will be able to compete successfully with our competitors on these fronts and, as a result, we may be unable to sustain our current market position.
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Our results of operations are subject to exchange rate fluctuations. To the extent that we incur costs in one currency and generate sales in a different currency, our profit margins may be affected by changes in the exchange rates between the two currencies. Our sales of display panels are denominated mainly in U.S. dollars, whereas our purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. Our risk management policy regarding foreign currency risk is to minimize the impact of foreign currency fluctuations on our foreign currency denominated assets and liabilities.
The average selling prices of display panels have declined in general and could continue to decline with time irrespective of industry-wide cyclical fluctuations. Certain contributing factors for this decline will be beyond our ability to control and manage. However, in anticipation of such price decline we have continued to develop new technologies and have implemented various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we have entered into cross-currency interest rate swap contracts and foreign currency forward contracts.
Derivative instruments used by us for hedging purposes as of December 31, 2009 are as follows:
Hedging purpose |
Derivative instrument | |
Hedge of fair value | Foreign currency forwards | |
Hedge of cash flows | Cross currency swap | |
Interest rate swap |
We enter into foreign currency forward contracts to manage the exposure to changes in the value of foreign currency denominated accounts receivable and accounts payable in accordance with its foreign currency risk management policy. Hedge accounting is not applied to the abovementioned derivatives.
(1) Foreign currency forward contracts
Details of foreign currency forwards outstanding as of December 31, 2009 are as follows:
(In millions of Won and US$, except forward rate) | ||||||||||
Bank |
Maturity date | Selling | Buying | Forward rate | ||||||
UBS and 8 others |
January 22, 2010 ~ February 26, 2010 |
US$ | 175 | (Won) | 207,276 | (Won)1,177.0:US$1 ~ (Won)1,200.5:US$1 |
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(2) Unrealized gains and losses
Unrealized gains and losses related to the above derivatives as of December 31, 2009 are as follows:
(In millions of Won) | |||||
Type |
Unrealized gains |
Unrealized losses | |||
Foreign Currency Forwards |
(Won) | 2,674 | |
The unrealized gains and losses are charged to operations as gains and losses on foreign currency translation for the year ended December 31, 2009.
Details of our derivative instruments related to hedge of cash flows from changes in foreign currency exchange rates and interest rates related to floating rate debt as of December 31, 2009 are as follows:
(1) Cross Currency Swap
In 2009, we early settled our two floating to fixed cross currency swaps in the amount of US$100 million and US$50 million, respectively. As a result, as of December 31, 2009, we had no cross currency swaps outstanding. Net unrealized gains and losses, net of the related deferred tax effects, incurred prior to the early settlement of the cross currency swaps were recorded as accumulated other comprehensive income.
In relation to the above-mentioned cross currency swap, unrealized losses with present value of (Won)4,523 million recorded as accumulated other comprehensive income are expected to be charged to operations as losses within twelve months of December 31, 2009.
(2) Interest Rate Swap
(In millions of US$, except forward rate) | ||||||||||
Bank |
Maturity date | Contract amount |
Contract rate |
|||||||
Standard Chartered First Bank Korea |
May 24, 2010 | US$ | 100 | Receiving floating rate |
6-month LIBOR | |||||
Paying fixed rate |
5.644 | % |
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Net unrealized gains and losses, net of the related deferred tax effects, were recorded as accumulated other comprehensive income.
In relation to the above-mentioned interest rate swap, unrealized losses with present value of (Won)3,047 million recorded as accumulated other comprehensive income are expected to be charged to operations as losses within twelve months of December 31, 2009.
(3) Unrealized gains and losses
Unrealized gains and losses, before tax, related to hedge of cash flows as of December 31, 2009 are as follows:
(In millions of Won) | ||||||
Type |
Unrealized gains |
Unrealized losses |
Cash flow hedge requirements | |||
Cross currency swap |
| 8,144 | Fulfilled | |||
Interest rate swap |
| 3,047 | Fulfilled |
Realized gains and losses related to derivative instruments for the year ended December 31, 2009 are as follows:
(In millions of Won) | ||||||
Hedge purpose |
Type |
Transaction gains |
Transaction losses | |||
Cash flow hedge |
Cross currency swap | 55 | 13,645 | |||
Cash flow hedge |
Interest Rate Swap | | 5,422 | |||
Cash flow hedge |
Foreign currency forwards | | 2,534 | |||
Fair value hedge |
Foreign currency forwards | 52,350 | 52,991 |
| January 2009: We entered into a long-term supply agreement with Apple Inc. to supply LCD panels to Apple Inc. for 5 years. In connection with the Agreement, we received long-term advances from Apple Inc. in the amount of US$500,000,000 in January 2009 which will be offset as the consideration for products supplied to Apple Inc. |
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(Unit: In millions of Won) | |||||||||||
Account |
2009 | 2008 | 2007 | ||||||||
Material Cost | 400,467 | 302,445 | 246,577 | ||||||||
Labor Cost | 191,507 | 128,041 | 110,586 | ||||||||
Depreciation Expense | 89,459 | 21,679 | 22,516 | ||||||||
Others | 92,905 | 49,027 | 34,737 | ||||||||
Total R&D Expense | 774,338 | 501,192 | 414,416 | ||||||||
Accounting Treatment |
Selling & Administrative Expenses | 168,081 | 148,037 | 106,082 | |||||||
Manufacturing Cost | 606,257 | 353,155 | 308,334 | ||||||||
R&D Expense / Sales Ratio [Total R&D Expense÷Sales for the period×100] |
3.8 | % | 3.2 | % | 2.9 | % |
[Achievements in 2007]
1) Development of first Poland model
| 32-inch HD model |
2) Development of socket type backlight model
| 42-inch FHD model |
| 47-inch HD/FHD model |
3) Development of new concept backlight model
| Development of 32-inch HD model |
| 42/47-inch model under development |
4) Development of interlace image sticking free technology and model
| Improvement of low picture quality caused by television interlace signals |
5) Development of TFT-LCD with ODF (One Drop Filling) for mobile phone application
| Our first ODF model for mobile phone application (1.52 inch) |
6) Development of GIP (Gate in Panel) application model 15XGA
| Removal of gate drive integrated circuits: 3ea g 0ea |
| Reduction in net material costs and shortening of assembly process |
7) 24-inch TN (92%) monitor model development
| The worlds first large-size panel TN application |
| Realization of 92% high color gamut on the worlds largest TN panel |
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8) 15.4-inch LED backlight applied model development
| The worlds first 15.4-inch wide LED-applied display panel for notebook computers |
| The worlds largest LED-applied panel for notebook computers |
9) Development of FHD 120Hz display panel
| 37- to 47-inch FHD model |
10) Development of backlight localization model
| 32-inch HD model |
11) Development of enhanced Dynamic Contrast Ratio technology
| 32-inch HD model |
| Enhanced from 5000:1 to 10000:1 |
12) Development of technology that improves panel transmittance
| Expected to be applied to new models |
13) Development of THM (through-hole mounting) technology and model
| 37- to 47-inch model |
| Providing more mounting options to users |
14) Development of the worlds first DRD (Double Rate Driving) technology-applied model
| Reduction in source drive integrated circuits: 6ea g 3ea |
| Reduction in net material costs and shortening of assembly process |
15) COG (Chip On Panel) applied model development
| Development of thin and light LCD panels made possible by flat type structure |
16) 26-inch/30-inch IPS 102% monitor model development
| Development of 26-inch/30-inch IPS model that can realize 102% wide color gamut |
17) 2.4-inch narrow bezel for Mobile Display
| The borders on the left and right sides of this 2.4-inch qVGA-resolution (240RGB×320) LCD panel measure just 1mm each. Most a-Si TFT LCD panels currently produced generally have borders measuring closer to 2mm |
18) Development of 6-inch Electrophoretic Display Product (EDP) to be used in e-books. The first EPD product for LG Display
| The first EDP to be developed and launched for e-books, the 6-inch SVGA-resolution (800RGBX600) EDP will be supplied to SONY |
[Achievements in 2008]
19) 42FHD Ultra-Slim LCD television development
| Development of ultra-slim (19.8mm in thickness) 42-inch television panel |
20) 37FHD COF adoption LCD television development
| Cost reduction with TCP g COF change: $2.4 (as of March 2008) |
21) CCFL scanning backlight technology development
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| Achieve 6ms MPRT from 8ms |
22) 24WUXGA monitor model development applying RGB LED backlight
| High color gamut (NTSC > 105%), color depth (10 bit) |
23) 13.3-inch notebook computer model development applying LED backlight
| Thin & Light model development applying LED backlight and COG technology |
(3.5mm in thickness, 275g in weight)
24) IPS GIP technology development
| Developed LCD industrys first WUXGA GIP technology in wide view mode area (IPS, VA) |
| Comparative advantage in cost & transmittance over VA |
25) Notebook computer model development applying RGB LED backlight
| High color gamut (100%) notebook computer model development applied RGB LED backlight |
26) Free form LCD development (Elliptical, Circle)
| Development of the worlds largest 6-inch elliptical and 1.4-inch circular-shaped LCD panels |
| Developing non-traditional shaped displays by applying (i) error-free, cutting-edge techniques to overcome technical limitations in making curved LCD panels, (ii) accumulated panel design knowledge and (iii) unique screen information processing algorithm |
| Potential applications of the elliptical-shaped LCD panels include digital photo frame, as well as instrument panels for automobiles and home electronics. The circular LCD panel is expected to make a huge impact in the design of small digital devices like mobile phones, watches and gaming devices. |
27) 42HD power consumption saving technology development
| Power consumption reduction using lamp mura coverage technology which reduces the number of lamps used for B/L from 18pcs(160W) to 9pcs(80W) in case of 42-inch HD LCD panels |
28) New liquid crystal development
| CR: Up 5% compared with the MP level |
| Material cost is similar to the MP material |
29) New AG Polarizer development
| New Polarizer which has a low CR drop ratio under bright room condition |
| CR drop ratio under 1,500lux compared with dark room condition : 82% g 67% |
30) PSM (Potential Sharing Method) technology development
(Improves the Yogore mura characteristics by applying a different electric circuit driving method)
| The time for Yogore mura occurrence delayed by more than 50% |
: Black line 1level base, 552Hrs, 720Hrs g 1,392Hrs, 2,064Hrsh
31) LED backlight 47FHD television model in development
| Development of next generation light source which enables realization of ultra slim LCD panels |
32) 24WUXGA monitor model development applying RGB LED backlight
| Our first green & slim monitor model development applying white LED backlight (thickness 18.3mm) |
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| Our first display port interface type monitor |
33) Line up of aspect ratio 16:9 wide models (185W, 23W, 27W)
| 16:9 models provide for better productivity and larger contents area than existing 16:10 models |
| Supports HD or FHD that are compatible with television applications |
| Development of our first 27W size model |
34) Power consumption saving monitor model development
| Reduces power consumption by 40% by decreasing the number of B/L lamps from 4pcs to 2pcs (17SXGA, 19SXGA, 185WXGA, 19WXGA+. 22WSXGA+) |
35) Notebook model development applying VIC (Viewing Image Control) technology
| Unlike existing models which use external polarizer attachments to adjust viewing angles, the VIC technology allows for the adjustment to be controlled by the LCD panel itself. (Wide viewing angle « Narrow viewing angle) |
36) Notebook model development applying 0.3t glass
| Thin & Light model development applying 0.3t glass |
37) 8.9-inch small-sized notebook (netbook) model development
| Development of minimum size notebook model for improved portability |
38) New aspect ratio 16:9 notebook model development
| Existing aspect ratios: 16:10, 4:3 |
| New aspect ratio 16:9, 15.6-inch notebook model development |
39) Development of highest resolution for mobile application that uses the a-Si method.
| Development of the worlds first 3-inch WVGA LCD panels (300ppi) |
40) 42FHD super narrow bezel LCD television development
| Development of narrow bezel (10.0mm in metal bezel) 42-inch television panel |
41) 47FHD slim depth & narrow bezel LCD television development
| Development of slim (20.8mm in thickness) & narrow bezel (14.0mm in metal bezel) 47-inch television panel |
42) Display port development
| Securing the next generation Interface technology that will replace the current LVDS interface: Decreases the number of connector pins from 91pin (51+41) to 30pin and improves EMI characteristics |
43) LCM rotation circuit development
| Increases the design flexibility of television sets by using a 180° screen rotation function |
44) Small- to medium-sized television model development
| To meet increased demand for secondary television sets |
| 19/22/26 inch model development |
45) 55FHD television model development
| Development of 55-inch (a new category) television panel applying scanning B/L technology |
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46) Development of television model applying GIP+TRD technology
| Development of 32-inch and 26-inch HD television applying GIP+TRD technology |
47) One PCB structure development
| Achieving cost reduction by combining Source PCB with Control PCB: $1.94®$1.1 |
48) 42FHD Gate Single Bank technology development
| Reduction in gate driver integrated circuits by applying 42FHD Gate Single Bank technology: 8ea ® 4ea |
49) 22-inch WSXGA+ model development for Economy IPS Monitor
| Development of the worlds first Economy IPS 22-inch WSXGA+ model |
| Achieving cost competitiveness by applying various cost reduction technologies, including DBEF-D sheet deletion |
50) 21.5-inch TN FHD model development applying 960ch source driver integrated circuits chip
| Development of LG Displays first 21.5-inch wide-format TN FHD model |
| Increased cost competitiveness by applying 960ch source driver integrated circuits chip, which reduces the number of integrated circuits: 8ea ® 6ea |
51) 27-inch TN FHD model development applying BDI (Black Data Insertion) technology
| Development of LG Displays first 27-inch wide-format TN FHD model that applies BDI technology, which removes motion picture afterimages |
| Applying CCA (Color Compensation Algorism) technology that enables the display of superior color tone |
| Achieving 16:9 spect ratio, more than 2.07 million pixel and FHD Resolution |
52) a-Si TFT based 3-inch DOD AMOLED technology development
| Development of the worlds first 3-inch AMOLED applying a-Si TFT and DOD Structure |
| Possible to use prior LCD infrastructure (a-SI TFT) to develop AMOLED |
53) Development of AMOLED applying new crystallization (A-SPC) technology
| Development of the worlds first AMOLED applying non-laser crystallization method (A-SPC) |
| Development of the worlds largest AMOLED television (15-inch HD) |
[Achievements in 2009]
54) Developments of 15.6-inch, 18.5-inch HD monitors for emerging market
| Achieving cost reduction by focusing on basic functions and by applying GIP and DRD |
55) Development of 22-inch WSXGA+ monitor applying White LED backlight
| Development of our first environmentally friendly slim model (14.5mm in thickness) |
| Reduces power consumption by 47% compared to conventional CCFL model by applying White LED backlight |
56) Development of 24-inch WUXGA+ monitor applying GIP
| Development of the worlds first monitor applying IPS GIP technology |
| Increased cost competitiveness by applying 960ch source driver integrated circuits chip, which reduces the number of integrated circuits: 8ea ® 6ea |
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57) Development of 55/47/42-inch FHD LED models
| Development of Direct thicker LED model MP |
| Realization of TM240Hz |
58) 240Hz driving technology development
| Development of the worlds first 1 Gate 1 Drain 240Hz driving technology |
59) Development of low voltage liquid crystal development
| Improving contrast ratio by 2.7% |
| Decreases voltage used in liquid crystals reducing circuit heat; decreases voltage by 6.9% |
60) Development of Ez (Easy) Gamma technology
| Minimize Gamma difference by using new measuring algorithm: 2.2±0.6 ® 2.2±0.25 |
61) Development of 22-inch White+ technology
| Increases transmissivity by 66% by using White+ Quad type pixel structure |
62) Development of 55FHD direct slim LED model
| Development of the worlds first direct-mounted 16.3mm depth slim LCM |
| Realization of 240 block local dimming and Trumotion 240Hz |
63) Development of 42HD GIP +TRD technology
| The worlds first application of the 42HD GIP + TRD structure |
| Removal of gate drive integrated circuits: 3ea ® 0ea |
| Reduction in source drive integrated circuits: 6ea ® 2ea |
64) Development of TV3 CR5 Color PR
| Realization of 100% BT709 reiteration rate by applying RGB Color Locus |
| Achieving a 5% increase in CR by decreasing size of Color PR pigment |
65) Development of the worlds first slim 27W FHD TN monitors
| Reduces thickness by applying edge-mounted backlight: 37.2t ® 21.6t |
| Reduces power consumption by 60% compared to conventional models by applying 4Lamp |
| Realization of MPRT 8ms by applying BDI technology |
66) Development of the worlds first 25W FHD TN new size monitors
| Development of new aspect ratio model: 16:9 wide-format |
| Reduction in the number of driver integrated circuits by applying 960ch Source Driver: 8ea ® 6ea |
| Removal of gate driver integrated circuits by applying GIP (Gate in Panel) technology |
67) Development of 16:9 wide-format power consumption saving monitors (200W HD+, 215W FHD, 230W FHD)
| Reduces power consumption by 40% compared to conventional models by applying 2Lamp |
| Slim design which reduces thickness: 17.0t ® 14.5t |
| To meet Energy Star 5.0 standards |
68) Development of the worlds first 22-inch WSXGA+ DRD (Double Rate Driving) monitors
| A 50% reduction in source driver integrated circuits by applying Double Rate Driving technology: 8ea ® 4ea |
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| Removal of gate driver integrated circuits by applying GIP technology |
| Application of optimum thin-film transistor structure for Double Rate Driving monitors |
69) Development of the worlds first 23W e-IPS monitors
| Slim design: Reduces thickness by applying edge-mounted backlight: 35.7t ® 17t |
| Reduces power consumption by 50% compared to conventional model by applying 4Lamp |
| Realization of high aperature ratio by applying UH-IPS technology |
| Reduction in the number of integrated circuits by applying 960ch source driver: 8ea ® 6ea |
| Removal of gate driver integrated circuits by applying GIP technology |
| To meet Energy Star 5.0 standards |
70) Development of high efficiency backlight technology
| Removal of DBDEF-D Sheet by increasing backlight luminance level by more than 30% ® development of high efficiency lamp and improvement of optics sheet optical efficiency |
71) Development of GIP and high aperature ratio technology for QHD IPS model
| Stable GIP output in QHD IPS models |
| Maximizing transmissivity by applying UH-IPS technology and asymmetric pixel design |
72) Development of three-dimensional display technology using the shutter glasses method.
| Realization of stable rate of 172Hz |
| Realization of 4port low voltage differential signaling frequencies at a rate of 400MHz |
| Realization of ODC (Over Driver Circuit) tuning of GTG 3.5ms which is optimum for three-dimensional display |
73) Development of 17.1-inch wide-format slim (flat type) panel applying COG (Chip On Panel) chip, our largest slim (flat type) panel
| Development of our largest size slim (flat type) model (previously, our largest model was the 15.4-inch wide-format) |
| Reduction in thickness : 6.5mm ® 4.3mm |
74) Development of new high resolution 101W model (1024x600, 1366x768)
| Achieving higher resolution : 1024x576 ® 1024x600, 1366x768 |
75) Development of worlds first 17.3-inch HD+ LED panel for notebook computers
| New size and resolution for 16:9 wide-format |
| Existing model: 17.1-inch WXGA+ 1400x900 / New model: 17.3-inch HD+ 1600x900 |
76) Development of 13.3-inch HD LED panel for notebook computers
| New size and resolution for 16:9 wide-format |
77) Development of worlds first 14.0-inch HD+ LED panel for notebook computers
| New size and HD+ resolution (1600x900) for 16:9 wide-format |
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78) Development of worlds first 15.6-inch HD+ LED panel for notebook computers
| First HD+ resolution (1600x900) for 16:9 wide-format |
79) Development of worlds first 15.6-inch FHD LED panel for notebook computers
| First FHD resolution (1920x1080) for 16:9 wide-format |
80) Development of the first Green PC models (13.3-inch, 14.0-inch, 15.6-inch)
| First models applying Green product concept (halogen free, low power consumption) |
81) Development of DRD (Double Rate Driving) technology applying COG (Chip on Glass)
| Development of the first COG that applies DRD technology (a 50% reduction in the number of COG drive integrated circuits) |
82) Development of 10.1-inch SD (1024 x 600) model for netbooks
| Improved resolution: 1024 x 576®1024 x 600 |
| Reduction in cost by applying COG instead of COF |
83) Development of 10.1-inch HD (1366 x 768) model for netbooks
| Highest resolution among 10.1-inch models |
| Reduction in cost by applying GIP technology |
84) Development of 17.1-inch WUXGA flat type model
| Development of largest flat type model (previously, largest model was 15.4-inch) |
| The thinnest among 17.1-inch models |
| Reduction in thickness: 6.5t ® 4.3t |
85) Developments of 11.6-inch HD monitor for netbooks
| Development of largest/ highest resolution monitor for netbooks |
| Reduction in cost by applying GIP technology |
86) Development of low-cost 26-inch and 32-inch HD model for televisions
| Worlds first monitor without a cover shield |
| Application of sheet type support side |
| Reduction in cost by applying low-cost single bottom covers for mold frames |
87) Development of large-sized (42-inch/47-inch) edge type LED LCD model for televisions
| Development of our first model for televisions applying edge type LED backlight (mass production commenced in September 2009) |
| Slim depth (11.9mm in thickness) & narrow bezel (18mm in thickness) |
88) Development of worlds first S/D-IC + Tcon merging technology applicable to television monitors
| Minimizing size of printed circuit board by applying 1380ch S/D-IC + ASIC technology and removing ASIC chip |
| A 49% cost reduction in manufacturing circuits |
89) Achieving a full product line-up for netbook monitors
| A full product line-up that covers the full spectrum of netbook monitor sizes from 8.9-inch to 11.6-inch models |
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90) Development of our first flat type monitor for netbooks
| Development of 11.6-inch flat type HD monitor |
91) Development of new LED-applied model utilizing vertical LED array technology
| Development of 15.6-inch HD model applying vertical LED array technology (technology applied in existing models: horizontal LED array) |
| Reduction in power consumption and raw material costs |
92) Development of worlds first 21.5W FHD IPS monitor applying white LED backlight technology
| Application of environmentally friendly components including white LED backlight and halogen free parts |
| Achievement of high luminance (more than 330nit) by applying high efficiency white LED backlight |
| A 100% sRGB coverage |
93) Development of worlds first 27W QHD IPS monitor applying white LED backlight technology
| Application of environmentally friendly components including white LED backlight and halogen free parts |
| Achievement of high luminance (more than 380nit) by applying high efficiency white LED backlight |
| A 100% sRGB coverage |
| Realization of high resolution (2560x1440) |
| Removal of gate driver integrated circuits by applying GIP (Gate In Panel) technology |
94) Development of worlds first 19-inch WXGA monitor applying DRD (Double Rate Driver)
| A 50% reduction in the number of source driver integrated circuits by applying DRD (Double Rate Driving) technology |
| Removal of gate driver integrated circuits by applying GIP (Gate In Panel) technology |
| Optimization of TFT design structure for DRD (Double Rate Driver) technology |
95) Development of worlds first 22W e-IPS monitor applying GIP (Gate In Panel) technology
| Achievement of high aperture ratio by applying UH-IPS technology |
| Reduction in the number of source driver integrated circuits by applying 960 channel chip (8ea®6ea) |
| Removal of gate driver integrated circuits by applying GIP (Gate In Panel) technology |
96) Development of worlds first QHD new high resolution monitor (27W QHD)
| Achievement of high resolution (2560 x 1440) |
| Maximization of aperture ratio applying UH-IPS technology and elimination of gate driver integrated circuits by applying GIP (Gate In Panel) technology |
| Achievement of high luminance and sRGB coverage of 100% applying high efficiency white LED |
97) Development of worlds first monitor applying GIP (Gate In Panel), DRD (Double Rate Driver) and I-VCOM monitor (185W HD)
| 50% reduction in the number of source driver integrated circuits by applying DRD (Double Rate Driving) technology |
| Elimination of gate driver integrated circuits by applying GIP (Gate In Panel) technology |
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| Elimination of DBEF Optical sheet by applying I-VCOM technology and optical efficiency improvement in backlight |
98) Development of shutter glass type three-dimensional monitor with full high definition
| 172Hz operation frame rate |
| Highest data interface speed of over 400MHz in 4port LVDS interface and achievement of GTG 3.5ms by optimal tuning of ODC (Over Driving Circuit) |
99) One layer vertical LED monitor development and reinforcement of monitor product line up (200W HD+, 215W FHD, 230W FHD)
| Minimization of the number of LED PKG applying vertical array structure |
| Elimination of DBEF Sheet applying two-in-one LED PKG |
| Slim design: optimization of mechanical structure |
100) Development of worlds first notebook monitor applying 2ea Sheet Backlight
| Achieving cost competitiveness by switching from conventional 3~4ea sheet to 2ea complex sheet backlight (with the Diffuser Sheet eliminated) |
In order to highlight the importance of creating customer value, we have formulated a roadmap toward creating customer value and have shared this information with all of our employees. Through our Voice of Customer campaign, we have responded to customer feedback including complaints, suggestions, praises, enquiries and requests as soon as they were made and we have made efforts to change any negative feedback made by a customer into a positive feedback through such prompt response. In addition, in order to support our customers, we have established IPS camps and have cooperated with our customers to promote IPS technology. Furthermore, we have hosted Why LGD campaigns in order to provide superior products and services to our customers including in the areas of technology, quality, responsiveness, delivery and cost. We also monitor customer opinion through annual customer satisfaction surveys and customer interviews, and the results of such surveys and interviews are reflected in the performance evaluation of our executive officers.
As of December 31, 2009, we currently hold a total of 12,151 patents, including 5,630 in Korea, and 6,521 in other countries.
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We are subject to strict environmental regulations and we may be subject to fines or restrictions that could cause our operations to be interrupted. Our manufacturing processes generate chemical waste, waste water and other industrial waste at various stages in the manufacturing process, and we are subject to a variety of laws and regulations relating to the use, storage, discharge and disposal of such chemical by-products and waste substances. We have installed various types of anti-pollution equipment, consistent with industry standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations. We have also voluntarily agreed to reduce emission of greenhouse gases, such as per fluoro compounds, or PFCs, and sulfur hexafluoride, or SF6, gases, by installing PFC abatement systems to meet voluntary emissions targets for the TFT-LCD industry by 2010. We installed PFC abatement systems at all of our production lines when the production facilities were being constructed. We also installed a SF6 abatement system in P1 in April 2005 and we intend to install similar abatement systems in our other production facilities through implementation of Clean Development Mechanism, or CDM, projects. Our methodology for SF6 decomposition has been approved by the CDM Executive Board, an entity established by the parties to the United Nations Framework Convention on Climate Change, or UNFCCC, in February 2009, and we are currently conducting a feasibility study on the CDM project design document and working toward receiving the approval of the Korean government for such projects. In addition, as of December 31, 2009, we were party to voluntary agreements, which reflect a coordinated energy conservation initiative between government and industry, with respect to our operation of P1 through P8, the Gumi module production plant and the Paju module production plant. In accordance with such agreements, we have implemented a variety of energy-saving measures in those facilities, including installation of energy saving devices and consulting with energy conservation specialists. We also established an overall greenhouse gas emissions inventory system for our domestic sites, which was verified by Lloyds Register Quality Assurance, which is certified as the designated operational entity for CDM by the CDM Executive Board. Operations at our manufacturing plants are subject to regulation and periodic monitoring by the Korean Ministry of Environment and local environmental protection authorities. We believe that we have adopted adequate anti-pollution measures for the effective maintenance of environmental protection standards consistent with local industry practice, and that we are in compliance in all material respects with the applicable environmental laws and regulations in Korea. Expenditures related to such compliance may be substantial. Such expenditures are generally included in capital expenditures. As required by Korean law, we employ licensed environmental specialists for each environmental area, including air quality, water quality, toxic materials and radiation. We currently have ISO 14001 certifications with respect to the environmental record for P1 through P8, the Gumi module production plant and the Paju module production plant, as well as our module production plants in Nanjing and Guangzhou, China. We have been certified by the Korean Ministry of Environment as an Environmentally Friendly Company, with respect to our environmental record for P1 and our module production plant in Gumi since 1997, with respect to our operations at P2 and P3 since 2006, and with respect to our operations at P4, P5 and P6 since 2008.
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We also have an internal monitoring system to control the use of hazardous substances in the manufacture of our products as we are committed to compliance with all applicable environmental laws and regulations, including European Union Restriction of Hazardous Substances (RoHS) Directive 2002/95/EC, which took effect on July 1, 2006 and restricts the use of certain hazardous substances in the manufacture of electrical and electronic equipment. In June 2006, we became the first TFT-LCD panel manufacturer to be recognized as an internationally accredited RoHS testing laboratory by the European Unions German accreditation organization, EU TÜV SÜD. In October 2007, we became the first TFT-LCD company to be certified the International Electrotechnical Commission-Hazardous Substance Process Management (IECQ-HSPM) QC 080000, which is an international system requirements document intended to help organizations manage hazardous substances in their components and products through hazardous substance process management, and demonstrates the organizations conformity with RoHS.
Furthermore, we are operating a green purchasing system, which excludes the hazardous materials at the purchasing stage. This system has enabled us to comply with various environmental legislations of hazardous substances, from European Union RoHS to China RoHS.
A. Financial highlights (Based on Non-consolidated, Korean GAAP)
(Unit: In millions of Won, except for per share data) | |||||||||||||
Description |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||
Current Assets |
7,897,206 | 6,256,112 | 5,644,253 | 2,731,656 | 3,196,934 | ||||||||
Quick Assets |
6,610,901 | 5,374,609 | 4,963,657 | 1,996,280 | 2,725,169 | ||||||||
Inventories |
1,286,305 | 881,503 | 680,596 | 735,376 | 471,765 | ||||||||
Non-current Assets |
10,987,957 | 10,245,875 | 7,750,182 | 10,084,191 | 9,798,981 | ||||||||
Investments |
1,177,182 | 973,322 | 489,114 | 361,558 | 213,984 | ||||||||
Tangible Assets |
8,731,929 | 8,431,214 | 6,830,600 | 8,860,076 | 8,988,459 | ||||||||
Intangible Assets |
240,900 | 194,343 | 111,530 | 114,182 | 149,894 | ||||||||
Other Non-current Asset |
837,946 | 646,996 | 318,938 | 748,375 | 446,644 | ||||||||
Total Assets |
18,885,163 | 16,501,987 | 13,394,435 | 12,815,847 | 12,995,915 | ||||||||
Current Liabilities |
5,720,245 | 4,227,226 | 2,245,410 | 2,694,389 | 2,594,282 | ||||||||
Non-current Liabilities |
3,039,634 | 2,998,739 | 2,859,652 | 3,231,782 | 2,726,036 | ||||||||
Total Liabilities |
8,759,879 | 7,225,965 | 5,105,062 | 5,926,171 | 5,320,318 | ||||||||
Capital Stock |
1,789,079 | 1,789,079 | 1,789,079 | 1,789,079 | 1,789,079 | ||||||||
Capital Surplus |
2,311,071 | 2,311,071 | 2,311,071 | 2,275,172 | 2,279,250 | ||||||||
Capital Adjustment |
(713 | ) | | | | | |||||||
Other Accumulated Comprehensive Income (Loss) |
134,874 | 173,938 | 5,823 | (13,948 | ) | (1,418 | ) | ||||||
Retained Earnings |
5,890,973 | 5,001,934 | 4,183,400 | 2,839,373 | 3,608,686 | ||||||||
Total Shareholders Equity |
10,125,284 | 9,276,022 | 8,289,373 | 6,889,676 | 7,675,597 |
28
Description |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||
Sales Revenues |
20,119,342 | 15,865,240 | 14,163,131 | 10,200,660 | 8,890,155 | ||||||
Operating Income (Loss) |
1,000,583 | 1,536,306 | 1,491,135 | (945,208 | ) | 447,637 | |||||
Income (Loss) from continuing operation |
1,067,947 | 1,086,896 | 1,344,027 | (769,313 | ) | 517,012 | |||||
Net Income (Loss) |
1,067,947 | 1,086,896 | 1,344,027 | (769,313 | ) | 517,012 | |||||
Earnings (loss) per share basic |
2,985 | 3,038 | 3,756 | (2,150 | ) | 1,523 | |||||
Earnings (loss) per share diluted |
2,954 | 3,003 | 3,716 | (2,150 | ) | 1,523 |
B. Financial highlights (Based on Consolidated, Korean GAAP)
(Unit: In millions of Won) | |||||||||||||
Description |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||
Current Assets |
8,377,533 | 7,018,010 | 5,746,133 | 3,154,627 | 3,846,068 | ||||||||
Quick Assets |
6,672,171 | 5,881,337 | 4,922,209 | 2,101,922 | 3,155,283 | ||||||||
Inventories |
1,705,362 | 1,136,673 | 823,924 | 1,052,705 | 690,785 | ||||||||
Non-current Assets |
11,160,657 | 10,370,356 | 8,033,702 | 10,333,160 | 9,828,014 | ||||||||
Investments |
311,618 | 190,227 | 24,718 | 19,298 | 14,173 | ||||||||
Tangible Assets |
9,671,504 | 9,270,262 | 7,528,523 | 9,428,046 | 9,199,599 | ||||||||
Intangible Assets |
265,534 | 199,697 | 123,111 | 123,826 | 159,306 | ||||||||
Other Non-current Asset |
912,001 | 710,170 | 357,350 | 761,990 | 454,936 | ||||||||
Total Assets |
19,538,190 | 17,388,366 | 13,779,835 | 13,487,787 | 13,674,082 | ||||||||
Current Liabilities |
6,214,493 | 4,785,882 | 2,401,222 | 3,208,789 | 3,138,835 | ||||||||
Non-current Liabilities |
3,107,804 | 3,313,861 | 3,089,154 | 3,389,322 | 2,859,650 | ||||||||
Total Liabilities |
9,322,297 | 8,099,743 | 5,490,376 | 6,598,111 | 5,998,485 | ||||||||
Capital Stock |
1,789,079 | 1,789,079 | 1,789,079 | 1,789,079 | 1,789,079 | ||||||||
Capital Surplus |
2,311,071 | 2,311,071 | 2,311,071 | 2,275,172 | 2,279,250 | ||||||||
Capital Adjustment |
(713 | ) | | | | | |||||||
Other Accumulated Comprehensive Income (Loss) |
134,874 | 173,938 | 5,823 | (13,948 | ) | (1,418 | ) | ||||||
Retained Earnings |
5,885,500 | 5,001,934 | 4,183,400 | 2,839,373 | 3,608,686 | ||||||||
Minority Interest |
96,082 | 12,601 | 86 | | | ||||||||
Total Shareholders Equity |
10,215,893 | 9,288,623 | 8,289,459 | 6,889,676 | 7,675,597 |
29
Description |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||
Sales Revenues |
20,613,571 | 16,263,635 | 14,351,966 | 10,624,200 | 10,075,580 | ||||||
Operating Income (Loss) |
1,067,241 | 1,735,441 | 1,504,007 | (879,038 | ) | 469,697 | |||||
Net Income (Loss) |
1,083,653 | 1,086,778 | 1,344,027 | (769,313 | ) | 517,012 |
C. Status of equity investment
| Status of equity investment as of December 31, 2009: |
Company |
Paid-in Capital | Equity Investment Date | Ownership Ratio |
|||||
LG Display America, Inc. |
US$ | 5,000,000 | September 24,1999 | 100 | % | |||
LG Display Germany GmbH |
EUR | 960,000 | November 5, 1999 | 100 | % | |||
LG Display Japan Co., Ltd. |
¥ | 95,000,000 | October 12, 1999 | 100 | % | |||
LG Display Taiwan Co., Ltd. |
NT$ | 115,500,000 | May 19, 2000 | 100 | % | |||
LG Display Nanjing Co., Ltd. |
CNY | 1,807,914,180 | July 15, 2002 | 100 | % | |||
LG Display Shanghai Co., Ltd. |
CNY | 4,138,650 | January 16, 2003 | 100 | % | |||
LG Display Poland Sp. zo.o. |
PLN | 410,327,700 | September 6, 2005 | 80 | % | |||
LG Display Guangzhou Co., Ltd. |
CNY | 855,487,730 | August 7, 2006 | 89 | % | |||
LG Display Shenzhen Co., Ltd. |
CNY | 3,775,250 | August 28,2007 | 100 | % | |||
Suzhou Raken Technology Co., Ltd. |
CNY | 472,319,351 | October 7, 2008 | 51 | % | |||
LG Display Singapore Co., Ltd. |
SGD | 1,400,000 | January 12, 2009 | 100 | % | |||
LG Electronics (Nanjing) Plasma Co., Ltd. |
CNY | 206,918,375 | December 29, 2009 | 100 | % | |||
Paju Electric Glass Co., Ltd. |
(Won) | 14,400,000,000 | March 25, 2005 | 40 | % | |||
TLI Co., Ltd. |
(Won) | 14,073,806,250 | May 16, 2008 | 13 | % | |||
AVACO Co., Ltd. |
(Won) | 6,172,728,120 | June 9, 2008 | 20 | % | |||
Guangzhou Vision Display Technology Research and Development Limited |
CNY | 25,000,000 | July 11, 2008 | 50 | % | |||
NEW OPTICS., Ltd. |
(Won) | 9,699,600,000 | July 30, 2008 | 37 | % | |||
ADP Engineering Co., Ltd. |
(Won) | 6,300,000,000 | February 24, 2009 | 13 | % | |||
Wooree LED Co., Ltd. |
(Won) | 11,900,000,000 | May 22, 2009 | 30 | % | |||
Dynamic Solar Design Co., Ltd. |
(Won) | 6,066,658,000 | June 24, 2009 | 40 | % | |||
RPO, Inc. |
US$ | 12,285,021.96 | November 3, 2009 | 26 | % | |||
Global OLED Technology LLC |
US$ | 61,250,000 | December 23, 2009 | 49 | % | |||
LB Gemini New Growth Fund No.16 |
(Won) | 1,800,000,000 | December 7, 2009 | 31 | % |
30
(Unit: In millions of Won) | ||||||
Description |
2009 | 2008 | 2007 | |||
Auditor |
KPMG Samjong | KPMG Samjong | Samil PricewaterhouseCoopers | |||
Activity |
Audit by independent auditor |
Audit by independent auditor |
Audit by independent auditor | |||
Compensation |
700 (540)* | 750 (750)** | 650 (1,407)*** | |||
Time required |
17,569 | 23,100 | 14,725 |
* | Compensation amount in ( ) is for US-GAAP audit, 20-F filing and SOX404 audit |
** | Compensation amount in ( ) is for US-GAAP audit and review and SOX404 audit |
*** | Compensation amount in ( ) is for US-GAAP audit and review, 20-F filing, SOX404 audit and IFRS audit Note) Compensation is based on annual contracts. |
(Unit: In millions of Won) | ||||||||
Fiscal Year |
Independent Auditor | Contract Date | Detail | Compensation | ||||
2009 |
KPMG Samjong | September 8, 2009 |
Agreed procedure regarding Company A |
30 | ||||
December 18, 2009 |
Agreed procedure regarding Company B |
140 |
15. Managements Discussion and Analysis of Financial Condition and Results of Operations
A. Risk relating to Forward-looking Statements
The annual report contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These forward-looking statements reflect our current views as of the date of this report with respect to future events and are not a guarantee of future performance or results. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors beyond our control. We have no obligation to update or correct the forward-looking statements contained in these materials subsequent to the date hereof. All forward-looking statements attributable to us in this report are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
31
B. Financial Condition and Results of Operations
1. Results of Operations (Based on Non-consolidated, Korean GAAP)
In 2009, we successfully commenced production at our P8 and P6E fabrication facilities and, according to DisplaySearch, we also increased our worldwide market share based on revenue for LCD panels in notebook computers, desktop monitors and in particular for LCD panels in television. During the same period, we have also achieved substantial growth in the sale of our mobile products and we have further strengthened our infrastructure for the commercialization of OLED technology. Our sales increased by 27% from (Won)15,865 billion in 2008 to (Won)20,119 billion in 2009. Despite the oversupply of LCD panels in the global market during the first half of 2009, due in large part to our efforts to strengthen our relationships with customers, our operating income amounted to (Won)1,001 billion and our net income amounted to (Won)1,068 billion in 2009.
(Unit: In millions of Won) | ||||||||
Description |
2009 | 2008 | Changes | |||||
Sales Revenue |
20,119,342 | 15,865,240 | 4,254,102 | |||||
Cost of Sales |
18,298,074 | 13,626,602 | 4,671,472 | |||||
Gross Profit |
1,821,268 | 2,238,638 | (417,370 | ) | ||||
Selling and administrative expenses |
820,685 | 702,332 | 118,353 | |||||
Operating Income |
1,000,583 | 1,536,306 | (535,723 | ) | ||||
Non-operating Income |
1,582,656 | 3,127,987 | (1,545,331 | ) | ||||
Non-operating Expense |
1,644,534 | 3,370,813 | (1,726,279 | ) | ||||
Income before income taxes |
938,705 | 1,293,480 | (354,775 | ) | ||||
Income tax expenses (benefits) |
(129,242 | ) | 206,584 | (335,826 | ) | |||
Net income (loss) |
1,067,947 | 1,086,896 | (18,949 | ) |
1) Sales and Cost of Sales
Our cost of sales as a percentage of sales revenue increased by 5% from 85.9% in 2008 to 90.9% in 2009. Such increase was primarily attributable to changes in currency exchange rates and a decrease in the average selling prices of LCD panels and not to an increase in the cost of sales per panel. Although we have successfully decreased our cost of sales per panel in 2009 by promoting Max Capa / Min Loss and other activities to increase production capacity and production volume and reduce cost, our cost of sales as a percentage of sales revenue increased in 2009 compared to 2008 because the decrease in the average selling prices of LCD panels from 2008 to 2009 outpaced the decrease in our cost of sales per panel from 2008 to 2009. Consequently, despite an increase in our sales revenue in 2009 compared to 2008, our gross profit decreased in 2009 compared to 2008.
32
(Unit: In millions of Won, except percentages) | |||||||||||||||
Description |
2009 | 2008 | Changes | ||||||||||||
Sales Revenue |
(Won) | 20,119,342 | (Won) | 15,865,240 | (Won) | 4,254,102 | 26.8 | % | |||||||
Cost of Sales |
(Won) | 18,298,074 | (Won) | 13,626,602 | (Won) | 4,671,472 | 34.3 | % | |||||||
Gross Profit |
(Won) | 1,821,268 | (Won) | 2,238,638 | (Won) | (417,370 | ) | (18.6 | )% | ||||||
Cost of Sales as a percentage of Sales |
90.9 | % | 85.9 | % |
2) Sales by Product Category
Due to the strong growth of the LCD television market, sales of our LCD panels for televisions accounted for over 50% of our sales revenue in 2009. We intend to further increase our market share for LCD panels in televisions by increasing our product competitiveness, including in 240Hz products, and by strengthening our sales promotion activities. The following table shows the sales generated by each of our product categories as a percentage of our sales revenue.
2009 | 2008 | 2007 | |||||||
Panels for Televisions |
55 | % | 48 | % | 47 | % | |||
Panels for Desktop Monitors |
23 | % | 24 | % | 26 | % | |||
Panels for Notebook Computers |
17 | % | 23 | % | 22 | % | |||
Panels for Application |
5 | % | 5 | % | 5 | % |
3) Production Capacity
Our annual production capacity increased by 39% in 2009 compared to 2008, in large part due to the successful ramp-up of our P8 and P6E fabrication facilities and our Max Capa / Min Loss activities.
2. Financial Condition (Based on Non-consolidated, Korean GAAP)
Our current assets increased by (Won)1,641 billion from (Won)6,256 billion as of December 31, 2008 to (Won)7,897 billion as of December 31, 2009, and our non-current assets increased by (Won)742 billion from (Won)10,246 billion as of December 31, 2008 to (Won)10,988 billion as of December 31, 2009. Our current liabilities increased by (Won)1,493 billion from (Won)4,227 billion as of December 31, 2008 to (Won)5,720 billion as of December 31, 2009, and our non-current liabilities increased by (Won)41 billion from (Won)2,999 billion as of December 31, 2008 to (Won)3,040 billion as of December 31, 2009. Our shareholders equity increased by (Won)849 billion from (Won)9,276 billion as of December 31, 2008 to (Won)10,125 billion as of December 31, 2009.
33
(Unit: In millions of Won) | ||||||||
Description |
2009 | 2008 | Changes | |||||
Current Assets |
7,897,206 | 6,256,112 | 1,641,094 | |||||
Non-current Assets |
10,987,957 | 10,245,875 | 742,082 | |||||
Total Assets |
18,885,163 | 16,501,987 | 2,383,176 | |||||
Current Liabilities |
5,720,245 | 4,227,226 | 1,493,019 | |||||
Non-current Liabilities |
3,039,634 | 2,998,739 | 40,895 | |||||
Total Liabilities |
8,759,879 | 7,225,965 | 1,533,914 | |||||
Capital Stock |
1,789,079 | 1,789,079 | | |||||
Capital Surplus |
2,311,071 | 2,311,071 | | |||||
Capital Adjustments |
(713 | ) | | (713 | ) | |||
Accumulated other Comprehensive Income and Expense |
134,874 | 173,938 | (39,064 | ) | ||||
Retained Earnings |
5,890,973 | 5,001,934 | 889,039 | |||||
Shareholders Equity |
10,125,284 | 9,276,022 | 849,262 | |||||
Total liabilities and shareholders equity |
18,885,163 | 16,501,987 | 2,383,176 |
In 2009, due in large part to our continuous Max Capa activities, we were able to increase the production capacities of our existing production facilities. In addition, we also commenced production at our P8 and P6E fabrication facilities, which further enabled us to increase our production capacity. Due to such increase, our inventory increased by (Won)356 billion from December 31, 2008 to December 31, 2009. This increase, combined with a reversal of write-down in inventory of (Won)48 billion from December 31, 2008 to December 31, 2009, resulted in the book value of our inventory increasing by (Won)404 billion from (Won)882 billion as of December 31, 2008 to (Won)1,286 billion as of December 31, 2009.
Our accounts receivable balance increased by (Won)1,327 billion from (Won)1,696 billion as of December 31, 2008 to (Won)3,023 billion as of December 31, 2009, primarily due to an increase in our fourth quarter sales in 2009 compared to our fourth quarter sales in 2008. Our fourth quarter sales increased by (Won)2,202 billion from (Won)3,723 billion in 2008 to (Won)5,925 billion in 2009. Meanwhile, the accounts receivables we sold to financial institutions as part of our accounts receivable factoring arrangements decreased by (Won)371 billion from (Won)601 billion in 2008 to (Won)230 billion (US$187 million / Yen 950 million) in 2009.
34
3. Liquidity and Capital Resources
Due to a general decrease in interest rates in 2009 compared to 2008, we reduced our cash and cash equivalents and increased our short-term financial instruments in 2009. Our cash and cash equivalents decreased by (Won)503 billion from (Won)1,208 billion as of December 31, 2008 to (Won)704 billion as of December 31, 2009 and our short-term financial instruments increased by (Won)445 billion from (Won)2,055 billion as of December 31, 2008 to (Won)2,500 billion as of December 31, 2009. This resulted in a decrease in cash and short-term financial instruments of (Won)59 billion from (Won)3,263 billion as of December 31, 2008 to (Won)3,204 billion as of December 31, 2009.
In 2009, our net cash provided by operating activities amounted to (Won)3.5 trillion, our net cash provided by our financing activities, including the incurrence of short- and long-term borrowings as well as the issuance of corporate bonds, amounted to (Won)267 billion and our net cash used in our investing activities, including the acquisition of tangible assets and investments in equity method investees, amounted to (Won)4.3 trillion.
We currently expect that our total capital expenditures on a cash-out basis to be approximately (Won)4 trillion. However, our overall expenditure levels and our allocation among projects are subject to many uncertainties, including whether to (i) expand our 8th generation fabrication facility to meet customer demand, (ii) invest in new business ventures or (iii) make additional investments in China, among others. We review the amount of our capital expenditures and may make adjustments from time to time based on cash flow from operations, the progress of our expansion plans and market conditions.
(Unit: In millions of Won) | |||||||||
Description |
2009 | 2008 | Changes | ||||||
Operating Income |
1,000,583 | 1,536,306 | (535,723 | ) | |||||
Net cash provided by operating activities |
3,492,808 | 4,955,484 | (1,462,676 | ) | |||||
Net cash provided by (used in) financing activities |
267,222 | (697,841 | ) | 965,063 | |||||
Net cash used in investing activities |
(4,263,492 | ) | (4,159,606 | ) | (103,886 | ) | |||
Cash and Cash Equivalents (as of Dec. 31) |
704,324 | 1,207,786 | (503,462 | ) |
| Outside director: Independent |
| Non-outside director: Not independent |
| Each of our outside directors meets the applicable independence standards set forth under the applicable laws and regulations. Each of our outside directors was nominated by the Outside Director Nomination and Corporate Governance Committee, was approved by the board of directors and was appointed at the general meeting of shareholders. None of our directors has or had any business transaction or any related party transactions with us. Our outside directors are comprised of four persons including three who are members of our audit committee. Of the remaining outside directors, Dongwoo Chun is currently serving as Chairman of the Outside Director Nomination and Corporate Governance Committee. As of December 31, 2009, our non-outside directors were comprised of the chief executive officer, the chief financial officer and a member who was nominated by LG Electronics. On April 30, 2009, Paul Verhagen, who was nominated by Philips Electronics, resigned from his position as our board member, and on November 25, 2009, Bruce I. Berkoff resigned from his position as our board member. |
35
B. Members of the Board of Directors
Members of the Board of Directors (as of December 31, 2009)
Name |
Date of birth | Position |
Business experience |
First elected | ||||
Young Soo Kwon | February 6, 1957 | Representative Director, President and Chief Executive Officer |
President and Chief Financial Officer of LG Electronics | January 1, 2007 | ||||
James (Hoyoung) Jeong | November 2, 1961 | Director and Chief Financial Officer |
Executive Vice President and Chief Financial Officer of LG Electronics | January 1, 2008 | ||||
Simon (Shin Ik) Kang | May 10, 1954 | Director | Head of Home Entertainment Division of LG Electronics | March 1, 2008 | ||||
Ingoo Han | October 15, 1956 | Outside Director | Dean, Graduate School of Management, Korea Advanced Institute of Science and Technology | July 19, 2004 | ||||
Dongwoo Chun | January 15, 1945 | Outside Director | Outside Director, Pixelplus | March 23, 2005 | ||||
Yoshihide Nakamura | October 22, 1942 | Outside Director | President of ULDAGE, Inc. | February 29, 2008 | ||||
William Y. Kim | June 6, 1956 | Outside Director | Partner of Ropes & Gray LLP | February 29, 2008 |
* | Paul Verhagen resigned on April 30, 2009. |
* | Bruce I. Berkoff resigned on November 25, 2009. |
* | Simon (Shin Ik) Kang resigned on March 12, 2010. |
* | Ingoo Han resigned on March 12, 2010. |
On March 12, 2010, Do Hyun Jung was elected as our non-outside director and Tae Sik Ahn was elected as our outside director by our shareholders at the annual general meeting of shareholders.
36
C. Committees of the Board of Directors
Committees of the Board of Directors (as of December 31, 2009)
Committee |
Composition |
Member | ||
Audit Committee | 3 outside directors | Ingoo Han, Yoshihide Nakamura, William Y. Kim | ||
Outside Director Nomination and Corporate Governance Committee | 1 non-outside director and 2 outside directors |
Simon (Shin Ik) Kang, Dongwoo Chun, William Y. Kim | ||
Remuneration Committee | 1 non-outside director and 1 outside director |
Simon (Shin Ik) Kang, Dongwoo Chun |
* | Simon (Shin Ik) Kang resigned on March 12, 2010. |
* | Ingoo Han resigned on March 12, 2010. |
On March 12, 2010, Tae Sik Ahn was elected as the chairman of our Audit Committee.
17. Information Regarding Shares
(1) Total number of shares authorized to be issued (as of December 31, 2009): 500,000,000 shares.
(2) Total shares issued and outstanding (as of December 31, 2009): 357,815,700 shares.
(1) Largest shareholder and related parties.
(Unit: share) | ||||
Name |
Relationship | As of September 30, 2009 | ||
LG Electronics |
Largest Shareholder |
135,625,000 (37.9%) | ||
Young Soo Kwon |
Related Party |
23,000 (0.0%) |
(2) Shareholders who owned 5% or more of our shares as of December 31, 2009
Beneficial Owner |
Number of Shares of Common Stock | Percentage | |||
LG Electronics |
135,625,000 | 37.9 | % | ||
Citibank |
18,513,073 | 5.2 | % |
37
(1) Remuneration for directors in 2009
(Unit: In millions of Won) | ||||||||
Classification |
Amount paid |
Approved payment amount at shareholders meeting |
Per capita average remuneration paid |
Remarks | ||||
Non-outside Directors (3 persons) ** |
1,689 | 8,500 | 563 | |||||
Outside Directors (5 persons) |
285 | 57 | Three of our outside directors are members of the audit committee. |
* | Period: January 1, 2009 ~ December 31, 2009 |
* | Amount paid is calculated on the basis of actually paid amount except accrued salary and severance benefits |
** | Amount paid to non-outside directors includes (i) remuneration for Paul Verhagen, who resigned on April 30, 2009 and (ii) remuneration for Bruce. I. Berkoff, who resigned on November 25, 2009. |
** | Per capita average remuneration paid is calculated by dividing total amount paid by the average number of non-outside/outside directors for the year ended December 31, 2009. |
(2) Stock option
The following table sets forth certain information regarding our stock options as of December 31, 2009.
(Unit: Won, Stock) | |||||||||||||||||
Executive Officers (including |
Grant Date |
Exercise Period |
Exercise Price |
Number of Granted Options |
Number of Exercised Options |
Number of Cancelled Options* |
Number of Exercisable Options* | ||||||||||
From | To | ||||||||||||||||
Ron H.Wirahadiraksa |
April 7, 2005 | April 8, 2008 | April 7, 2012 | (Won) | 44,050 | 100,000 | 0 | 50,000 | 50,000 | ||||||||
Duke M. Koo |
April 7, 2005 | April 8, 2008 | April 7, 2012 | (Won) | 44,050 | 40,000 | 0 | 20,000 | 20,000 | ||||||||
Sang Deog Yeo |
April 7, 2005 | April 8, 2008 | April 7, 2012 | (Won) | 44,050 | 40,000 | 0 | 20,000 | 20,000 | ||||||||
Jae Geol Ju |
April 7, 2005 | April 8, 2008 | April 7, 2012 | (Won) | 44,050 | 40,000 | 0 | 20,000 | 20,000 | ||||||||
Total |
220,000 | 110,000 | 110,000 |
* | When the increase rate of our share price is the same or less than the increase rate of the Korea Composite Stock Price Index (KOSPI) over the three-year period following the grant date, only 50% of the initially granted shares are exercisable. Since the increase rate of our share price was lower than the increase rate of KOSPI during the period from April 7, 2005 to April 7, 2008, only 50% of the 220,000 initially granted shares are exercisable. |
38
As of December 31, 2009, we had 23,854 employees (excluding our executive officers). The total amount of salary paid to our employees for the year ended December 31, 2009 based on cash payment was (Won)1,002,188 million. The following table provides details of our employees as of December 31, 2009:
(Unit: person, in millions of Won) | ||||||||||||
Details of Employees* |
Total Salary in 2009** |
Per Capita Salary*** |
Average Service Year | |||||||||
Office |
Production Worker |
Others | Total | |||||||||
7,664 |
16,190 | | 23,854 | 1,002,188 | 46.85 | 4.3 |
* | Directors and executive officers have been excluded. |
** | Welfare benefit and retirement expense have been excluded. Total welfare benefit provided to our employees for the year ended December 31, 2009 was (Won)176,020 million and the per capita welfare benefit provided was (Won)8.2 million. |
** | Based on cash payment. |
** | Includes incentive payments to employees who have transferred from our affiliated companies. |
*** | Per Capita Salary is calculated using the average number of average employees (21,390) for the year ended December 31, 2009. |
39
LG DISPLAY CO., LTD.
Non-Consolidated Financial Statements
December 31, 2009 and 2008
(With Independent Auditors Report Thereon)
Based on a report originally issued in Korean
To the Shareholders and Board of Directors
LG Display Co., Ltd.:
We have audited the accompanying non-consolidated statements of financial position of LG Display Co., Ltd. (the Company) as of December 31, 2009 and 2008, and the related non-consolidated statements of income, appropriations of retained earnings, changes in stockholders equity and cash flows for the years then ended. These non-consolidated financial statements are the responsibility of the Companys management. Our responsibility is to issue a report on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company, as of December 31, 2009 and 2008 and the results of its operations, the appropriation of its retained earnings, the changes in its equity and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the Republic of Korea.
Without qualifying our opinion, we draw attention to the following:
As discussed in note 2(b) to the non-consolidated financial statements, accounting principles and auditing standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations, changes in shareholders equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such non-consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting procedures and auditing standards and their application in practice.
As discussed in note 18(b) to the non-consolidated financial statements, the Company is under investigations by Korea Fair Trade Commission in Korea, European Commission and antitrust authorities in other countries with respect to possible anti-competitive activities in the LCD industry. In addition, the Company has been named as defendants in a number of federal class actions in the United States and Canada and related individual lawsuits based on alleged antitrust violations concerning the sale of LCD panels, and the Company and certain of its officers and directors have been named as defendants in a federal class action in the United States by shareholders of the Company alleging violations of the U.S. Securities Exchange Act of 1934. The Company estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Company.
1
/s/ KPMG Samjong Accounting Corp. |
Seoul, Korea |
February 16, 2010 |
This report is effective as of February 16, 2010, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying non-consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
2
Non-Consolidated Statements of Financial Position
As at December 31, 2009 and 2008
(In millions of Won) | Note | 2009 | 2008 | ||||
Assets |
|||||||
Cash and cash equivalents |
3,16 | (Won) | 704,324 | 1,207,786 | |||
Short-term financial instruments |
3 | 2,500,000 | 2,055,000 | ||||
Available-for-sale securities |
6 | | 74 | ||||
Trade accounts and notes receivable, net |
4,8,16,18 | 3,023,158 | 1,695,578 | ||||
Other accounts receivable, net |
4,16 | 81,413 | 41,570 | ||||
Accrued income, net |
4 | 41,241 | 88,175 | ||||
Advance payments, net |
4 | 11,187 | 250 | ||||
Prepaid expenses |
38,208 | 34,156 | |||||
Value added tax receivable |
16 | 45,451 | 145,862 | ||||
Deferred income tax assets, net |
24 | 163,182 | 80,994 | ||||
Other current assets |
2,737 | 25,164 | |||||
Inventories, net |
5,11 | 1,286,305 | 881,503 | ||||
Total current assets |
7,897,206 | 6,256,112 | |||||
Long-term financial instruments |
13 | 13 | |||||
Available-for-sale securities |
6 | 119,944 | 129,497 | ||||
Equity method investments |
7 | 1,057,225 | 831,237 | ||||
Long-term loans |
16 | | 12,575 | ||||
Property, plant and equipment, net |
8,9,10,11 | 8,731,929 | 8,431,214 | ||||
Intangible assets, net |
10,12 | 240,900 | 194,343 | ||||
Non-current guarantee deposits |
16 | 59,796 | 46,972 | ||||
Long-term other receivables, net |
4 | | 182 | ||||
Long-term prepaid expenses |
139,884 | 150,665 | |||||
Deferred income tax assets, net |
24 | 638,266 | 409,528 | ||||
Other non-current assets |
| 39,649 | |||||
Total non-current assets |
10,987,957 | 10,245,875 | |||||
Total assets |
(Won) | 18,885,163 | 16,501,987 | ||||
See accompanying notes to non-consolidated financial statements.
3
LG DISPLAY CO., LTD.
Non-Consolidated Statements of Financial Position, Continued
As at December 31, 2009 and 2008
(In millions of Won) | Note | 2009 | 2008 | |||||
Liabilities |
||||||||
Trade accounts and notes payable |
8,16 | (Won) | 2,014,909 | 951,975 | ||||
Other accounts payable |
8,16 | 1,392,811 | 2,205,092 | |||||
Short-term borrowings |
14 | 506,731 | | |||||
Advances received |
27,830 | 10,669 | ||||||
Withholdings |
16,820 | 15,486 | ||||||
Accrued expenses |
18 | 638,419 | 212,330 | |||||
Income tax payable |
24 | 120,206 | 265,550 | |||||
Warranty reserve, current |
17 | 57,985 | 48,008 | |||||
Current portion of long-term debt and debentures, net of discounts |
13,14 | 934,921 | 498,652 | |||||
Other current liabilities |
9,613 | 19,464 | ||||||
Total current liabilities |
5,720,245 | 4,227,226 | ||||||
Debentures, net of current portion and discounts on debentures |
13 | 698,059 | 1,490,445 | |||||
Long-term debt, net of current portion |
14 | 1,256,488 | 1,019,306 | |||||
Long-term accrued expenses |
29 | 7,615 | | |||||
Long-term other accounts payable |
7 | 429,222 | 406,156 | |||||
Long-term advances received |
16 | 583,800 | | |||||
Accrued severance benefits, net |
15 | 58,839 | 70,139 | |||||
Warranty reserve, non-current |
17 | 5,611 | 10,097 | |||||
Other non-current liabilities |
| 2,596 | ||||||
Total non-current liabilities |
3,039,634 | 2,998,739 | ||||||
Total liabilities |
8,759,879 | 7,225,965 | ||||||
Shareholders equity |
||||||||
Common stock, (Won)5,000 par value. Authorized 500,000,000 shares; issued and outstanding 357,815,700 shares in 2009 and 2008 |
1,20 | 1,789,079 | 1,789,079 | |||||
Capital surplus |
21 | 2,311,071 | 2,311,071 | |||||
Capital adjustment |
7 | (713 | ) | | ||||
Accumulated other comprehensive income |
22 | 134,874 | 173,938 | |||||
Retained earnings |
23 | 5,890,973 | 5,001,934 | |||||
Total shareholders equity |
10,125,284 | 9,276,022 | ||||||
Commitments and contingencies |
||||||||
Total liabilities and shareholders equity |
(Won) | 18,885,163 | 16,501,987 | |||||
See accompanying notes to non-consolidated financial statements.
4
Non-Consolidated Statements of Income
For the years ended December 31, 2009 and 2008
(In millions of Won, except earnings per share) | Note | 2009 | 2008 | |||||
Sales |
8,33 | (Won) | 20,119,342 | 15,865,240 | ||||
Cost of sales |
8,25 | 18,298,074 | 13,626,602 | |||||
Gross profit |
1,821,268 | 2,238,638 | ||||||
Selling and administrative expenses |
820,685 | 702,332 | ||||||
Operating income |
26 | 1,000,583 | 1,536,306 | |||||
Interest income |
125,313 | 205,988 | ||||||
Rental income |
4,116 | 3,203 | ||||||
Foreign exchange gains |
1,077,831 | 2,492,293 | ||||||
Gain on foreign currency translation |
19 | 236,268 | 211,068 | |||||
Equity income on investments |
7 | 129,348 | 164,142 | |||||
Gain on disposal of property, plant and equipment |
2,497 | 3,299 | ||||||
Gain on disposal of intangible assets |
9 | 1,633 | ||||||
Commission earned |
7,007 | 30,207 | ||||||
Reversal of allowance for doubtful accounts |
260 | 5,961 | ||||||
Gain on redemption of debentures |
13 | | 1,152 | |||||
Other income |
7 | 9,041 | ||||||
Non-operating income |
1,582,656 | 3,127,987 | ||||||
Interest expense |
10 | 122,602 | 115,702 | |||||
Foreign exchange losses |
1,078,556 | 2,324,969 | ||||||
Loss on foreign currency translation |
21,384 | 437,392 | ||||||
Donations |
6,929 | 7,829 | ||||||
Loss on disposal of trade accounts and notes receivable |
4 | 10,571 | 23,019 | |||||
Other bad debt expenses |
32 | | ||||||
Loss on disposal of available-for-sale securities |
5 | | ||||||
Equity loss on investments |
7 | 108,135 | 454,672 | |||||
Loss on disposal of property, plant and equipment |
133 | 536 | ||||||
Impairment loss on property, plant and equipment |
9 | | 83 | |||||
Loss on redemption of debentures |
13 | 173 | 13 | |||||
Loss on disposal of equity method investments |
7 | 165 | 100 | |||||
Other expenses |
18 | 295,849 | 6,498 | |||||
Non-operating expenses |
1,644,534 | 3,370,813 | ||||||
Income before income taxes |
938,705 | 1,293,480 | ||||||
Income tax expense (benefit) |
24 | (129,242 | ) | 206,584 | ||||
Net income |
(Won) | 1,067,947 | 1,086,896 | |||||
Earnings per share |
27 | |||||||
Basic earnings per share |
(Won) | 2,985 | 3,038 | |||||
Diluted earnings per share |
(Won) | 2,954 | 3,003 | |||||
See accompanying notes to non-consolidated financial statements.
5
Non-Consolidated Statements of Appropriations of Retained Earnings
For the years ended December 31, 2009 and 2008
(Date of appropriations : March 12, 2010 and March 13, 2009 for the years ended December 31, 2009 and 2008, respectively)
(In millions of Won) | Note | 2009 | 2008 | ||||
Retained earnings before appropriations |
|||||||
Unappropriated retained earnings carried over from prior year |
(Won) | 4,649,962 | 3,759,865 | ||||
Net income |
1,067,947 | 1,086,896 | |||||
5,717,909 | 4,846,761 | ||||||
Appropriation of retained earnings |
|||||||
Legal reserve |
17,891 | 17,891 | |||||
Cash dividend (Dividend per share (dividends as a percentage of par value) : (Won)500(10%) in 2009 and 2008 |
28 | 178,908 | 178,908 | ||||
196,799 | 196,799 | ||||||
Unappropriated retained earnings carried forward to the following year |
(Won) | 5,521,110 | 4,649,962 | ||||
See accompanying notes to non-consolidated financial statements.
6
Non-Consolidated Statements of Changes in Stockholders Equity
For the years ended December 31, 2009 and 2008
(In millions of Won) | Capital stock | Capital surplus |
Accumulated other Capital Adjustment |
comprehensive income (loss) |
Retained earnings |
Total | |||||||||||
Balances at January 1, 2008 |
(Won) | 1,789,079 | 2,311,071 | | 5,823 | 4,183,400 | 8,289,373 | ||||||||||
Net income |
| | | | 1,086,896 | 1,086,896 | |||||||||||
Cash dividend |
| | | | (268,362 | ) | (268,362 | ) | |||||||||
Change in fair value of available-for-sale securities |
| | | 25,934 | | 25,934 | |||||||||||
Change in capital adjustment arising from equity method investments |
| | | 144,688 | | 144,688 | |||||||||||
Gain on valuation of cash flow hedges |
| | | (1,498 | ) | | (1,498 | ) | |||||||||
Loss on valuation of cash flow hedges |
| | | (1,009 | ) | | (1,009 | ) | |||||||||
Balances at December 31, 2008 |
(Won) | 1,789,079 | 2,311,071 | | 173,938 | 5,001,934 | 9,276,022 | ||||||||||
Balances at January 1, 2009 |
(Won) | 1,789,079 | 2,311,071 | | 173,938 | 5,001,934 | 9,276,022 | ||||||||||
Net income |
| | | | 1,067,947 | 1,067,947 | |||||||||||
Cash dividend |
| | | | (178,908 | ) | (178,908 | ) | |||||||||
Change in fair value of available-for-sale securities |
| | | (22,453 | ) | | (22,453 | ) | |||||||||
Change in capital adjustment arising from equity method investments |
| | | (25,034 | ) | | (25,034 | ) | |||||||||
Loss on valuation of cash flow hedges |
| | | 8,423 | | 8,423 | |||||||||||
Acquisition of invested in affiliates |
| | (713 | ) | | | (713 | ) | |||||||||
Balances at December 31, 2009 |
(Won) | 1,789,079 | 2,311,071 | (713 | ) | 134,874 | 5,890,973 | 10,125,284 | |||||||||
See accompanying notes to non-consolidated financial statements.
7
Non-Consolidated Statements of Cash Flows
For the years ended December 31, 2009 and 2008
(In millions of Won) | Note | 2009 | 2008 | ||||||
Cash flows from operating activities: |
|||||||||
Net income |
(Won) | 1,067,947 | 1,086,896 | ||||||
Adjustments for: |
|||||||||
Depreciation |
9 | 2,569,202 | 2,280,579 | ||||||
Amortization of intangible assets |
12 | 42,606 | 50,310 | ||||||
Provision for severance benefits |
15 | 79,321 | 68,956 | ||||||
Provision for warranty reserve |
17 | 113,866 | 90,063 | ||||||
Loss (gain) on foreign currency translation, net |
(214,884 | ) | 226,347 | ||||||
Equity loss (income) on investments, net |
(21,213 | ) | 290,530 | ||||||
Other bad debt expenses |
32 | | |||||||
Loss on disposal of available-for-sale securities |
5 | | |||||||
Loss on disposal of equity method investments |
165 | 100 | |||||||
Gain on disposal of property, plant and equipment, net |
(2,364 | ) | (2,763 | ) | |||||
Gain on disposal of intangible assets, net |
(9 | ) | (1,633 | ) | |||||
Impairment loss on property, plant and equipment |
| 83 | |||||||
Amortization of discount on debentures, net |
30,429 | 30,838 | |||||||
Loss (gain) on redemption of debentures, net |
173 | (1,139 | ) | ||||||
Reversal of allowance for doubtful accounts |
(260 | ) | | ||||||
Reversal of stock compensation cost |
29 | | (560 | ) | |||||
Other income (expenses), net |
263,520 | | |||||||
2,860,589 | 3,031,711 | ||||||||
Changes in operating assets and liabilities: |
|||||||||
Decrease (increase) in trade accounts receivable and notes receivable |
(1,328,237 | ) | 619,830 | ||||||
Decrease (increase) in other accounts receivable |
(38,120 | ) | 81,060 | ||||||
Decrease (increase) in accrued income |
46,876 | (74,131 | ) | ||||||
Decrease (increase) in advance payments |
(11,183 | ) | 2,493 | ||||||
Decrease (increase) in prepaid expenses |
25,757 | 28,721 | |||||||
Decrease (increase) in value added tax receivable |
102,997 | (66,833 | ) | ||||||
Decrease (increase) in current deferred income tax assets |
(83,852 | ) | | ||||||
Decrease (increase) in other current assets |
24,948 | 1,853 | |||||||
Decrease (increase) in inventories |
(404,802 | ) | (200,907 | ) | |||||
Decrease (increase) in long-term other receivables |
| 182 | |||||||
Decrease (increase) in long-term prepaid expenses |
(19,029 | ) | (24,482 | ) | |||||
Decrease (increase) in non-current deferred income tax assets |
(216,129 | ) | (81,165 | ) | |||||
Decrease (increase) in other non-current assets |
41,735 | 2,539 | |||||||
Increase (decrease) in trade accounts and notes payable |
1,064,542 | 59,217 | |||||||
Increase (decrease) in other accounts payable |
(175,010 | ) | 403,602 | ||||||
Increase (decrease) in advances received |
17,161 | (1,691 | ) | ||||||
Increase (decrease) in withholdings |
1,334 | 8,759 | |||||||
Increase (decrease) in accrued expenses |
159,059 | 38,663 | |||||||
Increase (decrease) in income tax payable |
(144,232 | ) | 193,208 | ||||||
Increase (decrease) in other current liabilities |
(3,662 | ) | (20,536 | ) | |||||
Increase (decrease) in warranty reserve |
17 | (108,375 | ) | (81,253 | ) | ||||
Accrued severance benefits transferred from affiliated company, net |
1,630 | 3,339 | |||||||
Increase (decrease) in long-term accrued expenses |
7,615 | | |||||||
Increase (decrease) in long-term advances received |
695,500 | | |||||||
Payment of severance benefits |
(47,761 | ) | (23,850 | ) | |||||
Decrease (increase) in severance insurance deposits |
(44,567 | ) | (31,792 | ) | |||||
Decrease (increase) in contribution to the National Pension Fund |
77 | 51 | |||||||
(435,728 | ) | 836,877 | |||||||
Net cash provided by operating activities |
(Won) | 3,492,808 | 4,955,484 | ||||||
See accompanying notes to non-consolidated financial statements.
8
LG DISPLAY CO., LTD.
Non-Consolidated Statements of Cash Flows, Continued
For the years ended December 31, 2009 and 2008
(In millions of Won) | Note | 2009 | 2008 | ||||||
Cash flows from investing activities: |
|||||||||
Acquisition of short-term financial instruments |
(Won) | (4,000,000 | ) | (1,270,000 | ) | ||||
Proceeds from short-term financial instruments |
3,555,000 | | |||||||
Proceeds from available-for-sale securities |
69 | | |||||||
Decrease in short-term loans |
12,575 | | |||||||
Acquisition of available-for-sale securities |
(19,233 | ) | (96,260 | ) | |||||
Cash dividends received |
7 | 28,561 | 12,187 | ||||||
Acquisition of equity method securities |
(242,490 | ) | (46,755 | ) | |||||
Proceeds from disposal of property, plant and equipment |
7,602 | 10,343 | |||||||
Proceeds from disposal of intangible assets |
11 | 3,196 | |||||||
Government subsidies received |
2,550 | | |||||||
Acquisition of property, plant and equipment |
(3,496,658 | ) | (2,623,303 | ) | |||||
Acquisition of intangible assets |
(98,780 | ) | (125,103 | ) | |||||
Refund of non-current guarantee deposits |
553 | 32 | |||||||
Payment of non-current guarantee deposits |
(13,252 | ) | (13,469 | ) | |||||
Long-term loans granted |
| (10,474 | ) | ||||||
Net cash used in investing activities |
(4,263,492 | ) | (4,159,606 | ) | |||||
Cash flows from financing activities: |
|||||||||
Proceeds from short-term borrowings |
651,518 | | |||||||
Proceeds from long-term debt |
323,914 | | |||||||
Proceeds from issuance of debentures |
498,020 | | |||||||
Redemption of debentures |
(400,000 | ) | (78,308 | ) | |||||
Repayment of current portion of long-term debts |
(500,451 | ) | (351,171 | ) | |||||
Repayment of short-term borrowings |
(126,871 | ) | | ||||||
Payment of cash dividends |
(178,908 | ) | (268,362 | ) | |||||
Net cash used in financing activities |
267,222 | (697,841 | ) | ||||||
Net increase (decrease) in cash and cash equivalents |
(503,462 | ) | 98,037 | ||||||
Cash and cash equivalents, beginning of the year |
1,207,786 | 1,109,749 | |||||||
Cash and cash equivalents, end of the year |
(Won) | 704,324 | 1,207,786 | ||||||
See accompanying notes to non-consolidated financial statements.
9
Notes to Non-Consolidated Financial Statements
December 31, 2009 and 2008
1 Organization and Description of Business
LG Display Co., Ltd. (the Company) was incorporated in 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor Liquid Crystal Display (TFT-LCD) related business to the Company. The main business of the Company is to manufacture and sell TFT-LCD panels. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (Philips) entered into a joint venture agreement. Pursuant to the agreement, the Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders meeting on the same date as a result of the decrease in Philipss share interest in the Company and the possibility of its business expansion to Organic Light Emitting Diode (OLED) and Flexible Display products. In March 2009, Philips, which used to be one of the major shareholders of the Company, sold all of its share holdings, 47,225 thousand shares, of the Company. As of December 31, 2009, LG Electronics Inc. owns 37.9% (135,625 thousand shares) of the Companys common shares.
As of December 31, 2009, the Company has LCD Research & Development Center and TFT-LCD manufacturing plants in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Company has overseas subsidiaries located in the United States of America, Europe and Asia.
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements
(a) Significant Accounting Policies
The significant accounting policies followed by the Company in the preparation of its non-consolidated financial statements are the same as those followed by the Company in its preparation of annual non-consolidated financial statements for the year ended December 31, 2008.
(b) Basis of Presenting Financial Statements
The Company maintains its accounting records in Korean Won and prepares statutory financial statements in the Korean language in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles(GAAP) in other countries. Accordingly, these non-consolidated financial statements are intended for use only by those who are informed about Korean accounting principles and practices. The accompanying non-consolidated financial statements have been translated into English from the Korean language non-consolidated financial statements.
(c) Revenue Recognition
Revenue is recognized when the significant risks and rewards of ownership have been transferred to the Companys customers, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts, volume rebates and other cash incentives paid to customers.
10
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks, and financial instruments with maturity of three months or less at the time of purchase. These financial instruments are readily convertible into cash without significant transaction costs and bear low risks from changes in value due to interest rate fluctuations.
(e) Allowance for Doubtful Accounts
Allowance for doubtful accounts is estimated based on an analysis of individual accounts and past experience of collection and presented as a deduction from trade receivables.
(f) Inventories
Inventories are stated at the lower of cost or market value, with cost being determined by a weighted-average method, except for the materials in transit, which is determined by a specific identification method. Valuation loss, which is comprised of the amount of any write-down of inventories to market value and the amount of loss from the difference between the quantity of inventories recorded in the financial statements and the actual quantity incurred in the ordinary course of business, is added to the cost of goods sold. Valuation loss for the holding inventories is presented as a reduction of the inventories. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed and reduces cost of sales to the extent that revised book value does not exceed the book value that would have been recorded without the impairment.
Variable production overheads are allocated based on the actual level of production and fixed production overheads are allocated based on the actual capacity of production facilities. However, the normal capacity may be used for allocation of fixed production overheads if the actual level of production is lower than the normal capacity. The difference between actual fixed production overheads and allocated amount based on the normal level of production is recognized as capacity variances in non-operating expenses.
11
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(g) Investments in Securities
Upon acquisition, the Company classifies debt and equity securities, excluding investments in subsidiaries, associates and joint ventures, into the following categories: held-to-maturity, trading securities or available-for-sale securities. This classification is reassessed at each balance sheet date.
Investments in debt securities where the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are acquired principally for the purpose of selling in the short-term are classified as trading securities. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities.
Investments in securities are initially recognized at the fair value of considerations provided by the Company for the acquisition of securities and related transaction costs.
Held-to-maturity investments are carried at amortized cost. Trading and available-for-sale securities are subsequently carried at fair value. Investments in available-for-sale equity securities that do not have readily determinable fair values are recognized at cost less impairment, if any.
Gains and losses arising from changes in the fair value of trading securities are included in the income statement in the period in which they arise. Unrealized gains and losses arising from changes in the fair value of available-for-sale securities are recognized as accumulated other comprehensive income or loss, net of tax, directly in equity. Gains and losses of available-for-sale securities are recognized in the income statement when the securities are disposed or an impairment loss is recognized. Held-to-maturity investments are carried at amortized cost with interest income and expense recognized in the income statement using the effective interest method.
The Company assesses at the end of each reporting period whether there is any objective evidence that investments in securities are impaired. Impairment losses are recognized when the reasonably estimated recoverable amounts are less than the carrying amount and it is not obviously evidenced that impairment is unnecessary.
Trading securities are presented as current assets. Available-for-sale securities, which mature within one year from the balance sheet date or where the likelihood of disposal within one year from the balance sheet date is probable, are presented as current assets. Held-to-maturity securities, which mature within one year from the balance sheet date, are presented as current assets. All other available-for-sale securities and held-to-maturity securities are presented as long-term investments.
12
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(h) Equity Method Investments
Investments in associates and subsidiaries of which the Company has the ability to significantly influence are accounted for using the equity method of accounting. The Company records changes in its proportionate ownership in the net assets of the associates and subsidiaries in current operations or as adjustments to other comprehensive income (loss) or retained earnings, depending on the nature of the underlying change in the net assets of the associates and subsidiaries. If the carrying amount of an investment in an associate or subsidiary falls below zero as a result of reflecting the investees losses when the equity method is applied, the Company discontinues recognizing further changes in its share of equity interest in the associate or subsidiary and the related investment is accounted for at nil value. However, if the Company holds interest in the associate or subsidiary, including preferred stocks, long-term loans and receivables issued by the associate or subsidiary, the Company continues to account for the losses of the associate or subsidiary until the carrying amount of the interest is reduced to zero.
Unrealized gains on transactions between the Company and its associates or subsidiaries are eliminated to the extent of the Companys interest in each associate or subsidiary. Unrealized gains are accounted for as a reduction of the carrying amount of the investment in the associate, while unrealized losses are added to the carrying amount of the investment in the associate. However, in the case of unrealized gains or losses arising from sales by the Company to the subsidiaries, they are fully eliminated.
At the date of acquisition of an investment in an associate or subsidiary, the Companys share of the difference between the fair value and book value of the identifiable assets and liabilities of an associate or subsidiary is amortized or reinstated in accordance with the associate or subsidiarys methods of accounting for assets and liabilities. The amount of goodwill or negative goodwill is calculated as the difference between the acquisition cost of an investment in an associate or subsidiary and the Companys share of the fair value of the identifiable net assets of the associate or subsidiary. Goodwill is amortized using the straight-line method over five years. The amount of negative goodwill up to the fair value of depreciable non-monetary assets is recognized using the straight-line method as a gain over the weighted average useful lives and the remainder of negative goodwill up to the fair value of non-depreciable assets is recognized as a gain in the period of disposal of the assets. Any excess of negative goodwill over the fair value of identifiable non-monetary assets is recognized as a gain at the date of acquisition.
Assets and liabilities of a foreign company subject to the equity method of accounting for investments are translated into Korean Won at the rates of exchange prevailing at the end of the reporting period, while its equity is translated at the exchange rate at the time of transactions, and income statement accounts at the average rate over the year. Resulting translation gains and losses are recorded as accumulated other comprehensive income and loss.
(i) Interest in Joint Ventures
Joint ventures are those entities two or more venturers are bound by a contractual arrangement and the contractual arrangement establishes a joint control. The Company accounts for its interest in a jointly controlled entity using the equity method of accounting.
13
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(j) Property, Plant and Equipment
Upon acquisition, property, plant and equipment are stated at cost, which includes acquisition cost or production cost and other costs required to prepare the asset for its intended use as well as capitalized financial expense. Assets acquired through investment in kind or donations are recorded at their fair value upon acquisition. For assets acquired in exchange for a similar asset, the carrying amount of the asset given up is used to measure the cost of the asset received, and for assets acquired in exchange for a dissimilar asset, the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident.
Depreciation is computed by using the straight-line method over the estimated useful lives for the assets with the depreciable amount is determined after deducting its residual value from the cost. Assets are stated at cost less accumulated amortization and accumulated impairment loss, if any.
Estimated useful lives of the assets are as follows:
Estimated useful lives (years) | ||
Buildings |
20, 40 | |
Structures |
20, 40 | |
Machinery and equipment |
4 | |
Vehicles |
4,12 | |
Tools, furniture and fixtures |
4 |
Significant additions or improvement extending the useful lives or increasing the value of the assets are capitalized. Normal maintenance and repairs are charged to expenses as incurred.
(k) Intangible Assets
Intangible assets are stated at cost, which includes acquisition or production cost and other costs required to prepare the asset for its intended use, less accumulated amortization and accumulated impairment loss, if any. Amortization commences when the asset is available for use, and the residual value of an intangible asset is assumed to be zero.
Costs incurred during the development phase are recognized as assets only if the criteria for capitalization as an intangible asset are met, otherwise costs are recognized as a development cost in cost of sales or selling, general and administrative expenses. Any expenditure incurred in the research phase is recognized as research expense in selling, general and administrative expenses.
Intangible assets are amortized using the straight-line method over the following estimated useful lives:
Estimated useful lives (years) | ||
Intellectual property rights |
5, 10 | |
Rights to use electricity and gas supply facilities |
10 | |
Rights to use industrial water facilities |
10 | |
Software |
4 |
14
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(l) Grants Received
Grants received from government and other third parties, which are to be repaid, are recorded as a liability. While non-refundable grants received are presented as a reduction of the acquisition cost of the acquired assets, grants received for a specific purpose, not related to the acquisition of assets, are offset against the related expense, and other grants received are recorded as other income.
(m) Impairment of Assets
When the book value of an asset is significantly greater than its recoverable value due to obsolescence, physical damage or an abrupt decline in the market value of the asset, the decline in value is deducted from the book value to agree with the recoverable amount and is recognized as an asset impairment loss for the period. When the recoverable value subsequently exceeds the book value, the reversal of impairment amount is recognized as a gain for the period to the extent that the revised book value does not exceed the book value that would have been recorded without the impairment.
(n) Convertible Bonds
When accounting for a convertible bond, the liability component and the equity component of a bond are separated. At the date of issue, the liability component of the bond is calculated at the fair value of a similar debt security without conversion rights, which is the present value of future cash flows from an ordinary bond until maturity and the equity component is calculated as the difference between the gross proceeds of the bond received at the date of issue and the amount of liability component. The equity component of the convertible bond is presented as a part of capital surplus within equity. Subsequent to initial recognition, the liability component is measured at amortized cost using the effective interest rate method; however, the equity component is not remeasured subsequent to initial recognition.
(o) Stock and Bond Issue Costs
Stock issue cost is deducted from the gross proceeds from issuance of those stocks and bond issue cost is adjusted to issuance price of debentures and, in turn, discount or premium on debentures.
(p) Discount (Premium) on Debentures
Discount (premium) on debentures, which represents the difference between the face value and issuance price of debentures, is amortized (accreted) using the effective interest method over the life of the debentures. The amount amortized (accreted) is included in interest expense.
15
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(q) Retirement and Severance Benefits
Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termination of their employment with the Company. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors were to terminate their employment as of the end of the reporting period.
The Company has partially funded the accrued severance benefits through severance insurance deposits with insurance companies. Deposits made by the Company are recorded as a deduction from accrued severance benefits. In the case that the deposits are greater than the balance of accrued severance benefits, the excess portion of deposits over accrued severance benefits is recorded as other investments. The Company deposited a certain portion of severance benefits to the National Pension Service according to the prior National Pension Law. The deposit amount is recorded as a deduction from accrued severance benefits.
(r) Valuation of Receivables and Payables at Present Value
Receivables and payables arising from long-term cash loans or borrowings and other similar transactions are discounted using appropriate discount rates and stated at present value. The difference between the nominal value and present value of these receivables or payables is amortized using the effective interest rate method. The amount amortized is included in interest expense or interest income.
(s) Foreign Currency Translation
Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into Korean Won at the foreign exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won using the foreign exchange rates prevailing at the end of the reporting period, with the resulting gains or losses recognized in the statement of income.
(t) Derivatives
The Company enters into foreign currency forward contracts to manage the foreign currency risk exposures to the changes in fair value of foreign currency denominated accounts receivable and accounts payable. In addition, the Company entered into cross currency swap and interest rate swap contracts to manage the interest rate and foreign currency risk exposures to the variability of future cash flows of floating rate notes.
Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value at each end of the reporting period. Attributable transaction costs are recognized in profit or loss when incurred.
Where a derivative, which meets certain criteria, is used for hedging the exposure to changes in the fair value of a recognized asset or liability, it is designated as a fair value hedge. Where a derivative, which meets certain criteria, is used for hedging the exposure to the variability of the future cash flows of a forecasted transaction, it is designated as a cash flow hedge.
16
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(t) Derivatives, Continued
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the statement of income, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
The effective portion of the changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity, other comprehensive income or loss. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect profit or loss or adjusted to the carrying value of an asset or liability of the related to the hedged transaction. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at the time remains in equity and is recognized in income when the forecast transaction is ultimately recognized in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income.
The Company documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis at each end of the reporting period, of whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in fair values or cash flows of hedged items and recognizes the gain or loss related to any ineffective portion immediately in the statement of income.
(u) Provisions and Contingent Liabilities
When it is probable that an outflow of economic benefits will occur due to a present obligation resulting from a past event, and whose amount is reasonably estimable, a corresponding amount of provision is recognized in the financial statements. However, when such outflow is dependent upon a future event, is not probable to occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is made in the notes to the financial statements.
(v) Income Taxes
Income tax expense includes the current income tax under the relevant income tax laws and the changes in deferred tax assets or liabilities. Deferred tax assets and liabilities represent the amount of future income tax payables to be decreased or increased, respectively, by temporary differences, which is the difference between the carrying amounts of assets and liabilities for financial reporting purpose and the tax bases of assets and liabilities, and unused loss carryforwards and tax credits. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the temporary differences, unused losses, and unused tax credits can be utilized. Deferred tax assets and liabilities are computed on temporary differences by applying enacted statutory tax rates applicable to the years when such differences are expected to reverse. Changes in the carrying amount of deferred tax assets or liabilities result from a change in tax rates or tax laws are recognized in the income statement except to the extent that the changes relate to items previously reflected directly in the shareholders equity.
17
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
2 Summary of Significant Accounting Policies and Basis of Presenting Financial Statements, Continued
(w) Sale or Discount of Accounts Receivable
The Company sells or discounts certain accounts or notes receivable to financial institutions, and accounts for the transactions as sale of the receivables if the control over the receivables is substantially transferred to the buyers. The losses from the sale of the receivables are charged to current operations as incurred.
(x) Earnings Per Share
Earnings per share are calculated by dividing net income attributable to stockholders of the Company by the weighted-average number of shares outstanding during the period. Diluted earnings per share are determined by adjusting net income attributable to stockholders and the weighted-average number of shares outstanding for the effects of all dilutive potential shares.
(y) Use of Estimates
The preparation of non-consolidated financial statements in accordance with accounting principles generally accepted in the Republic of Korea requires management to make estimates and assumptions that affect the amounts reported in the non-consolidated financial statements and related notes to non-consolidated financial statements. Items requiring managements estimates and assumptions include, but not limited to, the valuation of property, plant and equipment, accounts receivable, inventories, deferred income tax and derivative contracts. Actual results may differ from those estimates.
18
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
3 Cash and Cash Equivalents and Short-term Financial Instruments
Cash and cash equivalents and short-term financial instruments as of December 31, 2009 and 2008 are as follows:
(In millions of Won) | Annual | ||||||
interest rate(%) at December 31, 2009 |
2009 | 2008 | |||||
Cash and cash equivalents |
|||||||
Checking accounts |
| (Won) | 98 | 141 | |||
Time deposits |
3.57~3.65 | 374,737 | 601,692 | ||||
Passbook accounts in foreign currencies |
0.07~1.96 | 329,489 | 605,953 | ||||
704,324 | 1,207,786 | ||||||
Short-term financial instruments |
|||||||
Time deposits and others |
3.30~4.44 | 2,500,000 | 2,055,000 | ||||
(Won) | 3,204,324 | 3,262,786 | |||||
4 Receivables
The Companys allowance for doubtful accounts on receivables, including trade accounts and notes receivable, as of December 31, 2009 and 2008 is as follows:
(In millions of Won) | 2009 | ||||||
Gross amount |
Allowance for doubtful accounts |
Carrying value | |||||
Trade accounts and notes receivable |
(Won) | 3,023,191 | 33 | 3,023,158 | |||
Other accounts receivable |
81,502 | 89 | 81,413 | ||||
Accrued income |
41,360 | 119 | 41,241 | ||||
Advance payments |
11,300 | 113 | 11,187 |
(In millions of Won) | 2008 | ||||||
Gross amount |
Allowance for doubtful accounts |
Carrying value | |||||
Trade accounts and notes receivable |
(Won) | 1,695,871 | 293 | 1,695,578 | |||
Other accounts receivable |
41,792 | 222 | 41,570 | ||||
Accrued income |
88,237 | 62 | 88,175 | ||||
Advance payments |
253 | 3 | 250 | ||||
Long-term other receivables |
184 | 2 | 182 |
19
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
4 Receivables, Continued
During 2009 certain trade accounts and notes receivable arising sales have been sold to financial institutions, of which trade accounts and notes receivable from the Companys subsidiaries amounting to USD 187 million ((Won)217,784 million) and JPY 950 million ((Won)12,003 million) are current and outstanding as of December 31, 2009. For the year ended December 31, 2009, the Company recognized (Won)10,571 million as loss on disposal of trade accounts and notes receivable.
5 Inventories
Inventories as of December 31, 2009 and 2008 are as follows:
(In millions of Won) | 2009 | ||||||
Gross amount | Valuation loss | Book value | |||||
Finished goods |
(Won) | 397,330 | 11,812 | 385,518 | |||
Work-in-process |
571,612 | 27,541 | 544,071 | ||||
Raw materials |
237,478 | 8,848 | 228,630 | ||||
Supplies |
165,003 | 36,917 | 128,086 | ||||
(Won) | 1,371,423 | 85,118 | 1,286,305 | ||||
(In millions of Won) | 2008 | ||||||
Gross amount | Valuation loss | Book value | |||||
Finished goods |
(Won) | 330,361 | 44,154 | 286,207 | |||
Work-in-process |
415,264 | 57,173 | 358,091 | ||||
Raw materials |
173,708 | 5,520 | 168,188 | ||||
Supplies |
95,685 | 26,668 | 69,017 | ||||
(Won) | 1,015,018 | 133,515 | 881,503 | ||||
20
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
6 Available-for-Sale Securities
Available-for-sale securities as of December 31, 2009 and 2008 are as follows:
(In millions of Won) | 2009 | |||||||||||||
Unrealized gains (losses) | ||||||||||||||
Acquisition cost |
Beginning balance |
Changes in unrealized gains and losses, net |
Realized gains on disposition |
Net balance at end of year |
Carrying value (fair value) | |||||||||
Non-current asset |
||||||||||||||
Debt securities |
||||||||||||||
Government bonds |
83 | | | | | 83 | ||||||||
Everlight Electronics Co., Ltd.(*2) |
7,628 | | 1,599 | | 1,599 | 9,227 | ||||||||
(Won) | 7,711 | | 1,599 | | 1,599 | 9,310 | ||||||||
Equity securities |
||||||||||||||
HannStar Display Corporation(*1) |
96,249 | 33,248 | (31,775 | ) | | 1,473 | 97,722 | |||||||
Prime View International Co., Ltd. (*3) |
11,522 | | 1,390 | | 1,390 | 12,912 | ||||||||
(Won) | 107,771 | 33,248 | (30,385 | ) | | 2,863 | 110,634 | |||||||
Total |
(Won) | 115,482 | 33,248 | (28,786 | ) | | 4,462 | 119,944 | ||||||
(*1) | In February 2008, the Company purchased 180 million shares of non-voting mandatorily redeemable convertible preferred stock of HannStar Display Corporation (Hannstar) located in Taiwan. The preferred stocks are convertible into common stocks of HannStar at a ratio of 1:1 at the option of the Company from the issue date, February 28, 2008, to the maturity, February 28, 2011. In 2009, there is no preferred stock converted into common stock. |
The Company has a put option for total or partial cash redemption of convertible preferred stocks during the period from 18 months after issuance of the convertible preferred stocks to 91 days prior to maturity of them and the issuer has a call option to repay, in cash, total preferred stocks during the period from 2 years after issuance to 90 days prior to maturity.
The abovementioned convertible preferred stocks have been privately placed under the Taiwanese Law, which restricts the sale of the preferred stocks (up to 3 years), and the stocks acquired through conversion are not to be traded in the Taiwanese Stock Exchange until the original maturity of the preferred stocks.
21
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
6 Available-for-Sale Securities, Continued
(*2) | In November 2009, the Company acquired convertible bonds of Everlight Electronics Co., Ltd. (Everlight), a Taiwanese company which has LED packaging technologies, for strategic alliance purposes. |
(*3) | In December 2009, the Company purchased 420,000 GDRs (Global Depositary Receipt) of Prime View International Co., Ltd. (PVI) for strategic alliance purposes. |
The fair values of the preferred stock of HannStar and the convertible bonds of Everlight have been computed by discounting estimated cash flows from the stock using yield rate that reflects HannStars and Everlights credit risks. The fair value of PVIs GDRs is listed price in Luxembourg Stock Exchange.
(In millions of Won) | 2008 | ||||||||||||
Unrealized gains (losses) | |||||||||||||
Acquisition cost |
Beginning balance |
Changes in unrealized gains and losses, net |
Realized gains on disposition |
Net balance at end of year |
Carrying value (fair value) | ||||||||
Current asset |
|||||||||||||
Debt securities |
|||||||||||||
Government bonds |
(Won) | 74 | | | | | 74 | ||||||
Non-current asset |
|||||||||||||
Equity securities |
|||||||||||||
HannStar Display Corporation |
(Won) | 96,249 | | 33,248 | | 33,248 | 129,497 | ||||||
22
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
7 Equity Method Investments
(a) 2009
(i) Investments in companies accounted for using the equity method as of December 31, 2009 are as follows:
(In millions of Won) | ||||||||||
Company |
Percentage of Ownership (%) |
Acquisition cost |
Net asset value |
Carrying value | ||||||
LG Display America, Inc. |
100.00 | 6,082 | (404,476 | ) | | |||||
LG Display Germany GmbH |
100.00 | 1,252 | 14,688 | 113 | ||||||
LG Display Japan Co., Ltd. |
100.00 | 1,088 | 15,533 | 9,500 | ||||||
LG Display Taiwan Co., Ltd. |
100.00 | 6,076 | 29,704 | 21,784 | ||||||
LG Display Nanjing Co., Ltd. |
100.00 | 197,132 | 408,200 | 408,331 | ||||||
LG Display Shanghai Co., Ltd. |
100.00 | 596 | 11,026 | 1,094 | ||||||
LG Display Poland Sp. zo.o. |
80.29 | 131,761 | 174,906 | 174,906 | ||||||
LG Display Guangzhou Co., Ltd. |
89.12 | 120,809 | 172,269 | 164,952 | ||||||
LG Display Shenzhen Co., Ltd. |
100.00 | 469 | 5,080 | 362 | ||||||
Suzhou Raken Technology Ltd. |
51.00 | 86,745 | 100,003 | 94,797 | ||||||
LG Display Singapore Pte. Ltd. (*1) |
100.00 | 1,250 | 4,173 | | ||||||
LG Electronics (Nanjing) Plasma Co., Ltd. (*5) |
100.00 | 3,503 | 2,790 | 2,790 | ||||||
Paju Electric Glass Co., Ltd. |
40.00 | 14,400 | 36,256 | 33,901 | ||||||
TLI Inc. (*4) |
12.69 | 14,074 | 9,914 | 13,345 | ||||||
AVACO Co., Ltd. (*4) |
19.90 | 6,173 | 9,889 | 5,975 | ||||||
New Optics Ltd. |
36.68 | 9,700 | 10,659 | 11,503 | ||||||
Guangzhou New Vision Technology Research and Development Limited |
50.00 | 3,655 | 3,996 | 3,996 | ||||||
ADP Engineering Co., Ltd. (*2) |
12.93 | 6,330 | 4,328 | 4,124 | ||||||
WooRee LED Co., Ltd. (*3) |
29.57 | 11,900 | 6,502 | 11,537 | ||||||
Dynamic Solar Design Co., Ltd. (*3) |
40.00 | 6,067 | 2,587 | 5,627 | ||||||
RPO, Inc. (*3) |
25.96 | 14,538 | 4,858 | 14,538 | ||||||
Global OLED Technology LLC (*6) |
49.00 | 72,250 | 72,250 | 72,250 | ||||||
LB Gemini New Growth Fund No. 16 (*7) |
30.64 | 1,800 | 1,800 | 1,800 | ||||||
(Won) | 717,650 | 696,935 | 1,057,225 | |||||||
23
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
7 Equity Method Investments, Continued
(*1) | LG Display Singapore Pte. Ltd. (LGDSG) was established in Singapore in January 2009, by incorporating the Singapore branch of the Company, to sell TFT-LCD products. It is wholly owned by the Company as of December 31, 2009. |
(*2) | In February 2009, the Company acquired 3,000,000 common shares of ADP Engineering Co., Ltd. (ADP Engineering) (12.9%) at (Won)6,330 million. Although the Companys share interests in ADP Engineering is below 20%, the Company is able to exercise significant influence through its right to assign a director in the board of directors of ADP Engineering and, accordingly, the investment in ADP Engineering has been accounted for using the equity method. |
(*3) | In May and June 2009, the Company acquired 6,800,000 and 933,332 common shares (29.6% and 40.0%) of WooRee LED Co., Ltd. and Dynamic Solar Design Co., Ltd. at (Won)11,900 million and (Won)6,067 million, respectively. Also, In November 2009, the Company acquired 34,125,061 common shares (26.0%) of RPO, Inc. at (Won)14,538 million. |
(*4) | Although the Companys share interests in these investees are below 20%, the Company is able to exercise significant influence through its right to assign a director in the board of directors of each investee and, accordingly, the investment in these investees have been accounted for using the equity method. As of December 31, 2009, the fair values of TLI Inc. and AVACO Co., Ltd., listed in KOSDAQ, are (Won)14,900 and (Won)7,170 per share, respectively. |
(*5) | In July 2009, the Company entered into a stock purchase agreement with LG Electronics Inc. and LG Electronics (China) Co., Ltd. for the acquisition of the shares of LG Electronics (Nanjing) Plasma Co., Ltd. in order to expand cell back-end process to module production. In accordance with the agreement, the Company acquired whole shares of LG Electronics (Nanjing) Plasma Co., Ltd. at (Won)3,503 million in December 2009. |
(*6) | The Company entered into a joint venture agreement with other LG affiliates, accordingly, Global OLED Technology LLC was set up with the purpose of managing and utilizing OLED patents purchased from Eastman Kodak Company. The Company acquired 49% equity interest in the joint venture and the Companys investment in this equity investee is (Won)72,250 million. |
(*7) | In December 2009, the Company joined the LB Gemini New Growth Fund No.16 as a member in a limited partnership with a view to searching for direct investment targets and gaining benefit from indirect investment. The Company invested (Won)1,800 million as a part of the agreed total investment amount up to (Won)30,000 million and acquired 30.6% equity interest in the fund. |
24
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
7 Equity Method Investments, Continued
(ii) Changes in goodwill and negative goodwill for equity method investments for the year ended December 31, 2009 are as follows:
(In millions of Won) | |||||||||||||
Company |
Balance at January 1, 2009 |
Increase (Decrease) |
Amortized (Reversal) amount |
Balance at December 31, 2009 |
|||||||||
TLI Inc. |
(Won) | 4,964 | (71 | ) | (1,250 | ) | 3,643 | ||||||
AVACO Co., Ltd. |
(661 | ) | | 455 | (206 | ) | |||||||
New Optics Ltd. |
1,498 | | (165 | ) | 1,333 | ||||||||
ADP Engineering Co., Ltd. |
| (272 | ) | 26 | (246 | ) | |||||||
WooRee LED Co., Ltd. |
| 5,594 | (559 | ) | 5,035 | ||||||||
Dynamic Solar Design Co., Ltd. |
| 3,378 | (338 | ) | 3,040 | ||||||||
RPO, Inc. |
| 9,680 | | 9,680 | |||||||||
(Won) | 5,801 | 18,309 | (1,831 | ) | 22,279 | ||||||||
(iii) Details of eliminated unrealized gains and losses from transactions between the Company and equity investees as of December 31, 2009 are as follows:
(In millions of Won) | ||||||||||||
Company |
Inventories | Property, plant and equipment |
Accounts receivable |
Total | ||||||||
LG Display America, Inc. |
(Won) | (24,746 | ) | | | (24,746 | ) | |||||
LG Display Germany GmbH |
(14,589 | ) | | 14 | (14,575 | ) | ||||||
LG Display Japan Co., Ltd. |
(6,039 | ) | | 6 | (6,033 | ) | ||||||
LG Display Taiwan Co., Ltd. |
(7,941 | ) | | 21 | (7,920 | ) | ||||||
LG Display Nanjing Co., Ltd. |
| 131 | | 131 | ||||||||
LG Display Shanghai Co., Ltd. |
(9,980 | ) | | 48 | (9,932 | ) | ||||||
LG Display Guangzhou Co., Ltd. |
| (7,317 | ) | | (7,317 | ) | ||||||
LG Display Shenzhen Co., Ltd. |
(4,739 | ) | | 21 | (4,718 | ) | ||||||
Suzhou Raken Technology Ltd. |
(5,178 | ) | (28 | ) | | (5,206 | ) | |||||
LG Display Singapore Pte. Ltd. |
(4,173 | ) | | | (4,173 | ) | ||||||
Paju Electric Glass Co., Ltd. |
(2,355 | ) | | | (2,355 | ) | ||||||
TLI Inc. |
(212 | ) | | | (212 | ) | ||||||
AVACO Co., Ltd. |
| (3,708 | ) | | (3,708 | ) | ||||||
New Optics Ltd. |
(489 | ) | | | (489 | ) | ||||||
ADP Engineering Co., Ltd. |
| 42 | | 42 | ||||||||
(Won) | (80,441 | ) | (10,880 | ) | 110 | (91,211 | ) | |||||
25
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
7 Equity Method Investments, Continued
(iv) Changes in the balances of investments in the companies accounted for using the equity method for the year ended December 31, 2009 are as follows:
(In millions of Won) | |||||||||||||||||||
Company |
Balance at January 1, 2009 |
Acquisitions during the year |
Dividend received |
Equity income (loss) |
Accumulated other comprehensive income |
Other | Balance at December 31, 2009 | ||||||||||||
LG Display America, Inc. (*1) |
(Won) | | | | (54,485 | ) | 31,419 | 23,066 | | ||||||||||
LG Display Germany GmbH |
19,373 | | | (18,071 | ) | (1,189 | ) | | 113 | ||||||||||
LG Display Japan Co., Ltd. |
15,686 | | | (5,088 | ) | (1,098 | ) | | 9,500 | ||||||||||
LG Display Taiwan Co., Ltd. |
35,230 | | | (14,405 | ) | 959 | | 21,784 | |||||||||||
LG Display Nanjing Co., Ltd. |
409,200 | 4,428 | (28,004 | ) | 56,439 | (32,620 | ) | (1,112 | ) | 408,331 | |||||||||
LG Display Hong Kong Co., Ltd. (*2) |
2,000 | | | (202 | ) | (159 | ) | (1,639 | ) | | |||||||||
LG Display Shanghai Co., Ltd. |
9,093 | | | (8,117 | ) | 118 | | 1,094 | |||||||||||
LG Display Poland Sp. zo.o. |
157,864 | | | 24,359 | (7,317 | ) | | 174,906 | |||||||||||
LG Display Guangzhou Co., Ltd. |
100,279 | 50,335 | | 27,599 | (13,261 | ) | | 164,952 | |||||||||||
LG Display Shenzhen Co., Ltd. |
3,467 | | | (2,597 | ) | (508 | ) | | 362 | ||||||||||
Suzhou Raken Technology Ltd. |
18,328 | 73,592 | | 11,302 | (8,425 | ) | | 94,797 | |||||||||||
LG Display Singapore Pte. Ltd. |
| 1,250 | | (1,680 | ) | 430 | | | |||||||||||
LG Electronics (Nanjing) Plasma Co., Ltd. |
| 3,503 | | | | (713 | ) | 2,790 | |||||||||||
Paju Electric Glass Co., Ltd. (*3) |
25,841 | | | 8,060 | | | 33,901 | ||||||||||||
TLI Inc. (*3) |
12,565 | | (353 | ) | 1,316 | (18 | ) | (165 | ) | 13,345 | |||||||||
AVACO Co., Ltd. (*3) |
6,021 | | (204 | ) | (63 | ) | 221 | | 5,975 | ||||||||||
New Optics Ltd. (*3) |
11,721 | | | (418 | ) | 200 | | 11,503 | |||||||||||
Guangzhou New Vision Technology Research and Development Limited (*3) |
4,569 | | | 273 | (846 | ) | | 3,996 | |||||||||||
ADP Engineering Co., Ltd. (*3) |
| 6,330 | | (2,206 | ) | | | 4,124 | |||||||||||
WooRee LED Co., Ltd. (*3) |
| 11,900 | | (363 | ) | | | 11,537 | |||||||||||
Dynamic Solar Design Co., Ltd. (*3) |
| 6,067 | | (440 | ) | | | 5,627 | |||||||||||
RPO, Inc. (*3) |
| 14,538 | | | | | 14,538 | ||||||||||||
Global OLED Technology LLC (*3) |
| 72,250 | | | | | 72,250 | ||||||||||||
LB Gemini New Growth Fund No. 16 (*3) |
| 1,800 | | | | | 1,800 | ||||||||||||
(Won) | 831,237 | 245,993 | (28,561 | ) | 21,213 | (32,094 | ) | 19,437 | 1,057,225 | ||||||||||
26
LG DISPLAY CO., LTD.
Notes to Non-Consolidated Financial Statements(Continued)
December 31, 2009 and 2008
7 Equity Method Investments, Continued
(*1) | LG Display America, Inc. (LGDUS) was sentenced to pay the fine of USD400 million by the U.S. Government. The Company recognized all losses related to LGDUSs fine payable and recorded the cumulative loss in excess of the Companys investment in LGDUS as long-term other accounts payable. |
(*2) | LG Display Hong Kong Co., Ltd. was liquidated in November 2009. |
(*3) | The Company accounted for its investments in these companies by using equity method of accounting based on the unaudited financial statements of the investees as it was unable to obtain the audited financial statements. The Company performed certain procedures to gain reasonableness of the unaudited financial statements. |
(v) Accumulated amounts of the investors share of losses in associates that were not recognized as the Company ceased to apply the equity method to the balance of its investment in the associate are as follows: