LPL

LG Display Co., Ltd. - Form 6-K Summary

Business Context and Reporting Period

This Form 6-K, filed on March 4, 2021, submits the audited consolidated financial statements for LG Display Co., Ltd. and its subsidiaries for the fiscal years ended December 31, 2020, and December 31, 2019. The company is a global manufacturer of Thin Film Transistor Liquid Crystal Display (TFT-LCD) and Organic Light Emitting Diode (OLED) panels. The financial statements were audited by Samjong Accounting Corporation (KPMG) and received an unqualified opinion.

Key Financial Metrics (Fiscal Year 2020)

Note: All figures are in millions of Korean Won (W).

Material Changes vs. Prior Period

• Significant Loss Reduction: The company reported a net loss of W70.6 billion in 2020, a dramatic improvement from the W2.87 trillion net loss in 2019. This improvement was driven by a reduction in operating losses and significantly lower impairment charges.
• Impairment Charges: Impairment losses on property, plant, and equipment dropped from W1.55 trillion in 2019 to W38.5 billion in 2020. Impairment on intangible assets decreased from W249.5 billion to W79.6 billion.
• Revenue Growth: Revenue increased by approximately 3.2% year-over-year, reaching W24.23 trillion.
• Capital Expenditure: Acquisition of property, plant, and equipment decreased significantly to W2.60 trillion in 2020 from W6.93 trillion in 2019, reflecting a slowdown in major facility expansion compared to the prior year.
• Foreign Currency Impact: The company recognized a net foreign currency loss of W41.9 billion in 2020 (W1.73 trillion loss vs. W1.69 trillion gain in non-operating items), compared to a net loss of W60.7 billion in 2019.

Guidance, Outlook, Risks, and Contingencies

Management Commentary & Outlook: The filing does not contain forward-looking guidance or specific management commentary regarding future quarters. The focus is on the historical financial performance and the successful reduction of losses.

Key Audit Matters & Risks:

• Impairment Testing: The auditor highlighted the impairment test for the Display Cash Generating Unit (CGU) as a key audit matter. The recoverable amount is based on a discounted cash flow model using significant management judgments regarding revenue forecasts, growth rates, and discount rates. As of December 31, 2020, the recoverable amount exceeded the carrying amount by W1.66 trillion.
• Deferred Tax Assets: Recognition of deferred tax assets (W2.27 trillion) depends on the generation of future taxable income. This involves high subjective judgment regarding future profitability and tax strategies.
• Legal Proceedings: The company faces "follow-on" damages claims related to EU competition law violations (anti-trust) and patent infringement actions by Solas OLED Ltd. in the US, Germany, and China. While an agreement was reached with Solas OLED in December 2020 to withdraw lawsuits, the company cannot reliably estimate the timing or amount of outflows for the anti-trust proceedings.

Investor Verification Checklist

• Impairment Assumptions: Verify the sensitivity of the Display CGU impairment test to changes in the discount rate (7.0%) and terminal growth rate (1.0%). A 0.68% increase in the discount rate would eliminate the headroom.
• Deferred Tax Realization: Assess the feasibility of realizing W2.27 trillion in deferred tax assets, particularly given the history of losses and the reliance on future taxable income projections.
• Customer Concentration: Note that the top ten end-brand customers accounted for 85% of sales in 2020, indicating high concentration risk.
• Related Party Transactions: Review significant transactions with LG Electronics Inc. and its subsidiaries, which accounted for W3.58 trillion in sales and W365 billion in purchases in 2020.
• Legal Exposure: Monitor the status of the EU anti-trust litigation, as the potential liability remains unquantified.