LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 25, 2015, submits the audited consolidated financial statements for LG Display Co., Ltd. and its subsidiaries for the fiscal years ended December 31, 2014, and December 31, 2013. The company is a global manufacturer of Thin Film Transistor Liquid Crystal Display (TFT-LCD) panels and is expanding into Organic Light Emitting Diode (OLED) and Flexible Display products. The financial statements were audited by Samjong Accounting Corporation (KPMG) and received an unqualified opinion.
Key Financial Metrics (FY 2014 vs. FY 2013)
| Item (In millions of KRW) | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | 26,455,529 | 27,033,035 |
| Operating Income | 1,357,255 | 1,163,314 |
| Net Income | 917,404 | 418,973 |
| Operating Margin | 5.13% | 4.30% |
| Net Margin | 3.47% | 1.55% |
| Total Assets | 22,967,023 | 21,715,284 |
| Total Liabilities | 11,183,613 | 10,917,864 |
| Shareholders' Equity | 11,783,410 | 10,797,420 |
| Cash & Cash Equivalents | 889,839 | 1,021,870 |
| Net Cash from Operating Activities | 2,864,521 | 3,584,773 |
| Net Cash Used in Investing Activities | (3,451,279) | (4,504,321) |
| Net Cash from Financing Activities | 404,659 | (390,984) |
Material Changes and Analysis
- Profitability Surge: Despite a 2.1% decline in revenue, Net Income more than doubled, increasing by 119% from KRW 419 billion to KRW 917 billion. Operating Income rose 17% to KRW 1.36 trillion.
- Expense Management: Cost of sales decreased by 3.6% while revenue declined only slightly, improving the gross margin. Selling, administrative, and R&D expenses remained relatively stable or grew modestly compared to the significant jump in operating profit.
- Non-Operating Items: A significant gain of KRW 34.8 billion was recognized in 2014 due to a successful appeal against a fine by the Korea Fair Trade Commission. Additionally, foreign currency gains contributed positively to non-operating income.
- Capital Expenditure: Net cash used in investing activities decreased by 23% year-over-year, driven by a reduction in acquisitions of property, plant, and equipment (from KRW 3.47 trillion in 2013 to KRW 2.98 trillion in 2014), though capital intensity remains high.
- Liquidity: Cash and cash equivalents decreased by KRW 132 billion, primarily due to investing outflows and a net decrease in cash of KRW 182 billion for the year.
Outlook, Risks, and Contingencies
- Legal Proceedings (Antitrust): The company is a defendant in numerous individual lawsuits and class actions in the United States and Canada regarding alleged antitrust violations in the sale of LCD panels. While losses have been estimated and recognized, the auditor notes that actual losses could be materially different based on future developments.
- Patent Litigation: The company is defending against patent infringement cases filed by Delaware Display Group LLC, Innovative Display Technologies LLC, and Surpass Tech Innovation LLC. No provision has been recognized as the potential loss cannot be reasonably estimated.
- Customer Concentration: Sales to the top two customers (Company A and Company B) accounted for 28% and 27% of total revenue, respectively. The top ten end-brand customers collectively accounted for 79% of sales.
- Dividends: The Board of Directors determined a dividend of KRW 500 per share (totaling KRW 178.9 billion) in 2015, which has not yet been paid.
Key Facts for Investor Verification
- Antitrust Exposure: Verify the status of ongoing antitrust litigation in the US and Canada and the adequacy of the current provisions against potential future judgments.
- Revenue Concentration: Assess the risk associated with the high concentration of revenue from the top two customers (55% combined) and the top ten customers (79%).
- Capital Intensity: Monitor the trajectory of capital expenditures and construction-in-progress, which remains a significant portion of the balance sheet, to ensure future cash flow generation supports these investments.
- Foreign Exchange Sensitivity: Review the impact of currency fluctuations, as the company has significant exposure to USD, JPY, and CNY, which materially affected non-operating income in 2014.
- Dividend Payout: Confirm the timing and payment of the declared KRW 178.9 billion dividend.