LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 27, 2014, submits the audited separate financial statements for LG Display Co., Ltd. for the fiscal years ended December 31, 2013, and December 31, 2012. The company, a major manufacturer of TFT-LCD panels and OLED products, is a foreign private issuer based in Seoul, Republic of Korea. The financial statements were audited by Samjong Accounting Corporation (KPMG), which issued an unqualified opinion.
Key Financial Metrics (FY 2013 vs. FY 2012)
| Metric (Millions of KRW) | FY 2013 | FY 2012 |
|---|---|---|
| Revenues | 25,854,183 | 28,672,355 |
| Operating Income | 753,550 | 626,478 |
| Net Income | 99,672 | 28,549 |
| Total Assets | 20,644,593 | 23,801,588 |
| Total Liabilities | 10,882,168 | 14,140,468 |
| Total Shareholders' Equity | 9,762,425 | 9,661,120 |
| Net Cash from Operating Activities | 3,938,855 | 4,420,386 |
| Net Cash Used in Investing Activities | (4,558,137) | (3,613,821) |
| Cash and Cash Equivalents (Year End) | 253,059 | 1,400,566 |
Material Changes and Analysis
- Revenue Decline: Revenues decreased by approximately 9.8% to 25.85 trillion KRW, driven by a reduction in sales volume and pricing pressures in the LCD market.
- Profitability Improvement: Despite lower revenue, Operating Income increased by 20.3% to 753.55 billion KRW. This was achieved through cost management and a reduction in selling and administrative expenses.
- Net Income Surge: Net Income more than tripled to 99.67 billion KRW (up from 28.55 billion KRW). This significant increase was primarily due to a substantial reduction in "Other non-operating expenses," specifically expenses related to legal proceedings and claims, which dropped from 458.2 billion KRW in 2012 to 257.9 billion KRW in 2013.
- Balance Sheet Strengthening: Total liabilities decreased by 23% to 10.88 trillion KRW, while Total Assets decreased by 13% to 20.64 trillion KRW. The reduction in liabilities outpaced the reduction in assets, resulting in an increase in Shareholders' Equity.
- Cash Position: Cash and cash equivalents declined significantly by 82% to 253 billion KRW. This was due to heavy capital expenditures (Acquisition of property, plant, and equipment totaled 2.97 trillion KRW) and a net decrease in cash of 1.15 trillion KRW for the year.
Guidance, Risks, and Contingencies
Antitrust Investigations and Litigation: The company faces ongoing investigations and litigation regarding alleged anti-competitive activities in the LCD industry across multiple jurisdictions (U.S., EU, Korea, etc.).
- U.S. DOJ: A $400 million fine was paid in 2008. Class action settlements with direct and indirect purchasers were approved in 2011 and 2013, respectively.
- European Commission: A fine of EUR 215 million was imposed in 2010. The company has appealed this decision, and the General Court has not yet ruled.
- Korea Fair Trade Commission: A fine of approximately 31.4 billion KRW was imposed in 2011. In February 2014, the Seoul High Court annulled this fining decision.
- Outstanding Risks: The company is defending against various individual lawsuits and state attorney general actions. Management notes that for some cases, potential losses cannot be reasonably estimated.
Patent Litigation: The company is involved in patent infringement disputes, including cases with Anvik Corporation (settled in Jan 2014 with no payment), ITRI (USITC found no infringement), and Samsung Display (litigations withdrawn in Sept 2013 for amicable settlement).
Supreme Court Ruling on Wages: A December 2013 Supreme Court of Korea ruling regarding the calculation of ordinary wages (including regular bonuses) could impact overtime and night work payments. Management believes retrospective claims are unlikely to be accepted due to existing labor union agreements and potential substantial detriment to the company.
Investor Verification Checklist
- Antitrust Exposure: Verify the status of the European Commission appeal and the potential financial impact of remaining U.S. state and individual class action lawsuits.
- Cash Flow Sustainability: Assess the impact of the significant drop in cash reserves (from 1.4 trillion to 253 billion KRW) against future capital expenditure requirements for OLED and flexible display expansion.
- Legal Provisions: Review the adequacy of the provisions recorded for legal proceedings (156.6 billion KRW) given the uncertainty of ongoing global antitrust litigation.
- Related Party Transactions: Note the significant volume of sales to subsidiaries (e.g., LG Display America, Inc.) and purchases from LG Electronics Inc. and its subsidiaries, which constitute a major portion of revenue and expenses.
- Effective Tax Rate: Investigate the high effective tax rate of 74.21% in 2013, driven largely by a 215 billion KRW change in unrecognized deferred tax assets.