LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on March 1, 2012, reports the consolidated financial statements for LG Display Co., Ltd. for the fiscal years ended December 31, 2011, and 2010. The company is a leading manufacturer of Thin Film Transistor Liquid Crystal Display (TFT-LCD) panels and Organic Light Emitting Diode (OLED) products. The financial statements were audited by KPMG Samjong Accounting Corp. and prepared in accordance with Korean International Financial Reporting Standards (K-IFRS).
Key Financial Metrics (FY 2011 vs. FY 2010)
| Metric (KRW Millions) | FY 2011 | FY 2010 |
|---|---|---|
| Revenue | 24,291,289 | 25,511,535 |
| Operating Income (Loss) | (924,336) | 1,310,472 |
| Net Income (Loss) | (787,895) | 1,159,234 |
| Net Cash from Operating Activities | 3,665,858 | 4,883,532 |
| Total Assets | 25,162,931 | 23,857,658 |
| Total Liabilities | 15,031,903 | 12,796,691 |
| Total Shareholders' Equity | 10,131,028 | 11,060,967 |
| Debt-to-Equity Ratio | 148% | 116% |
Note: The company reported a significant net loss in 2011 compared to a net profit in 2010. Gross profit margin declined from approximately 14.6% in 2010 to 5.0% in 2011.
Material Changes vs. Prior Period
- Profitability Reversal: The company swung from a net profit of KRW 1.16 trillion in 2010 to a net loss of KRW 788 billion in 2011. Operating income turned negative (KRW 924 billion loss) from a positive KRW 1.31 trillion.
- Revenue Decline: Total revenue decreased by approximately 4.8% year-over-year.
- Impairment Charges: Significant impairment losses were recognized in 2011, including KRW 3.6 billion on property, plant, and equipment, and KRW 5.6 billion on intangible assets. Additionally, the investment in RPO, Inc. was fully impaired (KRW 10.9 billion).
- Antitrust Costs: "Anti-trust related expenses and others" decreased to KRW 151 billion in 2011 from KRW 310 billion in 2010, reflecting the timing of fines and settlements.
- Capital Structure: Total liabilities increased by KRW 2.2 trillion, while equity decreased by KRW 930 billion due to the net loss. The liabilities-to-equity ratio rose from 116% to 148%.
Guidance, Risks, and Contingencies
Antitrust Investigations and Litigation: The filing highlights ongoing and concluded antitrust investigations in multiple jurisdictions (Korea, EU, US, Canada, etc.) regarding alleged anti-competitive activities in the LCD industry.
- US DOJ: A USD 400 million fine was paid in 2008.
- European Commission: A EUR 215 million fine was imposed in December 2010; the company has appealed.
- Korea Fair Trade Commission: A fine of approximately KRW 31.4 billion was imposed in December 2011; the company has appealed.
- Class Actions: The company is defending against numerous class action lawsuits in the US and Canada. A settlement with the direct purchaser class in the US was preliminarily approved in October 2011. Trials for indirect purchasers are scheduled.
Patent Litigation: The company is involved in patent infringement lawsuits, including a settled case with AU Optronics Corp. and an ongoing stay in the case against Chimei Innolux Corp.
Management Commentary: The auditor's report notes that while losses related to legal proceedings have been estimated and recognized, actual losses could be materially different based on future developments. The filing does not provide specific forward-looking financial guidance for 2012.
Key Facts for Investor Verification
- Antitrust Exposure: Verify the status of the appeal regarding the EUR 215 million EU fine and the KRW 31.4 billion Korean fine, as well as the potential liability from pending US indirect purchaser class action trials.
- Cash Flow Sustainability: Despite the net loss, operating cash flow remained positive at KRW 3.7 trillion. Investors should monitor the ability to service debt (KRW 4.6 trillion in borrowings) and fund capital expenditures (KRW 4.1 trillion in 2011) without further equity dilution.
- Customer Concentration: Sales to LG Electronics accounted for 20% of total revenue in 2011. The top ten end-brand customers accounted for 71% of sales.
- Impairment Reversals: Assess the likelihood of future impairments given the heavy investment in construction-in-progress (KRW 3.5 trillion) and the cyclical nature of the LCD industry.
- Convertible Bonds: Monitor the USD 66 million convertible bonds maturing in April 2012, which are classified as financial liabilities at fair value through profit or loss.