LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on March 12, 2020, submits the audited separate financial statements of LG Display Co., Ltd. for the fiscal years ended December 31, 2019, and 2018. The company, a global manufacturer of TFT-LCD and OLED panels, operates plants in Korea, China, and Vietnam. The financial statements were audited by Samjong Accounting Corporation (KPMG), which issued an unqualified opinion on March 11, 2020.
Key Financial Metrics (FY 2019 vs. FY 2018)
| Item (in millions of KRW) | FY 2019 | FY 2018 |
|---|---|---|
| Revenues | 21,658,329 | 22,371,687 |
| Operating Income (Loss) | (1,784,245) | (472,995) |
| Net Income (Loss) | (2,639,893) | (442,291) |
| Total Assets | 27,382,680 | 27,062,106 |
| Total Liabilities | 16,716,587 | 13,849,525 |
| Shareholders' Equity | 10,666,093 | 13,212,581 |
| Net Cash from Operating Activities | 1,792,225 | 3,685,474 |
| Net Cash Used in Investing Activities | (3,436,655) | (5,493,181) |
| Net Cash from Financing Activities | 2,276,392 | 1,714,582 |
Note: The filing does not explicitly state gross margin or operating margin percentages; they must be calculated from the provided figures.
Material Changes and Drivers
- Significant Net Loss: The net loss widened significantly from W442 billion in 2018 to W2.64 trillion in 2019. This was primarily driven by substantial impairment losses.
- Impairment Charges: The company recognized total impairment losses of approximately W1.38 trillion in 2019. This includes W1.00 trillion for the Display (AD PO) Cash Generating Unit (CGU) and W231 billion for the Lighting CGU, alongside W1.14 trillion in impairment on property, plant, and equipment.
- Revenue Decline: Revenues decreased by approximately 3.2% year-over-year, reflecting market conditions in the display panel industry.
- Balance Sheet Deterioration: Total liabilities increased by W2.87 trillion, while shareholders' equity decreased by W2.55 trillion due to the accumulated losses.
- Investment Activity: Capital expenditures (acquisition of property, plant, and equipment) decreased significantly to W2.17 trillion in 2019 from W5.55 trillion in 2018.
Outlook, Risks, and Contingencies
- Business Restructuring: The company restructured its Cash Generating Units (CGUs) in 2019, separating Display (AD PO) and Lighting businesses. The Lighting business is planned for discontinuance.
- Key Audit Matters: Auditors highlighted the assessment of impairment for non-financial assets (including goodwill) and the recoverability of deferred tax assets as key matters requiring significant management judgment.
- Legal Proceedings: The company faces ongoing "follow-on" damages claims related to EU anti-trust litigations and patent infringement actions filed by Solas OLED Ltd. in the US and Germany. Final results remain unpredictable.
- Tax Uncertainties: Chinese tax authorities imposed additional income taxes of W127.1 billion on subsidiaries in 2019 regarding transfer pricing. The company has initiated a mutual agreement procedure with Korean tax authorities and expects a favorable resolution.
- Financial Risk: The company maintains significant exposure to foreign currency risk (USD, JPY) and interest rate risk, utilizing swap contracts for hedging.
Investor Verification Checklist
- Impairment Assumptions: Verify the reasonableness of the discount rates (6.1%) and terminal growth rates used in the discounted cash flow models for the Display (AD PO) and Lighting CGUs.
- Deferred Tax Assets: Assess the likelihood of realizing W1.37 trillion in deferred tax assets given the current loss position and future profitability forecasts.
- Related Party Transactions: Review the significant volume of sales and purchases with LG Electronics Inc. and other LG Group affiliates (total related party sales exceeded W19 trillion in 2019).
- Liquidity Position: Monitor the company's ability to service its debt, given the increase in total borrowings and bonds to over W8.5 trillion and the reduction in operating cash flow.
- Legal Exposure: Track the status of the Solas OLED patent litigation and the EU anti-trust damages claims for potential future liabilities.