Business Context and Reporting Period
Company: LG Display Co., Ltd.
Filing Type: Form 6-K (Submission of Audit Report)
Reporting Period: Fiscal Year ended December 31, 2014
Audit Date: February 17, 2015 (Report received February 25, 2015)
Auditor: Samjong Accounting Corporation (KPMG)
Opinion: Unqualified
The filing submits the independent auditors' report on the separate financial statements prepared in accordance with Korean International Financial Reporting Standards (K-IFRS). The company manufactures and sells TFT-LCD panels and OLED products.
Key Financial Metrics (FY 2014)
| Item (Millions of KRW) | FY 2014 | FY 2013 |
|---|---|---|
| Revenues | 25,383,670 | 25,854,183 |
| Operating Income | 984,790 | 753,550 |
| Net Income | 973,118 | 99,672 |
| Total Assets | 21,011,837 | 20,644,593 |
| Total Liabilities | 10,387,762 | 10,882,168 |
| Total Shareholders' Equity | 10,624,075 | 9,762,425 |
| Net Cash from Operating Activities | 2,566,399 | 3,938,855 |
| Net Cash Used in Investing Activities | (2,247,777) | (4,558,137) |
| Net Cash Used in Financing Activities | (471,123) | (528,225) |
| Earnings Per Share (Basic) | 2,720 KRW | 279 KRW |
Material Changes vs. Prior Period
- Profitability Surge: Net income increased dramatically by approximately 877% to 973.1 billion KRW, compared to 99.7 billion KRW in 2013. Operating income rose 31% to 984.8 billion KRW.
- Revenue Decline: Total revenues decreased slightly by 1.8% to 25.4 trillion KRW.
- Cost Management: Cost of sales decreased by 3.2% despite the revenue decline, contributing to a higher gross profit margin.
- Balance Sheet Strength: Total liabilities decreased by 4.5% while shareholders' equity increased by 8.8%, improving the debt-to-equity ratio.
- Cash Flow: Net cash provided by operating activities decreased by 35% to 2.57 trillion KRW, primarily due to changes in working capital (increases in receivables and inventories). However, cash used in investing activities decreased significantly (less negative) due to reduced capital expenditures.
Guidance, Risks, and Contingencies
Legal Proceedings (Antitrust): The auditor's report includes an "Emphasis of Matter" regarding ongoing antitrust litigation in the United States and Canada concerning alleged violations related to the sale of LCD panels. While the company has recognized estimated losses, the auditor notes that actual losses could be materially different based on future developments.
Other Legal Matters: The company is defending against patent infringement cases (e.g., Delaware Display Group, Surpass Tech Innovation) where potential losses cannot be reasonably estimated at this time.
Defined Benefit Plans: Significant actuarial losses of 147.8 billion KRW were recognized in other comprehensive income due to changes in financial assumptions (discount rates) and experience adjustments.
Foreign Currency Risk: The company maintains exposure to USD, JPY, and other currencies. A 5% weakening of the Won against the USD would increase equity and profit by approximately 4.2 billion KRW, while a 5% weakening against the JPY would decrease them by 5.5 billion KRW.
Investor Verification Checklist
- Antitrust Exposure: Verify the current status and potential financial impact of the US and Canadian LCD panel antitrust class actions, as actual losses may exceed current provisions.
- Working Capital Trends: Investigate the reasons for the significant increase in trade receivables (up 13%) and inventories (up 29%), which contributed to the decline in operating cash flow.
- Capital Expenditure Strategy: Review the reduction in capital expenditures (Acquisition of PP&E dropped from 2.97 trillion KRW in 2013 to 1.37 trillion KRW in 2014) and its impact on future production capacity.
- Related Party Transactions: Examine the substantial volume of sales to subsidiaries (e.g., LG Display America, Japan, Germany) which accounted for a significant portion of total revenue.
- Dividend Policy: Confirm the proposed cash dividend of 500 KRW per share (10% yield) to be appropriated from retained earnings.