LG Display Co., Ltd. - SEC Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 28, 2013, submits the audited separate financial statements for LG Display Co., Ltd. for the fiscal years ended December 31, 2012, and December 31, 2011. The company is a leading 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 prepared in accordance with Korean International Financial Reporting Standards (K-IFRS) and audited by KPMG Samjong Accounting Corp., which issued an unqualified opinion.
Key Financial Metrics (FY 2012 vs. FY 2011)
| Metric (KRW Millions) | FY 2012 | FY 2011 |
|---|---|---|
| Revenues | 28,672,355 | 23,471,309 |
| Operating Income | 626,478 | (1,051,042) |
| Net Income | 28,549 | (991,032) |
| Total Assets | 23,801,588 | 24,273,964 |
| Total Liabilities | 14,140,468 | 14,587,047 |
| Shareholders' Equity | 9,661,120 | 9,686,917 |
| Net Cash from Operating Activities | 4,420,386 | 3,103,718 |
| Net Cash Used in Investing Activities | (3,613,821) | (3,277,789) |
| Net Borrowings to Equity Ratio | 28% | 32% |
Material Changes and Analysis
- Turnaround in Profitability: The company returned to profitability in 2012, reporting a net income of KRW 28.5 billion compared to a net loss of KRW 991 billion in 2011. Operating income improved significantly from a loss of KRW 1.05 trillion to a profit of KRW 626 billion.
- Revenue Growth: Revenues increased by approximately 22% year-over-year, driven by sales of goods which rose to KRW 28.5 trillion.
- Accounting Policy Change: The company adopted an amendment to K-IFRS No. 1001 regarding the presentation of operating profit. This change reclassified certain items (such as foreign currency gains/losses and legal expenses) from operating to non-operating categories. The 2011 comparative figures were restated to reflect this change retrospectively.
- Cash Flow Strength: Net cash provided by operating activities increased by 42% to KRW 4.42 trillion, indicating strong operational cash generation despite heavy capital expenditures.
- Capital Expenditures: Net cash used in investing activities increased to KRW 3.61 trillion, primarily due to acquisitions of property, plant, and equipment (KRW 3.7 trillion), reflecting continued investment in manufacturing capacity.
Outlook, Risks, and Contingencies
Legal and Regulatory Contingencies: The company faces significant ongoing legal and regulatory risks related to anti-competitive activities in the LCD industry.
- Antitrust Investigations: The company has been subject to investigations by authorities in the U.S., EU, Korea, Japan, Canada, Mexico, Brazil, and Taiwan. Fines have been imposed by the U.S. Department of Justice (USD 400 million), the European Commission (EUR 215 million), the Korea Fair Trade Commission (approx. KRW 31.4 billion), and China (RMB 118 million). Some appeals are pending.
- Class Action Lawsuits: The company is defending against numerous class action lawsuits in the U.S. and Canada alleging antitrust violations. Settlements have been reached with direct and indirect purchaser classes, subject to court approval.
- Patent Litigation: The company is involved in various patent infringement lawsuits, including disputes with Samsung Display and Samsung Electronics regarding OLED and LCD technologies, as well as actions by the Industrial Technology Research Institute of Taiwan.
Financial Risks:
- Currency Risk: The company is exposed to foreign exchange risk, primarily from the USD and JPY. A 5% weakening of the won against the USD would increase profit by approximately KRW 15.9 billion, while a 5% weakening against the JPY would decrease profit by KRW 13.9 billion.
- Liquidity: The company maintains a net borrowings to equity ratio of 28% and has access to various credit facilities and lines of credit to manage liquidity.
Key Facts for Investor Verification
- Profitability Sustainability: Verify if the return to profitability in 2012 is sustainable given the cyclical nature of the LCD industry and the impact of the accounting policy change on operating income presentation.
- Antitrust Exposure: Monitor the status of pending antitrust appeals and class action lawsuits, as final outcomes could result in material additional fines or settlements not fully accrued.
- Capital Allocation: Assess the return on the significant capital expenditures (KRW 3.7 trillion) made in 2012 for new manufacturing facilities and technology.
- Related Party Transactions: Review the significant volume of transactions with subsidiaries and LG Electronics Inc., which accounted for the majority of sales and purchases.
- Defined Benefit Obligations: Note the increase in defined benefit plan obligations and the associated actuarial losses recognized in other comprehensive income.