Business Context and Reporting Period
Company: LG Display Co., Ltd.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fiscal Year Ended December 31, 2009 (Non-consolidated)
Filing Date: March 5, 2010
Auditor: KPMG Samjong Accounting Corp. (Unqualified Opinion)
Business Overview: The Company manufactures and sells TFT-LCD panels and AM-OLED products. As of December 31, 2009, LG Electronics Inc. owns 37.9% of the Company. Export sales represented approximately 95% of total sales.
Key Financial Metrics (Non-Consolidated)
Unit: KRW (Millions), unless otherwise noted.
| Item | FY 2009 | FY 2008 |
|---|---|---|
| Revenues | 20,119,342 | 15,865,240 |
| Operating Income | 1,000,583 | 1,536,306 |
| Net Income | 1,067,947 | 1,086,896 |
| Total Assets | 18,885,163 | 16,501,987 |
| Total Liabilities | 8,759,879 | 7,225,965 |
| Shareholders' Equity | 10,125,284 | 9,276,022 |
| Cash & Cash Equivalents | 704,324 | 1,207,786 |
| Net Cash from Operating Activities | 3,492,808 | 4,955,484 |
| Net Cash Used in Investing Activities | (4,263,492) | (4,159,606) |
| Net Cash from Financing Activities | 267,222 | (697,841) |
| Dividend per Share | 500 KRW | 500 KRW |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased by approximately 26.8% (from 15.9 trillion to 20.1 trillion KRW), driven by higher sales volumes and market demand.
- Operating Income Decline: Despite revenue growth, Operating Income decreased by 34.9% (from 1.54 trillion to 1.00 trillion KRW). Gross profit margin compressed as Cost of Sales rose faster than revenue.
- Net Income Stability: Net Income remained relatively flat, decreasing slightly by 1.7%. This stability was largely due to significant non-operating income, specifically foreign exchange gains of 1.08 trillion KRW (down from 2.49 trillion KRW in 2008) and a tax benefit of 129 billion KRW in 2009 compared to a tax expense of 207 billion KRW in 2008.
- Liquidity: Cash and cash equivalents decreased by 41.7% to 704 billion KRW, primarily due to heavy capital expenditures (Acquisition of property, plant, and equipment totaled 3.5 trillion KRW).
- Debt Structure: Short-term borrowings increased to 507 billion KRW (from zero in 2008), while long-term debt and debentures were restructured with significant maturities in 2010.
Guidance, Risks, and Contingencies
Legal and Regulatory Risks (Antitrust): The Company is under investigation by the Korea Fair Trade Commission, European Commission, and other authorities regarding anti-competitive activities in the LCD industry.
- US DOJ Settlement: In November 2008, the Company and its US subsidiary pleaded guilty to Sherman Antitrust Act violations and agreed to pay a fine of USD 400 million. The Company has recognized losses related to this fine.
- Class Actions: The Company is a defendant in federal class actions in the US and Canada alleging antitrust violations, as well as shareholder lawsuits alleging violations of the US Securities Exchange Act of 1934.
- Uncertainty: Actual losses from these proceedings may be materially different from estimated reserves.
- Patent Litigation: Ongoing lawsuits regarding patent infringement (e.g., against Chi Mei Optoelectronics, AU Optronics, and Anvik Corporation). Outcomes are unpredictable.
- Apple Agreement: Entered a 5-year long-term supply agreement with Apple Inc. in January 2009, receiving a USD 500 million prepayment.
Investor Verification Checklist
- Antitrust Liability Exposure: Verify the current status of the USD 400 million DOJ fine payment schedule and the potential magnitude of additional fines or damages from pending class actions and EU investigations.
- Foreign Exchange Sensitivity: Assess the impact of currency fluctuations on future earnings, given that 95% of sales are exports and the 2009 net income was significantly supported by foreign exchange gains.
- Capital Expenditure Sustainability: Review the necessity and ROI of the 3.5 trillion KRW spent on property, plant, and equipment in 2009, and the resulting cash burn.
- K-IFRS Impact: Analyze the specific adjustments required for the 2010 financial statements under K-IFRS, particularly regarding the reclassification of convertible bonds and capitalization of development costs.
- Debt Maturity Wall: Confirm refinancing plans for the significant debt maturities scheduled for 2010 (approx. 390 billion KRW in debentures and 15.7 billion KRW in long-term debt).