Business Context and Reporting Period
This Form 6-K, filed on March 3, 2009, submits the audited consolidated and non-consolidated financial statements of LG Display Co., Ltd. (formerly LG.Philips LCD Co., Ltd.) for the fiscal year ended December 31, 2008. The company, headquartered in Seoul, Republic of Korea, 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 audited by KPMG Samjong Accounting Corp. and received an unqualified opinion.
Key Financial Metrics (Consolidated)
Unit: Korean Won (KRW) in millions, unless otherwise noted.
| Metric | FY 2008 | FY 2007 |
|---|---|---|
| Revenues | 16,263,635 | 14,351,966 |
| Operating Income | 1,735,441 | 1,504,007 |
| Net Income | 1,086,778 | 1,344,027 |
| Total Assets | 17,388,366 | 13,779,835 |
| Total Liabilities | 8,099,743 | 5,490,376 |
| Shareholders' Equity | 9,288,623 | 8,289,459 |
| Cash and Cash Equivalents | 1,367,752 | 1,196,423 |
| Net Cash from Operating Activities | 4,601,081 | 3,306,507 |
| Net Cash Used in Investing Activities | (4,304,986) | (2,382,074) |
Margins: Operating margin was approximately 10.7% in 2008 compared to 10.5% in 2007. Net income margin decreased to 6.7% in 2008 from 9.4% in 2007.
Material Changes vs. Prior Period
- Revenue Growth: Consolidated revenues increased by 13.3% to KRW 16.26 trillion, driven by higher sales volumes and market expansion, with export sales representing approximately 93% of total sales.
- Profitability Decline: Despite revenue growth, Net Income decreased by 19.1% to KRW 1.09 trillion. This decline was primarily due to significant non-operating expenses, including foreign exchange losses of KRW 2.69 trillion (compared to KRW 0.30 trillion in 2007) and other expenses totaling KRW 465.4 billion.
- Balance Sheet Expansion: Total assets grew by 26.2% to KRW 17.39 trillion, largely due to increased Property, Plant, and Equipment (PPE) and inventory levels to support production capacity. Total liabilities increased by 47.5%, reflecting higher short-term borrowings and accounts payable.
- Investing Activity: Net cash used in investing activities nearly doubled to KRW 4.30 trillion, primarily driven by capital expenditures for PPE acquisitions of KRW 2.78 trillion.
Guidance, Risks, and Contingencies
Antitrust Investigations and Litigation: The filing highlights significant legal risks. The company and its US subsidiary (LGDUS) agreed to a plea agreement with the U.S. Department of Justice (DOJ) in November 2008 regarding price-fixing conspiracies in the LCD industry, agreeing to pay a fine of USD 400 million over five years. As of December 31, 2008, the company remains under investigation by fair trade or antitrust authorities in Korea, Japan, Canada, and the European Commission. Additionally, the company is a defendant in federal class actions in the U.S. and Canada regarding antitrust violations and a shareholder class action in the U.S. alleging violations of the Securities Exchange Act of 1934.
Patent Litigation: The company is involved in various patent infringement lawsuits, including cases against Chi Mei Optoelectronics Corp. and AU Optronics Corp., and investigations by the U.S. International Trade Commission (ITC) initiated by O2 Micro International Ltd. The outcome of these matters is uncertain and could negatively impact financial results.
Accounting Standards: The company is in the process of adopting Korean International Financial Reporting Standards (K-IFRS) for 2010. Material adjustments are expected regarding convertible bonds and employee benefits.
Key Facts for Investor Verification
- Antitrust Fine Impact: Verify the specific accounting treatment and cash flow impact of the USD 400 million DOJ fine agreed upon in late 2008.
- Foreign Exchange Exposure: Assess the sensitivity of future earnings to currency fluctuations, given the KRW 2.69 trillion foreign exchange loss recorded in 2008.
- Capital Expenditure Sustainability: Review the pipeline of capital projects given the KRW 2.78 trillion spent on PPE in 2008 and the resulting increase in depreciation expenses.
- Legal Contingencies: Monitor the status of ongoing antitrust investigations in the EU, Japan, and Canada, as well as the shareholder class action lawsuit.
- Inventory Levels: Note the increase in net inventories to KRW 1.14 trillion (up from KRW 0.82 trillion in 2007) and the associated valuation losses of KRW 109.5 billion.