Business Context and Reporting Period
This Form 6-K filing by LG.Philips LCD Co., Ltd. (now LG Display Co., Ltd.) reports the submission of its audited consolidated and non-consolidated financial statements for the fiscal years ended December 31, 2007, and 2006. The filing date is February 20, 2008. The company operates as a single segment manufacturer of Thin Film Transistor Liquid Crystal Displays (TFT-LCDs). As of February 4, 2008, the Board of Directors changed the company's trade name to LG Display Co., Ltd.
Key Financial Metrics (Consolidated)
Unit: KRW Millions (Korean GAAP)
| Item | FY 2007 | FY 2006 |
|---|---|---|
| Revenues | 14,351,966 | 10,624,200 |
| Operating Income | 1,504,007 | (879,038) |
| Net Income | 1,344,027 | (769,313) |
| Total Assets | 13,779,835 | 13,487,787 |
| Total Liabilities | 5,490,376 | 6,598,111 |
| Shareholders' Equity | 8,289,459 | 6,889,676 |
| Operating Cash Flow | 3,306,507 | 1,865,500 |
| Investing Cash Flow | (2,382,074) | (3,067,195) |
| Financing Cash Flow | (682,458) | 576,605 |
| Net Increase in Cash | 242,061 | (625,090) |
Margins (FY 2007): Operating Margin: 10.5%; Net Margin: 9.4%.
Debt: Total debt includes short-term borrowings of 4,660, current portion of long-term debt of 409,082, long-term debentures of 1,998,147, and long-term debts of 993,785.
Material Changes vs. Prior Period
- Profitability Turnaround: The company returned to profitability in 2007, recording a net income of 1.34 trillion KRW compared to a net loss of 769 billion KRW in 2006. Operating income swung from a loss of 879 billion KRW to a profit of 1.5 trillion KRW.
- Revenue Growth: Revenues increased by approximately 35% year-over-year, driven by higher sales volumes and improved market conditions.
- Balance Sheet Strengthening: Total liabilities decreased by 1.1 trillion KRW, while shareholders' equity increased by 1.4 trillion KRW, significantly improving the debt-to-equity profile.
- Asset Impairment: The company recorded an impairment loss on property, plant, and equipment of 44,398 million KRW in 2007 due to changes in facility investment plans, compared to no impairment in 2006.
- Foreign Exchange: Significant foreign exchange gains of 376 billion KRW were recorded in 2007, compared to 306 billion KRW in 2006, partially offset by foreign exchange losses of 299 billion KRW.
Guidance, Outlook, Risks, and Unusual Items
Subsequent Events: On January 1, 2008, the company entered into a contract to acquire the Active Matrix-Organic Light Emitting Diodes (AM OLED) business from its parent, LG Electronics Inc. The trade name change to LG Display Co., Ltd. was approved by the Board on February 4, 2008.
Risks and Contingencies:
- Antitrust Investigations: The company is under investigation by fair trade or antitrust authorities in Korea, Japan, the US, and other markets regarding possible anti-competitive activities in the LCD industry. It is also named as a defendant in federal class actions in the US alleging violations of antitrust laws.
- Patent Litigation: The company is involved in various patent infringement lawsuits. Notable outcomes include settlements with Chunghwa Picture Tubes and Tatung Co., resulting in compensation payments to the company. Other cases involving Chi Mei Optoelectronics and AU Optronics remain pending or were settled in early 2008.
- Convertible Bonds: The company redeemed convertible bonds in 2007, recording a loss on redemption of 19,500 million KRW. New US dollar-denominated convertible bonds totaling US$550 million were issued in April 2007.
Management Commentary: The filing does not contain explicit forward-looking guidance or earnings projections for future periods beyond the disclosure of the AM OLED acquisition and name change.
Key Facts for Investor Verification
- Antitrust Exposure: Verify the status and potential financial impact of ongoing antitrust investigations and class action lawsuits in the US and other jurisdictions.
- AM OLED Acquisition: Confirm the final terms, valuation, and integration progress of the AM OLED business acquired from LG Electronics Inc.
- Currency Hedging: Review the effectiveness of foreign currency hedging strategies given the significant volatility in exchange gains/losses impacting non-operating income.
- Debt Maturity Profile: Assess the liquidity position relative to the aggregate annual maturities of long-term debts, particularly the significant debenture repayments due in 2009 and 2010.
- Related Party Transactions: Note the high volume of sales to related parties (LG Group companies), which accounted for a significant portion of total sales.