LG Display Co., Ltd. — Form 20-F Summary
Period: Fiscal year ended December 31, 2009; filed June 9, 2010. Although the request specifies 2009 Q4, this is an annual filing and does not provide a clear standalone fourth-quarter income statement or cash-flow summary. Financial statements are consolidated and prepared under U.S. GAAP. Won amounts translated to U.S. dollars use the December 31, 2009 rate of Won 1,163.65 per US$1.
Business context
LG Display manufactures TFT-LCD panels, principally for televisions, notebook computers, desktop monitors and other applications. Television panels became the largest revenue category in 2009. The company reported a 24.8% global share of large-size panel revenue, citing DisplaySearch. It operated eight fabrication facilities in Korea and module facilities in Korea, China and Poland.
Key financial metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Sales | Won 20,038 billion (US$17.220 billion) | Won 16,274 billion |
| Gross profit / margin | Won 2,213 billion / 11.0% | Won 2,665 billion / 16.4% |
| Operating income / margin | Won 695 billion / 3.5% | Won 1,234 billion / 7.6% |
| Net income | Won 1,111 billion (US$954 million) | Won 905 billion |
| Basic earnings per share | Won 3,102 | Won 2,529 |
| Net cash from operating activities | Won 4,151 billion | Won 4,525 billion |
| Capital expenditures, cash basis | Won 3,779 billion | Won 2,749 billion |
| Cash and short-term financial instruments at year-end | Won 3,318 billion | Won 3,408 billion |
| Total current assets / current liabilities | Won 8,451 billion / Won 6,530 billion | Won 7,021 billion / Won 4,793 billion |
| Short-term borrowings | Won 771 billion | Won 601 billion |
| Long-term debt, including current installments | Won 3,307 billion | Won 3,513 billion |
EBITDA, a non-GAAP measure defined by the company, was Won 3,840 billion in 2009, up from Won 3,521 billion in 2008. Total debt represented by short-term borrowings and long-term debt including current installments was approximately Won 4,078 billion at year-end.
Material changes versus 2008
- Sales rose 23.1%, largely on higher panel volumes, especially televisions. Television revenue increased 36.7%; notebook revenue declined 3.6%, while desktop monitor revenue rose 17.9%.
- Panel price pressure weakened profitability: cost of sales increased 31.0%, gross profit fell 17.0%, and operating income fell 43.7%. Average selling prices declined across televisions, notebooks and desktop monitors.
- Net income increased 22.7% despite lower operating income. The company attributed this chiefly to a Won 270.7 billion net foreign-exchange gain, compared with a Won 242.7 billion loss in 2008, and a Won 95.6 billion income-tax benefit.
- Operating cash flow declined 8.3%. Management cited increased inventory and the timing of receivable collections. Year-end inventory increased 46.7% to Won 1,668 billion.
- Antitrust expense was Won 325.8 billion in 2009, following a Won 534.8 billion charge in 2008 related to the U.S. Department of Justice fine.
Outlook, management commentary and risks
- Management expected approximately Won 5.5 trillion of 2010 cash capital expenditures, including P8 expansions, facility improvements and a proposed China fab. P8E began production on some lines in Q2 2010; P8E+ was expected to begin mass production in the first half of 2011. The Guangzhou project remained subject to Chinese government approval, and its capex plan was not finalized.
- Management anticipated additional industry capacity in 2010 and possible downward price pressure, while expecting demand for large-size panels to continue growing. No specific earnings or revenue guidance was provided.
- Industry cyclicality, persistent panel price declines, competition and capacity expansion may pressure margins. The business also faces concentrated customer exposure: the top ten end-brand customers represented 76.5% of sales in 2009, and LG Electronics was a major customer and 37.9% shareholder.
- Currency movements are material: 97.1% of 2009 sales were denominated in U.S. dollars, while raw-material purchases were mainly in U.S. dollars and Japanese yen. The filing states that a short-term 10% U.S. dollar move against the Won could materially affect short-term financial condition, results or cash flows.
- Antitrust proceedings remained unresolved in several jurisdictions, alongside U.S. and Canadian purchaser litigation and patent disputes. The U.S. criminal fine totaled US$400 million, payable in scheduled installments. Management accrued certain probable, estimable losses but cautioned actual liabilities could differ materially.
- In April 2010, holders exercised the put option on US$484 million of the US$550 million convertible bonds; the company repaid US$531 million. The remaining US$66 million was due in 2012 at 116.77% of principal if not converted.
- The company planned to report under IFRS beginning in 2010 and warned the change could materially affect reported results or financial condition. The filing states disclosure controls and internal control over financial reporting were effective as of December 31, 2009.
Most important facts for investors to verify
- Standalone Q4 2009 results, which are not clearly provided in this annual filing.
- Whether panel pricing, gross margin and operating profitability recovered after the 2009 declines.
- Actual 2010 capital spending, project approvals and production ramp-up against the stated plans.
- Final outcomes and potential cash exposure from antitrust and patent litigation, beyond recorded accruals and scheduled U.S. fine payments.
- Liquidity after the April 2010 convertible-bond put repayment, considering near-term debt maturities and large planned capex.
- The effect of IFRS adoption on comparable reported earnings, assets, liabilities and cash flows.