SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2019
LG Display Co., Ltd.
(Translation of Registrant’s name into English)
LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 07336, Republic of Korea
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
QUARTERLY REPORT
(From January 1, 2019 to September 30, 2019)
THIS IS A TRANSLATION OF THE QUARTERLY REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SUPERVISORY COMMISSION.
IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED AND CERTAIN NUMBERS WERE ROUNDED FOR THE CONVENIENCE OF READERS. REFERENCES TO “Q1”, “Q2”, “Q3” AND “Q4” OF A FISCAL YEAR ARE REFERENCES TO THE THREE-MONTH PERIODS ENDED MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31, RESPECTIVELY, OF SUCH FISCAL YEAR. REFERENCES TO “Q1~Q3” OF A FISCAL YEAR ARE REFERENCES TO THE NINE-MONTH PERIOD ENDED SEPTEMBER 30 OF SUCH FISCAL YEAR.
UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH KOREAN INTERNATIONAL FINANCIAL REPORTING STANDARDS, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. K-IFRS ALSO DIFFERS IN CERTAIN RESPECTS FROM THE INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES IN THIS DOCUMENT.
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Attachment: 1. Financial Statements in accordance with K-IFRS
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1. | Company |
A. | Name and contact information |
The name of our company is “EL-GI DISPLAY CHUSIK HOESA,” which shall be “LG Display Co., Ltd.” in English.
Our principal executive office is located at LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 07336, Republic of Korea, and our telephone number is +82-2-3777-1010. Our website address is http://www.lgdisplay.com.
B. | Credit rating |
(1) | Corporate bonds (Domestic) |
Subject instrument |
Month of rating |
Credit rating(1) | Rating agency (Rating range) | |||
Corporate bonds |
May 2017 | AA | NICE Information Service Co., Ltd. (AAA ~ D) | |||
February 2018 | ||||||
May 2018 | ||||||
February 2019 | AA- | |||||
April 2019 | ||||||
May 2017 | AA | Korea Investors Service, Inc. (AAA ~ D) | ||||
October 2017 | ||||||
May 2018 | ||||||
February 2019 | AA- | |||||
June 2019 | ||||||
May 2017 | AA | Korea Ratings Corporation (AAA ~ D) | ||||
October 2017 | ||||||
February 2018 | ||||||
April 2018 | ||||||
April 2019 | AA- |
(1) | Domestic corporate bond credit ratings are generally defined to indicate the following: |
Subject instrument |
Credit rating |
Definition | ||
Corporate bonds |
AAA | Strongest capacity for timely repayment. | ||
AA+/AA/AA- | Very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category | |||
A+/A/A- | Strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories. | |||
BBB+/BBB/BBB- | Capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. | |||
BB+/BB/BB- | Capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time. | |||
B+/B/B- | Lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain. | |||
CCC | Lack of capacity for even current repayment and high risk of default. | |||
CC | Greater uncertainties than higher ratings. | |||
C | High credit risk and lack of capacity for timely repayment. | |||
D | Insolvency. |
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(2) | Corporate bonds (Overseas) |
Subject instrument |
Month of rating |
Credit rating | Rating agency (Rating range) | |||
Corporate bonds(1) |
November 2018 | AA | Standard & Poor’s Rating Services (AAA ~ D) |
(2) | Represents credit rating for our overseas corporate bonds guaranteed by the Korea Development Bank. |
(3) | Overseas corporate bond credit ratings are generally defined to indicate the following: |
Subject instrument |
Credit rating |
Definition | ||
Corporate bonds |
AAA | Highest level of stability. | ||
AA+/AA/AA- | Very high level of stability. This stability may be slightly more risky than is the case for the highest rating category but presents no issues. | |||
A+/A/A- | High level of stability. There are no issues with repaying the principal, but there are characteristics that could be subject to future deterioration. | |||
BBB+/BBB/BBB- | Level of stability is adequate. Current level of stability and profitability is adequate, but requires special attention during times of economic downturns. | |||
BB+/BB/BB- | Speculative characteristics. There is no guarantee on future stability. Expected business performance is uncertain. | |||
B+/B/B- | Inadequate as an investment target. Ability to make principal repayments or comply with contractual terms and conditions is uncertain. | |||
CCC/CC/C | Very low level of stability. Ability to make payments of principal and interest is highly unlikely. Extremely speculative. Currently in default or undergoing a serious problem. | |||
D | Bankruptcy. |
(3) | Commercial paper |
Subject instrument |
Month of rating |
Credit rating(1) | Rating agency (Rating range) | |||
Commercial paper |
May 2017 | A1 | Korea Investors Service, Inc. (A1 ~ D) | |||
May 2017 | A1 | Korea Ratings Corporation (A1 ~ D) | ||||
October 2017 | A1 | Korea Investors Service, Inc. (A1 ~ D) | ||||
December 2017 | A1 | Korea Ratings Corporation (A1 ~ D) | ||||
May 2018 | A1 | Korea Investors Service, Inc. (A1 ~ D) |
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Subject instrument |
Month of rating |
Credit rating(1) | Rating agency (Rating range) | |||
May 2018 | A1 | NICE Information Service Co., Ltd. (A1 ~ D) | ||||
November 2018 | Cancelled(2) | Korea Investors Service, Inc. (A1 ~ D) | ||||
November 2018 | Cancelled(2) | NICE Information Service Co., Ltd. (A1 ~ D) |
(4) | Domestic commercial paper credit ratings are generally defined to indicate the following: |
Subject instrument |
Credit rating |
Definition | ||
Commercial paper |
A1 | Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by any reasonably foreseeable changes in external factors. | ||
A2 | Strong capacity for timely repayment with very low investment risk. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category. | |||
A3 | Capacity for timely repayment is adequate with low investment risk. This capacity may, nevertheless, be somewhat influenced by sudden changes in external factors. | |||
B | Capacity for timely repayment is acknowledged, but there are some speculative characteristics. | |||
C | Capacity for timely repayment is questionable. | |||
D | Insolvency. |
‘+’ or ‘-’ modifier can be attached to ratings A2 through B to differentiate ratings within broader rating categories.
(5) | Ratings have been cancelled due to repayment of our outstanding commercial paper on October 22, 2018 upon maturity. |
C. | Capitalization |
(1) | Change in capital stock (as of September 30, 2019) |
There were no changes to our issued capital stock during the reporting period ended September 30, 2019.
(2) | Convertible bonds (as of September 30, 2019) |
Description |
Issue Date | Maturity Date |
Issue Amount (in millions of Won) |
Class of Shares Subject to Conversion |
Conversion Period |
Conditions for Conversion | Outstanding Bonds | Notes | ||||||||||||||||||||||||||||||||
Conversion Ratio |
Conversion Price |
Issue Amount (in millions of Won) |
Number of Shares subject to conversion |
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Unsecured Foreign Convertible Bonds No. 3 |
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Aug. 22, 2019 |
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Aug. 22, 2024 |
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813,427(1)(2) | |
Registered Common Shares |
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Aug. 23, 2020 ~ Aug. 12, 2024 |
100 | % | 813,427 | (1) | 40,988,998 | |
Listed on Singapore Stock Exchange |
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Total |
— | — | 813,427 | — | — | 100 | % | 813,427 | 40,988,998 | — | ||||||||||||||||||||||||||||||
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(6) | The issue amount for Unsecured Foreign Convertible Bonds No. 3 is calculated based on the application of
the mid-point of the relevant Won-US dollar exchange rates as of noon, July 30, 2019 (Korea Standard Time) quoted on Bloomberg, which was
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(7) | The proceeds of our Unsecured Foreign Convertible Bonds No. 3 were used for general corporate purposes. |
D. | Voting rights (as of September 30, 2019) |
(Unit: share) | ||||||
Description |
Number of shares | |||||
A. Total number of shares issued(1): |
Common shares(1) | 357,815,700 | ||||
Preferred shares | — | |||||
B. Shares without voting rights: |
Common shares | — | ||||
Preferred shares | — | |||||
C. Shares subject to restrictions on voting rights pursuant to our articles of incorporation: |
Common shares | — | ||||
Preferred shares | — | |||||
D. Shares subject to restrictions on voting rights pursuant to regulations: |
Common shares | — | ||||
Preferred shares | — | |||||
E. Shares with restored voting rights: |
Common shares | — | ||||
Preferred shares | — | |||||
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Total number of issued shares with voting rights (=A – B – C – D + E): |
Common shares | 357,815,700 | ||||
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Preferred shares | — | |||||
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(8) | Authorized: 500,000,000 shares |
E. | Dividends |
Dividends for the three most recent fiscal years
Description (unit) |
2019 Q1~Q3 | 2018 | 2017 | |||||||||||||
Par value (Won) |
5,000 | 5,000 | 5,000 | |||||||||||||
Profit (loss) for the year (million Won)(1) |
(1,028,664 | ) | (207,239 | ) | 1,802,756 | |||||||||||
Earnings (loss) per share (Won)(2) |
(2,875 | ) | (579 | ) | 5,038 | |||||||||||
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Total cash dividend amount for the period (million Won) |
— | — | 178,908 | |||||||||||||
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Total stock dividend amount for the period (million Won) |
— | — | — | |||||||||||||
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Cash dividend payout ratio (%)(3) |
— | — | 9.92 | % | ||||||||||||
Cash dividend yield (%)(4) |
Common shares | — | — | 1.69 | % | |||||||||||
Preferred shares | — | — | — | |||||||||||||
Stock dividend yield (%) |
Common shares | — | — | — | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Cash dividend per share (Won) |
Common shares | — | — | 500 | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Stock dividend per share (share) |
Common shares | — | — | — | ||||||||||||
Preferred shares | — | — | — |
(9) | Based on profit for the year attributable to the owners of the controlling company. |
(10) | Earnings per share is based on par value of |
(11) | Cash dividend payout ratio is the percentage that is derived by dividing total cash dividend by profit for the year attributable to the owners of the controlling company. |
(12) | Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common shares during the one-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends. |
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2. | Business |
A. | Business overview |
We were incorporated in February 1985 under the laws of the Republic of Korea. LG Electronics and LG Semicon transferred their respective LCD business to us in 1998, and since then, our business has been focused on the research, development, manufacture and sale of display panels, applying technologies such as TFT-LCD and OLED.
As of September 30, 2019, in order to support our business activities, we operated TFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.
As of September 30, 2019, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.
Consolidated operating results highlights
(Unit: In billions of Won) | ||||||||||||
2019 Q1~Q3 | 2018 | 2017(1) | ||||||||||
Sales Revenue |
17,054 | 24,337 | 27,790 | |||||||||
Gross Profit |
1,416 | 3,085 | 5,366 | |||||||||
Operating Profit (loss) |
(938 | ) | 93 | 2,462 | ||||||||
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Total Assets |
37,443 | 33,176 | 29,160 | |||||||||
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Total Liabilities |
23,117 | 18,289 | 14,178 | |||||||||
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(13) | Figures for 2017 were recorded in accordance with the previously applicable accounting standards, including K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.” |
B. | Industry |
(1) | Industry characteristics |
• | The entry barriers to manufacture display panels are relatively high due to the technology and capital intensive nature of the mass manufacturing process that is required to achieve economies of scale, among other factors. |
• | While growth in the market for displays used in notebook computer, monitor and other traditional IT products has stagnated or declined, the market for small- and medium-sized displays (including those used in smartphones) in the rapidly evolving IT environment has shown gradual growth. The display market for televisions has also shown steady growth mainly due to growing demand from developing countries as well as from consumers in general for larger sized display panels. As for displays used in industrial, automobile and other value added products, we expect to see growth in these markets. |
(2) | Growth Potential |
• | We are focusing on securing profitability through differentiated products such as “Crystal Sound” OLED and “Wallpaper” display panels under our strategic plan to transition our business to center around OLED, which has a strong future growth potential. In the television sector, we are expanding our offerings of premium products such as OLED and UHD products. In particular, with respect to large-sized OLED television display panels, we are continuing to secure additional production capacity of 8.5th generation OLED panels and are planning to further strengthen the fundamentals of our OLED business through building a successful line-up of new products and investments in the 8.5th and 10.5th generation OLED display panel production. In the IT sector, we are increasing the proportion of premium products such as high resolution and wide screen products based on IPS and Oxide technologies. In the mobile sector, we are continuously striving to secure mass production capabilities for 6th generation plastic OLED smartphones through additional investments. We are also strengthening the foundation for the expansion of small- and medium-sized OLED business. |
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(3) | Cyclicality |
• | The display panel business is highly cyclical and sensitive to fluctuations in the general economy. The industry experiences recurring volatility caused by imbalances between supply and demand due to capacity expansion and changing production utilization rates within the industry. |
• | Macroeconomic factors and other causes of business cycles can affect the rate of growth in demand for display panels. Accordingly, if supply exceeds demand, average selling prices of display panels may decrease. Conversely, if growth in demand outpaces growth in supply, average selling prices may increase. |
(4) | Market conditions |
• | Most display panel manufacturers are located in East Asia as set forth below. Chinese panel manufacturers have continued to invest in new fabrication facilities and additional supplies, and although the actual level of oversupply has become less severe than the previously forecast level due to certain delays in investments, the concern over a structural oversupply in the market continues to exist. |
a. | Korea: LG Display, Samsung Display, etc. |
b. | Taiwan: AU Optronics, Innolux, CPT, HannStar, etc. |
c. | Japan: Japan Display, Sharp, Panasonic LCD, etc. |
d. | China: BOE, CSOT, CEC Panda, HKC, etc. |
• | Our worldwide market share of large-sized display panels (i.e., panels that are 9 inches or larger) based on revenue is as follows: |
2019 Q1~Q3 | 2018 | 2017 | ||||||||||
Panels for Televisions(1)(2) |
29.4 | % | 28.3 | % | 28.1 | % | ||||||
Panels for Monitors(1) |
28.1 | % | 30.7 | % | 36.3 | % | ||||||
Panels for Notebook Computers(1) |
21.8 | % | 23.7 | % | 21.3 | % | ||||||
Panels for Tablet Computers(1) |
28.6 | % | 31.0 | % | 29.1 | % | ||||||
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Total(1) |
28.4 | % | 28.8 | % | 29.2 | % | ||||||
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(14) | Source: Large-Area Display Market Tracker (IHS Technology). The relevant amounts for the first three quarters of 2019 are estimates only, as the actual results for such period have not yet been released. |
(15) | Includes panels for public displays. |
(5) | Competitiveness and competitive advantages |
• | Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, timely investments, adaptable production capabilities, development of new and premium products through technological advances, competitive production costs, success in marketing to our end-brand customers, component and raw material supply costs, foreign exchange rates and general economic and industry conditions. |
• | In order to compete effectively, it is critical to be cost competitive and maintain stable and long-term relationships with customers which will enable us to be profitable even in a buyer’s market. |
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• | A substantial portion of our sales is attributable to a limited number of end-brand customers and their designated system integrators. The loss of these end-brand customers, as a result of customers entering into strategic supplier arrangements with our competitors or otherwise, would result in reduced sales. |
• | Developing new products and technologies that can be differentiated from those of our competitors is critical to the success of our business. It is important that we take active measures to protect our intellectual property internationally by obtaining patents and undertaking monitoring activities in our major markets. It is also necessary to recruit and retain experienced key managerial personnel and skilled line operators. |
• | As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing various technologies and products, including display panels with OLED, IPS, in-TOUCH and other technologies. With respect to OLED panels, following our supply of the world’s first 55-inch OLED 3D panels for televisions in January 2013, we have supplied ultra-high definition (“Ultra HD” or “UHD”) OLED panels as well as “Wallpaper” and “Crystal Sound” OLED panels for televisions, plastic OLED panels for smartphones, round OLED panels for wearable devices among others and have shown that we are technologically a step ahead of the competition. With respect to TFT-LCD panels, we are leading the market with our differentiated products with IPS technology, such as our ultra-large and high definition UHD television panels, large sized/borderless monitors, high-resolution/oxide notebooks and automotive and commercial products, and have prepared our production facilities to produce products with in-TOUCH technology. |
• | Moreover, we are maintaining and strengthening close long-term relationships with major global firms to secure customers and expand partnerships for technology development. |
C. | New businesses |
For our continued growth, we are actively exploring and preparing for new business opportunities that may arise in the changing market environment. As such, we are continually reviewing and looking at opportunities in the display and promising new industries.
3. | Major Products and Raw Materials |
A. | Major products |
We manufacture TFT-LCD and OLED panels, of which a significant majority is sold overseas.
(Unit: In billions of Won, except percentages) |
2019 Q1~Q3 | ||||||||||||||||||||||
Business area |
Sales type |
Items (By product) | Usage | Major trademark |
Sales Revenue |
Percentages (%) |
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Display |
Goods/ Products/Services/Other sales | Televisions | |
Panels for televisions |
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LG Display | 6,184 | 36.26 | % | |||||||||||||
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Desktop monitors |
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Panels for monitors |
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LG Display | 3,006 | 17.63 | % | |||||||||||||
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Tablet products |
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Panels for tablets |
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LG Display | 1,733 | 10.16 | % | |||||||||||||
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Notebook computers |
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Panels for notebook computers |
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LG Display | 2,020 | 11.85 | % | |||||||||||||
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Mobile, etc. |
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Panels for smartphones, etc. |
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LG Display | 4,110 | 24.10 | % | |||||||||||||
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Total |
17,054 | 100.0 | % | |||||||||||||||||||
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B. | Average selling price trend of major products |
While average selling prices of display panels are subject to change based on market conditions and demand by product category, the average selling price of display panels per square meter of net display area shipped in the third quarter of 2019 increased by approximately 13% compared to the second quarter of 2019 due to an increase in the sales of mobile products, which resulted in an improvement in our overall product mix. There is no assurance that the average selling prices of display panels will not fluctuate in the future due to changes in market conditions.
(Unit: US$ / m2)
Period |
Average Selling Price(1)(2) (in US$ / m2) | |
2019 Q3 |
513 | |
2019 Q2 |
456 | |
2019 Q1 |
528 | |
2018 Q4 |
559 | |
2018 Q3 |
500 | |
2018 Q2 |
501 | |
2018 Q1 |
522 | |
2017 Q4 |
589 | |
2017 Q3 |
600 | |
2017 Q2 |
574 | |
2017 Q1 |
608 |
(16) | Quarterly average selling price per square meter of net display area shipped. |
(17) | Excludes semi-finished products in the cell process. |
C. | Major raw materials |
Prices of major raw materials depend on fluctuations in supply and demand in the market as well as on change in size and quantity of raw materials due to the increased production of large-sized panels.
(Unit: In billions of Won, except percentages) | ||||||||||||||||||||
Business area |
Purchase type | Items | Usage | Cost(1) | Ratio (%) | Suppliers | ||||||||||||||
Display |
Raw materials | Printed circuit boards |
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Display panel manufacturing |
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1,663 | 16.8 | % | Korea SMT Co., Ltd., etc. | |||||||||||
Polarizers | 1,528 | 18.0 | % | LG Chem, etc. | ||||||||||||||||
Backlights | 1,194 | 16.1 | % | Heesung Electronics LTD., etc. | ||||||||||||||||
Glass | 1,190 | 10.9 | % | Paju Electric Glass Co., Ltd., Asahi Electric Glass Co., Ltd., etc. | ||||||||||||||||
Drive IC | 697 | 7.7 | % | Silicon Works Co., Ltd., MagnaChip Semiconductor Corporation, etc. | ||||||||||||||||
Others | 2,738 | 30.4 | % | — | ||||||||||||||||
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Total |
9,009 | 100.0 | % | |||||||||||||||||
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- Period: January 1, 2019 ~ September 30, 2019.
(18) | Based on total cost for purchase of raw materials which includes manufacturing and development costs, etc. |
(19) | Among our major suppliers, LG Chem and Silicon Works Co., Ltd. are member companies of the LG Group, and Paju Electric Glass Co., Ltd. is our affiliate. |
• | The average price of EGI (Electrolytic Galvanized Iron), which is the main raw material for BLU components, increased by 0.3% from 2017 to 2018 but decreased by 9.2% from 2018 to the third quarter of 2019. Such decrease in the third quarter of 2019 was due to the concerns of a slowdown in the global economy and an increase in inventory levels. The average price of resin increased by 18.7% from 2017 to 2018 but decreased by 36.8% from 2018 to the third quarter of 2019. Such decrease in the third quarter of 2019 was due to the concerns of a slowdown in the global economy and an increase in supply as a result of new investments by suppliers. The average price of copper, the main raw material for PCB components, increased by 5.9% from 2017 to 2018 but decreased by 7.4% from 2018 to the third quarter of 2019. Such decrease in the third quarter of 2019 was due to the prolonged U.S.-China trade disputes, concerns of a slowdown in China’s (the largest consumer of copper) economy in the second half of 2019, and an increase in inventory levels. |
4. | Production and Equipment |
A. | Production capacity and output |
(1) | Production capacity |
The table below sets forth the production capacity of our Gumi, Paju and Guangzhou facilities in the periods indicated.
(Unit: 1,000 glass sheets) | ||||||||||||||||||||
Business area |
Items | Location of facilities | 2019 Q1~Q3(1) | 2018(2) | 2017(2) | |||||||||||||||
Display |
Display panel | Gumi, Paju, Guangzhou | 7,229 | 10,161 | 10,538 |
(20) | Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth-generation glass sheets) during the period multiplied by the number of months in the period (Q1~Q3 : 9 months). The production capacity for facilities with adjusted utilization rates have been calculated based on the maximum input capacity during the period. |
(21) | Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth-generation glass sheets) during the year multiplied by the number of months in a year (i.e., 12 months). The production capacity for facilities with adjusted utilization rates have been calculated based on the maximum input capacity during the period. |
(2) | Production output |
The table below sets forth the production output of our Gumi, Paju and Guangzhou facilities in the periods indicated.
(Unit: 1,000 glass sheets) | ||||||||||||||||
Business area |
Items | Location of facilities | 2019 Q1~Q3(1) | 2018(1) | 2017(1) | |||||||||||
Display |
Display panel | Gumi, Paju, Guangzhou | 6,548 | 9,428 | 9,262 |
(1) | Based on the production results (input standard) of each plant converted into eighth-generation glass sheets. |
B. | Production performance and utilization ratio |
(Unit: Hours, except percentages) | ||||||||
Production facilities |
Available working hours in 2019 Q1~Q3 |
Actual working hours in 2019 Q1~Q3 |
Average utilization ratio | |||||
Gumi |
6,552(1) (24 hours x 273 days)(2) |
6,472(1) (24 hours x 270 days)(2) |
98.8 | % | ||||
Paju |
6,552(1) (24 hours x 273 days)(2) |
6,446(1) (24 hours x 269 days)(2) |
98.4 | % | ||||
Guangzhou |
6,552(1) (24 hours x 273 days)(2) |
6,552(1) (24 hours x 273 days)(2) |
100.0 | % |
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(22) | Based on the assumption that all 24 hours in a day have been fully utilized. |
(23) | Number of days is calculated by averaging the number of working days for each facility. |
C. | Investment plan |
In 2018, our total capital expenditures on a cash out basis was 7.9 trillion. In 2019, we plan to continue
investing in new technologies for the future, including OLED and oxide technologies, and respond to increases in demand for large-sized panels. W
5. | Sales |
A. | Sales performance |
(Unit: In billions of Won) | ||||||||||||||||||||||||
Business area |
Sales types | Items (Market) | 2019 Q1~Q3 | 2018 | 2017 | |||||||||||||||||||
Display | Products | Display panel | Overseas(1) | 16,026 | 22,722 | 25,763 | ||||||||||||||||||
Korea(1) | 1,000 | 1,572 | 1,982 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total | 17,027 | 24,294 | 27,745 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Royalty | |
LCD, OLED technology patent |
|
Overseas(1) | 10 | 18 | 20 | |||||||||||||||||
Korea(1) | 0 | 0 | 0 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total | 10 | 18 | 20 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Others | |
Raw materials, components, etc. |
|
Overseas(1) | 13 | 8 | 11 | |||||||||||||||||
Korea(1) | 5 | 17 | 14 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total | 18 | 25 | 25 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total | Overseas(1) | 16,049 | 22,747 | 25,794 | ||||||||||||||||||||
Korea(1) | 1,005 | 1,590 | 1,996 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total | 17,054 | 24,337 | 27,790 | |||||||||||||||||||||
|
|
|
|
|
|
(24) | Based on ship-to-party. |
(25) | Sales for 2017 were recorded based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.” |
B. | Sales organization and sales route |
• | As of September 30, 2019, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions. |
• | Sales subsidiaries in the United States, Germany, Japan, Taiwan, China and Singapore perform sales activities and provide local technical support to customers. |
• | Sales of our products take place through one of the following two routes: |
1) LG Display Headquarters and overseas manufacturing subsidiaries g Overseas sales subsidiaries (USA/Germany/Japan/Taiwan/China/Singapore), etc. g System integrators and end-brand customers g End users
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2) LG Display Headquarters and overseas manufacturing subsidiaries g System integrators and end-brand customers g End users
• | Sales performance by sales route |
Sales performance |
Sales route |
Ratio | ||||
Overseas | Overseas subsidiaries | 93.9 | % | |||
Headquarters | 6.1 | % | ||||
Overseas sales portion (overseas sales / total sales) | 94.1 | % | ||||
Korea | Overseas subsidiaries | 3.8 | % | |||
Headquarters | 96.2 | % | ||||
Korea sales portion (Korea sales / total sales) |
5.9 | % |
(3) | Sales methods and sales terms |
• | Direct sales and sales through overseas subsidiaries, etc. Sales terms are subject to change depending on the fluctuation in the supply and demand of LCD panels. |
(4) | Sales strategy |
• | As part of our sales strategy, we have secured stable sales to major personal computer manufacturers and leading consumer electronics manufacturers globally. |
• | With respect to television products, we have led the premium television market with our OLED TVs and strengthened the differentiation of our OLED products through unique designs and integration of additional technologies (wallpaper, CSO, rollable, etc.). We also strengthened sales of high-resolution, IPS, narrow bezel and other high-end display panels in the monitor, notebook computer and tablet markets. |
• | With respect to smartphones, commercial products (including interactive whiteboards and video wall displays), industrial products (including aviation and medical equipment) and automobile display products, we have continued to build a strong and diversified business portfolio by expanding our business with customers with a global reach on the strength of our differentiated products applying IPS, plastic OLED, high-resolution, high-reliability, Super Narrow bezel, in-TOUCH and other technologies. |
(5) | Major customers |
• | Customers “A” and “B” each accounted for more than 10% of our sales revenue in each of the first three quarters of 2018 and 2019, and our sales revenue derived from our top ten customers comprised 76% of our total sales revenue in the first three quarters of 2018 and 79% in the first three quarters of 2019. |
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(6) | Purchase orders |
• | We do not have purchase order contracts that recognize unbilled revenue by implementing the cost-based method. |
6. | Market Risks and Risk Management |
A. | Market risks |
The display industry continues to experience continued declines in the average selling prices of TFT-LCD and OLED panels irrespective of cyclical fluctuations in the industry, and our margins would be adversely impacted if prices decrease faster than we are able to reduce our costs.
The display industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel manufacturers in Korea, Taiwan, China and Japan coupled with changes in the production mix of such manufacturers.
Our ability to compete successfully depends on factors both within and outside our control, including product pricing, performance and reliability, timely investments, adaptable production capabilities, utilization of differentiated technologies in product development, success or failure of our end-brand customers in marketing their brands and products, component and raw material supply costs, and general economic and industry conditions. We cannot provide assurance that we will be able to compete successfully with our competitors on these fronts and, as a result, we may be unable to sustain our current market position.
Our results of operations are subject to exchange rate fluctuations. To the extent that we incur costs in one currency and generate sales in a different currency, our profit margins may be affected by changes in the exchange rates between the two currencies. Our sales of display panels are denominated mainly in U.S. dollars, whereas our foreign currency denominated purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. Seeking to achieve stable management, we take every precaution in our foreign currency risk management to minimize the risk of foreign currency fluctuations on our foreign currency denominated assets and liabilities.
B. | Risk management |
As the average selling prices of TFT-LCD and OLED panels can continue to decline over time irrespective of industry-wide cyclical fluctuations, we may find it hard to manage risks associated with certain factors that are outside our control. However, we counteract such declines in average selling prices by increasing the proportion of high value added panels in our product mix while also implementing various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we eliminate such risk by matching foreign currency inflow and outflow by currency. We also continually monitor our currency position and risk, and when needed, we may from time to time enter into cross-currency interest rate swap contracts and foreign currency forward contracts.
7. | Derivative Contracts |
A. | Currency risks |
• | We are exposed to currency risks on sales, purchases and borrowings that are denominated in currencies other than in Won, our functional currency. These currencies are primarily the U.S. dollar, the Chinese Yuan and the Japanese Yen. |
• | Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by our underlying operations, primarily in Won, the U.S. dollar and the Chinese Yuan. |
• | In respect of other monetary assets and liabilities denominated in foreign currencies, we have adopted a policy to maintain our net exposure within an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to address short-term imbalances. |
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• | In 2018, in order to avoid risks of interest rate fluctuations and exchange rate fluctuations on foreign currency denominated borrowings with floating interest rates, we entered into an aggregate of $1,785 million in Won/US dollar cross currency swap agreements with Standard Chartered Bank and others, for which we have not applied hedge accounting. |
• | Any rights or obligations arising from derivative contracts that do not apply hedge accounting are measured at fair value and are accounted for as assets and liabilities, whereas any resulting valuation gain or loss is recognized as profit or loss at the time such valuation gain or loss is incurred. |
We recognized a net gain on valuation of derivative instruments in the amount of 113,426 million with
respect to our foreign exchange derivative instruments held during the reporting period. W
B. | Interest rate risks |
• | Our exposure to interest rate risks relates primarily to our floating rate long term loan obligations. We have established and are managing interest rate risk policies to minimize uncertainty and costs associated with interest rate fluctuations by monitoring cyclical interest rate fluctuations and enacting countermeasures. |
8. | Major contracts |
Our material contracts, other than contracts entered into in the ordinary course of business, are set forth below:
Type of agreement |
Name of party | Term | Content | |||
Technology licensing agreement |
Semiconductor Energy Laboratory |
October 2005 ~ | Patent licensing of LCD and OLED related technology | |||
Hewlett-Packard | January 2011 ~ | Patent licensing of semi-conductor device technology | ||||
Ignis Innovation, Inc. |
July 2016 ~ | Patent licensing of OLED related technology | ||||
Technology licensing/supply agreement |
HannStar Display Corporation |
December 2013 ~ | Patent cross-licensing of LCD technology | |||
AU Optronics Corporation |
August 2011~ | Patent cross-licensing of LCD technology | ||||
Innolux Corporation |
July 2012 ~ | Patent cross-licensing of LCD technology | ||||
Universal Display Corporation |
January 2015 ~ December 2022 |
Patent cross-licensing of OLED related technology |
9. | Research & Development |
A. | Summary of R&D-related expenditures |
(Unit: In millions of Won, except percentages) | ||||||||||||
Items(1) |
2019 Q1~Q3 |
2018 | 2017 | |||||||||
Material Cost | 616,610 | 656,011 | 646,622 | |||||||||
Labor Cost | 527,180 | 667,837 | 668,429 | |||||||||
Depreciation Expense | 389,452 | 426,264 | 298,383 | |||||||||
Others | 199,318 | 314,007 | 298,256 | |||||||||
|
|
|
|
|
||||||||
Total R&D-Related Expenditures |
1,732,560 | 2,064,119 | 1,911,690 | |||||||||
|
|
|
|
|
||||||||
Accounting Treatment(2) |
Selling & Administrative Expenses | 743,950 | 918,512 | 917,645 | ||||||||
Manufacturing Cost | 639,946 | 772,772 | 657,838 | |||||||||
Development Cost (Intangible Assets) | 348,664 | 372,835 | 336,207 | |||||||||
|
|
|
|
|
||||||||
R&D-Related
Expenditures / Revenue Ratio |
10.2% | 8.5 | % | 6.9 | % | |||||||
|
|
|
|
|
16
(26) | Calculated based on the total R&D-related expenditures before subtracting government subsidies (state subsidies). |
(27) | For accounting treatment purposes, selling & administrative expenses are presented as research and development expenses in our statements of comprehensive income, net of amortization of capitalized intangible asset development costs. |
B. | R&D achievements |
Achievements in 2017
(1) | Developed 5.7-inch QHD+ full vision display (LG Electronics) |
• | Developed a full vision display smartphone product (G6) through strategic collaboration with other LG Group companies |
• | Applied first 18:9 screen aspect ratio with 4-corner round display |
(2) | Developed mobile LTPS 30Hz product (SH 5.1-inch FHD) |
• | Secured 30Hz low-frequency drive technology based on LTPS TFT-LCD |
• | Reduced logic power consumption through 30Hz low-frequency drive (reduced from 96mW to 69mW on 5.1-inch FHD) |
(3) | Developed and released the world’s first Crystal Sound OLED, or CSO, television product |
• | Released product with a new platform concept through development of OLED panel product with integrated speakers |
• | Delivered OLED television product that achieves differentiated value not only in picture quality and design, but also sound quality |
(4) | Developed notebook oxide product (13.9-inch, Ultra HD) |
• | Achieved high definition/narrow bezel product through application of oxide BCE GIP technology |
• | Delivered low power consumption product through application of low refresh rate, or LRR, technology |
(5) | Developed medical monitor product for surgical endoscope (27.0-inch, Ultra HD) |
• | Newly entered the medical devices market through development and production of medical monitor product for surgical endoscope |
• | Achieved high definition (3,840 x 2,160), high luminance (800 nit) and high contrast ratio (1,300:1) |
• | Implemented coverglass direct bonding applying our own manufacturing processes (M6 line) |
(6) | Developed the world’s first four-side borderless monitor with a resolution of 8K4K (31.5-inch 8K4K oxide) |
• | Pioneered Ultra HD Premium MNT market through development of the world’s first four-side borderless monitor with a resolution of 8K4K |
• | Delivered Ultra HD based on oxide GIP (280 PPI with a resolution of 7680x4320) |
• | Delivered wide color gamut (Adobe RGB 100%/DCI 98%), four-side borderless |
(7) | Developed the world’s largest automotive Center Information Display (“CID”) product (15.4-inch Widescreen Ultra Extended Graphics Array (“WUXGA”)) |
• | Developed the world’s largest auto component display in the automotive industry |
• | Guaranteed the first 1000hr reliability in the automotive industry |
(8) | Developed the world’s first 88-inch Ultra Stretch display product |
• | Strengthened competitiveness through application of smart (digital) stepper |
(9) | Developed products utilizing U-IPS (75-inch/65-inch/55-inch/49-inch, Ultra HD) |
• | Utilized U-IPS technology to strengthen product competitiveness by improving panel transmittance rate and reflectivity |
(10) | Developed the world’s first 65-inch UHD OLED television product utilizing GIP |
• | Strengthened product competitiveness through application of the world’s first oxide based UHD GIP technology |
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Achievements in 2018
(1) | Developed the world’s first glass-integrated LCD television product (Art Glass Series) |
• | Achieved LCD modular appearance and simplicity in design by using glass material throughout product (including the panel, light guide plate and back cover) |
• | Strengthened competitiveness of frameless design by decreasing bezel size from 7.8mm to 5.9mm |
(2) | Developed our first 5.8-inch Ultra HD Mobile 4K product |
• | Developed our first Ultra HD mobile product |
• | Achieved high luminance, low power consumption and HD resolution by applying Ultra HD RGBW (M+) pixel structure |
(3) | Developed the world’s first 5.8-inch mobile FHD product applying M+ |
• | Our first product applying camera notch concept technology |
(4) | Developed the world’s first four-side borderless curved monitor with 1900R curvature radius |
• | Our first product applying glass 0.25T (etching) bezel printing/reverse bonding process technology |
• | Strengthened product competitiveness with our first shared design applying three-side/four-side borderless TFT Mask |
• | Achieved high-speed driving at 144Hz, high color recall (DCI 98%) and HDR (peak luminance 550nit) |
(5) | Developed the world’s first 34-inch large-screen monitor/high-resolution four-sided borderless HDR |
• | Pioneered HD Premium 21:9 monitor market through development of the world’s first WUHD(5K2K), four-side borderless monitor |
• | Delivered Ultra HD (DCI 98Z%, sRGB 135%) by applying Adv. KSF LED PKG technology |
• | Achieved high luminance (HDR 600); typ. 450 nit, maximum 600nit |
(6) | Developed LGD 6.01QHD+M+ Full Screen Display (LG Electronics) |
• | Developed a full screen display concept smartphone product (G7) through strategic collaboration with other LG Group companies |
• | Implemented a full screen display product concept through achievement of our first 19.5:9 screen aspect ratio and lower bezel of 2.7mm |
(7) | Developed the world’s narrowest bezel videowall product (0.44mm bezel, 55-inch FHD) |
• | Achieved product competitiveness by developing the world’s narrowest bezel (originally 0.9mm g 0.44mm, Even Bezel) |
(8) | Developed the world’s first automotive glassless 3D cluster product |
• | Developed FHD glassless barrier type 3D model (12.3 inches, 167 ppi level) |
• | Achieved customers’ eye-tracking movement by applying a top moving barrier panel at the top of the panel |
• | Improved adhesion accuracy of image panel and barrier panel by using OCA bonding technology |
• | Improved barrier contrast ratio by applying a copper-based metal barrier panel |
(9) | Developed the world’s first 6th generation a-Si Indirect DXD product (21.9-inch, 14 x 17 resolution, 14 µm pixel pitches) |
• | Entered the DXD market through development of the world’s first 6th generation a-Si Indirect DXD product |
• | Set up infrastructure for DXD product development through the development of our first DXD product |
(10) | Developed the world’s first 17-inch large-sized and lightweight notebook monitor |
• | Developed large-sized (17-inch) product with a new screen aspect ratio (16:10) |
• | Developed light-weight product (268g) through securing 17-inch+ Slim Design model technology |
Achievements in 2019
(1) Developed the world’s first ultra large-sized in-TOUCH product (50-inch UHD)
• | World’s first to apply in-TOUCH technology on ultra large-sized products (50-inch and larger) |
18
• | World’s first to apply low temperature PAS to achieve in-TOUCH function |
(2) | Developed the world’s first transparent WOLED product (55-inch FHD) |
• | Developed WOLED-based Top Emission OLED device and process technology |
(3) | Developed the world’s first OLED 8K product (88-inch 8K) |
• | Developed gearing technology that secures and compensates aperture ratio for high resolution (8K) product implementation |
(4) | Developed the world’s first gaming monitor product applying OLED (55” UHD) |
• | Developed 55” UHD gaming monitor product using advantages of OLED (latency, gray to gray, color recall) |
(5) | Developed the world’s first curved gaming monitor product applying AH-IPS COT (37.5” WQ+) |
• | Developed and produced the world’s first monitor product applying AH-IPS COT |
• | Pioneered gaming/curved premium monitor product market |
10. | Intellectual Property |
As of September 30, 2019, our cumulative patent portfolio (including patents that have already expired) included a total of 43,637 patents, consisting of 18,880 in Korea and 24,757 in other countries.
11. | Environmental and Safety Matters |
We are subject to a variety of environmental laws and regulations, and we may be subject to fines or restrictions that could cause our operations to be interrupted. Our manufacturing processes generate worksite waste, including water and air pollutants, at various stages in the manufacturing process, and we are subject to relevant laws and regulations in each area of the environment, including with respect to the treatment of chemical by-products. We have installed various types of anti-pollution equipment, consistent with environmental standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations.
In accordance with the Framework Act on Low Carbon, Green Growth, we implemented the greenhouse gas emission and energy consumption target system from 2012 to 2014. In 2015, we implemented the greenhouse gas trading system, under which we are responsible to meet our emission targets based on the emission credits allocated to us by the Ministry of Environment of the Korean government. As a result, we have been investing in additional equipment and there may be other costs associated with meeting reduction targets, which may have a negative effect on our profitability or production activities.
In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2018 to the Korean government in March 2019 after it was certified by BSI Korea, a government-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:
(Unit: thousand tonnes of CO2 equivalent; Tetra Joules) | ||||||||||||
Category |
2018 | 2017 | 2016 | |||||||||
Greenhouse gases |
6,696 | 6,314 | 6,092 | |||||||||
Energy |
64,296 | 63,451 | 60,423 |
As we were designated as a target company for the greenhouse gas emission trading system in 2015, we submit a plan for allocating and monitoring our greenhouse gas emissions to the government every year. In order to continually promote the reduction of greenhouse gas emissions, we have set a short-term goal to reduce the emission level from 2014 to 2022 by 16.8% and a medium- to long-term goal to reduce the emission level from 2014 to 2045 by 65.1%. To achieve this, we are continually investing in facility improvements and monitoring our emission levels.
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We are making extensive investments to replace SF6 gas, which is the main component of greenhouse gases, with NF3 gas. In addition, as a short-term strategy, we are actively implementing measures in compliance with the emission trading system. In 2018, we reduced our carbon dioxide greenhouse gas emission levels by 1.28 million tons, which was 0.63 million tons more than our initial target of 0.65 million tons. As our medium- to long-term goal, we plan to develop low-carbon production technologies in order to eliminate greenhouse gas emission during our manufacturing process and to conserve energy.
The increase in greenhouse gas emission in 2018 is due to the inclusion of certain other greenhouse gas emissions (N2O used in deposition facilities and CO2 in cleaning facilities) during the second planning period (2018 to 2020) that were not included during the first planning period (2015 to 2017) in the overall amount of greenhouse gas emissions in accordance with guidelines issued by the Korean government.
Operations at our manufacturing plants are subject to regulation and periodic scheduled and unscheduled on-site inspections by the Ministry of Environment and local environmental protection authorities. We believe that we have adopted adequate anti-pollution measures and have minimized our impact on the environment by improving existing and developing new technologies for the effective maintenance of environmental protection standards consistent with local industry practice. In addition, we have continually monitored, and we believe that we are in compliance in all material respects with, the applicable environmental laws and regulations in Korea. Expenditures related to such compliance may be substantial. Such expenditures are generally included in capital expenditures. As required by Korean law, we employ licensed environmental specialists to manage our water and air pollution, toxic materials and waste. In December 2013, to ensure safe water quality and reduce costs, we entered into a contract with a specialist company to operate our waste water treatment facilities. In stages beginning in November 1997, we have obtained environmental management system ISO 14001 certifications for our domestic panel and module production facilities and our overseas module production plants in Nanjing, Yantai, Guangzhou and Vietnam, and in December 2013, we have obtained energy management system ISO 50001 certifications for our domestic panel and module production plants and our overseas module production plants in Nanjing and Guangzhou.
In addition, in August 2014, GP1, our newest 8th generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO 14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we were first certified by the Ministry of Environment as a “Green Company” for P1 in 1997, and such certification has since been renewed on a timely basis, most recently in May 2018. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minister of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry & Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued water conservation activities (reuse system investments, etc.) and greenhouse gas emission reduction activities (process gas and energy reduction, etc.), we attained the highest level, Leadership A, and received the grand prize award at the CDP Water Korea Best Awards in 2016 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee. We also attained a Leadership A in the climate change information technology sector and received a carbon management honors award. Our continued efforts to reduce greenhouse gas emissions was recognized again in 2018 following 2017 by becoming the only domestic information technology company to attain the Leadership A level and again receiving carbon management honors by ranking in the top five among all eligible companies. In May 2017, we were awarded a commendation from the Minister of Environment for having scored the highest grade among companies in the low- and medium-volume pollutant emitters category that had entered into voluntary agreements with the Metropolitan Air Quality Management Office, in recognition of having successfully met our voluntary targets for reduction of air pollutants as well as our overall efforts to enhance our relevant facilities and operational systems. In addition, in recognition of efficient control, management and operating systems implemented in our manufacturing facilities, we received the top-level certification, Level 1, in 2017 under the Factory Energy Management System evaluation presided by the Korea Energy Agency. Furthermore, in November 2017, we received the highest commendation, the Presidential Award, in the Korean Energy Efficiency Awards presided by the Ministry of Industry, Trade and Energy in recognition of our energy management practices and energy saving measures. In May 2018, we received the CEM Insight Award, presented at the Clean Energy Ministerial Meetings, and also received certification for our energy business management (Energy Champion) presided by the Ministry of Trade, Industry and Technology and the Korea Energy Agency in November 2018.
20
In the case of the European Union’s Restriction of Hazardous Substances (RoHS) Directive 2011/65/EU, with the adoption of Directive (EU) 2015/863 in 2016, four additional substances (four phthalate substances) have been added to the six already restricted substances, which additional restrictions became effective as of July 22, 2019. In order to address the latent risk elements of the four phthalate substances scheduled to be restricted in 2019 and to establish a more stable management system, we implemented in 2016 a preemptive response process with respect to such four phthalate substances. In implementing this process, we collaborated with external agencies to ascertain regulatory trends and establish our response strategy, and we formulated and applied effective management measures through the collaborative efforts of our development, procurement and quality teams. Beryllium (Be) was not designated internationally as a mandatorily restricted substance but has continued to be the subject of discussion for restriction, and certain of our customers have designated it as a restricted substance not to be used in products. Accordingly, we have completed verification of the parts used in products for customers who have banned the use of Beryllium. We have also conducted verification of the parts used in products for all customers who are expected to implement a ban and we have established a Beryllium verification process for parts in development. Through such efforts, we have established a voluntary hazardous substance response process that can be expanded to products for all customers, not only those who have requested a response.
In October 2005, we became the first display panel company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Trade, Industry & Energy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Our efforts to keep pace with the increasingly stringent accreditation standards and to receive and maintain such accreditations are part of our on-going efforts to systematically monitor environmentally controlled substances in our component parts inventory. Moreover, we participated in reforming IEC 62321, an international testing standard published by the International Electrotechnical Commission and used by RoHS, and the commission adopted our halogen-free combustion ion chromatography method in as IEC 62321-3-2, which was published in June 2013. In 2017, in a joint effort with the global product testing/accreditation agency SGS, we became the first display panel company to develop Eco Label, an environmentally friendly accreditation program for television display modules, and received the SGS Eco Label accreditation for our OLED and LCD television models in 2017 and 2018. For the IPS Nano Color for LCD, we received the Quality & Performance Mark from Intertek, a global product testing/accreditation agency, by applying a technology to eliminate cadmium (Cd) and indium phosphide (InP). In 2018, we became the first display panel company to receive the “Green Technology Certification” from the Korean Ministry of Science and ICT for improving the light efficiency technology of OLED to promote energy use reduction.
In June 2017, we were assessed a fine of 1 million, which we subsequently paid, for failure to meet
certain waste disposal subcontractor requirements under the Waste Management Act. To prevent such violations from occurring again, we are strengthening the periodic evaluation process for our waste management subcontractors. W
In June 2017, we were audited by the Ministry of Employment and Labor in connection with the occurrence of a safety accident and found to be
in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of 2.4 million. In addition,
the trial court ordered a fine of W0.5 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. In relation to the same
matter, in May 2018, the Prosecutor’s Office sought a fine of W3.0 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and
Health Act. The trial court (Goyang Branch of Uijeongbu District Court) issued a summary order confirming the same fine of W3.0 million on November 22, 2018. We and our chief production officer appealed
the trial court’s decision, and the case is currently pending appeal at the Uijeongbu District Court. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.
W
In January 2018, we were audited by the Ministry of Employment and Labor in connection with the occurrence of another safety accident and
found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of 14.4 million.
In relation to this matter, in January 2019, the trial court (Goyang Branch of Uijeongbu District Court) assessed a fine of W1 million as a summary order on each of us and our chief production officer pursuant
to certain other provisions of the Industrial Safety and Health Act. In addition, in January 2019, the trial court sought a fine of W4 million and W2 million on us and the
employee in charge of on-site safety management, respectively, on the basis of certain other provisions of the Industrial Safety and Health Act. Relevant authorities are currently conducting further
investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees. W
21
Also in January 2018, the government of Gyeong-gi
Province issued a warning and assessed a fine of 1 million on us, which we subsequently paid, for the failure to comply with certain requirements relating to air pollutant emission and prevention facilities
under the Air Quality Management Act. To prevent such violations from occurring again, we have shortened the air pollutant emission maintenance reporting period and strengthened the verification process for relevant data. W
In February 2018, we were assessed a fine of 0.04 million by Paju City for stopping a vehicle in front
of a day care center in violation of certain provisions of the Road Traffic Law. We have since paid the fine and are in the process of strengthening our parking guidance procedures to prevent such recurrence. W
In March 2018, we were audited by the Ministry of Employment and Labor in connection with our health and safety training practices, and we
were found to have omitted requisite health and safety training sessions for certain employees in our P9 facilities in 2016 and 2017. As a result, we were assessed a fine of 6.95 million, which we subsequently
paid, and have strengthened our efforts to promote health and safety training programs in advance as well as our management and supervision activities to ensure such programs are conducted. W
In April 2018, we were assessed a fine of 0.24 million by
Yeongdeungpo-gu Office for our failure to keep one of our rescue vehicles current with its statutory inspection requirements, which we subsequently paid. In order to prevent recurrence, we are continually
monitoring the compliance of inspection requirements for our vehicles. W
In June 2019, the government of
Gyeong-gi Province reviewed the operational history and the number of self-measurements of our emission outlets and confirmed that there were certain deficiencies in self-measurements for our reserve
facilities. As a result, we were assessed a fine of 1.6 million by the government of Gyeong-gi Province, which we subsequently paid, for the violation of Article 39 of
the Air Quality Management Act. To prevent the recurrence, we have established a monthly self-measurement plan for our reserve facilities. W
12. | Financial Information |
A. | Financial highlights (Based on consolidated K-IFRS). Figures for 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.” |
(Unit: In millions of Won) | ||||||||||||
Description |
As of September 30, 2019 | As of December 31, 2018 | As of December 31, 2017 | |||||||||
Current assets |
10,779,641 | 8,800,127 | 10,473,703 | |||||||||
Quick assets |
8,052,447 | 6,108,924 | 8,123,619 | |||||||||
Inventories |
2,727,194 | 2,691,203 | 2,350,084 | |||||||||
Non-current assets |
26,663,424 | 24,375,583 | 18,685,984 | |||||||||
Investments in equity accounted investees |
113,842 | 113,989 | 122,507 | |||||||||
Property, plant and equipment, net |
23,730,603 | 21,600,130 | 16,201,960 | |||||||||
Intangible assets |
971,454 | 987,642 | 912,821 | |||||||||
Other non-current assets |
1,847,525 | 1,673,822 | 1,448,696 | |||||||||
Total assets |
37,443,065 | 33,175,710 | 29,159,687 | |||||||||
Current liabilities |
10,640,846 | 9,954,483 | 8,978,682 | |||||||||
Non-current liabilities |
12,476,294 | 8,334,981 | 5,199,495 | |||||||||
Total liabilities |
23,117,140 | 18,289,464 | 14,178,177 | |||||||||
Share capital |
1,789,079 | 1,789,079 | 1,789,079 | |||||||||
Share premium |
2,251,113 | 2,251,113 | 2,251,113 | |||||||||
Retained earnings |
9,201,528 | 10,239,965 | 10,621,571 | |||||||||
Other equity |
(99,090 | ) | (300,968 | ) | (288,280 | ) | ||||||
Non-controlling interest |
1,183,295 | 907,057 | 608,027 | |||||||||
|
|
|
|
|
|
|||||||
Total equity |
14,325,925 | 14,886,246 | 14,981,510 | |||||||||
|
|
|
|
|
|
22
(Unit: In millions of Won, except for per share data and number of consolidated entities) | ||||||||||||
Description |
For the nine months ended September 30, 2019 |
For the year ended December 31, 2018 |
For the year ended December 31, 2017 |
|||||||||
Revenue |
17,053,872 | 24,336,571 | 27,790,216 | |||||||||
Operating profit (loss) |
(937,500 | ) | 92,891 | 2,461,618 | ||||||||
Operating profit (loss) from continuing operations |
(1,055,024 | ) | (179,443 | ) | 1,937,052 | |||||||
Profit (loss) for the period |
(1,055,024 | ) | (179,443 | ) | 1,937,052 | |||||||
Profit (loss) attributable to: |
||||||||||||
Owners of the Company |
(1,028,664 | ) | (207,239 | ) | 1,802,756 | |||||||
Non-controlling interest |
(26,360 | ) | 27,796 | 134,296 | ||||||||
Basic earnings (loss) per share |
(2,875 | ) | (579 | ) | 5,038 | |||||||
Diluted earnings (loss) per share |
(2,875 | ) | (579 | ) | 5,038 | |||||||
Number of consolidated entities |
22 | 22 | 20 |
B. | Financial highlights (Based on separate K-IFRS). Figures for 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.” |
(Unit: In millions of Won) | ||||||||||||
Description |
As of September 30, 2019 | As of December 31, 2018 | As of December 31, 2017 | |||||||||
Current assets |
7,832,401 | 6,378,339 | 8,381,074 | |||||||||
Quick assets |
5,819,939 | 4,427,184 | 6,698,829 | |||||||||
Inventories |
2,012,462 | 1,951,155 | 1,682,245 | |||||||||
Non-current assets |
21,602,029 | 20,683,767 | 17,028,341 | |||||||||
Investments |
5,084,793 | 3,602,214 | 2,683,941 | |||||||||
Property, plant and equipment, net |
14,257,615 | 14,984,564 | 12,487,001 | |||||||||
Intangible assets |
792,511 | 816,808 | 731,373 | |||||||||
Other non-current assets |
1,467,110 | 1,280,181 | 1,126,026 | |||||||||
Total assets |
29,434,430 | 27,062,106 | 25,409,415 | |||||||||
Current liabilities |
9,045,792 | 7,416,630 | 7,394,605 | |||||||||
Non-current liabilities |
8,282,231 | 6,432,895 | 4,185,551 | |||||||||
Total liabilities |
17,328,023 | 13,849,525 | 11,580,156 | |||||||||
Share capital |
1,789,079 | 1,789,079 | 1,789,079 | |||||||||
Share premium |
2,251,113 | 2,251,113 | 2,251,113 | |||||||||
Retained earnings |
8,066,215 | 9,172,389 | 9,789,067 | |||||||||
Other equity |
0 | 0 | 0 | |||||||||
Total equity |
12,106,407 | 13,212,581 | 13,829,259 |
23
(Unit: In millions of Won, except for per share data) | ||||||||||||
Description |
For the nine months ended September 30, 2019 |
For the year ended December 31, 2018 |
For the year ended December 31, 2017 |
|||||||||
Revenue |
15,752,138 | 22,371,687 | 25,591,082 | |||||||||
Operating profit (loss) |
(1,210,164 | ) | (472,995 | ) | 1,536,730 | |||||||
Operating profit (loss) from continuing operations |
(1,096,752 | ) | (442,291 | ) | 1,779,721 | |||||||
Profit (loss) for the period |
(1,096,752 | ) | (442,291 | ) | 1,779,721 | |||||||
Basic earnings (loss) per share |
(3,065 | ) | (1,236 | ) | 4,974 | |||||||
Diluted earnings (loss) per share |
(3,065 | ) | (1,236 | ) | 4,974 |
C. | Consolidated subsidiaries (as of September 30, 2019) |
Company Interest |
Primary Business | Location | Equity | |||||
LG Display America, Inc. |
Sales | U.S.A. | 100 | % | ||||
LG Display Germany GmbH |
Sales | Germany | 100 | % | ||||
LG Display Japan Co., Ltd. |
Sales | Japan | 100 | % | ||||
LG Display Taiwan Co., Ltd. |
Sales | Taiwan | 100 | % | ||||
LG Display Nanjing Co., Ltd. |
Manufacturing | China | 100 | % | ||||
LG Display Shanghai Co., Ltd. |
Sales | China | 100 | % | ||||
LG Display Poland Sp. zo.o. (1) |
Manufacturing | Poland | 100 | % | ||||
LG Display Guangzhou Co., Ltd. |
Manufacturing | China | 100 | % | ||||
LG Display Shenzhen Co., Ltd. |
Sales | China | 100 | % | ||||
LG Display Singapore Pte. Ltd. |
Sales | Singapore | 100 | % | ||||
L&T Display Technology (Fujian) Limited |
Manufacturing and sales | China | 51 | % | ||||
LG Display Yantai Co., Ltd. |
Manufacturing | China | 100 | % | ||||
LG Display (China) Co., Ltd. |
Manufacturing and sales | China | 70 | % | ||||
Nanumnuri Co., Ltd. |
Workplace services | Korea | 100 | % | ||||
Unified Innovative Technology, LLC |
Managing intellectual property | U.S.A. | 100 | % | ||||
Global OLED Technology LLC |
Managing intellectual property | U.S.A. | 100 | % | ||||
LG Display Guangzhou Trading Co., Ltd. |
Sales | China | 100 | % | ||||
LG Display Vietnam Haiphong Co., Ltd. (2) |
Manufacturing | Vietnam | 100 | % | ||||
Suzhou Lehui Display Co., Ltd. |
Manufacturing and sales | China | 100 | % | ||||
LG Display Fund I LLC (3) |
Investing in new emerging companies | U.S.A | 100 | % | ||||
LG Display High-Tech (China) Co., Ltd. (4) |
Manufacturing and sales | China | 75 | % | ||||
MMT (Money Market Trust) |
Money market trust | Korea | 100 | % |
D. | Status of equity investments (as of September 30, 2019) |
(1) | Consolidated subsidiaries |
Company |
Investment Amount (in millions) |
Initial Equity Investment Date |
Equity Interest |
|||||||||
LG Display America, Inc. |
US$ | 411 | September 24, 1999 | 100 | % | |||||||
LG Display Germany GmbH |
EUR | 1 | November 5, 1999 | 100 | % | |||||||
LG Display Japan Co., Ltd. |
¥ | 95 | October 12, 1999 | 100 | % | |||||||
LG Display Taiwan Co., Ltd. |
NT$ | 116 | May 19, 2000 | 100 | % |
24
Company |
Investment Amount (in millions) |
Initial Equity Investment Date |
Equity Interest |
|||||||||
LG Display Nanjing Co., Ltd. |
CNY | 3,020 | July 15, 2002 | 100 | % | |||||||
LG Display Shanghai Co., Ltd. |
CNY | 4 | January 16, 2003 | 100 | % | |||||||
LG Display Poland Sp. zo.o. (1) |
PLN | 511 | September 6, 2005 | 100 | % | |||||||
LG Display Guangzhou Co., Ltd. |
CNY | 1,655 | August 7, 2006 | 100 | % | |||||||
LG Display Shenzhen Co., Ltd. |
CNY | 4 | August 28, 2007 | 100 | % | |||||||
LG Display Singapore Pte. Ltd. |
US$ | 1 | January 12, 2009 | 100 | % | |||||||
L&T Display Technology (Fujian) Limited |
CNY | 116 | January 5, 2010 | 51 | % | |||||||
LG Display Yantai Co., Ltd. |
CNY | 1,008 | April 19, 2010 | 100 | % | |||||||
Nanumnuri Co., Ltd. |
March 19, 2012 | 100 | % | |||||||||
LG Display (China) Co., Ltd. |
CNY | 8,232 | December 27, 2012 | 70 | % | |||||||
Unified Innovative Technology, LLC |
US$ | 9 | March 21, 2014 | 100 | % | |||||||
LG Display Guangzhou Trading Co., Ltd. |
CNY | 1 | May 27, 2015 | 100 | % | |||||||
Global OLED Technology LLC |
US$ | 138 | May 7, 2015 | 100 | % | |||||||
LG Display Vietnam Haiphong Co., Ltd. (2) |
US$ | 600 | May 13, 2016 | 100 | % | |||||||
Suzhou Lehui Display Co., Ltd. |
CNY | 637 | July 1, 2016 | 100 | % | |||||||
LG Display Fund I LLC (3) |
US$ | 5 | May 1, 2018 | 100 | % | |||||||
LG Display High-Tech (China) Co., Ltd. (4) |
CNY | 14,570 | July 11, 2018 | 75 | % | |||||||
MMT (Money Market Trust) |
March 31, 2017 | 100 | % |
Changes since December 31, 2018:
(1) | LG Display Poland Sp. zo.o. began a liquidation process as of July 1, 2019. |
(2) | During the reporting period, we invested an additional |
(3) | During the reporting period, we invested an additional |
(4) | During the reporting period, we invested an additional
|
Additionally, for the nine-month periods ended September 30, 2018 and 2019, the amount of dividends attributable to the parent company from the aggregate
dividends distributed by our consolidated subsidiaries was 90,281 million and W11,120 million, respectively. W
(2) | Affiliated companies |
Company |
Carrying Amount (in millions) |
Date of Incorporation |
Equity Interest |
|||||||||
Paju Electric Glass Co., Ltd. |
January 2005 | 40 | % | |||||||||
Invenia Co., Ltd. (1) |
— | January 2001 | — | |||||||||
Wooree E&L Co., Ltd. |
June 2008 | 14 | % | |||||||||
YAS Co., Ltd. |
April 2002 | 15 | % | |||||||||
Avatec Co., Ltd. (2) |
August 2000 | 14 | % | |||||||||
Arctic Sentinel, Inc. |
— | June 2008 | 10 | % | ||||||||
Cynora GmbH (3) |
March 2003 | 12 | % | |||||||||
Material Science Co., Ltd. |
January 2014 | 10 | % | |||||||||
Nanosys Inc. |
July 2001 | 4 | % |
25
Changes since December 31, 2018:
(28) | In September 2019, we sold all of the 3,000,000 shares of Invenia Co., Ltd. we previously held, and recognized
a disposal gain of |
(29) | In August 2019, we sold 650,000 shares of Avatec Co., Ltd. we previously held, and our interest in Avatec Co.,
Ltd. following such sale is 14% as of the end of the reporting period. As a result of such sale, we recognized a disposal gain of |
(30) | We did not participate in Cynora GmbH’s paid-in capital increase during the reporting period, and as a result, our equity interest decreased from 14% as of December 31, 2018 to 12% as of September 30, 2019. |
Additionally, for the nine-month periods ended September 30, 2018 and 2019, the aggregate amount of dividends we received from our affiliated companies
was 5,272 million and W7,502 million, respectively. W
13. | Audit Information |
A. | Audit service |
(Unit: In millions of Won, hours) | ||||||
Description |
2019 Q1~Q3 | 2018 | 2017 | |||
Auditor |
KPMG Samjong | KPMG Samjong | KPMG Samjong | |||
Activity |
Audit by independent auditor |
Audit by independent auditor |
Audit by independent auditor | |||
Compensation(1) |
1,280 (500)(2) | 1,170 (450)(2) | 1,040 (450)(2) | |||
Time required |
10,673 | 17,269 | 17,909 |
(31) | Compensation amount is the contracted amount for the full fiscal year. |
(32) | Compensation amount in ( ) is for Form 20-F filing and SOX 404 audit. |
B. | Non-audit service |
(Unit: In millions of Won, hours) | ||||||||||
Period |
Date of contract | Description of service | Period of service | Compensation | ||||||
2019 Q1~Q3 |
July 23, 2019 | Issuance of comfort letters |
|
July 23, 2019 ~ August 31, 2019 |
|
120 | ||||
2018 |
September 11, 2018 | Green bond verification |
|
September 11, 2018 ~ October 9, 2018 |
|
45 |
14. | Board of Directors |
A. | Members of the board of directors |
As of September 30, 2019, our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.
(As of September 30,2019) | ||||
Name |
Position |
Primary responsibility | ||
Sang Beom Han | Representative Director (non-outside) | Overall head of business management | ||
Donghee Suh(1) | Director (non-outside), Chief Financial Officer and Senior Vice President | Overall head of finances | ||
Young-Soo Kwon(1) | Director (non-standing) | Chairman of the board of directors | ||
Sung-Sik Hwang | Outside Director | Related to the overall management | ||
Kun Tai Han(2) | Outside Director | Related to the overall management | ||
Byung Ho Lee | Outside Director | Related to the overall management | ||
Chang-Yang Lee(1) | Outside Director | Related to the overall management |
26
(33) | Each of Donghee Suh, Young-Soo Kwon and Chang-Yang Lee was newly appointed at the annual general meeting of shareholders held on March 15, 2019. |
(34) | Kun Tai Han was reappointed for another term as an outside director at the annual general meeting of shareholders held on March 15, 2019. |
B. | Committees of the board of directors |
We have the following committees that serve under our board of directors: Audit Committee, Outside Director Nomination Committee and Management Committee. The Management Committee consists of two non-outside directors, Sang Beom Han and Donghee Suh.
As of March 15, 2019, the composition of the Outside Director Nomination Committee was as follows.
(As of March 15, 2019) | ||||
Committee |
Composition |
Member | ||
Outside Director Nomination Committee(1) | 1 non-standing director and 2 outside directors | Young-Soo Kwon, Kun Tai Han, Byung Ho Lee |
(35) | Each of Young-Soo Kwon, Kun Tai Han, Byung Ho Lee was appointed as a member of the outside director nomination committee of the board of directors at the board of directors’ meeting on March 15, 2019. |
As of the September 30, 2019, the composition of the Audit Committee was as follows.
(As of September 30, 2019) | ||||
Committee |
Composition |
Member | ||
Audit Committee | 3 outside directors | Sung-Sik Hwang(1), Kun Tai Han, Chang-Yang Lee(2) |
(36) | Sung-Sik Hwang is the audit committee chairman. He was reappointed for another term as an Audit Committee member at the annual general meeting of shareholders held on March 15, 2018. |
(37) | Chang-Yang Lee was newly appointed as an audit committee member at the annual general meeting of shareholders held on March 15, 2019. |
C. | Independence of directors |
Directors are appointed in accordance with the procedures of the Commercial Act and other relevant laws and regulations. Our board of directors is independent as four out of the seven directors that comprise the board are outside directors. Outside directors candidates are nominated for appointment at a shareholders’ meeting after undergoing rigorous review by the Outside Director Nomination Committee.
All of our current outside directors were nominated by the Outside Director Nomination Committee, and all of our current non-outside directors were nominated by the board of directors.
15. | Information Regarding Shares |
A. | Total number of shares |
(1) | Total number of shares authorized to be issued (as of September 30, 2019): 500,000,000 shares. |
(2) | Total shares issued and outstanding (as of September 30, 2019): 357,815,700 shares. |
B. | Shareholder list |
(1) | Largest shareholder and related parties as of September 30, 2019: |
Name |
Relationship | Number of shares of common stock | Equity interest | |||||||
LG Electronics |
Largest shareholder |
135,625,000 | 37.9 | % | ||||||
Sang Beom Han |
Officer of member company |
54,000 | 0.0 | % |
27
(2) | Shareholders who are known to us that own 5% or more of our shares as of September 30, 2019: |
Beneficial owner |
Number of shares of common stock | Equity interest | ||||||
LG Electronics |
135,625,000 | 37.90 | % | |||||
National Pension Service |
24,515,566 | 6.85 | % |
16. | Directors and Employees |
A. | Directors |
(1) | Remuneration for directors in 2019 Q1~Q3: |
(Unit: person, in millions of Won) | ||||||||||||
Classification |
No. of directors(1) | Amount paid(2) | Per capita average remuneration paid(3) |
|||||||||
Non-outside directors |
3 | 1,471 | 490 | |||||||||
Outside directors who are not audit committee members |
1 | 59 | 59 | |||||||||
Outside directors who are audit committee members |
3 | 182 | 61 | |||||||||
|
|
|
|
|
|
|||||||
Total |
7 | 1,712 | (4) | 245 | ||||||||
|
|
|
|
|
|
(38) | Number of directors as at September 30, 2019. |
(39) | Amount paid is calculated on the basis of amount of cash actually paid. |
(40) | Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the nine months ended September 30, 2019. |
(41) | As Joon Park resigned as an outside director on March 14, 2019 and Chang Yang Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2019, the total amount paid includes remuneration paid to both Mr. Park and Mr. Lee. |
(2) | Remuneration for individual directors and audit committee members |
Not required for quarterly reports.
(3) | Remuneration for the five highest paid officers (among those paid over
|
Not required for quarterly reports.
(4) | Stock options |
Not applicable.
B. | Employees |
As of September 30, 2019, we had 29,108 employees (excluding our directors). On average, our male employees have served 10.8 years and our
female employees have served 8.9 years. The total amount of salary paid to our employees for the nine months ended September 30, 2019 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the
Income Tax Act was 1,330,998 million for our male employees and W233,435 million for our female employees. The following table provides details of our employees as of
September 30, 2019: W
28
(Unit: person, in millions of Won, year) | ||||||||||||||||
Number of employees(1) |
Total salary in 2019 Q1~Q3(2)(3)(4) | Average salary per capita(5) |
Average years of service |
|||||||||||||
Male |
23,423 | 1,330,998 | 56 | 10.8 | ||||||||||||
Female |
5,642 | 233,435 | 41 | 8.9 | ||||||||||||
Total |
29,065 | 1,564,433 | 53 | 10.4 |
(42) | Includes part-time employees hired for temporary needs or to serve as temporary replacements for employees on parental leave. |
(43) | Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees
for the nine months ended September 30, 2019 was |
(44) | Based on income tax statements, which are submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act. |
(45) | Includes incentive payments to employees who have transferred from our affiliated companies. |
(46) | Calculated using the average number of employees (male: 23,600, female: 5,716) for the nine months ended September 30, 2019. |
In December 2017, we were audited by the Ministry of Employment and Labor regarding our human
resource practices (including in relation to employment contracts, hours of work, outsourcing and employees in pregnancy), and we were found to be in violation of certain provisions of the Labor Standard Act relating to overtime, night and holiday
work. As a result, we were issued a corrective order in January 2018 and paid additional overtime wages of 2,893 million to 16,106 administrative employees of our Paju facilities for their nighttime work
between January 1, 2015 to December 31, 2017. In addition, we reviewed nighttime work records of our administrative employees outside of our Paju facilities during the same period and paid additional overtime wages of
W2,166 million to eligible employees. In order to prevent such violation from occurring again, we are periodically monitoring the nighttime work records of our employees. W
From December 2017 to January 2018, we were audited by the Ministry of Employment and Labor regarding our human resource practices relating to
temporary and part-time employees, and we were found to have omitted certain required information (including the number of break hours and vacation days) in the employment contracts of 82 temporary employees. As a result, we were assessed a fine of
27 million, which we subsequently paid. In order to prevent such violation from occurring again, we have amended the relevant provisions of the applicable employment contracts. W
17. | Other Matters |
A. | Legal proceedings |
We are a defendant in three separate civil lawsuits (comprising one damages claim in the United Kingdom filed by private plaintiffs, one damages claim in Israel filed by private plaintiffs and one unjust enrichment claim in the United States filed by the Commonwealth of Puerto Rico) filed against us and certain other TFT-LCD panel manufacturers in connection with alleged anticompetitive behavior of the defendants. In each of these cases, the amount being sought has not been determined, and no trial has been scheduled. While the expected outcome of each of these cases is unclear, we do not believe that any of these cases would have a material effect on our financial conditions. During the reporting period, we also settled a civil lawsuit that was filed against us and certain other TFT-LCD panel manufacturers in connection with alleged anticompetitive behavior of the defendants by certain plaintiffs in the United Kingdom.
We are also a defendant in two patent infringement lawsuits (one in the United States and the other in Germany) filed against us by Solas OLED Ltd. In each of these cases, the amount being sought has not been determined, and no trial has been scheduled. The expected outcome of each of these cases is currently unclear.
B. | Material events subsequent to the reporting period |
Not Applicable.
C. | Material change in management |
At our meeting of the board of directors on September 16, 2019, Mr. Ho-young Jeong was appointed as our new chief executive officer.
29
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Financial Statements
(Unaudited)
September 30, 2019 and 2018
(With Independent Auditors’ Review Report Thereon)
30
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
LG Display Co., Ltd.:
Reviewed Financial Statements
We have reviewed the accompanying condensed consolidated interim financial statements of LG Display Co., Ltd. and subsidiaries (the “Group”) which comprise the condensed consolidated interim statement of financial position as of September 30, 2019, the condensed consolidated interim statements of comprehensive loss for the three-month and nine-month periods ended September 30, 2019 and 2018, and statements of changes in equity and cash flows for the nine-month periods ended September 30, 2019 and 2018, and notes comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Condensed Consolidated Interim Financial Statements
Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting, and for such internal controls as management determines necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting.
Other Matters
The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.
We audited the consolidated statement of financial position as of December 31, 2018 and the related consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 25, 2019, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2018, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.
32
KPMG Samjong Accounting Corp.
Seoul, Korea
November 13, 2019
This report is effective as of November 13, 2019 the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
33
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Statements of Financial Position
(Unaudited)
As of September 30, 2019 and December 31, 2018
(In millions of won) | Note | September 30, 2019 | December 31, 2018 | |||||||
Assets |
||||||||||
Cash and cash equivalents |
4, 25 | 2,365,022 | ||||||||
Deposits in banks |
4, 25 | 78,000 | 78,400 | |||||||
Trade accounts and notes receivable, net |
5, 14, 25, 27 | 3,620,964 | 2,829,163 | |||||||
Other accounts receivable, net |
5, 25 | 441,480 | 169,313 | |||||||
Other current financial assets |
6, 25 | 98,029 | 46,301 | |||||||
Inventories |
7 | 2,727,194 | 2,691,203 | |||||||
Prepaid income taxes |
114,926 | 4,516 | ||||||||
Non-current assets held for sale |
28 | — | 70,161 | |||||||
Other current assets |
5 | 939,356 | 546,048 | |||||||
|
|
|
|
|||||||
Total current assets |
10,779,641 | 8,800,127 | ||||||||
Deposits in banks |
4, 25 | 11 | 11 | |||||||
Investments in equity accounted investees |
8 | 113,842 | 113,989 | |||||||
Other non-current accounts receivable, net |
5, 25 | 9,666 | 11,448 | |||||||
Other non-current financial assets |
6, 25 | 158,899 | 144,214 | |||||||
Property, plant and equipment, net |
9, 17 | 23,730,603 | 21,600,130 | |||||||
Intangible assets, net |
10, 17 | 971,454 | 987,642 | |||||||
Deferred tax assets |
23 | 1,393,796 | 1,136,166 | |||||||
Other non-current assets |
5 | 285,153 | 381,983 | |||||||
|
|
|
|
|||||||
Total non-current assets |
26,663,424 | 24,375,583 | ||||||||
|
|
|
|
|||||||
Total assets |
33,175,710 | |||||||||
|
|
|
|
|||||||
Liabilities |
||||||||||
Trade accounts and notes payable |
25, 27 | 3,087,461 | ||||||||
Current financial liabilities |
11, 25 | 1,919,581 | 1,553,907 | |||||||
Other accounts payable |
25 | 3,698,896 | 3,566,629 | |||||||
Accrued expenses |
938,056 | 633,346 | ||||||||
Income tax payable |
113,101 | 105,900 | ||||||||
Provisions |
13 | 163,062 | 98,254 | |||||||
Advances received |
14 | 1,077,015 | 834,010 | |||||||
Other current liabilities |
13 | 57,803 | 74,976 | |||||||
|
|
|
|
|||||||
Total current liabilities |
10,640,846 | 9,954,483 | ||||||||
Non-current financial liabilities |
11, 25 | 11,615,684 | 7,030,628 | |||||||
Non-current provisions |
13 | 57,554 | 32,764 | |||||||
Defined benefit liabilities, net |
12 | 176,139 | 45,360 | |||||||
Long-term advances received |
14 | 518,050 | 1,114,316 | |||||||
Deferred tax liabilities |
23 | 14,250 | 15,087 | |||||||
Other non-current liabilities |
13 | 94,617 | 96,826 | |||||||
|
|
|
|
|||||||
Total non-current liabilities |
12,476,294 | 8,334,981 | ||||||||
|
|
|
|
|||||||
Total liabilities |
23,117,140 | 18,289,464 | ||||||||
|
|
|
|
|||||||
Equity | ||||||||||
Share capital |
15 | 1,789,079 | 1,789,079 | |||||||
Share premium |
2,251,113 | 2,251,113 | ||||||||
Retained earnings |
9,201,528 | 10,239,965 | ||||||||
Reserves |
15 | (99,090 | ) | (300,968 | ) | |||||
|
|
|
|
|||||||
Total equity attributable to owners of the Controlling Company |
13,142,630 | 13,979,189 | ||||||||
|
|
|
|
|||||||
Non-controlling interests |
1,183,295 | 907,057 | ||||||||
|
|
|
|
|||||||
Total equity |
14,325,925 | 14,886,246 | ||||||||
|
|
|
|
|||||||
Total liabilities and equity |
33,175,710 | |||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
34
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Statements of Comprehensive Loss
(Unaudited)
For the three-month and nine-month periods ended September 30, 2019 and 2018
(In millions of won, except earnings per share) | Note | For the three-month period ended September 30 |
For the nine-month period ended September 30 |
|||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Revenue |
16, 17, 27 | 6,102,363 | 17,053,872 | 17,388,775 | ||||||||||||||||
Cost of sales |
7, 18, 27 | (5,520,082 | ) | (5,213,629 | ) | (15,637,832 | ) | (15,491,214 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
301,599 | 888,734 | 1,416,040 | 1,897,561 | ||||||||||||||||
Selling expenses |
19 | (247,756 | ) | (220,736 | ) | (722,564 | ) | (597,547 | ) | |||||||||||
Administrative expenses |
19 | (272,799 | ) | (199,732 | ) | (655,805 | ) | (578,145 | ) | |||||||||||
Research and development expenses |
(217,782 | ) | (328,195 | ) | (975,171 | ) | (908,229 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating profit (loss) |
(436,738 | ) | 140,071 | (937,500 | ) | (186,360 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Finance income |
22 | 143,943 | 48,421 | 267,229 | 202,304 | |||||||||||||||
Finance costs |
22 | (177,376 | ) | (49,177 | ) | (359,005 | ) | (241,504 | ) | |||||||||||
Other non-operating income |
21 | 308,549 | 218,147 | 975,549 | 816,198 | |||||||||||||||
Other non-operating expenses |
21 | (441,893 | ) | (249,417 | ) | (1,127,397 | ) | (917,205 | ) | |||||||||||
Equity in income of equity accounted investees, net |
3,306 | 2,218 | 9,859 | 1,035 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Profit (loss) before income tax |
(600,209 | ) | 110,263 | (1,171,265 | ) | (325,532 | ) | |||||||||||||
Income tax expense (benefit) |
23 | (158,005 | ) | 92,755 | (116,241 | ) | 6,485 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Profit (loss) for the period |
(442,204 | ) | 17,508 | (1,055,024 | ) | (332,017 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||
Items that will never be reclassified to profit or loss |
||||||||||||||||||||
Remeasurements of net defined benefit liabilities |
12 | (1,355 | ) | (4,737 | ) | (6,203 | ) | (16,129 | ) | |||||||||||
Other comprehensive income from associates |
107 | 7 | 240 | 30 | ||||||||||||||||
Related income tax |
12 | 332 | 1,267 | (3,219 | ) | 4,893 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
(916 | ) | (3,463 | ) | (9,182 | ) | (11,206 | ) | |||||||||||||
Items that are or may be reclassified to profit or loss | ||||||||||||||||||||
Foreign currency translation differences for foreign operations |
37,529 | (186,146 | ) | 226,967 | (46,214 | ) | ||||||||||||||
Other comprehensive income (loss) from associates |
2,957 | (271 | ) | 7,063 | 418 | |||||||||||||||
40,486 | (186,417 | ) | 234,030 | (45,796 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) for the period, net of income tax |
|
39,570 | (189,880 | ) | 224,848 | (57,002 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive loss for the period |
(172,372 | ) | (830,176 | ) | (389,019 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Profit (loss) attributable to: |
||||||||||||||||||||
Owners of the Controlling Company |
(419,354 | ) | 3,421 | (1,028,664 | ) | (353,418 | ) | |||||||||||||
Non-controlling interests |
(22,850 | ) | 14,087 | (26,360 | ) | 21,401 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Profit (loss) for the period |
17,508 | (1,055,024 | ) | (332,017 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income (loss) attributable to: | ||||||||||||||||||||
Owners of the Controlling Company |
(379,060 | ) | (151,747 | ) | (834,801 | ) | (397,735 | ) | ||||||||||||
Non-controlling interests |
(23,574 | ) | (20,625 | ) | 4,625 | 8,716 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive loss for the year |
(172,372 | ) | (830,176 | ) | (389,019 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Earnings (loss) per share (in won) |
||||||||||||||||||||
Basic and diluted earnings (loss) per share |
24 | 10 | (2,875 | ) | (988 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
35
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Statements of Changes in Equity
For the nine-month periods ended September 30, 2019 and 2018
Attributable to owners of the Controlling Company | ||||||||||||||||||||||||||||
(In millions of won) | Share capital |
Share premium |
Retained earnings |
Reserves | Sub-total | Non-controlling interests |
Total equity |
|||||||||||||||||||||
Balances at January 1, 2018 |
2,251,113 | 10,621,571 | (288,280 | ) | 14,373,483 | 608,027 | 14,981,510 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) for the period |
||||||||||||||||||||||||||||
Profit (loss) for the period |
— | — | (353,418 | ) | — | (353,418 | ) | 21,401 | (332,017 | ) | ||||||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities, net of tax |
— | — | (11,236 | ) | — | (11,236 | ) | — | (11,236 | ) | ||||||||||||||||||
Foreign currency translation differences |
— | — | — | (33,529 | ) | (33,529 | ) | (12,685 | ) | (46,214 | ) | |||||||||||||||||
Other comprehensive income from associates |
— | — | 30 | 418 | 448 | — | 448 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other comprehensive loss |
— | — | (11,206 | ) | (33,111 | ) | (44,317 | ) | (12,685 | ) | (57,002 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) for the period |
— | (364,624 | ) | (33,111 | ) | (397,735 | ) | 8,716 | (389,019 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Transaction with owners, recognized directly in equity |
||||||||||||||||||||||||||||
Dividends to shareholders |
— | — | (178,908 | ) | — | (178,908 | ) | — | (178,908 | ) | ||||||||||||||||||
Subsidiaries’ dividends distributed to non-controlling interests |
— | — | — | — | — | (53,107 | ) | (53,107 | ) | |||||||||||||||||||
Capital contribution from non-controlling interests |
— | — | — | — | — | 331,603 | 331,603 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances at September 30, 2018 |
2,251,113 | 10,078,039 | (321,391 | ) | 13,796,840 | 895,239 | 14,692,079 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances at January 1, 2019 |
2,251,113 | 10,239,965 | (300,968 | ) | 13,979,189 | 907,057 | 14,886,246 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) for the period |
||||||||||||||||||||||||||||
Loss for the period |
— | — | (1,028,664 | ) | — | (1,028,664 | ) | (26,360 | ) | (1,055,024 | ) | |||||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities, net of tax |
— | — | (9,422 | ) | — | (9,422 | ) | — | (9,422 | ) | ||||||||||||||||||
Foreign currency translation differences |
— | — | — | 195,982 | 195,982 | 30,985 | 226,967 | |||||||||||||||||||||
Other comprehensive income from associates |
— | — | 240 | 7,063 | 7,303 | — | 7,303 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other comprehensive income (loss) |
— | — | (9,182 | ) | 203,045 | 193,863 | 30,985 | 224,848 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income (loss) for the period |
— | (1,037,846 | ) | 203,045 | (834,801 | ) | 4,625 | (830,176 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Transaction with owners, recognized directly in equity |
||||||||||||||||||||||||||||
Capital contribution from non-controlling interests and others |
— | — | (591 | ) | (1,167 | ) | (1,758 | ) | 278,154 | 276,396 | ||||||||||||||||||
Subsidiaries’ dividends distributed to non-controlling interests |
— | — | — | — | — | (6,541 | ) | (6,541 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances at September 30, 2019 |
2,251,113 | 9,201,528 | (99,090 | ) | 13,142,630 | 1,183,295 | 14,325,925 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
36
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Cash flows from operating activities: |
||||||||||||
Loss for the period |
(332,017 | ) | ||||||||||
Adjustments for: |
||||||||||||
Income tax expense (benefit) |
23 | (116,241 | ) | 6,485 | ||||||||
Depreciation and amortization |
18 | 2,686,784 | 2,699,538 | |||||||||
Gain on foreign currency translation |
(100,605 | ) | (73,426 | ) | ||||||||
Loss on foreign currency translation |
196,923 | 136,914 | ||||||||||
Expenses related to defined benefit plans |
12 | 147,814 | 155,228 | |||||||||
Gain on disposal of property, plant and equipment |
(13,571 | ) | (5,125 | ) | ||||||||
Loss on disposal of property, plant and equipment |
31,726 | 13,362 | ||||||||||
Impairment loss on property, plant and equipment |
36,371 | 25,715 | ||||||||||
Gain on disposal of intangible assets |
(552 | ) | (239 | ) | ||||||||
Loss on disposal of intangible assets |
139 | — | ||||||||||
Impairment loss on intangible assets |
116,506 | 353 | ||||||||||
Reversal of impairment loss on intangible assets |
(480 | ) | (26 | ) | ||||||||
Gain on disposal of non-current assets held for sale |
(8,353 | ) | — | |||||||||
Expense on increase of provisions |
286,970 | 154,676 | ||||||||||
Finance income |
(183,852 | ) | (61,814 | ) | ||||||||
Finance costs |
290,399 | 116,252 | ||||||||||
Equity in income of equity method accounted investees, net |
8 | (9,860 | ) | (1,035 | ) | |||||||
Other income |
(18,926 | ) | (3,344 | ) | ||||||||
Other expenses |
4,114 | 593 | ||||||||||
|
|
|
|
|||||||||
3,345,306 | 3,164,107 | |||||||||||
Changes in: |
||||||||||||
Trade accounts and notes receivable |
(1,138,581 | ) | 946,803 | |||||||||
Other accounts receivable |
10,693 | (6,969 | ) | |||||||||
Inventories |
(51,755 | ) | (344,614 | ) | ||||||||
Lease receivables |
4,485 | — | ||||||||||
Other current assets |
(276,791 | ) | (102,441 | ) | ||||||||
Other non-current assets |
(20,474 | ) | (39,400 | ) | ||||||||
Trade accounts and notes payable |
(452,958 | ) | 303,604 | |||||||||
Other accounts payable |
1,319,025 | (178,400 | ) | |||||||||
Accrued expenses |
285,349 | (24,311 | ) | |||||||||
Provisions |
(197,371 | ) | (149,139 | ) | ||||||||
Other current liabilities |
(67,127 | ) | 105,308 | |||||||||
Defined benefit liabilities, net |
(23,345 | ) | (7,536 | ) | ||||||||
Long-term advances received |
63,672 | 819,646 | ||||||||||
Other non-current liabilities |
9,343 | 19,123 | ||||||||||
|
|
|
|
|||||||||
(535,835 | ) | 1,341,674 | ||||||||||
Cash generated from operating activities |
1,754,447 | 4,173,764 | ||||||||||
Income taxes paid |
(251,372 | ) | (371,198 | ) | ||||||||
Interests received |
39,566 | 59,699 | ||||||||||
Interests paid |
(299,156 | ) | (150,666 | ) | ||||||||
|
|
|
|
|||||||||
Net cash provided by operating activities |
3,711,599 | |||||||||||
|
|
|
|
See accompanying notes to the consolidated interim financial statements.
37
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Statements of Cash Flows, Continued
(Unaudited)
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Cash flows from investing activities: |
||||||||||||
Dividends received |
5,272 | |||||||||||
Increase in deposits in banks |
(111,180 | ) | (772,219 | ) | ||||||||
Proceeds from withdrawal of deposits in banks |
111,580 | 1,451,541 | ||||||||||
Acquisition of financial assets at fair value through profit or loss |
(708 | ) | (432 | ) | ||||||||
Proceeds from disposal of financial assets at fair value through profit or loss |
213 | — | ||||||||||
Acquisition of financial assets at fair value through other comprehensive income |
(21 | ) | — | |||||||||
Proceeds from disposal of financial assets at fair value through other comprehensive income |
99 | 6 | ||||||||||
Acquisition of investments in equity accounted investees |
— | (14,732 | ) | |||||||||
Proceeds from disposal of investments in equity accounted investees |
7,039 | 2,382 | ||||||||||
Acquisition of property, plant and equipment |
(5,924,316 | ) | (6,053,560 | ) | ||||||||
Proceeds from disposal of property, plant and equipment |
281,167 | 140,093 | ||||||||||
Acquisition of intangible assets |
(424,142 | ) | (405,293 | ) | ||||||||
Proceeds from disposal of intangible assets |
2,349 | 960 | ||||||||||
Government grants received |
248,124 | 1,210 | ||||||||||
Proceeds from disposal of non-current assets held for sale |
81,351 | — | ||||||||||
Receipt from settlement of derivatives |
22,852 | 314 | ||||||||||
Proceeds from collection of short-term loans |
14,656 | 11,755 | ||||||||||
Increase in short-term loans |
(8,725 | ) | (5,000 | ) | ||||||||
Increase in long-term loans |
(6,465 | ) | (31,180 | ) | ||||||||
Increase in deposits |
(30,501 | ) | (14,373 | ) | ||||||||
Decrease in deposits |
5,205 | 3,562 | ||||||||||
Proceeds from disposal of emission rights |
20,416 | 10,200 | ||||||||||
|
|
|
|
|||||||||
Net cash used in investing activities |
(5,703,505 | ) | (5,669,494 | ) | ||||||||
|
|
|
|
|||||||||
Cash flows from financing activities: |
26 | |||||||||||
Proceeds from short-term borrowings |
1,817,444 | 109,446 | ||||||||||
Repayments of short-term borrowings |
(1,131,464 | ) | (109,712 | ) | ||||||||
Proceeds from issuance of bonds |
1,323,239 | 498,170 | ||||||||||
Proceeds from long-term borrowings |
3,765,753 | 2,532,019 | ||||||||||
Repayments of current portion of long-term borrowings and bonds |
(1,223,299 | ) | (1,015,802 | ) | ||||||||
Repayment of lease liabilities |
(45,357 | ) | — | |||||||||
Capital contribution from non-controlling interests |
276,396 | 331,603 | ||||||||||
Subsidiaries’ dividends distributed to non-controlling interests |
(6,541 | ) | (51,085 | ) | ||||||||
Dividends paid |
— | (178,908 | ) | |||||||||
|
|
|
|
|||||||||
Net cash provided by financing activities |
4,776,171 | 2,115,731 | ||||||||||
|
|
|
|
|||||||||
Net increase in cash and cash equivalents |
316,151 | 157,836 | ||||||||||
Cash and cash equivalents at January 1 |
2,365,022 | 2,602,560 | ||||||||||
Effect of exchange rate fluctuations on cash held |
78,519 | (156 | ) | |||||||||
|
|
|
|
|||||||||
Cash and cash equivalents at September 30 |
2,760,240 | |||||||||||
|
|
|
|
See accompanying notes to the consolidated interim financial statements.
38
1. | Reporting Entity |
(a) | Description of the Controlling Company |
LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of September 30, 2019, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of September 30, 2019, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.
The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of September 30, 2019, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of September 30, 2019, there are 19,414,164 ADSs outstanding.
39
1. | Reporting Entity, Continued |
(b) | Consolidated Subsidiaries as of September 30, 2019 |
(In millions) | ||||||||||||||||||
Subsidiaries |
Location | Percentage of ownership |
Fiscal year end |
Date of incorporation | Business | Capital stocks | ||||||||||||
LG Display America, Inc. |
San Jose, U.S.A. | 100 | % | December 31 | September 24, 1999 | Sell display products | USD 411 | |||||||||||
LG Display Germany GmbH |
Eschborn, Germany | 100 | % | December 31 | November 5, 1999 | Sell display products | EUR 1 | |||||||||||
LG Display Japan Co., Ltd. |
Tokyo, Japan | 100 | % | December 31 | October 12, 1999 | Sell display products | JPY 95 | |||||||||||
LG Display Taiwan Co., Ltd. |
Taipei, Taiwan | 100 | % | December 31 | April 12, 1999 | Sell display products | NTD 116 | |||||||||||
LG Display Nanjing Co., Ltd. |
Nanjing, China | 100 | % | December 31 | July 15, 2002 | Manufacture display products | CNY 3,020 | |||||||||||
LG Display Shanghai Co., Ltd. |
Shanghai, China | 100 | % | December 31 | January 16, 2003 | Sell display products | CNY 4 | |||||||||||
LG Display Poland Sp. z o.o.(*1) |
Wroclaw, Poland | 100 | % | December 31 | September 6, 2005 | Manufacture display products | PLN 511 | |||||||||||
LG Display Guangzhou Co., Ltd. |
Guangzhou, China | 100 | % | December 31 | June 30, 2006 | Manufacture display products | CNY 1,655 | |||||||||||
LG Display Shenzhen Co., Ltd. |
Shenzhen, China | 100 | % | December 31 | August 28, 2007 | Sell display products | CNY 4 | |||||||||||
LG Display Singapore Pte. Ltd. |
Singapore | 100 | % | December 31 | January 12, 2009 | Sell display products | USD 1 | |||||||||||
L&T Display Technology (Fujian) Limited |
Fujian, China |
51 | % | December 31 | January 5, 2010 | Manufacture and sell LCD module and LCD monitor sets |
CNY 116 | |||||||||||
LG Display Yantai Co., Ltd. |
Yantai, China |
100 | % | December 31 | April 19, 2010 | Manufacture display products | CNY 1,008 | |||||||||||
Nanumnuri Co., Ltd. |
Gumi, South Korea |
100 | % | December 31 | March 21, 2012 | Janitorial services | KRW 800 | |||||||||||
LG Display (China) Co., Ltd. |
Guangzhou, China | 70 | % | December 31 | December 10, 2012 | Manufacture and sell display products |
CNY 8,232 | |||||||||||
Unified Innovative Technology, LLC |
Wilmington, U.S.A. |
100 | % | December 31 | March 12, 2014 | Manage intellectual property | USD 9 | |||||||||||
LG Display Guangzhou Trading Co., Ltd. |
Guangzhou, China | 100 | % | December 31 | April 28, 2015 | Sell display products | CNY 1 | |||||||||||
Global OLED Technology, LLC |
Sterling, U.S.A. | 100 | % | December 31 | December 18, 2009 | Manage OLED intellectual property |
USD 138 | |||||||||||
LG Display Vietnam Haiphong Co., Ltd.(*2) |
Haiphong, Vietnam |
100 | % | December 31 | May 5, 2016 | Manufacture display products | USD 600 | |||||||||||
Suzhou Lehui Display Co., Ltd. |
Suzhou, China | 100 | % | December 31 | July 1, 2016 | Manufacture and sell LCD module and LCD monitor sets |
CNY 637 | |||||||||||
LG DISPLAY FUND I LLC(*3) |
Wilmington, U.S.A. |
100 | % | December 31 | May 1, 2018 | Invest in venture business and acquire technologies |
USD 5 | |||||||||||
LG Display High-Tech (China) Co., Ltd.(*4) |
Guangzhou, China | 75 | % | December 31 | July 11, 2018 | Manufacture and sell display products |
CNY 14,570 | |||||||||||
Money Market Trust |
Seoul, South Korea |
100 | % | December 31 | — | Money market trust | KRW 153,700 |
40
1. | Reporting Entity, Continued |
(*1) | On July 1, 2019, LG Display Poland Sp. Z o.o. commenced the liquidation process. |
(*2) | For the nine-month period ended September 30, 2019, the Controlling Company contributed
|
(*3) | For the nine-month period ended September 30, 2019, the Controlling Company contributed
|
(*4) | For the nine-month period ended September 30, 2019, the Controlling Company contributed
|
11,120 million and W90,281 million are attributable to the
Controlling Company over the distributed dividends from consolidated subsidiaries for the nine-month periods ended September 30, 2019 and 2018, respectively. W
2. | Basis of Presenting Financial Statements |
(a) | Statement of Compliance |
The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034, Interim Financial Reporting. They do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the consolidated financial statements of the Group as of and for the year ended December 31, 2018.
From January 1, 2019, the Group adopted K-IFRS No. 1116, Leases for the first time. Changes to significant accounting policies are described in Note 3.
(b) | Basis of Measurement |
The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:
• | derivative financial instruments at fair value, financial assets at fair value through profit or loss (“FVTPL”), financial asset at fair value through other comprehensive income (“FVOCI”) and financial liabilities at FVTPL, and |
• | net defined benefit liabilities recognized at the present value of defined benefit obligations less the fair value of plan assets. |
(c) | Functional and Presentation Currency |
Each subsidiary’s financial statements within the Group are presented in the subsidiary’s functional currency, which is the currency of the primary economic environment in which each subsidiary operates. The condensed consolidated interim financial statements are presented in Korean won, which is the Controlling Company’s functional currency.
41
2. | Basis of Presenting Financial Statements, Continued |
(d) | Use of Estimates and Judgments |
The preparation of the condensed consolidated interim financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
3. | Summary of Significant Accounting Policies |
The significant accounting policies followed by the Group in the preparation of its condensed consolidated interim financial statements are the same as those followed by the Group in its preparation of the consolidated financial statements as of and for the year ended December 31, 2018, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the changes in accounting policies explained below. The changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2019.
Changes in Accounting Policies
The Group has initially adopted K-IFRS No. 1116, Leases, from January 1, 2019. A number of other new standards are effective from January 1, 2019 but they do not have a material effect on the Group’s condensed consolidated interim financial statements.
K-IFRS No. 1116 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
(i) | Definition of a lease |
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under K-IFRS No. 2104, Determining Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under K-IFRS No. 1116, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to K-IFRS No. 1116, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases for contracts that were previously identified as leases under K-IFRS No. 1017 and K-IFRS No. 2104 as of January 1, 2019. Contracts that were not identified as leases under K-IFRS No. 1017 and K-IFRS No. 2104 were not reassessed. Therefore, the definition of a lease under K-IFRS No. 1116 has been applied only to contracts entered into or changed on or after January 1, 2019.
42
3. | Summary of Significant Accounting Policies, Continued |
(ii) | Accounting as a lessee |
The Group leases land, buildings, vehicles, machinery and equipment and others.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under K-IFRS No. 1116, the Group recognizes right-of-use assets and lease liabilities for most leases on the condensed consolidated interim statement of financial position.
However, as permitted in K-IFRS No. 1116, the Group has elected not to recognize right-of-use assets and lease liabilities for certain short-term leases and leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
The carrying amounts of right-of-use assets recognized in the condensed consolidated interim financial statements are as below and those right-of use assets are presented in property, plant and equipment in the condensed consolidated interim statements of financial position.
(In millions of won)
Land | Buildings | Machinery and equipment |
Vehicles | Others | Total | |||||||||||||||||||
Balance at January 1, 2019 |
75,777 | 1,111 | 10,800 | 392 | 142,040 | |||||||||||||||||||
Balance at September 30, 2019 |
63,431 | 966 | 9,783 | 400 | 130,203 |
The Group presents lease liabilities in financial liabilities in the condensed consolidated interim statement of financial position.
i) | Significant accounting policies |
The Group recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses. The book value of right-of-use asset is adjusted when there is a remeasurement of the lease liability arising from a change in future lease payments.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate that would be applicable when the Group were to borrow the funds to obtain and asset of a similar value to the right-of-use asset over a similar term, and with a similar security in a similar economic environment. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest expense on the lease liability and decreased by lease payment made. The Group remeasures the lease liability when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
43
3. | Summary of Significant Accounting Policies, Continued |
Determination of the lease term for some lease contracts that include renewal options require the Group’s judgment. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.
ii) | Initial application |
At initial application, the Group measures lease liabilities for leases classified as operating leases under K-IFRS No. 1017, at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
The Group used the following practical expedients when applying K-IFRS No. 1116 to leases previously classified as operating leases under K-IFRS No. 1017.
• | Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of remaining lease term at initial application. |
• | Excluded initial direct costs from measuring the right-of-use asset at the date of initial application. |
• | Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. |
(iii) | Accounting as a lessor |
The accounting policies applicable to the Group as a lessor are not different from those under K-IFRS No. 1017. However, when the Group is an intermediate lessor, the sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
The Group sub-leases some of its right-of-use assets. Under K-IFRS No. 1017, the Group previously classified the head lease and sub-lease contracts as operating leases. On initial application to K-IFRS No. 1116, the right-of-use assets recognized from the head leases are presented in property, plant and equipment and the sub-lease contracts are classified as finance leases under K-IFRS No. 1116.
44
3. | Summary of Significant Accounting Policies, Continued |
(iv) | Impacts on condensed consolidated interim financial statements |
i) | Impacts on initial application |
On initial application to K-IFRS No. 1116, the Group recognized additional right-of-use assets and additional lease liabilities. The impact on initial application is summarized below.
(In millions of won) | ||||
January 1, 2019 | ||||
Right-of-use assets presented in property, plant and equipment |
||||
Prepaid expenses |
(61,570 | ) | ||
Lease receivables |
34,649 | |||
Lease liabilities |
115,119 |
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 3.36%.
ii) | Impacts for the period |
As a result of initially applying K-IFRS No. 1116, the Group recognized
130,203 million of right-of-use assets and W100,286 million of lease liabilities as at
September 30, 2019. W
Also in accordance with K-IFRS No. 1116, the Group recognized
depreciation and interest expense, instead of operating lease expense in relation to leases. During the nine-month period ended September 30, 2019, the Group recognized 36,332 million of depreciation and
W3,043 million of interest expense from these leases. W
45
4. | Cash and Cash Equivalents and Deposits in Banks |
Cash and cash equivalents and deposits in banks as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Cash and cash equivalents |
||||||||
Demand deposits |
2,365,022 | |||||||
Deposits in banks |
||||||||
Time deposits |
4,318 | |||||||
Restricted deposits (*) |
77,200 | 74,082 | ||||||
|
|
|
|
|||||
78,400 | ||||||||
|
|
|
|
|||||
Non-current assets |
||||||||
Deposits in banks |
||||||||
Restricted deposits (*) |
11 | |||||||
|
|
|
|
|||||
2,443,433 | ||||||||
|
|
|
|
(*) | Includes funds deposited under agreements on mutually beneficial cooperation to aid LG Group companies’ suppliers, restricted deposits pledged to enforce the Group’s investment plans upon the receipt of grants from Gumi city and Gyeongsangbuk-do, and others. |
46
5. | Receivables and Other Assets |
(a) | Trade accounts and notes receivable as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Due from third parties |
2,305,368 | |||||||
Due from related parties |
631,046 | 523,795 | ||||||
|
|
|
|
|||||
2,829,163 | ||||||||
|
|
|
|
(b) | Other accounts receivable as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Non-trade receivables, net |
159,238 | |||||||
Accrued income |
30,700 | 10,075 | ||||||
|
|
|
|
|||||
169,313 | ||||||||
|
|
|
|
|||||
Non-current assets |
||||||||
Long-term non-trade receivables |
9,666 | 11,448 | ||||||
|
|
|
|
|||||
180,761 | ||||||||
|
|
|
|
Due from related parties included in other accounts receivable as of September 30, 2019 and
December 31, 2018 are 89 million and W39,092 million, respectively. W
47
5. | Receivables and Other Assets, Continued |
(c) | The aging of trade accounts and notes receivable and other accounts receivable as of September 30, 2019 and December 31, 2018 are as follows: |
September 30, 2019 | ||||||||||||||||
Book value | Allowance for impairment | |||||||||||||||
(In millions of won) | Trade accounts and notes receivable |
Other accounts receivable |
Trade accounts and notes receivable |
Other accounts receivable |
||||||||||||
Current |
445,102 | (988 | ) | (2,951 | ) | |||||||||||
1-15 days past due |
4,070 | 1,840 | (1 | ) | (7 | ) | ||||||||||
16-30 days past due |
788 | 5,828 | — | (2 | ) | |||||||||||
31-60 days past due |
113 | 53 | — | — | ||||||||||||
More than 60 days past due |
8,122 | 1,308 | (3 | ) | (25 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
454,131 | (992 | ) | (2,985 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2018 | ||||||||||||||||
Book value | Allowance for impairment | |||||||||||||||
(In millions of won) | Trade accounts and notes receivable |
Other accounts receivable |
Trade accounts and notes receivable |
Other accounts receivable |
||||||||||||
Current |
177,689 | (473 | ) | (816 | ) | |||||||||||
1-15 days past due |
21,558 | 3,148 | (4 | ) | (26 | ) | ||||||||||
16-30 days past due |
454 | 441 | — | (4 | ) | |||||||||||
31-60 days past due |
30 | 96 | — | (1 | ) | |||||||||||
More than 60 days past due |
— | 668 | — | (434 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
182,042 | (477 | ) | (1,281 | ) | ||||||||||||
|
|
|
|
|
|
|
|
The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the nine-month period ended September 30, 2019 and the year ended December 31, 2018 are as follows:
2019 | 2018 | |||||||||||||||
(In millions of won) | Trade accounts and notes receivable |
Other accounts receivable |
Trade accounts and notes receivable |
Other accounts receivable |
||||||||||||
Balance at the beginning of the period |
1,281 | 1,632 | 1,311 | |||||||||||||
(Reversal of) bad debt expense |
515 | 1,704 | (1,155 | ) | (30 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at the reporting date |
2,985 | 477 | 1,281 | |||||||||||||
|
|
|
|
|
|
|
|
48
5. | Receivables and Other Assets, Continued |
(d) | Other assets as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Advanced payments |
13,259 | |||||||
Prepaid expenses |
165,432 | 89,110 | ||||||
Value added tax refundable |
747,691 | 436,190 | ||||||
Right to recover returned goods |
20,428 | 7,489 | ||||||
|
|
|
|
|||||
546,048 | ||||||||
|
|
|
|
|||||
Non-current assets |
||||||||
Long-term prepaid expenses |
381,983 | |||||||
Long-term advanced payments |
4,632 | — | ||||||
|
|
|
|
|||||
381,983 | ||||||||
|
|
|
|
49
6. | Other Financial Assets |
Other financial assets as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Financial asset at fair value through profit or loss |
||||||||
Derivatives(*) |
13,059 | |||||||
Financial assets at fair value through other comprehensive income |
||||||||
Debt instruments |
||||||||
Government bonds |
106 | |||||||
Financial assets carried at amortized cost |
||||||||
Deposits |
17,020 | |||||||
Short-term loans |
24,984 | 16,116 | ||||||
Lease receivables |
5,740 | — | ||||||
|
|
|
|
|||||
33,136 | ||||||||
|
|
|
|
|||||
46,301 | ||||||||
|
|
|
|
|||||
Non-current assets |
||||||||
Financial assets at fair value through profit or loss |
||||||||
Equity instruments |
||||||||
Intellectual Discovery, Ltd. |
4,598 | |||||||
Kyulux, Inc. |
2,460 | 2,460 | ||||||
Fineeva Co., Ltd. |
4 | 286 | ||||||
ARCH Venture Fund VIII, L.P. |
6,724 | 6,337 | ||||||
Sierra Ventures XII, L.P. |
601 | — | ||||||
|
|
|
|
|||||
13,681 | ||||||||
|
|
|
|
|||||
Convertible bonds |
1,327 | |||||||
Derivatives(*) |
55,722 | — | ||||||
|
|
|
|
|||||
15,008 | ||||||||
|
|
|
|
|||||
Financial assets at fair value through other comprehensive income |
||||||||
Debt instruments |
||||||||
Government bonds |
55 | |||||||
Financial assets carried at amortized cost |
||||||||
Deposits |
74,103 | |||||||
Long-term loans |
45,766 | 55,048 | ||||||
Lease receivables |
23,935 | — | ||||||
|
|
|
|
|||||
129,151 | ||||||||
|
|
|
|
|||||
144,214 | ||||||||
|
|
|
|
(*) | Represents valuation gain from currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. The contracts are not designated as hedging instruments. |
Other financial assets issued by related parties as of
December 31, 2018 is 2,000 million. W
50
7. | Inventories |
Inventories as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Finished goods |
1,084,297 | |||||||
Work-in-process |
985,934 | 856,388 | ||||||
Raw materials |
468,257 | 554,720 | ||||||
Supplies |
185,239 | 195,798 | ||||||
|
|
|
|
|||||
2,691,203 | ||||||||
|
|
|
|
For the nine-month periods ended September 30, 2019 and 2018, the amount of inventories recognized as cost of sales including inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:
(In millions of won) | 2019 | 2018 | ||||||
Inventories recognized as cost of sales |
15,491,214 | |||||||
Including: inventory write-downs |
493,486 | 274,874 | ||||||
Including: reversal and usage of inventory write-downs |
(313,180 | ) | (206,127 | ) |
51
8. | Investments in Equity Accounted Investees |
Associates as of September 30, 2019 are as follows:
(In millions of won) Associates |
Location |
Fiscal year end |
Date of incorporation |
Business |
September 30, 2019 | December 31, 2018 | ||||||||||||||
Percentage of ownership |
Carrying amount |
Percentage of ownership |
Carrying amount |
|||||||||||||||||
Paju Electric Glass Co., Ltd. |
Paju, South Korea |
December 31 | January 2005 |
Manufacture glass for display | 40% | 40% | ||||||||||||||
INVENIA Co., Ltd.(*1) |
Seongnam, South Korea |
December 31 | January 2001 |
Develop and manufacture equipment for display | — | — | 13% | 4,166 | ||||||||||||
WooRee E&L Co., Ltd. |
Ansan, South Korea |
December 31 | June 2008 |
Manufacture LED back light unit packages | 14% | 5,412 | 14% | 4,746 | ||||||||||||
YAS Co., Ltd. |
Paju, South Korea |
December 31 | April 2002 |
Develop and manufacture deposition equipment for OLEDs | 15% | 18,541 | 15% | 16,308 | ||||||||||||
AVATEC Co., Ltd.(*2) |
Daegu, South Korea |
December 31 | August 2000 |
Process and sell glass for display | 14% | 19,790 | 17% | 23,441 | ||||||||||||
Arctic Sentinel, Inc. |
Los Angeles, U.S.A. | March 31 | June 2008 |
Develop and manufacture tablet for kids |
10% | — | 10% | — | ||||||||||||
CYNORA GmbH(*3) |
Bruchsal, Germany |
December 31 | March 2003 |
Develop organic emitting materials for displays and lighting devices | 12% | 8,668 | 14% | 8,668 |
52
8. | Investments in Equity Accounted Investees, Continued |
(In millions of won) Associates |
Location |
Fiscal year end |
Date of incorporation |
Business |
September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Percentage of ownership |
Carrying Amount |
Percentage of ownership |
Carrying amount |
|||||||||||||||||||||||||
Material Science Co., Ltd. |
Seoul, South Korea |
December 31 | |
January 2014 |
|
Develop, manufacture, and sell materials for display | 10% | 10% | ||||||||||||||||||||
Nanosys Inc. |
Milpitas, U.S.A. |
December 31 | |
July 2001 |
|
Develop, manufacture, and sell materials for display | 4% | 5,512 | 4% | 5,491 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||
|
|
|
|
(*1) | In September 2019, the Controlling Company disposed of the entire investments, 3,000,000 shares of common
stock, in INVENIA Co., Ltd and recognized |
(*2) | In August 2019, the Controlling Company disposed of 650,000 shares of common stock in AVATEC Co., Ltd. As of
September 30, 2019, the Controlling Company ownership percentage in AVATEC Co., LTD. is 14% and the Controlling Company recognized |
(*3) | For the nine-month period ended September 30, 2019, the Controlling Company’s ownership percentage in CYNORA GmbH decreased from 14% to 12% as the Controlling Company did not participate in the capital increase of CYNORA GmbH. |
Although the Controlling Company’s respective share interests in WooRee E&L Co., Ltd., YAS Co., Ltd., AVATEC Co., Ltd., Arctic Sentinel, Inc., CYNORA GmbH, Material Science and Nanosys Inc. are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee. Accordingly, the investments in these investees have been accounted for using the equity method.
Dividends income recognized from equity method investees
for the nine-month periods ended September 30, 2019 and 2018 amounted to 7,502 million and W5,272 million, respectively. W
53
9. | Property, Plant and Equipment |
For the nine-month periods ended September 30, 2019 and 2018, the Group purchased property, plant and equipment of
4,865,409 million and W6,323,537 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were
W212,218 million and 3.53%, and W96,530 million and 2.72% for the nine-month periods ended September 30, 2019 and 2018, respectively. In addition, for the nine-month
period ended September 30, 2019, the Group entered into various new lease agreements for the usage of buildings, vehicles and others. In relation to these leases, the Group recognized W66,581 million of right-of-use assets and lease liabilities, in aggregate, during the nine-month period ended September 30, 2019. Also, for the nine-month periods ended September 30,
2019 and 2018, the Group disposed of property, plant and equipment with carrying amounts of W572,664 million and W103,573 million, respectively, and recognized
W13,571 million and W31,726 million, respectively, as gain and loss on disposal of property, plant and equipment for the nine-month period ended September 30, 2019
(gain and loss for the nine-month period ended September 30, 2018: W5,125 million and W13,362 million, respectively). W
10. | Intangible Assets |
The Group capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of
products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of September 30, 2019 and
December 31, 2018 are 367,847 million and W366,910 million, respectively. The Group recognized an impairment loss amounting to
W116,506 million in connection with projects dropped after the impairment review on its development projects. W
54
11. | Financial Liabilities |
(a) | Financial liabilities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current |
||||||||
Short-term borrowings |
— | |||||||
Current portion of long-term borrowings and bonds |
1,158,003 | 1,553,907 | ||||||
Lease liabilities |
44,592 | — | ||||||
|
|
|
|
|||||
1,553,907 | ||||||||
|
|
|
|
|||||
Non-current |
||||||||
Won denominated borrowings |
2,700,608 | |||||||
Foreign currency denominated borrowings |
5,865,905 | 2,531,663 | ||||||
Bonds |
2,885,933 | 1,772,599 | ||||||
Derivatives(*) |
6,157 | 25,758 | ||||||
Lease liabilities |
55,694 | — | ||||||
|
|
|
|
|||||
7,030,628 | ||||||||
|
|
|
|
(*) | Represents currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. |
(b) | Foreign currency denominated short-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, USD and CNY) Lender |
Annual interest rate as of September 30, 2019 (%)(*) |
September 30, 2019 |
December 31, 2018 |
|||||||
Standard Chartered Bank Korea Limited |
12ML + 0.78~0.88 | — | ||||||||
Standard Chartered Bank Vietnam and others |
3ML + 0.80~0.90 | 63,928 | — | |||||||
Standard Chartered Bank (China) Limited and others |
PBOC x 1.05 PBOC - 0.05 |
292,668 | — | |||||||
|
|
|
|
|||||||
Foreign currency equivalent |
USD | 353 | — | |||||||
CNY | 1,737 | — | ||||||||
|
|
|
|
|||||||
— | ||||||||||
|
|
|
|
(*) | ML represents Month LIBOR (London Inter-Bank Offered Rates) and PBOC represents People’s Bank of China. |
55
11. | Financial Liabilities, Continued |
(c) | Won denominated long-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) Lender |
Annual interest rate as of September 30, 2019 (%) |
September 30, 2019 |
December 31, 2018 |
|||||||
Woori Bank |
2.75 | 1,259 | ||||||||
Korea Development Bank and others |
CD rate (91 days) + 1.00, 2.21~3.25 |
3,230,000 | 2,850,000 | |||||||
Less current portion of long-term borrowings |
(428,775 | ) | (150,651 | ) | ||||||
|
|
|
|
|||||||
2,700,608 | ||||||||||
|
|
|
|
(d) | Foreign currency denominated long-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, USD and CNY) Lender |
Annual interest rate as of September 30, 2019 (%) |
September 30, 2019 |
December 31, 2018 |
|||||||
The Export-Import Bank of Korea and others |
3ML+0.75~1.70 6ML+1.25~1.35 |
955,975 | ||||||||
China Construction Bank and others |
USD: 3ML+0.80~1.43 CNY: PBOC x (0.95~1.05) |
4,239,404 | 2,419,286 | |||||||
|
|
|
|
|||||||
Foreign currency equivalent |
USD | 2,639 | USD | 2,262 | ||||||
CNY | 17,000 | CNY | 5,198 | |||||||
Less current portion of long-term borrowings |
(169,443 | ) | (843,598 | ) | ||||||
|
|
|
|
|||||||
2,531,663 | ||||||||||
|
|
|
|
56
11. | Financial Liabilities, Continued |
(e) | Details of bonds issued and outstanding as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, USD) | Maturity | Annual interest rate as of September 30, 2019 (%) |
September 30, 2019 |
December 31, 2018 |
||||||||||||
Won denominated bonds (*1) |
||||||||||||||||
Publicly issued bonds |
|
Oct 2019 ~ Feb 2024 |
|
1.80~2.95 | 1,900,000 | |||||||||||
Privately issued bonds |
|
May 2025 ~ May 2033 |
|
3.25~4.25 | 110,000 | 110,000 | ||||||||||
Less discount on bonds |
(3,870 | ) | (3,949 | ) | ||||||||||||
Less current portion |
(559,785 | ) | (559,658 | ) | ||||||||||||
|
|
|
|
|||||||||||||
1,446,393 | ||||||||||||||||
Foreign currency denominated bonds (*2) |
||||||||||||||||
Publicly issued bond |
Nov 2021 | 3.88 | 335,430 | |||||||||||||
Privately issued bonds |
Apr 2023 | 3ML+1.47 | 120,130 | — | ||||||||||||
Foreign currency equivalent |
USD | 400 | USD | 300 | ||||||||||||
Less discount on bonds |
(8,027 | ) | (9,224 | ) | ||||||||||||
|
|
|
|
|||||||||||||
326,206 | ||||||||||||||||
|
|
|
|
|||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Foreign currency convertible bonds |
Aug 2024 | 1.50 | — | |||||||||||||
Foreign currency equivalent |
USD | 697 | — | |||||||||||||
|
|
|
|
|||||||||||||
1,772,599 | ||||||||||||||||
|
|
|
|
(*1) | Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly. |
(*2) | Principal of the foreign currency denominated bonds is to be repaid at maturity and interests are paid quarterly or semi-annually. |
57
11. | Financial Liabilities, Continued |
(f) | Details of the convertible bonds issued and outstanding as of September 30, 2019 are as follows: |
(In won, USD) |
Description | |
Type |
Foreign currency unsecured denominated convertible bonds | |
Issuance amount |
USD 687,800,000 | |
Interest rate (%) |
1.50 | |
Issuance date |
August 22, 2019 | |
Maturity date |
August 22, 2024 | |
Interest payment |
Payable semi-annually in arrear until maturity date in equal installments commencing on issuance | |
Principal redemption |
1. Redemption at maturity : Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed or converted, together with accrued but unpaid interest | |
2. Advanced redemption : The Controlling Company has a right to redeem in advance (call option) and the bondholders have a right to require the Controlling Company to redeem in advance (put option) | ||
Conversion price |
||
Conversion period |
From August 23, 2020 to August 12, 2024 | |
Redemption at the option of the issuer (Call option) |
- On or at any time after 3 years from the issuance, if the closing price of the shares for any 20 trading days out of the 30 consecutive trading days is at least 130% of the applicable conversion price - The aggregate principal amount of the convertible bonds outstanding is less than 10% of the aggregate principal amount originally issued (clean up call), or - In the event of certain changes in laws and other directives resulting in additional taxes for the holders | |
Redemption at the option of the bondholders (Put option) |
On the day of 3 years from the issuance |
The Controlling Company designated the convertible bonds as financial liabilities at fair value through profit of loss and recognized the change in fair value in profit or loss. The Controlling Company measures the convertible bond at fair value using the market price of convertible bonds disclosed on Bloomberg. The number of convertible shares as of September 30, 2019 is as follows:
(In won and No. of shares) | September 30, 2019 | |||
Aggregate outstanding amount of the convertible bonds |
||||
Conversion price |
||||
Number of convertible shares |
40,988,998 |
58
12. | Employee Benefits |
The Controlling Company and certain subsidiaries’ defined benefit plans provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Group.
(a) | Net defined benefit liabilities recognized as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Present value of partially funded defined benefit obligations |
1,595,423 | |||||||
Fair value of plan assets |
(1,532,157 | ) | (1,550,063 | ) | ||||
|
|
|
|
|||||
45,360 | ||||||||
|
|
|
|
(b) | Expenses recognized in profit or loss for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Current service cost |
51,314 | 146,903 | 154,502 | |||||||||||||
Net interest cost |
303 | 242 | 911 | 726 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
51,556 | 147,814 | 155,228 | ||||||||||||||
|
|
|
|
|
|
|
|
(c) | Plan assets as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Guaranteed deposits in banks |
1,550,063 |
As of September 30, 2019, the Group maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.
(d) | Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Remeasurements of net defined benefit liabilities |
(4,737 | ) | (6,203 | ) | (16,129 | ) | ||||||||||
Tax effect |
332 | 1,267 | (3,219 | ) | 4,893 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Remeasurements of net defined benefit liabilities, net of income tax |
(3,470 | ) | (9,422 | ) | (11,236 | ) | ||||||||||
|
|
|
|
|
|
|
|
59
13. | Provisions and Other Liabilities |
(a) | Changes in provisions for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | Litigations and claims |
Warranties (*) | Others | Total | ||||||||||||
Balance at January 1, 2019 |
122,088 | 8,930 | 131,018 | |||||||||||||
Additions |
3,073 | 283,778 | 16,869 | 303,720 | ||||||||||||
Usage |
(3,073 | ) | (211,049 | ) | — | (214,122 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2019 |
194,817 | 25,799 | 220,616 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Current |
137,263 | 25,799 | 163,062 | |||||||||||||
Non-current |
57,554 | — | 57,554 |
(*) | The provision for warranties on defective products is normally applicable for 18~36 months from the date of purchase. The provision is calculated by using historical and anticipated rates of warranty claims, and costs per claim to satisfy the Group’s warranty obligation. |
(b) | Other liabilities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current liabilities |
||||||||
Withholdings |
30,970 | |||||||
Unearned revenues |
9,361 | 43,841 | ||||||
Security deposits received |
7,620 | 165 | ||||||
|
|
|
|
|||||
74,976 | ||||||||
|
|
|
|
|||||
Non-current liabilities |
||||||||
Long-term accrued expenses |
80,817 | |||||||
Long-term other accounts payable |
2,229 | 3,103 | ||||||
Long-term unearned revenues |
1,331 | 2,116 | ||||||
Security deposits received |
3,380 | 10,790 | ||||||
|
|
|
|
|||||
96,826 | ||||||||
|
|
|
|
60
14. | Contingencies and Commitments |
(a) | Legal Proceedings |
Anti-trust Litigations
Some individual claimants filed “follow-on” damages claims against the Group and other TFT-LCD manufacturers alleging violations of EU competition law. While the Group continues its vigorous defense of the various pending proceedings described above, management’s assessment of the facts and circumstances could change based upon new information, intervening events and the final outcome of the cases. Consequently, the actual results could be different from management’s current estimates.
Solas OLED Ltd. Litigations
In April 2019, Solas OLED Ltd. filed patent infringement actions against the Controlling Company and television manufacturers in the United States District Court for the Western District of Texas as well as the Controlling Company and its subsidiary, LG Display Germany GmbH, and television manufactures in the Mannheim District Court in Germany. The Controlling Company has not recognized any provision as of September 30, 2019. It is not possible to reasonably estimate an amount of potential loss, if any, because the plaintiffs have not provided any information regarding damages.
Others
The Group is involved in various disputes in addition to pending proceedings described above. The Group cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the disputes.
(b) | Commitments |
Factoring and securitization of accounts receivable
The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities
of up to an aggregate of USD 1,560 million (1,874,028 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of September 30, 2019, there are no
short-term borrowings that are outstanding but past due in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse. W
61
14. | Contingencies and Commitments, Continued |
The Controlling Company and overseas subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables that could be sold under the agreement and the amount of sold but not yet due accounts receivables by contract are as follows:
Credit limit |
|
Not yet due |
|
|||||||||||||||
(In millions of USD and KRW) Classification |
Financial institutions |
Contractual amount |
KRW equivalent |
Contractual amount |
KRW equivalent |
|||||||||||||
Controlling Company |
Shinhan Bank | KRW | 90,000 | 90,000 | — | — | ||||||||||||
USD | 25 | 30,033 | — | — | ||||||||||||||
Sumitomo Mitsui Banking Corporation | USD | 20 | 24,026 | — | — | |||||||||||||
Bank of Tokyo-Mitsubishi UFJ | KRW | 130,000 | 130,000 | KRW | 21,894 | 21,894 | ||||||||||||
USD | 70 | 84,091 | — | — | ||||||||||||||
BNP Paribas | USD | 125 | 150,163 | USD | 22 | 26,431 | ||||||||||||
ING Bank | USD | 150 | 180,195 | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
USD | 390 | 688,508 | USD | 22 | ||||||||||||||
|
|
|||||||||||||||||
KRW | 220,000 | KRW | 21,894 | 48,325 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Subsidiaries |
||||||||||||||||||
LG Display Singapore Pte. Ltd. |
Standard Chartered Bank | USD | 300 | 360,390 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
LG Display Taiwan Co., Ltd. |
BNP Paribas | USD | 52 | 62,468 | — | — | ||||||||||||
Australia and New Zealand Banking Group Ltd. | USD | 70 | 84,091 | — | — | |||||||||||||
Taishin International Bank | USD | 280 | 336,364 | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
LG Display Germany GmbH |
Citibank | USD | 80 | 96,104 | — | — | ||||||||||||
BNP Paribas | USD | 75 | 90,098 | — | — | |||||||||||||
Commerzbank AG and others | Not Applicable | Not Applicable | USD | 18 | 22,222 | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
LG Display America, Inc. |
Hong Kong & Shanghai Banking Corp. | USD | 400 | 480,520 | USD | 360 | 432,468 | |||||||||||
Standard Chartered Bank | USD | 600 | 720,780 | — | — | |||||||||||||
Sumitomo Mitsui Banking Corporation | USD | 200 | 240,260 | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
USD | 2,057 | 2,471,075 | USD | 378 | 454,690 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
USD | 2,447 | 3,159,583 | USD | 400 | ||||||||||||||
KRW | 220,000 | KRW | 21,894 | 503,015 | ||||||||||||||
|
|
|
|
|
|
|
|
In connection with all of the contracts in the above table, the Controlling Company has sold its accounts receivable without recourse.
62
14. | Contingencies and Commitments, Continued |
Letters of credit
As of September 30, 2019, the Controlling Company has agreements in relation to opening of letters of credit up to USD 50 million
(60,065 million) with Sumitomo Mitsui Banking Corporation. W
Payment guarantees
The Controlling Company obtained payment guarantees amounting to USD 1,275 million (1,531,658 million)
from KEB Hana Bank and others for advances received related to the long-term supply agreements. The Controlling Company also obtained payment guarantees amounting to USD 306 million (W367,373 million)
from Korea Development Bank for foreign currency denominated bonds. W
LG Display (China) Co., Ltd. and other
subsidiaries are provided with payment guarantees from the China Construction Bank Corporation and other various banks amounting to CNY 1,298 million (218,655 million), JPY 900 million
(W10,021 million), EUR 2.5 million (W3,287 million), VND 42,914 million (W2,223 million) and USD 0.5 million
(W601 million), respectively, for their local tax payments and utility payments. W
License agreements
As of September 30, 2019, in relation to its LCD business, the Group has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.
Long-term supply agreement
As of September 30, 2019, in connection with long-term supply agreements with customers, the
Controlling Company recognized USD 1,075 million (1,291,398 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as
well as those arising from the supply of products thereafter. The Controlling Company received payment guarantees amounting to USD 1,275 million (W1,531,658 million) from KEB Hana Bank and other various banks
relating to advances received (see note 14(b) payment guarantees). W
63
15. | Capital and Reserves |
(a) | Share capital |
The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value 5,000), and as
of September 30, 2019 and December 31, 2018, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2018 to September 30, 2019. W
(b) | Reserves |
Reserves consist mainly of the following:
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Other comprehensive income (loss) from associates
The other comprehensive income (loss) from associates comprises the amount related to change in equity of equity accounted investees.
Reserves as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Foreign currency translation differences for foreign operations |
(272,474 | ) | ||||||
Other comprehensive loss from associates |
(21,431 | ) | (28,494 | ) | ||||
|
|
|
|
|||||
(300,968 | ) | |||||||
|
|
|
|
64
16. | Revenue |
Details of revenue for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Sales of goods |
6,091,633 | 17,026,655 | 17,357,832 | |||||||||||||
Royalties |
3,012 | 4,016 | 9,661 | 13,591 | ||||||||||||
Others |
5,378 | 6,714 | 17,556 | 17,352 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
6,102,363 | 17,053,872 | 17,388,775 | ||||||||||||||
|
|
|
|
|
|
|
|
17. | Geographic and Other Information |
The following is a summary of sales by region based on the location of the customers for the three-month and nine-month periods ended September 30, 2019 and 2018.
(a) | Revenue by geography |
(In millions of won) | For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
||||||||||||||
Region |
2019 | 2018 | 2019 | 2018 | ||||||||||||
Domestic |
330,653 | 1,005,263 | 1,202,043 | |||||||||||||
Foreign |
||||||||||||||||
China |
3,848,616 | 3,725,909 | 10,971,875 | 10,753,323 | ||||||||||||
Asia (excluding China) |
609,797 | 789,131 | 1,847,276 | 1,768,846 | ||||||||||||
United States |
502,786 | 664,993 | 1,476,344 | 1,858,873 | ||||||||||||
Europe (excluding Poland) |
394,782 | 401,978 | 1,106,974 | 1,095,354 | ||||||||||||
Poland |
190,283 | 189,699 | 646,140 | 710,336 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Sub total |
5,771,710 | 16,048,609 | 16,186,732 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
6,102,363 | 17,053,872 | 17,388,775 | |||||||||||||
|
|
|
|
|
|
|
|
Sales to Company A and Company B amount to 5,695,420 million and
W3,444,284 million, respectively, for the nine-month period ended September 30, 2019 (the nine-month period ended September 30, 2018: W4,775,823 million and
W3,866,931 million). The Group’s top ten end-brand customers together accounted for 79% of revenue for the nine-month period ended September 30, 2019 (the nine-month
period ended September 30, 2018: 76%). W
65
17. | Geographic and Other Information, Continued |
(b) | Non-current assets by geography |
September 30, 2019 | December 31, 2018 | |||||||||||||||
(In millions of won) Region |
Property, plant and equipment |
Intangible assets |
Property, plant and equipment |
Intangible assets |
||||||||||||
Domestic |
792,511 | 14,984,688 | 816,808 | |||||||||||||
Foreign |
||||||||||||||||
China |
7,068,530 | 30,451 | 5,049,216 | 12,332 | ||||||||||||
Others |
2,404,355 | 148,492 | 1,566,226 | 158,502 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Sub total |
178,943 | 6,615,442 | 170,834 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
971,454 | 21,600,130 | 987,642 | |||||||||||||
|
|
|
|
|
|
|
|
(c) | Revenue by product and services |
(In millions of won) | For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
||||||||||||||
Product |
2019 | 2018 | 2019 | 2018 | ||||||||||||
Televisions |
2,470,289 | 6,183,831 | 7,215,558 | |||||||||||||
Desktop monitors |
1,052,998 | 1,132,831 | 3,006,075 | 3,051,733 | ||||||||||||
Tablet products |
541,897 | 461,422 | 1,733,161 | 1,349,134 | ||||||||||||
Notebook computers |
707,259 | 733,088 | 2,020,487 | 1,952,219 | ||||||||||||
Mobile and others |
1,630,780 | 1,304,733 | 4,110,318 | 3,820,131 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
6,102,363 | 17,053,872 | 17,388,775 | ||||||||||||||
|
|
|
|
|
|
|
|
66
18. | The Nature of Expenses and Others |
The classification of expenses by nature for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Changes in inventories |
(157,096 | ) | (35,991 | ) | (237,320 | ) | ||||||||||
Purchases of raw materials, merchandise and others |
3,367,883 | 3,172,444 | 9,297,391 | 8,982,723 | ||||||||||||
Depreciation and amortization |
973,612 | 880,427 | 2,686,784 | 2,699,538 | ||||||||||||
Outsourcing |
199,230 | 194,441 | 632,772 | 576,214 | ||||||||||||
Labor |
894,698 | 825,119 | 2,457,134 | 2,517,311 | ||||||||||||
Supplies and others |
175,535 | 238,035 | 623,799 | 731,288 | ||||||||||||
Utility |
246,219 | 240,126 | 679,073 | 672,443 | ||||||||||||
Fees and commissions |
175,613 | 181,962 | 532,586 | 551,289 | ||||||||||||
Shipping |
48,304 | 60,771 | 155,008 | 174,074 | ||||||||||||
Advertising |
49,915 | 33,927 | 84,401 | 72,455 | ||||||||||||
Warranty |
85,421 | 62,614 | 283,778 | 154,676 | ||||||||||||
Travel |
24,611 | 26,626 | 74,319 | 78,796 | ||||||||||||
Taxes and dues |
26,265 | 27,713 | 81,277 | 94,342 | ||||||||||||
Others |
304,106 | 177,692 | 634,211 | 557,134 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
5,964,801 | 18,186,542 | 17,624,963 | ||||||||||||||
|
|
|
|
|
|
|
|
Total expenses consist of cost of sales, selling, administrative, research and development expenses and other non-operating expenses, excluding foreign exchange differences.
67
19. | Selling and Administrative Expenses |
Details of selling and administrative expenses for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Salaries(*) |
87,314 | 337,735 | 267,906 | |||||||||||||
Expenses related to defined benefit plans |
8,681 | 7,543 | 25,337 | 22,605 | ||||||||||||
Other employee benefits |
17,632 | 22,892 | 60,464 | 69,612 | ||||||||||||
Shipping |
39,952 | 50,189 | 129,540 | 144,855 | ||||||||||||
Fees and commissions |
54,157 | 62,223 | 164,970 | 162,058 | ||||||||||||
Depreciation |
60,520 | 45,966 | 169,386 | 126,790 | ||||||||||||
Taxes and dues |
10,576 | 14,041 | 35,513 | 51,936 | ||||||||||||
Advertising |
49,915 | 33,927 | 84,401 | 72,455 | ||||||||||||
Warranty |
85,421 | 62,614 | 283,778 | 154,676 | ||||||||||||
Rent |
812 | 6,653 | 2,200 | 19,843 | ||||||||||||
Insurance |
2,933 | 2,833 | 8,420 | 8,710 | ||||||||||||
Travel |
6,087 | 6,248 | 18,013 | 17,971 | ||||||||||||
Training |
3,613 | 3,164 | 10,363 | 9,717 | ||||||||||||
Others |
15,211 | 14,861 | 48,249 | 46,558 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
420,468 | 1,378,369 | 1,175,692 | ||||||||||||||
|
|
|
|
|
|
|
|
(*) | Expenses recognized in relation to employee termination benefits for the nine-month period ended
September 30, 2019 amount to |
20. | Personnel Expenses |
Details of personnel expenses for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Salaries and wages |
695,482 | 2,046,813 | 2,119,641 | |||||||||||||
Other employee benefits |
121,985 | 124,623 | 364,307 | 383,781 | ||||||||||||
Contributions to National Pension plan |
18,997 | 19,336 | 55,150 | 56,816 | ||||||||||||
Expenses related to defined benefit plan and defined contribution plan |
49,316 | 51,556 | 147,832 | 155,228 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
890,997 | 2,614,102 | 2,715,466 | ||||||||||||||
|
|
|
|
|
|
|
|
68
21. | Other Non-operating Income and Other Non-operating Expenses |
(a) | Details of other non-operating income for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Foreign currency gain |
214,298 | 928,925 | 804,181 | |||||||||||||
Gain on disposal of property, plant and equipment |
4,946 | 794 | 13,571 | 5,125 | ||||||||||||
Gain on disposal of intangible assets |
— | — | 552 | 239 | ||||||||||||
Reversal of impairment loss on intangible assets |
279 | — | 480 | 26 | ||||||||||||
Rental income |
695 | 1,995 | 2,085 | 2,581 | ||||||||||||
Gain on disposal of non-current assets held for sale |
— | — | 8,353 | — | ||||||||||||
Others |
16,048 | 1,060 | 21,583 | 4,046 | ||||||||||||
218,147 | 975,549 | 816,198 | ||||||||||||||
|
|
|
|
|
|
|
|
(b) | Details of other non-operating expenses for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Foreign currency loss |
246,908 | 932,227 | 867,377 | |||||||||||||
Other bad debt expense |
643 | — | 1,041 | — | ||||||||||||
Loss on disposal of property, plant and equipment |
9,727 | 1,017 | 31,726 | 13,362 | ||||||||||||
Loss on disposal of intangible assets |
— | — | 139 | — | ||||||||||||
Impairment loss on property, plant and equipment |
26,606 | — | 36,371 | 25,715 | ||||||||||||
Impairment loss on intangible assets |
116,506 | 61 | 116,506 | 353 | ||||||||||||
Donations |
180 | 202 | 605 | 3,275 | ||||||||||||
Others |
1,358 | 1,229 | 8,782 | 7,123 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
249,417 | 1,127,397 | 917,205 | ||||||||||||||
|
|
|
|
|
|
|
|
69
22. | Finance Income and Finance Costs |
Finance income and costs recognized in profit and loss for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Finance income |
||||||||||||||||
Interest income |
16,736 | 36,016 | 56,303 | |||||||||||||
Foreign currency gain |
39,548 | 28,936 | 86,834 | 143,138 | ||||||||||||
Gain on disposal of investments in equity accounted investees |
4,531 | — | 4,531 | — | ||||||||||||
Gain on transaction of derivatives |
9,685 | 249 | 22,852 | 363 | ||||||||||||
Gain on valuation of derivatives |
76,090 | 2,500 | 116,990 | 2,500 | ||||||||||||
Gain on valuation of financial asset at fair value through profit or loss |
— | — | 6 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
48,421 | 267,229 | 202,304 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Finance costs |
||||||||||||||||
Interest expense |
18,222 | 108,980 | 62,510 | |||||||||||||
Foreign currency loss |
97,782 | 18,664 | 206,095 | 162,846 | ||||||||||||
Impairment loss on investments in equity accounted investees |
— | 183 | — | 183 | ||||||||||||
Loss on sale of trade accounts and notes receivable |
3,713 | 3,709 | 15,937 | 5,445 | ||||||||||||
Loss on transaction of derivatives |
— | 5 | — | 48 | ||||||||||||
Loss on valuation of derivatives |
— | 7,239 | 3,564 | 7,740 | ||||||||||||
Loss on valuation of financial assets at fair value through profit or loss |
— | — | 3,960 | — | ||||||||||||
Loss on valuation of financial liabilities at fair value through profit or loss |
9,059 | — | 9,059 | — | ||||||||||||
Other |
9,424 | 1,155 | 11,410 | 2,732 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
49,177 | 359,005 | 241,504 | ||||||||||||||
|
|
|
|
|
|
|
|
23. | Income Taxes |
(a) | Details of income tax expense (benefit) for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Current tax expense |
77,972 | 145,445 | 170,145 | |||||||||||||
Deferred tax expense (benefit) |
(192,222 | ) | 14,783 | (261,686 | ) | (163,660 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Income tax expense (benefit) |
92,755 | (116,241 | ) | 6,485 | ||||||||||||
|
|
|
|
|
|
|
|
70
23. | Income Taxes, Continued |
(b) | Tax Assets and Liabilities |
The carrying amount of tax assets are reviewed at each reporting date and deferred tax assets are reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Group’s estimated future taxable income. The Group’s tax assets and liabilities may differ from actual refundable or payable amount.
Deferred tax assets and liabilities as of September 30, 2019 and December 31, 2018 are attributable to the following:
Assets | Liabilities | Total | ||||||||||||||||||||||
(In millions of won) | September 30, 2019 |
December, 31, 2018 |
September 30, 2019 |
December, 31, 2018 |
September 30, 2019 |
December, 31, 2018 |
||||||||||||||||||
Other accounts receivable, net |
— | (5,968 | ) | (1,013 | ) | (5,968 | ) | (1,013 | ) | |||||||||||||||
Inventories, net |
77,889 | 60,606 | — | — | 77,889 | 60,606 | ||||||||||||||||||
Defined benefit liabilities, net |
27,234 | — | — | — | 27,234 | — | ||||||||||||||||||
Investments in subsidiaries and associates |
— | 13,404 | (8,555 | ) | — | (8,555 | ) | 13,404 | ||||||||||||||||
Accrued expenses |
181,565 | 126,072 | — | — | 181,565 | 126,072 | ||||||||||||||||||
Property, plant and equipment |
414,517 | 445,721 | (6,681 | ) | (1,495 | ) | 407,836 | 444,226 | ||||||||||||||||
Intangible assets |
2,664 | 3,468 | (13,714 | ) | (14,588 | ) | (11,050 | ) | (11,120 | ) | ||||||||||||||
Provisions |
48,767 | 32,468 | (5,826 | ) | — | 42,941 | 32,468 | |||||||||||||||||
Gain or loss on foreign currency translation, net |
12 | 13 | — | — | 12 | 13 | ||||||||||||||||||
Other temporary differences |
115,536 | 20,850 | (849 | ) | (7,665 | ) | 114,687 | 13,185 | ||||||||||||||||
Tax loss carryforwards |
351,465 | 134,845 | — | — | 351,465 | 134,845 | ||||||||||||||||||
Tax credit carryforwards |
201,490 | 308,393 | — | — | 201,490 | 308,393 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Deferred tax assets (liabilities) |
1,145,840 | (41,593 | ) | (24,761 | ) | 1,379,546 | 1,121,079 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
71
24. | Earnings (Loss) Per Share |
(a) | Basic earnings (loss) per share for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In won and number of shares) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Profit (loss) attributable to owners of the Controlling Company |
3,420,651,372 | (1,028,663,506,656 | ) | (353,418,396,893 | ) | |||||||||||
Weighted-average number of common stocks outstanding |
357,815,700 | 357,815,700 | 357,815,700 | 357,815,700 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings (loss) per share |
10 | (2,875 | ) | (988 | ) | |||||||||||
|
|
|
|
|
|
|
|
For the three-month and nine-month periods ended September 30, 2019 and 2018, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.
(b) | The Controlling Company issued potential common stocks as a result of issuance of the convertible bonds on August 24, 2019. Diluted earnings (loss) per share are not calculated due to loss for the three-month and nine-month periods ended September 30, 2019. |
72
25. | Financial Risk Management |
The Group is exposed to credit risk, liquidity risk and market risks. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below an acceptable level.
(a) | Market risk |
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
(i) | Currency risk |
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Controlling Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, CNY, JPY, etc.
Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily KRW, USD and CNY.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Meanwhile, the Group entered into currency interest rate swap contracts to hedge currency risk with respect to foreign currency denominated borrowings and bonds.
73
25. | Financial Risk Management, Continued |
i) Exposure to currency risk
The Group’s exposure to foreign currency risk based on notional amounts as of September 30, 2019 and December 31, 2018 is as follows:
September 30, 2019 | ||||||||||||||||||||||||||||
(In millions) | USD | JPY | CNY | TWD | EUR | PLN | VND | |||||||||||||||||||||
Cash and cash equivalents |
1,245 | 742 | 6,144 | 24 | 5 | 26 | 54,130 | |||||||||||||||||||||
Trade accounts and notes receivable |
2,809 | 1 | 518 | — | 4 | — | — | |||||||||||||||||||||
Non-trade receivables |
261 | 957 | 182 | 3 | 5 | — | 8,607 | |||||||||||||||||||||
Other assets denominated in foreign currencies |
178 | 444 | 6,038 | 587 | 22 | 529 | 3,827 | |||||||||||||||||||||
Trade accounts and notes payable |
(279 | ) | (9,459 | ) | (2,413 | ) | — | — | — | (279,089 | ) | |||||||||||||||||
Other accounts payable |
(650 | ) | (10,657 | ) | (2,514 | ) | (3 | ) | (3 | ) | — | (918,226 | ) | |||||||||||||||
Financial liabilities |
(4,083 | ) | — | (18,737 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Aggregate amounts in the consolidated statement of financial position |
(519 | ) | (17,972 | ) | (10,782 | ) | 611 | 33 | 555 | (1,130,751 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Currency interest swap contracts |
2,085 | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net exposure |
1,566 | (17,972 | ) | (10,782 | ) | 611 | 33 | 555 | (1,130,751 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 | ||||||||||||||||||||||||||||
(In millions) | USD | JPY | CNY | TWD | EUR | PLN | VND | |||||||||||||||||||||
Cash and cash equivalents |
790 | 83 | 5,515 | 121 | 8 | 206 | 2,070,889 | |||||||||||||||||||||
Trade accounts and notes receivable |
2,175 | 7 | 1,098 | — | — | — | — | |||||||||||||||||||||
Non-trade receivables |
21 | 852 | 201 | 3 | 4 | — | 23,182 | |||||||||||||||||||||
Other assets denominated in foreign currencies |
33 | 220 | 11,157 | 108 | 12 | 23 | 2,782 | |||||||||||||||||||||
Trade accounts and notes payable |
(863 | ) | (12,501 | ) | (2,862 | ) | — | — | — | (355,390 | ) | |||||||||||||||||
Other accounts payable |
(928 | ) | (20,326 | ) | (4,762 | ) | (6 | ) | (3 | ) | (4 | ) | (1,585,130 | ) | ||||||||||||||
Financial liabilities |
(2,571 | ) | — | (5,198 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Aggregate amounts in the consolidated statements of financial position |
(1,343 | ) | (31,665 | ) | 5,149 | 226 | 21 | 225 | 156,333 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Currency interest swap contracts |
780 | — | — | — — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net exposure |
(563 | ) | (31,665 | ) | 5,149 | 226 | 21 | 225 | 156,333 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
25. | Financial Risk Management, Continued |
Average exchange rates applied for the nine-month periods ended September 30, 2019 and 2018 and the exchange rates at September 30, 2019 and December 31, 2018 are as follows:
Average rate | Reporting date spot rate | |||||||||||||||
(In won) | 2019 | 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
USD |
1,090.96 | 1,118.10 | ||||||||||||||
JPY |
10.65 | 9.95 | 11.13 | 10.13 | ||||||||||||
CNY |
169.11 | 167.56 | 168.52 | 162.76 | ||||||||||||
TWD |
37.44 | 36.48 | 38.69 | 36.58 | ||||||||||||
EUR |
1,305.11 | 1,302.36 | 1,314.64 | 1,279.16 | ||||||||||||
PLN |
303.51 | 306.68 | 300.21 | 297.33 | ||||||||||||
VND |
0.0500 | 0.0476 | 0.0518 | 0.0482 |
ii) Sensitivity analysis
A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in foreign currency as of September 30, 2019 and December 31, 2018, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:
September 30, 2019 | December 31, 2018 | |||||||||||||||
(In millions of won) | Equity | Profit or loss | Equity | Profit or loss | ||||||||||||
USD (5 percent weakening) |
135,121 | (46,136 | ) | 38,725 | ||||||||||||
JPY (5 percent weakening) |
(7,689 | ) | (6,106 | ) | (12,060 | ) | (10,497 | ) | ||||||||
CNY (5 percent weakening) |
(91,359 | ) | 1,337 | 41,779 | 318 | |||||||||||
TWD (5 percent weakening) |
1,181 | — | 413 | 1 | ||||||||||||
EUR (5 percent weakening) |
1,922 | 446 | 1,197 | 390 | ||||||||||||
PLN (5 percent weakening) |
8,313 | 22 | 3,451 | (236 | ) | |||||||||||
VND (5 percent weakening) |
(2,123 | ) | (2,123 | ) | 273 | 273 |
A stronger won against the above currencies as of September 30, 2019 and December 31, 2018 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
75
25. | Financial Risk Management, Continued |
(ii) Interest rate risk
Interest rate risk arises principally from the Group’s bonds and borrowings. The Group establishes and applies its policy to reduce
uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Group entered
into currency interest swap contracts amounting to USD 1,785 million (2,144,321 million) in notional amount to hedge interest rate risks with respect to variable rate applied foreign currency denominated
borrowings. W
i) Profile
The interest rate profile of the Group’s interest-bearing financial instruments as of September 30, 2019 and December 31, 2018 is as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Fixed rate instruments |
||||||||
Financial assets |
2,443,583 | |||||||
Financial liabilities |
(6,356,922 | ) | (5,033,515 | ) | ||||
|
|
|
|
|||||
(2,589,932 | ) | |||||||
|
|
|
|
|||||
Variable rate instruments |
||||||||
Financial liabilities |
(3,525,262 | ) |
ii) Equity and profit or loss sensitivity analysis for variable rate instruments
As of September 30, 2019 and December 31, 2018, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Equity | Profit or loss | |||||||||||||||
(In millions of won) | 1%p increase |
1%p decrease |
1%p increase |
1%p decrease |
||||||||||||
September 30, 2019 |
||||||||||||||||
Variable rate instruments |
35,729 | (35,729 | ) | 35,729 | ||||||||||||
December 31, 2018 |
||||||||||||||||
Variable rate instruments |
25,558 | (25,558 | ) | 25,558 |
76
25. | Financial Risk Management, Continued |
(b) | Credit risk |
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.
The Group’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.
The Group establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively prior to determination on utilization of third party guarantees, insurance or factoring as appropriate.
In relation to the impairment of financial assets, the Group recognizes expected credit loss and its changes at each reporting date in order to reflect changes in the credit risk according to the expected credit loss model subsequent to initial recognition of financial assets.
77
25. | Financial Risk Management, Continued |
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposures to credit risk as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Financial assets carried at amortized cost |
||||||||
Cash and cash equivalents |
2,365,022 | |||||||
Deposits in banks |
78,011 | 78,411 | ||||||
Trade accounts and notes receivable, net |
3,620,964 | 2,829,163 | ||||||
Non-trade receivables |
410,780 | 159,238 | ||||||
Accrued income |
30,700 | 10,075 | ||||||
Deposits |
37,498 | 91,123 | ||||||
Short-term loans |
24,984 | 16,116 | ||||||
Long-term loans |
45,766 | 55,048 | ||||||
Long-term non-trade receivables |
9,666 | 11,448 | ||||||
Lease receivables |
29,675 | — | ||||||
|
|
|
|
|||||
5,615,644 | ||||||||
Financial assets at fair value through profit or loss |
||||||||
Convertible bonds |
1,327 | |||||||
Derivatives |
106,884 | 13,059 | ||||||
|
|
|
|
|||||
14,386 | ||||||||
Financial assets at fair value through other comprehensive income |
||||||||
Debt instruments |
161 | |||||||
|
|
|
|
|||||
5,630,191 | ||||||||
|
|
|
|
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the sales and investing activities. Trade accounts and notes receivable are insured in order to manage credit risk if it does not meet the Group’s internal credit ratings. Uninsured trade accounts and notes receivables are managed by continuous monitoring of internal credit ratings and seeking insurance coverage, if necessary.
78
25. | Financial Risk Management, Continued |
(c) | Liquidity risk |
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flows from operations to meet its capital requirements, the Group may rely on financing activities, such as external long-term borrowings and offerings of debt instruments, equity-linked and other debt instruments. In addition, the Group maintains a line of credit with various banks.
The following are the contractual maturities of financial liabilities, including estimated interest payments, as of September 30, 2019.
Contractual cash flows in | ||||||||||||||||||||||||||||
(In millions of won) | Carrying amount |
Total | 6 months or less |
6-12 months |
1-2 years | 2-5 years | More than 5 years |
|||||||||||||||||||||
Non-derivative financial liabilities: |
||||||||||||||||||||||||||||
Unsecured bank borrowings |
11,188,329 | 795,255 | 889,123 | 1,816,941 | 6,613,880 | 1,073,130 | ||||||||||||||||||||||
Unsecured bond issues |
3,445,718 | 3,705,881 | 340,349 | 297,203 | 515,612 | 2,415,742 | 136,975 | |||||||||||||||||||||
Trade accounts and notes payable |
2,673,332 | 2,673,332 | 2,673,332 | — | — | — | — | |||||||||||||||||||||
Other accounts payable |
2,123,927 | 2,123,927 | 2,122,820 | 1,107 | — | — | — | |||||||||||||||||||||
Other accounts payable (enterprise procurement cards)(*) |
1,574,969 | 1,592,526 | 1,084,807 | 507,719 | — | — | — | |||||||||||||||||||||
Long-term other accounts payable |
2,229 | 2,229 | — | — | 2,219 | 10 | — | |||||||||||||||||||||
Security deposits received |
11,000 | 11,000 | 2,290 | 5,330 | 3,380 | — | — | |||||||||||||||||||||
Lease liabilities |
100,286 | 125,597 | 34,943 | 24,813 | 22,891 | 32,736 | 10,214 | |||||||||||||||||||||
Derivative financial liabilities |
||||||||||||||||||||||||||||
Derivatives |
6,157 | (22,392 | ) | — | — | (3,788 | ) | (18,604 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
21,400,429 | 7,053,796 | 1,725,295 | 2,357,255 | 9,043,764 | 1,220,319 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Represents the amount of utility expenses, payables from transactions between the Controlling Company and subsidiaries and others paid by the enterprise procurement cards and the outstanding payables are settled at the end of the billing cycle. |
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
79
25. | Financial Risk Management, Continued |
(d) | Capital management |
Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Total liabilities |
18,289,464 | |||||||
Total equity |
14,325,925 | 14,886,246 | ||||||
Cash and deposits in banks (*1) |
2,837,692 | 2,443,422 | ||||||
Borrowings (including bonds) |
13,428,822 | 8,558,777 | ||||||
Total liabilities to equity ratio |
161 | % | 123 | % | ||||
Net borrowings to equity ratio (*2) |
74 | % | 41 | % |
(*1) | Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks. |
(*2) | Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds and excluding lease liabilities) less cash and current deposits in banks by total equity. |
80
25. | Financial Risk Management, Continued |
(e) | Determination of fair value |
(i) | Measurement of fair value |
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
i) | Current Assets and Liabilities |
The carrying amounts approximate fair value because of the short maturity of these instruments.
ii) | Trade Receivables and Other Receivables |
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.
iii) | Investments in Equity and Debt Instruments |
The fair value of marketable financial assets at FVTPL and FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using the results of fair value assessment performed by external valuation institution and others.
iv) | Non-derivative Financial Liabilities |
Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
81
25. | Financial Risk Management, Continued |
(ii) | Fair values versus carrying amounts |
The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed consolidated interim statements of financial position as of September 30, 2019 and December 31, 2018 are as follows:
September 30, 2019 | December 31, 2018 | |||||||||||||||
(In millions of won) | Carrying amounts | Fair Values | Carrying amounts | Fair Values | ||||||||||||
Financial assets carried at amortized cost |
||||||||||||||||
Cash and cash equivalents |
(*) | 2,365,022 | (*) | |||||||||||||
Deposits in banks |
78,011 | (*) | 78,411 | (*) | ||||||||||||
Trade accounts and notes receivable |
3,620,964 | (*) | 2,829,163 | (*) | ||||||||||||
Non-trade receivables |
410,780 | (*) | 159,238 | (*) | ||||||||||||
Accrued income |
30,700 | (*) | 10,075 | (*) | ||||||||||||
Deposits |
37,498 | (*) | 91,123 | (*) | ||||||||||||
Short-term loans |
24,984 | (*) | 16,116 | (*) | ||||||||||||
Long-term loans |
45,766 | (*) | 55,048 | (*) | ||||||||||||
Long-term non-trade receivables |
9,666 | (*) | 11,448 | (*) | ||||||||||||
Lease receivables |
29,675 | (*) | — | — | ||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Equity instruments |
10,709 | 13,681 | 13,681 | |||||||||||||
Convertible bonds |
1,327 | 1,327 | 1,327 | 1,327 | ||||||||||||
Derivatives |
106,884 | 106,884 | 13,059 | 13,059 | ||||||||||||
Financial assets at fair value through other comprehensive income |
||||||||||||||||
Debt instruments |
85 | 161 | 161 | |||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Derivatives |
6,157 | 25,758 | 25,758 | |||||||||||||
Unsecured convertible bonds |
837,095 | 837,095 | — | — | ||||||||||||
Liabilities carried at amortized cost |
||||||||||||||||
Secured bank borrowings |
— | 268,093 | 268,093 | |||||||||||||
Unsecured bank borrowings |
9,983,104 | 10,059,389 | 5,958,427 | 6,013,903 | ||||||||||||
Unsecured bond issues |
2,608,623 | 2,680,560 | 2,332,257 | 2,384,987 | ||||||||||||
Trade accounts and notes payable |
2,673,332 | (*) | 3,087,461 | (*) | ||||||||||||
Other accounts payable |
3,698,896 | (*) | 3,566,629 | (*) | ||||||||||||
Long-term other accounts payable |
2,229 | (*) | 3,103 | (*) | ||||||||||||
Security deposits received |
11,000 | (*) | 10,955 | (*) | ||||||||||||
Lease liabilities |
100,286 | (*) | — | — |
(*) | Excluded from disclosures as the carrying amount approximates fair value. |
82
25. | Financial Risk Management, Continued |
(iii) | Fair values of financial assets and liabilities |
i) Fair value hierarchy
The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities |
• | Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly |
• | Level 3: inputs for the assets or liabilities that are not based on observable market data |
ii) Financial instruments measured at fair value
Fair value hierarchy classifications of the financial instruments that are measured at fair value as of September 30, 2019 and December 31, 2018 are as follows:
September 30, 2019 | ||||||||||||||||
(In millions of won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Equity instruments |
— | 10,709 | 10,709 | |||||||||||||
Convertible bonds |
— | — | 1,327 | 1,327 | ||||||||||||
Derivatives |
— | — | 106,884 | 106,884 | ||||||||||||
Financial assets at fair value through other comprehensive income |
||||||||||||||||
Debt instruments |
— | — | 85 | |||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Derivatives |
— | 6,157 | 6,157 | |||||||||||||
Unsecured convertible bonds |
837,095 | — | — | 837,095 |
December 31, 2018 | ||||||||||||||||
(In millions of won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Equity instruments |
— | 13,681 | 13,681 | |||||||||||||
Convertible bonds |
— | — | 1,327 | 1,327 | ||||||||||||
Derivatives |
— | — | 13,059 | 13,059 | ||||||||||||
Financial assets at fair value through other comprehensive income |
||||||||||||||||
Debt instruments |
— | — | 161 | |||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Derivatives |
— | 25,758 | 25,758 |
83
25. Financial Risk Management, Continued
iii) | Financial instruments not measured at fair value but for which the fair value is disclosed |
Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | Valuation technique |
Input | |||||||||||||||||
Classification |
Level 1 | Level 2 | Level 3 | |||||||||||||||||
Liabilities |
||||||||||||||||||||
Unsecured bank borrowings |
— | 10,059,389 | |
Discounted cash flow |
|
|
Discount rate |
| ||||||||||||
Unsecured bond issues |
— | — | 2,680,560 | |
Discounted cash flow |
|
|
Discount rate |
| |||||||||||
(In millions of won) | December 31, 2018 | Valuation technique |
Input | |||||||||||||||||
Classification |
Level 1 | Level 2 | Level 3 | |||||||||||||||||
Liabilities |
||||||||||||||||||||
Secured bank borrowings |
— | 268,093 | |
Discounted cash flow |
|
|
Discount rate |
| ||||||||||||
Unsecured bank borrowings |
— | — | 6,013,903 | |
Discounted cash flow |
|
|
Discount rate |
| |||||||||||
Unsecured bond issues |
— | — | 2,384,987 | |
Discounted cash flow |
|
|
Discount rate |
|
iv) | The interest rates applied for determination of the above fair value as of September 30, 2019 and December 31, 2018 are as follows: |
September 30, 2019 | December 31, 2018 | |||||||
Borrowings, bonds and others |
1.68~3.26 | % | 2.09~3.37 | % |
84
26. | Changes in liabilities arising from financing activities |
Changes in liabilities arising from financing activities for the nine-month period ended September 30, 2019 are as follows:
Non-cash transactions | ||||||||||||||||||||||||||||
(In millions of won) | January 1, 2019 |
Cash flows from financing activities |
Reclassification | Gain or loss on foreign currency translation |
Effective interest adjustment |
Others | September 30, 2019 |
|||||||||||||||||||||
Short-term borrowings |
685,980 | — | 31,006 | — | — | 716,986 | ||||||||||||||||||||||
Current portion of long-term borrowings and bonds |
1,553,907 | (1,223,299 | ) | 803,886 | 23,061 | 448 | — | 1,158,003 | ||||||||||||||||||||
Long-term borrowings |
5,232,271 | 3,765,753 | (544,207 | ) | 214,083 | — | — | 8,667,900 | ||||||||||||||||||||
Bonds |
1,772,599 | 1,323,239 | (259,679 | ) | 26,872 | 5,306 | 17,596 | 2,885,933 | ||||||||||||||||||||
Lease liabilities |
— | (45,357 | ) | — | (3,350 | ) | 3,043 | 145,950 | 100,286 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
4,506,316 | — | 291,672 | 8,797 | 163,546 | 13,529,108 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
27. | Related Parties and Others |
(a) | Related parties |
Related parties as of September 30, 2019 are as follows:
Classification |
Description | |
Associates(*) |
Paju Electric Glass Co., Ltd. and others | |
Entity that has significant influence over the Controlling Company |
LG Electronics Inc. | |
Subsidiaries of the entity that has significant influence over the Controlling Company |
Subsidiaries of LG Electronics Inc. |
(*) | Details of associates are described in note 8. |
86
27. | Related Parties and Others, Continued |
(b) | Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
INVENIA Co., Ltd.(*) |
— | 262 | 9,520 | — | 195 | |||||||||||||||||||
AVATEC Co., Ltd. |
2,639 | — | — | — | 17,720 | 196 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | — | 87,211 | — | — | 1,107 | ||||||||||||||||||
WooRee E&L Co., Ltd. |
— | — | 1,852 | — | — | — | ||||||||||||||||||
YAS Co., Ltd. |
— | — | 1,225 | 9,530 | — | 839 | ||||||||||||||||||
Material Science Co., Ltd. |
— | — | 21 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 90,571 | 19,050 | 17,720 | 2,337 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 2,950 | 63,498 | — | 36,903 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 79 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
76,909 | — | — | 42 | — | 221 |
87
27. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2019 | ||||||||||||||||||||||||
Sales and others |
Purchase and others | |||||||||||||||||||||||
(In millions of won) | Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | |||||||||||||||||||
LG Electronics Nanjing New Technology Co., Ltd. |
— | — | — | — | 101 | |||||||||||||||||||
LG Electronics RUS, LLC |
21,936 | — | — | — | — | 137 | ||||||||||||||||||
LG Electronics do Brasil Ltda. |
38,672 | — | — | — | — | 47 | ||||||||||||||||||
LG Innotek Co., Ltd. |
1,465 | — | 13,520 | — | — | 15,531 | ||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
10,755 | — | — | — | — | — | ||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
1,452 | — | — | — | — | — | ||||||||||||||||||
LG Electronics Mexicali, S.A. DE C.V. |
24,359 | — | — | — | — | 15 | ||||||||||||||||||
LG Electronics Mlawa Sp. z o.o. |
93,527 | — | — | — | — | 784 | ||||||||||||||||||
LG Electronics Taiwan Taipei Co., Ltd. |
533 | — | — | — | — | 104 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. (*) |
— | — | — | 29,011 | — | — | ||||||||||||||||||
LG Electronics Reynosa, S.A. DE C.V. |
212,403 | — | — | — | — | 149 | ||||||||||||||||||
LG Electronics Air-Conditioning (Shandong) Co., Ltd. |
— | — | 286 | 10,394 | — | 13 | ||||||||||||||||||
HiEntech Co., Ltd. (*) |
11 | — | — | 1,251 | — | 7,385 | ||||||||||||||||||
HiEntech (Tianjin) Co., Ltd. (*) |
— | — | — | 9,984 | — | 5,633 | ||||||||||||||||||
LG Electronics Egypt S.A.E. |
22,027 | — | — | — | — | 2 | ||||||||||||||||||
LG Electronics Alabama Inc. |
3,932 | — | — | — | — | — | ||||||||||||||||||
LG Electronics Japan, Inc. |
— | — | — | — | — | 1,610 | ||||||||||||||||||
Others |
1,981 | — | — | 1 | — | 2,032 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 13,806 | 50,683 | — | 33,843 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 107,327 | 133,231 | 17,720 | 73,083 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Represents transactions occurred prior to disposal of the entire investments. |
88
27. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
INVENIA Co., Ltd.(*) |
180 | 1,024 | 45,580 | — | 297 | |||||||||||||||||||
AVATEC Co., Ltd. |
2,639 | 265 | — | — | 54,939 | 616 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | 6,057 | 267,065 | — | — | 3,209 | ||||||||||||||||||
WooRee E&L Co., Ltd. |
— | — | 4,539 | — | — | 1 | ||||||||||||||||||
YAS Co., Ltd. |
— | 1,000 | 4,795 | 100,142 | — | 2,822 | ||||||||||||||||||
Material Science Co., Ltd. |
— | 21 | — | — | 313 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
7,502 | 277,444 | 145,722 | 54,939 | 7,258 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 10,730 | 677,932 | — | 109,505 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 119 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
205,520 | — | — | 2,982 | — | 346 | ||||||||||||||||||
LG Electronics Nanjing New Technology Co., Ltd. |
220,569 | — | — | 30 | — | 275 | ||||||||||||||||||
LG Electronics RUS, LLC |
64,129 | — | — | — | — | 1,562 | ||||||||||||||||||
LG Electronics do Brasil Ltda. |
118,900 | — | — | — | — | 178 | ||||||||||||||||||
LG Innotek Co., Ltd. |
5,699 | — | 46,232 | — | — | 57,602 |
89
27. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||
Sales and others |
Purchase and others | |||||||||||||||||||||||
(In millions of won) | Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | |||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
— | — | — | — | — | |||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
41,876 | — | — | — | — | — | ||||||||||||||||||
LG Electronics Mexicali, S.A. DE C.V. |
93,095 | — | — | — | — | 65 | ||||||||||||||||||
LG Electronics Mlawa Sp. z o.o. |
402,384 | — | — | — | — | 1,648 | ||||||||||||||||||
LG Electronics Taiwan Taipei Co., Ltd. |
4,172 | — | — | 31 | — | 282 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. (*) |
— | — | — | 79,986 | — | — | ||||||||||||||||||
LG Electronics Reynosa, S.A. DE C.V. |
557,029 | — | — | — | 672 | |||||||||||||||||||
LG Electronics Air-Conditioning (Shandong) Co., Ltd. |
— | — | 445 | 14,553 | — | 88 | ||||||||||||||||||
HiEntech Co., Ltd. (*) |
47 | — | — | 7,264 | — | 21,576 | ||||||||||||||||||
HiEntech (Tianjin) Co., Ltd. (*) |
— | — | — | 32,335 | — | 15,423 | ||||||||||||||||||
LG Electronics Egypt S.A.E |
80,553 | — | — | — | — | 2 | ||||||||||||||||||
LG Electronics Alabama Inc. |
9,032 | — | — | — | — | — | ||||||||||||||||||
LG Electronics Japan, Inc. |
— | — | — | 14 | — | 4,672 | ||||||||||||||||||
Others |
8,716 | — | 1 | 1 | — | 5,168 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 46,678 | 137,196 | — | 109,678 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
7,502 | 334,852 | 960,850 | 54,939 | 226,441 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Represents transaction occurred prior to disposal of the entire investments. |
90
27. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
INVENIA Co., Ltd. |
— | 585 | 5,446 | — | 245 | |||||||||||||||||||
AVATEC Co., Ltd. |
— | — | — | — | 16,650 | 243 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | — | 90,642 | — | — | 1,503 | ||||||||||||||||||
WooRee E&L Co., Ltd. |
— | — | 3 | — | — | 45 | ||||||||||||||||||
YAS Co., Ltd. |
— | — | 1,011 | 102,340 | — | 667 | ||||||||||||||||||
LB Gemini New Growth Fund No. 16 |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 92,241 | 107,786 | 16,650 | 2,703 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 5,387 | 176,237 | — | 25,054 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 15 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
49,740 | — | — | — | — | 3,070 |
91
27. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2018 | ||||||||||||||||||||||||
Sales and others |
Purchase and others | |||||||||||||||||||||||
(In millions of won) | Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | |||||||||||||||||||
LG Electronics Nanjing New Technology Co., Ltd. |
— | — | 94 | — | 70 | |||||||||||||||||||
LG Electronics RUS, LLC |
29,226 | — | — | — | — | 1,438 | ||||||||||||||||||
LG Electronics do Brasil Ltda. |
30,401 | — | — | — | — | 113 | ||||||||||||||||||
LG Innotek Co., Ltd. |
7,696 | — | 33,546 | — | — | 6,640 | ||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
12,162 | — | — | — | — | — | ||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
44,914 | — | — | — | — | — | ||||||||||||||||||
LG Electronics Mexicali, S.A. DE C.V. |
39,938 | — | — | — | — | 107 | ||||||||||||||||||
LG Electronics Mlawa Sp. z o.o. |
133,918 | — | — | — | — | 212 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. |
— | — | — | 68,422 | — | 987 | ||||||||||||||||||
LG Electronics Reynosa, S.A. DE C.V. |
300,482 | — | — | — | — | 332 | ||||||||||||||||||
HiEntech Co., Ltd. |
— | — | — | 1,444 | — | 6,936 | ||||||||||||||||||
HiEntech (Tianjin) Co., Ltd. |
— | — | — | 61,557 | — | 4,249 | ||||||||||||||||||
LG Electronics Air-Conditioning (Shandong) Co., Ltd. |
— | — | 159 | 11,846 | — | 2 | ||||||||||||||||||
LG Electronics Almaty Kazakhstan |
501 | — | — | — | — | 14 | ||||||||||||||||||
LG Electronics Egypt S.A.E. |
275 | — | — | — | — | — | ||||||||||||||||||
LG Electronics S.A. (Pty) Ltd. |
1,369 | — | — | — | — | 8 | ||||||||||||||||||
LG Electronics Taiwan Taipei Co., Ltd. |
1,742 | — | — | — | — | 65 | ||||||||||||||||||
Others |
1,856 | — | 17 | — | — | 2,863 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 33,722 | 143,363 | — | 27,121 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 131,350 | 427,386 | 16,650 | 54,878 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
92
27. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Sales and others |
Purchase and others | |||||||||||||||||||||||
(In millions of won) | Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | |||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
INVENIA Co., Ltd. |
30 | 1,354 | 27,320 | — | 523 | |||||||||||||||||||
AVATEC Co., Ltd. |
— | 530 | — | — | 51,729 | 466 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | 4,172 | 274,440 | — | — | 3,346 | ||||||||||||||||||
WooRee E&L Co., Ltd. |
— | — | 41 | — | — | 131 | ||||||||||||||||||
YAS Co., Ltd. |
— | — | 3,192 | 119,892 | — | 2,183 | ||||||||||||||||||
LB Gemini New Growth Fund No. 16 |
— | 540 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
5,272 | 279,027 | 147,212 | 51,729 | 6,649 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 28,927 | 733,261 | — | 73,722 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Controlling Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 41 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
119,976 | — | — | 1,415 | — | 3,075 | ||||||||||||||||||
LG Electronics Nanjing New Technology Co., Ltd. |
169,104 | — | — | 112 | — | 1,416 | ||||||||||||||||||
LG Electronics RUS, LLC |
68,606 | — | — | — | — | 2,537 | ||||||||||||||||||
LG Electronics do Brasil Ltda. |
155,100 | — | — | — | — | 277 | ||||||||||||||||||
LG Innotek Co., Ltd. |
24,744 | — | 106,184 | — | — | 34,692 |
93
27. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Sales and others |
Purchase and others | |||||||||||||||||||||||
(In millions of won) | Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | |||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
— | — | — | — | — | |||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
119,960 | — | — | — | — | — | ||||||||||||||||||
LG Electronics Mexicali, S.A. DE C.V. |
140,151 | — | — | — | — | 172 | ||||||||||||||||||
LG Electronics Mlawa Sp. z o.o. |
495,955 | — | — | — | — | 526 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. |
— | — | — | 274,206 | — | 7,248 | ||||||||||||||||||
LG Electronics Reynosa, S.A. DE C.V. |
793,912 | — | — | — | — | 1,628 | ||||||||||||||||||
HiEntech Co., Ltd. |
— | — | — | 7,806 | — | 21,802 | ||||||||||||||||||
HiEntech (Tianjin) Co., Ltd. |
— | — | — | 74,717 | — | 18,786 | ||||||||||||||||||
LG Electronics Air-Conditioning (Shandong) Co., Ltd. |
— | — | 287 | 13,756 | — | 19,311 | ||||||||||||||||||
LG Electronics Almaty Kazakhstan |
3,708 | — | — | — | — | 35 | ||||||||||||||||||
LG Electronics Egypt S.A.E. |
15,156 | — | — | — | — | 16 | ||||||||||||||||||
LG Electronics S.A. (Pty) Ltd. |
5,804 | — | — | — | — | 14 | ||||||||||||||||||
LG Electronics Taiwan Taipei Co., Ltd. |
8,480 | — | — | — | — | 257 | ||||||||||||||||||
Others |
2,646 | — | 26 | 1 | — | 6,589 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 106,497 | 372,013 | — | 118,422 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
5,272 | 414,451 | 1,252,486 | 51,729 | 198,793 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
94
27. | Related Parties and Others, Continued |
(c) Trade accounts and notes receivable and payable and others as of September 30, 2019 and December 31, 2018 are as follows:
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
|||||||||||||||
(In millions of won) | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
Associates |
||||||||||||||||
INVENIA Co., Ltd.(*1) |
2,000 | — | 30,179 | |||||||||||||
AVATEC Co., Ltd. |
— | — | 4,637 | 4,382 | ||||||||||||
Paju Electric Glass Co., Ltd. |
— | — | 70,776 | 60,566 | ||||||||||||
WooRee E&L Co., Ltd. |
— | — | 1,826 | 7 | ||||||||||||
YAS Co., Ltd. |
— | — | 31,838 | 6,145 | ||||||||||||
Material Science Co., Ltd. |
— | — | 23 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
2,000 | 109,100 | 101,279 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Entity that has significant influence over the Controlling Company |
||||||||||||||||
LG Electronics Inc. |
247,679 | 177,118 | 430,677 | |||||||||||||
Subsidiaries of the entity that has significant influence over the Controlling Company |
||||||||||||||||
LG Electronics India Pvt. Ltd. |
9,047 | 81 | 29 | |||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
49,093 | 25,544 | 419 | — | ||||||||||||
LG Electronics Nanjing New Technology Co., Ltd. |
60,586 | 43,463 | 29 | 139 | ||||||||||||
LG Electronics RUS, LLC |
16,447 | 22,570 | 49 | 90 | ||||||||||||
LG Electronics do Brasil Ltda. |
18,720 | 15,608 | 23 | 62 |
95
27. | Related Parties and Others, Continued |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
|||||||||||||||
(In millions of won) | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
LG Innotek Co., Ltd. |
2,885 | 35,347 | 47,382 | |||||||||||||
LG Electronics Mexicali, S.A. DE C.V. |
15,693 | 15,305 | 3 | — | ||||||||||||
LG Electronics Mlawa Sp. z o.o. |
85,419 | 70,236 | 426 | 33 | ||||||||||||
LG Hitachi Water Solutions Co., |
— | 9,100 | — | 50,425 | ||||||||||||
LG Electronics Reynosa, S.A. DE C.V. |
160,274 | 69,189 | 16 | 134 | ||||||||||||
HiEntech Co., Ltd.(*2) |
— | — | — | 16,816 | ||||||||||||
HiEntech (Tianjin) Co., Ltd.(*2) |
— | — | — | 16,345 | ||||||||||||
LG Electronics Egypt S.A.E. |
7,676 | 10,296 | 2 | — | ||||||||||||
LG Electronics Air-Conditioning(Shandong) |
— | — | 12,061 | 17,654 | ||||||||||||
Qingdao LG Inspur Digital Communication |
7,240 | 3,530 | — | — | ||||||||||||
Others |
4,954 | 18,435 | 1,626 | 1,246 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
315,208 | 50,082 | 150,355 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
564,887 | 336,300 | 682,311 | ||||||||||||||
|
|
|
|
|
|
|
|
(*1) | Excluded from related parties due to disposal of equity investments during the nine-month period ended September 30, 2019. |
(*2) | Excluded from related parties due to LG Electronics Inc.’s disposal of the entire investments during the nine-month period ended September 30, 2019. |
96
27. | Related Parties and Others, Continued |
(d) | Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Associates |
Loans | Collection of loans | Loans | Collection of loans | ||||||||||||
INVENIA Co., Ltd.(*) |
— | — | 375 | |||||||||||||
YAS Co., Ltd. |
— | — | — | 375 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
— | — | 750 | ||||||||||||||
|
|
|
|
|
|
|
|
(*) | Excluded from related parties due to disposal of equity investments during the nine-month period ended September 30, 2019. |
97
27. | Related Parties and Others, Continued |
(e) | Conglomerate Transactions |
Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and nine-month periods ended September 30, 2019 and 2018 and as of September 30, 2019 and December 31, 2018 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.
For the three-month period ended September 30, 2019 |
For the nine-month period ended September 30, 2019 |
September 30, 2019 | ||||||||||||||||||||||
(In millions of won) | Sales and others |
Purchase and others |
Sales and others |
Purchase and others |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
||||||||||||||||||
LG International Corp. and its subsidiaries |
96,796 | 498,204 | 321,579 | 125,556 | 100,950 | |||||||||||||||||||
LG Uplus Corp. |
— | 622 | — | 1,761 | — | 230 | ||||||||||||||||||
LG Chem Ltd. and its subsidiaries |
65 | 288,422 | 82,400 | 877,573 | 290 | 200,930 | ||||||||||||||||||
S&I Corp. and its subsidiaries (formerly, Serveone) |
84 | 111,788 | 267 | 626,010 | 21,307 | 125,079 | ||||||||||||||||||
Silicon Works Co., Ltd. |
— | 209,633 | 92 | 516,189 | — | 144,614 | ||||||||||||||||||
LG Corp. |
— | 13,849 | — | 40,218 | 9,146 | — | ||||||||||||||||||
LG Management Development Institute |
— | 2,239 | — | 6,624 | 3,480 | 466 | ||||||||||||||||||
LG CNS Co., Ltd. and its subsidiaries |
5 | 64,158 | 14 | 157,763 | 2 | 45,124 | ||||||||||||||||||
LG Hausys Ltd. |
— | — | 1 | 1 | — | — | ||||||||||||||||||
LG Household & Health Care and its subsidiaries |
— | 112 | — | 209 | — | 88 | ||||||||||||||||||
LG Holdings Japan Co., Ltd. |
— | 542 | — | 1,529 | 2,370 | — | ||||||||||||||||||
G2R Inc. and its subsidiaries |
— | 18,853 | — | 20,756 | — | 10,649 | ||||||||||||||||||
Robostar Co., Ltd. |
— | 196 | — | 7,096 | — | 194 | ||||||||||||||||||
Others(*) |
1 | 71,251 | 5 | 191,014 | — | 68,362 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
878,461 | 580,983 | 2,768,322 | 162,151 | 696,686 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
98
27. | Related Parties and Others, Continued |
(*) | Due to S&I Corp.’s disposal of partial investments in Serveone in May 2019, Serveone was reclassified from one of the S&I Corp.’s subsidiaries to associates. Accordingly, transactions with S&I Corp. after the disposal are classified as others. In addition, due to LG Electronics Inc.’s disposal of entire investments in HiEntech Co., Ltd. and its subsidiaries and LG Hitachi Water Solutions Co., Ltd., outstanding payables due are reclassified as others. |
For the three-month period ended September 30, 2018 |
For the nine-month period ended September 30, 2018 |
December 31, 2018 | ||||||||||||||||||||||
(In millions of won) | Sales and others |
Purchase and others |
Sales and others |
Purchase and others |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
||||||||||||||||||
LG International Corp. and its subsidiaries |
98,477 | 559,214 | 418,950 | 83,011 | 146,836 | |||||||||||||||||||
LG Uplus Corp. |
— | 555 | 21 | 1,175 | — | 178 | ||||||||||||||||||
LG Chem Ltd. and its subsidiaries |
70 | 328,388 | 1,634 | 904,594 | 173 | 184,357 | ||||||||||||||||||
S&I Corp. and its subsidiaries (Formerly, Serveone) |
97 | 465,055 | 305 | 1,462,429 | 21,307 | 510,132 | ||||||||||||||||||
Silicon Works Co., Ltd. |
— | 195,615 | — | 499,456 | — | 140,694 | ||||||||||||||||||
LG Corp. |
— | 13,634 | — | 39,003 | 11,246 | — | ||||||||||||||||||
LG Management Development Institute |
— | 2,366 | — | 7,484 | 3,480 | 441 | ||||||||||||||||||
LG CNS Co., Ltd. and its subsidiaries |
— | 48,835 | — | 134,800 | 1 | 95,703 | ||||||||||||||||||
LG Hausys Ltd. |
1 | — | 1,111 | 1 | — | 3 | ||||||||||||||||||
LG Household & Health Care and its subsidiaries |
1 | 90 | 1 | 115 | — | — | ||||||||||||||||||
LG Holdings Japan Co., Ltd. |
— | 463 | — | 1,375 | 2,037 | — | ||||||||||||||||||
G2R Inc. and its subsidiaries |
— | 2,015 | — | 42,227 | — | 19,773 | ||||||||||||||||||
Robostar Co., Ltd. |
— | — | — | — | — | 2,723 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,155,493 | 562,286 | 3,511,609 | 121,255 | 1,100,840 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
99
27. | Related Parties and Others, Continued |
(f) | Key management personnel compensation |
Compensation costs of key management for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30, |
For the nine-month periods ended September 30, |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Short-term benefits |
918 | 2,590 | 2,734 | |||||||||||||
Expenses related to the defined benefit plan |
103 | 103 | 450 | 690 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
1,021 | 3,040 | 3,424 | ||||||||||||||
|
|
|
|
|
|
|
|
Key management refers to the registered directors who have significant control and responsibilities over the Controlling Company’s operations and business.
28. | Non-Current Assets Held for Sale |
The Group decided to dispose certain tangible assets of LG Display Poland Sp. z o.o. based on the management’s approval and began effort to sell the disposal group. During the nine-month period ended September 30, 2019, the Group completed the sale of these assets to LG Chem Poland Sp. z o.o.
Gain from disposal of non-current assets held for sale amount to
8,353 million and was recognized as other non-operating income. W
100
LG DISPLAY CO., LTD.
Condensed Separate Interim Financial Statements
(Unaudited)
September 30, 2019 and 2018
(With Independent Auditors’ Review Report Thereon)
101
Page | ||||
103 | ||||
105 | ||||
Condensed Separate Interim Statements of Comprehensive Income (Loss) |
106 | |||
107 | ||||
108 | ||||
Notes to the Condensed Separate Interim Financial Statements |
110 |
102
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
LG Display Co., Ltd.:
Reviewed Financial Statements
We have reviewed the accompanying condensed separate interim financial statements of LG Display Co., Ltd. (the “Company”) which comprise the condensed separate interim statement of financial position as of September 30, 2019, the condensed separate interim statements of comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2019 and 2018, and statements of changes in equity and cash flows for the nine-month periods ended September 30, 2019 and 2018, and notes comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Condensed Separate Interim Financial Statements
Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting, and for such internal controls as management determines necessary to enable the preparation of condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the condensed separate interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting.
Other Matters
The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.
We audited the separate statement of financial position as of December 31, 2018, and the related separate statements of comprehensive loss, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 25, 2019, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2018, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.
103
KPMG Samjong Accounting Corp.
Seoul, Korea
November 13, 2019
This report is effective as of November 13, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
104
LG DISPLAY CO., LTD.
Condensed Separate Interim Statements of Financial Position
(Unaudited)
As of September 30, 2019 and December 31, 2018
(In millions of won) | Note | September 30, 2019 | December 31, 2018 | |||||||||
Assets |
||||||||||||
Cash and cash equivalents |
4, 24 | 473,283 | ||||||||||
Deposits in banks |
4, 24 | 77,200 | 77,200 | |||||||||
Trade accounts and notes receivable, net |
5, 14, 24, 26 | 4,520,681 | 3,389,108 | |||||||||
Other accounts receivable, net |
5, 24 | 467,068 | 321,963 | |||||||||
Other current financial assets |
6, 24 | 76,161 | 29,281 | |||||||||
Inventories |
7 | 2,012,462 | 1,951,155 | |||||||||
Prepaid income tax |
110,594 | — | ||||||||||
Other current assets |
5 | 210,054 | 136,349 | |||||||||
|
|
|
|
|||||||||
Total current assets |
7,832,401 | 6,378,339 | ||||||||||
Deposits in banks |
4, 24 | 11 | 11 | |||||||||
Investments |
8 | 5,084,793 | 3,602,214 | |||||||||
Other non-current accounts receivable, net |
5, 24 | 20,889 | 25,823 | |||||||||
Other non-current financial assets |
6, 24 | 118,908 | 77,192 | |||||||||
Property, plant and equipment, net |
9 | 14,257,615 | 14,984,564 | |||||||||
Intangible assets, net |
10 | 792,511 | 816,808 | |||||||||
Deferred tax assets |
22 | 1,035,526 | 851,936 | |||||||||
Other non-current assets |
5 | 291,776 | 325,219 | |||||||||
|
|
|
|
|||||||||
Total non-current assets |
21,602,029 | 20,683,767 | ||||||||||
|
|
|
|
|||||||||
Total assets |
27,062,106 | |||||||||||
|
|
|
|
|||||||||
Liabilities |
||||||||||||
Trade accounts and notes payable |
24, 26 | 3,186,123 | ||||||||||
Current financial liabilities |
11, 24 | 1,432,911 | 1,044,841 | |||||||||
Other accounts payable |
24 | 2,569,705 | 1,746,412 | |||||||||
Accrued expenses |
782,500 | 516,970 | ||||||||||
Income tax payable |
29,118 | 17,404 | ||||||||||
Provisions |
13 | 161,518 | 96,555 | |||||||||
Advances received |
14 | 1,031,522 | 780,906 | |||||||||
Other current liabilities |
13 | 59,094 | 27,419 | |||||||||
|
|
|
|
|||||||||
Total current liabilities |
9,045,792 | 7,416,630 | ||||||||||
Non-current financial liabilities |
11, 24 | 7,431,545 | 5,139,476 | |||||||||
Non-current provisions |
13 | 57,554 | 32,764 | |||||||||
Defined benefit liabilities, net |
12 | 174,722 | 44,187 | |||||||||
Long-term advances received |
14 | 526,005 | 1,122,015 | |||||||||
Other non-current liabilities |
13 | 92,405 | 94,453 | |||||||||
|
|
|
|
|||||||||
Total non-current liabilities |
8,282,231 | 6,432,895 | ||||||||||
|
|
|
|
|||||||||
Total liabilities |
17,328,023 | 13,849,525 | ||||||||||
|
|
|
|
|||||||||
Equity |
||||||||||||
Share capital |
15 | 1,789,079 | 1,789,079 | |||||||||
Share premium |
2,251,113 | 2,251,113 | ||||||||||
Retained earnings |
8,066,215 | 9,172,389 | ||||||||||
|
|
|
|
|||||||||
Total equity |
12,106,407 | 13,212,581 | ||||||||||
|
|
|
|
|||||||||
Total liabilities and equity |
27,062,106 | |||||||||||
|
|
|
|
See accompanying notes to the separate interim financial statements.
105
LG DISPLAY CO., LTD.
Condensed Separate Interim Statements of Comprehensive Income (loss)
(Unaudited)
For the three-month and nine-month periods ended September 30, 2019 and 2018
(In millions of won, except earnings per share) | Note | For the three-month period ended Sep 30 |
For the nine-month period ended Sep 30 |
|||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Revenue |
16, 26 | 5,661,046 | 15,850,273 | |||||||||||||||||
Cost of sales |
7, 17, 26 | (5,441,111 | ) | (4,941,650 | ) | (15,066,015 | ) | (14,740,881 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit (loss) |
(8,538 | ) | 719,396 | 686,123 | 1,109,392 | |||||||||||||||
Selling expenses |
18 | (166,991 | ) | (140,644 | ) | (479,202 | ) | (370,218 | ) | |||||||||||
Administrative expenses |
18 | (203,221 | ) | (132,797 | ) | (453,090 | ) | (383,714 | ) | |||||||||||
Research and development expenses |
(213,974 | ) | (325,002 | ) | (963,995 | ) | (897,196 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(592,724 | ) | 120,953 | (1,210,164 | ) | (541,736 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Finance income |
21 | 106,117 | 13,564 | 201,120 | 121,121 | |||||||||||||||
Finance costs |
21 | (186,379 | ) | (14,029 | ) | (308,941 | ) | (70,218 | ) | |||||||||||
Other non-operating income |
20 | 199,365 | 61,929 | 645,078 | 424,721 | |||||||||||||||
Other non-operating expenses |
20 | (296,702 | ) | (61,178 | ) | (734,043 | ) | (448,101 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income tax |
(770,323 | ) | 121,239 | (1,406,950 | ) | (514,213 | ) | |||||||||||||
Income tax expense (benefit) |
22 | (195,277 | ) | 97,966 | (310,198 | ) | (39,883 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) for the period |
(575,046 | ) | 23,273 | (1,096,752 | ) | (474,330 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||
Items that will never be reclassified to profit or loss |
||||||||||||||||||||
Remeasurements of net defined benefit liabilities |
12 | (1,355 | ) | (4,737 | ) | (6,203 | ) | (16,129 | ) | |||||||||||
Related income tax |
12 | 332 | 1,267 | (3,219 | ) | 4,893 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive loss for the period, net of income tax |
(1,023 | ) | (3,470 | ) | (9,422 | ) | (11,236 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income (loss) for the period |
19,803 | (485,566 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Earnings (loss) per share (in won) |
||||||||||||||||||||
Basic and diluted earnings (loss) per share |
23 | 65 | (1,326 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the separate interim financial statements.
106
LG DISPLAY CO., LTD.
Condensed Separate Interim Statements of Changes in Equity
(Unaudited)
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Share capital |
Share premium |
Retained earnings |
Total equity |
||||||||||||
Balances at January 1, 2018 |
2,251,113 | 9,789,067 | 13,829,259 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss for the period |
||||||||||||||||
Loss for the period |
— | — | (474,330 | ) | (474,330 | ) | ||||||||||
Other comprehensive loss |
||||||||||||||||
Remeasurements of net defined benefit liabilities, net of tax |
— | — | (11,236 | ) | (11,236 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss for the period |
— | (485,566 | ) | (485,566 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Transaction with owners, recognized directly in equity |
||||||||||||||||
Dividends to shareholders |
— | — | (178,908 | ) | (178,908 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balances at September 30, 2018 |
2,251,113 | 9,124,593 | 13,164,785 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balances at January 1, 2019 |
2,251,113 | 9,172,389 | 13,212,581 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss for the period |
||||||||||||||||
Loss for the period |
— | — | (1,096,752 | ) | (1,096,752 | ) | ||||||||||
Other comprehensive loss |
||||||||||||||||
Remeasurements of net defined benefit liabilities, net of tax |
— | — | (9,422 | ) | (9,422 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss for the period |
— | (1,106,174 | ) | (1,106,174 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balances at September 30, 2019 |
2,251,113 | 8,066,215 | 12,106,407 | |||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the separate interim financial statements.
107
LG DISPLAY CO., LTD.
Condensed Separate Interim Statements of Cash Flows
(Unaudited)
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Cash flows from operating activities: |
||||||||||||
Loss for the period |
(474,330 | ) | ||||||||||
Adjustments for: |
||||||||||||
Income tax benefit |
22 | (310,198 | ) | (39,883 | ) | |||||||
Depreciation and amortization |
17 | 1,866,814 | 1,786,316 | |||||||||
Gain on foreign currency translation |
(73,717 | ) | (40,060 | ) | ||||||||
Loss on foreign currency translation |
140,748 | 91,399 | ||||||||||
Expenses related to defined benefit plans |
12 | 146,330 | 154,052 | |||||||||
Gain on disposal of property, plant and equipment |
(34,624 | ) | (33,788 | ) | ||||||||
Loss on disposal of property, plant and equipment |
16,408 | 7,375 | ||||||||||
Impairment loss on property, plant and equipment |
18,047 | 25,715 | ||||||||||
Gain on disposal of intangible assets |
(552 | ) | (239 | ) | ||||||||
Loss on disposal of intangible assets |
18 | — | ||||||||||
Impairment loss on intangible assets |
116,506 | 353 | ||||||||||
Reversal of impairment loss on intangible assets |
(480 | ) | (26 | ) | ||||||||
Expense on increases of provisions |
247,826 | 135,395 | ||||||||||
Finance income |
(180,135 | ) | (116,813 | ) | ||||||||
Finance costs |
292,235 | 65,529 | ||||||||||
Other income |
(18,945 | ) | (3,269 | ) | ||||||||
Other expenses |
5,325 | 612 | ||||||||||
|
|
|
|
|||||||||
2,231,606 | 2,032,668 | |||||||||||
Changes in |
||||||||||||
Trade accounts and notes receivable |
(1,468,471 | ) | 887,513 | |||||||||
Other accounts receivable |
(47,051 | ) | 51,381 | |||||||||
Inventories |
(61,308 | ) | (345,548 | ) | ||||||||
Other current assets |
(36,108 | ) | 17,190 | |||||||||
Other non-current assets |
(24,984 | ) | (43,718 | ) | ||||||||
Trade accounts and notes payable |
(204,078 | ) | 1,152,050 | |||||||||
Other accounts payable |
1,364,558 | (166,994 | ) | |||||||||
Accrued expenses |
244,276 | (70,563 | ) | |||||||||
Provisions |
(158,073 | ) | (129,627 | ) | ||||||||
Other current liabilities |
(52,115 | ) | 119,686 | |||||||||
Defined benefit liabilities, net |
(21,997 | ) | (6,491 | ) | ||||||||
Long-term advances received |
63,672 | 829,088 | ||||||||||
Other non-current liabilities |
9,893 | 20,267 | ||||||||||
|
|
|
|
|||||||||
(391,786 | ) | 2,314,234 | ||||||||||
Cash generated from operating activities |
743,068 | 3,872,572 | ||||||||||
Income taxes refunded (paid) |
15,746 | (228,055 | ) | |||||||||
Interests received |
9,070 | 17,740 | ||||||||||
Interests paid |
(169,711 | ) | (103,761 | ) | ||||||||
|
|
|
|
|||||||||
Net cash provided by operating activities |
3,558,496 | |||||||||||
|
|
|
|
See accompanying notes to the separate interim financial statements.
108
LG DISPLAY CO., LTD.
Condensed Separate Interim Statements of Cash Flows, Continued
(Unaudited)
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Cash flows from investing activities: |
||||||||||||
Dividends received |
24,136 | |||||||||||
Increase in deposits in banks |
(111,180 | ) | (272,680 | ) | ||||||||
Proceeds from withdrawal of deposits in banks |
111,180 | 775,895 | ||||||||||
Acquisition of financial assets at fair value through profit or loss |
— | (285 | ) | |||||||||
Acquisition of financial assets at fair value through other comprehensive income |
(21 | ) | — | |||||||||
Proceeds from disposal of financial assets at fair value through other comprehensive income |
99 | 6 | ||||||||||
Acquisition of investments |
(1,342,937 | ) | (562,662 | ) | ||||||||
Proceeds from disposal of investments |
7,039 | 2,382 | ||||||||||
Acquisition of property, plant and equipment |
(1,884,476 | ) | (4,410,924 | ) | ||||||||
Proceeds from disposal of property, plant and equipment |
327,652 | 192,098 | ||||||||||
Acquisition of intangible assets |
(404,429 | ) | (398,107 | ) | ||||||||
Proceeds from disposal of intangible assets |
2,349 | 960 | ||||||||||
Government grants received |
3,979 | 1,210 | ||||||||||
Receipt from settlement of derivatives |
22,852 | 314 | ||||||||||
Proceeds from collection of short-term loans |
14,656 | 6,847 | ||||||||||
Increase in short-term loans |
(8,725 | ) | (5,000 | ) | ||||||||
Increase in long-term loans |
(6,465 | ) | (31,180 | ) | ||||||||
Increase in deposits |
(4,463 | ) | (349 | ) | ||||||||
Decrease in deposits |
5,242 | 364 | ||||||||||
Proceeds from disposal of emission rights |
20,416 | 10,200 | ||||||||||
|
|
|
|
|||||||||
Net cash used in investing activities |
(3,228,610 | ) | (4,666,775 | ) | ||||||||
|
|
|
|
|||||||||
Cash flows from financing activities: |
25 | |||||||||||
Proceeds from short-term borrowings |
1,264,915 | 109,446 | ||||||||||
Repayments of short-term borrowings |
(928,335 | ) | (109,712 | ) | ||||||||
Proceeds from issuance of bonds |
1,323,239 | 498,170 | ||||||||||
Proceeds from long-term borrowings• |
1,569,148 | 1,774,180 | ||||||||||
Repayments of current portion of long-term borrowings and bonds• |
(708,260 | ) | (726,014 | ) | ||||||||
Payment guarantee fee received |
5,043 | 1,328 | ||||||||||
Repayments of lease liabilities |
(10,415 | ) | — | |||||||||
Dividends paid |
— | (178,908 | ) | |||||||||
|
|
|
|
|||||||||
Net cash provided by financing activities |
2,515,335 | 1,368,490 | ||||||||||
|
|
|
|
|||||||||
Net increase (decrease) in cash and cash equivalents |
(115,102 | ) | 260,211 | |||||||||
Cash and cash equivalents at January 1 |
473,283 | 566,408 | ||||||||||
|
|
|
|
|||||||||
Cash and cash equivalents at September 30 |
826,619 | |||||||||||
|
|
|
|
See accompanying notes to the separate interim financial statements.
109
1. | Organization and Description of Business |
LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of September 30, 2019, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of September 30, 2019, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.
The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of September 30, 2019, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of September 30, 2019, there are 19,414,164 ADSs outstanding.
2. | Basis of Presenting Financial Statements |
(a) | Statement of Compliance |
The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the separate financial statements of the Company as of and for the year ended December 31, 2018.
These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, Separate Financial Statements, presented by a parent, an investor in an associate, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.
From January 1, 2019, the Company adopted K-IFRS No. 1116, Leases, for the first time. Changes to significant accounting policies are described in Note 3.
110
2. | Basis of Presenting Financial Statements, Continued |
(b) | Basis of Measurement |
The condensed separate interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:
• | derivative financial instruments at fair value, financial assets at fair value through profit or loss (“FVTPL”), financial asset at fair value through other comprehensive income (“FVOCI”) and financial liabilities at FVTPL and |
• | net defined benefit liabilities recognized at the present value of defined benefit obligations less the fair value of plan assets. |
(c) | Functional and Presentation Currency |
The condensed separate interim financial statements are presented in Korean won, which is the Company’s functional currency.
(d) | Use of Estimates and Judgments |
The preparation of the condensed separate interim financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
111
3. | Summary of Significant Accounting Policies |
The significant accounting policies followed by the Company in the preparation of its condensed separate interim financial statements are the same as those followed by the Company in its preparation of the separate financial statements as of and for the year ended December 31, 2018, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the changes in accounting policies explained below. The changes in accounting policies are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2019.
Changes | in Accounting Policies |
The Company has initially adopted K-IFRS 1116, Leases, from January 1, 2019. A number of other new standards are effective from January 1, 2019 but they do not have a material effect on the Company’s condensed separate interim financial statements.
K-IFRS No. 1116 introduced a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
(i) | Definition of a lease |
Previously, the Company determined at contract inception whether an arrangement was or contained a lease under K-IFRS No. 2104, Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under K-IFRS No. 1116, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to K-IFRS No. 1116, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases for contracts that were previously identified as leases under K-IFRS No. 1017 and K-IFRS No. 2104 as of January 1, 2019. Contracts that were not identified as leases under K-IFRS No. 1017 and K-IFRS No. 2104 were not reassessed. Therefore, the definition of a lease under K-IFRS No. 1116 has been applied only to contracts entered into or changed on or after January 1, 2019.
(ii) | Accounting as a lessee |
The Company leases buildings, vehicles, machinery and equipment and others.
As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under K-IFRS No. 1116, the Company recognizes right-of-use assets and lease liabilities for most leases on the condensed separate interim statement of financial position.
However, as permitted in K-IFRS No.1116, the Company has elected not to recognize right-of-use assets and lease liabilities for certain short-term leases and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
112
3. | Summary of Significant Accounting Policies, Continued |
The carrying amounts of right-of-use assets recognized in the condensed separate interim financial statements are as below and those right-of use assets are presented in property, plant and equipment in the condensed separate interim statements of financial position.
(In millions of won) | Buildings | Machinery and equipment |
Vehicles | Others | Total | |||||||||||||||
Balance at January 1, 2019 |
1,021 | 5,922 | 51 | 16,332 | ||||||||||||||||
Balance at September 30, 2019 |
964 | 5,172 | 48 | 9,266 |
The Company presents lease liabilities in financial liabilities in the condensed separate interim statement of financial position.
i) | Significant accounting policies |
The Company recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses. The book value of right-of-use asset is adjusted when there is a remeasurement of the lease liability arising from a change in future lease payments.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate that would be applicable when the Company were to borrow the funds to obtain an asset of a similar value to the right-of-use asset over a similar term and with a similar security in a similar economic environment. Generally, the Company uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest expense on the lease liability and decreased by lease payment made. The Company remeasures the lease liability when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
Determination of the lease term for some lease contracts that include renewal options require the Company’s judgment. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.
ii) | Initial application |
At initial application, the Company measures lease liabilities for leases classified as operating leases under K-IFRS No. 1017, at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
113
3. | Summary of Significant Accounting Policies, Continued |
The Company used the following practical expedients when applying K-IFRS No. 1116 to leases previously classified as operating leases under K-IFRS No. 1017.
• | Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of remaining lease term at initial application. |
• | Excluded initial direct costs from measuring the right-of-use asset at the date of initial application. |
• | Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. |
(iii) | Impacts on condensed separate interim financial statements |
i) | Impacts on initial application |
On initial application to K-IFRS No. 1116, the Company recognized additional right-of-use assets and additional lease liabilities. The impact on initial application is summarized below.
(In millions of won) | January 1, 2019 | |||
Right-of-use assets presented in property, plant and equipment |
||||
Lease liabilities |
16,332 |
When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 2.96%.
ii) | Impacts for the period |
As a result of initially applying K-IFRS No. 1116, the Company recognized
W9,266 million of right-of-use assets and W9,017 million of lease liabilities as at September 30, 2019.
Also in accordance with K-IFRS No. 1116, the Company recognized depreciation and interest
expense, instead of operating lease expense in relation to leases. During the nine-month period ended September 30, 2019, the Company recognized W10,227 million of depreciation and W300 million of interest
expense from these leases.
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4. | Cash and Cash Equivalents and Deposits in Banks |
Cash and cash equivalents and deposits in banks as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Cash and cash equivalents |
||||||||
Demand deposits |
473,283 | |||||||
Deposits in banks |
||||||||
Time deposits |
3,118 | |||||||
Restricted deposits (*) |
77,200 | 74,082 | ||||||
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77,200 | ||||||||
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Non-current assets |
||||||||
Deposits in banks |
||||||||
Restricted deposits (*) |
11 | |||||||
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550,494 | ||||||||
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(*) | Includes funds deposited under agreements on mutually beneficial cooperation to aid LG Group companies’ suppliers, restricted deposits pledged to enforce the Company’s investment plans upon the receipt of grants from Gumi city and Gyeongsangbuk-do, and others. |
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5. | Receivables and Other Assets |
(a) | Trade accounts and notes receivable as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Due from third parties |
257,037 | |||||||
Due from related parties |
4,217,223 | 3,132,071 | ||||||
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3,389,108 | ||||||||
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(b) | Other accounts receivable as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Non-trade receivables, net |
316,069 | |||||||
Accrued income |
24,556 | 5,894 | ||||||
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321,963 | ||||||||
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Non-current assets |
||||||||
Long-term non-trade receivables |
25,823 | |||||||
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347,786 | ||||||||
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Due from related parties included in other accounts receivable as of September 30, 2019 and December 31,
2018 are W73,359 million and W247,677 million, respectively.
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5. | Receivables and Other Assets, Continued |
(c) | The aging of trade accounts and notes receivable and other accounts receivable as of September 30, 2019 and December 31, 2018 are as follows: |
September 30, 2019 | ||||||||||||||||
Book value | Allowance for impairment | |||||||||||||||
(In millions of won) | Trade accounts and notes receivable |
Other accounts receivable |
Trade accounts and notes receivable |
Other accounts receivable |
||||||||||||
Current |
483,037 | (4 | ) | (2,798 | ) | |||||||||||
1-15 days past due |
348 | 948 | — | (3 | ) | |||||||||||
16-30 days past due |
275 | 5,466 | — | — | ||||||||||||
31-60 days past due |
64 | 29 | — | — | ||||||||||||
More than 60 days past due |
8 | 1,303 | — | (25 | ) | |||||||||||
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490,783 | (4 | ) | (2,826 | ) | ||||||||||||
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December 31, 2018 | ||||||||||||||||
Book value | Allowance for impairment | |||||||||||||||
(In millions of won) | Trade accounts and notes receivable |
Other accounts receivable |
Trade accounts and notes receivable |
Other accounts receivable |
||||||||||||
Current |
347,669 | (5 | ) | (551 | ) | |||||||||||
1-15 days past due |
1,353 | 274 | — | (2 | ) | |||||||||||
16-30 days past due |
79 | 69 | — | (1 | ) | |||||||||||
31-60 days past due |
28 | 95 | — | (1 | ) | |||||||||||
More than 60 days past due |
— | 668 | — | (434 | ) | |||||||||||
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348,775 | (5 | ) | (989 | ) | ||||||||||||
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The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the nine-month period ended September 30, 2019 and the year ended December 31, 2018 are as follows:
2019 | 2018 | |||||||||||||||
(In millions of won) | Trade accounts and notes receivable |
Other accounts receivable |
Trade accounts and notes receivable |
Other accounts receivable |
||||||||||||
Balance at the beginning of the period |
989 | 570 | 1,092 | |||||||||||||
(Reversal of) bad debt expense |
(1 | ) | 1,837 | (565 | ) | (103 | ) | |||||||||
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Balance at the reporting date |
2,826 | 5 | 989 | |||||||||||||
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5. | Receivables and Other Assets, Continued |
(d) | Other assets as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Advanced payments |
3,354 | |||||||
Prepaid expenses |
149,843 | 73,254 | ||||||
Value added tax refundable |
38,750 | 52,252 | ||||||
Right to recover returned goods |
20,428 | 7,489 | ||||||
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136,349 | ||||||||
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Non-current assets |
||||||||
Long-term prepaid expenses |
325,219 | |||||||
Long-term advanced payments |
4,631 | — | ||||||
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325,219 | ||||||||
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6. | Other Financial Assets |
Other financial assets as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current assets |
||||||||
Financial assets at fair value through profit or loss |
||||||||
Derivatives(*) |
13,059 | |||||||
Financial assets at fair value through other comprehensive income |
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Debt instruments |
||||||||
Government bonds |
106 | |||||||
Financial asset carried at amortized cost |
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Short-term loans |
16,116 | |||||||
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29,281 | ||||||||
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Non-current assets |
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Financial assets at fair value through profit or loss |
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Equity instruments |
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Intellectual Discovery, Ltd. |
4,598 | |||||||
Kyulux, Inc. |
2,460 | 2,460 | ||||||
Fineeva Co., Ltd. |
4 | 286 | ||||||
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7,344 | ||||||||
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Convertible bonds |
1,327 | |||||||
Derivatives(*) |
55,722 | — | ||||||
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8,671 | ||||||||
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Financial assets at fair value through other comprehensive income |
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Debt instruments |
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Government bonds |
55 | |||||||
Financial assets carried at amortized cost |
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Deposits |
13,418 | |||||||
Long-term loans |
45,766 | 55,048 | ||||||
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68,466 | ||||||||
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77,192 | ||||||||
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(*) | Represents valuation gain from currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. The contracts are not designated as hedging instruments. |
Other financial assets issued by related
parties as of December 31, 2018 is W2,000 million.
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7. | Inventories |
Inventories as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Finished goods |
539,859 | |||||||
Work-in-process |
915,201 | 791,396 | ||||||
Raw materials |
404,742 | 500,413 | ||||||
Supplies |
113,368 | 119,487 | ||||||
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1,951,155 | ||||||||
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For the nine-month periods ended September 30, 2019 and 2018, the amount of inventories recognized as cost of sales including inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:
(In millions of won) | 2019 | 2018 | ||||||
Inventories recognized as cost of sales |
14,740,881 | |||||||
Including: inventory write-downs |
403,197 | 235,218 | ||||||
Including: reversal and usage of inventory write-downs |
(280,323 | ) | (184,139 | ) |
120
8. | Investments |
(a) | Investments in subsidiaries consist of the following: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Overseas Subsidiaries |
Location | Business | Percentage of ownership |
Book value |
Percentage of ownership |
Book Value |
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LG Display America, Inc. |
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San Jose, U.S.A. |
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Sell display products | 100 | % | 100 | % | ||||||||||||||||
LG Display Germany GmbH |
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Eschborn, Germany |
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Sell display products | 100 | % | 19,373 | 100 | % | 19,373 | ||||||||||||||
LG Display Japan Co., Ltd. |
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Tokyo, Japan |
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Sell display products | 100 | % | 15,686 | 100 | % | 15,686 | ||||||||||||||
LG Display Taiwan Co., Ltd. |
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Taipei, Taiwan |
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Sell display products | 100 | % | 35,230 | 100 | % | 35,230 | ||||||||||||||
LG Display Nanjing Co., Ltd. |
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Nanjing, China |
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Manufacture display products |
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100 | % | 593,726 | 100 | % | 593,726 | ||||||||||||
LG Display Shanghai Co., Ltd. |
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Shanghai, China |
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Sell display products | 100 | % | 9,093 | 100 | % | 9,093 | ||||||||||||||
LG Display Poland Sp. z o.o. (*1) |
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Wroclaw, Poland |
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Manufacture display products |
|
100 | % | 166,054 | 100 | % | 194,992 | ||||||||||||
LG Display Guangzhou Co., Ltd. |
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Guangzhou, China |
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Manufacture display products |
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100 | % | 293,557 | 100 | % | 293,557 | ||||||||||||
LG Display Shenzhen Co., Ltd. |
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Shenzhen, China |
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Sell display products | 100 | % | 3,467 | 100 | % | 3,467 | ||||||||||||||
LG Display Singapore Pte. Ltd. |
Singapore | Sell display products | 100 | % | 1,250 | 100 | % | 1,250 | ||||||||||||||||
L&T Display Technology (Fujian) Limited |
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Fujian, China |
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Manufacture and sell LCD module and LCD monitor sets |
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51 | % | 10,123 | 51 | % | 10,123 | ||||||||||||
LG Display Yantai Co., Ltd. |
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Yantai, China |
|
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Manufacture display products |
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100 | % | 169,195 | 100 | % | 169,195 | ||||||||||||
Nanumnuri Co., Ltd. |
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Gumi, South Korea |
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Janitorial services | 100 | % | 800 | 100 | % | 800 | ||||||||||||||
LG Display (China) Co., Ltd. |
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Guangzhou, China |
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Manufacture and Sell display products |
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51 | % | 723,086 | 51 | % | 723,086 | ||||||||||||
Unified Innovative Technology, LLC |
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Wilmington, U.S.A. |
|
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Manage intellectual property |
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100 | % | 9,489 | 100 | % | 9,489 | ||||||||||||
LG Display Guangzhou Trading Co., Ltd. |
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Guangzhou, China |
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Sell display products | 100 | % | 218 | 100 | % | 218 | ||||||||||||||
Global OLED Technology LLC |
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Sterling, U.S.A |
|
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Manage OLED intellectual property |
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100 | % | 164,322 | 100 | % | 164,322 | ||||||||||||
LG Display Vietnam Haiphong Co., Ltd.(*2) |
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Haiphong, Vietnam |
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Manufacture display Products |
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100 | % | 672,658 | 100 | % | 329,978 | |||||||||||||
Suzhou Lehui Display Co., Ltd. |
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Suzhou, China |
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Manufacture and sell LCD module and LCD monitor sets |
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100 | % | 121,640 | 100 | % | 121,640 | ||||||||||||
LG DISPLAY FUND I LLC(*3) |
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Wilmington, U.S.A |
|
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Invest in venture business and acquire technologies |
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100 | % | 5,424 | 100 | % | 2,249 | ||||||||||||
LG Display High-Tech (China) Co., Ltd.(*4) |
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Guangzhou, China |
|
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Manufacture and sell display products |
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74 | % | 1,794,547 | 69 | % | 749,154 | ||||||||||||
Money Market Trust |
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Seoul, South Korea |
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Money market trust | 100 | % | 153,700 | 100 | % | 24,501 | ||||||||||||||
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8. | Investments, Continued |
(*1) | On July 1, 2019, LG Display Poland Sp. Z o.o. (“LGDWR”) commenced the liquidation process and
for the nine-month period ended September 30, 2019, the Company recognized an impairment loss of |
(*2) | For the nine-month period ended September 30, 2019, the Company contributed
|
(*3) | For the nine-month period ended September 30, 2019, the Company contributed
|
(*4) | For the nine-month period ended September 30, 2019, the Company contributed
|
122
8. | Investments, Continued |
(b) | Investments in associates consist of the following: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||||||||||||||
Associates |
Location |
Business |
Percentage of ownership |
Book Value |
Percentage of ownership |
Book Value |
||||||||||||||
Paju Electric Glass Co., Ltd. |
Paju, South Korea |
Manufacture glass for display | 40 | % | 40 | % | ||||||||||||||
INVENIA Co., Ltd.(*1) |
Seongnam, South Korea |
Develop and manufacture the equipment for display | — | — | 13 | % | 6,330 | |||||||||||||
WooRee E&L Co., Ltd. |
Ansan, South Korea |
Manufacture LED back light unit packages | 14 | % | 4,746 | 14 | % | 4,746 | ||||||||||||
YAS Co., Ltd. |
Paju, South Korea |
Develop and manufacture deposition equipment for OLEDs | 15 | % | 10,000 | 15 | % | 10,000 | ||||||||||||
AVATEC Co., Ltd.(*2) |
Daegu, South Korea |
Process and sell glass for display | 14 | % | 8,000 | 17 | % | 10,600 | ||||||||||||
Arctic Sentinel, Inc. |
Los Angeles, U.S.A. | Develop and manufacture tablet for kids | 10 | % | — | 10 | % | — | ||||||||||||
CYNORA GmbH(*)(*3) |
Bruchsal, Germany |
Develop organic emitting materials for displays and lighting devices | 12 | % | 8,668 | 14 | % | 8,668 | ||||||||||||
Material Science Co., Ltd. |
Seoul, South Korea |
Develop, manufacture and sell materials for display | 10 | % | 3,346 | 10 | % | 3,346 | ||||||||||||
Nanosys Inc. |
Milpitas, U.S.A. |
Develop, manufacture and sell materials for display | 4 | % | 5,491 | 4 | % | 5,491 | ||||||||||||
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(*1) | In September 2019, the Company disposed of the entire investments, 3,000,000 shares of common stock, in INVENIA
Co., Ltd. and recognized |
(*2) | In August 2019, the Company disposed of 650,000 shares of common stock in AVATEC Co., Ltd. As of
September 30, 2019, the Company ownership percentage in AVATEC Co., Ltd. is 14% and the Company recognized |
(*3) | For the nine-month period ended September 30, 2019, the Company’s ownership percentage in CYNORA GmbH decreased from 14% to 12% as the Company did not participate in the capital increase of CYNORA GmbH. |
For the nine-month
periods ended September 30, 2019 and 2018, the aggregate amount of recognized dividends income from subsidiaries and associates are W18,622 million and W95,553 million, respectively.
123
9. | Property, Plant and Equipment |
For the nine-month periods ended September 30, 2019 and 2018, the Company purchased property, plant and equipment of
W1,378,503 million and W4,138,561 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W105,272 million and 2.77%, and
W82,092 million and 2.68% for the nine-month periods ended September 30, 2019 and 2018, respectively. In addition, for the nine-month period ended September 30, 2019, the Company entered into various new lease agreements for
the usage of buildings, vehicles and others. In relation to these leases, the Company recognized W3,161 million of right-of-use assets and lease
liabilities, in aggregate, during the nine-month period ended September 30, 2019. Also, for the nine-month periods ended September 30, 2019 and 2018, the Company disposed of property, plant and equipment with carrying amounts of
W541,708 million and W126,210 million, respectively, and recognized W34,624 million and W16,408 million, respectively, as gain and loss on disposal of property,
plant and equipment for the nine-month period ended September 30, 2019 (gain and loss for the nine-month period ended September 30, 2018: W33,788 million and W7,375million, respectively).
10. | Intangible Assets |
The Company capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing
of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of September 30, 2019 and
December 31, 2018, are W367,847 million and W366,910 million, respectively. The Company recognized an impairment loss amounting to W116,506 million in connection with projects
dropped after the impairment review on its development projects.
124
11. | Financial Liabilities |
(a) | Financial liabilities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current |
||||||||
Short-term borrowings |
— | |||||||
Current portion of long-term borrowings and bonds |
1,060,638 | 1,040,148 | ||||||
Current portion of payment guarantee liabilities |
5,238 | 4,693 | ||||||
Lease liabilities |
6,645 | — | ||||||
|
|
|
|
|||||
1,044,841 | ||||||||
|
|
|
|
|||||
Non-current |
||||||||
Won denominated borrowings |
2,700,608 | |||||||
Foreign currency denominated borrowings |
1,723,866 | 626,136 | ||||||
Bonds |
2,885,933 | 1,772,599 | ||||||
Payment guarantee liabilities |
11,222 | 14,375 | ||||||
Derivatives(*) |
6,157 | 25,758 | ||||||
Lease liabilities |
2,372 | — | ||||||
|
|
|
|
|||||
5,139,476 | ||||||||
|
|
|
|
(*) | Represents currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. |
(b) | Foreign currency denominated short-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won and USD)
Lender |
Annual interest rate as of September 30, 2019 (%)(*) |
September 30, 2019 |
December 31, 2018 |
|||||||||
Standard Chartered Bank Korea Limited |
12ML + 0.78~0.88 | — | ||||||||||
|
|
|
|
|||||||||
Foreign currency equivalent |
USD 300 | — |
(*) | ML represents Month LIBOR (London Inter-Bank Offered Rates). |
125
11. | Financial Liabilities, Continued |
(c) | Won denominated long-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||
Lender |
Annual interest rate as of September 30, 2019 (%) |
September 30, 2019 |
December 31, 2018 |
|||||||||
Woori Bank |
2.75 | 1,259 | ||||||||||
Korea Development Bank and others |
|
CD rate (91 days) + 1.00, 2.21~3.25 |
|
3,230,000 | 2,850,000 | |||||||
Less current portion of long-term borrowings |
(428,775 | ) | (150,651 | ) | ||||||||
|
|
|
|
|||||||||
2,700,608 | ||||||||||||
|
|
|
|
(d) | Foreign currency denominated long-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won and USD) | ||||||||||||
Lender |
Annual interest rate as of September 30, 2019 (%) |
September 30, 2019 |
December 31, 2018 |
|||||||||
The Export-Import Bank of Korea and others |
|
3ML+0.75 ~1.70 6ML+1.25 ~1.35 |
|
955,975 | ||||||||
|
|
|
|
|||||||||
Foreign currency equivalent |
USD 1,495 | USD 855 | ||||||||||
Less current portion of long-term borrowings |
(72,078 | ) | (329,839 | ) | ||||||||
|
|
|
|
|||||||||
626,136 | ||||||||||||
|
|
|
|
126
11. | Financial Liabilities, Continued |
(e) | Details of bonds issued and outstanding as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | Maturity | Annual interest rate as of September 30, 2019 (%) |
September 30, 2019 |
December 31, 2018 |
||||||||||||
Won denominated bonds (*1) |
||||||||||||||||
Publicly issued bonds |
|
Oct 2019~ Feb 2024 |
|
1.80~2.95 | 1,900,000 | |||||||||||
Privately issued bonds |
|
May 2025~ May 2033 |
|
3.25~4.25 | 110,000 | 110,000 | ||||||||||
Less discount on bonds |
(3,870 | ) | (3,949 | ) | ||||||||||||
Less current portion |
(559,785 | ) | (559,658 | ) | ||||||||||||
|
|
|
|
|||||||||||||
1,446,393 | ||||||||||||||||
|
|
|
|
|||||||||||||
Foreign currency denominated bonds (*2) |
||||||||||||||||
Publicly issued bonds |
Nov 2021 | 3.88 | 335,430 | |||||||||||||
Privately issued bonds |
Apr 2023 | 3ML+1.47 | 120,130 | — | ||||||||||||
|
|
|
|
|||||||||||||
Foreign currency equivalent |
USD 400 | USD 300 | ||||||||||||||
|
|
|
|
|||||||||||||
Less discount on bonds |
(8,027 | ) | (9,224 | ) | ||||||||||||
|
|
|
|
|||||||||||||
326,206 | ||||||||||||||||
|
|
|
|
|||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Foreign currency convertible bonds |
Aug 2024 | 1.50 | — | |||||||||||||
|
|
|
|
|||||||||||||
Foreign currency equivalent |
USD 697 | — | ||||||||||||||
|
|
|
|
|||||||||||||
1,772,599 | ||||||||||||||||
|
|
|
|
(*1) | Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly. |
(*2) | Principal of the foreign currency denominated bonds is to be repaid at maturity and interests are paid quarterly or semi-annually. |
127
11. | Financial Liabilities, Continued |
(f) | Details of the convertible bonds issued and outstanding as of September 30, 2019 as follows: |
(In won, USD)) | ||
Description | ||
Type |
Foreign currency unsecured denominated convertible bonds | |
Issuance amount |
USD 687,800,000 | |
Interest rate (%) |
1.50 | |
Issuance date |
August 22, 2019 | |
Maturity date |
August 22, 2024 | |
Interest payment |
Payable semi-annually in arrear until maturity date in equal installments commencing on issuance | |
Principal redemption |
1. Redemption at maturity: Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed or converted, together with accrued but unpaid interest | |
2. Advanced redemption: The Company has a right to redeem in advance (call option) and the bondholders have a right to require the Company to redeem in advance (put option) | ||
Conversion price |
||
Conversion period |
From August 23, 2020 to August 12, 2024 | |
Redemption at the option of the issuer |
- On or at any time after 3 years from the issuance, if the closing price of the shares for any 20 trading days out of the 30 consecutive trading days is at least 130% of the applicable conversion price - The aggregate principal amount of the convertible bonds outstanding is less than 10% of the aggregate principal amount originally issued (clean up call), or - In the event of certain changes in laws and other directives resulting in additional taxes for the holders | |
Redemption at the option of the bondholders (Put option) |
On the day of 3 years from the issuance |
The Company designated the convertible bonds as financial liabilities at fair value through profit of loss and recognized the change in fair value in profit or loss. The Company measures the convertible bond at fair value using the market price of convertible bonds disclosed on Bloomberg. The number of convertible shares as of September 30, 2019 is as follows:
(In won and No. of shares) | September 30, 2019 | |||
Aggregate outstanding amount of the convertible bonds |
||||
Conversion price |
||||
Number of convertible shares |
40,988,998 |
128
12. | Employee Benefits |
The Company’s defined benefit plans provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Company.
(a) | Net defined benefit liabilities recognized as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Present value of partially funded defined benefit obligations |
1,592,366 | |||||||
Fair value of plan assets |
(1,529,424 | ) | (1,548,179 | ) | ||||
|
|
|
|
|||||
44,187 | ||||||||
|
|
|
|
(b) | Expenses recognized in profit or loss for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Current service cost |
51,108 | 145,419 | 153,326 | |||||||||||||
Net interest cost |
303 | 242 | 911 | 726 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
51,350 | 146,330 | 154,052 | ||||||||||||||
|
|
|
|
|
|
|
|
(c) | Plan assets as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Guaranteed deposits in banks |
1,548,179 |
As of September 30, 2019, the Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.
(d) | Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Remeasurements of net defined benefit liabilities |
(4,737 | ) | (6,203 | ) | (16,129 | ) | ||||||||||
Tax effect |
332 | 1,267 | (3,219 | ) | 4,893 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Remeasurements of net defined benefit liabilities, net of income tax |
(3,470 | ) | (9,422 | ) | (11,236 | ) | ||||||||||
|
|
|
|
|
|
|
|
129
13. | Provisions and Other Liabilities |
(a) | Changes in provisions for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | Litigations and claims |
Warranties (*) | Others | Total | ||||||||||||
Balance at January 1, 2019 |
120,389 | 8,930 | 129,319 | |||||||||||||
Additions |
3,073 | 244,635 | 16,869 | 264,577 | ||||||||||||
Usage |
(3,073 | ) | (171,751 | ) | — | (174,824 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2019 |
193,273 | 25,799 | 219,072 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Current |
135,719 | 25,799 | 161,518 | |||||||||||||
Non-current |
57,554 | — | 57,554 |
(*) | The provision for warranties on defective products is normally applicable for 18~36 months from the date of purchase. The provision is calculated by using historical and anticipated rates of warranty claims and costs per claim to satisfy the Company’s warranty obligation. |
(b) | Other liabilities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Current liabilities |
||||||||
Withholdings |
16,181 | |||||||
Unearned revenues |
27,478 | 11,073 | ||||||
Security deposits received |
7,620 | 165 | ||||||
|
|
|
|
|||||
27,419 | ||||||||
|
|
|
|
|||||
Non-current liabilities |
||||||||
Long-term accrued expenses |
78,466 | |||||||
Long-term other accounts payable |
2,223 | 3,081 | ||||||
Long-term unearned revenues |
1,331 | 2,116 | ||||||
Security deposits received |
3,380 | 10,790 | ||||||
|
|
|
|
|||||
94,453 | ||||||||
|
|
|
|
130
14. | Contingencies and Commitments |
(a) | Legal Proceedings |
Anti-trust litigations
Some individual claimants filed “follow-on” damages claims against the Company and other TFT-LCD manufacturers alleging violations of EU competition law. While the Company continues its vigorous defense of the various pending proceedings described above, management’s assessment of the facts and circumstances could change based upon new information, intervening events and the final outcome of the cases. Consequently, the actual results could be different from management’s current estimates.
Solas OLED Ltd. Litigations
In April 2019, Solas OLED Ltd. filed patent infringement actions against the Company and television manufacturers in the United States District Court for the Western District of Texas as well as the Company and its subsidiary, LG Display Germany GmbH, and television manufacturers in Mannheim District Court in Germany. The Company has not recognized any provision as of September 30, 2019. It is not possible to reasonably estimate an amount of potential loss, if any, because plaintiffs have not provided any information regarding damages.
Others
The Company is involved in various disputes in addition to pending proceedings described above. The Company cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the disputes.
(b) | Commitments |
Factoring and securitization of accounts receivable
The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an
aggregate of USD 1,560 million (W1,874,028 million) in connection with the Company’s export sales transactions with its subsidiaries. As of September 30, 2019, there are no outstanding short-term borrowings that are past
due in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.
The Company has a credit facility agreement with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts
receivables up to an aggregate of W688,507 million in connection with its domestic and export sales transactions and, as of September 30, 2019, W48,325 million of accounts and notes receivable sold to
Shinhan Bank were outstanding in connection with the agreement. In connection with the contract above, the Company has sold its accounts receivable without recourse.
Letters of credit
As of September 30, 2019, the Company has agreements in relation to opening of letters of credit up to USD 50 million
(W60,065 million) with Sumitomo Mitsui Banking Corporation.
131
14. | Contingencies and Commitments, Continued |
Payment guarantees
The Company provides payment guarantees in connection with the principal amount of term loan credit facilities amounting to USD
1,144 million (W1,374,564 million) and payables for facilities amounting to USD 55 million (W65,588 million).
In addition, the Company obtained payment guarantees amounting to USD 1,275 million (W1,531,658 million) from KEB Hana
Bank and others for advances received related to the long-term supply agreements. The Company also obtained payment guarantees amounting to USD 306 million (W367,373 million) from Korea Development Bank for foreign currency
denominated bonds.
License agreements
As of September 30, 2019, in relation to its LCD business, the Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.
Long-term supply agreement
As of September 30, 2019, in connection with long-term supply agreements with customers, the Company recognized USD 1,075 million
(W1,291,398 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The
Company received payment guarantees amounting to USD 1,275 million (W1,531,658 million) from KEB Hana Bank and other various banks relating to advances received (see note 14(b) payment guarantees).
15. | Share capital |
The Company is authorized to issue 500,000,000 shares of capital stock (par value W 5,000), and as of September 30, 2019
and December 31, 2018, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2018 to September 30, 2019.
16. | Revenue |
Details of revenue for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Sales of goods |
5,650,848 | 15,707,148 | 15,818,884 | |||||||||||||
Royalties |
9,890 | 3,491 | 28,911 | 11,356 | ||||||||||||
Others |
5,181 | 6,707 | 16,079 | 20,033 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
5,661,046 | 15,752,138 | 15,850,273 | ||||||||||||||
|
|
|
|
|
|
|
|
132
17. | The Nature of Expenses and Others |
The classification of expenses by nature for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Changes in inventories |
(200,754 | ) | (61,308 | ) | (258,600 | ) | ||||||||||
Purchases of raw materials, merchandise and others |
2,297,856 | 2,250,888 | 6,410,588 | 6,138,450 | ||||||||||||
Depreciation and amortization |
657,755 | 615,599 | 1,866,814 | 1,786,316 | ||||||||||||
Outsourcing |
1,758,873 | 1,383,154 | 4,499,514 | 4,292,740 | ||||||||||||
Labor |
709,854 | 667,704 | 1,952,977 | 2,041,913 | ||||||||||||
Supplies and others |
124,969 | 182,420 | 472,819 | 571,924 | ||||||||||||
Utility |
196,821 | 194,949 | 540,738 | 543,100 | ||||||||||||
Fees and commissions |
120,862 | 132,822 | 372,146 | 411,347 | ||||||||||||
Shipping |
17,922 | 25,557 | 56,119 | 76,077 | ||||||||||||
Advertising |
49,836 | 33,731 | 84,147 | 72,146 | ||||||||||||
Warranty |
68,924 | 54,984 | 244,635 | 135,395 | ||||||||||||
Travel |
22,056 | 24,388 | 66,793 | 72,255 | ||||||||||||
Taxes and dues |
15,421 | 13,237 | 45,043 | 42,251 | ||||||||||||
Others |
279,750 | 163,798 | 572,748 | 510,440 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
5,542,477 | 17,123,773 | 16,435,754 | ||||||||||||||
|
|
|
|
|
|
|
|
Total expenses consist of cost of sales, selling, administrative, research and development expenses and other non-operating expenses, excluding foreign exchange differences.
133
18. | Selling and Administrative Expenses |
Details of selling and administrative expenses for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Salaries(*) |
59,913 | 254,359 | 185,484 | |||||||||||||
Expenses related to defined benefit plans |
7,798 | 7,339 | 23,851 | 21,431 | ||||||||||||
Other employee benefits |
10,812 | 10,897 | 38,147 | 33,546 | ||||||||||||
Shipping |
13,333 | 17,460 | 42,728 | 53,612 | ||||||||||||
Fees and commissions |
35,485 | 39,867 | 103,811 | 104,200 | ||||||||||||
Depreciation |
28,591 | 28,652 | 84,030 | 82,628 | ||||||||||||
Taxes and dues |
536 | 417 | 1,823 | 1,909 | ||||||||||||
Advertising |
49,836 | 33,731 | 84,147 | 72,146 | ||||||||||||
Warranty |
68,924 | 54,984 | 244,635 | 135,395 | ||||||||||||
Rent |
130 | 2,636 | 466 | 7,952 | ||||||||||||
Insurance |
1,551 | 1,477 | 4,418 | 4,597 | ||||||||||||
Travel |
4,529 | 4,718 | 13,226 | 13,202 | ||||||||||||
Training |
2,933 | 2,515 | 8,287 | 8,072 | ||||||||||||
Others |
8,386 | 8,835 | 28,364 | 29,758 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
273,441 | 932,292 | 753,932 | ||||||||||||||
|
|
|
|
|
|
|
|
(*) | Expenses recognized in relation to employee termination benefits for the nine-month period ended
September 30, 2019 amount to |
19. | Personnel Expenses |
Details of personnel expenses for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Salaries and wages |
584,592 | 1,682,577 | 1,783,405 | |||||||||||||
Other employee benefits |
73,780 | 78,302 | 225,860 | 245,793 | ||||||||||||
Contributions to National Pension plan |
18,997 | 19,336 | 55,150 | 56,816 | ||||||||||||
Expenses related to defined benefit plan and defined contribution plan |
48,776 | 51,350 | 146,346 | 154,052 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
733,580 | 2,109,933 | 2,240,066 | ||||||||||||||
|
|
|
|
|
|
|
|
134
20. | Other Non-operating Income and Other Non-operating Expenses |
(a) | Details of other non-operating income for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Foreign currency gain |
54,638 | 600,310 | 387,075 | |||||||||||||
Gain on disposal of property, plant and equipment |
6,661 | 6,769 | 34,624 | 33,788 | ||||||||||||
Gain on disposal of intangible assets |
— | — | 552 | 239 | ||||||||||||
Reversal of impairment loss on intangible assets |
279 | — | 480 | 26 | ||||||||||||
Rental income |
402 | 442 | 1,412 | 1,319 | ||||||||||||
Others |
5,735 | 80 | 7,700 | 2,274 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
61,929 | 645,078 | 424,721 | ||||||||||||||
|
|
|
|
|
|
|
|
(b) | Details of other non-operating expenses for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Foreign currency loss |
58,794 | 572,572 | 404,356 | |||||||||||||
Other bad debt expense |
1,188 | — | 1,198 | 23 | ||||||||||||
Loss on disposal of property, plant and equipment |
9,661 | 1,002 | 16,408 | 7,375 | ||||||||||||
Loss on disposal of intangible assets |
— | — | 18 | — | ||||||||||||
Impairment loss on property, plant and equipment |
12,103 | — | 18,047 | 25,715 | ||||||||||||
Impairment loss on intangible assets |
116,506 | 62 | 116,506 | 353 | ||||||||||||
Donations |
138 | 139 | 520 | 3,159 | ||||||||||||
Others |
1,047 | 1,181 | 8,774 | 7,120 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
61,178 | 734,043 | 448,101 | ||||||||||||||
|
|
|
|
|
|
|
|
135
21. | Finance Income and Finance Costs |
Finance income and costs recognized in profit and loss for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Finance income |
||||||||||||||||
Interest income |
5,094 | 9,053 | 14,015 | |||||||||||||
Dividend income |
— | — | 18,622 | 95,553 | ||||||||||||
Foreign currency gain |
9,807 | 4,460 | 24,259 | 5,948 | ||||||||||||
Gain on disposal of investments |
5,408 | — | 5,408 | — | ||||||||||||
Gain on transaction of derivatives |
9,685 | 249 | 22,852 | 362 | ||||||||||||
Gain on valuation of derivatives |
76,090 | 2,500 | 116,990 | 2,500 | ||||||||||||
Other |
1,343 | 1,261 | 3,936 | 2,743 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
13,564 | 201,120 | 121,121 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Finance costs |
||||||||||||||||
Interest expense |
5,390 | 85,630 | 26,300 | |||||||||||||
Foreign currency loss |
92,739 | — | 164,606 | 33,054 | ||||||||||||
Impairment loss on investments |
28,938 | — | 28,938 | — | ||||||||||||
Loss on sale of trade accounts and notes receivable |
269 | 255 | 1,716 | 322 | ||||||||||||
Loss on valuation of financial assets at fair value through profit or loss |
— | — | 3,960 | — | ||||||||||||
Loss on valuation of financial liabilities at fair value through profit or loss |
9,059 | — | 9,059 | — | ||||||||||||
Loss on transaction of derivatives |
— | 5 | — | 48 | ||||||||||||
Loss on valuation of derivatives |
— | 7,239 | 3,564 | 7,740 | ||||||||||||
Other |
9,433 | 1,140 | 11,468 | 2,754 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
14,029 | 308,941 | 70,218 | ||||||||||||||
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|
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|
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|
|
136
22. | Income Taxes |
(a) | Details of income tax expense (benefit) for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Current tax expense (benefit) |
88,683 | (123,389 | ) | 80,491 | ||||||||||||
Deferred tax expense (benefit) |
(196,846 | ) | 9,283 | (186,809 | ) | (120,374 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Income tax expense (benefit) |
97,966 | (310,198 | ) | (39,883 | ) | |||||||||||
|
|
|
|
|
|
|
|
(b) | Tax Assets and Liabilities |
The carrying amount of tax assets are reviewed at each reporting date and deferred tax assets are reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Company’s estimated future taxable income. The Company’s tax assets and liabilities may differ from actual refundable or payable amount.
Deferred tax assets and liabilities as of September 30, 2019 and December 31, 2018 are attributable to the following:
Assets | Liabilities | Total | ||||||||||||||||||||||
(In millions of won) | September 30, 2019 |
December 31, 2018 |
September 30, 2019 |
December 31, 2018 |
September 30, 2019 |
December 31, 2018 |
||||||||||||||||||
Other accounts receivable, net |
— | (5,966 | ) | (1,013 | ) | (5,966 | ) | (1,013 | ) | |||||||||||||||
Inventories, net |
56,833 | 53,882 | — | — | 56,833 | 53,882 | ||||||||||||||||||
Defined benefit liabilities, net |
27,234 | — | — | — | 27,234 | — | ||||||||||||||||||
Accrued expenses |
172,670 | 121,508 | — | — | 172,670 | 121,508 | ||||||||||||||||||
Property, plant and equipment |
182,419 | 191,073 | — | — | 182,419 | 191,073 | ||||||||||||||||||
Intangible assets |
127 | 925 | — | — | 127 | 925 | ||||||||||||||||||
Provisions |
48,767 | 32,468 | — | — | 48,767 | 32,468 | ||||||||||||||||||
Gain or loss on foreign currency translation, net |
12 | 13 | — | — | 12 | 13 | ||||||||||||||||||
Other temporary differences |
40,218 | 17,932 | — | — | 40,218 | 17,932 | ||||||||||||||||||
Tax loss carryforwards |
311,722 | 126,755 | — | — | 311,722 | 126,755 | ||||||||||||||||||
Tax credit carryforwards |
201,490 | 308,393 | — | — | 201,490 | 308,393 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Deferred tax assets (liabilities) |
852,949 | (5,966 | ) | (1,013 | ) | 1,035,526 | 851,936 | |||||||||||||||||
|
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|
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|
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|
|
137
23. | Earnings (Loss) Per Share |
(a) | Basic earnings (loss) per share for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In won and number of shares) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Profit (loss) for the period |
23,272,424,699 | (1,096,752,176,951 | ) | (474,330,116,040 | ) | |||||||||||
Weighted-average number of common stocks outstanding |
357,815,700 | 357,815,700 | 357,815,700 | 357,815,700 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings (loss) per share |
65 | (3,065 | ) | (1,326 | ) | |||||||||||
|
|
|
|
|
|
|
|
For the three-month and nine-month periods ended September 30, 2019 and 2018, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.
(b) | The Company issued potential common stocks as a result of an issuance of the convertible bonds on August 24, 2019. Diluted earnings (loss) per share are not calculated due to loss for the three-month and nine-month periods ended September 30, 2019. |
138
24. | Financial Risk Management |
The Company is exposed to credit risk, liquidity risk and market risks. The Company identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below an acceptable level.
(a) | Market risk |
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
(i) | Currency risk |
The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, JPY, etc.
Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily KRW and USD.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Company adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Meanwhile, the Company entered into currency interest rate swap contracts to hedge currency risk with respect to foreign currency denominated borrowings and bonds.
i) Exposure to currency risk
The Company’s exposure to foreign currency risk based on notional amounts as of September 30, 2019 and December 31, 2018 is as follows:
September 30, 2019 | ||||||||||||||||||||
(In millions) |
USD | JPY | CNY | PLN | EUR | |||||||||||||||
Cash and cash equivalents |
226 | 594 | 159 | — | — | |||||||||||||||
Trade accounts and notes receivable |
3,583 | 3,072 | — | — | 10 | |||||||||||||||
Non-trade receivables |
313 | 955 | 60 | — | — | |||||||||||||||
Trade accounts and notes payable |
(876 | ) | (8,827 | ) | — | — | — | |||||||||||||
Other accounts payable |
(167 | ) | (3,655 | ) | — | — | (1 | ) | ||||||||||||
Financial liabilities |
(2,885 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Aggregate notional amounts in the separate statements of financial position |
194 | (7,861 | ) | 219 | — | 9 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Currency interest rate swap contracts |
2,085 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net exposure |
2,279 | (7,861 | ) | 219 | — | 9 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
139
24. | Financial Risk Management, Continued |
December 31, 2018 | ||||||||||||||||||||
(In millions) |
USD | JPY | CNY | PLN | EUR | |||||||||||||||
Cash and cash equivalents |
66 | — | 54 | 1 | 7 | |||||||||||||||
Trade accounts and notes receivable |
2,809 | 2,937 | — | — | — | |||||||||||||||
Non-trade receivables |
48 | 836 | 1,018 | — | — | |||||||||||||||
Trade accounts and notes payable |
(1,392 | ) | (11,477 | ) | — | — | — | |||||||||||||
Other accounts payable |
(117 | ) | (13,982 | ) | — | (18 | ) | (2 | ) | |||||||||||
Financial liabilities |
(1,163 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Aggregate notional amounts in the separate statements of financial position |
251 | (21,686 | ) | 1,072 | (17 | ) | 5 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Currency interest rate swap contracts |
780 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net exposure |
1,031 | (21,686 | ) | 1,072 | (17 | ) | 5 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
Average exchange rates applied for the nine-month periods ended September 30, 2019 and 2018 and the exchange rates at September 30, 2019 and December 31, 2018 are as follows:
Average rate | Reporting date spot rate | |||||||||||||||
(In won) |
2019 | 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
USD |
1,090.96 | 1,201.30 | 1,118.10 | |||||||||||||
JPY |
10.65 | 9.95 | 11.13 | 10.13 | ||||||||||||
CNY |
169.11 | 167.56 | 168.52 | 162.76 | ||||||||||||
PLN |
303.51 | 306.68 | 300.21 | 297.33 | ||||||||||||
EUR |
1,305.11 | 1,320.36 | 1,314.64 | 1,279.16 |
140
24. | Financial Risk Management, Continued |
ii) | Sensitivity analysis |
A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in foreign currency as of September 30, 2019 and December 31, 2018, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:
September 30, 2019 | December 31, 2018 | |||||||||||||||
(In millions of won) | Equity | Profit or loss | Equity | Profit or loss | ||||||||||||
USD (5 percent weakening) |
99,244 | 41,788 | 41,788 | |||||||||||||
JPY (5 percent weakening) |
(3,173 | ) | (3,173 | ) | (7,965 | ) | (7,965 | ) | ||||||||
CNY (5 percent weakening) |
1,338 | 1,338 | 6,325 | 6,325 | ||||||||||||
PLN (5 percent weakening) |
— | — | (183 | ) | (183 | ) | ||||||||||
EUR (5 percent weakening) |
429 | 429 | 232 | 232 |
A stronger won against the above currencies as of September 30, 2019 and December 31, 2018 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
141
24. | Financial Risk Management, Continued |
(ii) | Interest rate risk |
Interest rate risk arises principally from the Company’s bonds and borrowings. The Company establishes and applies its policy to reduce
uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Company entered
into currency interest swap contracts amounting to USD 1,785 million (W2,144,321 million) in notional amount to hedge interest rate risks with respect to variable rate applied foreign currency denominated borrowings.
i) | Profile |
The interest rate profile of the Company’s interest-bearing financial instruments as of September 30, 2019 and December 31, 2018 is as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Fixed rate instruments |
||||||||
Financial assets |
550,644 | |||||||
Financial liabilities |
(6,356,922 | ) | (5,033,515 | ) | ||||
|
|
|
|
|||||
(4,482,871 | ) | |||||||
|
|
|
|
|||||
Variable rate instruments |
||||||||
Financial liabilities |
(1,105,976 | ) |
ii) | Equity and profit or loss sensitivity analysis for variable rate instruments |
As of September 30, 2019 and December 31, 2018, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Equity | Profit or loss | |||||||||||||||
(In millions of won) | 1%p increase |
1%p decrease |
1%p increase |
1%p decrease |
||||||||||||
September 30, 2019 |
||||||||||||||||
Variable rate instruments |
2,408 | (2,408 | ) | 2,408 | ||||||||||||
December 31, 2018 |
||||||||||||||||
Variable rate instruments |
8,018 | (8,018 | ) | 8,018 |
142
24. | Financial Risk Management, Continued |
(b) | Credit risk |
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.
The Company’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.
The Company establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively prior to determination on utilization of third party guarantees, insurance or factoring as appropriate.
In relation to the impairment of financial assets, the Company recognizes expected credit loss and its changes at each reporting date in order to reflect changes in the credit risk according to the expected credit loss model subsequent to initial recognition of financial assets.
143
24. | Financial Risk Management, Continued |
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposures to credit risk as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Financial assets carried at amortized cost |
||||||||
Cash and cash equivalents |
473,283 | |||||||
Deposits in banks |
77,211 | 77,211 | ||||||
Trade accounts and notes receivable, net |
4,520,681 | 3,389,108 | ||||||
Non-trade receivables |
442,512 | 316,069 | ||||||
Accrued income |
24,556 | 5,894 | ||||||
Deposits |
12,639 | 13,418 | ||||||
Short-term loans |
24,984 | 16,116 | ||||||
Long-term loans |
45,766 | 55,048 | ||||||
Long-term non-trade receivables |
20,889 | 25,823 | ||||||
|
|
|
|
|||||
4,371,970 | ||||||||
|
|
|
|
|||||
Financial assets at fair value through profit or loss |
||||||||
Convertible bonds |
1,327 | |||||||
Derivatives |
106,884 | 13,059 | ||||||
|
|
|
|
|||||
14,386 | ||||||||
|
|
|
|
|||||
Financial assets at fair value through other comprehensive income |
||||||||
Debt instruments |
161 | |||||||
|
|
|
|
|||||
4,386,517 | ||||||||
|
|
|
|
In addition to the financial assets above, as of September 30, 2019, the Company provides payment
guarantees in connection with the principal amount of credit facilities amounting to USD 1,144 million (W1,332,545 million) and payables for facilities amounting to USD 55 million (W65,588 million), for
its subsidiary.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the sales and investing activities. Trade accounts and notes receivable are insured in order to manage credit risk if it does not meet the Company’s internal credit ratings. Uninsured trade accounts and notes receivables are managed by continuous monitoring of internal credit ratings and seeking insurance coverage, if necessary.
144
24. | Financial Risk Management, Continued |
(c) | Liquidity risk |
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Company does not generate sufficient cash flows from operations to meet its capital requirements, the Company may rely on financing activities, such as external long-term borrowings and offerings of debt instruments, equity-linked and other debt instruments. In addition, the Company maintains a line of credit with various banks.
The following are the contractual maturities of financial liabilities, including estimated interest payments, as of September 30, 2019.
Contractual cash flows in | ||||||||||||||||||||||||||||
(In millions of won) |
Carrying amount |
Total | 6 months or less |
6-12 months |
1-2 years |
2-5 years |
More than 5 years |
|||||||||||||||||||||
Non-derivative financial liabilities |
||||||||||||||||||||||||||||
Unsecured bank borrowings |
5,876,251 | 498,720 | 530,620 | 1,124,376 | 3,583,387 | 139,148 | ||||||||||||||||||||||
Unsecured bond issues |
3,445,718 | 3,705,881 | 340,349 | 297,203 | 515,612 | 2,415,742 | 136,975 | |||||||||||||||||||||
Trade accounts and notes payable |
2,979,424 | 2,979,424 | 2,979,424 | — | — | — | — | |||||||||||||||||||||
Other accounts payable |
994,736 | 994,736 | 993,629 | 1,107 | — | — | — | |||||||||||||||||||||
Other accounts payable (enterprise procurement cards)(*1) |
1,574,969 | 1,592,526 | 1,084,807 | 507,719 | — | — | — | |||||||||||||||||||||
Long-term other accounts payable |
2,223 | 2,223 | — | — | 2,213 | 10 | — | |||||||||||||||||||||
Payment guarantee(*2) |
16,460 | 1,517,838 | 41,367 | 101,053 | 211,321 | 1,015,380 | 148,717 | |||||||||||||||||||||
Security deposits received |
11,000 | 11,000 | 2,290 | 5,330 | 3,380 | — | — | |||||||||||||||||||||
Lease liabilities |
9,017 | 12,647 | 6,641 | 2,764 | 2,362 | 880 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Derivative financial liabilities |
||||||||||||||||||||||||||||
Derivatives |
(22,392 | ) | — | — | (3,788 | ) | (18,604 | ) | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
16,670,134 | 5,939,249 | 1,436,217 | 1,855,476 | 6,996,795 | 424,840 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
24. | Financial Risk Management, Continued |
(*1) | Represents the amount of utility expenses, payables from transactions between the Company and subsidiaries and others paid by enterprise procurement cards and the outstanding payables are settled at the end of the billing cycle. |
(*2) | Contractual cash flows of payment guarantee is identical to timing of principal payment and represent the maximum amount that the Company could be required to pay the guarantee amount. |
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
(d) | Capital management |
Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||
Total liabilities |
13,849,525 | |||||||
Total equity |
12,106,407 | 13,212,581 | ||||||
Cash and deposits in banks(*1) |
435,381 | 550,483 | ||||||
Borrowings (including bonds) |
8,832,822 | 6,139,491 | ||||||
Total liabilities to equity ratio |
143 | % | 105 | % | ||||
Net borrowings to equity ratio(*2) |
69 | % | 42 | % |
(*1) | Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks. |
(*2) | Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds and excluding lease liabilities) less cash and current deposits in banks by total equity. |
146
24. | Financial Risk Management, Continued |
(e) | Determination of fair value |
(i) Measurement of fair value
A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
i) Current Assets and Liabilities
The carrying amounts approximate fair value because of the short maturity of these instruments.
ii) Trade Receivables and Other Receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.
iii) Investments in Equity and Debt Instruments
The fair value of marketable financial assets at FVTPL and at FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using the results of fair value assessment performed by external valuation institution and others.
iv) Non-derivative Financial Liabilities
Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
147
24. | Financial Risk Management, Continued |
(ii) | Fair values versus carrying amounts |
The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed separate interim statements of financial position as of September 30, 2019 and December 31, 2018 are as follows:
September 30, 2019 | December 31, 2018 | |||||||||||||||
(In millions of won) | Carrying amounts | Fair values | Carrying amounts | Fair values | ||||||||||||
Financial assets carried at amortized cost |
||||||||||||||||
Cash and cash equivalents |
(*) | 473,283 | (*) | |||||||||||||
Deposits in banks |
77,211 | (*) | 77,211 | (*) | ||||||||||||
Trade accounts and notes receivable |
4,520,681 | (*) | 3,389,108 | (*) | ||||||||||||
Non-trade receivables |
442,512 | (*) | 316,069 | (*) | ||||||||||||
Accrued income |
24,556 | (*) | 5,894 | (*) | ||||||||||||
Deposits |
12,639 | (*) | 13,418 | (*) | ||||||||||||
Short-term loans |
24,984 | (*) | 16,116 | (*) | ||||||||||||
Long-term loans |
45,766 | (*) | 55,048 | (*) | ||||||||||||
Long-term non-trade receivables |
20,889 | (*) | 25,823 | (*) | ||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Equity instruments |
3,384 | 7,344 | 7,344 | |||||||||||||
Convertible bonds |
1,327 | 1,327 | 1,327 | 1,327 | ||||||||||||
Derivatives |
106,884 | 106,884 | 13,059 | 13,059 | ||||||||||||
Financial assets at fair value through other comprehensive income |
||||||||||||||||
Debt instruments |
85 | 161 | 161 | |||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Derivatives |
6,157 | 25,758 | 25,758 | |||||||||||||
Unsecured convertible bonds |
837,095 | 837,095 | — | — | ||||||||||||
Liabilities carried at amortized cost |
||||||||||||||||
Unsecured bank borrowings |
5,463,389 | 3,807,234 | 3,862,709 | |||||||||||||
Unsecured bond issues |
2,608,623 | 2,680,560 | 2,332,257 | 2,384,987 | ||||||||||||
Trade accounts and notes payable |
2,979,424 | (*) | 3,186,123 | (*) | ||||||||||||
Other accounts payable |
2,569,705 | (*) | 1,746,412 | (*) | ||||||||||||
Long-term other accounts payable |
2,223 | (*) | 3,081 | (*) | ||||||||||||
Payment guarantee liabilities |
16,460 | (*) | 19,068 | (*) | ||||||||||||
Security deposits received |
11,000 | (*) | 10,955 | (*) | ||||||||||||
Lease liabilities |
9,017 | (*) | — | — |
(*) | Excluded from disclosures as the carrying amount approximates fair value. |
148
24. | Financial Risk Management, Continued |
(iii) | Fair values of financial assets and liabilities |
i) Fair value hierarchy
The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities |
• | Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly |
• | Level 3: inputs for the asset or liability that are not based on observable market data |
ii) Financial instruments measured at fair value
Fair value hierarchy classifications of the financial instruments that are measured at fair value as of September 30, 2019 and December 31, 2018 are as follows:
September 30, 2019 | ||||||||||||||||
(In millions of won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Equity instruments |
— | 3,384 | 3,384 | |||||||||||||
Convertible bonds |
— | — | 1,327 | 1,327 | ||||||||||||
Derivatives |
— | — | 106,884 | 106,884 | ||||||||||||
Financial assets at fair value through other comprehensive income |
||||||||||||||||
Debt instruments |
85 | — | — | 85 | ||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Derivatives |
— | — | 6,157 | 6,157 | ||||||||||||
Unsecured convertible bonds |
837,095 | — | — | 837,095 |
December 31, 2018 | ||||||||||||||||
(In millions of won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Equity instruments |
— | 7,344 | 7,344 | |||||||||||||
Convertible bonds |
— | — | 1,327 | 1,327 | ||||||||||||
Derivatives |
— | — | 13,059 | 13,059 | ||||||||||||
Financial assets at fair value through other comprehensive income |
||||||||||||||||
Debt instruments |
161 | — | — | 161 | ||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Derivatives |
— | — | 25,758 | 25,758 |
149
24. | Financial Risk Management, Continued |
iii) | Financial instruments not measured at fair value but for which the fair value is disclosed |
Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | September 30, 2019 | Valuation technique |
Input | |||||||||||||||||
Classification |
Level 1 | Level 2 | Level 3 | |||||||||||||||||
Liabilities |
||||||||||||||||||||
Unsecured bank borrowings |
— | 5,463,389 | |
Discounted cash flow |
|
|
Discount rate |
| ||||||||||||
Unsecured bond issues |
— | — | 2,680,560 | |
Discounted cash flow |
|
|
Discount rate |
| |||||||||||
(In millions of won) | December 31, 2018 | Valuation technique |
Input | |||||||||||||||||
Classification |
Level 1 | Level 2 | Level 3 | |||||||||||||||||
Liabilities |
||||||||||||||||||||
Unsecured bank borrowings |
— | 3,862,709 | |
Discounted cash flow |
|
|
Discount rate |
| ||||||||||||
Unsecured bond issues |
— | — | 2,384,987 | |
Discounted cash flow |
|
|
Discount rate |
|
iv) | The interest rates applied for determination of the above fair value as of September 30, 2019 and December 31, 2018 are as follows: |
September 30, 2019 |
December 31, 2018 |
|||||||
Borrowings, bonds and others |
1.68~3.26 | % | 2.09~3.37 | % |
150
25. | Changes in liabilities arising from financing activities |
Changes in liabilities arising from financing activities for the nine-month period ended September 30, 2019 are as follows:
Non-cash transactions | ||||||||||||||||||||||||||||
(In millions of won) |
January 1, 2019 |
Cash flows from financing activities |
Reclassification | Gain or loss on foreign currency translation |
Effective interest adjustment |
Others | September 30, 2019 |
|||||||||||||||||||||
Short-term borrowings |
336,580 | — | 23,810 | — | — | 360,390 | ||||||||||||||||||||||
Current portion of long-term borrowings and bonds |
1,040,148 | (708,260 | ) | 721,835 | 6,467 | 448 | — | 1,060,638 | ||||||||||||||||||||
Payment guarantee liabilities |
19,068 | 5,043 | — | — | — | (7,651 | ) | 16,460 | ||||||||||||||||||||
Long-term borrowings |
3,326,744 | 1,569,148 | (462,156 | ) | 92,125 | — | — | 4,525,861 | ||||||||||||||||||||
Bonds |
1,772,599 | 1,323,239 | (259,679 | ) | 26,872 | 5,306 | 17,596 | 2,885,933 | ||||||||||||||||||||
Lease liabilities |
— | (10,415 | ) | — | — | 300 | 19,132 | 9,017 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
2,515,335 | — | 149,274 | 6,054 | 29,077 | 8,858,299 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
26. | Related Parties and Others |
(a) | Related parties |
Related parties as of September 30, 2019 are as follows:
Classification |
Description | |
Subsidiaries(*) |
LG Display America, Inc. and others | |
Associates(*) |
Paju Electric Glass Co., Ltd. and others | |
Entity that has significant influence over the Company |
LG Electronics Inc. | |
Subsidiaries of the entity that has significant influence over the Company |
Subsidiaries of LG Electronics Inc. |
(*) | Details of subsidiaries and associates are described in note 8. |
152
26. | Related Parties and Others, Continued |
(b) | Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows: |
For the three-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) |
Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs |
||||||||||||||||||
Subsidiaries |
||||||||||||||||||||||||
LG Display America, Inc. |
— | — | — | — | — | |||||||||||||||||||
LG Display Japan Co., Ltd. |
581,374 | — | — | — | — | — | ||||||||||||||||||
LG Display Germany GmbH |
397,136 | — | — | — | — | 4,997 | ||||||||||||||||||
LG Display Taiwan Co., Ltd. |
424,667 | — | — | — | — | 91 | ||||||||||||||||||
LG Display Nanjing Co., Ltd. |
1,063 | — | 1,025 | — | 377,658 | 5,786 | ||||||||||||||||||
LG Display Shanghai Co., Ltd. |
268,607 | — | — | — | — | — | ||||||||||||||||||
LG Display Poland Sp. z o.o. |
— | — | — | — | — | 418 | ||||||||||||||||||
LG Display Guangzhou Co., Ltd. |
28,045 | — | 2,966 | — | 545,512 | 9,556 | ||||||||||||||||||
LG Display Shenzhen Co., Ltd. |
81,253 | — | — | — | — | — | ||||||||||||||||||
LG Display Yantai Co., Ltd. |
186 | — | 4,866 | — | 394,088 | 1,150 | ||||||||||||||||||
LG Display (China) Co., Ltd. |
4 | — | 386,990 | — | — | 1,609 | ||||||||||||||||||
LG Display Singapore Pte. Ltd. |
288,844 | — | — | — | — | 779 | ||||||||||||||||||
L&T Display Technology (Fujian) Limited |
86,349 | — | 2 | — | — | 457 | ||||||||||||||||||
Nanumnuri Co., Ltd. |
47 | — | — | — | — | 5,519 | ||||||||||||||||||
Global OLED Technology LLC |
— | — | — | — | — | 1,475 | ||||||||||||||||||
LG Display Guangzhou Trading Co., Ltd. |
191,060 | — | — | — | — | — | ||||||||||||||||||
LG Display Vietnam Haiphong Co., Ltd. |
2,449 | — | 57,528 | — | 364,306 | 4,711 | ||||||||||||||||||
Suzhou Lehui Display Co., Ltd. |
45,647 | — | 101 | — | — | — | ||||||||||||||||||
LG Display High-Tech (China) Co., Ltd. |
7,299 | — | 883 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 454,361 | — | 1,681,564 | 36,548 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
153
26. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
WooRee E&L Co., Ltd. |
— | 11 | — | — | — | |||||||||||||||||||
INVENIA Co., Ltd.(*) |
— | — | 262 | 1,018 | — | 195 | ||||||||||||||||||
AVATEC Co., Ltd. |
2,639 | — | — | — | 17,720 | 196 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | — | 87,211 | — | — | 1,107 | ||||||||||||||||||
YAS Co., Ltd. |
— | — | 1,225 | — | — | 839 | ||||||||||||||||||
Material Science Co., Ltd. |
— | — | 21 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 88,730 | 1,018 | 17,720 | 2,337 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 2,036 | 17,972 | — | 37,867 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 79 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
76,909 | — | — | — | — | 219 | ||||||||||||||||||
LG Electronics Reynosa S.A. DE C.V. |
— | — | — | — | — | 149 | ||||||||||||||||||
LG Electronics S.A. (Pty) Ltd |
267 | — | — | — | — | 6 | ||||||||||||||||||
LG Electronics Mexicali S.A.DE C.V. |
— | — | — | — | — | 15 | ||||||||||||||||||
LG Electronics RUS, LLC |
85 | — | — | — | — | 137 |
154
26. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Egypt S.A.E. |
— | — | — | — | 2 | |||||||||||||||||||
LG Innotek Co., Ltd. |
1,314 | — | 9,600 | — | — | 15,531 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. |
— | — | — | 22,023 | — | — | ||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
924 | — | — | — | — | — | ||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
10,346 | — | — | — | — | — | ||||||||||||||||||
HiEntech Co., Ltd. |
13 | — | — | — | — | 7,385 | ||||||||||||||||||
Others |
13,278 | — | — | — | — | 3,669 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 9,600 | 22,023 | — | 27,192 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 554,727 | 41,013 | 1,699,284 | 103,944 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Represents transactions occurred prior to disposal of the entire investments. |
155
26. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Subsidiaries |
||||||||||||||||||||||||
LG Display America, Inc. |
— | — | — | — | 5 | |||||||||||||||||||
LG Display Japan Co., Ltd. |
1,736,365 | — | — | — | — | 5 | ||||||||||||||||||
LG Display Germany GmbH |
1,231,933 | — | — | — | — | 11,557 | ||||||||||||||||||
LG Display Taiwan Co., Ltd. |
1,065,101 | — | — | — | — | 373 | ||||||||||||||||||
LG Display Nanjing Co., Ltd. |
9,004 | — | 3,650 | — | 1,087,038 | 20,911 | ||||||||||||||||||
LG Display Shanghai Co., Ltd. |
748,674 | — | — | — | — | — | ||||||||||||||||||
LG Display Poland Sp. z o.o. |
47 | — | — | — | 7,535 | 1,717 | ||||||||||||||||||
LG Display Guangzhou Co., Ltd. |
80,978 | — | 9,640 | — | 1,553,397 | 24,251 | ||||||||||||||||||
LG Display Shenzhen Co., Ltd. |
280,046 | — | — | — | — | — | ||||||||||||||||||
LG Display Yantai Co., Ltd. |
2,065 | — | 12,444 | — | 789,084 | 7,238 | ||||||||||||||||||
LG Display (China) Co., Ltd. |
4 | 11,120 | 1,064,552 | — | — | 2,094 | ||||||||||||||||||
LG Display Singapore Pte. Ltd. |
830,889 | — | — | — | — | 1,139 | ||||||||||||||||||
L&T Display Technology (Fujian) Limited |
272,499 | — | 2 | — | — | 1,037 | ||||||||||||||||||
Nanumnuri Co., Ltd. |
144 | — | — | — | — | 16,848 | ||||||||||||||||||
Global OLED Technology LLC |
— | — | — | — | — | 4,384 | ||||||||||||||||||
LG Display Guangzhou Trading Co., Ltd. |
916,136 | — | — | — | — | — | ||||||||||||||||||
LG Display Vietnam Haiphong Co., Ltd. |
16,340 | — | 100,541 | — | 716,768 | 18,891 | ||||||||||||||||||
Suzhou Lehui Display Co., Ltd. |
117,519 | — | 101 | — | — | — | ||||||||||||||||||
LG Display High-Tech (China) Co., Ltd. |
33,637 | — | 883 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
11,120 | 1,191,813 | — | 4,153,822 | 110,450 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
156
26. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
WooRee E&L Co., Ltd. |
— | 23 | — | — | 1 | |||||||||||||||||||
INVENIA Co., Ltd.(*) |
— | 180 | 1,024 | 8,700 | — | 297 | ||||||||||||||||||
AVATEC Co., Ltd. |
2,639 | 265 | — | — | 54,939 | 616 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | 6,057 | 267,065 | — | — | 3,209 | ||||||||||||||||||
YAS Co., Ltd. |
— | 1,000 | 4,795 | 11,908 | — | 2,822 | ||||||||||||||||||
Material Science Co., Ltd. |
— | — | 21 | — | — | 313 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
7,502 | 272,928 | 20,608 | 54,939 | 7,258 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 8,580 | 150,797 | — | 102,164 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 119 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
205,520 | — | — | — | — | 344 | ||||||||||||||||||
LG Electronics Reynosa S.A. DE C.V. |
— | — | — | — | — | 672 | ||||||||||||||||||
LG Electronics S.A. (Pty) Ltd |
2,384 | — | — | — | — | 15 | ||||||||||||||||||
LG Electronics Mexicali S.A.DE C.V. |
1,266 | — | — | — | — | 65 | ||||||||||||||||||
LG Electronics RUS, LLC |
361 | — | — | — | — | 1,562 |
157
26. Related Parties and Others, Continued
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Egypt S.A.E. |
— | — | — | — | 2 | |||||||||||||||||||
LG Electronics (Kunshan) Computer Co., Ltd. |
385 | — | — | — | — | — | ||||||||||||||||||
LG Innotek Co., Ltd. |
5,347 | — | 32,636 | — | — | 57,602 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. (*) |
— | — | — | 68,282 | — | — | ||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
36,182 | — | — | — | — | — | ||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
13,142 | — | — | — | — | — | ||||||||||||||||||
HiEntech Co., Ltd. (*) |
47 | — | — | — | — | 21,576 | ||||||||||||||||||
Others |
22,614 | — | — | — | — | 9,245 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 32,636 | 68,282 | — | 91,202 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
18,622 | 1,505,957 | 239,687 | 4,208,761 | 311,074 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Represents transactions occurred prior to disposal of the entire investments. |
158
26. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Subsidiaries |
||||||||||||||||||||||||
LG Display America, Inc. |
— | — | — | — | 7 | |||||||||||||||||||
LG Display Japan Co., Ltd. |
788,408 | — | — | — | — | 6 | ||||||||||||||||||
LG Display Germany GmbH |
435,550 | — | — | — | — | 74 | ||||||||||||||||||
LG Display Taiwan Co., Ltd. |
424,876 | — | — | — | — | 109 | ||||||||||||||||||
LG Display Nanjing Co., Ltd. |
533 | — | 3,093 | — | 312,979 | 10,583 | ||||||||||||||||||
LG Display Shanghai Co., Ltd. |
271,183 | — | — | — | — | 9 | ||||||||||||||||||
LG Display Poland Sp. z o.o. |
70 | — | — | — | 8,970 | 6 | ||||||||||||||||||
LG Display Guangzhou Co., Ltd. |
17,279 | — | 3,904 | — | 502,223 | 3,600 | ||||||||||||||||||
LG Display Shenzhen Co., Ltd. |
390,859 | — | — | — | — | — | ||||||||||||||||||
LG Display Yantai Co., Ltd. |
7,085 | — | 6,363 | — | 129,026 | 3,463 | ||||||||||||||||||
LG Display (China) Co., Ltd. |
— | — | 446,462 | — | — | 266 | ||||||||||||||||||
LG Display Singapore Pte. Ltd. |
339,124 | — | — | — | — | 4 | ||||||||||||||||||
L&T Display Technology (Fujian) Limited |
112,109 | — | — | — | — | — | ||||||||||||||||||
Nanumnuri Co., Ltd. |
45 | — | — | — | — | 5,760 | ||||||||||||||||||
Global OLED Technology LLC |
— | — | — | — | — | — | ||||||||||||||||||
LG Display Guangzhou Trading Co., Ltd. |
206,246 | — | — | — | — | — | ||||||||||||||||||
LG Display Vietnam Haiphong Co., Ltd. |
1,262 | — | 12,753 | — | 300,671 | 2,465 | ||||||||||||||||||
Suzhou Lehui Display Co., Ltd. |
53,179 | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 472,575 | — | 1,253,869 | 26,352 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
159
26. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
WooRee E&L Co., Ltd. |
— | — | — | — | 45 | |||||||||||||||||||
INVENIA Co., Ltd. |
— | — | 585 | 5,369 | — | 211 | ||||||||||||||||||
AVATEC Co., Ltd. |
— | — | — | — | 16,650 | 243 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | — | 90,642 | — | — | 1,503 | ||||||||||||||||||
LB Gemini New Growth Fund No.16 |
— | — | — | — | — | — | ||||||||||||||||||
YAS Co., Ltd. |
— | — | 1,011 | 7,484 | — | 667 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 92,238 | 12,853 | 16,650 | 2,669 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 4,238 | 100,234 | — | 25,849 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 15 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
49,740 | — | — | — | — | 6 | ||||||||||||||||||
LG Electronics Reynosa S.A. DE C.V. |
6,017 | — | — | — | — | 332 | ||||||||||||||||||
LG Electronics Almaty Kazakhstan |
501 | — | — | — | — | 14 | ||||||||||||||||||
LG Electronics S.A. (Pty) Ltd |
1,369 | — | — | — | — | 8 | ||||||||||||||||||
LG Electronics Mexicali S.A.DE C.V. |
521 | — | — | — | — | 107 | ||||||||||||||||||
LG Electronics RUS, LLC |
8 | — | — | — | — | 617 |
160
26. | Related Parties and Others, Continued |
For the three-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Egypt S.A.E. |
— | — | — | — | — | |||||||||||||||||||
LG Innotek Co., Ltd. |
7,653 | — | 32,714 | — | — | 6,640 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. |
— | — | — | 59,080 | — | 987 | ||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
26,953 | — | — | — | — | — | ||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
12,162 | — | — | — | — | — | ||||||||||||||||||
HiEntech Co., Ltd. |
— | — | — | — | — | 6,936 | ||||||||||||||||||
Others |
2,333 | — | 18 | — | — | 3,176 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 32,732 | 59,080 | — | 18,838 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 601,783 | 172,167 | 1,270,519 | 73,708 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
161
26. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs |
||||||||||||||||||
Subsidiaries |
||||||||||||||||||||||||
LG Display America, Inc. |
— | — | — | — | 8 | |||||||||||||||||||
LG Display Japan Co., Ltd. |
1,781,914 | — | — | — | — | 2,158 | ||||||||||||||||||
LG Display Germany GmbH |
1,261,511 | — | — | — | — | 892 | ||||||||||||||||||
LG Display Taiwan Co., Ltd. |
1,088,959 | — | — | — | — | 459 | ||||||||||||||||||
LG Display Nanjing Co., Ltd. |
10,693 | — | 4,845 | — | 956,316 | 18,806 | ||||||||||||||||||
LG Display Shanghai Co., Ltd. |
713,664 | — | — | — | — | 52 | ||||||||||||||||||
LG Display Poland Sp. z o.o. |
274 | — | — | — | 27,489 | 12 | ||||||||||||||||||
LG Display Guangzhou Co., Ltd. |
40,227 | — | 9,781 | — | 1,457,260 | 10,748 | ||||||||||||||||||
LG Display Shenzhen Co., Ltd. |
1,146,447 | — | — | — | — | 4 | ||||||||||||||||||
LG Display Yantai Co., Ltd. |
21,415 | — | 14,965 | — | 900,549 | 12,035 | ||||||||||||||||||
LG Display (China) Co., Ltd. |
328 | 90,281 | 1,122,101 | — | — | 1,008 | ||||||||||||||||||
LG Display Singapore Pte. Ltd. |
774,083 | — | — | — | — | 23 | ||||||||||||||||||
L&T Display Technology (Fujian) Limited |
298,712 | — | — | — | 8 | 36 | ||||||||||||||||||
Nanumnuri Co., Ltd. |
134 | — | — | — | — | 16,931 | ||||||||||||||||||
Global OLED Technology LLC |
— | — | — | — | — | 3,002 | ||||||||||||||||||
LG Display Guangzhou Trading Co., Ltd. |
439,646 | — | — | — | — | — | ||||||||||||||||||
LG Display Vietnam Haiphong Co., Ltd. |
37,772 | — | 23,608 | — | 586,153 | 3,082 | ||||||||||||||||||
Suzhou Lehui Display Co., Ltd. |
131,142 | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
90,281 | 1,175,300 | — | 3,927,775 | 69,256 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
162
26. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Associates and their subsidiaries |
||||||||||||||||||||||||
WooRee E&L Co., Ltd. |
— | 34 | — | — | 131 | |||||||||||||||||||
INVENIA Co., Ltd. |
— | 30 | 1,354 | 26,956 | — | 467 | ||||||||||||||||||
AVATEC Co., Ltd. |
— | 530 | — | — | 51,729 | 466 | ||||||||||||||||||
Paju Electric Glass Co., Ltd. |
— | 4,172 | 274,440 | — | — | 3,346 | ||||||||||||||||||
LB Gemini New Growth Fund No.16 |
— | 540 | — | — | — | — | ||||||||||||||||||
YAS Co., Ltd. |
— | — | 3,192 | 25,036 | — | 2,183 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
5,272 | 279,020 | 51,992 | 51,729 | 6,593 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Inc. |
— | 25,818 | 406,187 | — | 73,656 | |||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics India Pvt. Ltd. |
— | — | — | — | 41 | |||||||||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
119,976 | — | — | — | — | 11 | ||||||||||||||||||
LG Electronics Reynosa S.A. DE C.V. |
23,517 | — | — | — | — | 1,628 | ||||||||||||||||||
LG Electronics Almaty Kazakhstan |
3,708 | — | — | — | — | 35 | ||||||||||||||||||
LG Electronics S.A. (Pty) Ltd |
5,804 | — | — | — | — | 14 | ||||||||||||||||||
LG Electronics Mexicali S.A.DE C.V. |
2,022 | — | — | — | — | 172 | ||||||||||||||||||
LG Electronics RUS, LLC |
2,170 | — | — | — | — | 1,716 |
163
26. | Related Parties and Others, Continued |
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Purchase and others | ||||||||||||||||||||||||
(In millions of won) | Sales and others |
Dividend income |
Purchase of raw material and others |
Acquisition of property, plant and equipment |
Outsourcing fees |
Other costs | ||||||||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||||||||||
LG Electronics Egypt S.A.E. |
— | — | — | — | 16 | |||||||||||||||||||
LG Innotek Co., Ltd. |
24,701 | — | 97,846 | — | — | 34,692 | ||||||||||||||||||
LG Hitachi Water Solutions Co., Ltd. |
— | — | — | 256,036 | — | 7,248 | ||||||||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd. |
63,570 | — | — | — | — | — | ||||||||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
32,248 | — | — | — | — | — | ||||||||||||||||||
HiEntech Co., Ltd. |
— | — | — | — | — | 21,802 | ||||||||||||||||||
Others |
4,068 | — | 27 | — | — | 7,205 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
— | 97,873 | 256,036 | — | 74,580 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
95,553 | 1,578,011 | 714,215 | 3,979,504 | 224,085 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
164
26. | Related Parties and Others, Continued |
(c) | Trade accounts and notes receivable and payable as of September 30, 2019 and December 31, 2018 are as follows: |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
|||||||||||||||
(In millions of won) | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
Subsidiaries |
||||||||||||||||
LG Display America, Inc. |
1,031,718 | — | — | |||||||||||||
LG Display Japan Co., Ltd. |
311,090 | 349,814 | 3 | 5 | ||||||||||||
LG Display Germany GmbH |
455,266 | 433,077 | 6,228 | 4,332 | ||||||||||||
LG Display Taiwan Co., Ltd. |
532,273 | 274,860 | 26 | 34 | ||||||||||||
LG Display Nanjing Co., Ltd. |
1,779 | 2,448 | 288,732 | 272,991 | ||||||||||||
LG Display Shanghai Co., Ltd. |
252,913 | 168,117 | — | 1 | ||||||||||||
LG Display Poland Sp. z o. o |
— | 30 | — | 6,849 | ||||||||||||
LG Display Guangzhou Co., Ltd. |
13,487 | 167,814 | 355,184 | 196,070 | ||||||||||||
LG Display Guangzhou Trading Co., Ltd. |
376,123 | 377,145 | — | — | ||||||||||||
LG Display Shenzhen Co., Ltd. |
112,763 | 32,759 | — | — | ||||||||||||
LG Display Yantai Co., Ltd. |
8 | 115 | 373,549 | 382,448 | ||||||||||||
LG Display (China) Co., Ltd. |
1,229 | — | 138,096 | 187,004 | ||||||||||||
LG Display Singapore Pte. Ltd. |
242,711 | 85,680 | 296 | 1 | ||||||||||||
L&T Display Technology (Fujian) Limited |
60,918 | 62,336 | 190,536 | 139,171 | ||||||||||||
Nanumnuri Co., Ltd. |
— | — | 3,893 | 2,065 | ||||||||||||
Global OLED Technology LLC |
— | — | — | 1,146 | ||||||||||||
LG Display Vietnam Haiphong Co., Ltd. |
59,738 | 22,113 | 230,287 | 340,780 | ||||||||||||
Suzhou Lehui Display Co., Ltd. |
31,489 | 32,641 | 102 | — | ||||||||||||
LG Display High-Tech (China) Co., Ltd. |
10,111 | 17,333 | 22,701 | 3,362 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
3,058,000 | 1,609,633 | 1,536,259 | ||||||||||||||
|
|
|
|
|
|
|
|
165
26. | Related Parties and Others, Continued |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
|||||||||||||||
(In millions of won) | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
Associates |
||||||||||||||||
WooRee E&L Co., Ltd. |
— | 8 | 6 | |||||||||||||
INVENIA Co., Ltd.(*1) |
— | 2,000 | — | 1,671 | ||||||||||||
AVATEC Co., Ltd. |
— | — | 4,637 | 4,382 | ||||||||||||
Paju Electric Glass Co., Ltd. |
— | — | 70,776 | 60,566 | ||||||||||||
YAS Co., Ltd. |
— | — | 2,066 | 2,709 | ||||||||||||
Material Science Co., Ltd. |
— | — | 23 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
2,000 | 77,510 | 69,334 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Entity that has significant influence over the Company |
||||||||||||||||
LG Electronics Inc. |
247,134 | 101,922 | 99,574 |
166
26. | Related Parties and Others, Continued |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
|||||||||||||||
(In millions of won) | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | ||||||||||||
Subsidiaries of the entity that has significant influence over the Company |
||||||||||||||||
LG Innotek Co., Ltd. |
2,782 | 30,067 | 45,815 | |||||||||||||
LG Hitachi Water Solutions Co., Ltd.(*2) |
— | 9,100 | — | 47,463 | ||||||||||||
Hi Entech Co., Ltd.(*2) |
— | — | — | 4,782 | ||||||||||||
Inspur LG Digital Mobile Communications Co., Ltd |
942 | 6,137 | — | — | ||||||||||||
LG Electronics Reynosa S.A. DE C.V |
— | 2,572 | 16 | 134 | ||||||||||||
LG Electronics India Pvt. Ltd. |
16,460 | 9,047 | 81 | 29 | ||||||||||||
LG Electronics Vietnam Haiphong Co., Ltd. |
49,093 | 25,544 | 4 | — | ||||||||||||
LG Electronics S.A. (Pty) Ltd. |
32 | 896 | — | 5 | ||||||||||||
LG Electronics RUS, LLC |
84 | — | 49 | — | ||||||||||||
LG Electronics Egypt S.A.E |
7,676 | 10,296 | 2 | — | ||||||||||||
LG Electronics (Kunshan) Computer Co., Ltd. |
— | 1,370 | — | — | ||||||||||||
Qingdao LG Inspur Digital Communication Co., Ltd. |
6,832 | 3,530 | — | — | ||||||||||||
Others |
7,403 | 3,340 | 1,917 | 1,275 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
74,614 | 32,136 | 99,503 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
3,381,748 | 821,201 | 1,804,670 | ||||||||||||||
|
|
|
|
|
|
|
|
(*1) | Excluded from related parties due to disposal of equity investments during the nine-month period ended September 30, 2019. |
(*2) | Excluded from related parties due to LG Electronics Inc.’s disposal of the entire investments during the nine-month period ended September 30, 2019. |
167
26. | Related Parties and Others, Continued |
(d) | Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
2019 | 2018 | |||||||||||||||
(In millions of won) Associates |
Loans | Collection of loans |
Loans | Collection of loans |
||||||||||||
INVENIA Co., Ltd.(*) |
— | — | 375 | |||||||||||||
YAS Co., Ltd. |
— | — | — | 375 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
— | — | 750 | ||||||||||||||
|
|
|
|
|
|
|
|
(*) | Excluded from related parties due to disposal of equity investments during the nine-month period ended September 30, 2019. |
168
26. | Related Parties and Others, Continued |
(e) | Conglomerate Transactions |
Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and nine-month periods ended September 30, 2019 and 2018 and as of September 30, 2019 and December 31, 2018 are as follows. These entities are not affiliates according to K-IFRS No. 1024, Related Party Disclosures.
For the three-month period ended September 30, 2019 |
For the nine-month period ended September 30, 2019 |
September 30, 2019 | ||||||||||||||||||||||
(In millions of won) | Sales and others |
Purchase and others |
Sales and others |
Purchase and others |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
||||||||||||||||||
LG International Corp. and its subsidiaries(*) |
26,478 | 498,170 | 91,019 | 125,536 | 48,707 | |||||||||||||||||||
LG Uplus Corp. |
— | 621 | — | 1,756 | — | 230 | ||||||||||||||||||
LG Chem Ltd. and its subsidiaries |
65 | 160,262 | 131 | 460,489 | 65 | 114,205 | ||||||||||||||||||
S&I Corp. and its subsidiaries (formerly, Serveone) |
84 | 58,504 | 251 | 304,372 | 21,307 | 64,170 | ||||||||||||||||||
Silicon Works Co., Ltd |
— | 207,055 | 92 | 513,561 | — | 142,045 | ||||||||||||||||||
LG Corp. |
— | 13,849 | — | 40,218 | 9,146 | — | ||||||||||||||||||
LG Management Development Institute |
— | 2,239 | — | 6,624 | 3,480 | 466 | ||||||||||||||||||
LG CNS Co., Ltd. and its subsidiaries |
— | 40,795 | — | 99,111 | — | 32,172 | ||||||||||||||||||
LG Hausys Ltd |
— | — | 1 | 1 | — | — | ||||||||||||||||||
G2R Inc. and its subsidiaries |
— | 17,364 | — | 19,251 | — | 9,828 | ||||||||||||||||||
Robostar Co., Ltd. |
— | 155 | — | 2,143 | — | 157 | ||||||||||||||||||
Others(*) |
— | 29,573 | — | 86,549 | — | 36,516 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
556,895 | 498,645 | 1,625,094 | 159,534 | 448,496 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
169
26. | Related Parties and Others, Continued |
(*) | Due to S&I Corp.’s disposal of partial investments in Serveone in May 2019, Serveone was reclassified from one of the S&I Corp.’s subsidiaries to associates. Accordingly, transactions with S&I Corp. after the disposal are classified as others. In addition, due to LG Electronics Inc.’s disposal of entire investments in HiEntech Co., Ltd. and its subsidiaries and LG Hitachi Water Solutions Co., Ltd., outstanding payables due are reclassified as others. |
For the three-month period ended September 30, 2018 |
For the nine-month period ended September 30, 2018 |
September 30, 2018 |
||||||||||||||||||||||
(In millions of won) | Sales and others |
Purchase and others |
Sales and others |
Purchase and others |
Trade accounts and notes receivable and others |
Trade accounts and notes payable and others |
||||||||||||||||||
LG International Corp. and its subsidiaries |
39,572 | 559,012 | 136,111 | 82,965 | 82,028 | |||||||||||||||||||
LG Uplus Corp. |
— | 552 | 21 | 1,170 | — | 178 | ||||||||||||||||||
LG Chem Ltd. and its subsidiaries |
70 | 202,820 | 1,634 | 571,940 | 14 | 93,274 | ||||||||||||||||||
S&I Corp. and its subsidiaries (Formerly, Serveone) |
96 | 245,678 | 291 | 932,230 | 21,307 | 239,091 | ||||||||||||||||||
Silicon Works Co., Ltd |
— | 195,615 | — | 499,456 | — | 140,694 | ||||||||||||||||||
LG Corp. |
— | 13,634 | — | 39,003 | 11,246 | — | ||||||||||||||||||
LG Management Development Institute |
— | 2,366 | — | 7,484 | 3,480 | 441 | ||||||||||||||||||
LG CNS Co., Ltd. and its subsidiaries |
— | 36,920 | — | 108,174 | — | 72,694 | ||||||||||||||||||
LG Hausys Ltd |
1 | — | 1,111 | 1 | — | 3 | ||||||||||||||||||
G2R Inc. and its subsidiaries |
— | 1,901 | — | 38,971 | — | 19,773 | ||||||||||||||||||
Robostar Co., Ltd. |
— | — | — | — | — | 530 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
739,058 | 562,069 | 2,334,540 | 119,012 | 648,706 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
170
26. | Related Parties and Others, Continued |
(f) | Key management personnel compensation |
Compensation costs of key management for the three-month and nine-month periods ended September 30, 2019 and 2018 are as follows:
For the three-month periods ended September 30 |
For the nine-month periods ended September 30 |
|||||||||||||||
(In millions of won) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Short-term benefits |
918 | 2,590 | 2,734 | |||||||||||||
Expenses related to the defined benefit plan |
103 | 103 | 450 | 690 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
1,021 | 3,040 | 3,424 | ||||||||||||||
|
|
|
|
|
|
|
|
Key management refers to the registered directors who have significant control and responsibilities over the Company’s operations and business.
171
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LG Display Co., Ltd. | ||||||
(Registrant) | ||||||
Date: November 14, 2019 | By: | /s/ Heeyeon Kim |
||||
(Signature) | ||||||
Name: | Heeyeon Kim |
|||||
Title: | Head of IR / Vice President |
172