6-K 1 d833240d6k.htm FORM 6-K Form 6-K
Table of Contents

 

 

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  ☒

 

 

 


Table of Contents

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.

Contents

 

1.

 

Company

    4  
  A.   

Name and contact information

    4  
  B.   

Domestic credit rating

    4  
  C.   

Capitalization

    6  
  D.   

Voting rights

    7  
  E.   

Dividends

    7  

2.

 

Business

    8  
  A.   

Business overview

    8  
  B.   

Industry

    8  
  C.   

New businesses

    10  

3.

 

Major Products and Raw Materials

    10  
  A.   

Major products

    10  
  B.   

Average selling price trend of major products

    11  
  C.   

Major raw materials

    11  

4.

 

Production and Equipment

    12  
  A.   

Production capacity and output

    12  
  B.   

Production performance and utilization ratio

    12  
  C.   

Investment plan

    13  

5.

 

Sales

    13  
  A.   

Sales performance

    13  
  B.   

Sales route and sales method

    13  
  C.   

Purchase orders

    15  

6.

 

Market Risks and Risk Management

    15  
  A.   

Market risks

    15  
  B.   

Risk management  

    15  

 

2


Table of Contents

7.

 

Derivative Contracts

    15  
  A.   

Currency risks

    15  
  B.   

Interest rate risks

    16  

8.

 

Major Contracts

    16  

9.

 

Research & Development

    16  
  A.    Summary of R&D-related expenditures     16  
  B.   

R&D achievements

    17  

10.

 

Intellectual Property

    19  

11.

 

Environmental and Safety Matters

    19  

12.

 

Financial Information

    22  
  A.   

Financial highlights (Based on consolidated K-IFRS)

    22  
  B.   

Financial highlights (Based on separate K-IFRS)

    23  
  C.   

Consolidated subsidiaries

    24  
  D.   

Status of equity investment

    24  

13.

 

Audit Information

    26  
  A.   

Audit service

    26  
  B.   

Non-audit service

    26  

14.

 

Board of Directors

    26  
  A.   

Members of the board of directors

    26  
  B.   

Committees of the board of directors

    27  
  C.   

Independence of directors

    27  

15.

 

Information Regarding Shares

    27  
  A.   

Total number of shares

    27  
  B.   

Shareholder list

    27  

16.

 

Directors and Employees

    28  
  A.   

Directors

    28  
  B.   

Employees

    28  

17.

 

Other Matters

    29  
  A.   

Legal proceedings

    29  
  B.   

Material events subsequent to the reporting period

    29  
  C.   

Material change in management

    29  

Attachment: 1. Financial Statements in accordance with K-IFRS

 

3


Table of Contents
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.

LOGO ‘+’ 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
 

Unsecured Foreign Convertible Bonds No. 3

    
Aug. 22,
2019
 
 
    
Aug. 22,
2024
 
 
     813,427(1)(2)      

Registered
Common
Shares
 
 
 
    


Aug. 23,
2020 ~
Aug. 12,
2024



 
     100   W 19,845        813,427 (1)      40,988,998       


Listed on
Singapore
Stock
Exchange
 
 
 
 
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

     —          —          813,427       —          —          100   W 19,845        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 W1,182.65 per U.S. dollar, to the actual issue amount of USD 687,800,000.

  (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     —    
    

 

 

 

Total number of issued shares with voting rights (=A – B – C – D + E):

   Common shares     357,815,700  
    

 

 

 
   Preferred shares     —    
    

 

 

 

 

(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  
     

 

 

    

 

 

    

 

 

 

Total cash dividend amount for the period (million Won)

        —          —          178,908  
     

 

 

    

 

 

    

 

 

 

Total stock dividend amount for the period (million Won)

        —          —          —    
     

 

 

    

 

 

    

 

 

 

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 W5,000 per share and is calculated by dividing net income by weighted average number of common shares.

(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  
  

 

 

    

 

 

    

 

 

 

Total Assets

     37,443        33,176        29,160  
  

 

 

    

 

 

    

 

 

 

Total Liabilities

     23,117        18,289        14,178  
  

 

 

    

 

 

    

 

 

 

 

(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
  

 

 

   

 

 

   

 

 

 

Total(1)

     28.4     28.8     29.2
  

 

 

   

 

 

   

 

 

 

 

(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
(%)
 

Display

   Goods/ Products/Services/Other sales      Televisions       
Panels for
televisions
 
 
     LG Display        6,184        36.26
    
Desktop
monitors
 
 
    
Panels for
monitors
 
 
     LG Display        3,006        17.63
    
Tablet
products
 
 
    
Panels for
tablets
 
 
     LG Display        1,733        10.16
    
Notebook
computers
 
 
    

Panels for
notebook
computers
 
 
 
     LG Display        2,020        11.85
    

Mobile,

etc.

 

 

    

Panels for
smartphones,
etc.
 
 
 
     LG Display        4,110        24.10
              

 

 

    

 

 

 

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
    
Display panel
manufacturing
 
 
     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   —  
           

 

 

    

 

 

   

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 W7.9 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.

 

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 W113,426 million with respect to our foreign exchange derivative instruments held during the reporting period.

 

  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
(Total R&D-Related Expenditures ÷ Revenue for the period × 100)

   10.2%      8.5      6.9
     

 

  

 

 

    

 

 

 

 

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(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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Table of Contents

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)

 

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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.

 

 

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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 W1 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.

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 W2.4 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.

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 W14.4 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.

 

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Also in January 2018, the government of Gyeong-gi Province issued a warning and assessed a fine of W1 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.

In February 2018, we were assessed a fine of W0.04 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.

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 W6.95 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.

In April 2018, we were assessed a fine of W0.24 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.

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 W1.6 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.

 

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  
  

 

 

    

 

 

    

 

 

 

 

 

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(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  

 

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     (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

 

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Table of Contents

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.

   W 800        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)

   W 153,700        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 W342,680 million in LG Display Vietnam Haiphong Co., Ltd.

(3)

During the reporting period, we invested an additional W3,175 million in LG DISPLAY FUND I LLC.

(4)

During the reporting period, we invested an additional W1,045,393 million in LG Display High-Tech (China) Co., Ltd. and the non-controlling shareholders invested an additional W276,396 million. Due to such additional investment, our interest in LG Display High-Tech (China) Co., Ltd. has increased from 69% in 2018 to 75% as of the end of the reporting period.

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 W90,281 million and W11,120 million, respectively.

 

  (2)

Affiliated companies

 

Company

   Carrying Amount
(in millions)
     Date of
Incorporation
     Equity
Interest
 

Paju Electric Glass Co., Ltd.

   W 52,732        January 2005        40

Invenia Co., Ltd. (1)

     —          January 2001        —    

Wooree E&L Co., Ltd.

   W 5,412        June 2008        14

YAS Co., Ltd.

   W 18,541        April 2002        15

Avatec Co., Ltd. (2)

   W 19,790        August 2000        14

Arctic Sentinel, Inc.

     —          June 2008        10

Cynora GmbH (3)

   W 8,668        March 2003        12

Material Science Co., Ltd.

   W 3,187        January 2014        10

Nanosys Inc.

   W 5,512        July 2001        4

 

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Table of Contents

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 W4,324 million, which has been reflected in our financial income.

(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 W207 million, which has been reflected in our financial income.

(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 W5,272 million and W7,502 million, respectively.

 

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

 

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(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

 

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Table of Contents
  (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 W500 million per year)

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 W1,330,998 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:

 

28


Table of Contents
(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 W274,393 million and the per capita welfare benefit provided was W9.4 million.

(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 W2,893 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.

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 W27 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.

 

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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2019 and 2018

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

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.

 

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Table of Contents

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.

 

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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    W 2,759,692     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

      W 37,443,065     33,175,710
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   25, 27    W 2,673,332     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

      W 37,443,065     33,175,710
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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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      W 5,821,681     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

      W (402,634     (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

      W (442,204     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

      W (402,634     (172,372     (830,176     (389,019
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share (in won)

           

Basic and diluted earnings (loss) per share

     24      W (1,172     10     (2,875     (988
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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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

  W 1,789,079     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

  W —         —         (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

  W 1,789,079     2,251,113     10,078,039     (321,391     13,796,840     895,239     14,692,079
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2019

  W 1,789,079     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

  W —         —         (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

  W 1,789,079     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.

 

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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

      W (1,055,024     (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

      W 1,243,485     3,711,599
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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Table of Contents

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

      W 7,502     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

      W 2,759,692     2,760,240
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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Table of Contents
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.

 

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Table of Contents
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


Table of Contents
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 W342,680 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”).

 

  (*3)

For the nine-month period ended September 30, 2019, the Controlling Company contributed W3,175 million in cash for the capital increase of LG DISPLAY FUND I LLC.

 

  (*4)

For the nine-month period ended September 30, 2019, the Controlling Company contributed W1,045,393 million in cash for the capital increase of LG Display High-Tech (China) Co., Ltd. (“LGDCO”). Meanwhile, additional contribution from non-controlling interest amounted to W276,396 million. The Group’s ownership percentage in LGDCO increased from 69% to 75% as a result of this additional investment.

W11,120 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.

 

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.

 

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Table of Contents
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.

 

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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

   W 53,960        75,777        1,111        10,800        392        142,040  

Balance at

September 30, 2019

   W 55,623        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.

 

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Table of Contents
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.

 

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Table of Contents
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

   W 142,040  

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 W130,203 million of right-of-use assets and W100,286 million of lease liabilities as at September 30, 2019.

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 W36,332 million of depreciation and W3,043 million of interest expense from these leases.

 

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Table of Contents
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

   W 2,759,692        2,365,022  

Deposits in banks

     

Time deposits

   W 800        4,318  

Restricted deposits (*)

     77,200        74,082  
  

 

 

    

 

 

 
   W 78,000        78,400  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted deposits (*)

   W 11        11  
  

 

 

    

 

 

 
   W 2,837,703        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.

 

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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

   W 2,989,918        2,305,368  

Due from related parties

     631,046        523,795  
  

 

 

    

 

 

 
   W 3,620,964        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

   W 410,780        159,238  

Accrued income

     30,700        10,075  
  

 

 

    

 

 

 
   W 441,480        169,313  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivables

     9,666        11,448  
  

 

 

    

 

 

 
   W 451,146        180,761  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable as of September 30, 2019 and December 31, 2018 are W89 million and W39,092 million, respectively.

 

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Table of Contents
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

   W 3,608,863        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
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,621,956        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

   W 2,807,598        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
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,829,640        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

   W 477        1,281        1,632        1,311  

(Reversal of) bad debt expense

     515        1,704        (1,155      (30
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 992        2,985        477        1,281  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 5,805        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  
  

 

 

    

 

 

 
   W 939,356        546,048  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 280,521        381,983  

Long-term advanced payments

     4,632        —    
  

 

 

    

 

 

 
   W 285,153        381,983  
  

 

 

    

 

 

 

 

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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 asset at fair value through profit or loss

     

Derivatives(*)

   W 51,162        13,059  

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 15        106  

Financial assets carried at amortized cost

     

Deposits

   W 16,128        17,020  

Short-term loans

     24,984        16,116  

Lease receivables

     5,740        —    
  

 

 

    

 

 

 
   W 46,852        33,136  
  

 

 

    

 

 

 
   W 98,029        46,301  
  

 

 

    

 

 

 

Non-current assets

     

Financial assets at fair value through profit or loss

     

Equity instruments

     

Intellectual Discovery, Ltd.

   W 920        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        —    
  

 

 

    

 

 

 
   W 10,709        13,681  
  

 

 

    

 

 

 

Convertible bonds

   W 1,327        1,327  

Derivatives(*)

     55,722        —    
  

 

 

    

 

 

 
   W 67,758        15,008  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 70        55  

Financial assets carried at amortized cost

     

Deposits

   W 21,370        74,103  

Long-term loans

     45,766        55,048  

Lease receivables

     23,935        —    
  

 

 

    

 

 

 
   W 91,071        129,151  
  

 

 

    

 

 

 
   W 158,899        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 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

   W 1,087,764        1,084,297  

Work-in-process

     985,934        856,388  

Raw materials

     468,257        554,720  

Supplies

     185,239        195,798  
  

 

 

    

 

 

 
   W 2,727,194        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

   W 15,637,832        15,491,214  

Including: inventory write-downs

     493,486        274,874  

Including: reversal and usage of inventory write-downs

     (313,180      (206,127

 

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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%   W     52,732     40%   W     47,823  

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  

 

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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%     W 3,187       10%     W 3,346  

Nanosys Inc.

 

Milpitas,

U.S.A.

    December 31      

July

2001

 

 

  Develop, manufacture, and sell materials for display     4%       5,512       4%       5,491  
           

 

 

     

 

 

 
            W 113,842       W     113,989  
           

 

 

     

 

 

 

 

(*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 W4,324 million for the difference between the disposal amount and the carrying amount as financial income.

(*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 W207 million for the difference between the disposal amount and the carrying amount as financial income.

(*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 W7,502 million and W5,272 million, respectively.

 

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9.

Property, Plant and Equipment

For the nine-month periods ended September 30, 2019 and 2018, the Group purchased property, plant and equipment of W4,865,409 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).

 

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 W367,847 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.

 

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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

   W 716,986        —    

Current portion of long-term borrowings and bonds

     1,158,003        1,553,907  

Lease liabilities

     44,592        —    
  

 

 

    

 

 

 
   W 1,919,581        1,553,907  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 2,801,995        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        —    
  

 

 

    

 

 

 
   W 11,615,684        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    W 360,390        —    

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        —    
     

 

 

    

 

 

 
      W 716,986        —    
     

 

 

    

 

 

 

 

(*)

ML represents Month LIBOR (London Inter-Bank Offered Rates) and PBOC represents People’s Bank of China.

 

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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    W 770        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
     

 

 

    

 

 

 
      W 2,801,995        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

   W 1,795,944        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
     

 

 

    

 

 

 
      W 5,865,905        2,531,663  
     

 

 

    

 

 

 

 

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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      W 2,030,000        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
        

 

 

    

 

 

 
         W 1,576,345        1,446,393  

Foreign currency denominated bonds (*2)

           

Publicly issued bond

     Nov 2021        3.88      W 360,390        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
        

 

 

    

 

 

 
         W 472,493        326,206  
        

 

 

    

 

 

 

Financial liabilities at fair value through profit or loss

           

Foreign currency convertible bonds

     Aug 2024        1.50      W 837,095        —    

Foreign currency equivalent

         USD 697        —    
        

 

 

    

 

 

 
         W 2,885,933        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.

 

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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

   W    19,845 (subject to adjustment based on certain events)

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

   W 813,426,670,000  

Conversion price

   W 19,845  

Number of convertible shares

     40,988,998  

 

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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

   W 1,708,296        1,595,423  

Fair value of plan assets

     (1,532,157      (1,550,063
  

 

 

    

 

 

 
   W 176,139        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

   W 49,012        51,314        146,903        154,502  

Net interest cost

     303        242        911        726  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 49,315        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

   W 1,532,157        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

   W (1,355      (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

   W (1,023      (3,470      (9,422      (11,236
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W —          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

   W —          194,817        25,799        220,616  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W —          137,263        25,799        163,062  

Non-current

   W —          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

   W 40,822        30,970  

Unearned revenues

     9,361        43,841  

Security deposits received

     7,620        165  
  

 

 

    

 

 

 
   W 57,803        74,976  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 87,677        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  
  

 

 

    

 

 

 
   W 94,617        96,826  
  

 

 

    

 

 

 

 

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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 (W1,874,028 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.

 

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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.

 

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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 (W60,065 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling 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 Controlling Company also obtained payment guarantees amounting to USD 306 million (W367,373 million) from Korea Development Bank for foreign currency denominated bonds.

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 (W218,655 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.

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 (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 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).

 

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15.

Capital and Reserves

 

  (a)

Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), 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.

 

  (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

   W (77,659      (272,474

Other comprehensive loss from associates

     (21,431      (28,494
  

 

 

    

 

 

 
   W (99,090      (300,968
  

 

 

    

 

 

 

 

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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

   W 5,813,291        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,821,681        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

   W 275,417        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

   W 5,546,264        5,771,710        16,048,609        16,186,732  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 5,821,681        6,102,363        17,053,872        17,388,775  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sales to Company A and Company B amount to W5,695,420 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%).

 

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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

   W 14,257,718        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

   W 9,472,885        178,943        6,615,442        170,834  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 23,730,603        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

   W 1,888,747        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,821,681        6,102,363        17,053,872        17,388,775  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W (157,973      (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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,413,439        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.

 

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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(*)

   W 165,045        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 520,555        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 W84,083 million.

 

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

   W 738,442        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 928,740        890,997        2,614,102        2,715,466  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 286,581        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  
   W 308,549        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

   W 286,873        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 441,893        249,417        1,127,397        917,205  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 14,089        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        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 143,943        48,421        267,229        202,304  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   W 57,398        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 177,376        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

   W 34,217        77,972        145,445        170,145  

Deferred tax expense (benefit)

     (192,222      14,783        (261,686      (163,660
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense (benefit)

   W (158,005      92,755        (116,241      6,485  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W —          —          (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)

   W 1,421,139        1,145,840        (41,593     (24,761     1,379,546       1,121,079  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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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

   W (419,353,052,881)        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

   W (1,172      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.

 

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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.

 

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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  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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

   W 1,161.69        1,090.96      W 1,201.30        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)

   W 42,784        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.

 

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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 (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 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

   W 2,837,777        2,443,583  

Financial liabilities

     (6,356,922      (5,033,515
  

 

 

    

 

 

 
   W (3,519,145      (2,589,932
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (7,071,900      (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

   W (35,729      35,729        (35,729      35,729  

December 31, 2018

           

Variable rate instruments

   W (25,558      25,558        (25,558      25,558  

 

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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.

 

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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

   W 2,759,692        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        —    
  

 

 

    

 

 

 
   W 7,047,736        5,615,644  

Financial assets at fair value through profit or loss

     

Convertible bonds

   W 1,327        1,327  

Derivatives

     106,884        13,059  
  

 

 

    

 

 

 
   W 108,211        14,386  

Financial assets at fair value through other comprehensive income

     

Debt instruments

   W 85        161  
  

 

 

    

 

 

 
   W 7,156,032        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.

 

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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

   W 9,983,104        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     —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 19,920,722        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.

 

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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

   W 23,117,140       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.

 

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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.

 

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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

   W 2,759,692        (*)        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

   W 10,709        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

   W 85        85        161        161  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W 6,157        6,157        25,758        25,758  

Unsecured convertible bonds

     837,095        837,095        —          —    

Liabilities carried at amortized cost

           

Secured bank borrowings

   W —          —          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.

 

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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

   W —          —          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

   W 85        —          —          85  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          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

   W   —          —          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

   W 161        —          —          161  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          25,758        25,758  

 

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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

   W  —          —          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

   W  —          —          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

 

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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

   W —          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  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   W   8,558,777        4,506,316       —         291,672       8,797        163,546        13,529,108  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

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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.

 

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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.(*)

   W —          —          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        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        —          90,571        19,050        17,720        2,337  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W   211,026        —          2,950        63,498        —          36,903  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 31,515        —          —          —          —          79  

LG Electronics Vietnam Haiphong Co., Ltd.

     76,909        —          —          42        —          221  

 

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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.

   W 86,179        —          —          —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 627,656        —          13,806        50,683        —          33,843  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   841,321        —          107,327        133,231        17,720        73,083  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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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.(*)

   W —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        7,502        277,444        145,722        54,939        7,258  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W   743,075        —          10,730        677,932        —          109,505  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 76,950        —          —          —          —          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  

 

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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.

   W 13,551        —          —          —          —          —    

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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,902,222        —          46,678        137,196        —          109,678  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,647,936        7,502        334,852        960,850        54,939        226,441  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transaction occurred prior to disposal of the entire investments.

 

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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.

   W —          —          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

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          92,241        107,786        16,650        2,703  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 224,579        —          5,387        176,237        —          25,054  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 27,537        —          —          —          —          15  

LG Electronics Vietnam Haiphong Co., Ltd.

     49,740        —          —          —          —          3,070  

 

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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.

   W 47,520        —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 729,277        —          33,722        143,363        —          27,121  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 953,856        —          131,350        427,386        16,650        54,878  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W —          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        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        279,027        147,212        51,729        6,649  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 924,915        —          28,927        733,261        —          73,722  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 51,311        —          —          —          —          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  

 

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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.

   W 32,248        —          —          —          —          —    

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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,206,861        —          106,497        372,013        —          118,422  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,131,776        5,272        414,451        1,252,486        51,729        198,793  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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)

   W —          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        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          2,000        109,100        101,279  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

           

LG Electronics Inc.

   W 188,358        247,679        177,118        430,677  

Subsidiaries of the entity that has significant influence over the Controlling Company

           

LG Electronics India Pvt. Ltd.

   W 16,460        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  

 

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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.

   W 215        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.,
Ltd.(*2)

     —          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)
Co., Ltd.

     —          —          12,061        17,654  

Qingdao LG Inspur Digital Communication
Co., Ltd.

     7,240        3,530        —          —    

Others

     4,954        18,435        1,626        1,246  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 442,777        315,208        50,082        150,355  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 631,135        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.

 

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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.(*)

   W 1,000        —          —          375  

YAS Co., Ltd.

     —          —          —          375  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,000        —          —          750  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Excluded from related parties due to disposal of equity investments during the nine-month period ended September 30, 2019.

 

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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

   W 146,375        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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 146,530        878,461        580,983        2,768,322        162,151        696,686  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 171,456        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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 171,625        1,155,493        562,286        3,511,609        121,255        1,100,840  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 769        918        2,590        2,734  

Expenses related to the defined benefit plan

     103        103        450      690
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 872        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 W8,353 million and was recognized as other non-operating income.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2019 and 2018

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

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.

 

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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.

 

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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      W 358,181      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

      W 29,434,430      27,062,106
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

     24, 26      W 2,979,424      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

      W 29,434,430      27,062,106
     

 

 

    

 

 

 

See accompanying notes to the separate interim financial statements.

 

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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      W 5,432,573     5,661,046   W 15,752,138     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

      W (576,069     19,803   W (1,106,174     (485,566
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share (in won)

           

Basic and diluted earnings (loss) per share

     23      W (1,607     65   W (3,065     (1,326
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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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

   W 1,789,079      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

   W —          —          (485,566     (485,566
  

 

 

    

 

 

    

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

          

Dividends to shareholders

     —          —          (178,908     (178,908
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at September 30, 2018

   W 1,789,079      2,251,113      9,124,593     13,164,785
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at January 1, 2019

   W 1,789,079      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

   W —          —          (1,106,174     (1,106,174
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at September 30, 2019

   W 1,789,079      2,251,113      8,066,215     12,106,407
  

 

 

    

 

 

    

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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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

      W (1,096,752     (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

      W 598,173     3,558,496
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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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

      W 18,622     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

      W 358,181     826,619
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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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.

 

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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.

 

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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.

 

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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

   W 9,338        1,021        5,922        51        16,332  

Balance at September 30, 2019

   W 3,082        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.

 

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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

   W 16,332  

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

   W 358,181        473,283  

Deposits in banks

     

Time deposits

   W —          3,118  

Restricted deposits (*)

     77,200        74,082  
  

 

 

    

 

 

 
   W 77,200        77,200  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted deposits (*)

   W 11        11  
  

 

 

    

 

 

 
   W 435,392        550,494  
  

 

 

    

 

 

 

 

(*)

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

   W 303,458        257,037  

Due from related parties

     4,217,223        3,132,071  
  

 

 

    

 

 

 
   W 4,520,681        3,389,108  
  

 

 

    

 

 

 

 

  (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

   W 442,512        316,069  

Accrued income

     24,556        5,894  
  

 

 

    

 

 

 
   W 467,068        321,963  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivables

   W 20,889        25,823  
  

 

 

    

 

 

 
   W 487,957        347,786  
  

 

 

    

 

 

 

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

   W 4,519,990        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
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,520,685        490,783        (4      (2,826
  

 

 

    

 

 

    

 

 

    

 

 

 
     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

   W 3,387,653        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
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,389,113        348,775        (5      (989
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   W 5        989        570        1,092  

(Reversal of) bad debt expense

     (1      1,837        (565      (103
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 4        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

   W 1,033        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  
  

 

 

    

 

 

 
   W  210,054        136,349  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 287,145        325,219  

Long-term advanced payments

     4,631        —    
  

 

 

    

 

 

 
   W 291,776        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(*)

   W 51,162        13,059  

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 15        106  

Financial asset carried at amortized cost

     

Short-term loans

   W 24,984        16,116  
  

 

 

    

 

 

 
   W 76,161        29,281  
  

 

 

    

 

 

 

Non-current assets

     

Financial assets at fair value through profit or loss

     

Equity instruments

     

Intellectual Discovery, Ltd.

   W 920        4,598  

Kyulux, Inc.

     2,460        2,460  

Fineeva Co., Ltd.

     4        286  
  

 

 

    

 

 

 
   W 3,384        7,344  
  

 

 

    

 

 

 

Convertible bonds

   W 1,327        1,327  

Derivatives(*)

     55,722        —    
  

 

 

    

 

 

 
   W 60,433        8,671  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 70        55  

Financial assets carried at amortized cost

     

Deposits

   W 12,639        13,418  

Long-term loans

     45,766        55,048  
  

 

 

    

 

 

 
   W 58,405        68,466  
  

 

 

    

 

 

 
   W 118,908        77,192  
  

 

 

    

 

 

 

 

(*)

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

   W 579,151        539,859  

Work-in-process

     915,201        791,396  

Raw materials

     404,742        500,413  

Supplies

     113,368        119,487  
  

 

 

    

 

 

 
   W 2,012,462        1,951,155  
  

 

 

    

 

 

 

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

   W 15,066,015        14,740,881  

Including: inventory write-downs

     403,197        235,218  

Including: reversal and usage of inventory write-downs

     (280,323      (184,139

 

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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
 

LG Display America, Inc.

    

San Jose,

U.S.A.

 

 

     Sell display products        100   W 36,815        100   W 36,815  

LG Display Germany GmbH

    
Eschborn,
Germany
 
 
     Sell display products        100     19,373        100     19,373  

LG Display Japan Co., Ltd.

    
Tokyo,
Japan
 
 
     Sell display products        100     15,686        100     15,686  

LG Display Taiwan Co., Ltd.

    
Taipei,
Taiwan
 
 
     Sell display products        100     35,230        100     35,230  

LG Display Nanjing Co., Ltd.

    
Nanjing,
China
 
 
    
Manufacture display
products
 
 
     100     593,726        100     593,726  

LG Display Shanghai Co., Ltd.

    
Shanghai,
China
 
 
     Sell display products        100     9,093        100     9,093  

LG Display Poland Sp. z o.o. (*1)

    
Wroclaw,
Poland
 
 
    
Manufacture display
products
 
 
     100     166,054        100     194,992  

LG Display Guangzhou Co., Ltd.

    
Guangzhou,
China
 
 
    
Manufacture display
products
 
 
     100     293,557        100     293,557  

LG Display Shenzhen Co., Ltd.

    
Shenzhen,
China
 
 
     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

    

Fujian,

China

 

 

    

Manufacture and sell LCD
module and LCD monitor
sets
 
 
 
     51     10,123        51     10,123  

LG Display Yantai Co., Ltd.

    

Yantai,

China

 

 

    
Manufacture display
products
 
 
     100     169,195        100     169,195  

Nanumnuri Co., Ltd.

    

Gumi,

South Korea

 

 

     Janitorial services        100     800        100     800  

LG Display (China) Co., Ltd.

    
Guangzhou,
China
 
 
    
Manufacture and Sell
display products
 
 
     51     723,086        51     723,086  

Unified Innovative Technology, LLC

    
Wilmington,
U.S.A.
 
 
    
Manage intellectual
property
 
 
     100     9,489        100     9,489  

LG Display Guangzhou Trading Co., Ltd.

    
Guangzhou,
China
 
 
     Sell display products        100     218        100     218  

Global OLED Technology LLC

    

Sterling,

U.S.A

 

 

    
Manage OLED intellectual
property
 
 
     100     164,322        100     164,322  

LG Display Vietnam Haiphong Co., Ltd.(*2)

    
Haiphong,
Vietnam

 
    
Manufacture display
Products
 
 
     100     672,658        100     329,978  

Suzhou Lehui Display Co., Ltd.

    

Suzhou,

China

 

 

    

Manufacture and sell LCD
module and LCD monitor
sets
 
 
 
     100     121,640        100     121,640  

LG DISPLAY FUND I LLC(*3)

    
Wilmington,
U.S.A
 
 
    
Invest in venture business
and acquire technologies
 
 
     100     5,424        100     2,249  

LG Display High-Tech (China) Co., Ltd.(*4)

    
Guangzhou,
China
 
 
    

Manufacture and sell

display products

 

 

     74     1,794,547        69     749,154  

Money Market Trust

    

Seoul,

South Korea

 

 

     Money market trust        100     153,700        100     24,501  
          

 

 

      

 

 

 
           W  4,999,453        W  3,507,944  
          

 

 

      

 

 

 

 

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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 W28,938 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in LGDWR.

 

  (*2)

For the nine-month period ended September 30, 2019, the Company contributed W342,680 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Company’s ownership percentage in LGDVN as a result of this additional investment.

 

  (*3)

For the nine-month period ended September 30, 2019, the Company contributed W3,175 million in cash for the capital increase of LG DISPLAY FUND I LLC. There was no change in the Company’s ownership percentage in LG DISPLAY FUND I LLC as a result of this additional investment.

 

  (*4)

For the nine-month period ended September 30, 2019, the Company contributed W1,045,393 million in cash and cash equivalents, including the right to receive cash dividends amounting to W177,509 million from LG Display Guangzhou Co., Ltd., for the capital increase of LG Display High-Tech (China) Co., Ltd. (“LGDCO”). The Company’s ownership percentage in LGDCO increased from 69% to 74% as a result.

 

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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    W 45,089        40    W 45,089  

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  
           

 

 

       

 

 

 
            W  85,340         W  94,270  
           

 

 

       

 

 

 

 

  (*1)

In September 2019, the Company disposed of the entire investments, 3,000,000 shares of common stock, in INVENIA Co., Ltd. and recognized W2,770 million for the difference between the disposal amount and the carrying amount as finance income.

 

  (*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 W2,638 million for the difference between the disposal amount and the carrying amount as finance income.

 

  (*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.

 

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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.

 

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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

   W 360,390        —    

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        —    
  

 

 

    

 

 

 
   W  1,432,911        1,044,841  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W  2,801,995        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        —    
  

 

 

    

 

 

 
   W  7,431,545        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      W  360,390        —    
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 300        —    

 

(*)

ML represents Month LIBOR (London Inter-Bank Offered Rates).

 

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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      W 770        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
     

 

 

    

 

 

 
      W  2,801,995        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

 

 

   W 1,795,944        955,975  
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 1,495        USD 855  

Less current portion of long-term borrowings

        (72,078      (329,839
     

 

 

    

 

 

 
      W  1,723,866        626,136  
     

 

 

    

 

 

 

 

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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      W 2,030,000        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
        

 

 

    

 

 

 
         W 1,576,345        1,446,393  
        

 

 

    

 

 

 

Foreign currency denominated bonds (*2)

           

Publicly issued bonds

     Nov 2021        3.88      W 360,390        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
        

 

 

    

 

 

 
         W 472,493        326,206  
        

 

 

    

 

 

 

Financial liabilities at fair value through profit or loss

           

Foreign currency convertible bonds

     Aug 2024        1.50      W 837,095        —    
        

 

 

    

 

 

 

Foreign currency equivalent

           USD 697        —    
        

 

 

    

 

 

 
         W  2,885,933        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.

 

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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

   W 19,845 (subject to adjustment based on certain events)

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 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

   W 813,426,670,000  

Conversion price

   W 19,845  

Number of convertible shares

     40,988,998  

 

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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

   W 1,704,146        1,592,366  

Fair value of plan assets

     (1,529,424      (1,548,179
  

 

 

    

 

 

 
   W 174,722        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

   W 48,473        51,108        145,419        153,326  

Net interest cost

     303        242        911        726  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 48,776        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

   W 1,529,424        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

   W (1,355      (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

   W (1,023      (3,470      (9,422      (11,236
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W —          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

   W —          193,273        25,799        219,072  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W —          135,719        25,799        161,518  

Non-current

   W —          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

   W 23,996        16,181  

Unearned revenues

     27,478        11,073  

Security deposits received

     7,620        165  
  

 

 

    

 

 

 
   W 59,094        27,419  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 85,471        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  
  

 

 

    

 

 

 
   W 92,405        94,453  
  

 

 

    

 

 

 

 

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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.

 

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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

   W 5,417,502        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,432,573        5,661,046        15,752,138        15,850,273  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W (154,959      (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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  6,165,940        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.

 

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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(*)

   W 137,368        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 370,212        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 W84,083 million.

 

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

   W 602,331        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 743,884        733,580        2,109,933        2,240,066  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 186,288        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 199,365        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

   W 156,059        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 296,702        61,178        734,043        448,101  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 3,784        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 106,117        13,564        201,120        121,121  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   W 45,941        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 186,379        14,029        308,941        70,218  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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)

   W 1,569        88,683        (123,389      80,491  

Deferred tax expense (benefit)

     (196,846      9,283        (186,809      (120,374
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense (benefit)

   W (195,277      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

   W —          —          (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)

   W 1,041,492        852,949        (5,966     (1,013     1,035,526       851,936  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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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

   W (575,046,871,311      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

   W (1,607      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.

 

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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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 1,161.69        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  

 

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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)

   W   99,244        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.

 

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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

   W 435,466        550,644  

Financial liabilities

     (6,356,922      (5,033,515
  

 

 

    

 

 

 
   W (5,921,456      (4,482,871
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (2,475,900      (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

   W (2,408      2,408        (2,408      2,408  

December 31, 2018

           

Variable rate instruments

   W (8,018      8,018        (8,018      8,018  

 

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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.

 

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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

   W 358,181        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  
  

 

 

    

 

 

 
   W 5,527,419        4,371,970  
  

 

 

    

 

 

 

Financial assets at fair value through profit or loss

     

Convertible bonds

   W 1,327        1,327  

Derivatives

     106,884        13,059  
  

 

 

    

 

 

 
   W 108,211        14,386  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

   W 85        161  
  

 

 

    

 

 

 
   W 5,635,715        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.

 

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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

   W 5,387,104        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

   W 6,157        (22,392     —          —          (3,788     (18,604     —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

   W 14,426,808        16,670,134       5,939,249        1,436,217        1,855,476       6,996,795       424,840  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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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

   W 17,328,023       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.

 

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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.

 

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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

   W 358,181        (*)        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

   W 3,384        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

   W 85        85        161        161  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W 6,157        6,157        25,758        25,758  

Unsecured convertible bonds

     837,095        837,095        —          —    

Liabilities carried at amortized cost

           

Unsecured bank borrowings

   W 5,387,104        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.

 

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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

   W —          —          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

   W —          —          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  

 

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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

   W     —          —          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

   W     —          —          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

 

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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

   W —          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  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   W 6,158,559        2,515,335       —         149,274        6,054        29,077       8,858,299  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

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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.

 

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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.

   W 2,422,394        —          —          —          —          —    

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        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,826,424        —          454,361        —          1,681,564        36,548  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W —          —          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        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        —          88,730        1,018        17,720        2,337  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 209,998        —          2,036        17,972        —          37,867  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 31,515        —          —          —          —          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  

 

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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.

   W 22,027        —          —          —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 156,676        —          9,600        22,023        —          27,192  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,195,737        —          554,727        41,013        1,699,284        103,944  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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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.

   W 6,449,061        —          —          —          —          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        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,790,442        11,120        1,191,813        —          4,153,822        110,450  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        7,502        272,928        20,608        54,939        7,258  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 739,773        —          8,580        150,797        —          102,164  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 76,950        —          —          —          —          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  

 

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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.

   W 80,553        —          —          —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 444,751        —          32,636        68,282        —          91,202  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 14,977,605        18,622        1,505,957        239,687        4,208,761        311,074  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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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.

   W 1,947,098        —          —          —          —          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        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,994,906        —          472,575        —          1,253,869        26,352  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W —          —          —          —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          92,238        12,853        16,650        2,669  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 222,952        —          4,238        100,234        —          25,849  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 27,537        —          —          —          —          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  

 

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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.

   W 275        —          —          —          —          —    

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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 135,069        —          32,732        59,080        —          18,838  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W  5,352,927        —          601,783        172,167        1,270,519        73,708  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W 5,905,631        —          —          —          —          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        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,652,552        90,281        1,175,300        —          3,927,775        69,256  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        279,020        51,992        51,729        6,593  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 919,008        —          25,818        406,187        —          73,656  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 51,311        —          —          —          —          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  

 

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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.

   W 15,156        —          —          —          —          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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 348,251        —          97,873        256,036        —          74,580  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 14,919,811        95,553        1,578,011        714,215        3,979,504        224,085  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W 1,552,302        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,014,200        3,058,000        1,609,633        1,536,259  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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.

   W —          —          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        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          2,000        77,510        69,334  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

           

LG Electronics Inc.

   W   187,855        247,134        101,922        99,574  

 

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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.

   W 5        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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 88,527        74,614        32,136        99,503  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,290,582        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.

 

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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.(*)

   W 1,000        —          —          375  

YAS Co., Ltd.

            —          —          375  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,000        —          —          750  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Excluded from related parties due to disposal of equity investments during the nine-month period ended September 30, 2019.

 

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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(*)

   W 146,375        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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 146,524        556,895        498,645        1,625,094        159,534        448,496  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 171,420        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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 171,587        739,058        562,069        2,334,540        119,012        648,706  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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

   W 769        918        2,590        2,734  

Expenses related to the defined benefit plan

     103        103        450        690  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 872        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.

 

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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   

 

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