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 August 2012

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 150-721, 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  x            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  x

 

 

 


Table of Contents

SEMIANNUAL REPORT

(From January 1, 2012 to June 30, 2012)

THIS IS A TRANSLATION OF THE SEMIANNUAL 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” AND “Q3” OF A FISCAL YEAR ARE REFERENCES TO THE THREE-MONTH PERIODS ENDED MARCH 31, JUNE 30 AND SEPTEMBER 30, RESPECTIVELY, OF SUCH FISCAL YEAR. REFERENCES TO “H1” OF A FISCAL YEAR ARE REFERENCES TO THE SIX-MONTH PERIOD ENDED JUNE 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. 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

     5   

D. Voting rights

     6   

E. Dividends

     6   

2. Business

     7   

A. Business overview

     7   

B. Industry

     8   

C. New businesses

     9   

3. Major Products and Raw Materials

     12   

A. Major products

     12   

B. Average selling price trend of major products

     12   

C. Major raw materials

     12   

4. Production and Equipment

     13   

A. Production capacity and output

     13   

B. Production performance and utilization ratio

     13   

C. Investment plan

     13   

5. Sales

     14   

A. Sales performance

     14   

B. Sales route and sales method

     14   

6. Market Risks and Risk Management

     15   

A. Market risks

     15   

B. Risk management

     15   

7. Derivative Contracts

     15   

A. Currency risks

     15   

B. Interest rate risks

     16   

8. Major Contracts

     16   

 

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9. Research & Development

     16   

A. Summary of R&D-related expenditures

     16   

B. R&D achievements

     17   

10. Intellectual Property

     24   

11. Environmental Matters

     24   

12. Financial Information

     27   

A. Financial highlights (Based on consolidated K-IFRS)

     27   

B. Financial highlights (Based on separate K-IFRS)

     28   

C. Consolidated subsidiaries

     29   

D. Status of equity investment

     30   

13. Audit Information

     31   

A. Audit service

     31   

B. Non-audit service

     31   

14. Board of Directors

     31   

A. Independence of directors

     31   

B. Members of the board of directors

     31   

C. Committees of the board of directors

     32   

15. Information Regarding Shares

     32   

A. Total number of shares

     32   

B. Shareholder list

     32   

16. Directors and Employees

     33   

A. Directors

     33   

B. Employees

     33   

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

 

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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 150-721, Republic of Korea, Republic of Korea, and our telephone number is +82-2-3777-1114. Our website address is http://www.lgdisplay.com.

 

  B. Domestic credit rating

 

Subject
instruments

  

Month of rating

    

Credit

rating

  

Rating agency (Rating range)

Commercial Paper    January 2006      A1   

NICE Information Service Co., Ltd.

(A1 ~ D)

   June 2006        
   December 2006        
   June 2007        
   December 2007        
   September 2008        
   December 2008        
  

 

   June 2006      A1   

Korea Investors Service, Inc.

(A1 ~ D)

   January 2007        
   June 2007        
   December 2007        
   September 2008        

 

 

Corporate
Debenture

   June 2006      AA-   

NICE Information Service Co., Ltd.

(AAA ~ D)

  

 

  
   December 2006      A+   
   June 2007        
   September 2008        
  

 

  
   July 2009      AA-   
  

 

  
   October 2009      AA-   
   February 2010        
   May 2010        
   December 2010        
   August 2011        
   June 2012        
  

 

   June 2006      AA-   

Korea Investors Service, Inc.

(AAA ~ D)

  

 

  
   January 2007      A+   

 

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   June 2007        
   September 2008        
  

 

  
   July 2009      AA-   
   December 2009        
   February 2010        
   May 2010        
   August 2010        
   February 2011        
   April 2011        
   August 2011        
   October 2011        
   June 2012        
  

 

   October 2009      AA-   

Korea Ratings Corporation

(AAA ~ D)

   December 2009        
   August 2010        
   December 2010        
   February 2011        
   April 2011        
   July 2011        
   October 2011        
   June 2012        

 

 

  C. Capitalization

 

  (1) Change in capital stock (as of June 30, 2012)

(Unit: Won, Share)

 

Date

  

Description

   Change in number of
common shares
     Face amount
per share
 

July 23, 2004

   Offering (1)      33,600,000         5,000   

September 8, 2004

   Follow-on offering (2)      1,715,700         5,000   

July 27, 2005

   Follow-on offering (3)      32,500,000         5,000   

 

(1) ADSs offering: 24,960,000 shares (US$30 per share, US$15 per ADS) / Initial public offering in Korea: 8,640,000 shares
((Won)34,500 per share)
(2) ADSs offering: 1,715,700 shares ((Won)34,500 per share) pursuant to the exercise of greenshoe option by the underwriters
(3) ADSs offering: 32,500,000 shares (US$42.64 per share, US$21.32 per ADS)

 

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  (2) Convertible bonds (as of June 30, 2012)

(Unit: In millions of Won, Share)

 

Issue date:    April 18, 2007
Maturity:    April 18, 2012 (3)
Face amount: (1)    (Won)513,480
Conversion shares:    Registered common shares
Conversion period:    Convertible into shares of common stock during the period from April 19, 2008 to April 3, 2012
Conversion price: (2)    (Won)47,892 per share
Outstanding (3)   Face amount:   
  Number of convertible shares: (2)   
Remarks:   

-   Registered form

-   Listed on Singapore Exchange

 

(1) Face amount translated from US$550 million at the noon buying rate of the Federal Reserve Bank of New York in effect on April 10, 2007 (which was the date the convertible bond purchase agreement was entered into), which was (Won)933.6 = US$1.00.
(2) Conversion price was adjusted from (Won)49,070 to (Won)48,760 and the number of convertible shares was adjusted from 10,464,234 to 10,530,762 following the approval by the shareholders of a cash dividend of (Won)750 per share at the annual general meeting of shareholders on February 29, 2008. Conversion price was further adjusted from (Won)48,760 to (Won)48,251 and the number of shares issuable upon conversion was adjusted from 10,530,762 to 10,641,851 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 13, 2009. Conversion price was further adjusted from (Won)48,251 to (Won)48,075 and the number of shares issuable upon conversion was adjusted from 10,641,851 to 10,680,811 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 12, 2010. In April 2010, certain holders of our US$550 million convertible bonds due 2012 exercised their put option for an aggregate principal amount of US$484 million and were repaid at 109.75% of their principal amount. Accordingly, the number of shares issuable upon conversion changed from 10,680,811 to 1,281,697. Conversion price was further adjusted from (Won)48,075 to (Won)47,892 and the number of shares issuable upon conversion was adjusted from 1,281,697 to 1,286,594 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 11, 2011.
(3) The remaining US$66 million of these convertible bonds were repaid in full upon their maturity on April 18, 2012 at 116.77% of their principal amount.

 

  D. Voting rights (as of June 30, 2012)

(Unit: share)

 

Description

   Number of shares  

A. Total shares issued:

     357,815,700   

B. Shares without voting rights:

     —     

C. Shares subject to restrictions on voting rights pursuant to our articles of incorporation:

     —     

D. Shares subject to restrictions on voting rights pursuant to regulations:

     —     

E. Shares with restored voting rights:

     —     
  

 

 

 

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

     357,815,700   

 

  E. Dividends

At the annual general meeting of shareholders on March 9, 2012, we did not declare a cash dividend to our shareholders.

 

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Dividends during the recent three fiscal years

 

Description (unit)

   2011     2010     2009  

Par value (Won)

     5,000        5,000        5,000   

Profit (loss) for the period / Net income (million Won)

     (991,032 )(3)      1,002,648 (3)      1,067,947 (4) 

Earnings per share (Won) (1)

     (2,770     2,802        2,985   

Total cash dividend amount (million Won)

     —          178,908        178,908   

Total stock dividend amount (million Won)

     —          —          —     

Cash dividend payout ratio (%)

     —          17.8        16.8   

Cash dividend yield (%) (2)

     —          1.3        1.3   

Stock dividend yield (%)

     —          —          —     

Cash dividend per share (Won)

     —          500        500   

Stock dividend per share (share)

     —          —          —     

 

(1) Earnings per share is based on par value of (Won)5,000 per share and is calculated by dividing net income by weighted average number of common stock.
(2) 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 stock 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.
(3) Profit for the period based on separate K-IFRS.
(4) Net income based on non-consolidated Korean GAAP.

 

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, LTPS-LCD and OLED.

As of June 30, 2012, we operated TFT-LCD and OLED production facilities in Paju and Gumi, Korea and a LCD research center in Paju, Korea. We have also established subsidiaries in the Americas, Europe and Asia.

As of June 30, 2012, our business consisted of the manufacture and sale of LCD and OLED panels and monitor products. Because our non-LCD business represented an extremely small portion of our assets and revenues as of and for the six months ended June 30, 2012, we have included them as part of our LCD reporting business segment.

2012 (H1) Financial highlights by business (based on K-IFRS)

(Unit: In billions of Won)

 

2012 (H1)

   LCD business  

Sales Revenue

     13,094   

Gross Profit

     1,098   

Operating Profit (Loss)

     (204

 

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  B. Industry

 

  (1) Industry characteristics and growth potential

 

   

TFT-LCD technology is one of the widely used technologies in the manufacture of flat panel displays, and the demand for flat panel displays is growing. The flat panel display industry is characterized by entry barriers due to rapidly evolving technology, capital-intensive characteristics, and the significant investments required to achieve economies of scale, among other factors. There is intense competition among the players in the industry, and the industry as a whole has experienced continued growth in its production capacity in response to growth in demand for flat panel displays.

 

   

The demand for LCD panels for notebook computers and desktop monitors has grown, to a degree, in tandem with the growth in the information technology industry. The demand for LCD panels for television sets has been growing as digital broadcasting is becoming more common and as LCD television has come to play an important role in the digital display market. In addition, markets for small- to medium-sized LCD panels, such as those used in mobile phones (including smartphones), smartbooks, medical applications, automobile navigation systems and e-books, among others, have shown continued growth.

 

   

The average selling prices of LCD panels may continue to decline with time irrespective of general business cycles as a result of, among other factors, technology advancements and cost reductions.

 

  (2) Cyclicality

 

   

The TFT-LCD business is highly cyclical. In spite of the increased demand for products, this industry has experienced periodic volatility caused by imbalances between supply and demand due to capacity expansion 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.

 

  (3) Market conditions

 

   

Since 2011, due to a general overcapacity in the TFT-LCD industry, TFT-LCD panel makers have slowed their respective rates of production capacity growth, while a number of them are pursuing other strategic alternatives such as mergers or formation of new alliances.

 

   

Most TFT-LCD panel makers are located in Asia.

 

  a. Korea: LG Display, Samsung Display, Hydis Technologies, etc.

 

  b. Taiwan: AU Optronics, Chimei Innolux, CPT, HannStar, etc.

 

  c. Japan: Japan Display, Sharp, Panasonic LCD, etc.

 

  d. China: BOE, CSOT, etc.

 

  (4) Market shares

 

   

Our worldwide market share of large-sized TFT-LCD panels (i.e., TFT-LCD panels that are 9 inches or larger) based on revenue is as follows:

 

     2012 (H1) (1     2011(2)     2010 (3)  

Panels for Notebook Computers (4)

     32.7     34.9     33.2

Panels for Monitors

     31.8     28.3     26.5

Panels for Televisions

     25.7     24.7     23.4

Total

     28.3     27.3     25.4

 

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Table of Contents
(1) Source: 2012 Q2 DisplaySearch Quarterly Large-Area TFT LCD Shipment Report.
(2) Source: 2011 Q4 DisplaySearch Quarterly Large-Area TFT LCD Shipment Report (advanced version with LED backlight).
(3) Source: 2010 Q4 DisplaySearch Large-Area TFT LCD Shipment Report (advanced version with LED backlight).
(4) Includes panels for netbooks.

 

  (5) Competitiveness

 

   

Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, successful and timely investment and product development, cost competitiveness, 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.

 

   

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 new technologies and products, including in the categories of 3D, touch screens and next generation displays. With respect to 3D technology, we have commenced mass production of high definition 3D panels with reduced degrees of “crosstalk,” or the degree of 3D image overlapping, of less than 1% (which is less than what the human eye can perceive). We have also acquired the technical skills and have established a supply chain management system that enables us to provide one-stop solutions to our customers with respect to touch module products. In addition, we have shown that we are technologically a step ahead of the competition by developing products such as 10.1-inch flexible LCDs, 2.6 mm thin televisions (the thinnest in the world at the time) and 19-inch flexible e-papers. We are a leader in large OLED panel display technology, as demonstrated by our 55-inch OLED display panel unveiled at the Consumer Electronics Show in Las Vegas in January 2012, which was the largest OLED panel at the time.

 

   

Moreover, we entered into long-term sales contracts with major global firms to secure customers and expand partnerships for technology development.

 

  C. New businesses

 

   

In order to meet the rapidly increasing market demand for large TFT-LCD panels, we commenced mass production at P83, an eighth generation fabrication line located in our P8 facility, and P98, a new eighth generation production facility, in March 2011 and June 2012, respectively.

 

   

We also plan to strengthen our market position in future display technologies by strengthening our OLED business, accelerating the development of flexible display technologies and maintaining our leadership position in the LED backlight LCD market.

 

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Table of Contents
   

We are making an effort to increase our competitiveness, including in the LCD component parts market, by forming cooperative relationships with suppliers and purchasers of our products. As part of this effort, in March 2005, we established a joint venture company, Paju Electric Glass Co., Ltd., with Nippon Electric Glass Co., Ltd. We invested (Won)14.4 billion in return for a 40% interest in Paju Electric Glass Co., Ltd. In November 2010 and April 2011, we invested an additional (Won)14.8 billion and (Won)4.4 billion, respectively, in Paju Electric Glass Co., Ltd. but the additional investments did not change our percentage interest in Paju Electric Glass Co., Ltd. In July 2008, we purchased 6,850,000 shares of common stock of New Optics Ltd. at a purchase price of (Won)9.7 billion, and in February 2010, we purchased an additional 1,000,000 shares of common stock of New Optics at a purchase price of (Won)2.5 billion. In January 2010, we purchased 10.8 million shares of Can Yang Investment Limited representing a 15% interest at a purchase price of US$10.8 million. In October 2010, we invested an additional US$4.5 million and acquired 4.8 million additional shares of Can Yang Investment Limited.

 

   

In October 2008, we established a joint venture company, Suzhou Raken Technology Ltd., with AmTRAN Technology Co., Ltd., a Taiwan corporation. We invested US$10.4 million in return for a 51% interest in Suzhou Raken Technology Ltd. Suzhou Raken Technology Ltd. will supply both parties with TFT-LCD modules and TFT-LCD televisions. Through the establishment of this joint venture, we are able to further expand our customer base by securing a stable long-term panel dealer. In 2009 and 2010, we invested an additional US$58.7 million and US$14.5 million, respectively, in Suzhou Raken Technology Ltd., but the additional investments did not change our percentage interest in Suzhou Raken Technology Ltd.

 

   

As part of our strategy to expand our production capacity overseas, we signed an investment agreement and a joint venture agreement in November 2009 with the City of Guangzhou, China, to build an eighth-generation panel fabrication facility in China and held a groundbreaking ceremony in May 2012.

 

   

In December 2009, certain LG affiliates and we entered into a joint venture investment agreement and established a joint venture company, Global OLED Technology LLC, for purposes of managing the patent assets relating to OLED technology that we acquired from Eastman Kodak Company in December 2009. As of December 31, 2009, we had invested (Won)72.3 billion in return for a 49% equity interest in the joint venture company. In June 2010, we sold (Won)19.0 billion worth of our equity interest in the joint venture company. After such sale, our equity interest was reduced to 32.73%.

 

   

In December 2009, we acquired a 30.6% limited partnership interest in LB Gemini New Growth Fund No. 16. Under the limited partnership agreement, we agreed to invest a total amount of (Won)30 billion in the fund, and as of December 31, 2010, we had invested (Won)8.3 billion in the fund. By becoming a limited partner of this fund, our aim is to seek direct investment opportunities as well as to receive benefits from the investment. In February 2011, we received a distribution of (Won)1.4 billion from the fund, and in March and April 2011, we invested an additional (Won)1.9 billion and (Won)3.1 billion, respectively, in the fund. In June 2011, we received a further distribution of (Won)0.7 billion as return of principal and (Won)0.9 billion as dividends and we invested an additional (Won)1.2 billion in the fund. In December 2011, we invested an additional (Won)2.0 billion in the fund. In April and July 2012, we received distributions of (Won)1.0 billion and (Won)0.8 billion from the fund, respectively. The additional investments did not change our investment commitment amount of (Won)30 billion or our limited partnership interest in the fund, which remained at 30.6%.

 

   

In order to establish a production base for LCD modules, LCD television sets and LCD monitors, we entered into a joint investment agreement with Top Victory Investment Ltd. in January 2010 and established L&T Display Technology (Xiamen) Ltd. and L&T Display Technology (Fujian) Ltd. in Xiamen and Fujian, China, respectively. We invested (i) (Won)7.1 billion and acquired a 51% equity interest in L&T Display Technology (Xiamen) Ltd. and (ii) (Won)10.1 billion and acquired a 51% equity interest in L&T Display Technology (Fujian) Ltd.

 

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Table of Contents
   

In May 2010, we completed the acquisition of the LCD module division of LG Innotek Co., Ltd. Through this acquisition, we expect to improve our module manufacturing process and simplify our supply chain which will increase our efficiency and competitiveness.

 

   

In August 2010, in order to strengthen our competitiveness in the LED backlight LCD market, we entered into a joint venture with Everlight Electronics Co., Ltd. and AmTRAN Technology Co., Ltd. and established Eralite Optoelectronics (Jiangsu) Co., Ltd., a company that specializes in LED packaging and manufacturing, in Suzhou, China. We invested US$4 million and acquired a 20% equity interest in Eralite Optoelectronics (Jiangsu) Co., Ltd.

 

   

In September 2010, in order to strengthen our OLED business, we acquired a 20% equity interest in YAS Co., Ltd., which develops and manufactures OLED deposition equipment components, at a purchase price of (Won)10 billion.

 

   

In November 2010, in order to strengthen our e-book business, we acquired a 100% equity interest in Image & Materials, Inc., a company that develops and manufactures e-book deposition equipment components, at a purchase price of (Won)35 billion. In each of June 2011, September 2011 and February 2012, we invested an additional (Won)3.0 billion in Image & Materials, Inc.

 

   

In October 2010, in order to strengthen our competitiveness in the e-book market, we entered into a joint venture with Iriver Ltd. and established L&I Electronics Technology (Dongguan) Limited, a company that specializes in e-book manufacturing, in Dongguan, China. We invested US$2.6 million and acquired a 51% equity interest in L&I Electronics Technology (Dongguan) Limited.

 

   

In November 2010, in order to build Backlight-Module-System (BMS) lines that would help differentiate our technical skills from those of our competitors and increase our cost competitiveness, we entered into a joint venture with Compal Electronics, Inc., a Taiwanese company, and established LUCOM Display Technology (Kunshan) Ltd. in Kunshan, China. We invested US$2.3 million and acquired a 51% equity interest in LUCOM Display Technology (Kunshan) Ltd. In February and April 2011, we invested an additional US$ 3.1 million and US$2.3 million, respectively, in LUCOM Display Technology (Kunshan) Ltd., but the additional investments did not change our percentage interest in LUCOM Display Technology (Kunshan) Ltd.

 

   

In April 2011, in order to enhance the product quality and assist the local development of coaters, a component used in our TFT-LCD products, we invested (Won)20 billion and acquired a 16.6% interest in Narae Nanotech Corporation, a Korean equipment manufacturer. In June 2011, we invested an additional (Won)10.0 billion and acquired a further 7.7% interest in Narae Nanotech Corporation. As of June 30, 2012, we held a 23% equity interest in Narae Nanotech Corporation.

 

   

In November 2011, in order to improve our cost competitiveness with respect to the glass substrate etching stage of our TFT-LCD panel manufacturing process, we invested (Won)10.6 billion and acquired a 20.3% interest in Avatec Co., Ltd., a third party glass substrate etching processor.

 

   

In November 2011, in order to expand our module production capacity, we established LG Display U.S.A. Inc. in Texas, United States, and LG Display Reynosa S.A. de C.V. in Reynosa, Mexico. We invested in the form of paid-in capital (Won)12.4 billion and (Won)9.2 billion in LG Display U.S.A. Inc. and LG Display Reynosa S.A. de C.V., respectively. We currently own a 100% interest in LG Display U.S.A. Inc. and a 99% interest in LG Display Reynosa S.A. de C.V. LG Display U.S.A. Inc. owns the remaining 1% interest in LG Display Reynosa S.A. de C.V.

 

   

In April 2012, in order to improve our cost competitiveness with respect to tempered glass used for touch screens, we invested (Won)2.0 billion and acquired a 19.8% interest in Glonix Co., Ltd.

 

   

In June 2012, in order to ensure a stable supply of driver integrated circuits and other component parts and to jointly develop new technologies, we invested (Won)52.5 billion and acquired a 13% interest in Silicon Works Co., Ltd.

 

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Table of Contents
3. Major Products and Raw Materials

 

  A. Major products

We manufacture TFT-LCD panels, of which a significant majority is exported overseas.

(Unit: In billions of Won, except percentages)

 

Business

area

  

Sales

Type

  

Items

(Market)

  

Usage

  

Major

trademark

   Sales in 2012 H1
(%)
 

TFT-LCD

   Product/ Service/ Other Sales    TFT-LCD (Overseas (1))    Panels for Notebook Computer, Monitor, Television, etc    LG Display      12,092 (92.3 %) 
      TFT-LCD (Korea (1))    Panels for Notebook Computer, Monitor, Television, etc    LG Display      1,002 (7.7 %) 
              

 

 

 

Total

                 13,094 (100 %) 
              

 

 

 

 

(1) Based on ship-to-party.

 

  B. Average selling price trend of major products

The average selling price of LCD panels per square meter of net display area shipped in the second quarter of 2012 increased by 5% from the first quarter of 2012. There is no assurance that the average selling prices of LCD panels will not fluctuate in the future due to changes in supply and demand.

(Unit: US$ / m2)

 

Description

   2012 Q2      2012 Q1      2011 Q4      2011 Q3  

TFT-LCD panel (1)(2)

     701         669         684         705   

 

(1) Quarterly average selling price per square meter of net display area shipped.
(2) 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

TFT-LCD    Raw Materials    Glass   

LCD panel

manufacturing

     1,730         20.6  

Samsung Corning Precision

Glass Co., Ltd., Nippon
Electric Glass Co., Ltd., etc.

     

Backlight

        2,712         32.3   Heesung Electronics Ltd., etc.
     

Polarizer

        1,305         15.5   LG Chem, etc.
     

Others

        2,658         31.6  
           

 

 

    

 

 

   

Total

              8,405         100.0  
           

 

 

    

 

 

   

 

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Period: January 1, 2012 ~ June 30, 2012.

(1) Based on total cost for purchase of raw materials which includes manufacturing and development costs, etc.

 

4. Production and Equipment

 

  A. Production capacity and output

 

  (1) Production capacity

The table below sets forth the production capacity of our Gumi and Paju facilities in the periods indicated.

(Unit: 1,000 Glass sheets)

 

Business area

  

Items

  

Location of facilities

   2012 (H1) (1)      2011 (2)      2010 (2)  

TFT-LCD

   TFT-LCD    Gumi, Paju      4,231         8,376         7,509   

 

(1) 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 (i.e., 6 months).
(2) 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).

 

  (2) Production output

The table below sets forth the production output of our Gumi and Paju facilities in the periods indicated.

(Unit: 1,000 Glass sheets)

 

Business area

  

Items

  

Location of facilities

   2012 (H1)      2011      2010  

TFT-LCD

   TFT-LCD    Gumi, Paju      3,740         6,850         6,490   

 

   

Based on glass input substrate size for eighth generation glass sheets.

 

  B. Production performance and utilization ratio

(Unit: Hours, except percentages)

 

Business place (area)

   Available working hours
of 2012 (H1)
  Actual working hours
of 2012 (H1)
  Average
utilization ratio
 

Gumi

(TFT-LCD)

   4,368 (1)

(182 days) (2)

  4,234 (1)

(176 days) (2)

    96.9

Paju

(TFT-LCD)

   3,619 (1)

(151 days) (2)

  3,619 (1)

(151 days) (2)

    100.0

 

(1) Based on the assumption that all 24 hours in a day have been fully utilized.
(2) Number of days is calculated by averaging the number of working days for each facility.

 

  C. Investment plan

In connection with our strategy to expand our TFT-LCD production capacity, we estimate that we will incur capital expenditures on a cash out basis of approximately (Won)4 trillion in 2012. Such amount is subject to change depending on business conditions and market environment.

 

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5. Sales

 

  A. Sales performance

(Unit: In billions of Won)

 

Business area

  

Sales types

  

Items (Market)

   2012 (H1)      2011      2010  

TFT-LCD

   Products, etc.    TFT-LCD    Overseas (1)      12,092         22,328         23,806   
        

Korea (1)

     1,002         1,963         1,706   
           

 

 

    

 

 

    

 

 

 
        

Total

     13,094         24,291         25,512   
           

 

 

    

 

 

    

 

 

 

 

(1) Based on ship-to-party.

 

  B. Sales route and sales method

 

  (1) Sales organization

 

   

As of June 30, 2012, each of our Television Business Unit and IT/Mobile Business Unit 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.

 

  (2) Sales route

Sales of our products take place through one of the following two routes:

 

   

LG Display HQ and overseas manufacturing subsidiaries ® Overseas sales subsidiaries (USA/Germany/Japan/Taiwan/China/Singapore), etc. ® System integrators and end-brand customers ® End users

 

   

LG Display HQ and overseas manufacturing subsidiaries ® System integrators and end-brand customers ® End users

 

  (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

 

   

To secure stable sales to major personal computer makers and leading consumer electronics makers globally. To increase sales of high-end notebook computer products (including smartbooks, IPS and slim and narrow bezel notebook computer products), to strengthen sales of the high-end monitor segment (such as IPS, slim and narrow bezel and 3D monitors), to lead in the large and wide television market (including the LED television market) and to continually increase our market share in the 3D television market by utilizing film patterned retarder technology.

 

   

In the small- to medium-sized products segment, which is centered on high-end products applying IPS technology, to strengthen our business portfolio by developing a diverse range of products, such as mobile phone (including smartphone), smartbook, car navigation, industrial products (including aviation and medical equipment), etc.

 

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Table of Contents
  (5) Purchase orders

 

   

Customers generally place purchase orders with us one month prior to delivery. Our customary practice for procuring orders from our customers and delivering our products to such customers is as follows:

 

   

Receive order from customer (overseas sales subsidiaries, etc.) ® Headquarter is notified ® Manufacture product ® Ship product (overseas sales subsidiaries, etc.) ® Sell product (overseas sales subsidiaries, etc.)

 

6. Market Risks and Risk Management

 

  A. Market risks

Our industry continues to experience continued declines in the average selling prices of display 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 TFT-LCD 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 makers in Korea, Taiwan, China and Japan. Our main competitors in the industry include Samsung Display, Hydis Technologies, AU Optronics, Chimei Innolux, CPT, HannStar, Japan Display, Sharp, Panasonic LCD, BOE and CSOT.

Our ability to compete successfully depends on factors both within and outside our control, including product pricing, performance and reliability, successful and timely investment and 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 purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. Our risk management policy regarding foreign currency risk is to minimize the impact of foreign currency fluctuations on our foreign currency denominated assets and liabilities. For additional information, see Note 9 of the notes to our unaudited consolidated interim financial statements as of and for the six months ended June 30, 2012 attached hereto.

 

  B. Risk management

The average selling prices of display panels have declined in general and could continue to decline with time irrespective of industry-wide cyclical fluctuations. Certain contributing factors for this decline will be beyond our ability to control and manage. However, in anticipation of such price decline we have continued to develop new technologies and have implemented various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we may from time to time enter into cross-currency interest rate swap contracts and foreign currency forward contracts. For additional information, see Note 9 of the notes to our unaudited consolidated interim financial statements as of and for the six months ended June 30, 2012 attached hereto.

 

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 Euro, the Japanese Yen and the Chinese Renminbi.

 

   

We generally use forward exchange contracts with a maturity of less than one year to hedge against currency risks.

 

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Table of Contents
   

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, the Japanese Yen and the Chinese Renminbi.

 

   

In respect of other monetary assets and liabilities denominated in foreign currencies, we ensure that our net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to address short-term imbalances. In addition, we also adjust the factoring volumes of foreign currency denominated receivables and utilize usances as means of settling accounts payable relating to capital expenditures for our facilities, in response to currency fluctuations.

 

  B. Interest rate risks

 

   

Our exposure to interest rate risks relates primarily to our long term debt obligations. As of June 30, 2012, we had no interest swap contracts outstanding.

 

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
  

 

   Fergason Patent Properties    October 2007 ~    Patent licensing of LCD driving technology
  

 

   Hewlett-Packard    January 2011 ~    Patent licensing of semi-conductor device technology

 

Technology licensing/supply agreement

   Chunghwa Picture Tubes    November 2007 ~    Patent cross-licensing of LCD technology
  

 

   HannStar Display Corporation    November 2009 ~    Patent cross-licensing of LCD technology
  

 

   AU Optronics Corporation    August 2011~    Patent cross-licensing of LCD technology

 

 

9. Research & Development

 

  A. Summary of R&D-related expenditures

(Unit: In millions of Won, except percentages)

 

Items

       2012 (H1)     2011     2010  

Material Cost

       252,508        550,200        616,072   

Labor Cost

       208,932        365,375        285,212   

Depreciation Expense

       111,348        217,874        93,365   

Others

       95,420        180,582        122,619   

Total R&D-Related Expenditures

       668,208        1,314,031        1,117,268   

Accounting Treatment

 

Selling & Administrative

Expenses

     148,999        248,328        264,073   
 

Manufacturing Cost

     413,018        942,015        717,848   
 

Development Cost (Intangible

Assets)

     106,191        123,688        135,347   

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

     5.1     5.4     4.4

 

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Table of Contents
  B. R&D achievements

Achievements in 2010

 

  1) Development of 9.7-inch AH-IPS model for Apple’s i-Pad.

 

   

Development of the world’s first IPS Tablet

 

   

Achieving the following viewing angles by applying AH-IPS: top (80°) / bottom (80°) / left (80°) / right (80°)

 

  2) Development of second Green PC products (13.3-inch, 14.0-inch and 15.6-inch in high-definition (“HD”))

 

   

Thin and light; low electricity consumption thereby increasing battery life

 

   

Development of Company-led flat product market

 

  3) Development of world’s first TruMotion 480Hz product (47-inch and 55-inch in full high-definition (“FHD”))

 

   

World’s first application of 240hz driving technology and scanning technology to achieve TruMotion 480Hz.

 

   

50% reduction in source driver integrated circuits (from 16ea to 8ea) by applying 1 gate 1 drain technology

 

  4) World’s first FHD 47-inch three-dimensional (“3D”) display panels using Glass Patterned Retarder (GPR) technology

 

   

Achieving FHD for 3D display panels using GPR technology

 

  5) Development of our first large-sized display panels viewable in 3D using shutter glasses (42-inch, 47-inch, 55-inch in FHD)

 

   

Achieving high aperture ratio by applying S-IPS V technology

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

   

Reduction in the number of integrated circuits (from 8ea to 6ea) by applying 960Ch source driver integrated circuits

 

  6) World’s first LCD product which uses the LCD monitor’s bottom cover as the back cover of a television set (32-inch, 37-inch and 42-inch in FHD)

 

   

Removal of the television set back cover by replacing it with the LCD monitor’s bottom cover. Co-designed with a third party

 

  7) Development of 42-inch and 47-inch FHD display panels for television to be sold in emerging markets

 

   

Focusing on basic functions and removing functions that are costly

 

   

Achieving cost reduction by applying GIP technology

 

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Table of Contents
  8) Development of intra interface technology for large-sized, high resolution, high frequency display panels

 

   

Improved data transmission rate (from 660Mbps to 1.6Gbps)

 

   

Developing slim PCBs by decreasing the number of transmission lines

 

  9) Development of our first 21.5-inch and 26-inch FHD Edge LED products

 

   

Application of 21.5-inch, 26-inch FHD TV LED BL and mid-sized FHD model Slim TCON (176Pin ® 88Pin)

 

  10) Development of our first 32 HD Edge LED product

 

   

Application of 32-inch HD TV Edge LED BL

 

  11) Development of our first 37-inch FHD M240Hz product

 

   

Development of 37-inch FHD 240Hz panel. Development and mass production of MEMC 240Hz with TCON model.

 

  12) Development of 240Hz panel for LG Electronics’ Borderless TV

 

   

Development of Narrow Bezel 240Hz panel (Bezel 14mm ® 7mm) for LG Electronics’ Borderless TV

 

  13) Development of the world’s first slim 23W FHD monitor in IPS mode

 

   

Slim design by applying slim-type LED backlight (thickness: 14.5t ® 11.5t)

 

   

Cost saving by applying low voltage liquid crystal

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

  14) Development of the world’s first slim 185W HD monitor in TN mode

 

   

Slim design by applying slim-type LED backlight (thickness: 11.5t ® 9.7t)

 

   

50% reduction in source driver integrated circuits by applying DRD (Double Rate Driving) technology

 

   

Elimination of optical sheet by applying new TFT structure technology (I-VCOM)

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

  15) Development of 42-inch, 47-inch and 55-inch FHD monitors applying low cell gap (3.1 ® 2.8um) technology

 

   

Enhanced 3D performance (3D CrossTalk 10.x% ® 5.x%)

 

   

World’s first application of this technology in 42-inch, 47 inch and 55-inch FHD products

 

  16) Development of ultra slim 0.2t glass 12.1-inch notebook computer

 

   

Realization of ultra slim product by applying 0.2t glass and flat screen backlight structure

 

  17) Development of world’s first ultra slim 19SX TN monitor

 

   

Slim design by applying slim type LED backlight (thickness: 15.5 ® 9.9t)

 

   

50% reduction (6ea to 3ea) in the number of source driver integrated circuits by applying DRD technology

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

  18) Development of 215FHD e-IPS monitor products applying LED PKG

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

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Realization of 2 sheet structure by adopting I-VCOM resulting in increased transmittance and backlight luminance

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Minimization of LCM thickness by applying thin LED array structure (14.5t ® 10.2t)

 

  19) Development and application of LED PKG in 215FHD TN monitor products

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Elimination of DBEF sheet by adopting I-VCOM resulting in increased transmittance and backlight luminance

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Minimization of LCM thickness by applying thin LED array structure (14.5t ® 10.2t)

 

  67) Development of world’s first slim TN monitor (185W HD, 20W HD+, 215W/23W FHD)

 

   

Developing ultra slim monitor by cooperating with set makers in the design process (SET standard: over 20t ® 12.9t)

 

   

Minimization of LCM thickness by applying thin LED array structure (11.5t ® 8.2t)

 

   

Simplification of circuit by developing T-con + Scaler 1chip

 

  20) Development of world’s first ultra slim 215W FHD TN monitor

 

   

Developing ultra slim monitor by cooperating with set makers in the design process (SET standard: 12.9t ® 7.2t)

 

   

Minimization of LCM thickness by applying thin LED array structure (8.2t ® 6t)

 

  21) Development of the world’s first 3D FPR type 42-inch, 47-inch and 55-inch FHD panels

 

   

Improved 3D performance (cross talk 1.0% i, 3D luminance 170 nit)

 

  22) Development of our first 42-inch, 47-inch and 55-inch FHD panels with built-in 3D formatters

 

   

Development of our first products with built-in MEMC and 3D formatters

 

  23) Development of the world’s first real 240Hz applying GIP driving technology

 

   

First to develop real 240Hz applying GIP driving technology

 

   

Reduced the number of driver integrated circuits by applying 960ch Source Driver: 8ea ® 6 ea

 

  24) Development of panels for Macbook Air

 

   

Development and mass production of 116HD, 133 WXGA+ panels

 

   

Application of Z-inversion technology for low energy consumption

 

  25) Introduction of the world’s first HD shutter glasses type 3D notebook product (17.3 inch FHD)

 

   

Development of 172Hz high recharging speed notebook LCD panel

 

   

Development of Timing Controller (TC) driving technology

 

  26) The first all-in-one touch panel notebook from an LCD panel manufacturer (15.6 inch HD add-on touch notebook)

 

   

The world’s first large size (15.6-inch) notebook panel to receive Win7 Touch certification (received on July 23, 2010)

 

   

The world’s first LCD and touch panel integrated add-on touch module developed by an LCD panel manufacturer

 

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Table of Contents
  27) Introduction of the world’s first Micro Film 3D notebook (15.6-inch FHD)

 

   

The world’s first 3D FPR type notebook (developed timely to win market share in the 3D market)

 

  28) Development of the world’s first 240Hz 23W IPS monitor

 

   

The world’s first to realize 240Hz by application of 120Hz panel driving and scanning technologies

 

   

Achievement of Motion Picture Response Time (MPRT) of 8ms

 

  29) Development of the world’s first add-on infrared camera type 215W IPS monitor

 

   

Realization of thin LCM (20.5t) by application of the world’s first add-on infrared camera

 

   

Improved touch capabilities (dead zone free and multi-touch) and the first in the world to receive Win 7 Logo certification

 

   

Touch location auto correction by applying auto calibration

 

  30) Development of 20-inch HD and 23-inch FHD e-IPS monitor products applying widescreen LED PKG

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Cost reduction and lower power consumption (20% reduction for driver integrated circuits) by using low voltage driver integrated circuits

 

   

Minimization of LCM thickness by applying thin LED array structure (for 20-inch HD panels: 14.5t ® 10.2t)

 

  31) Development of 20-inch HD and 23-inch FHD TN monitor products applying widescreen LED PKG

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Elimination of DBEF sheet by adopting I-VCOM resulting in increased transmittance and backlight luminance (for 20-inch HD monitors)

 

   

50% reduction in the number of source driver integrated circuits by applying DRD technology (for 23-inch FHD panels)

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Minimization of LCM thickness by applying thin LED array structure (11.5t ® 10.2t)

Achievements in 2011

 

  1) Introduction of glass-free mobile 3D product (4.3-inch WVGA)

 

   

Development and preparation for mass production of our first glass-free 3D product (utilizing barrier cell)

 

  2) Introduction of the world’s first 12.5-inch AH-IPS notebook product

 

   

Development of the world’s first 12.5-inch notebook utilizing AH-IPS technology

 

   

Achievement of a maximum circuit logic power of 1.0W

 

   

Development of a slim and light AH-IPS model (development of a model that utilizes IPS and flat PCB)

 

  3) Introduction of an integrated 14.0-inch touch panel notebook product

 

   

Development of a 14.0-inch touch panel notebook product as part of our plan to develop and expand our integrated touch panel products portfolio

 

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Table of Contents
  4) Introduction of our 15.6-inch dream color IPS notebook product

 

   

Development of a notebook utilizing H-IPS technology

 

   

Realization of a 100% color reproduction rate by applying RGB LED technology

 

   

Realization of 1.073G color by applying 10-bit color depth technology

 

  5) Development and mass production of 9.7-inch LCD panels for i-Pad 2

 

   

Application of AH-IPS and slim LCD technology

 

   

Decreased thickness by 20% and weight by 7% compared to LCD panel for i-Pad 1

 

  6) Development of the world’s first 3D FPR 23-inch FHD TN monitor product

 

   

Minimization of flicker / crosstalk by applying FPR technology

 

   

Minimization of cost increase by applying one layer 3D film

 

   

Realization of high luminance 3D images (two times the luminance compared to images from monitors utilizing shutter glass technology)

 

  7) Introduction of our first 50-inch Cinema TV product

 

   

Application of 21:9 screen display ratio (2560 x 1080 resolution)

 

   

Application of 960ch + EPI source driver integrated circuits for optimal high-resolution

 

   

Application of scanning technology under the Horizontal 2Edge structure

 

  8) Development of the world’s first 3D FPR 23-inch IPS FHD monitor product

 

   

Minimization of flicker / crosstalk by applying FPR technology

 

   

Minimization of cost increase by applying one layer 3D film

 

   

Realization of high luminance 3D images (two times the luminance compared to images from monitors utilizing shutter glass technology)

 

  9) Development and introduction of the world’s first 15.6-inch HD FPR 3D notebook product

 

   

Realization of the world’s first 15.6-inch HD FPR 3D product

 

   

Realization of high luminance 3D images (two times the luminance compared to images from notebooks utilizing shutter glass technology)

 

   

Minimization of cost increase by applying one layer 3D film

 

  10) Development and introduction of the world’s first 17.3-inch Dream Color AH-IPS notebook product

 

   

Development of the world’s first 17.3-inch notebook computer applying AH-IPS

 

   

Realization of Dream Color (100% color reproduction rate) by applying RGB LED

 

   

Realization of 1.073G color by applying Color Depth 10-bit technology

 

   

Realization of 89 degrees viewing angle (up/down/left/right) by applying IPS technology

 

  11) Development and introduction of a 15.6-inch HD product with the world’s lowest (at the time) power consumption from logic circuit (0.5W).

 

   

Application of DRD Z-inversion, HVDD and low voltage process

 

   

Application of high intensity LED (2.3cd) and Vcut light guide plate

 

   

Increase in battery life due to logic circuit power consumption reduction

 

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Table of Contents
  12) Development of the world’s smallest (at the time) Narrow Bezel Notebook Model

 

   

The first in the world to apply 4.5 mm narrow bezel

 

   

Formation of camera hole by B/M mask patterning

 

  13) Development of a new 10.1-inch WX smartbook LCD

 

   

Development of the our first 10.1-inch WXGA LCD following in the footsteps of our 9.7-inch XGA model

 

   

Realization of reduced power consumption, high permeability and increased viewing angle by application of IPS technology.

 

  14) Development of a 42-inch FHD product applying COT technology

 

   

Simplifying panel production process by applying COT (Color Filter on TFT) technology

 

   

Luminance increased by 10%

 

  15) Development of 42-inch, 47-inch and 55-inch direct slim LCD TV

 

   

Development of the world’s first direct-mounted 11.0 mm depth ultra-slim LCM model

 

   

Application of 96 block local dimming and M240Hz technology

 

  16) Development of a 47-inch super narrow public display panel

 

   

Development of our first super narrow bezel (seam 6.9mm) product for application in public display panels

 

  17) Introduction of the world’s first 15.6-inch FHD AH-IPS notebook product

 

   

Development of the world’s first 15.6-inch FHD model applying AH-IPS technology

 

   

Development of slim & light AH-IPS model (thickness: 3.4mm; weight: 330g)

 

   

Achieving the following viewing angles by applying IPS technology; 178º from top to bottom; 178º from left to right

 

  18) Development of a 15.6-inch FHD notebook applying a new backlight arrangement

 

   

Optimization of light placement by application of New Concept LED Backlight

 

   

Reduction in the number of LED integrated circuits (78ea ® 10ea) by application of mid-power LED

 

   

Reduced energy consumption pursuant to a reduction in the number of LED integrated circuits (7.4W ® 5.9W)

 

  19) Development of the world’s first 215/25/27 FHD TN and 215 FHD IPS 3D monitor

 

   

Minimization of flicker/crosstalk by application of FPR technology

 

   

Minimization of cost increase by applying one-layered 3D film

 

   

Realization of high luminance 3D images (two times the luminance compared to images from monitors utilizing shutter glass technology)

 

  20) Development of a 4.5-inch true HD AH-IPS display smartphone product

 

   

For 4G LTE smartphones (introduced by LG Electronics in September 2011)

 

   

Application of true HD720 resolution and AH-IPS technology

 

  21) Development of the world’s first 14.0-inch HD 3D FPR notebook product

 

   

Realization of the world’s first 14.0-inch 3D FPR display

 

   

Realization of high luminance 3D images (two times the luminance compared to images from notebook panels utilizing shutter glass technology)

 

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  22) Development of the world’s first AH-IPS GIP / DRD column inversion technology

 

   

Development of AH-IPS GIP / DRD by application of shrink GIP technology

 

   

Realization of TN-equivalent panel size through reduced panel load

 

   

Achieved TN-equivalent logic energy consumption levels

Achievements in 2012

 

  1) Introduction of the world’s first 13.3-inch high definition plus (“HD+”) AH-IPS notebook product

 

   

Development of the world’s first 13.3-inch HD+ model applying AH-IPS technology

 

  2) Development and introduction of a 14.0-inch HD product with the world’s lowest (at the time) rate of logic circuit energy consumption (0.4W)

 

   

Application of DRD Z-inversion, HVDD and low voltage process

 

   

Application of high intensity LED (2.3cd) and Vcut light guiding plate

 

   

Increase in battery life due to reduced logic circuit energy consumption

 

  3) Introduction of a 14.0-inch HD+ notebook product with a high color reproduction rate

 

   

Development of a 14.0-inch HD+ 72% color reproduction rate model

 

   

Development of a slim model applying 0.3 mm glass etching

 

  4) Introduction of a 15.6-inch FHD glasses-free 3D notebook product

 

   

Development of the first notebook product applying switchable barrier type 3D technology that does not require the use of glasses

 

  5) Development of the world’s first 23-inch FHD monitor product applying AH-IPS 4Mask technology

 

   

Increased display panel luminance by application of AH-IPS technology (20% more luminance compared to display panels applying conventional IPS technology)

 

   

Simplified panel production process by application of AH-IPS 4Mask technology

 

   

30% reduction in energy consumption resulting from increased efficiency of LED and circuit components

 

   

Increased productivity in the manufacture of circuit and mechanical components resulting from increased standardization

 

  6) Development of TN monitor products (20-inch HD+, 21.5-inch FHD and 23-inch FHD) applying new LED

 

   

20% reduction in energy consumption resulting from increased efficiency of LED and circuit components (based on 23W power consumption models)

 

   

Increased productivity in the manufacture of circuit and mechanical components resulting from increased standardization

 

  7) Development of products with new edge backlight (32-inch, 37-inch and 42-inch FHD)

 

   

Vertical 2Bar LED backlight unit ® Vertical 1Bar LED backlight unit

 

   

Reduced energy consumption by 25% resulting from a reduction in the number of LED integrated (based on 32-inch display panel)

 

  8) Development of 42-inch FHD product with new direct backlight unit

 

   

Development of LED Lens through the improvement of LED Beam spread angle ( 72ea based on 42-inch display panel)

 

   

Same thickness as conventional edge LED lighting lamp (35.5 mm)

 

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  9) Development of products with the world’s narrowest bezels of 3.5 mm (47-inch and 55-inch FHD)

 

   

Narrow set design possible using 3.5 mm bezel

 

  10) Development of the world’s first panel products without borders on three sides (32-inch, 42-inch, 47-inch and 55-inch FHD)

 

   

Made possible by removing the forward-facing case top, resulting in “zero” bezel on three sides

 

  11) Development of monitor products without borders on three sides (21.5-inch, 23-inch and 27-inch FHD)

 

   

Made possible by removing the forward-facing case top, resulting in “zero” bezel on three sides, and application of double-sided adhesive to secure the position of the panel and backlight

 

   

Used double guide panels to reduce light leakage issues in IPS panels

 

  12) Development of 12.5-inch HD AH-IPS slim and light notebook display panels

 

   

Achieved thickness of 2.85t

 

   

Reduced the number of LEDs required by using high intensity LEDs (2.5cd)

 

  13) The world’s first GF2 Touch Tablet Product Development (10.1WXGA LCM + Touch)

 

   

Touch Concept: GF2, Touch IC In-House

 

   

Reduced cost by applying TMIC

 

   

Reduced power consumption by applying 6 in 1 (Buck version) PMIC

 

   

Reduced cost and power consumption by applying AH-IPS + DRD-Z

 

   

Reduced cost by applying Taper LGP

 

  14) Development of Automotive 9.2WV product that applies wide temperature AH5-IPS technology

 

   

For use in Center Information Displays and Rear Seat Entertainment Displays mounted on K9 model Kia cars

 

   

Wide temperature materials/components used and AH5-IPS technology applied

 

  15) Application and introduction of the world’s first large multi-model on a glass (MMG) type product (60-inch FHD and 32-inch HD)

 

   

Increased glass efficiency by successfully applying large MMG technology for the first time in the industry

 

   

Developed three sided and six sided chamfers for eighth generation 60-inch FHD panels and 32-inch HD panels, respectively

 

10. Intellectual Property

As of June 30, 2012, our cumulative patent portfolio (including patents that have already expired) included a total of 18,301 patents, consisting of 8,218 in Korea and 10,083 in other countries.

 

11. Environmental Matters

We are subject to a variety of environmental 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 a variety of laws and regulations relating to the use, storage, discharge and disposal of such chemical by-products and waste substances. 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,

 

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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.

We have also voluntarily agreed to reduce emission of greenhouse gases, such as triflouride oxide and perfluoro compounds, or PFCs, including sulfur hexafluoride, or SF6, gases, by installing abatement systems to meet voluntary emissions targets for the TFT-LCD industry for 2010. As part of our voluntary activities to reduce emission of greenhouse gases, we installed triflouride oxide abatement systems at all of our production lines.

We also installed an SF6 abatement system in P1 in April 2005, and have taken steps to install additional SF6 abatement systems through the use of Clean Development Mechanism, or CDM, projects. We manage our CDM projects jointly with LG International Corp. On July 10, 2010, after becoming the first TFT-LCD company to receive the UNFCCC CDM Executive Board’s approval of our CDM project, we installed an SF6 abatement system in P6. We received a total of 343,971 tonnes of CO2 equivalent of certified emission reduction credits, or CERs, from the UN for the reduction of greenhouse gas emissions during the period from August 1, 2010 to December 31, 2010, all of which was sold in December 2011. We also received a total of 197,984 tonnes of CO2 equivalent of CERs for the reduction of greenhouse gas emissions during the period from January 1, 2011 to April 30, 2011. We were the first TFT-LCD manufacturer to receive CERs pursuant to an SF6 decomposition CDM project. Currently, a third party accreditation agency is also examining the reduction of our greenhouse gas emissions since May 1, 2011 as part of our application for receiving CERs from the UN. In August 2011, we commenced the installation of an SF6 abatement system in P7 through the implementation of CDM projects which became operational in February 2012, which further reduced our greenhouse gas emissions.

Under the Framework Act on Low Carbon, Green Growth, the Korean government has designated us as one of the companies subject to greenhouse gas emission and energy consumption targets. As a result, we may need to invest in additional equipment and there may be other costs associated with meeting the reduction target for 2012, which may have a negative effect on our profitability or production activities. In addition, if we fail to meet our reduction target and are unable to comply with the government’s subsequent enforcement notice relating to such failure, we may be subject to fines.

In connection with the greenhouse gas emission reduction target system, we submitted a statement of our domestic emissions and energy usage for the years 2007 through 2010 to the Korean government (i.e., the Ministry of Environment and the Ministry of Knowledge Economy), which was certified by DNV Certification Co., Ltd., a government-designated certification agency. We are currently preparing a statement of our domestic emissions and energy usage for the year 2011, which we submitted to the Ministry of Environment and the Ministry of Knowledge Economy in March 2012 after certification by Lloyd’s Register Quality Assurance, another 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

   2011      2010      2009  

Greenhouse gases

     5,926         5,576         4,755   

Energy

     55,234         45,850         37,075   

In addition, in order to improve the efficiency and reliability of measuring our greenhouse gas emission reduction activities, we have begun implementing improvements in our electronic greenhouse gas inventory system and plan to complete such improvements sometime in 2012.

 

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Operations at our manufacturing plants are subject to regulation and periodic monitoring by the Korean 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 for each environmental area, including air quality, water quality, toxic materials and radiation. We currently have ISO 14001 certifications with respect to the environmental record for P1 through P8, our OLED production facility in Gumi, Korea, our Gumi module production plant and our Paju module production plant, as well as our module production plants in Nanjing and Guangzhou, China.

In addition, with respect to P1 through P8 and our module production plants in Gumi and Paju, we have established and are currently operating a new green management system, which was certified by BSI Group Korea in November 2011. Furthermore, we have been certified by the Korean Ministry of Environment as a “Green Company”, with respect to our environmental record for P1 and our module production plant in Gumi since 1997, with respect to our operations at P2 and P3 since 2006, and with respect to our operations at P4, P5 and P6 since 2008, and received commendations from the Prime Minister and the Minister of Environment of Korea for our efforts to promote recycling.

We also have an internal monitoring system to control the use of hazardous substances in the manufacture of our products as we are committed to compliance with all applicable environmental laws and regulations, including European Union Restriction of Hazardous Substances (RoHS) Directive 2002/95/EC, which took effect in July 2006, and restricts the use of certain hazardous substances in the manufacture of electrical and electronic equipment.

In addition, as part of our commitment to purchase environment-friendly raw materials, we have implemented a green purchasing system that prevents the introduction of hazardous materials at the purchasing stage. The green purchasing system has been a key component in our efforts to comply with RoHS and other applicable environmental laws and regulation.

In October 2005, we became the first TFT-LCD company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Knowledge Economy. 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 by 2012, a RoHS international testing standard, by including a halogen-free combustion ion chromatography method in our committee draft that we submitted in June 2010.

 

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12. Financial Information

 

  A. Financial highlights (Based on consolidated K-IFRS)

(Unit: In millions of Won)

 

Description

   As of June 30,
2012
     As of December 31,
2011
     As of December 31,
2010
    As of December 31,
2009(1)
 

Current assets

     8,407,889         7,858,065         8,840,433        8,226,142   

Quick assets

     5,838,927         5,540,695         6,625,216        6,558,362   

Inventories

     2,568,962         2,317,370         2,215,217        1,667,780   

Non-current assets

     17,134,708         17,304,866         15,017,225        11,477,335   

Investments in equity accounted investees

     411,041         385,145         325,532        282,450   

Property, plant and equipment, net

     14,407,926         14,696,849         12,815,401        9,596,497   

Intangible assets

     511,230         535,114         539,901        352,393   

Other non-current assets

     1,804,511         1,687,758         1,336,391        1,245,995   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     25,542,597         25,162,931         23,857,658        19,703,477   
  

 

 

    

 

 

    

 

 

   

 

 

 

Current liabilities

     10,361,819         9,911,434         8,881,829        6,495,071   

Non-current liabilities

     5,284,848         5,120,469         3,914,862        3,168,657   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     15,646,667         15,031,903         12,796,691        9,663,728   
  

 

 

    

 

 

    

 

 

   

 

 

 

Share capital

     1,789,079         1,789,079         1,789,079        1,789,079   

Share premium

     2,251,113         2,251,113         2,251,113        2,251,113   

Reserves

     18,635         12,181         (35,298     (51,005

Retained earnings

     5,823,865         6,063,359         7,031,163        6,050,562   

Non-controlling interest

     13,238         15,296         24,910        0   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     9,895,930         10,131,028         11,060,967        10,039,749   
  

 

 

    

 

 

    

 

 

   

 

 

 

(Unit: In millions of Won, except for per share data and number of consolidated entities)

 

Description

   For the six months ended
June 30, 2012
    For the six months ended
June 30, 2011
    For the six months ended
June 30, 2010
    For the six months ended
June 30, 2009(1)
 

Revenue

     13,094,048        11,412,578        12,330,543        8,314,678   

Results (loss) from operating activities

     (203,708     (287,548     1,515,410        34,807   

Income (loss) from continuing operation

     (241,576     (94,123     1,203,413        20,316   

Profit (loss) for the period

     (241,576     (94,123     1,203,413        20,316   

Profit (loss) attributable to:

        

Owners of the Company

     (239,639     (90,258     1,204,583        20,316   

Non-controlling interest

     (1,937     (3,865     (1,170     —     

Basic earnings (loss) per share

     (670     (252     3,366        57   

Diluted earnings (loss) per share

     (670     (252     3,277        57   

Number of consolidated entities

     19        18        16        11   

 

(1) Although our financial statements for the year ended December 31, 2009 were audited by our independent auditors in accordance with K-IFRS, our half-year financial statements were not reviewed by our independent auditors.

 

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  B. Financial highlights (Based on separate K-IFRS)

(Unit: In millions of Won)

 

Description

   As of June 30,
2012
     As of December 31,
2011
    As of December 31,
2010
    As of December 31,
2009(1)
 

Current assets

     8,037,354         7,326,764        8,499,873        7,973,355   

Quick assets

     5,889,794         5,414,054        6,739,908        6,687,050   

Inventories

     2,147,560         1,912,710        1,759,965        1,286,305   

Non-current assets

     16,783,944         16,947,200        14,658,125        11,283,512   

Investments

     1,404,358         1,386,313        1,279,831        1,075,229   

Property, plant and equipment, net

     13,222,007         13,522,553        11,688,061        8,730,263   

Intangible assets

     497,473         479,510        483,260        340,885   

Other non-current assets

     1,660,106         1,558,824        1,206,973        1,137,135   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

     24,821,298         24,273,964        23,157,998        19,256,867   
  

 

 

    

 

 

   

 

 

   

 

 

 

Current liabilities

     10,105,129         9,485,333        8,453,869        6,120,663   

Non-current liabilities

     5,313,506         5,101,714        3,833,454        3,102,006   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     15,418,635         14,587,047        12,287,323        9,222,669   
  

 

 

    

 

 

   

 

 

   

 

 

 

Share capital

     1,789,079         1,789,079        1,789,079        1,789,079   

Share premium

     2,251,113         2,251,113        2,251,113        2,251,113   

Reserves

     1,781         (3,944     (7,795     (17,366

Retained earnings

     5,360,690         5,650,669        6,838,278        6,011,372   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total equity

     9,402,663         9,686,917        10,870,675        10,034,198   
  

 

 

    

 

 

   

 

 

   

 

 

 

(Unit: In millions of Won, except for per share data)

 

Description

  For the six months ended
June 30, 2012
    For the six months ended
June 30, 2011
    For the six months ended
June 30, 2010
    For the six months ended
June 30, 2009(1)
 

Revenue

    12,722,936        10,950,409        12,379,226        8,234,951   

Results (loss) from operating activities

    (271,614     (373,131     1,407,744        (28,653

Income (loss) from continuing operation

    (290,314     (100,014     1,130,351        (8,321

Profit (loss) for the period

    (290,314     (100,014     1,130,351        (8,321

Basic earnings (loss) per share

    (811     (280     3,159        (23

Diluted earnings (loss) per share

    (811     (280     3,072        (23

 

(1) Although our financial statements for the year ended December 31, 2009 were audited by our independent auditors in accordance with K-IFRS, our half-year financial statements were not reviewed by our independent auditors.

 

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  C. Consolidated subsidiaries (as of June 30, 2012)

 

Company

  

            Primary Business             

  

        Location        

   Equity
Interest
 
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 and sales    China      100
LG Display Shanghai Co., Ltd.    Sales    China      100
LG Display Poland Sp. zo.o.    Manufacturing and sales    Poland      80
LG Display Guangzhou Co., Ltd.    Manufacturing and sales    China      90
LG Display Shenzhen Co., Ltd.    Sales    China      100
LG Display Singapore Pte. Ltd.    Sales    Singapore      100

L&T Display Technology (Xiamen) Co., Ltd.

   Manufacturing and sales    China      51

L&T Display Technology (Fujian) Co., Ltd.

   Manufacturing and sales    China      51
LG Display Yantai Co., Ltd.    Manufacturing and sales    China      100

L&I Electronic Technology (Dongguan) Limited

   Manufacturing and sales    China      51
Image & Materials, Inc.    Manufacturing and sales    Korea      100

LUCOM Display Technology (Kunshan) Limited

   Manufacturing and sales    China      51
LG Display U.S.A. Inc.    Manufacturing and sales    U.S.A.      100
LG Display Reynosa S.A. de C.V.    Manufacturing    Mexico      100
Nanumnuri Co., Ltd.(1)    Workplace services ( 2)    Korea      100

 

(1) Formed as a wholly owned subsidiary in March 2012 in order to comply with Korean legal requirement for employers with 100 or more employees to employ disabled persons. We made a capital contribution of (Won)800 million.
(2) Includes workplace services such as janitorial, car washing, gym and cafe services.

 

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  D. Status of equity investment (as of June 30, 2012)

 

Company

  

Investment Amount

  

Initial Equity
Investment Date

   Equity
Interest
 

LG Display America, Inc.

   US$260,000,000    September 24, 1999      100

LG Display Germany GmbH

   EUR960,000    November 5, 1999      100

LG Display Japan Co., Ltd.

   ¥95,000,000    October 12, 1999      100

LG Display Taiwan Co., Ltd.

   NT$115,500,000    May 19, 2000      100

LG Display Nanjing Co., Ltd.

   CNY2,834,206,315    July 15, 2002      100

LG Display Shanghai Co., Ltd.

   CNY4,138,650    January 16, 2003      100

LG Display Poland Sp. zo.o.

   PLN410,327,700    September 6, 2005      80
LG Display Guangzhou Co., Ltd.    CNY895,904,754    August 7, 2006      90
LG Display Shenzhen Co., Ltd.    CNY3,775,250    August 28, 2007      100
LG Display Singapore Pte. Ltd.    SGD1,400,000    January 12, 2009      100

L&T Display Technology (Xiamen) Co., Ltd.

   CNY41,785,824    January 5, 2010      51

L&T Display Technology (Fujian) Co., Ltd.

   CNY59,197,026    January 5, 2010      51
LG Display Yantai Co., Ltd.    CNY273,048,000    April 19, 2010      100

L&I Electronic Technology (Dongguan) Limited

   CNY17,062,560    October 25, 2010      51
Image & Materials, Inc.    (Won)43,999,839,152    November 29, 2010      100

LUCOM Display Technology (Kunshan) Limited

   CNY50,353,677    December 27, 2010      51
LG Display U.S.A. Inc.    US$10,920,000    December 8, 2011      100
LG Display Reynosa S.A. de C.V.    MXN111,998,058    December 30, 2011      100
Nanumnuri Co., Ltd.    (Won)800,000,000    March 19, 2012      100

Suzhou Raken Technology Co., Ltd.

   CNY569,455,395    October 7, 2008      51
Paju Electric Glass Co., Ltd.    (Won)33,648,000,000    March 25, 2005      40
TLI Co., Ltd.    (Won)14,073,806,250    May 16, 2008      12
AVACO Co., Ltd.    (Won)6,172,728,120    June 9, 2008      16

Guangzhou Vision Display Technology Research and Development Limited

   CNY25,000,000    July 11, 2008      50
NEW OPTICS, Ltd.    (Won)12,199,600,000    July 30, 2008      42
LIG ADP Co., Ltd.    (Won)6,330,000,000    February 24, 2009      13
Wooree LED Co., Ltd.    (Won)11,900,000,000    May 22, 2009      30

Dynamic Solar Design Co., Ltd.

   (Won)6,066,658,000    June 24, 2009      40
RPO, Inc.    US$12,285,022    November 3, 2009      26
Global OLED Technology LLC    US$45,170,000    December 23, 2009      33

LB Gemini New Growth Fund No. 16

   (Won)13,418,147,109    December 7, 2009      31
Can Yang Investment Ltd.    US$15,300,000    January 27, 2010      9
YAS Co., Ltd.    (Won)10,000,000,000    September 16, 2010      19

Eralite Optoelectronics (Jiangsu) Co., Ltd.

   US$4,000,000    September 28, 2010      20
Narae Nanotech Corporation    (Won)30,000,000,000    April 22, 2011      23
Avatec Co., Ltd.    (Won)10,600,000,000    December 6, 2011      20
Glonix Co., Ltd.    (Won)2,000,000,000    April 10, 2012      20

 

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13. Audit Information

 

  A. Audit service

(Unit: In millions of Won, hours)

 

Description

  

2012 (H1)

  

2011

  

2010

Auditor    KPMG Samjong    KPMG Samjong    KPMG Samjong
Activity    Audit by independent auditor    Audit by independent auditor    Audit by independent auditor
Compensation (1)    850 (285) (2)    850 (285) (2)    850 (585) (3)
Time required    5,962    16,154    16,646

 

(1) Compensation amount is the contracted amount for the full fiscal year.
(2) Compensation amount in ( ) is for Form 20-F filing and SOX 404 audit.
(3) Compensation amount in ( ) is for K-IFRS audit of 2009 financial statements, Form 20-F filing and SOX 404 audit.

 

  B. Non-audit service

Not applicable.

 

14. Board of Directors

 

  A. Independence of directors

 

   

Outside director: Independent

 

   

Non-outside director: Not independent

 

   

Each of our outside directors meets the applicable independence standards set forth under the applicable laws and regulations. Each of our outside directors was nominated by the Outside Director Nomination and Corporate Governance Committee, was approved by the board of directors and was appointed at the general meeting of shareholders. None of our outside directors has or had any business transaction or any related party transactions with us. Our outside directors are comprised of four persons, three of whom are also members of our audit committee. As of June 30, 2012, our non-outside directors are the chief executive officer, the chief financial officer and a non-standing director.

 

  B. Members of the board of directors

(as of June 30, 2012)

 

Name

  

Date of birth

   Position   

Business experience

   First elected
Sang Beom Han    June 18, 1955    Representative

Director, Chief
Executive Officer
and Executive Vice
President

   Head of LG Display TV Business Division    March 9, 2012

 

James (Hoyoung) Jeong    November 2, 1961    Director and

Chief Financial
Officer

   Executive Vice President and Chief Financial Officer of LG Electronics    February 29, 2008

 

Yu Sig Kang    November 3, 1948    Director    Vice Chairman, Representative Director, LG Corp.    March 11, 2011

 

Tae Sik Ahn    March 21, 1956    Outside Director    Professor, College of Business Administration and Graduate School of Business, Seoul National University    March 12, 2010

 

William Y. Kim    June 6, 1956    Outside Director    Partner, Ropes & Gray LLP    February 29, 2008

 

Jin Jang    November 28, 1954    Outside Director    Chair Professor, Department of Information Display, Kyung Hee University    March 11, 2011

 

Dong Il Kwon    February 5, 1957    Outside Director    Professor, Department of Materials Science and Engineering, Seoul National University    March 9, 2012

 

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  C. Committees of the board of directors

(as of June 30, 2012)

 

Committee

  

Composition

  

Member

Audit Committee    3 outside directors    Tae Sik Ahn, William Y. Kim, Jin Jang

 

Outside Director Nomination and Corporate Governance Committee   

1 non-outside director and

2 outside directors

   James (Hoyoung) Jeong, Dong Il Kwon, Jin Jang

 

Remuneration Committee   

1 non-outside director and

2 outside directors

   William Y. Kim, James (Hoyoung) Jeong, Tae Sik Ahn

 

Management Committee    2 non-outside directors    Sang Beom Han, James (Hoyoung) Jeong

 

 

15. Information Regarding Shares

 

  A. Total number of shares

 

  (1) Total number of shares authorized to be issued (as of June 30, 2012): 500,000,000 shares.

 

  (2) Total shares issued and outstanding (as of June 30, 2012): 357,815,700 shares.

 

  B. Shareholder list

 

  (1) Largest shareholder and related parties as of June 30, 2012:

 

Name

   Relationship    Number of Shares of Common Stock      Equity Interest  

LG Electronics

   Largest
Shareholder
     135,625,000         37.9

Sang Beom Han

   Related

Party

     930         0.0

 

  (2) Shareholders who are known to us to own 5% or more of our shares as of June 30, 2012:

 

Beneficial Owner

   Number of Shares of Common Stock      Equity Interest  

LG Electronics

     135,625,000         37.9

National Pension Service

     21,633,625         6.1

 

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16. Directors and Employees

 

  A. Directors

 

  (1) Remuneration for directors in 2012 (H1)

(Unit: person, in millions of Won)

 

Classification

  

No. of
directors (1)

   Amount
paid (2)
    Per capita average
remuneration  paid (5)
     Remarks  

Non-outside directors

   3      513  (3)(4)      171         —     

Outside directors who are not audit committee members

   1      22        22         —     

Outside directors who are audit committee members

   3      84        28         —     
  

 

  

 

 

   

 

 

    

 

 

 

Total

   7      619        —           —     
  

 

  

 

 

   

 

 

    

 

 

 

 

(1) Number of directors as at June 30, 2012.
(2) Amount paid is calculated on the basis of amount of cash actually paid.
(3) Among the non-outside directors, Yu Sig Kang does not receive any remuneration.
(4) Includes remuneration for Young Soo Kwon whose term as president ended on March 9, 2012.
(5) Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the six months ended June 30, 2012.

 

  (2) Stock option

The following table sets forth certain information regarding our stock options as of June 30, 2012.

(Unit: Won, Stock)

 

Executive

Officers (including Former Officers)

   Grant Date    Exercise Period (2)    Exercise      Number of
Granted
     Number of
Exercised
     Number of
Cancelled
     Number of
Exercisable
 
      From    To    Price      Options      Options      Options (1)      Options (1)  

Ron H.Wirahadiraksa

   April 7, 2005    April 8, 2008    April 7, 2012    (Won) 44,050         100,000         0         50,000         50,000   

Duke M. Koo

   April 7, 2005    April 8, 2008    April 7, 2012    (Won) 44,050         40,000         0         20,000         20,000   

Sang Deog Yeo

   April 7, 2005    April 8, 2008    April 7, 2012    (Won) 44,050         40,000         0         20,000         20,000   

Jae Geol Ju

   April 7, 2005    April 8, 2008    April 7, 2012    (Won) 44,050         40,000         0         20,000         20,000   
              

 

 

    

 

 

    

 

 

    

 

 

 

Total

                 220,000            110,000         110,000   
              

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) When the increase rate of our share price is the same or less than the increase rate of the Korea Composite Stock Price Index (“KOSPI”) over the three-year period following the grant date, only 50% of the initially granted shares are exercisable. Since the increase rate of our share price was lower than the increase rate of KOSPI during the period from April 7, 2005 to April 7, 2008, only 50% of the 220,000 initially granted shares are exercisable.
(2) On April 7, 2012, all outstanding stock options expired unexercised.

 

  B. Employees

As of June 30, 2012, we had 34,832 employees (excluding our executive officers). The total amount of salary paid to our employees for the six months ended June 2012 based on cash payment (excluding welfare benefits and retirement expenses) was (Won)801,731 million. The following table provides details of our employees as of June 30, 2012:

 

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Table of Contents

(Unit: person, in millions of Won, year)

 

     Number of
Employees
     Total Salary in 2012 (H1) (1) (2) (3)      Per Capita
Salary (4)
     Average Service
Year
 

Male

     24,229         615,070         25         5.0   

Female

     10,603         186,661         18         3.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     34,832         801,731         23         4.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the six months ended June 30, 2012 was (Won)148,986 million and the per capita welfare benefit provided was (Won)4.3 million.
(2) Based on cash payments made in Korea.
(3) Includes incentive payments to employees who have transferred from our affiliated companies.
(4) Per Capita Salary is calculated using the average number of employees (total: 34,994, male: 24,349, female: 10,645) for the six months ended June 30, 2012.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2012 and 2011

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  

Independent Auditors’ Review Report

     37   

Condensed Consolidated Interim Statements of Financial Position

     39   

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

     40   

Condensed Consolidated Interim Statements of Changes in Equity

     41   

Condensed Consolidated Interim Statements of Cash Flows

     42   

Notes to the Condensed Consolidated Interim Financial Statements

  

 

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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 June 30, 2012, the condensed consolidated statements of comprehensive income (loss) for each of the three-month and six-month periods ended June 30, 2012 and 2011, and statements of changes in equity and cash flows for the six-month periods ended June 30, 2012 and 2011, 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 express a conclusion 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 auditing standards generally accepted in the Republic of Korea 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.

Emphasis of Matter

As discussed in note 17 to the condensed consolidated interim financial statements, LG Display Co., Ltd., along with its subsidiaries, has been under investigations by antitrust authorities in Brazil and other countries with respect to possible anti-competitive activities in the LCD industry and named as defendants in a number of individual lawsuits and federal class actions in the United States and Canada, respectively, in connection with the alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Group.

 

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Table of Contents

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. Accordingly, this report and the accompanying condensed consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

We audited the consolidated statement of financial position as of December 31, 2011 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 auditing standards generally accepted in the Republic of Korea, and our report thereon, dated February 22, 2012, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2011, presented for comparative purposes, is not different from that audited by us in all material respects.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

August 3, 2012

 

This report is effective as of August 3, 2012, 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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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Financial Position

(Unaudited)

As of June 30, 2012 and December 31, 2011

 

(In millions of won)    Note    2012      2011  

Assets

        

Cash and cash equivalents

   9    (Won) 2,292,623        1,517,977  

Deposits in banks

   9      362,460        815,000  

Trade accounts and notes receivable, net

   9, 16, 19      2,604,725        2,740,107  

Other accounts receivable, net

   9, 19      180,353        212,870  

Other current financial assets

   9      4,046        3,297  

Inventories

   5      2,568,962        2,317,370  

Other current assets

        394,720        251,444  
     

 

 

    

 

 

 

Total current assets

        8,407,889        7,858,065  

Investments in equity accounted investees

   6      411,041        385,145  

Other non-current financial assets

   9      143,554        84,548  

Deferred tax assets

   21      1,495,096        1,424,005  

Property, plant and equipment, net

   7, 20      14,407,926        14,696,849  

Intangible assets, net

   8, 20      511,230        535,114  

Other non-current assets

        165,861        179,205  
     

 

 

    

 

 

 

Total non-current assets

        17,134,708        17,304,866  
     

 

 

    

 

 

 

Total assets

      (Won) 25,542,597        25,162,931  
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

   9, 19    (Won) 4,137,098        3,782,627  

Current financial liabilities

   9, 10      1,467,609        894,972  

Other accounts payable

   9, 19      3,474,855        3,992,671  

Accrued expenses

        365,099        267,595  

Income tax payable

        40,016        58,259  

Provisions

        345,108        279,403  

Advances received

        502,564        616,351  

Other current liabilities

        29,470        19,556  
     

 

 

    

 

 

 

Total current liabilities

        10,361,819        9,911,434  

Non-current financial liabilities

   9, 10      3,290,196        3,722,364  

Non-current provisions

        5,429        5,400  

Deferred tax liabilities

   21      174        240  

Employee benefits

   14      189,141        146,638  

Long-term advances received

   16      1,361,484        668,914  

Other non-current liabilities

        438,424        576,913  
     

 

 

    

 

 

 

Total non-current liabilities

        5,284,848        5,120,469  
     

 

 

    

 

 

 

Total liabilities

        15,646,667        15,031,903  
     

 

 

    

 

 

 

Equity

        

Share capital

   18      1,789,079        1,789,079  

Share premium

        2,251,113        2,251,113  

Reserves

   18      18,635        12,181  

Retained earnings

        5,823,865        6,063,359  
     

 

 

    

 

 

 

Total equity attributable to equity holders of the Controlling Company

        9,882,692        10,115,732  
     

 

 

    

 

 

 

Non-controlling interests

        13,238        15,296  
     

 

 

    

 

 

 

Total equity

        9,895,930        10,131,028  
     

 

 

    

 

 

 

Total liabilities and equity

      (Won) 25,542,597        25,162,931  
     

 

 

    

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

(Unaudited)

For the three-month and six-month periods ended June 30, 2012 and 2011

 

(In millions of Won, except earnings per share)    Note    For the three-month  periods
ended June 30
    For the six-month periods
ended June 30
 
          2012     2011     2012     2011  

Revenue

   19, 20    (Won) 6,910,372       6,047,062     (Won) 13,094,048       11,412,578  

Cost of sales

   11      (6,140,397 )     (5,595,933 )     (11,995,847 )     (10,728,519 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        769,975       451,129       1,098,201       684,059  

Other income

   13      254,965       292,884       534,575       581,516  

Selling expenses

   11, 12      (228,977 )     (197,163 )     (436,771 )     (374,479 )

Administrative expenses

   11, 12      (127,493 )     (112,136 )     (255,341 )     (224,938 )

Research and development expenses

   11      (174,140 )     (219,927 )     (378,144 )     (417,762 )

Other expenses

   13      (519,822 )     (263,095 )     (766,228 )     (535,944 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Results from operating activities

        (25,492 )     (48,308 )     (203,708 )     (287,548 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

   15      56,828       77,606       100,911       202,399  

Finance costs

   15      (114,350 )     (77,466 )     (190,829 )     (159,601 )

Other non-operating loss, net

        (512 )     (3,008 )     (4,036 )     (6,231 )

Equity income (loss) on investments, net

        5,955       265       23,071       (1,729 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax

        (77,571 )     (50,911 )     (274,591 )     (252,710 )

Income tax expense (benefit)

   21      34,772       (72,214 )     (33,015 )     (158,587 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

        (112,343 )     21,303       (241,576 )     (94,123 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

           

Net change in fair value of available-for-sale financial assets

   15      9,404       3,206       7,334       1,691  

Defined benefit plan actuarial gain

   14      493       467       251       1,072  

Cumulative translation differences

        1,042       (5,031 )     702       (19,734 )

Gain (loss) on sale of own shares of associate accounted for using the equity method

        461       (499 )     125       (228 )

Income taxes on other comprehensive (income) loss items

        (1,960 )     (896 )     (1,934 )     (850 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) for the period, net of income tax

        9,440       (2,753 )     6,478       (18,049 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      (Won) (102,903 )     18,550     (Won) (235,098 )     (112,172 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) attributable to:

           

Owners of the Controlling Company

        (111,175 )     24,931       (239,639 )     (90,258 )

Non-controlling interests

        (1,168 )     (3,628 )     (1,937 )     (3,865 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

      (Won) (112,343 )     21,303     (Won) (241,576 )     (94,123 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

           

Owners of the Controlling Company

        (101,853 )     22,541       (233,040 )     (107,415 )

Non-controlling interests

        (1,050 )     (3,991 )     (2,058 )     (4,757 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      (Won) (102,903 )     18,550     (Won) (235,098 )     (112,172 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share

           

Basic earnings (loss) per share

   22    (Won) (311 )     70       (670 )     (252 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

   22    (Won) (311 )     67       (670 )     (252 )
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited)

For the six-month periods ended June 30, 2012 and 2011

 

                   Gain (loss) on sale                                      
     Share      Share      of own shares     Fair value     Translation     Retained           Non-controlling     Total  
(In millions of won)    capital      premium      of associates     reserve     reserve     earnings     Total     interests     equity  

Balances at January 1, 2011

   (Won) 1,789,079         2,251,113        810       (5,560 )     (30,548 )     7,031,163       11,036,057       24,910       11,060,967  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

                    

Loss for the period

     —           —           —          —          —          (90,258 )     (90,258 )     (3,865 )     (94,123 )

Other comprehensive income (loss)

                    

Net change in fair value of available-for-sale financial assets, net of tax

     —           —           —          1,077       —          —          1,077       —          1,077  

Defined benefit plan actuarial gain, net of tax

     —           —           —          —          —          836       836       —          836  

Cumulative translation differences

     —           —           —          —          (18,842 )     —          (18,842 )     (892 )     (19,734 )

Gain on sale of own shares of associates accounted for using the equity method, net of tax

     —           —           (228 )     —          —          —          (228 )     —          (228 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     —           —           (228 )     1,077       (18,842 )     836       (17,157 )     (892 )     (18,049 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

     —           —           (228 )     1,077       (18,842 )     (89,422 )     (107,415 )     (4,757 )     (112,172 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

                    

Dividends to equity holders

     —           —           —          —          —          (178,908 )     (178,908 )     —          (178,908 )

Changes in ownership interests in subsidiaries

     —           —           —          —          —          —          —          5,709       5,709  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2011

   (Won) 1,789,079        2,251,113        582       (4,483 )     (49,390 )     6,762,833       10,749,734       25,862       10,775,596  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2012

   (Won) 1,789,079        2,251,113        596       (3,856 )     15,441       6,063,359       10,115,732       15,296       10,131,028  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

                   —         

Loss for the period

     —           —           —          —          —          (239,639 )     (239,639 )     (1,937 )     (241,576 )

Other comprehensive income (loss)

                    

Net change in fair value of available-for-sale financial assets, net of tax

     —           —           —          5,506       —          —          5,506       —          5,506  

Defined benefit plan actuarial loss, net of tax

     —           —           —          —          —          145       145       —          145  

Cumulative translation differences

     —           —           —          —          823       —          823       (121 )     702  

Loss on sales of own shares of associates accounted for using the equity method, net of tax

     —           —           125       —          —          —          125       —          125  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           —           125       5,506       823       145       6,599       (121 )     6,478  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

     —           —           125       5,506       823       (239,494 )     (233,040 )     (2,058 )     (235,098 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

     —           —           —          —          —          —          —          —          —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2012

   (Won) 1,789,079        2,251,113        721       1,650       16,264       5,823,865       9,882,692       13,238       9,895,930  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

For the six-month periods ended June 30, 2012 and 2011

 

(In millions of won)    Note      2012     2011  

Cash flows from operating activities:

       

Loss for the period

      (Won) 241,576       94,123  

Adjustments for:

       

Income tax benefit

     21         (33,015 )     (158,587 )

Depreciation

        1,927,478       1,599,474  

Amortization of intangible assets

        126,979       109,933  

Gain on foreign currency translation

        (87,238 )     (105,698 )

Loss on foreign currency translation

        118,390       42,472  

Expenses related to defined benefit plan

     14         69,374       56,944  

Impairment loss on intangible assets

        37,683       —     

Gain on disposal of property, plant and equipment

        (2,731 )     (425 )

Loss on disposal of property, plant and equipment

        1,906       462  

Loss on disposal of intangible assets

        610    

Finance income

        (22,215 )     (129,347 )

Finance costs

        85,927       85,120  

Equity loss (income) on investments, net

        (23,071 )     1,729  

Other income

        (5,816 )     (18,919 )

Other expenses

        297,764       34,687  

Other non-operating loss

        —          7  
     

 

 

   

 

 

 
        2,250,449       1,423,729  

Change in trade accounts and notes receivable

        (462,088 )     717,383  

Change in other accounts receivable

        25,557       (97,818 )

Change in other current assets

        (126,359 )     (81,268 )

Change in inventories

        (251,592 )     (606,729 )

Change in other non-current accounts receivable

        (67 )     —     

Change in other non-current assets

        (19,480 )     (25,124 )

Change in trade accounts and notes payable

        355,036       (61,222 )

Change in other accounts payable

        (124,249 )     35,597  

Change in accrued expenses

        125,461       (34,363 )

Change in other current liabilities

        347,342       (7,700 )

Change in long-term advances received

        789,670       281,975  

Change in other non-current liabilities

        2,480       (3,333 )

Change in provisions

        (263,416 )     (65,613 )

Change in defined benefit obligation

        (26,431 )     (5,618 )
     

 

 

   

 

 

 

Cash generated from operating activities

        2,622,313       1,469,896  

Income taxes paid

        (53,313 )     (127,281 )

Interest received

        22,352       43,744  

Interest paid

        (97,632 )     (69,581 )
     

 

 

   

 

 

 

Net cash from operating activities

      (Won) 2,493,720       1,316,778  
     

 

 

   

 

 

 

See accompanying notes to the condensed 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 six-month periods ended June 30, 2012 and 2011

 

 

(In millions of won)    Note    2012     2011  

Cash flows from investing activities:

       

Dividends received

      (Won) 204       6,130  

Proceeds from withdrawal of deposits in banks

        812,000       2,300,000  

Increase in deposits in banks

        (359,460 )     (912,080 )

Acquisition of investments in equity accounted investees

        (2,000 )     (40,610 )

Proceeds from disposal of investments in equity accounted investees

        1,409       2,045  

Acquisition of property, plant and equipment

        (2,126,347 )     (1,989,295 )

Proceeds from disposal of property, plant and equipment

        7,830       678  

Acquisition of intangible assets

        (161,222 )     (113,128 )

Grants received

        2,173       1,560  

Proceeds from (payment upon) settlement of derivatives

        (1,156 )     26,797  

Proceeds from collection of short-term loans

        —          64  

Increase in short-term loans

        (24 )     —     

Acquisition of other non-current financial assets

        (53,580 )     (29,533 )

Proceeds from disposal of other non-current financial assets

        8,169       123,286  
     

 

 

   

 

 

 

Net cash used in investing activities

        (1,872,004 )     (624,086 )
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        2,686,094       937,044  

Repayments of short-term borrowings

        (2,670,238 )     (1,193,235 )

Issuance of debentures

        —          597,453  

Proceeds from long-term debt

        494,000       219,014  

Repayments of current portion of long-term debt

        (362,105 )     (472,027 )

Increase in non-controlling interest

        —          5,709  

Payment of cash dividend

        —          (178,908 )
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        147,751       (84,950 )
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        769,467       607,742  

Cash and cash equivalents at January 1

        1,517,977       1,631,009  

Effect of exchange rate fluctuations on cash held

        5,179       9,944  
     

 

 

   

 

 

 

Cash and cash equivalents at June 30

      (Won) 2,292,623       2,248,695  
     

 

 

   

 

 

 

See accompanying notes to the condensed 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 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) related business to the Controlling Company. The main business of the Controlling Company and its subsidiaries is to manufacture and sell TFT-LCD panels. The Controlling Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Controlling Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Controlling Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders’ meeting on the same date as a result of the decrease in Philips’s share interest in the Controlling Company and the possibility of its business expansion to Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of June 30, 2012, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common shares.

As of June 30, 2012, the Controlling Company has its TFT-LCD manufacturing plants, OLED manufacturing plant and LCD Research & Development Center in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Controlling Company has overseas subsidiaries located in the Americas, Europe and Asia.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of June 30, 2012, 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 June 30, 2012, there are 21,272,438 ADSs outstanding.

 

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Table of Contents
1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of June 30, 2012

 

(In millions)                              

Subsidiaries

  

Location

  

Percentage of
ownership

  

Date of
incorporation

  

Fiscal year end

  

Business

  

Capital
stocks

LG Display America, Inc. (*1)

  

California,

U.S.A.

   100%    September 24, 1999    December 31    Sell TFT-LCD products    USD260

LG Display Japan Co., Ltd.

   Tokyo, Japan    100%    October 12, 1999    December 31    Sell TFT-LCD Products    JPY95

LG Display Germany GmbH

   Dusseldorf, Germany    100%    November 5, 1999    December 31    Sell TFT-LCD products    EUR1

LG Display Taiwan Co., Ltd.

   Taipei, Taiwan    100%   

April 12,

1999

   December 31    Sell TFT-LCD products    NTD116

LG Display Nanjing Co., Ltd. (*2)

   Nanjing, China    100%   

July 15,

2002

   December 31    Manufacture and sell TFT-LCD products    CNY2,834

LG Display Shanghai Co., Ltd.

   Shanghai, China    100%    January 16, 2003    December 31    Sell TFT-LCD products    CNY4

LG Display Poland Sp. zo. o.

   Wroclaw, Poland    80%    September 6, 2005    December 31    Manufacture and sell TFT-LCD products    PLN511

LG Display Guangzhou Co., Ltd.

   Guangzhou, China    90%   

June 30,

2006

   December 31    Manufacture and sell TFT-LCD products    CNY992

LG Display Shenzhen Co., Ltd.

   Shenzhen, China    100%    August 28, 2007    December 31    Sell TFT-LCD products    CNY4

LG Display Singapore Pte. Ltd.

   Singapore    100%    January 12, 2009    December 31    Sell TFT-LCD products    SGD1.4

L&T Display Technology (Xiamen) Limited

  

Xiamen,

China

   51%   

January 5,

2010

   December 31    Manufacture LCD module and TV sets    CNY82

L&T Display Technology (Fujian) Limited

  

Fujian,

China

   51%   

January 5,

2010

   December 31    Manufacture LCD Module and monitor sets    CNY116

LG Display Yantai Co., Ltd.

  

Yantai,

China

   100%   

April 19,

2010

   December 31    Manufacture and sell TFT-LCD products    CNY273

L&I Electronic Technology (Dongguan) Limited

  

Dongguan,

China

   51%   

September 26,

2010

   December 31    Manufacture and Sell
e-Book devices
   CNY33

Image & Materials, Inc.(*3)

   Domestic    100%   

May 17,

2006

   December 31    Manufacture EPD materials    KRW1,008

LUCOM Display Technology (Kunshan) Limited

  

Kunshan,

China

   51%   

December 15,

2010

   December 31    Manufacture Notebook Borderless Hinge-up    CNY99

LG Display U.S.A. Inc.

   Texas, U.S.A.    100%   

October 26,

2011

   December 31    Manufacture TFT-LCD products    USD11

LG Display Reynosa S.A. de C.V.

   Reynosa, Mexico    100%   

November 4,

2011

   December 31    Manufacture TFT-LCD products    MXN112

Nanumnuri Co., Ltd.(*4)

   Domestic    100%   

March 21,

2012

   December 31   

Cleaning, Washing,

Cafe

   KRW800

 

(*1) In June 2012, the Controlling Company invested (Won) 88,380 million in cash for the capital increase of LG Display America, Inc. (“LGDUS.”) There were no changes in the Controlling Company’s ownership percentage in LGDUS, as a result of this additional investment.
(*2) In May 2012, the Controlling Company invested (Won) 52,358 million in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ.”) There were no changes in the Controlling Company’s ownership percentage in LGDNJ as a result of this additional investment

 

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Table of Contents
1. Reporting Entity, Continued

 

(*3) In February 2012, the Controlling Company invested (Won) 3,000 million in cash for the capital increase of Image & Materials, Inc. (“I&M”.) There were no changes in the Controlling Company’s ownership percentage in I&M, as a result of this additional investment.
(*4) In March 2012, the Controlling Company established Nanumnuri Co., Ltd., a wholly owned subsidiary of the Controlling Company was established as a Standard Workplace for the Disabled under Act on Employment Promotion and Vocational Rehabilitation for Disabled Persons, with investment of (Won) 800 million in cash.

 

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 Standards (“K-IFRSs”) 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, 2011.

The condensed consolidated interim financial statements were authorized for issuance by the Board of Directors on July 25, 2012.

 

  (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 measured at fair value;

 

   

financial instruments at fair value through profit or loss measured at fair value;

 

   

available-for-sale financial assets measured at fair value; and

 

   

liabilities for defined benefit plans recognized at the net total of the present value of defined benefit obligation less the fair value of plan assets

 

  (c) Functional and Presentation Currency

The condensed consolidated interim financial statements are presented in Korean won, which is the Controlling Company’s functional currency. All amounts in Korean won are in millions unless otherwise stated.

 

  (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.

 

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Table of Contents
2. Basis of Presenting Financial Statements, Continued

 

  (d) Use of Estimates and Judgments, Continued

 

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied in its financial statements as of and for the year ended December 31, 2011.

 

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, 2011, except for the application of K-IFRS No. 1034, Interim Financial Reporting, and the amendments to K-IFRS No. 1107, Financial Instruments: Disclosures, as explained below:

The Group has applied the amendments to K-IFRS No. 1107, Financial Instruments: Disclosures, effective January 1, 2012, by prospectively disclosing the nature of transferred assets, their carrying amount, and the description of risks and rewards for each class of transferred financial assets that are not derecognized in their entirety.

 

4. Financial Risk Management

The objectives and policies on financial risk management followed by the Group are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2011.

 

5. Inventories

Inventories as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    2012      2011  
     Acquisition
cost
     Inventory
reserve
    Book
value
     Acquisition
cost
     Inventory
reserve
    Book
value
 

Finished goods

   (Won) 1,197,349         (25,139     1,172,210         947,046         (25,110     921,936   

Work-in-process

     815,848         (45,233     770,615         818,666         (46,460     772,206   

Raw materials

     423,450         (17,866     405,584         475,378         (17,293     458,085   

Supplies

     267,316         (46,763     220,553         209,621         (44,478     165,143   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   (Won) 2,703,963         (135,001     2,568,962         2,450,711         (133,341     2,317,370   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents
6. Investments in Equity Accounted Investees

Associates and jointly controlled entities (equity method investees) as of June 30, 2012 are as follows:

 

(In millions of won)                               

Associates and jointly

controlled entities

  

Location

   Percentage
of ownership
 

Date of
incorporation

  

Fiscal year end

  

Business

   Carrying
Amount
 

Suzhou Raken Technology Ltd.

   Suzhou, China    51%   October 2008    December 31    Manufacture and sell LCD modules and LCD TV set    (Won) 131,717   

Guangzhou New Vision Technology Research and Development Limited

   Guangzhou, China    50%   July 2008    December 31    R&D on design of LCD modules and LCD TV set      3,769   

Global OLED Technology LLC

   Virginia, U.S.A.    33%   December 2009    December 31    Manage and utilize OLED patents      42,194   

Paju Electric Glass Co., Ltd.

   Domestic    40%   January 2005    December 31    Manufacture electric glass for flat-panel displays      80,962   

TLI Inc.

   Domestic    12%   October 1998    December 31    Manufacture and sell semiconductor parts      15,999   

AVACO Co., Ltd. (*1)

   Domestic    16%   January 2001    December 31    Manufacture and sell equipment for flat-panel displays      10,188   

New Optics LTD.

   Domestic    42%   August 2005    December 31    Manufacture back light parts for TFT-LCDs      21,979   

LIG ADP Co., Ltd.

   Domestic    13%   January 2001    December 31    Develop and manufacture equipment for flat-panel displays      2,458   

WooRee LED Co., Ltd.

   Domestic    30%   June 2008    December 31    Manufacture LED back light unit packages      20,765   

Dynamic Solar Design Co., Ltd.

   Domestic    40%   April 2009    December 31    Develop and manufacture equipment for solar battery and flat-panel displays      1,191   

RPO, Inc.

   California, U.S.A.    26%   November 2005    December 31    Develop digital waveguide touch technology      —     

LB Gemini New Growth Fund No. 16 (*2)

   Domestic    31%   December 2009    December 31    Invest in small and middle sized companies and benefit from M&A opportunities      13,227   

Can Yang Investments Limited (*3)

   Hong Kong    9%   January 2010    December 31    Develop, manufacture and sell TFT-OLEDs      12,698   

YAS Co., Ltd.

   Domestic    19%   April 2002    December 31    Develop and manufacture deposition equipment for OLEDs      9,441   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

   Suzhou, China    20%   August 2010    December 31    Manufacture LED packages      3,875   

Narenanotech Corporation

   Domestic    23%   December 1995    December 31    Manufacture and sell equipment for flat-panel displays      27,112   

AVATEC. Co., Ltd.

   Domestic    20%   August 2000    December 31    Manufacture and sell glass for flat-panel displays      11,587   

GLONIX Co., Ltd. (*4)

   Domestic    20%   Optober 2006    December 31    Manufacture and sell liquid crystal display      1,879   
                

 

 

 
                 (Won) 411,041   
                

 

 

 

 

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Table of Contents
6. Investments in Equity Accounted Investees, Continued

 

(*1) In 2012, the Controlling Company’s ownership in AVACO Co., Ltd. was reduced from 20% to 16% because the Controlling Company did not participate in AVACO Co., Ltd.’s capital increase. Despite the decrease in ownership, the Controlling Company is still able to exercise significant influence through its right to assign a director to the board of directors of AVACO Co. Ltd.
(*2) In 2012, the Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In 2012, the Controlling Company received (Won) 1,043 million from the Fund as capital distribution. Despite the payment from the Fund, there were no changes in the Controlling Company’s ownership percentage in the Fund and the Controlling Company is committed to make investment of up to an aggregate of (Won) 30,000 million.
(*3) In 2012, the Controlling Company’s ownership in Can Yang Investments Limited was reduced from 12% to 9% because the Controlling Company did not participate in Can Yang Investments Limited’s capital increase. Despite the decrease in ownership, the Controlling Company is still able to exercise significant influence through its right to assign a director to the board of directors of Can Yang Investments Limited.
(*4) In April 2012, the Controlling Company acquired 4,000,000 common shares (20%) of GLONIX Co., Ltd., which manufactures liquid crystal display, at (Won) 2,000 million. As of June 30, 2012, 20% of GLONIX Co., Ltd. is owned by the Controlling Company and the Controlling Company has the right to assign a director in the board of directors of GLONIX Co., Ltd.

The dividends received from equity accounted investees for the six-month periods ended June 30, 2012 and 2011 amounted to (Won) 204 million and (Won) 6,130 million, respectively.

 

7. Property, Plant and Equipment

For the six-month periods ended June 30, 2012 and 2011, the Group purchased property, plant and equipment of (Won) 1,654,468 million and (Won) 3,101,529 million, respectively. The capitalized borrowing costs and capitalization rate are (Won) 23,974 million and 3.90%, and (Won) 8,663 million and 2.26%, for the six-month periods ended June 30, 2012 and 2011, respectively. Also for the six-month periods ended June 30, 2012 and 2011, the Group disposed of property, plant and equipment with carrying amounts of (Won) 7,005 million and (Won) 722 million, respectively and recognized (Won) 2,731 million and (Won) 1,906 million as gain and loss, respectively, on disposal of property, plant and equipment for the six-month period ended June 30, 2012 (gain and loss for the six-month period ended on June 30, 2011: (Won) 425 million and (Won) 462 million, respectively).

 

8. Intangible Assets

The Group capitalizes the expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products that are ultimately selected for production. The balances of capitalized development costs as of June 30, 2012 and December 31, 2011 are (Won) 153,019 million and (Won) 144,211 million, respectively.

The Group recognized full impairment loss of (Won) 36,574 million for the difference between the carrying amount and the recoverable amount (determined based on value in use) of goodwill and in-process research and development because the economic benefit from these assets are estimated to be less than previously expected.

 

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Table of Contents
9. Financial Instruments

 

  (a) Credit risk

 

  (i) Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions of won)              
     2012      2011  

Cash and cash equivalents

   (Won) 2,292,623         1,517,977   

Deposits in banks

     362,460         815,000   

Trade accounts and notes receivable, net

     2,604,725         2,740,107   

Other accounts receivable, net

     180,353         212,870   

Available-for-sale financial assets

     2,838         2,838   

Guarantee deposits

     72,461         73,468   

Derivatives

     236         —     

Others

     695         695   
  

 

 

    

 

 

 
   (Won) 5,516,391         5,362,955   
  

 

 

    

 

 

 

The maximum exposure to credit risk for trade accounts and notes receivable as of June 30, 2012 and December 31, 2011 by geographic region is as follows:

 

(In millions of won)              
     2012      2011  

Domestic

   (Won) 146,162         56,200   

Euro-zone countries

     501,072         478,650   

Japan

     106,406         60,598   

United States

     680,614         777,292   

China

     741,291         1,003,650   

Taiwan

     274,458         279,919   

Others

     154,722         83,798   
  

 

 

    

 

 

 
   (Won) 2,604,725         2,740,107   
  

 

 

    

 

 

 

 

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Table of Contents
9. Financial Instruments, Continued

 

  (ii) Impairment loss

The aging of trade accounts and notes receivable and the related allowance for impairment losses as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    2012     2011  
     Book
Value
     Allowance  for
Impairment
Losses
    Book
Value
     Allowance  for
Impairment
Losses
 

Not past due

   (Won) 2,573,279         (2,250     2,704,076         (654

Past due 1-15 days

     17,351         (11     7,710         (2

Past due 16-30 days

     9,009         (5     14,327         (2

Past due 31-60 days

     3,518         (2     14,252         (3

More than 60 days

     3,837         (1     405         (2
  

 

 

    

 

 

   

 

 

    

 

 

 
   (Won) 2,606,994         (2,269     2,740,770         (663
  

 

 

    

 

 

   

 

 

    

 

 

 

The movement in the allowance for impairment in respect of receivables during the six-month period ended June 30, 2012 and the year ended December 31, 2011 are as follows:

 

(In millions of won)              
     2012      2011  

Balance at the beginning of the period

   (Won) 663         532   

Bad debt expense

     1,606         131   
  

 

 

    

 

 

 

Balance at the reporting date

   (Won) 2,269         663   
  

 

 

    

 

 

 

 

51


Table of Contents
9. Financial Instruments, Continued

 

  (b) Liquidity risk

 

  (i) The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements as of June 30, 2012:

 

(In millions of won)                                               
     Carrying
amount
     Contractual
cash flows
    6 months
or less
    6-12
months
     1-2
years
     2-5
years
     More than
5  years
 

Non-derivative financial liabilities

                  

Secured bank loan

   (Won) 57,690         60,227        725        725         58,777         —           —     

Unsecured bank loans

     1,908,405         2,115,481        121,110        365,254         156,470         1,470,271         2,376   

Unsecured bond issues

     2,791,586         3,093,889        505,841        652,803         383,907         1,551,338         —     

Trade accounts and notes payable

     4,137,098         4,137,098        4,137,098        —           —           —           —     

Other accounts payable

     3,388,164         3,389,134        3,389,134        —           —           —           —     

Other non-current accounts payable

     15,397         16,112        —          —           16,112         —           —     

Derivative financial liabilities

                  

Forward exchange contracts not designated for hedging

                  

Outflow

     124         23,146        23,146        —           —           —           —     

Inflow

     —           (23,022     (23,022     —           —           —           —     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 12,298,464         12,812,065        8,154,032        1,018,782         615,266         3,021,609         2,376   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

 

  (ii) As of June 30, 2012, there is no derivative designated as cash flow hedge.

 

52


Table of Contents
9. Financial Instruments, Continued

 

  (c) Currency risk

 

  (i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions)    2012  
     USD     JPY     CNY     TWD     EUR     PLN     SGD  

Cash and cash equivalents

     1,359        8,446        351        2        36        4        —     

Deposits in banks

     300        —          —          —          —          —          —     

Trade accounts and notes receivable

     1,886        6,979        768        —          67        —          —     

Other accounts receivable

     88        123        141        12        4        —          —     

Available-for-sale financial assets

     5        —          —          59        —          —          —     

Other assets denominated in foreign currencies

     1        184        21        12        —          —          1   

Trade accounts and notes payable

     (1,949     (38,407     (1,329     (435     (30     —          —     

Other accounts payable

     (178     (13,361     (391     (9     (36     (6     —     

Other non-current accounts payable

     (13     —          —          —          —          —          —     

Debts

     (900     (2,000     (65     —          (16     —          —     

Bonds

     (348     (9,997     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross statement of financial position exposure

     251        (48,033     (504     (359     25        (2     1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward exchange contracts

     50        —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     301        (48,033     (504     (359     25        (2     1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

53


Table of Contents
9. Financial Instruments, Continued

 

(In millions)    2011  
     USD     JPY     CNY     TWD     EUR     PLN     SGD  

Cash and cash equivalents

     822        14,286        439        4,543        40        7        —     

Trade accounts and notes receivable

     2,064        645        1,054        —          42        —          —     

Other accounts receivable

     80        111        134        222        10        —          —     

Available-for-sale financial assets

     5        —          —          49        —          —          —     

Other assets denominated in foreign currencies

     1        182        20        14        —          —          1   

Trade accounts and notes payable

     (1,921     (39,932     (1,629     —          (25     —          —     

Other accounts payable

     (64     (26,169     (401     (166     (84     (10     —     

Other non-current accounts payable

     (13     —          —          —          (26     —          —     

Debts

     (1,044     (6,000     (142     —          (27     —          —     

Bonds

     (347     (9,987     —          —          —          —          —     

Financial liabilities at fair value through profit or loss

     (76     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross statement of financial position exposure

     (493     (66,864     (525     4,662        (70     (3     1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward exchange contracts

     (160     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (653     (66,864     (525     4,662        (70     (3     1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average exchange rates applied for the six-month periods ended June 30, 2012 and 2011 and the exchange rates at June 30, 2012 and December 31, 2011 are as follows:

 

(In won)    Average rate      Spot rate  
     2012      2011      June 30,
2012
     December 31,
2011
 

USD

   (Won) 1,141.80         1,102.28       (Won) 1,153.80         1,153.30   

JPY

     14.33         13.45         14.54         14.85   

CNY

     180.65         168.49         181.49         182.51   

TWD

     38.51         37.92         38.55         38.13   

EUR

     1,481.47         1,545.96         1,435.04         1,494.10   

PLN

     349.38         391.08         334.34         338.65   

SGD

     903.22         875.51         900.53         886.44   

 

54


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Sensitivity analysis

A weakening of the won, as indicated below, against the following currencies which comprise the Group’s financial assets or liabilities denominated in foreign currency as of June 30, 2012 and December 31, 2011 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 considered to be reasonably possible at the end of each reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The changes in equity and profit or loss are as follows:

 

(In millions of won)    2012     2011  
     Equity     Profit
or loss
    Equity     Profit
or loss
 

USD (5 percent weakening)

   (Won) 6,938        32,339        (29,623     (28,032

JPY (5 percent weakening)

     (27,503     (23,222     (40,040     (35,494

CNY (5 percent weakening)

     (4,568     —          (4,830     —     

TWD (5 percent weakening)

     (671     (68     8,974        162   

EUR (5 percent weakening)

     1,034        2,320        (4,900     (1,957

PLN (5 percent weakening)

     (37     23        (85     128   

SGD (5 percent weakening)

     32        —          4        —     

A strengthening of the won against the above currencies as of June 30, 2012 and December 31, 2011 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.

 

55


Table of Contents
9. Financial Instruments, Continued

 

  (d) Interest rate risk

 

  (i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)             
     2012     2011  

Fixed rate instruments

    

Financial assets

   (Won) 2,657,921        2,335,815   

Financial liabilities

     (3,130,133     (2,685,175
  

 

 

   

 

 

 
   (Won) (472,212     (349,360
  

 

 

   

 

 

 

Variable rate instruments

    

Financial assets

   (Won) 600        600   

Financial liabilities

     (1,627,548     (1,925,192
  

 

 

   

 

 

 
   (Won) (1,626,948     (1,924,592
  

 

 

   

 

 

 

 

  (ii) Cash flow sensitivity analysis for variable rate instruments

As of June 30, 2012 and December 31, 2011, 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.

 

(In millions of won)    Equity      Profit or loss  
     1%p
increase
    1%p
decrease
     1%p
increase
    1%p
decrease
 

June 30, 2012

         

Variable rate instruments

   (Won) (12,332     12,332         (12,332     12,332   

December 31, 2011

         

Variable rate instruments

   (Won) (14,588     14,588         (14,588     14,588   

 

56


Table of Contents
9. Financial Instruments, Continued

 

  (e) Fair values

 

  (i) 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, are as follows:

 

(In millions of won)    June 30, 2012      December 31, 2011  
     Carrying
amounts
     Fair values      Carrying
amounts
     Fair values  

Assets carried at fair value

           

Available-for-sale financial assets

   (Won) 71,533         71,533         11,009         11,009   

Derivatives

     236         236         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 71,769         71,769         11,009         11,009   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets carried at amortized cost

           

Cash and cash equivalents

   (Won) 2,292,623         2,292,623         1,517,977         1,517,977   

Deposits in banks

     362,460         362,460         815,000         815,000   

Trade accounts and notes receivable

     2,604,725         2,604,725         2,740,107         2,740,107   

Other accounts receivable

     180,353         180,353         212,870         212,870   

Deposits

     72,461         72,461         73,468         73,468   

Others

     695         695         695         695   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 5,513,317         5,513,317         5,360,117         5,360,117   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at fair value

           

Financial liabilities at fair value through profit or loss

   (Won) —           —           87,339         87,339   

Derivatives

     124         124         6,969         6,969   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 124         124         94,308         94,308   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at amortized cost

           

Secured bank loans

   (Won) 57,690         57,690         57,665         57,665   

Unsecured bank loans

     1,908,405         1,945,976         1,673,387         1,620,010   

Unsecured bond issues

     2,791,586         2,851,198         2,791,976         2,829,206   

Trade accounts and notes payable

     4,137,098         4,137,098         3,782,627         3,782,627   

Other accounts payable

     3,388,164         3,389,101         3,905,496         3,905,496   

Other non-current liabilities

     15,397         15,396         53,457         53,379   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 12,298,340         12,396,459         12,264,608         12,248,383   
  

 

 

    

 

 

    

 

 

    

 

 

 

The basis for determining fair values above by the Group are consistent with those disclosed in the financial statements as of and for the year ended December 31, 2011.

 

57


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Interest rates used for determining fair value

The significant interest rates applied for determination of the above fair value as of June 30, 2012 and December 31, 2011 are as follows:

 

     2012     2011  

Derivatives

     3.59     3.90

Debentures, loans and borrowings

     3.75     4.19

 

  (iii) Fair value hierarchy

The table below analyzes financial instruments carried at fair value, by valuation method. 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

 

(In millions of won)    June 30, 2012  
     Level 1      Level 2     Level 3      Total  

Assets

          

Available-for-sale financial assets

   (Won) 71,533         —          —           71,533   

Derivatives

     —           236        —           236   
  

 

 

    

 

 

   

 

 

    

 

 

 
   (Won) 71,533         236        —           71,769   
  

 

 

    

 

 

   

 

 

    

 

 

 

Liabilities

          

Derivatives

   (Won) —           (124     —           (124

 

(In millions of won)    December 31, 2011  
     Level 1     Level 2     Level 3      Total  

Assets

         

Available-for-sale financial assets

   (Won) 11,009        —          —           11,009   

Liabilities

         

Financial liabilities at fair value through profit or loss

   (Won) (87,339     —          —           (87,339

Derivatives

     —          (6,969     —           (6,969
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) (87,339     (6,969     —           (94,308
  

 

 

   

 

 

   

 

 

    

 

 

 

The derivative financial assets and liabilities are classified as Level 2 since all significant inputs to compute the fair value of the over-the-counter derivatives were observable.

 

58


Table of Contents
9. Financial Instruments, Continued

 

  (f) Capital Management

Management’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowing to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the level of dividends to ordinary shareholders. Equity, defined by K-IFRS, is identical to the definition of capital, managed by management.

 

(In millions of won)             
     June 30, 2012     December 31, 2011  

Total liabilities

   (Won) 15,646,667        15,031,903   

Total equity

     9,895,930        10,131,028   

Cash and deposits in banks(*1)

     2,655,083        2,332,977   

Borrowings

     4,757,681        4,610,367   

Total Liabilities to equity ratio

     158     148

Net borrowing to equity ratio(*2)

     21     22

 

(*1) Cash and deposits in banks consist of cash and cash equivalents and deposits in banks.
(*2) Net borrowing is computed as borrowings net of cash and deposits in banks.

 

59


Table of Contents
10. Financial Liabilities

 

  (a) Financial liabilities as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)              
     2012      2011  

Current

     

Short-term borrowings

   (Won) 37,555         22,200   

Current portion of long-term debt

     1,429,930         778,464   

Current portion of financial liabilities at fair value through profits or loss

     —           87,339   

Derivatives

     124         6,969   
  

 

 

    

 

 

 
   (Won) 1,467,609         894,972   
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   (Won) 858,626         366,629   

Foreign currency denominated borrowings

     686,774         1,011,734   

Debentures

     1,744,796         2,344,001   
  

 

 

    

 

 

 
   (Won) 3,290,196         3,722,364   
  

 

 

    

 

 

 

Above financial liabilities, except for convertible bonds which are designated as financial liabilities at fair value through profit or loss and derivative liabilities, are measured at amortized cost.

 

  (b) Short-term borrowings as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won, USD)                  

Lender

   Annual interest rate
as of
June 30, 2012(*)
  2012      2011  

Foreign currency short-term borrowings

       

Bank of China and others

   2.70% ~ 6.56%   (Won) 36,844         21,489   
    

 

 

    

 

 

 

Foreign currency equivalent

     USD 25       USD 19   
     CNY 46         —     
    

 

 

    

 

 

 

Local currency short-term borrowings

       

Shinhan Bank and others

   CD+2.12%     711         711   
    

 

 

    

 

 

 
     (Won) 37,555         22,200   
    

 

 

    

 

 

 

 

(*) CD represents certificate of deposit.

The Group recognized (Won) 3,564 million and (Won) 307 million as interest expense in relation to the short-term borrowings that resulted from the sale of accounts receivable during the six-month periods ended June 30, 2012 and 2011, respectively.

 

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Table of Contents
10. Financial Liabilities, Continued

 

  (c) Local currency long-term debt as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions of won)    Annual interest rate            

Lender

   as of
June 30, 2012
  2012     2011  

Shinhan Bank and others

   3-year Korean Treasury
Bond rate less 1.25%,
2.75%
  (Won) 18,919        20,817   

National Agricultural Cooperative Federation and others

   4.51%~5.21%, CD+3.00%     844,586        350,300   

Less current portion of long-term debt

       (4,879     (4,488
    

 

 

   

 

 

 
     (Won) 858,626        366,629   
    

 

 

   

 

 

 

 

  (d) Foreign currency denominated long-term debt as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions of won, USD, JPY, CNY and EUR)    Annual interest rate            

Lender

   as of
June 30, 2012(*)
  2012     2011  

The Export-Import Bank of Korea

   6ML+0.69%   (Won) 34,614       
40,366
  

Kookmin Bank and others

   6ML+1.78%,
3ML+1.70%~2.79%
    1,004,036        1,225,110   

China Communication Bank and others

   3M EURIBOR+0.60,

90% of the Basic Rate
published by the People’s

Bank of China

    26,385        72,259   
    

 

 

   

 

 

 

Foreign currency equivalent

     USD 875      USD  1,025   
     CNY 19      CNY 142   
     EUR 16      EUR 27   
     JPY 2,000      JPY  6,000   
    

 

 

   

 

 

 

Less current portion of long-term debt

       (378,261     (326,001
    

 

 

   

 

 

 
     (Won) 686,774        1,011,734   
    

 

 

   

 

 

 

 

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

 

61


Table of Contents
10. Financial Liabilities, Continued

 

  (e) Details of the Controlling Company’s debentures issued and outstanding as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won, JPY and USD)         Annual interest            
     Maturity    rate as of
June 30, 2012
  2012     2011  

Local currency debentures(*1)

         

Publicly issued debentures

   November 2012~

October 2016

   4.24%~5.89%   (Won) 2,250,000        2,250,000   

Less discount on debentures

          (5,555     (6,721

Less current portion

          (499,649     (299,658
       

 

 

   

 

 

 
        (Won) 1,744,796        1,943,621   
       

 

 

   

 

 

 

Foreign currency debentures(*1)

         

Floating-rate notes

   August 2012 ~
April 2013
   3ML+1.80%

~2.40%

  (Won) 549,209        552,171   
       

 

 

   

 

 

 
        USD 350      USD 350   

Foreign currency equivalent

        JPY  10,000      JPY  10,000   
       

 

 

   

 

 

 

Less discount on bonds

          (2,068     (3,474

Less current portion

          (547,141     (148,317
       

 

 

   

 

 

 
        (Won) —          400,380   
       

 

 

   

 

 

 

Financial liabilities at fair value through profit or loss(*2)

         

Convertible bonds

   April 2012    Zero coupon   (Won) —          87,339   
       

 

 

   

 

 

 

Foreign currency equivalent

          —        USD 76   
       

 

 

   

 

 

 

Less current portion

        (Won) —          (87,339
       

 

 

   

 

 

 
          —          —     
       

 

 

   

 

 

 
        (Won) 1,744,796        2,344,001   
       

 

 

   

 

 

 

 

(*1) Principal of the local currency debentures is to be repaid at maturity and interests are paid quarterly in arrears.
(*2) The convertible bonds which were recognized as financial liabilities at fair value through profit or loss as of December 31, 2011 were repaid at 116.77% of the principal amount on April 18, 2012 upon maturity.

 

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11. The Nature of Expenses

The nature of expenses for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month     For the six-month  
     periods ended June 30,     periods ended June 30,  
     2012     2011     2012     2011  

Changes in inventories

   (Won) (371,283     (316,752     (251,592     (606,729

Purchase of raw material and merchandise and others

     4,513,249        3,980,535        8,283,999        7,597,005   

Depreciation and amortization

     1,064,454        893,568        2,054,457        1,709,407   

Outsourcing fee

     41,341        39,214        71,195        67,475   

Labor costs

     619,409        593,753        1,252,948        1,169,690   

Supplies and others

     197,532        324,840        404,148        601,643   

Utility expense

     145,396        129,133        305,974        263,489   

Fees and commissions

     107,707        107,260        217,006        215,262   

Shipping costs

     133,035        82,263        236,879        162,207   

After-sale service expenses

     26,605        24,268        52,961        40,122   

Others

     440,131        268,245        714,883        527,684   
  

 

 

   

 

 

   

 

 

   

 

 

 
   (Won) 6,917,576        6,126,327        13,342,858        11,747,255   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses consist of cost of sales, selling, administrative, research and development expenses and others (except foreign exchange difference).

For the six-month period ended June 30, 2012, other income and other expenses included exchange differences amounting to (Won) 519,722 million and (Won) 489,473 million, respectively (six-month period ended June 30, 2011: (Won) 570,620 million and (Won) 534,388 million, respectively).

 

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12. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month      For the six-month  
     periods ended June 30,      periods ended June 30,  
     2012      2011      2012      2011  

Salaries

   (Won) 56,456         55,235         117,400         114,619   

Expenses related to defined benefit plan

     5,215         4,486         10,783         9,330   

Other employee benefits

     16,180         19,473         29,465         34,052   

Shipping costs

     109,867         67,779         198,900         135,229   

Fees and commissions

     47,583         40,316         99,219         83,900   

Depreciation and amortization

     28,050         13,279         53,436         26,381   

Taxes and dues

     7,851         10,421         11,540         21,325   

Advertising

     27,072         37,271         51,565         62,530   

After-sale service expenses

     26,605         24,268         52,961         40,122   

Others

     31,591         36,771         66,843         71,929   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 356,470         309,299         692,112         599,417   
  

 

 

    

 

 

    

 

 

    

 

 

 

The expenses for the six-month period ended June 30, 2011 were reclassified to conform to the classification for the six month-month period ended June 30, 2012.

 

13. Other Income and Other Expenses

 

  (a) Details of other income for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month      For the six-month  
     periods ended June 30,      periods ended June 30,  
     2012      2011      2012      2011  

Rental income

   (Won) 2,043         1,653         3,384         3,114   

Foreign currency gain

     244,303         285,430         519,722         570,620   

Gain on disposal of property, plant and equipment

     2,678         267         2,731         425   

Reversal of allowance for doubtful accounts for other receivables

     —           90         296         301   

Reversal of stock compensation cost

     —           154         3         421   

Commission earned

     563         1,233         1,415         2,069   

Others

     5,378         4,057         7,024         4,566   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 254,965         292,884         534,575         581,516   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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13. Other Income and Other Expenses, Continued

 

  (b) Details of other expenses for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month      For the six-month  
     periods ended June 30,      periods ended June 30,  
     2012      2011      2012      2011  

Other bad debt expense

   (Won) 246         690         1         975   

Foreign currency loss

     273,253         261,927         489,473         534,388   

Loss on disposal of property, plant and equipment

     1,550         382         1,906         462   

Loss on disposal of intangible assets

     384         —           610         —     

Impairment loss on intangible assets

     37,683         —           37,683         —     

Expenses related to legal proceedings and others

     206,706         96         236,555         119   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 519,822         263,095         766,228         535,944   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

14. Employee Benefits

The Group’s primary defined benefit plan provides a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Controlling Company.

 

  (a) Recognized liabilities for defined benefit obligations as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)             
     2012     2011  

Present value of partially funded defined benefit obligations

   (Won) 534,535        486,891   

Fair value of plan assets

     (345,394     (340,253
  

 

 

   

 

 

 
   (Won) 189,141        146,638   
  

 

 

   

 

 

 

 

  (b) Expenses recognized in profit and loss for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month     For the six-month  
     periods ended June 30,     periods ended June 30,  
     2012     2011     2012     2011  

Current service cost

   (Won) 32,475        26,820        65,014        53,629   

Interest cost

     5,728        4,746        11,455        9,492   

Expected return on plan assets

     (3,547     (3,089     (7,095     (6,177
  

 

 

   

 

 

   

 

 

   

 

 

 
   (Won) 34,656        28,477        69,374        56,944   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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14. Employee Benefits, Continued

 

  (c) Plan assets as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)              
     2012      2011  

Deposits with financial institutions

   (Won) 345,394         340,253   

As of June 30, 2012, plan assets mainly consist of deposits in banks and others, which guarantee the payment of their principal and interest.

 

  (d) Actuarial gain and loss recognized in other comprehensive income (loss) for the three-month and six-month periods ended June 30, 2012 and 2011 is as follows:

 

(In millions of won)    For the three-month     For the six-month  
     periods ended June 30,     periods ended June 30,  
     2012     2011     2012     2011  

Defined benefit plan actuarial gain

   (Won) 493        467        251        1,072   

Income tax

     (119     (103     (106     (236
  

 

 

   

 

 

   

 

 

   

 

 

 

Defined benefit plan actuarial gain, net of income tax

   (Won) 374        364        145        836   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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15. Finance income and costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)         For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
          2012      2011      2012      2011  

Finance income

              

Interest income

      (Won) 6,565         14,202         14,693         31,090   

Foreign currency gain

        48,270         63,151         83,240         171,020   

Gain on valuation of financial assets at fair value through profit or loss

        —           109         —           145   

Gain on disposal of investments in equity accounted investees

        1,993         144         2,978         144   
     

 

 

    

 

 

    

 

 

    

 

 

 
      (Won) 56,828         77,606         100,911         202,399   
     

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

              

Interest expense

      (Won) 37,956         36,847         84,361         67,119   

Foreign currency loss

        67,795         31,066         87,867         66,909   

Loss on valuation of financial assets at fair value through profit or loss

        —           471         —           864   

Loss on valuation of financial liabilities at fair value through profit or loss

        —           1,182         —           2,261   

Loss on sale of trade accounts and notes receivable

        7,812         4,522         17,077         8,204   

Loss on redemption of debentures

        787         —           1,524         —     

Impairment loss on investments in equity accounted investees

        —           3,378         —           14,244   
     

 

 

    

 

 

    

 

 

    

 

 

 
      (Won)   114,350         77,466         190,829         159,601   
     

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b) Finance income and costs recognized in other comprehensive income for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)         For the  three-month
periods ended June 30,
    For the six-month
periods ended June 30,
 
          2012     2011     2012     2011  

Gain on valuation of available-for-sale securities

      (Won)     9,404        3,206        7,334        1,691   

Tax effect

        (1,845     (793     (1,828     (614
     

 

 

   

 

 

   

 

 

   

 

 

 
      (Won) 7,559        2,413        5,506        1,077   
     

 

 

   

 

 

   

 

 

   

 

 

 

 

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16. 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 1,473 million ((Won) 1,700,101 million) and JPY 5,000 million ((Won) 72,690 million) in connection with its export sales transactions. As of June 30, 2012, no accounts and notes receivable were sold but are not past due.

In June 2009 and January 2011, LG Display Singapore Pte. Ltd., the Controlling Company’s subsidiary, entered into agreements with Standard Chartered Bank and Citibank for accounts receivable sales negotiating facilities of up to an aggregate of USD 175 million ((Won) 201,915 million) and USD 100 million ((Won) 115,380 million), respectively, and as of June 30, 2012, accounts and notes receivable amounting to USD 147 million ((Won) 169,901 million) and USD 100 million ((Won) 115,315 million) were sold, with none of the underlying accounts and notes receivable being past due, respectively. In June 2009, June 2011 and July 2011, LG Display Taiwan Co., Ltd. entered into agreements with Taishin International Bank, BNP Paribas and Chinatrust Commercial Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD 983 million ((Won) 1,134,185 million), USD 65 million ((Won) 74,997 million) and USD 78 million ((Won) 89,996 million), respectively, and, as of June 30, 2012, accounts and notes receivable amounting to USD 339 million ((Won) 390,709 million) and USD 7 million ((Won) 8,035 million) were sold, with none of the underlying accounts and notes receivable being past due under the agreements with Taishin International Bank and Chinatrust Commercial Bank, respectively. In addition, in December 2010, LG Display Taiwan Co., Ltd. entered into agreements with Citibank and Standard Chartered Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD 134 million ((Won) 154,609 million) and USD 200 million ((Won) 230,760 million), respectively, and, as of June 30, 2012, accounts and notes receivable amounting to USD 52 million ((Won) 59,450 million) and USD 200 million ((Won) 230,440 million) were sold, with none of the underlying accounts and notes receivable being past due. In December 2010, LG Display Shanghai Co., Ltd. entered into an agreement with BNP Paribas for accounts receivable sales negotiating facilities of up to an aggregate of USD 130 million ((Won) 149,994 million), and, as of June 30, 2012, accounts and notes receivable amounting to USD 116 million ((Won) 133,830 million) were sold, with none of the underlying accounts and notes receivable being past due. In July 2009, LG Display Shenzhen Co., Ltd. and LG Display Shanghai Co., Ltd. entered into agreements with Bank of China Limited, and, as of June 30, 2012, accounts and notes receivable amounting to USD 77 million ((Won) 89,185 million) were sold, with none of the underlying accounts and notes receivable being past due. In June 2010, LG Display Germany GmbH entered into an agreement with Citibank for accounts receivable sales negotiating facilities of up to an aggregate of USD 307 million ((Won) 354,217 million), and, as of June 30, 2012, accounts and notes receivable amounting to USD 129 million ((Won) 149,133 million) were sold, with none of the underlying accounts and notes receivable being past due. In addition, LG Display Germany GmbH started forfaiting and accounts and notes receivable amounting to USD 14 million ((Won) 16,394 million) were sold, with none of the underlying accounts and notes receivable being past due. In March 2011, LG Display America, Inc. entered into agreements with Australia and New Zealand Banking Group Limited and Standard Chartered Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD 80 million ((Won) 92,304 million) and USD 50 million ((Won) 57,690 million), respectively, and, as of June 30, 2012, the amount of accounts and notes receivable amounting to USD 80 million ((Won) 92,299 million) and USD 46 million ((Won) 53,372 million) were sold but not past due, respectively. In addition, in June 2011, LG Display America, Inc. entered into an agreement with Citibank for accounts receivable sales negotiating facilities of up to an aggregate of USD 300 million ((Won) 346,140 million) and as of June 30, 2012, accounts and notes receivable amounting to USD 290 million ((Won) 335,144 million) were sold, with none of the underlying accounts and notes receivable being past due. In August 2011, LG Display Japan Co., Ltd. entered into an agreement with Sumitomo

 

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16. Commitments, Continued

Mitsui Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD 90 million ((Won) 103,842 million) and, as of June 30, 2012, the amount of accounts and notes receivable amounting to USD 2 million ((Won) 2,227 million) were sold, with none of the underlying accounts and notes receivable being past due. The Controlling Company has a credit facility agreement with Shinhan Bank pursuant to which the Controlling Company could sell its accounts and notes receivable up to an aggregate of (Won) 50,000 million in connection with its domestic sales transactions and as of June 30, 2012, there is no outstanding balance of accounts and notes receivable held by the bank. In addition, in April 2011, the Controlling Company entered into an agreement with Standard Chartered Bank for accounts receivable sales negotiating facilities of up to USD 50 million ((Won) 57,690 million) and as of June 30, 2012, accounts and notes receivable amounting to USD 17 million ((Won) 19,193 million) were sold to Standard Chartered Bank, with none of the underlying accounts and notes receivable being past due. In connection with all of the contracts in this paragraph, the Group has sold its accounts receivable without recourse.

Letters of credit

As of June 30, 2012, the Controlling Company has agreements with Korea Exchange Bank in relation to the opening of letters of credit up to USD 70 million ((Won) 80,766 million), USD 15 million ((Won) 17,307 million) with China Construction Bank, JPY 2,000 million ((Won) 29,076 million) with Woori Bank, USD 70 million ((Won) 80,766 million) with Bank of China, USD 60 million ((Won) 69,228 million) with Sumitomo Mitsui Banking Corporation and USD 30 million ((Won) 34,614 million) with Shinhan Bank.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 8.5 million ((Won) 9,807 million) and EUR 215 million ((Won) 308,534 million) from Royal Bank of Scotland and other various banks for a number of occasions including value added tax payments in Poland. As of June 30, 2012, the Controlling Company is providing a payment guarantee to a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR 16 million ((Won) 23,181 million) term loan credit facility of LG Display Poland Sp. zo.o. In addition, the Controlling Company provides a payment guarantee in connection with LG Display America Inc.’s term loan credit facilities with an aggregate amount of USD 7 million ((Won) 8,077 million) for principals and related interests.

LG Display Japan Co., Ltd. and other subsidiaries are provided with payment guarantees from the Bank of Tokyo-Mitsubishi UFJ and other various banks amounting to USD 12 million ((Won) 13,846 million), JPY 1,300 million ((Won) 18,899 million), CNY 1,200 million ((Won) 217,788 million) and PLN 0.2 million ((Won) 67 million) respectively, for their local tax payments.

Credit facility

LG Display Japan Co., Ltd. and other subsidiaries have entered into short-term credit facility agreements of up to USD 40 million ((Won) 46,152 million) and JPY 8,000 million ((Won) 116,303 million), respectively, with Mizuho Corporate Bank and other various banks.

License agreements

As of June 30, 2012, in relation to its TFT-LCD business, the Controlling Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

 

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16. Commitments, Continued

 

Long-term supply agreement

In connection with long-term supply agreements, as of June 30, 2012, the Controlling Company’s balance of advances received from customers amount to USD 1,580 million ((Won) 1,823,004 million) in the aggregate. 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 a payment guarantee amounting to USD 300 million ((Won) 346,140 million) from the Industrial Bank of Korea relating to advances received from certain customers that have signed long-term supply agreements.

Pledged Assets

Regarding the line of credit up to USD 50 million ((Won) 57,690 million), the Controlling Company provided part of its OLED machinery as pledged assets to the Export-Import Bank of Korea.

 

17. Contingencies

Patent infringement lawsuit against Chimei Innolux Corp. and others

In 2006, the Group filed a complaint in the United States District Court for the District of Delaware against Chimei Innolux Corp. (formerly, Chi Mei Optoelectronics Corp.) and AU Optronics Corp. claiming infringement of patents related to liquid crystal displays and the manufacturing processes for TFT-LCDs. Both AU Optronics Corp. and Chimei Innolux Corp. filed counter-claims against the Group claiming the Group’s infringement of their patents. The Court bifurcated the Group’s trial against AU Optronics Corp., from the trial against Chimei Innolux Corp., holding the first trial against AU Optronics Corp. in June 2009. In September 2011, the Group and AU Optronics Corp. filed a stipulation for dismissal of the Delaware case and amicably settled the claims and counterclaims between the two parties. The stay of the Chi Mei Optoelectronics case was lifted in January 2012, and the charge was dropped after two parties amicably settled the claims in May 2012.

Anvik Corporation’s lawsuit for infringement of patent

In 2007, Anvik Corporation filed a patent infringement case against the Group, along with other LCD manufacturing companies in the United States District Court for the Southern District of New York, in connection with the usage of photo-masking equipment manufactured by Nikon Corporation. The court granted Nikon Corporation’s motion for summary judgment of invalidity of the patents-in-suit and entered a judgment in favor of Nikon Corporation, the Controlling Company and LG Display America, Inc. and other TFT-LCD manufacturing companies, dismissing the case in April 2012. In April 2012, Anvik Corporation appealed the court’s decision to the United States Court of Appeals for the Federal Circuit. The Group is unable to predict the ultimate outcome of this case.

Industrial Technology Research Institute of Taiwan’s lawsuit for infringement of patent

In 2012, the United States International Trade Commission, or USITC, granted a motion by Industrial Technology Research Institute of Taiwan, or ITRI, to add the Controlling Company and LG Display America as additional respondents in a Section 337 investigation pending before the USITC. ITRI is seeking an exclusion order prohibiting the importation of televisions and monitors incorporating the Group’s products into the United States for alleged patent infringement. The Group is unable to predict the ultimate outcome of this case.

 

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17. Contingencies, Continued

 

Antitrust investigations and litigations

In December 2006, the Controlling Company received notices of investigation by the Korea Fair Trade Commission, the Japan Fair Trade Commission, the U.S. Department of Justice, and the European Commission with respect to possible anti-competitive activities in the TFT-LCD industry. The Controlling Company subsequently received similar notices from the Canadian Bureau of Competition Policy, the Federal Competition Commission of Mexico, the Secretariat of Economic Law of Brazil and the Taiwan Fair Trade Commission.

In November 2008, the Controlling Company executed an agreement with the U.S. Department of Justice (“DOJ”) whereby the Controlling Company and its U.S. subsidiary, LG Display America, Inc. (“LGDUS”), pleaded guilty to a Sherman Antitrust Act violation and agreed to pay a single total fine of USD 400 million. In December 2008, the U.S. District Court for the Northern District of California accepted the terms of the plea agreement and entered a judgment against the Controlling Company and LGDUS and ordered the payment of USD 400 million. The agreement resolved all federal criminal charges against the Controlling Company and LGDUS in the United States in connection with this matter.

In December 2010, the European Commission (“the EC”) issued a decision finding that the Controlling Company engaged in anti-competitive activities in the LCD industry in violation of European competition laws and imposed a fine of EUR 215 million. In February 2011, the Controlling Company filed with the European Union General Court an application for partial annulment and reduction of the fine imposed by the EC. The European Union General Court has not ruled on the Controlling Company’s application. In November 2011, the Controlling Company received an additional Request for Information from the EC relating to the alleged anti-competitive activities in the LCD industry and is responding to the request.

In November 2009, the Taiwan Fair Trade Commission terminated its investigation without any finding of violations or levying of fines. Also, in February 2012, the Competition Bureau of Canada terminated its investigation against the Controlling Company without any finding of violations or levying of fines. To date no decision has been issued by the Japan Fair Trade Commission, and we believe the statutory time period by which the Commission was required to have issued a decision has already lapsed. To date investigations by the Federal Competition Commission of Mexico and the Secretariat of Economic Law of Brazil are ongoing.

In August 2011, the Korea Fair Trade Commission issued an Examination Report finding that the Controlling Company engaged in anti-competitive activities in violation of Korean fair trade laws and a hearing was held in October 2011. In December 2011, the Korea Fair Trade Commission imposed a fine on the Controlling Company and certain of its subsidiaries of approximately (Won) 31,378 million, and the Controlling Company filed an appeal of the decision with the Seoul High Court in December 2011. To date the Seoul High Court has not ruled on the Controlling Company’s appeal.

Subsequent to the commencement of the DOJ investigation, a number of class action complaints were filed against the Controlling Company and other TFT-LCD panel manufacturers in the U.S. and Canada alleging violation of respective antitrust laws and related laws. The class action lawsuits in the U.S. were transferred to the Northern District of California for pretrial proceedings (“MDL Proceedings”). In March 2010, the court certified the class action complaints filed by direct purchasers and indirect purchasers. 78 entities (including groups of affiliated entities) submitted requests for exclusion from the direct purchaser class. The time period for submitting requests for exclusion from the indirect purchaser class expired on April 13, 2012. 10 entities (including groups and affiliated entities) submitted requests for exclusion from the indirect purchaser class. In addition, since 2010, the attorneys general of Arkansas, California, Florida, Illinois, Michigan, Mississippi, Missouri, New York, Oklahoma, Oregon, South Carolina, Washington, West Virginia and Wisconsin filed complaints against the Controlling Company, alleging similar antitrust violations as alleged in the MDL Proceedings. In June 2011, the Controlling Company reached a settlement with the

 

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17. Contingencies, Continued

 

direct purchaser class, which the federal district court approved in December 2011. In July 2012, the Controlling Company reached a settlement with the indirect purchaser class and with the state attorneys general of Arkansas, California, Florida, Michigan, Missouri, New York, West Virginia, and Wisconsin, which is subject to court approval.

Similar claims were filed separately by ATS. Claim, LLC, (assignee of Ricoh Electronics, Inc.), AT&T Corp. and its affiliates, Motorola Mobility, Inc., Electrograph Technologies Corp. and their respective related entities, all of which have been transferred to the MDL Proceedings. In November 2010, ATS Claim, LLC dismissed its action as to the Controlling Company pursuant to a settlement agreement. In addition, in 2010, TracFone Wireless Inc., Best Buy Co., Inc. and its affiliates, Target Corp., Sears, Roebuck and Co., Kmart Corp., Old Comp Inc., Good Guys, Inc., RadioShack Corp., Newegg Inc., Costco Wholesale Corp., Sony Electronics, Inc.and its affiliates, SB Liquidation Trust, and the trustee of the Circuit City Stores, Inc. Liquidation Trust, filed claims in the United States. In addition, in 2011, Office Depot, Inc., T-Mobile U.S.A., Inc., Interbond Corp. of America (BrandsMart), Jaco Electronics, Inc., P.C. Richard & Son Long Island Corp., MARTA Cooperative of America, Inc., ABC Appliance (ABC Warehouse), Schultze Agency Services, LLC (Tweeter), Tech Data Corp. and its affiliate, and AASI Creditor Liquidating Trust for All American Semiconductor Inc., and CompuCom Systems, Inc. filed similar claims. In 2012, ViewSonic Corp., NECO Alliance LLC, Rockwell Automation Inc., and Proview Technology, Inc. and its affiliates filed similar claims. To the extent these claims were not filed in the MDL Proceedings, they have been transferred to the MDL Proceedings for pretrial proceedings.

In Canada, the Ontario Superior Court of Justice certified the class action complaints filed by the direct and indirect purchasers in May 2011. The Controlling Company is pursuing an appeal of the decision as well as defending the on-going class actions in Quebec and British Columbia.

While the Group continues its vigorous defense of the various pending proceedings described above, there is a possibility that one or more proceedings may result in an unfavorable outcome to the Group. The Group has established provisions with respect to certain of the contingencies. However, the Group’s actual liability may be materially different from the provisions estimated. For certain cases described above, management is not able to estimate the potential estimated loss if the final outcome of the cases is unfavorable to the Group as the cases are in early stage and management does not have sufficient information to estimate the amount of possible loss.

 

18. Capital and Reserves

 

  (a) Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value (Won)5,000), and as of June 30, 2012 and December 31, 2011, the number of issued common shares is 357,815,700. There have been no changes in the capital stock for the six-month period ended June 30, 2012.

 

  (b) Reserves

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired.

 

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19. Related Parties

 

  (a) Key management personnel compensation

Compensation costs of key management for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2012      2011      2012      2011  

Short-term benefits

   (Won) 345         394         885         934   

Expenses related to defined benefit plan

     59         224         96         266   

Other long-term benefits

     —           164         —           319   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 404         782         981         1,519   
  

 

 

    

 

 

    

 

 

    

 

 

 

Key management refers to the registered directors who have significant control and responsibilities over the Group’s operations and business.

 

  (b) Significant transactions with related companies

Significant transactions which occurred in the normal course of business with related companies for the six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    Sales and other      Purchases and other  
     2012      2011      2012      2011  

Joint ventures

   (Won) 379,457         320,578         36,410         1,174   

Associates

     211         5,304         1,206,964         744,473   

LG Electronics

     2,851,041         2,536,845         133,687         174,006   

Other related parties

     20         20         19,821         18,714   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 3,230,729         2,862,747         1,396,882         938,367   
  

 

 

    

 

 

    

 

 

    

 

 

 

Account balances with related companies as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    Trade accounts and
notes receivable and other
     Trade accounts and
notes payable and other
 
     2012      2011      2012      2011  

Joint ventures

   (Won) 193,758         130,217         390,929         340,073   

Associates

     3         3         611,370         697,539   

LG Electronics

     556,200         497,747         93,471         98,487   

Other related parties

     —           —           6,741         3,632   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 749,961         627,967         1,102,511         1,139,731   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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20. Geographic and Other Information

The Group manufactures and sells TFT-LCD and AM-OLED products. The segment of AM-OLED is not presented separately, as the sales of AM-OLED products are insignificant to total sales.

The Group’s products are sold to domestic and overseas markets and the Group’s export sales represent approximately 92 percent of the total sales for the six-month period ended June 30, 2012.

The following is a summary of sales by region based on the location of the customers for the three-month and six-month periods ended June 30, 2012 and 2011.

 

  (a) Revenue by geography

 

(In millions of won)                            
     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 

Region

   2012      2011      2012      2011  

Domestic

   (Won) 503,931         520,022         1,002,474         908,032   

Foreign

           

China

     3,664,510         3,564,813         7,072,698         6,564,991   

Asia (excluding China)

     735,508         576,837         1,295,728         1,174,103   

United States

     849,018         612,939         1,462,665         1,169,638   

Europe

     1,157,405         772,451         2,260,483         1,595,814   
  

 

 

    

 

 

    

 

 

    

 

 

 

Sub total

   (Won) 6,406,441         5,527,040         12,091,574         10,504,546   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   (Won) 6,910,372         6,047,062         13,094,048         11,412,578   
  

 

 

    

 

 

    

 

 

    

 

 

 

Sales to Company A and Company B constituted 23% and 18% of total revenue, respectively, for the six-month period ended June 30, 2012 (the six-month period ended June 30, 2011: 24% and 17%). The Group’s top ten end-brand customers together accounted for 68% of sales for the six-month period ended June 30, 2012 (the six-month period ended June 30, 2011:74%).

 

  (b) Non-current assets by geography

 

(In millions of won)    June 30, 2012      December 31, 2011  

Region

   Property, plant
and equipment
     Intangible
assets
     Property, plant
and equipment
     Intangible
assets
 

Domestic

   (Won) 13,227,256         497,488         13,528,286         520,023   

Foreign

           

China

     1,014,465         12,029         1,009,959         15,045   

Others

     166,205         1,713         158,604         46   
  

 

 

    

 

 

    

 

 

    

 

 

 

Sub total

   (Won) 1,180,670         13,742         1,168,563         15,091   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   (Won) 14,407,926         511,230         14,696,849         535,114   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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20. Geographic and Other Information, continued

 

  (c) Revenue by product

 

(In millions of won)                            
     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 

Product

   2012      2011      2012      2011  

Panels for:

           

Notebook computers

   (Won) 1,635,710         1,360,040         2,811,870         2,357,541   

Desktop monitors

     1,194,208         1,172,334         2,479,372         2,450,794   

TFT-LCD televisions

     3,330,257         2,901,296         6,207,952         5,484,967   

Mobile and others

     750,197         613,392         1,594,854         1,119,276   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 6,910,372         6,047,062         13,094,048         11,412,578   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

21. Income Taxes

 

  (a) Details of Income tax expense (benefit) for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the  three-month
periods ended June 30,
    For the six-month
periods ended June 30,
 
     2012      2011     2012     2011  

Current tax expense (benefit)

   (Won) 13,257         (10,443     40,076        (1,138

Deferred tax expense (benefit)

     21,515         (61,771     (73,091     (157,449
  

 

 

    

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

   (Won) 34,772         (72,214     (33,015     (158,587
  

 

 

    

 

 

   

 

 

   

 

 

 

 

(b) Deferred Tax Assets and Liabilities

Deferred tax assets are reviewed at each reporting date and 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.

 

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21. Income Taxes, Continued

 

  (b) Deferred Tax Assets and Liabilities, Continued

 

Deferred tax assets and liabilities as of June 30, 2012 and December 31, 2011 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     2012      2011      2012     2011     2012     2011  

Other accounts receivable, net

   (Won) —           —           (1,252     (3,738     (1,252     (3,738

Inventories, net

     19,533         15,915         —          —          19,533        15,915   

Available-for-sale financial assets

     793         1,259         —          —          793        1,259   

Defined benefit obligation

     22,551         21,877         —          —          22,551        21,877   

Investments in equity accounted investees

     13,188         4,307         —          —          13,188        4,307   

Accrued expense

     35,718         72,965         —          —          35,718        72,965   

Property, plant and equipment

     141,117         133,720         —          —          141,117        133,720   

Intangible assets

     6,701         1,105         —          —          6,701        1,105   

Provisions

     12,733         11,618         —          —          12,733        11,618   

Gain or loss on foreign currency

     6,166         13,616         (963     (31,313     5,203        (17,697

Debentures

     —           6,059         —          —          —          6,059   

Others

     30,319         18,974         —          (715     30,319        18,259   

Tax losses

     333,489         329,068         —          —          333,489        329,068   

Tax credit carryforwards

     874,829         829,048         —          —          874,829        829,048   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax assets (liabilities)

   (Won) 1,497,137         1,459,531         (2,215     (35,766     1,494,922        1,423,765   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Controlling Company is 24.2% for the six-month period ended June 30, 2012.

 

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22. Earnings (Loss) Per Share

 

  (a) Basic earnings (loss) per share for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In won and Number of shares)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2012     2011      2012     2011  

Profit (loss) attributable to owners of the Controlling Company

   (Won) (111,175,869,752     24,930,784,784         (239,639,417,079     (90,258,445,462

Weighted-average number of common shares outstanding

     357,815,700        357,815,700         357,815,700        357,815,700   
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings (loss) per share

   (Won) (311     70         (670     (252
  

 

 

   

 

 

    

 

 

   

 

 

 

There were no events or transactions that result in changes in the number of common shares used for calculating earnings per share.

 

  (b) There are no effects of dilutive potential ordinary shares due to net loss for the three-month and six-month period ended June 30, 2012 and for the six-month period ended June 30, 2011. Diluted earnings per share for the three-month period ended June 30, 2011 were as follows:

 

(In won and No. of shares)       
     For the three-month period
ended June 30, 2011
 

Profit (loss) for the period

   (Won) 24,930,784,784   

Interest on convertible bond, net of tax

     (737,474,505

Adjusted income

     24,193,310,279   

Weighted-average number of common shares outstanding and common equivalent shares (*)

     359,102,294   
  

 

 

 

Diluted earnings per share

   (Won) 67   
  

 

 

 

 

(*) Weighted-average number of common shares outstanding to calculate dilutive potential ordinary shares for the three-month period ended June 30, 2011 is calculated as follows:

 

     For the three-month period
ended June 30, 2011
 

Weighted-average number of common shares (basic)

     357,815,700   

Effect of conversion of convertible bonds

     1,286,594   
  

 

 

 

Weighted-average number of common shares (diluted) at June 30, 2011

     359,102,294   
  

 

 

 

 

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22. Earnings (Loss) Per Share, continued

 

  (c) The number of dilutive potential ordinary shares outstanding for the three-month period ended June 30, 2011 is calculated as follows:

 

     2011  
(In shares)    Convertible bonds  

Common shares to be issued

     1,286,594   

Period

     April 1, 2011 ~ June 30, 2011   

Weight

     91 days / 91 days   

Weighted-average number of common shares to be issued

     1,286,594   

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2012 and 2011

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  

Independent Auditors’ Review Report

     81   

Condensed Separate Interim Statements of Financial Position

     83   

Condensed Separate Interim Statements of Comprehensive Income (Loss)

     84   

Condensed Separate Interim Statements of Changes in Equity

     85   

Condensed Separate Interim Statements of Cash Flows

     86   

Notes to the Condensed Separate Interim Financial Statements

  

 

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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 June 30, 2012, the condensed separate interim statements of comprehensive income (loss) for each of the three-month and six-month periods ended June 30, 2012 and 2011, and statements of changes in equity and cash flows for the six-month periods ended June 30, 2012 and 2011, 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 express a conclusion 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 auditing standards generally accepted in the Republic of Korea 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.

Emphasis of Matter

As discussed in note 17 to the condensed separate interim financial statements, LG Display Co., Ltd. has been under investigations by antitrust authorities in Brazil and other countries with respect to possible anti-competitive activities in the LCD industry and named as defendants in a number of individual lawsuits and federal class actions in the United States and Canada, respectively, in connection with the alleged antitrust violations concerning the sale of LCD panels. The Company estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Company.

 

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Table of Contents

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. Accordingly, this report and the accompanying condensed separate interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

We audited the separate statement of financial position as of December 31, 2011, 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 auditing standards generally accepted in the Republic of Korea, and our report thereon, dated February 22, 2012, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2011, presented for comparative purposes, is not different from that audited by us in all material respects.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

August 3, 2012

 

This report is effective as of August 3, 2012, 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 June 30, 2012 and December 31, 2011

 

(In millions of won)    Note    2012      2011  

Assets

        

Cash and cash equivalents

   9    (Won) 788,965        604,890  

Deposits in banks

   9      15,000        815,000  

Trade accounts and notes receivable, net

   9, 16, 19      4,775,171        3,789,332  

Other accounts receivable, net

   9, 19      96,751        102,097  

Other current financial assets

   9      3,211        2,976  

Inventories

   5      2,147,560        1,912,710  

Other current assets

        210,696        99,759  
     

 

 

    

 

 

 

Total current assets

        8,037,354        7,326,764  

Investments

   6      1,404,358        1,386,313  

Other non-current financial assets

   9      133,873        75,080  

Deferred tax assets

   20      1,379,335        1,329,905  

Property, plant and equipment, net

   7      13,222,007        13,522,553  

Intangible assets, net

   8      497,473        479,510  

Other non-current assets

        146,898        153,839  
     

 

 

    

 

 

 

Total non-current assets

        16,783,944        16,947,200  
     

 

 

    

 

 

 

Total assets

      (Won) 24,821,298        24,273,964  
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

   9, 19    (Won) 4,230,256        3,752,724  

Current financial liabilities

   9, 10      1,403,633        808,576  

Other accounts payable

   9, 19      3,220,710        3,690,913  

Accrued expenses

        394,839        342,973  

Provisions

        344,086        278,179  

Advances received

        483,501        593,436  

Other current liabilities

        28,104        18,532  
     

 

 

    

 

 

 

Total current liabilities

        10,105,129        9,485,333  

Non-current financial liabilities

   9, 10      3,289,932        3,714,001  

Non-current provisions

        5,429        5,419  

Employee benefits

   14      188,588        146,266  

Long-term advances received

   16      1,361,484        668,914  

Other non-current liabilities

        468,073        567,114  
     

 

 

    

 

 

 

Total non-current liabilities

        5,313,506        5,101,714  
     

 

 

    

 

 

 

Total liabilities

        15,418,635        14,587,047  
     

 

 

    

 

 

 

Equity

        

Share capital

   18      1,789,079        1,789,079  

Share premium

        2,251,113        2,251,113  

Reserves

   18      1,781        (3,944 )

Retained earnings

        5,360,690        5,650,669  
     

 

 

    

 

 

 

Total equity

        9,402,663        9,686,917  
     

 

 

    

 

 

 

Total liabilities and equity

      (Won) 24,821,298        24,273,964  
     

 

 

    

 

 

 

See accompanying notes to the condensed 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 six-month periods ended June 30, 2012 and 2011

 

(In millions of Won, except earnings per share)    Note      For the three-month periods
ended June 30
    For the six-month periods
ended June 30
 
            2012     2011     2012     2011  

Revenue

     19       (Won) 6,767,217       5,898,658      (Won) 12,722,936       10,950,409  

Cost of sales

     11         (6,144,727 )     (5,582,800     (11,922,189 )     (10,583,546 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        622,490       315,858        800,747       366,863  

Other income

     13         194,619       203,280        392,747       408,770  

Selling expenses

     11, 12         (157,269 )     (96,612     (289,393 )     (184,805 )

Administrative expenses

     11, 12         (101,198 )     (83,562     (208,206 )     (168,292 )

Research and development expenses

     11         (172,688 )     (217,470     (374,932 )     (413,360 )

Other expenses

     11, 13         (431,298 )     (192,921     (592,577 )     (382,307 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Results from operating activities

        (45,344 )     (71,427     (271,614 )     (373,131 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     15         70,101       100,727        81,902       217,510  

Finance costs

     15         (101,939 )     (49,323     (144,654 )     (112,035 )

Other non-operating loss, net

        (216 )     (2,403     (3,605 )     (5,439 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

        (77,398 )     (22,426     (337,971 )     (273,095 )

Income tax expense (benefit)

     20         37,838       (76,762     (47,657 )     (173,081 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

        (115,236 )     54,336        (290,314 )     (100,014 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

           

Net change in fair value of available-for-sale financial assets

     15         7,622       3,736        7,554       2,636  

Defined benefit plan actuarial gain

     14         494       467        441       1,072  

Income tax on other comprehensive (income) loss items

        (1,964 )     (925     (1,935 )     (816 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of income tax

        6,152       3,278        6,060       2,892  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      (Won) (109,084 )     57,614      (Won) (284,254 )     (97,122 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share

           

Basic earnings (loss) per share

     21       (Won) (322 )     152      (Won) (811 )     (280 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

     21       (Won) (322 )     149      (Won) (811 )     (280 )
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

For the six-month periods ended June 30, 2012 and 2011

 

(In millions of won)    Share
capital
     Share
premium
     Fair value
reserve
    Retained
earnings
    Total
equity
 

Balances at January 1, 2011

   (Won) 1,789,079        2,251,113        (7,795 )     6,838,278       10,870,675  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

            

Loss for the period

     —           —           —          (100,014 )     (100,014 )

Other comprehensive income (loss)

            

Net change in fair value of available-for-sale financial assets, net of tax

     —           —           2,056       —          2,056  

Defined benefit plan actuarial gain, net of tax

     —           —           —          836       836  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           —           2,056       836       2,892  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

     —           —           2,056       (99,178 )     (97,122 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

            

Dividends to equity holders

     —           —           —          (178,908 )     (178,908 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at June 30, 2011

   (Won) 1,789,079        2,251,113        (5,739 )     6,560,192       10,594,645  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at January 1, 2012

   (Won) 1,789,079        2,251,113        (3,944 )     5,650,669       9,686,917  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

            

Loss for the period

     —           —           —          (290,314 )     (290,314 )

Other comprehensive income (loss)

            

Net change in fair value of available-for-sale financial assets, net of tax

     —           —           5,725       —          5,725  

Defined benefit plan actuarial gain, net of tax

     —           —           —          335       335  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           —           5,725       335       6,060  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

     —           —           5,725       (289,979 )     (284,254 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

     —           —           —          —          —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at June 30, 2012

   (Won) 1,789,079        2,251,113        1,781       5,360,690       9,402,663  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows

(Unaudited)

For the six-month periods ended June 30, 2012 and 2011

 

(In millions of won)    Note      2012     2011  

Cash flows from operating activities:

       

Loss for the period

      (Won) 290,314       100,014  

Adjustments for:

       

Income tax benefit

     20         (47,657 )     (173,081 )

Depreciation

        1,803,555       1,475,060  

Amortization of intangible assets

        124,756       105,765  

Gain on foreign currency translation

        (72,649 )     (90,020 )

Loss on foreign currency translation

        90,204       29,655  

Expenses related to defined benefit plan

     14         69,115       56,833  

Gain on disposal of property, plant and equipment

        (3,058 )     (463 )

Loss on disposal of property, plant and equipment

        332       —     

Impairment loss on intangible assets

        1,063       —     

Finance income

        (71,142 )     (167,290 )

Finance costs

        122,077       87,229  

Other income

        (5,859 )     (29,119 )

Other expenses

        298,739       32,879  

Other non-operating loss

        —          7  
     

 

 

   

 

 

 
        2,019,162       1,227,441  

Change in trade accounts and notes receivable

        (1,586,836 )     766,252  

Change in other accounts receivable

        (9,143 )     (8,769 )

Change in other current assets

        (100,749 )     (52,328 )

Change in inventories

        (234,850 )     (664,775 )

Change in other non-current assets

        (19,294 )     (25,264 )

Change in trade accounts and notes payable

        495,828       (244,074 )

Change in other accounts payable

        75,163       134,704  

Change in accrued expenses

        80,029       (35,130 )

Change in other current liabilities

        350,853       (32,416 )

Change in long-term advances received

        789,670       281,975  

Change in provisions

        (263,416 )     (65,613 )

Change in defined benefit obligation

        (26,352 )     (5,471 )
     

 

 

   

 

 

 

Cash generated from operating activities

        1,570,065       1,276,532  

Income taxes paid

        1,684       (93,354 )

Interest received

        20,880       41,388  

Interest paid

        (95,291 )     (64,224 )
     

 

 

   

 

 

 

Net cash from operating activities

      (Won) 1,497,338       1,160,342  
     

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows, Continued

(Unaudited)

For the six-month periods ended June 30, 2012 and 2011

 

(In millions of won)    Note    2012     2011  

Cash flows from investing activities:

       

Dividends received

      (Won) 55,318       42,620  

Proceeds from withdrawal of deposits in banks

        812,000       2,300,000  

Increase in deposits in banks

        (12,000 )     (912,000 )

Acquisition of investments

        (146,538 )     (186,053 )

Proceeds from disposal of investments

        1,043       2,045  

Acquisition of property, plant and equipment

        (2,006,007 )     (1,839,177 )

Proceeds from disposal of property, plant and equipment

        8,000       678  

Acquisition of intangible assets

        (157,088 )     (109,026 )

Grants received

        2,173       1,560  

Proceeds from (payment for) settlement of derivatives

        (1,156 )     26,797  

Acquisition of other non-current financial assets

        (53,579 )     (29,340 )

Proceeds from disposal of non-current financial assets

        7,968       123,286  
     

 

 

   

 

 

 

Net cash used in investing activities

      (Won) (1,489,866 )     (578,610 )
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        2,648,686       805,321  

Repayment of short-term borrowings

        (2,648,686 )     (1,022,725 )

Issuance of debentures

        —          597,453  

Proceeds from issuance of long-term debt

        494,000       219,014  

Repayment of current portion of long-term debt

        (317,397 )     (435,373 )

Payment of cash dividend

        —          (178,908 )
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

      (Won) 176,603       (15,218 )
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        184,075       566,514  

Cash and cash equivalents at January 1

        604,890       889,784  
     

 

 

   

 

 

 

Cash and cash equivalents at June 30

      (Won) 788,965       1,456,298  
     

 

 

   

 

 

 

See accompanying notes to the condensed 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 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) related business to the Company. The main business of the Company is to manufacture and sell TFT-LCD panels. The Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders’ meeting on the same date as a result of the decrease in Philips’s share interest in the Company and the possibility of its business expansion to Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of June 30, 2012, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Company’s common shares.

As of June 30, 2012, the Company has its TFT-LCD manufacturing plants, OLED manufacturing plant and LCD Research & Development Center in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Company has overseas subsidiaries located in the Americas, Europe and Asia.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of June 30, 2012, 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 June 30, 2012, there are 21,272,438 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 Standards (“K-IFRSs”) 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 financial statements of the Company as of and for the year ended December 31, 2011.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027 Consolidated and Separate Financial Statements presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, 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.

The condensed separate interim financial statements were authorized for issuance by the Board of Directors on July 25, 2012.

 

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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 measured at fair value;

 

   

financial instruments at fair value through profit or loss measured at fair value;

 

   

available-for-sale financial assets measured at fair value; and

 

   

liabilities for defined benefit plans recognized at the net total of the present value of defined benefit obligation 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. All amounts in Korean won are in millions unless otherwise stated.

 

  (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.

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied in its financial statements as of and for the year ended December 31, 2011.

 

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 financial statements as of and for the year ended December 31, 2011, except for the application of K-IFRS No. 1034, Interim Financial Reporting, and the amendments to K-IFRS No. 1107, Financial Instruments: Disclosures, as explained below:

The Company has applied the amendments to K-IFRS No. 1107, Financial Instruments: Disclosures effective January 1, 2012, by prospectively disclosing the nature of transferred assets, their carrying amount, and the description of risks and rewards for each class of transferred financial assets that are not derecognized in their entirety.

 

4. Financial Risk Management

The objectives and policies on financial risk management followed by the Company are consistent with those disclosed in the financial statements as of and for the year ended December 31, 2011.

 

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5. Inventories

Inventories as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)       
     2012      2011  
     Acquisition
cost
     Inventory
reserve
    Book
value
     Acquisition
cost
     Inventory
reserve
    Book
value
 

Finished goods

   (Won) 866,056         (20,914     845,142         612,158         (19,911     592,247   

Work-in-process

     784,055         (44,987     739,068         810,864         (43,808     767,056   

Raw materials

     396,027         (16,385     379,642         431,042         (16,033     415,009   

Supplies

     220,998         (37,290     183,708         173,442         (35,044     138,398   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   (Won) 2,267,136         (119,576     2,147,560         2,027,506         (114,796     1,912,710   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

6. Investments

 

  (a) Investments in subsidiaries

In February 2012, the Company invested (Won) 3,000 million in cash for the capital increase of Image & Materials, Inc. (“I&M”), which is wholly owned by the Company. There were no changes in the Company’s ownership percentage in I&M as a result of this additional investment.

In March 2012, the Company established Nanumnuri Co., Ltd., a wholly owned subsidiary of the Company founded as a Standard Workplace for the Disabled under Act on Employment Promotion and Vocational Rehabilitation for Disabled Persons, with investment of (Won) 800 million in cash.

In May 2012, the Company invested (Won) 52,358 million in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ”). There were no changes in the Company’s ownership percentage in LGDNJ as a result of this additional investment.

In June 2012, the Company invested (Won) 88,380 million in cash for the capital increase of LG Display America, Inc. (“LGDUS”). There were no changes in the Company’s ownership percentage in LGDUS as a result of this additional investment.

However, the Company recognized an impairment loss of (Won) 38,725 million as finance costs for the difference between the carrying amount and the recoverable amount of investments in subsidiaries in 2012.

 

  (b) Investments in associates

In 2012, the Company recognized an impairment loss of (Won) 347 million for the difference between the carrying amount of and the recoverable amount of the investment in Dynamic Solar Design Co., Ltd., which was acquired to develop equipment, manufacture and sell solar battery and flat-panel display in 2009.

In April 2012, the Company acquired 4,000,000 common shares (20%) of GLONIX Co., Ltd., which manufactures liquid crystal display, at (Won) 2,000 million. As of June 30, 2012, 20% of GLONIX Co., Ltd. is owned by the Company and the Company has the right to assign a director in the board of directors of GLONIX Co., Ltd.

 

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6. Investments, Continued

In 2012, the Company’s ownership in Can Yang Investments Limited was reduced from 12% to 9% because the Company did not participate in Can Yang Investments Limited’s capital increase. Despite the decrease in ownership, the Company is still able to exercise significant influence through its right to assign a director to the board of directors of Can Yang Investments Limited.

In 2012, the Company’s ownership in AVACO Co., Ltd. was reduced from 20% to 16% because the Company did not participate in AVACO Co., Ltd.’s capital increase. Despite the decrease in ownership, the Company is still able to exercise significant influence through its right to assign a director to the board of directors of AVACO Co. Ltd.

The Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”).

In 2012, the Company received (Won) 1,043 million from the Fund as capital distribution. Despite the payment from the fund, there were no changes in the Company’s ownership percentage in the Fund and the Company is committed to make investment of up to an aggregate of (Won) 30,000 million.

The dividends received from associates for the six-month periods ended June 30, 2012 and 2011 amounted to (Won) 55,318 million and (Won) 42,620 million, respectively.

 

7. Property, Plant and Equipment

For the six-month periods ended June 30, 2012 and 2011, the Company purchased property, plant and equipment of (Won) 1,510,454 million and (Won) 2,945,912 million, respectively. The capitalized borrowing costs and capitalization rate are (Won) 23,974 million and 3.90%, and (Won) 8,355 million and 2.26% for the six-month periods ended June 30, 2012 and 2011, respectively. Also for the six-month periods ended June 30, 2012 and 2011, the Company disposed of property, plant and equipment with carrying amounts of (Won) 5,274 million and (Won) 215 million, respectively, and recognized (Won) 3,058 million and (Won) 332 million, respectively, as gain and loss on disposal of property, plant and equipment for the six-month period ended June 30, 2012 (gain for the six-month period ended on June 30, 2011: (Won) 463 million).

 

8. Intangible Assets

The Company capitalizes the expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products that are ultimately selected for production. The balances of capitalized development costs as of June 30, 2012 and December 31, 2011 are (Won) 153,019 million and (Won) 113,002 million, respectively.

 

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9. Financial Instruments

 

  (a) Credit risk

 

  (i) Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions of won)              
     2012      2011  

Cash and cash equivalents

   (Won) 788,965         604,890   

Deposits in banks

     15,000         815,000   

Trade accounts and notes receivable, net

     4,775,171         3,789,332   

Other accounts receivable, net

     96,751         102,097   

Available-for-sale financial assets

     2,838         2,838   

Guarantee deposits

     64,293         65,613   

Derivatives

     236         —     

Others

     613         613   
  

 

 

    

 

 

 
   (Won) 5,743,867         5,380,383   
  

 

 

    

 

 

 

In addition to the financial assets above, as of June 30, 2012 and December 31, 2011, the Company provides payment guarantees of (Won) 31,258 million and (Won) 50,606 million, respectively, for its subsidiaries’ loans.

The maximum exposure to credit risk for trade accounts and notes receivable as of June 30, 2012 and December 31, 2011 by geographic region is as follows:

 

(In millions of won)              
     2012      2011  

Domestic

   (Won) 146,162         56,200   

Euro-zone countries

     983,149         612,236   

Japan

     155,791         138,265   

United States

     1,575,417         828,959   

China

     1,252,368         1,195,899   

Taiwan

     432,644         829,171   

Others

     229,640         128,602   
  

 

 

    

 

 

 
   (Won) 4,775,171         3,789,332   
  

 

 

    

 

 

 

 

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9. Financial Instruments, Continued

 

  (ii) Impairment loss

The aging of trade accounts and notes receivable and the related allowance for impairment losses as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    2012     2011  
     Book Value      Allowance  for
Impairment
losses
    Book Value      Allowance  for
Impairment
losses
 

Not past due

   (Won) 4,750,798         (200     3,777,383         (49

Past due 1-15 days

     9,610         (3     953         (1

Past due 16-30 days

     8,103         (4     4,885         (1

Past due 31-60 days

     3,033         (2     5,762         (1

More than 60 days

     3,837         (1     403         (2
  

 

 

    

 

 

   

 

 

    

 

 

 
   (Won) 4,775,381         (210     3,789,386         (54
  

 

 

    

 

 

   

 

 

    

 

 

 

The movement in the allowance for impairment in respect of receivables during the six-month period ended June 30, 2012 and the year ended December 31, 2011 are as follows:

 

(In millions of won)              
     2012      2011  

Balance at the beginning of the period

   (Won) 54         24   

Bad debt expense

     156         30   
  

 

 

    

 

 

 

Balance at the reporting date

   (Won) 210         54   
  

 

 

    

 

 

 

 

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9. Financial Instruments, Continued

 

  (b) Liquidity risk

 

  (i) The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements as of June 30, 2012:

 

(In millions of won)                                               
     Carrying
amount
     Contractual
cash flows
    6 months
or less
    6-12
months
     1-2 years      2-5 years      More than
5 years
 

Non-derivative financial liabilities

                  

Secured bank loan

   (Won) 57,690         60,227        725        725         58,777         —           —     

Unsecured bank loans

     1,844,165         2,050,139        69,562        351,728         156,202         1,470,271         2,376   

Unsecured bond issues

     2,791,586         3,093,889        505,841        652,803         383,907         1,551,338         —     

Trade accounts and notes payable

     4,230,256         4,230,256        4,230,256        —           —           —           —     

Other accounts payable

     3,220,710         3,220,710        3,220,710        —           —           —           —     

Payment guarantee

     —           31,398        23,648        7,750         —           —           —     

Derivative financial liabilities

                  

Forward exchange contracts not designated for hedging

                  

Outflow

     124         23,146        23,146        —           —           —           —     

Inflow

     —           (23,022     (23,022     —           —           —           —     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 12,144,531         12,686,743        8,050,866        1,013,006         598,886         3,021,609         2,376   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

 

  (ii) As of June 30, 2012, there is no derivative designated as cash flow hedge.

 

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Table of Contents
9. Financial Instruments, Continued

 

  (c) Currency risk

 

  (i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions)    2012  
     USD     JPY     TWD      PLN      EUR  

Cash and cash equivalents

     155        8,415        —           2         2   

Trade accounts and notes receivable

     3,918        6,408        —           —           47   

Other accounts receivable

     25        1        12         —           —     

Available-for-sale financial assets

     5        —          —           —           —     

Other assets denominated in foreign currencies

     —          51        —           —           —     

Trade accounts and notes payable

     (2,368     (32,125     —           —           (1

Other accounts payable

     (140     (12,968     —           —           (5

Debts

     (875     (2,000     —           —           —     

Bonds

     (348     (9,997     —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Gross statement of financial position exposure

     372        (42,215     12         2         43   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Forward exchange contracts

     50        —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net exposure

     422        (42,215     12         2         43   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

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Table of Contents
9. Financial Instruments, Continued

 

(In millions)    2011  
     USD     JPY     TWD      PLN      EUR  

Cash and cash equivalents

     284        14,269        —           5         14   

Trade accounts and notes receivable

     3,080        6,493        —           —           31   

Other accounts receivable

     2        —          159         —           —     

Available-for-sale financial assets

     5        —          —           —           —     

Other assets denominated in foreign currencies

     —          51        —           —           —     

Trade accounts and notes payable

     (2,263     (33,375     —           —           (5

Other accounts payable

     (55     (25,815     —           —           (7

Debts

     (1,020     (6,000     —           —           —     

Bonds

     (347     (9,987     —           —           —     

Financial liabilities at fair value through profit or loss

     (76     —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Gross statement of financial position exposure

     (390     (54,364     159         5         33   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Forward exchange contracts

     (160     —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net exposure

     (550     (54,364     159         5         33   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Average exchange rates applied for the six-month periods ended June 30, 2012 and 2011 and the exchange rates at June 30, 2012 and December 31, 2011 are as follows:

 

(In won)    Average rate      Spot rate  
     2012      2011      June 30,
2012
     December 31,
2011
 

USD

   (Won) 1,141.80         1,102.28       (Won) 1,153.80         1,153.30   

JPY

     14.33         13.45         14.54         14.85   

TWD

     38.51         37.92         38.55         38.13   

EUR

     1,481.47         1,545.96         1,435.04         1,494.10   

PLN

     349.38         391.08         334.34         338.65   

 

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Table of Contents
9. Financial Instruments, Continued

 

  (ii) Sensitivity analysis

A weakening of the won, as indicated below, against the following currencies which comprise the Company’s financial assets or liabilities denominated in foreign currency as of June 30, 2012 and December 31, 2011 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 considered to be reasonably possible at the end of each reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The changes in equity and profit or loss are as follows:

 

(In millions of won)    2012     2011  
     Equity     Profit
or loss
    Equity     Profit
or loss
 

USD (5 percent weakening)

   (Won) 18,454        18,252        (24,041     (24,280

JPY (5 percent weakening)

     (23,260     (23,260     (30,601     (30,601

TWD (5 percent weakening)

     17        17        230        230   

PLN (5 percent weakening)

     25        25        64        64   

EUR (5 percent weakening)

     2,338        2,338        1,869        1,869   

A strengthening of the won against the above currencies as of June 30, 2012 and December 31, 2011 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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Table of Contents
9. Financial Instruments, Continued

 

  (d) Interest rate risk

 

  (i) Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)             
      2012     2011  

Fixed rate instruments

    

Financial assets

   (Won) 806,803        1,422,728   

Financial liabilities

     (3,093,288     (2,685,174
  

 

 

   

 

 

 
   (Won) (2,286,485     (1,262,446
  

 

 

   

 

 

 

Variable rate instruments

    

Financial assets

   (Won) 600        600   

Financial liabilities

     (1,600,153     (1,830,434
  

 

 

   

 

 

 
   (Won) (1,599,553     (1,829,834
  

 

 

   

 

 

 

 

  (ii) Cash flow sensitivity analysis for variable rate instruments

As of June 30, 2012 and December 31, 2011, 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.

 

(In millions of won)                          
     Equity      Profit or loss  
     1%p
increase
    1%p
decrease
     1%p
increase
    1%p
decrease
 

June 30, 2012

         

Variable rate instruments

   (Won) (12,125     12,125         (12,125     12,125   

December 31, 2011

         

Variable rate instruments

   (Won) (13,870     13,870         (13,870     13,870   

 

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Table of Contents
9. Financial Instruments, Continued

 

  (e) Fair values

 

  (i) 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, are as follows:

 

(In millions of won)    June 30, 2012      December 31, 2011  
     Carrying
amounts
     Fair
values
     Carrying
amounts
     Fair
values
 

Assets carried at fair value

           

Available-for-sale financial assets

   (Won) 69,268         69,268         9,157         9,157   

Derivatives

     236         236         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 69,504         69,504         9,157         9,157   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets carried at amortized cost

           

Cash and cash equivalents

   (Won) 788,965         788,965         604,890         604,890   

Deposits in banks

     15,000         15,000         815,000         815,000   

Trade accounts and notes receivable

     4,775,171         4,775,171         3,789,332         3,789,332   

Other accounts receivable

     96,751         96,751         102,097         102,097   

Deposits

     64,293         64,293         65,613         65,613   

Others

     613         613         613         613   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 5,740,793         5,740,793         5,377,545         5,377,545   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at fair value

           

Financial liabilities at fair value through profit or loss

   (Won) —           —           87,339         87,339   

Derivatives

     124         124         6,969         6,969   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 124         124         94,308         94,308   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at amortized cost

           

Secured bank loans

   (Won) 57,690         57,690         57,665         57,665   

Unsecured bank loans

     1,844,165         1,881,658         1,578,628         1,525,251   

Unsecured bond issues

     2,791,586         2,851,198         2,791,976         2,829,206   

Trade accounts and notes payable

     4,230,256         4,230,256         3,752,724         3,752,724   

Other accounts payable

     3,220,710         3,220,710         3,690,913         3,690,913   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 12,144,407         12,241,512         11,871,906         11,855,759   
  

 

 

    

 

 

    

 

 

    

 

 

 

The basis for determining fair values above by the Company are consistent with those disclosed in the financial statements as of and for the year ended December 31, 2011.

 

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Table of Contents
9. Financial Instruments, Continued

 

  (ii) Interest rates used for determining fair value

The significant interest rates applied for determination of the above fair value as of June 30, 2012 and December 31, 2011 are as follows:

 

     2012     2011  

Derivatives

     3.59     3.90

Debentures, loans and borrowings

     3.75     4.19

 

  (iii) Fair value hierarchy

The table below analyzes financial instruments carried at fair value, by valuation method. 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

 

(In millions of won)    June 30, 2012  
     Level 1     Level 2     Level 3      Total  

Assets

         

Available-for-sale financial assets

   (Won) 69,268        —          —           69,268   

Derivatives

     —          236        —           236   
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) 69,268        236        —           69,504   
  

 

 

   

 

 

   

 

 

    

 

 

 

Liabilities

         

Derivatives

   (Won) —          (124     —           (124
(In millions of won)    December 31, 2011  
     Level 1     Level 2     Level 3      Total  

Assets

         

Available-for-sale financial assets

   (Won) 9,157        —          —           9,157   

Liabilities

         

Financial liabilities at fair value through profit or loss

   (Won) (87,339     —          —           (87,339

Derivatives

     —          (6,969     —           (6,969
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) (87,339     (6,969     —           (94,308
  

 

 

   

 

 

   

 

 

    

 

 

 

The derivative financial assets and liabilities are classified as Level 2 since all significant inputs to compute the fair value of the over-the-counter derivatives were observable.

 

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Table of Contents
9. Financial Instruments, Continued

 

  (f) Capital Management

Management’s policy is to maintain a strong 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 level of dividends to ordinary shareholders. Equity, defined by K-IFRS, is identical to the definition of capital, managed by management.

 

(In millions of won)             
     June 30, 2012     December 31, 2011  

Total liabilities

   (Won) 15,418,635        14,587,047   

Total equity

     9,402,663        9,686,917   

Cash and deposits in banks(*1)

     803,965        1,419,890   

Borrowings

     4,693,441        4,515,608   

Total Liabilities to equity ratio

     164     151

Net borrowing to equity ratio(*2)

     41     32

 

(*1) Cash and deposits in banks consist of cash and cash equivalents and deposits in banks.
(*2) Net borrowing is computed as borrowings net of cash and deposits in banks.

 

10. Financial Liabilities

 

  (a) Financial liabilities as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    2012      2011  

Current

     

Current portion of long-term debt

   (Won) 1,403,509         714,268   

Current portion of financial liabilities at fair value through profits or loss

     —           87,339   

Derivatives

     124         6,969   
  

 

 

    

 

 

 
   (Won) 1,403,633         808,576   
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   (Won) 858,626         366,629   

Foreign currency denominated borrowings

     686,510         1,003,371   

Bonds

     1,744,796         2,344,001   
  

 

 

    

 

 

 
   (Won) 3,289,932         3,714,001   
  

 

 

    

 

 

 

Above financial liabilities, except for convertible bonds which are designated as financial liabilities at fair value through profit or loss and derivative liabilities, are measured at amortized cost.

 

  (b) The Company recognized (Won) 3,564 and (Won) 307 million as interest expense in relation to the short-term borrowings that resulted from the sale of accounts receivable during the six-month periods ended June 30, 2012 and 2011, respectively.

 

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Table of Contents
10. Financial Liabilities, Continued

 

  (c) Local currency denominated long-term debt as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions of won)                  

Lender

   Annual interest rate
as of June 30, 2012
   2012     2011  

Shinhan Bank and others

   3-year Korean Treasury

Bond rate less 1.25%,

2.75%

   (Won) 18,919        20,817   

National Agricultural Cooperative federation and others

   4.51%~5.21%      844,286        350,000   
     

 

 

   

 

 

 

Less current portion of long-term debt

        (4,579     (4,188
     

 

 

   

 

 

 
      (Won) 858,626        366,629   
     

 

 

   

 

 

 

 

  (d) Foreign currency denominated long-term debt as of June 30, 2012 and December 31, 2011 is as follows:

 

(In millions of won, USD and JPY)                  

Lender

   Annual interest rate
as  of June 30, 2012(*)
   2012     2011  

The Export-Import Bank of Korea

   6ML+0.69%    (Won) 34,614        40,366   

Kookmin Bank and others

   6ML+1.78%,

3ML+1.70%~2.79%

     1,004,036        1,225,110   
     

 

 

   

 

 

 

Foreign currency equivalent

        USD 875        USD 1,020   
        JPY 2,000        JPY 6,000   
     

 

 

   

 

 

 

Less current portion of long-term debt

     (352,140     (262,105
     

 

 

   

 

 

 
      (Won) 686,510        1,003,371   
     

 

 

   

 

 

 

 

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

 

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Table of Contents
9. Financial Instruments, Continued

 

  (e) Details of the Company’s debentures issued and outstanding as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won, JPY and USD)                 
     Maturity    Annual
interest rate
as of June 30,
2012
  2012     2011  

Local currency debentures(*1)

         

Publicly issued debentures

   November 2012

~October 2016

   4.24%

~5.89%

  (Won) 2,250,000        2,250,000   

Less discount on debentures

          (5,555     (6,721

Less current portion

          (499,649     (299,658
       

 

 

   

 

 

 
        (Won) 1,744,796        1,943,621   
       

 

 

   

 

 

 

Foreign currency Debentures(*1)

         

Floating-rate notes

   August 2012

~April 2013

   3ML+1.80%~2.40%   (Won) 549,209        552,171   
       

 

 

   

 

 

 

Foreign currency equivalent

         
 
USD 350
JPY 10,000
  
  
   
 
USD 350
JPY 10,000
  
  
       

 

 

   

 

 

 

Less discount on bonds

          (2,068     (3,474

Less current portion

          (547,141     (148,317
       

 

 

   

 

 

 
        (Won) —          400,380   
       

 

 

   

 

 

 

Financial liabilities at fair value through profit or loss(*2)

         

Convertible bonds

   April 2012    Zero
coupon
  (Won) —          87,339   
       

 

 

   

 

 

 

Foreign currency equivalent

          —          USD 76   
       

 

 

   

 

 

 

Less current portion convertible bonds convertible bonds

          —          (87,339
       

 

 

   

 

 

 
        (Won) —          —     
       

 

 

   

 

 

 
        (Won) 1,744,796        2,344,001   
       

 

 

   

 

 

 

 

(*1) Principal of the local currency debentures is to be repaid at maturity and interests are paid quarterly in arrears.
(*2) The convertible bonds which were recognized as financial liabilities at fair value through profit or loss as of December 31, 2011 were repaid at 116.77% of the principal amount on April 18, 2012 upon maturity.

 

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Table of Contents
11. The Nature of Expenses

The nature of expenses for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
    For the six-month
periods ended June 30,
 
     2012     2011     2012     2011  

Changes in inventories

   (Won) (352,045     (301,413     (234,850     (664,775

Purchase of raw material and merchandise and others

     4,062,712        3,508,008        7,176,422        6,616,158   

Depreciation and amortization

     1,001,078        831,819        1,928,311        1,580,825   

Outsourcing fee

     670,269        688,499        1,485,640        1,370,836   

Labor costs

     505,410        490,284        1,017,840        962,525   

Supplies and others

     170,645        262,783        349,603        513,392   

Utility expense

     134,144        116,994        283,482        239,466   

Fees and commissions

     85,644        77,657        170,851        166,226   

Shipping costs

     112,830        39,734        194,497        77,955   

After-sale service expenses

     19,039        17,032        38,454        26,567   

Others

     397,790        249,049        622,432        460,835   
  

 

 

   

 

 

   

 

 

   

 

 

 
   (Won) 6,807,516        5,980,446        13,032,682        11,350,010   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses consist of cost of sales, selling, administrative, research and development expenses and others (except foreign exchange difference).

For the six-month period ended June 30, 2012, other income and other expenses included exchange differences amounting to (Won) 385,888 million and (Won) 354,615 million, respectively (six-month period ended June 30, 2011: (Won) 385,303 million and (Won) 382,300 million, respectively).

 

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Table of Contents
11. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2012      2011      2012      2011  

Salaries

   (Won) 33,414         33,973         69,329         68,733   

Expenses related to defined benefit plan

     4,910         4,348         10,225         9,104   

Other employee benefit

     6,548         9,408         12,630         17,469   

Shipping costs

     91,428         26,153         159,126         52,791   

Fees and commissions

     32,554         19,135         67,040         51,995   

Depreciation and amortization

     25,691         10,405         47,584         19,839   

Taxes and dues

     573         501         1,182         1,231   

Advertising

     27,062         37,260         51,524         62,492   

After-sale service expenses

     19,039         17,032         38,454         26,567   

Others

     17,248         21,959         40,505         42,876   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 258,467         180,174         497,599         353,097   
  

 

 

    

 

 

    

 

 

    

 

 

 

The expenses for the six-month period ended June 30, 2011 were reclassified to conform to the classification for the six month-month period ended June 30, 2012.

 

13. Other Income and Other Expenses

 

  (a) Details of other income for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the  six-month
periods ended June 30,
 
     2012      2011      2012      2011  

Rental income

   (Won) 1,330         977         2,345         1,917   

Foreign currency gain

     189,733         197,666         385,888         385,303   

Gain on disposal of property, plant and equipment

     2,993         305         3,058         463   

Reversal of allowance for doubtful accounts for other receivables

     —           74         42         1   

Reversal of stock compensation cost

     —           154         3         421   

Commission earned

     563         1,348         1,411         2,026   

Others

     —           2,756         —           18,639   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 194,619         203,280         392,747         408,770   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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13. Other Income and Other Expenses, Continued

 

  (b) Details of other expenses for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2012      2011      2012      2011  

Other bad debt expense

   (Won) 56         —           —           —     

Foreign currency loss

     199,664         192,919         354,615         382,300   

Loss on disposal of property, plant and equipment

     331         —           332         —     

Impairment loss on intangible assets

     837         —           1,063         —     

Expenses related to legal proceedings and others

     230,410         2         236,567         7   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 431,298         192,921         592,577         382,307   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

14. Employee Benefits

The Company’s primary defined benefit plan provides 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) Recognized liabilities for defined benefit obligations as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    2012     2011  

Present value of partially funded defined benefit obligations

   (Won)   533,982        486,519   

Fair value of plan assets

     (345,394     (340,253
  

 

 

   

 

 

 
   (Won) 188,588        146,266   
  

 

 

   

 

 

 

 

  (b) Expenses recognized in profit and loss for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
    For the six-month
periods ended June 30,
 
     2012     2011     2012     2011  

Current service cost

   (Won) 32,377        26,759        64,755        53,518   

Interest cost

     5,728        4,746        11,455        9,492   

Expected return on plan assets

     (3,547     (3,089     (7,095     (6,177
  

 

 

   

 

 

   

 

 

   

 

 

 
   (Won)   34,558        28,416        69,115        56,833   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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14. Employee Benefits, Continued

 

 

  (c) Plan assets as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)              
     2012      2011  

Deposits with financial institutions

   (Won) 345,394         340,253   

As of June 30, 2012, plan assets mainly consist of deposits in banks and others, which guarantee the payment of their principal and interest.

 

  (d) Actuarial gain and loss recognized in other comprehensive income(loss) for the three-month and six-month periods ended June 30, 2012 and 2011 is as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
    For the six-month
periods  ended June 30,
 
     2012     2011     2012     2011  

Defined benefit plan actuarial gain

   (Won) 494        467        441        1,072   

Income tax

     (119     (103     (106     (236
  

 

 

   

 

 

   

 

 

   

 

 

 

Defined benefit plan actuarial gain, net of income tax

   (Won) 375        364        335        836   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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15. Finance income and costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2012      2011      2012      2011  

Finance income

           

Interest income

   (Won) 4,959         13,289         12,058         28,813   

Dividend income

     55,114         37,340         55,318         42,620   

Foreign currency gain

     10,028         50,098         14,526         146,077   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 70,101         100,727         81,902         217,510   
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   (Won) 36,573         34,289         81,496         61,565   

Foreign currency loss

     32,953         9,187         22,382         28,613   

Loss on valuation of financial assets at fair value through profit or loss

     —           180         —           573   

Loss on valuation of financial liabilities at fair value through profit or loss

     —           1,182         —           2,261   

Loss on redemption of debentures

     787         —           1,524         —     

Impairment loss on investments

     31,585         4,452         39,072         18,990   

Loss on factoring of trade receivables

     41         33         180         33   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 101,939         49,323         144,654         112,035   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b) Finance income and costs recognized in other comprehensive income for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
    For the six-month
periods  ended June 30,
 
     2012     2011     2012     2011  

Gain on valuation of available-for-sale securities

   (Won) 7,622        3,736        7,554        2,636   

Tax effect

     (1,845     (822     (1,829     (580
  

 

 

   

 

 

   

 

 

   

 

 

 
   (Won) 5,777        2,914        5,725        2,056   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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16. 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 1,473 million ((Won) 1,700,101 million) and JPY 5,000 million ((Won) 72,690 million) in connection with its export sales transactions. As of June 30, 2012, no accounts and notes receivable were sold but are not past due.

The Company has a credit facility agreement with Shinhan Bank pursuant to which the Company could sell its accounts receivables up to an aggregate of (Won) 50,000 million in connection with its domestic sales transactions and, as of June 30, 2012, no accounts and notes receivable were sold but are not past due. In addition, in April 2011, the Company entered into an agreement with Standard Chartered Bank for accounts receivable sales negotiating facilities of up to USD 50 million ((Won) 57,690 million) and as of June 30, 2012, accounts and notes receivable amounting to USD 17 million ((Won) 19,193 million) were sold to Standard Chartered Bank, with none of the underlying accounts and notes receivable being past due. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable without recourse.

Letters of credit

As of June 30, 2012, the Company has agreements with Korea Exchange Bank in relation to the opening of letters of credit up to USD 70 million ((Won) 80,766 million), USD 15 million ((Won) 17,307 million) with China Construction Bank, JPY 2,000 million ((Won) 29,076 million) with Woori Bank, USD 70 million ((Won) 80,766 million) with Bank of China, USD 60 million ((Won) 69,228 million) with Sumitomo Mitsui Banking Corporation and USD 30 million ((Won) 34,614 million) with Shinhan Bank.

Payment guarantees

The Company obtained payment guarantees amounting to USD 8.5 million ((Won) 9,807 million) and EUR 215 million ((Won) 308,534 million) from Royal Bank of Scotland and other various banks for a number of occasions including value added tax payments in Poland. As of June 30, 2012, the Company is providing a payment guarantee to a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR 16 million ((Won) 23,181 million) term loan credit facility of LG Display Poland Sp. zo.o. In addition, the Company provides a payment guarantee in connection with the term loan credit facilities of LG Display America, Inc. with an aggregate amount of USD 7 million ((Won) 8,077 million) for principals and related interests.

License agreements

As of June 30, 2012, in relation to its TFT-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

In connection with long-term supply agreements, as of June 30, 2012, the Company’s balance of advances received from customer amount to USD 1,580 million ((Won) 1,823,004 million) in the aggregate. 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 a payment guarantee amounting to USD 300 million ((Won) 346,140 million) from the Industrial Bank of Korea relating to advances received from certain customers that have signed long-term supply agreements.

 

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16. Commitments, Continued

 

Pledged Assets

Regarding the line of credit up to USD 50 million ((Won) 57,690 million), the Company provided with part of its OLED machinery as pledged assets to the Export-Import Bank of Korea.

 

17. Contingencies

Patent infringement lawsuit against Chimei Innolux Corp., and others

In 2006, the Company filed a complaint in the United States District Court for the District of Delaware against Chimei Innolux Corp. (formerly, Chi Mei Optoelectronics Corp.) and AU Optronics Corp. claiming infringement of patents related to liquid crystal displays and the manufacturing processes for TFT-LCDs. Both AU Optronics Corp. and Chimei Innolux Corp. filed counter-claims against the Company claiming the Company’s infringement of their patents. The Court bifurcated the Company’s trial against AU Optronics Corp., from the trial against Chimei Innolux Corp., holding the first trial against AU Optronics Corp. in June, 2009. In September 2011, the Company and AU Optronics Corp. filed a stipulation for dismissal of the Delaware case and amicably settled the claims and counterclaims between the two parties. The stay of the Chi Mei Optoelectronics case was lifted in January 2012, and the charge was dropped after two parties amicably settled the claims in May 2012.

Anvik Corporation’s lawsuit for infringement of patent

In 2007, Anvik Corporation filed a patent infringement case against the Company, along with other LCD manufacturing companies in the United States District Court for the Southern District of New York, in connection with the usage of photo-masking equipment manufactured by Nikon Corporation. The court granted Nikon Corporation’s motion for summary judgment of invalidity of the patents-in-suit and entered a judgment in favor of Nikon Corporation, the Company and LG Display America, Inc. and other TFT-LCD manufacturing companies, dismissing the case in April 2012. In April 2012, Anvik Corporation appealed the court’s decision to the United States Court of Appeals for the Federal Circuit. The Company is unable to predict the ultimate outcome of this case.

Industrial Technology Research Institute of Taiwan, lawsuit for infringement of patent

In 2012, the United States International Trade Commission, or USITC, granted a motion by Industrial Technology Research Institute of Taiwan, or ITRI, to add the Company and LG Display America as additional respondents in a Section 337 investigation pending before the USITC. ITRI is seeking an exclusion order prohibiting the importation of televisions and monitors incorporating the Company’s products into the United States for alleged patent infringement. The Company is unable to predict the ultimate outcome of this case.

Anti-trust investigations and litigations

In December 2006, the Company received notices of investigation by the Korea Fair Trade Commission, the Japan Fair Trade Commission, the U.S. Department of Justice, and the European Commission with respect to possible anti-competitive activities in the TFT-LCD industry. The Company subsequently received similar notices from the Canadian Bureau of Competition Policy, the Federal Competition Commission of Mexico, the Secretariat of Economic Law of Brazil and the Taiwan Fair Trade Commission.

In November 2008, the Company executed an agreement with the U.S. Department of Justice (“DOJ”) whereby the Company and its U.S. subsidiary, LG Display America, Inc. (“LGDUS”), pleaded guilty to a Sherman Antitrust Act violation and agreed to pay a single total fine of USD 400 million. In December

 

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17. Contingencies, Continued

 

2008, the U.S. District Court for the Northern District of California accepted the terms of the plea agreement and entered a judgment against the Company and LGDUS and ordered the payment of USD 400 million. The agreement resolved all federal criminal charges against the Company and LGDUS in the United States in connection with this matter.

In December 2010, the European Commission (“the EC”) issued a decision finding that the Company engaged in anti-competitive activities in the LCD industry in violation of European competition laws and imposed a fine of EUR 215 million. In February 2011, the Company filed with the European Union General Court an application for partial annulment and reduction of the fine imposed by the EC. The European Union General Court has not ruled on the Company’s application. In November 2011, the Company received an additional Request for Information from the EC relating to the alleged anti-competitive activities in the LCD industry and is responding to the request.

In November 2009, the Taiwan Fair Trade Commission terminated its investigation without any finding of violations or levying of fines. Also, in February 2012, the Competition Bureau of Canada terminated its investigation against the Company without any finding of violations or levying of fines. To date no decision has been issued by the Japan Fair Trade Commission, and we believe the statutory time period by which the Commission was required to have issued a decision has already lapsed. To date investigations by the Federal Competition Commission of Mexico and the Secretariat of Economic Law of Brazil are ongoing.

In August 2011, the Korea Fair Trade Commission issued an Examination Report finding that the Company engaged in anti-competitive activities in violation of Korean fair trade laws and a hearing was held in October 2011. In December 2011, the Korea Fair Trade Commission imposed a fine on the Company and certain of its subsidiaries of approximately (Won) 31,378 million, and the Company filed an appeal of the decision with the Seoul High Court in December 2011. To date the Seoul High Court has not ruled on the Company’s appeal.

Subsequent to the commencement of the DOJ investigation, a number of class action complaints were filed against the Company and other TFT-LCD panel manufacturers in the U.S. and Canada alleging violation of respective antitrust laws and related laws. The class action lawsuits in the U.S. were transferred to the Northern District of California for pretrial proceedings (“MDL Proceedings”). In March 2010, the court certified the class action complaints filed by direct purchasers and indirect purchasers. 78 entities (including groups of affiliated entities) submitted requests for exclusion from the direct purchaser class. The time period for submitting requests for exclusion from the indirect purchaser class expired on April 13, 2012. 10 entities (including groups and affiliated entities) submitted requests for exclusion from the indirect purchaser class. In addition, since 2010, the attorneys general of Arkansas, California, Florida, Illinois, Michigan, Mississippi, Missouri, New York, Oklahoma, Oregon, South Carolina, Washington, West Virginia and Wisconsin filed complaints against the Company, alleging similar antitrust violations as alleged in the MDL Proceedings. In June 2011, the Company reached a settlement with the direct purchaser class, which the

federal district court approved in December 2011. In July 2012, the Company reached a settlement with the indirect purchaser class and the with the state attorneys general of Arkansas, California, Florida, Michigan, Missouri, New York, West Virginia and Wisconsin which is subject to court approval.

Similar claims were filed separately by ATS. Claim, LLC, (assignee of Ricoh Electronics, Inc.), AT&T Corp. and its affiliates, Motorola Mobility, Inc., Electrograph Technologies Corp. and their respective related entities, all of which have been transferred to the MDL Proceedings. In November 2010, ATS Claim, LLC dismissed its action as to the Company pursuant to a settlement agreement. In addition, in 2010, TracFone Wireless Inc., Best Buy Co., Inc. and its affiliates, Target Corp., Sears, Roebuck and Co., Kmart Corp., Old Comp Inc., Good Guys, Inc., RadioShack Corp., Newegg Inc., Costco Wholesale Corp., Sony Electronics, Inc. and its affiliates, SB Liquidation Trust and the trustee of the Circuit City Stores, Inc. Liquidation Trust, filed claims in the United States. In addition, in 2011, Office Depot, Inc., T-Mobile U.S.A., Inc., Interbond Corp. of America (BrandsMart), Jaco Electronics, Inc., P.C. Richard & Son Long Island Corp.,

 

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17. Contingencies, Continued

 

MARTA Cooperative of America, Inc., ABC Appliance (ABC Warehouse), Schultze Agency Services, LLC (Tweeter), Tech Data Corp. and its affiliate, AASI Creditor Liquidating Trust for All American Semiconductor Inc., and CompuCom Systems, Inc. filed similar claims. In 2012, ViewSonic Corp., NECO Alliance LLC, Rockwell Automation Inc. and Proview Technology, Inc. and its affiliates filed similar claims. To the extent these claims were not filed in the MDL Proceedings, they have been transferred to the MDL Proceedings for pretrial proceedings.

In Canada, the Ontario Superior Court of Justice certified the class action complaints filed by the direct and indirect purchasers in May 2011. The Company is pursuing an appeal of the decision as well as defending the on-going class actions in Quebec and British Columbia.

While the Company continues its vigorous defense of the various pending proceedings described above, there is a possibility that one or more proceedings may result in an unfavorable outcome to the Company. The Company has established provisions with respect to certain of the contingencies. However, the Company’s actual liability may be materially different from the provisions estimated. For certain cases described above, management is not able to estimate the potential estimated loss if the final outcome of the cases is unfavorable to the Company as the cases are in early stage and management does not have sufficient information to estimate the amount of possible loss.

 

18. Capital and Reserves

 

  (a) Share capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value (Won) 5,000), and as of June 30, 2012 and December 31, 2011, the number of issued common shares is 357,815,700. There have been no changes in the capital stock for the six-month period ended June 30, 2012.

 

  (b) Reserve

Reserve is comprised of the fair value reserve which is the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired.

 

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19. Related Parties

 

  (a) Key management personnel compensation

Compensation costs of key management for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the  three-month
periods ended June 30,
     For the six-month
periods  ended June 30,
 
     2012      2011      2012      2011  

Short-term benefits

   (Won) 345         394         885         934   

Expenses related to defined benefit plan

     59         224         96         266   

Other long-term benefits

     —           164         —           319   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 404         782         981         1,519   
  

 

 

    

 

 

    

 

 

    

 

 

 

Key management refers to the registered directors who have significant control and responsibilities over the Company’s operations and business.

 

  (b) Significant transactions with related companies

Significant transactions which occurred in the normal course of business with related companies for the six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    Sales and other      Purchases and other  
     2012      2011      2012      2011  

Subsidiaries

   (Won) 11,441,107         10,042,426         1,690,239         1,681,210   

Joint ventures

     379,457         320,578         36,410         1,174   

Associates

     210         5,304         723,046         744,473   

LG Electronics

     481,770         556,149         133,206         173,759   

Other related parties

     20         20         16,687         10,434   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 12,302,564         10,924,477         2,599,588         2,611,050   
  

 

 

    

 

 

    

 

 

    

 

 

 

Account balances with related companies as of June 30, 2012 and December 31, 2011 are as follows:

 

(In millions of won)    Trade accounts and
notes receivable and other
     Trade accounts and
notes payable and other
 
     2012      2011      2012      2011  

Subsidiaries

   (Won) 4,212,837         3,428,624         655,371         859,659   

Joint ventures

     193,758         130,217         390,039         340,073   

Associates

     3         3         348,937         434,692   

LG Electronics

     157,665         86,924         93,327         98,232   

Other related parties

     —           —           5,828         3,042   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 4,564,263         3,645,768         1,493,502         1,735,698   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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20. Income Taxes

 

  (a) Details of income tax expense (benefit) for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In millions of won)    For the  three-month
periods ended June 30,
    For the six-month
periods  ended June 30,
 
     2012      2011     2012     2011  

Current tax expense (benefit)

   (Won) 3,144         (15,958     3,708        (15,384

Deferred tax expense (benefit)

     34,694         (60,804     (51,365     (157,697
  

 

 

    

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

   (Won) 37,838         (76,762     (47,657     (173,081
  

 

 

    

 

 

   

 

 

   

 

 

 

 

  (b) Deferred tax assets and liabilities

Deferred tax assets are reviewed at each reporting date and 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.

Deferred tax assets and liabilities as of June 30, 2012 and December 31, 2011 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     2012      2011      2012     2011     2012     2011  

Other accounts receivable, net

   (Won) —           —           (1,252     (3,738     (1,252     (3,738

Inventories, net

     18,116         14,484         —          —          18,116        14,484   

Available-for-sale financial assets

     793         1,259         —          —          793        1,259   

Defined benefit obligation

     22,551         21,877         —          —          22,551        21,877   

Accrued expense

     35,718         72,965         —          —          35,718        72,965   

Property, plant and equipment

     51,230         50,602         —          —          51,230        50,602   

Intangible assets

     6,701         1,105         —          —          6,701        1,105   

Provisions

     12,733         11,618         —          —          12,733        11,618   

Gain or loss on foreign currency translation, net

     6,166         13,616         (963     (31,313     5,203        (17,697

Debentures

     —           6,059         —          —          —          6,059   

Others

     19,224         13,970         —          (715     19,224        13,255   

Tax losses

     333,489         329,068         —          —          333,489        329,068   

Tax credit carryforwards

     874,829         829,048         —          —          874,829        829,048   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax assets (liabilities)

   (Won) 1,381,550         1,365,671         (2,215     (35,766     1,379,335        1,329,905   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Company is 24.2% for the six-month period ended June 30, 2012.

 

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21. Earnings (Loss) Per Share

 

  (a) Earnings (Loss) per share for the three-month and six-month periods ended June 30, 2012 and 2011 are as follows:

 

(In won and Number of shares)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2012     2011      2012     2011  

Profit (loss) for the period

   (Won) (115,235,095,455     54,335,655,073         (290,313,509,744     (100,014,429,268

Weighted-average number of common shares outstanding

     357,815,700        357,815,700         357,815,700        357,815,700   
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings (loss) per share

   (Won) (322     152         (811     (280
  

 

 

   

 

 

    

 

 

   

 

 

 

There were no events or transactions that result in changes in the number of common shares used for calculating loss per share.

 

  (b) There are no effects of dilutive potential ordinary shares due to net loss for the three-month and six-month periods ended June 30, 2012 and for the six-month period ended June 30, 2011. Diluted earnings per share for the three-month period ended June 30, 2011 was as follows:

 

(In millions of won, except earnings per share and share information)    For the three-month period
ended June 30, 2011
 

Profit (loss) for the period

   (Won) 54,335,655,073   

Interest on convertible bond, net of tax

     (737,474,505

Adjusted income

     53,598,180,568   

Weighted-average number of common shares

outstanding and common equivalent shares(*)

     359,102,294   
  

 

 

 

Diluted earnings per share

   (Won) 149   
  

 

 

 

 

(*) Weighted-average number of common shares outstanding for the three-month period ended June 30, 2011 is calculated as follows:

 

(in shares)    For the three-month period
ended June 30, 2011
 

Weighted-average number of common shares (basic)

     357,815,700   

Effect of conversion of convertible bonds

     1,286,594   
  

 

 

 

Weighted-average number of common shares (diluted) at June 30, 2011

     359,102,294   
  

 

 

 

 

  (c) The number of dilutive potential ordinary shares outstanding for the three-month period ended June 30, 2011 is calculated as follows:

 

(in shares)    2011  
     Convertible bonds  

Common shares to be issued

     1,286,594   

Period

     April 1, 2011 ~ June 30, 2011   

Weight

     91 days / 91 days   

Weighted-average number of common shares to be issued

     1,286,594   

 

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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: August 13, 2012     By:  

/s/ Heeyeon Kim

      (Signature)
    Name:   Heeyeon Kim
    Title:   Head of IR /IR Division

 

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