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 May 2016

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 07336, Republic of Korea

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.    

Form 20-F  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

QUARTERLY REPORT

(From January 1, 2016 to March 31, 2016)

THIS IS A TRANSLATION OF THE QUARTERLY REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SUPERVISORY COMMISSION.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED AND CERTAIN NUMBERS WERE ROUNDED FOR THE CONVENIENCE OF READERS. REFERENCES TO “Q1”, “Q2”, “Q3” AND “Q4” OF A FISCAL YEAR ARE REFERENCES TO THE THREE-MONTH PERIODS ENDED MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31, RESPECTIVELY, OF SUCH FISCAL YEAR.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH KOREAN INTERNATIONAL FINANCIAL REPORTING STANDARDS, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. K-IFRS ALSO DIFFERS IN CERTAIN RESPECTS FROM THE INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES IN THIS DOCUMENT.

Contents

 

1.

 

Company

     4   
  A.   

Name and contact information

     4   
  B.   

Domestic credit rating

     4   
  C.   

Capitalization

     5   
  D.   

Voting rights

     5   
  E.   

Dividends

     6   

2.

 

Business

     6   
  A.   

Business overview

     6   
  B.   

Industry

     7   
  C.   

New businesses

     8   

3.

 

Major Products and Raw Materials

     9   
  A.   

Major products

     9   
  B.   

Average selling price trend of major products

     9   
  C.   

Major raw materials

     9   

4.

 

Production and Equipment

     9   
  A.   

Production capacity and output

     9   
  B.   

Production performance and utilization ratio

     10   
  C.   

Investment plan

     10   

5.

 

Sales

     10   
  A.   

Sales performance

     10   
  B.   

Sales route and sales method

     11   

6.

 

Market Risks and Risk Management

     12   
  A.   

Market risks

     12   
  B.   

Risk management

     12   

7.

 

Derivative Contracts

     12   
  A.   

Currency risks

     12   
  B.   

Interest rate risks

     13   

 

2


Table of Contents

8.

  Major Contracts    13

9.

  Research & Development    13
 

A.

   Summary of R&D-related expenditures    13
 

B.

   R&D achievements    14

10.

  Intellectual Property    19

11.

  Environmental and Safety Matters    19

12.

  Financial Information    20
 

A.

   Financial highlights (Based on consolidated K-IFRS)    20
 

B.

   Financial highlights (Based on separate K-IFRS)    21
 

C.

   Consolidated subsidiaries    22
 

D.

   Status of equity investment    22

13.

  Audit Information    23
 

A.

   Audit service    23
 

B.

   Non-audit service    23

14.

  Board of Directors    23
 

A.

   Members of the board of directors    23
 

B.

   Committees of the board of directors    24
 

C.

   Independence of directors    24

15.

  Information Regarding Shares    25
 

A.

   Total number of shares    25
 

B.

   Shareholder list    25

16.

  Directors and Employees    25
 

A.

   Directors    25
 

B.

   Employees    26

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 07336, Republic of Korea, and our telephone number is +82-2-3777-1010. Our website address is http://www.lgdisplay.com.

 

  B. Domestic credit rating

 

  (1) Corporate bonds

 

Subject instrument

  

Month of rating

   Credit rating (1)   

Rating agency (Rating range)

Corporate bonds

   April 2014    AA    NICE Information Service Co., Ltd. (AAA ~ D)
   September 2014      
   April 2015      
   March 2014    AA    Korea Investors Service, Inc. (AAA ~ D)
   April 2015      
   May 2016      
   March 2014    AA    Korea Ratings Corporation (AAA ~ D)
   September 2014      
   May 2015      
   May 2016      

 

(1) Domestic corporate bond credit ratings are generally defined to indicate the following:

 

Subject instrument

  

Credit rating

  

Definition

Corporate bonds

   AAA    Strongest capacity for timely repayment.
   AA+/AA/AA-    Very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category
   A+/A/A-    Strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories.
   BBB+/BBB/BBB-    Capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity.
   BB+/BB/BB-    Capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time.
   B+/B/B-    Lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain.
   CCC    Lack of capacity for even current repayment and high risk of default.
   CC    Greater uncertainties than higher ratings.
   C    High credit risk and lack of capacity for timely repayment.
   D    Insolvency.

 

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  (2) Commercial paper

 

Subject instrument

  

Month of rating

   Credit rating (1)   

Rating agency (Rating range)

Commercial paper

   October 2015    A1    Korea Investors Service, Inc. (A1 ~ D)
   October 2015    A1    NICE Information Service Co., Ltd. (A1 ~ D)

 

(1) Domestic commercial paper credit ratings are generally defined to indicate the following:

 

Subject instrument

  

Credit rating

  

Definition

Commercial paper

   A1    Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by any reasonably foreseeable changes in external factors.
   A2    Strong capacity for timely repayment with very low investment risk. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category.
   A3    Capacity for timely repayment is adequate with low investment risk. This capacity may, nevertheless, be somewhat influenced by sudden changes in external factors.
   B    Capacity for timely repayment is acknowledged, but there are some speculative characteristics.
   C    Capacity for timely repayment is questionable.
   D    Insolvency.

LOGO ‘+’ or ‘-’ modifier can be attached to ratings A2 through B to differentiate ratings within broader rating categories.

 

  C. Capitalization

 

  (1) Change in capital stock (as of March 31, 2016)

There were no changes to our issued capital stock during the quarterly reporting period ended March 31, 2016.

 

  (2) Convertible bonds

Not applicable.

 

  D. Voting rights (as of March 31, 2016)

 

         (Unit: share)  

Description

       Number of shares  

A. Total number of shares issued: (1)

   Common shares (1)     357,815,700   
    

 

 

 
   Preferred shares     —     
    

 

 

 

B. Shares without voting rights:

   Common shares     —     
   Preferred shares     —     

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

   Common shares     —     
   Preferred shares     —     

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

   Common shares     —     
   Preferred shares     —     

E. Shares with restored voting rights:

   Common shares     —     
   Preferred shares     —     
    

 

 

 

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

   Common shares     357,815,700   
    

 

 

 
   Preferred shares     —     
    

 

 

 

 

(1) Authorized: 500,000,000 shares

 

 

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Table of Contents
  E. Dividends

Dividends for the three most recent fiscal years

 

Description (unit)

     2015     2014     2013  

Par value (Won)

  

     5,000        5,000        5,000   

Profit for the year (million Won) (1)

  

     966,553        904,268        426,118   

Earnings per share (Won) (2)

  

     2,701        2,527        1,191   
     

 

 

   

 

 

   

 

 

 

Total cash dividend amount for the period (million Won)

  

     178,908        178,908        —     
     

 

 

   

 

 

   

 

 

 

Total stock dividend amount for the period (million Won)

  

     —          —          —     
     

 

 

   

 

 

   

 

 

 

Cash dividend payout ratio (%)

  

     18.51     19.78     —     

Cash dividend yield (%) (3)

     Common shares         1.97     1.47     —     
     Preferred shares         —          —          —     

Stock dividend yield (%)

     Common shares         —          —          —     
     Preferred shares         —          —          —     

Cash dividend per share (Won)

     Common shares         500        500        —     
     Preferred shares         —          —          —     

Stock dividend per share (share)

     Common shares         —          —          —     
     Preferred shares         —          —          —     

 

(1) Based on profit for the year attributable to us as owners of the controlling company.
(2) Earnings per share is based on par value of W5,000 per share and is calculated by dividing net income by weighted average number of common shares.
(3) Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common shares during the one-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends.

 

2. Business

 

  A. Business overview

We were incorporated in February 1985 under the laws of the Republic of Korea. LG Electronics and LG Semicon transferred their respective LCD business to us in 1998, and since then, our business has been focused on the research, development, manufacture and sale of display panels, applying technologies such as TFT-LCD and OLED.

As of March 31, 2016, in Korea we operated TFT-LCD and OLED production facilities and a research center in Paju and TFT-LCD production facilities in Gumi. We have also established subsidiaries in the Americas, Europe and Asia.

As of March 31, 2016, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

2016 Q1 consolidated operating results highlights

 

     (Unit: In billions of Won)  

2016 Q1

   Display business  

Sales Revenue

     5,989   

Gross Profit

     626   

Operating Profit

     40   

 

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Table of Contents
  B. Industry

 

  (1) Industry characteristics and growth potential

 

    The entry barriers to manufacture display panels are relatively high due to the technology and capital intensive nature of the mass manufacturing process that is required to achieve economies of scale, among other factors.

 

    While growth in the market for displays used in notebook computer, monitor and other traditional IT products has stagnated or declined, the market for small- and medium-sized displays (including those used in smartphones) in the rapidly evolving IT environment has shown steady growth. The display market for televisions has also shown steady growth mainly due to growing demand from developing countries as well as from consumers in general for larger sized display panels. As for displays used in industrial, automobile and other value added products, we expect to see growth in these markets.

 

  (2) Cyclicality

 

    The display panel business is highly cyclical and sensitive to fluctuations in the general economy. The industry experiences recurring volatility caused by imbalances between supply and demand due to capacity expansion and changing production utilization rates within the industry.

 

    Macroeconomic factors and other causes of business cycles can affect the rate of growth in demand for display panels. Accordingly, if supply exceeds demand, average selling prices of display panels may decrease. Conversely, if growth in demand outpaces growth in supply, average selling prices may increase.

 

  (3) Market conditions

 

    Overall, while there have been some variations in rates of production capacity growth among individual display panel manufacturers, display panel manufacturers have generally slowed their respective rates of production capacity growth since 2011 due to a slowdown in growth of the display panel industry.

 

    Most display panel manufacturers are located in Asia.

 

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

 

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

 

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

 

  d. China: BOE, CSOT, CEC Panda, etc.

 

  (4) Market shares

 

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

 

     2016 Q1     2015     2014  

Panels for Televisions(1)

     26.1     25.4     25.0

Panels for Monitors

     35.2     39.0     32.7

Panels for Notebook Computers

     28.1     27.3     27.5

Panels for Tablet Computers

     24.3     22.5     27.0
  

 

 

   

 

 

   

 

 

 

Total

     27.8     27.7     26.9
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Source: Large-Area Display Market Tracker (IHS Technology)

(1) Includes panels for public displays.

 

  (5) Competitiveness

 

    Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, timely investments, adaptable production capabilities, development of new and premium products through technological advances, competitive production costs, success in marketing to our end-brand customers, component and raw material supply costs, foreign exchange rates and general economic and industry conditions.

 

    In order to compete effectively, it is critical to be cost competitive and maintain stable and long-term relationships with customers which will enable us to be profitable even in a buyer’s market.

 

    A substantial portion of our sales is attributable to a limited number of end-brand customers and their designated system integrators. The loss of these end-brand customers, as a result of customers entering into strategic supplier arrangements with our competitors or otherwise, would result in reduced sales.

 

    Developing new products and technologies that can be differentiated from those of our competitors is critical to the success of our business. It is important that we take active measures to protect our intellectual property internationally by obtaining patents and undertaking monitoring activities in our major markets. It is also necessary to recruit and retain experienced key managerial personnel and skilled line operators.

 

    As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing various technologies and products, including display panels with IPS, in-TOUCH, OLED and other technologies. With respect to TFT-LCD panels, we are leading the market with our differentiated products with IPS technology, such as our slim and light ultra-high definition (“Ultra HD”) television panels and 21:9 screen aspect ratio ultra-wide IPS curved monitors, and have prepared our production facilities to produce products with in-TOUCH technology. With respect to OLED panels, following our supply of the world’s first 55-inch OLED 3D panels for televisions in January 2013, we have supplied Ultra HD OLED panels for televisions, flexible plastic OLED panels for smartphones, round OLED panels for wearable devices among others and have shown that we are technologically a step ahead of the competition.

 

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

 

  C. New businesses

For our continued growth, we are actively exploring and preparing for new business opportunities that may arise in the changing market environment. As such, we are continually reviewing and looking at opportunities in the display and promising new industries.

 

 

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3. Major Products and Raw Materials

 

  A. Major products

We manufacture TFT-LCD and OLED panels, of which a significant majority is sold overseas.

 

               (Unit: In billions of Won, except percentages)

Business area

  

Sales type

  

Items (Market)

  

Usage

  

Major
trademark

   Sales in 2016 Q1 (%)

Display

   Product/ Service/ Other sales    Display panel (Overseas (1))    Panels for notebook computers, monitors, televisions, smartphones, tablets, etc.    LG Display    5,458 (91.1%)
      Display panel (Korea (1))    Panels for notebook computers, monitors, televisions, smartphones, tablets, etc.    LG Display    531 (8.9%)
              

 

Total

               5,989 (100.0%)
              

 

• Period: January 1, 2016 ~ March 31, 2016.

(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 first quarter of 2016 decreased by approximately 17% from the fourth quarter of 2015, largely as a result of a decrease in the shipment of panels for mobile devices, which generally have higher average selling prices per square meter of net display area compared to other products, reflecting seasonal factors. There is no assurance that the average selling prices of LCD panels will not fluctuate in the future due to changes in market conditions.

 

            (Unit: US$ / m2)  

Description

   2016 Q1      2015 Q4      2015 Q3      2015 Q2  

Display panel (1)(2)

     525         632         622         620   

 

(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

Display

     Raw materials       Backlights     
 
Display panel
manufacturing
  
  
     715         21   HeeSung Electronics, etc.
      Polarizers         553         16   LG Chem, etc.
      Glass         385         11   NEG, Asahi Glass, etc.
      Printed circuit boards         381         11   Korea SMT, etc.
      Others         1,440         41  
           

 

 

    

 

 

   

Total

              3,475         100  
           

 

 

    

 

 

   

• Period: January 1, 2016 ~ March 31, 2016.

(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

 

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

 

               (Unit: 1,000 glass sheets)  

Business area

   Items    Location of facilities    2016 Q1(1)      2015(2)      2014(2)  

Display

   Display panel    Gumi, Paju, Guangzhou, Ochang      2,243         9,781         9,573   

 

(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., 3 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, Paju, Guangzhou and Ochang facilities in the periods indicated.

 

               (Unit: 1,000 glass sheets)  

Business area

   Items    Location of facilities    2016 Q1      2015      2014  

Display

   Display panel    Gumi, Paju, Guangzhou, Ochang      2,104         8,609         8,425   

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

 

  B. Production performance and utilization ratio

 

          (Unit: Hours, except percentages)

Production facilities

   Available working hours
in 2016 Q1
   Actual working hours
in 2016 Q1
   Average utilization
ratio

Gumi

   2,184 (1)
(91 days) (2)
   2,102 (1)
(88 days) (2)
   96.2%

Paju

   2,184 (1)
(91 days) (2)
   2,160 (1)
(90 days) (2)
   98.9%

Guangzhou

   2,184 (1)
(91 days) (2)
   2,184 (1)
(91 days) (2)
   100.0%

Ochang

   2,184 (1)
(91 days) (2)
   1,896 (1)
(79 days) (2)
   86.8%

 

(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 2015, our total capital expenditures on a cash out basis was W2.4 trillion. In 2016, we currently expect that our total capital expenditures on a cash out basis will be higher than in 2015, in order to fund the construction of our P10 fabrication facility in Paju, Korea and expansion of our OLED panel production capacities, while maintaining and making improvements to our existing facilities. Such amount is subject to change depending on business conditions and market environment.

 

5. Sales

 

  A. Sales performance

 

                   (Unit: In billions of Won)  

Business area

   Sales types      Items (Market)     

 

   2016 Q1      2015      2014  

Display

     Products, etc.         Display panel       Overseas (1)      5,458         23,847         24,341   
         Korea (1)      531         2,609         2,692   
         Total      5,989         26,456         27,033   
           

 

 

    

 

 

    

 

 

 

 

(1) Based on ship-to-party.

 

 

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  B. Sales route and sales method

 

  (1) Sales organization

 

    As of March 31, 2016, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions.

 

    Sales subsidiaries in the United States, Germany, Japan, Taiwan, China and Singapore perform sales activities and provide local technical support to customers.

 

  (2) Sales route

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

 

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

 

    LG Display HQ and overseas manufacturing subsidiaries g System integrators and end-brand customers g 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

 

    As part of our sales strategy, we have secured stable sales to major personal computer manufacturers and leading consumer electronics manufacturers globally, led the television market with our OLED and other market leading television panels, increased the proportion of sales of our differentiated television panels, such as our Ultra HD and large television panels, in our product mix and strengthened sales of high-resolution, IPS, narrow bezel and other high-end display panels in the monitor, notebook computer and tablet markets.

 

    In the smartphone, industrial products (including aviation and medical equipment) and automobile displays segment, we have continued to build a strong and diversified business portfolio by expanding our business with customers with a global reach on the strength of our differentiated products applying IPS, plastic OLED, high-resolution, in-TOUCH and other technologies.

 

  (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.) g Headquarter is notified g Manufacture product g Ship product (overseas sales subsidiaries, etc.) g Sell product (overseas sales subsidiaries, etc.)

 

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6. Market Risks and Risk Management

 

  A. Market risks

The display industry continues to experience continued declines in the average selling prices of TFT-LCD and OLED panels irrespective of cyclical fluctuations in the industry, and our margins would be adversely impacted if prices decrease faster than we are able to reduce our costs.

The display industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel manufacturers in Korea, Taiwan, China and Japan coupled with changes in the production mix of such manufacturers. Our main competitors in the industry include Samsung Display, AU Optronics, Innolux, Sharp, BOE, CSOT, Japan Display, CPT, HannStar, Panasonic LCD and CEC Panda.

Our ability to compete successfully depends on factors both within and outside our control, including product pricing, performance and reliability, timely investments, adaptable production capabilities, utilization of differentiated technologies in product development, success or failure of our end-brand customers in marketing their brands and products, component and raw material supply costs, and general economic and industry conditions. We cannot provide assurance that we will be able to compete successfully with our competitors on these fronts and, as a result, we may be unable to sustain our current market position.

Our results of operations are subject to exchange rate fluctuations. To the extent that we incur costs in one currency and generate sales in a different currency, our profit margins may be affected by changes in the exchange rates between the two currencies. Our sales of display panels are denominated mainly in U.S. dollars, whereas our foreign currency denominated purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. Seeking to achieve stable management, we take every precaution in our foreign currency risk management to minimize the risk of foreign currency fluctuations on our foreign currency denominated assets and liabilities.

 

  B. Risk management

As the average selling prices of TFT-LCD and OLED panels can continue to decline over time irrespective of industry-wide cyclical fluctuations, we may find it hard to manage risks associated with certain factors that are outside our control. However, we counteract such declines in average selling prices by increasing the proportion of high value added panels in our product mix while also implementing various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we continually monitor our currency position and risk, and when needed, we may from time to time enter into cross-currency interest rate swap contracts and foreign currency forward contracts.

 

7. Derivative Contracts

 

  A. Currency risks

 

    We are exposed to currency risks on sales, purchases and borrowings that are denominated in currencies other than in Won, our functional currency. These currencies are primarily the U.S. dollar, the Japanese Yen and the Chinese Yuan.

 

    Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by our underlying operations, primarily in Won, the U.S. dollar and the Chinese Yuan.

 

    In respect of other monetary assets and liabilities denominated in foreign currencies, we 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.

 

    As of March 31, 2016, we have entered into an aggregate of US$100 million in Won/US$ forward foreign exchange contracts with Crédit Agricole and NongHyup Bank, for which we have not applied hedge accounting.

 

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We recognized a gain on valuation of derivative instruments in the amount of W1,917 million with respect to currency derivative instruments held as of March 31, 2016.

 

  B. Interest rate risks

 

    Our exposure to interest rate risks relates primarily to our floating rate long term loan obligations. We have established and are managing interest rate risk policies to minimize uncertainty and costs associated with interest rate fluctuations by monitoring cyclical interest rate fluctuations and enacting countermeasures.

 

    As of March 31, 2016, we have entered into an aggregate of W350 billion in interest rate swap agreements with Shinhan Bank and NongHyup Bank, for which we have not applied hedge accounting.

We recognized a loss on valuation of derivative instruments in the amount of W1,236 million with respect to interest rate derivative instruments held as of March 31, 2016.

 

8. Major contracts

Our material contracts, other than contracts entered into in the ordinary course of business, are set forth below:

 

Type of agreement

  

Name of party

  

Term

  

Content

 

Technology licensing agreement

   Semiconductor Energy Laboratory    October 2005 ~    Patent licensing of LCD and OLED related technology
   Hewlett-Packard    January 2011 ~    Patent licensing of semi-conductor device technology
Technology licensing/supply agreement    HannStar Display Corporation    December 2013 ~    Patent cross-licensing of LCD technology
   AU Optronics Corporation    August 2011~    Patent cross-licensing of LCD technology
   Innolux Corporation    July 2012 ~    Patent cross-licensing of LCD technology, etc.

 

9. Research & Development

 

  A. Summary of R&D-related expenditures

 

   (Unit: In millions of Won, except percentages)   

Items

   2016 Q1     2015     2014  

Material Cost

     153,965        679,603        762,008   

Labor Cost

     121,619        510,455        542,857   

Depreciation Expense

     33,856        196,799        249,306   

Others

     32,755        159,983        233,422   
     

 

 

   

 

 

   

 

 

 

Total R&D-Related Expenditures

     342,195        1,546,840        1,787,593   
     

 

 

   

 

 

   

 

 

 
   Selling & Administrative Expenses      216,488        995,336        987,594   

Accounting Treatment (1)

   Manufacturing Cost      54,439        324,437        532,918   
   Development Cost (Intangible Assets)      71,268        227,067        267,081   
     

 

 

   

 

 

   

 

 

 

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

     5.7     5.4     6.8
     

 

 

   

 

 

   

 

 

 

 

(1) For accounting treatment purposes, selling & administrative expenses are presented as research and development expenses in our statements of comprehensive income, net of amortization of capitalized intangible asset development costs, and the amounts for 2014 and 2015 have been restated.

 

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  B. R&D achievements

Achievements in 2014

 

  (1) Developed the world’s first green plus structure television panel products (42-inch, 49-inch and 55-inch Ultra HD)

 

    Added white pixels to increase transmittance by 55% compared to conventional display panels

 

    Developed energy conservation technology for Ultra HD products

 

  (2) Developed the world’s narrowest, at the time, bezel (BtB 3.5 mm) videowall product (55-inch FHD)

 

    The world’s narrowest, at the time, bezel (BtB 3.5 mm) videowall product

 

    Reduced panel PAD parts and minimized bezel size

 

  (3) Developed our first 79-inch Ultra HD product

 

    New size in our product lineup

 

    Achieved narrow bezel (On 9.9 mm) and slim depth (13.9 mm)

 

  (4) Developed the world’s first 4 sided borderless like product (49-inch, 55-inch and 60-inch FHD)

 

    Removed front case top and narrowed gap between the panel and front deco cabinet (set side reduced from 2.0 mm to 0.5 mm)

 

  (5) Developed the world’s first a-Si AF-IPS 5Mask panel product for smartphones (5.0 WVGA)

 

    Reduced production cost and simplified manufacturing process by reducing the number of mask steps from 6 to 5

 

    Same level of performance as 6Mask panels

 

  (6) Developed the world’s first LTPS AH-IPS photo alignment and negative LC panel product for smartphones (5.0-inch FHD)

 

    LTPS AH-IPS photo alignment and negative LC panel product for smartphones developed in March 2014

 

    Improved luminance and contrast ratio through improvement in panel transmittance (450 nit to 515 nit; 1,000:1 to 1500:1).

 

  (7) Developed the world’s first 23.8-inch FHD ultra slim and light monitor product

 

    Achieved ultra-light design (reduced LCM weight from 2,270g to 1,280g compared to conventional LCMs)

 

    Achieved ultra slim design by using slim component parts (7.6t reduced to 5.5t)

 

  (8) Developed LTPS AH-IPS Quad HD (“QHD”) smartphone product (5.5-inch QHD, 538 ppi, LG Electronics’ G3 model smartphone)

 

    LTPS AH-IPS QHD smartphone product developed in April 2014

 

    Width of panel bezel: 0.95 mm (L/R); luminance: 500 nit; G1F Touch Direct Bonded LCM

 

  (9) Developed our first curved Ultra HD product (65-inch and 55-inch Ultra HD)

 

    The curved LCM retains the same panel transmissivity as a conventional flat LCM through application of BM-less COT structure with a double pigment lamination

 

    Realized curved LCM technology by applying Frame (Horizontal / Vertical / Center) Structure and Curved C/T & Guide Panel Technologies

 

  (10) Developed the world’s first 6-inch plastic OLED product

 

    Developed the world’s first curved display with a curvature radius (“R”) of 700

 

    Precursor to the development of future bendable, foldable and rollable display products

 

  (11) Developed the world’s first 34-inch curved monitor product (3,800R)

 

    Launched the world’s first blade type 21:9 screen aspect ratio 34-inch wide QHD 3,800R curved monitor product and created a new market and standard for curved monitor products

 

    Achieved curvature of 3,800R by using annealing process and setting up assembly equipment utilizing 0.4t glass for curved panels and pol edge type curved backlight

 

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  (12) Developed the world’s first AH-IPS FHD GIP/DRD product (15.6-inch notebook product)

 

    The world’s first AH-IPS FHD (more than 142 ppi) GIP/DRD product developed in September 2014

 

    Increased cost competitiveness by developing GIP/DRD technology

 

  (13) Developed the world’s first in-TOUCH LTPS smartphone product (4.5-inch HD product)

 

    Completed development of an AH-IPS LTPS product applying LG Display’s own in-cell touch technology, which utilizes the AH-IPS Vcom electrodes in an all point sensing self-capacitive manner in July 2014 (450 nit luminance; L/R panel bezel of 1.00 mm; module thickness of 2.28 mm)

 

    Simplified SCM and provided a cost competitive and differentiated valued product with touch functionality

 

  (14) Developed the world’s first in-TOUCH a-Si smartphone product (4.5-inch WVGA product)

 

    Completed development of an AH-IPS a-Si product applying LG Display’s own in-cell touch technology, which utilizes the AH-IPS Vcom electrodes in an all point sensing self-capacitive manner in August 2014 (450 nit luminance; L/R panel bezel of 1.35 mm; module thickness of 2.6 mm)

 

    Simplified SCM and provided a cost competitive and differentiated valued product with touch functionality

 

  (15) Developed the world’s first Ultra HD+ curved (6,000R) product (105-inch Ultra HD)

 

    The world’s first large 105-inch 21:9 screen aspect ratio Ultra HD curved (6,000R) display product

 

  (16) Developed our first 98-inch Ultra HD product

 

    Our new line of 98-inch Ultra HD products

 

    Achieved ultra-high definition through utilizing the direct BLU local dimming and FCIC circuit compensation algorithm.

 

  (17) Developed four sided product with even bezels (5.9 mm) for commercial use (42-inch, 49-inch and 55-inch FHD product)

 

    Developed our first 4 sided even bezel product (off bezel: 5.9 mm)

 

    Reduced panel PAD and lower bezel thickness

 

    Improved PAC transmittance and after image reliability

 

  (18) Developed our first 60-inch Ultra HD product

 

    Our new line of 60-inch Ultra HD products

 

    Achieved narrow panel bezel of 7.8 mm

 

  (19) Developed the world’s first circular plastic OLED product (1.3 F)

 

    Developed the world’s first circular plastic OLED product in September 2014

 

    Developed ultrathin display module of 559 µm (without cover window)

 

    Lowered power consumption by developing Power Save Mode algorithm

 

    Display can be turned on without powering the P-IC

 

  (20) Developed the world’s first four sided borderless OLED television product (55-inch)

 

    Product developed using the world’s first four sided borderless technology utilizing reverse tab bonding manufacturing process in September 2014

 

  (21) Developed the world’s first ultra-slim OLED television products (49-inch, 55-inch and 65-inch Ultra HD)

 

    Achieved LCM thickness of 7.5 mm

 

    Reduced thickness by combining exterior set with LCM parts (B/cover, M/cabinet)

 

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  (22) Developed the world’s first 1:1 screen aspect ratio New Platform Monitor (26.5-inch; 1920 x 1920 resolution)

 

    Creation of new market through the development of new 1:1 screen aspect ratio platform display

 

    Development of high resolution display with four sided even bezels (on bezel: 8 mm)

 

  (23) Development of 14-inch FHD notebook product with three sided even bezels (3.9 mm)

 

    World’s first notebook panel with three sided narrow bezels (top and side bezels: 3.9 mm)

 

    Reduced GIP area by 50% compared to conventional GIP area

 

  (24) Development of 12.3-inch new display size UXGA tablet product

 

    Developed new display panel size for tablet products: 12.3-inch UXGA (4:3 screen aspect ratio)

 

    Increased yield of glass panel area per glass substrate by cutting glass substrates at 12.3 inches

Achievements in 2015

 

  (1) Developed the world’s narrowest, at the time, module bezel (0.7mm) LTPS smartphone display (5.3-inch FHD in-TOUCH)

 

    Developed the world’s first FHD in-TOUCH display (LTPS 5.3-inch FHD) applying the “Neo Edge” module process (new manufacturing technology) in January 2015

 

    Set-up glue & laser cutting process, 0.6mm panel bezel (L/R)

 

  (2) Developed the world’s first QHD in-TOUCH LTPS smartphone display (5.5-inch QHD)

 

    Developed LTPS 5.5-inch QHD display applying LG Display’s new capacitive type in-cell touch technology with “all points sensing” in March 2015; luminance: 500nit, contrast ratio: 1500:1(using photo alignment & negative LC), 0.95mm panel bezel (L/R)

 

    Delivered differentiated value proposition based on touch performance, simplified SCM process and competitive cost innovation

 

  (3) Developed the world’s narrowest, at the time, bezel videowall product (49-inch FHD)

 

    Developed the world’s narrowest bezel videowall product (bezel to bezel 3.5mm)

 

    Optimized sizing of panel PAD and mechanical bezel

 

  (4) Developed our first 43-inch Ultra HD slim and light LED television product

 

    Achieved LCD module thickness of 8.4mm

 

    Reduced thickness through publication of set LCM parts (back cover and middle cabinet)

 

  (5) Developed the world’s first Ultra HD OLED television product (55-inch, 65-inch and 77-inch Ultra HD)

 

    Developed the world’s first Ultra HD television product lineup

 

  (6) Developed the world’s first Ultra HD television product applying DRD technology (55-inch, 49-inch and 43-inch Ultra HD)

 

    World’s first application of Ultra HD DRD technology based on an RGBW(M+) pixel structure

 

    Utilized RGBW(M+) technology to optimize picture quality (high definition, high luminance, low energy consumption and High Dynamic Range (HDR))

 

  (7) Developed our first Ultra HD asymmetric RGBW(M+) structure product (15.6-inch)

 

    Improved panel transmittance, lowered energy consumption and enhanced outdoor visibility compared to previous models

 

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  (8) Developed the world’s first “second display” LTPS smartphone product (5.7-inch QHD+)

 

    Delivered differentiated set design through the realization of a second display by applying a panel exterior manufacturing process

 

    Developed panel and instrumental optics technology for the independent operation of main display and second display

 

    Developed advanced power consumption technology for the realization of “Always On Display” functionality for the second display

 

  (9) Developed the world’s first four sided borderless monitor product (23.8-inch FHD and 27-inch QHD)

 

    Developed the world’s first four sided borderless design LCD module

 

    Improved design by reducing lower bezel size from 12.6mm to 6.15mm (23.8-inch FHD)

 

  (10) Developed the world’s first in-TOUCH notebook product (15.6-inch and 14-inch FHD)

 

    Improved touch functionality and cost competitiveness through world’s first application of in-TOUCH technology on notebook products

 

    Simplified customer supply chain management by providing “touch” total solution

 

  (11) Developed the world’s first 15.6-inch FHD notebook narrow bezel (2.9mm) product

 

    Ultra-light and narrow concept project for 15.6-inch line extension to LG Electronics’ 13.3-inch and 14-inch Gram products

 

    Delivered differentiated design utilizing 2.9mm bezels (Top/L/R)

 

    Ultra slim and light design (225g, 2.3t)

 

  (12) Developed 1900R curved monitor product (34-inch, 21:9 screen aspect ratio)

 

    Strengthened product competitiveness by improving the curvature radius of 21:9 screen aspect ratio monitors (3800 reduced to 1900R)

 

    Applied 0.25T etching to address looseness and backlight bleeding attributable to curved screen

 

    Applied COT structure to enhance panel transmittance and address color mixing defects

 

  (13) Developed the world’s first four sided borderless 55-inch Ultra HD LED television product

 

    Developed panel reverse structure in order to deliver a four-sided borderless product

 

  (14) Developed the world’s first a-Si 98-inch Quad Ultra HD 120Hz television product

 

    Developed the world’s first drive technology for a-Si based extra-large 8K 120Hz panels

 

  (15) Developed the world’s first 65-inch 8K M+ product

 

    Achieved cost competitiveness and maximized 8K transmittance by applying GIP/Source single bank for the first time in the world

 

    Developed super resolution (4K enhanced to 8K) and M+ algorithm technologies

 

  (16) Developed our first 75-inch Ultra HD Signage product

 

    Delivered 11.9mm thickness on large-size LCD module

 

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Achievements in 2016

 

  (1) Developed the world’s narrowest, at the time, bezel videowall product (55-inch FHD, bezel to bezel 1.8mm)

 

    Delivered 0.9mm even bezel, four-sided borderless product (bezel to bezel 1.8mm)

 

  (2) Developed the world’s first ultra-stretch format display product (86-inch, 58:9 screen aspect ratio)

 

    Developed new display panel size and screen aspect ratio (86-inch, 58:9 screen aspect ratio)

 

    Applied next-generation stain (per pixel) offset technology

 

  (3) Developed the world’s first ultra-large display product utilizing data single bank and GIP technology (86-inch Ultra HD)

 

    Achieved cost-competitiveness by developing world’s first ultra-large display product utilizing data single bank and GIP technology

 

  (4) Developed the world’s first in-TOUCH monitor product (23-inch)

 

    Improved touch functionality and strengthened cost-competitiveness by applying the world’s first in-TOUCH technology to monitor display products

 

    Simplified customer software configuration management by providing touch total solution

 

  (5) Developed ultra-slim OLED television display product applying high dynamic range (65-inch, 800 nit luminance, 2.52 mm module thickness)

 

    Applied high dynamic range (HDR) technology to achieve 800 nit peak luminance and improved display quality

 

    Achieved module thickness of 2.52mm (without back cover) and 5.92mm (with back cover)

 

  (6) Developed combined 5.3-inch QHD in-TOUCH + 3D cover glass product for LG Electronics

 

    Developed world class smart phone product through collaboration with other LG Group companies

 

    Strengthened competitiveness of design by achieving processability and productivity for 0.4t 3D cover glass

 

    Improved power consumption of AoD Mode from Self Font Generation technology and operation optimization

 

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10. Intellectual Property

As of March 31, 2016, our cumulative patent portfolio (including patents that have already expired) included a total of 29,335 patents, consisting of 14,091 in Korea and 15,244 in other countries.

 

11. Environmental and Safety Matters

We are subject to a variety of environmental laws and regulations, and we may be subject to fines or restrictions that could cause our operations to be interrupted. Our manufacturing processes generate worksite waste, including water and air pollutants, at various stages in the manufacturing process, and we are subject to relevant laws and regulations in each area of the environment, including with respect to the treatment of chemical by-products. We have installed various types of anti-pollution equipment, consistent with environmental standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations.

In accordance with the Framework Act on Low Carbon, Green Growth, we implemented the greenhouse gas emission and energy consumption target system from 2012 to 2014. In 2015, we implemented the greenhouse gas trading system, under which we are responsible to meet our emission targets based on the emission credits allocated to us by the Ministry of Environment of the Korean government. As a result, we have been investing in additional equipment and there may be other costs associated with meeting reduction targets, which may have a negative effect on our profitability or production activities. As a designated company subject to greenhouse gas emission targets under the Framework Act on Low Carbon, Green Growth, if we fail to meet a reduction target and are unable to comply with the government’s subsequent enforcement notice relating to such failure, we may be subject to fines. Furthermore, as a designated company subject to the Act on Allocation and Trading of Greenhouse Gas Emissions, if do not have enough emission credits, we may be required to purchase additional credits or be subject to fines.

In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2015 to the Korean government (i.e., the Ministry of Environment) in March 2016 after it was certified by the Korean Foundation for Quality, a government-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:

 

 

     (Unit: thousand tonnes of CO2 equivalent; Tetra Joules)  

Category

   2015      2014      2013  

Greenhouse gases

     7,348         7,537         6,922   

Energy

     60,146         60,002         61,092   

Operations at our manufacturing plants are subject to regulation and periodic scheduled and unscheduled on-site inspections by the Ministry of Environment and local environmental protection authorities. We believe that we have adopted adequate anti-pollution measures and have minimized our impact on the environment by improving existing and developing new technologies for the effective maintenance of environmental protection standards consistent with local industry practice. In addition, we have continually monitored, and we believe that we are in compliance in all material respects with, the applicable environmental laws and regulations in Korea. Expenditures related to such compliance may be substantial. Such expenditures are generally included in capital expenditures. As required by Korean law, we employ licensed environmental specialists to manage our water and air pollution, toxic materials and waste. In December 2013, to ensure safe water quality and reduce costs, we entered into a contract with a specialist company to operate our waste water treatment facilities. In stages beginning in November 1997, we have obtained environmental management system ISO 14001 certifications for our domestic panel and module production facilities and our overseas module production plants in Nanjing, Yantai and Guangzhou, China, and with respect to our domestic panel and module production plants, we received ISO 50001 certification in December 2013 for our energy management system.

 

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In addition, in August 2014, GP1, our newest eighth-generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO 14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we have been certified by the Ministry of Environment as a “Green Company” for P1 and our Gumi module production plant since 1997, P2 and P3 since 2006 and P4, P5 and P6 since 2008. Also, we received certification to self-inspect designated waste products with respect to our Paju plant by the Ministry of Environment in 2011, which was recertified in 2013. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minster of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry & Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued greenhouse gas emission reduction activities, we received a special carbon management award in 2015 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee.

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 2011/65/EU, and restricts the use of certain hazardous substances in the manufacture of electrical and electronic equipment.

In addition, as part of our commitment to use 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 display panel company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Trade, Industry & Energy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Our efforts to keep pace with the increasingly stringent accreditation standards and to receive and maintain such accreditations are part of our on-going efforts to systematically monitor environmentally controlled substances in our component parts inventory. Moreover, we participated in reforming IEC 62321, an international testing standard published by the International Electrotechnical Commission and used by RoHS, and the commission adopted our halogen-free combustion ion chromatography method in as IEC 62321-3-2, which was published in June 2013.

In February 2015, we were issued a corrective order and assessed a fine of W276 million, which we subsequently followed and paid, respectively, for violating the Occupational Health and Safety Act in connection with an accidental nitrogen gas exposure at one of our production facilities in Paju, Korea in January 2015. To prevent such accidents happening again in the future, we have strengthened our safety standards and management and employee education.

 

12. Financial Information

 

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

 

 

     (Unit: In millions of Won)  

Description

   As of
March 31, 2016
     As of
December 31, 2015
     As of
December 31, 2014
 

Current assets

     8,856,127         9,531,634         9,240,629   

Quick assets

     6,324,236         7,179,965         6,486,531   

Inventories

     2,531,891         2,351,669         2,754,098   

Non-current assets

     13,321,816         13,045,526         13,726,394   

Investments in equity accounted investees

     347,462         384,755         407,644   

Property, plant and equipment, net

     10,779,379         10,546,020         11,402,866   

Intangible assets

     827,728         838,730         576,670   

Other non-current assets

     1,367,247         1,276,021         1,339,214   
  

 

 

    

 

 

    

 

 

 

Total assets

     22,177,943         22,577,160         22,967,023   
  

 

 

    

 

 

    

 

 

 

Current liabilities

     5,776,163         6,606,712         7,549,556   

Non-current liabilities

     3,901,143         3,265,492         3,634,057   

Total liabilities

     9,677,306         9,872,204         11,183,613   

Share capital

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

Share premium

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

Retained earnings

     7,981,165         8,158,526         7,455,063   

Other equity

     (18,745      (5,766      (63,843

Non-controlling interest

     498,025         512,004         351,998   
  

 

 

    

 

 

    

 

 

 

Total equity

     12,500,637         12,704,956         11,783,410   
  

 

 

    

 

 

    

 

 

 

 

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

Description

   For the three
months ended
March 31, 2016
     For the year ended
December 31, 2015
     For the year ended
December 31, 2014
 

Revenue

     5,989,201         28,383,884         26,455,529   

Operating profit

     39,521         1,625,566         1,357,255   

Operating profit from continuing operations

     1,187         1,023,456         917,404   

Profit for the period

     1,187         1,023,456         917,404   

Profit (loss) attributable to:

        

Owners of the Company

     2,444         966,553         904,268   

Non-controlling interest

     (1,257      56,903         13,136   

Basic earnings per share

     7         2,701         2,527   

Diluted earnings per share

     7         2,701         2,527   

Number of consolidated entities

     18         18         18   

 

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

 

     (Unit: In millions of Won)  

Description

   As of
March 31, 2016
     As of
December 31, 2015
     As of
December 31, 2014
 

Current assets

     7,421,917         8,246,330         8,291,088   

Quick assets

     5,459,610         6,396,117         6,244,413   

Inventories

     1,962,307         1,850,213         2,046,675   

Non-current assets

     11,930,428         11,964,363         12,720,749   

Investments

     2,668,825         2,543,205         2,301,881   

Property, plant and equipment, net

     7,476,479         7,719,022         8,700,301   

Intangible assets

     605,964         607,398         548,078   

Other non-current assets

     1,179,160         1,094,738         1,170,489   
  

 

 

    

 

 

    

 

 

 

Total assets

     19,352,345         20,210,693         21,011,837   
  

 

 

    

 

 

    

 

 

 

Current liabilities

     5,238,323         6,505,979         7,550,330   

Non-current liabilities

     3,018,616         2,375,131         2,837,432   

Total liabilities

     8,256,939         8,881,110         10,387,762   

Share capital

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

Share premium

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

Retained earnings

     7,055,214         7,289,333         6,583,607   

Reserves

     0         58         276   
  

 

 

    

 

 

    

 

 

 

Total equity

     11,095,406         11,329,583         10,624,075   
  

 

 

    

 

 

    

 

 

 

 

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

Description

   For the three
months ended
March 31, 2016
     For the year ended
December 31, 2015
     For the year ended
December 31, 2014
 

Revenue

     5,567,470         25,856,426         25,383,670   

Operating profit (loss)

     (117,251      770,856         984,790   

Operating profit (loss) from continuing operations

     (54,104      968,209         973,118   

Profit (loss) for the period

     (54,104      968,209         973,118   

Basic earnings (loss) per share

     (151      2,706         2,720   

Diluted earnings (loss) per share

     (151      2,706         2,720   

 

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  C. Consolidated subsidiaries (as of March 31, 2016)

 

Company Interest

  

Primary Business

   Location    Equity  

LG Display America, Inc.

   Sales    U.S.A.      100

LG Display Japan Co., Ltd.

   Sales    Japan      100

LG Display Germany GmbH

   Sales    Germany      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      100

LG Display Guangzhou Co., Ltd.

   Manufacturing and sales    China      100

LG Display Shenzhen Co., Ltd.

   Sales    China      100

LG Display Singapore Pte. Ltd.

   Sales    Singapore      100

L&T Display Technology (Fujian) Limited

   Manufacturing    China      51

LG Display Yantai Co., Ltd.

   Manufacturing and sales    China      100

LG Display (China) Co., Ltd.

   Manufacturing and sales    China      70

Nanumnuri Co., Ltd.

   Workplace services    Korea      100

Unified Innovative Technology, LLC

   Managing intellectual property    U.S.A.      100

Global OLED Technology LLC

   Managing intellectual property    U.S.A.      100

LG Display Guangzhou Trading Co., Ltd.

   Sales    China      100

MMT (Money Market Trust)

   Money market trust    Korea      100

 

  D. Status of equity investments (as of March 31, 2016)

 

Company(1)

  

Investment Amount

   Initial Equity Investment
Date
     Equity
Interest
 

LG Display America, Inc.

   US$411,000,000      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.

   CNY2,936,759,345      July 15, 2002         100

LG Display Shanghai Co., Ltd.

   CNY4,138,650      January 16, 2003         100

LG Display Poland Sp. zo.o.

   PLN511,071,000      September 6, 2005         100

LG Display Guangzhou Co., Ltd.

   CNY1,654,693,079      August 7, 2006         100

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 (Fujian) Limited

   CNY59,197,026      January 5, 2010         51

LG Display Yantai Co., Ltd.

   CNY1,007,720,600      April 19, 2010         100

Nanumnuri Co., Ltd.

   W800,000,000      March 19, 2012         100

LG Display (China) Co., Ltd.

   CNY5,703,466,124      December 27, 2012         70

Unified Innovative Technology, LLC

   US$9,000,000      March 21, 2014         100

Global OLED Technology LLC

   US$152,767,000      May 7, 2015         100

LG Display Guangzhou Trading Co., Ltd.

   CNY1,223,960      May 27, 2015         100

MMT (Money Market Trust)

   W130,300,000,000      March 31, 2016         100

Suzhou Raken Technology Co., Ltd.

   CNY637,079,715      October 7, 2008         51

Paju Electric Glass Co., Ltd.

   W33,648,000,000      March 25, 2005         40

TLI Co., Ltd.

   W14,073,806,250      May 16, 2008         10

AVACO Co., Ltd.

   W6,172,728,120      June 9, 2008         16

New Optics Ltd.

   W12,199,600,000      July 30, 2008         46

Invenia Co., Ltd. (formerly LIG Invenia Co., Ltd.)

   W6,330,000,000      February 24, 2009         13

Wooree E&L Co., Ltd. (formerly Wooree LED Co., Ltd.)(2)

   W11,900,000,000      May 22, 2009         14

LB Gemini New Growth Fund No. 16(3)

   W4,839,704,518      December 7, 2009         31

Can Yang Investments Limited

   CNY93,740,124      January 27, 2010         9

YAS Co., Ltd.

   W10,000,000,000      September 16, 2010         19

Narae Nanotech Corporation

   W30,000,000,000      April 22, 2011         23

Avatec Co., Ltd.

   W10,600,000,000      December 6, 2011         16

Fuhu, Inc.

   US$26,006,159      July 27, 2015         10

 

 

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Changes since December 31, 2015:

(1) In March 2016, we completed the liquidation of LG Display U.S.A. Inc. We recovered W380 million and recorded W152 million, the excess over carrying value, as finance income. We conducted money market trust acquisitions in the amount of W130,300 million during the reporting period.
(2) In the first quarter of 2016, Wooree E&L Co., Ltd. conducted a rights offering in which we did not participate. As a result, our shareholding percentage interest in such company decreased from 21% as of December 31, 2015 to 14% as of March 31, 2016. As of March 31, 2016, we determined that the recoverability of such investment was uncertain and we recognized an impairment loss of W6,137 million, an amount equal to the difference between the carrying amount and the recoverable amount of such investment, which loss was categorized as finance costs.
(3) In February 2016, we redeemed from LB Gemini New Growth Fund No. 16 our principal investment of W2,820 million. The investment did not affect our shareholding percentage interest.

 

13. Audit Information

 

  A. Audit service

 

     (Unit: In millions of Won, hours)

Description

   2016 Q1   2015   2014

Auditor

   KPMG Samjong   KPMG Samjong   KPMG Samjong

Activity

   Audit by independent
auditor
  Audit by independent
auditor
  Audit by independent
auditor

Compensation (1)

   1,020 (440) (2)   990 (400) (2)   910 (326) (2)

Time required

   1,640   17,530   16,380

 

(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.

 

  B. Non-audit service

None.

 

14. Board of Directors

 

  A. Members of the board of directors

As of March 31, 2016 our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.

 

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Table of Contents

 

     (As of March 31, 2016)

Name

  

Position

  

Primary responsibility

Yu Sig Kang(1)    Director (non-standing)    Chairman of the board of directors
Sang Beom Han    Representative Director (non-outside), Chief Executive Officer and President    Overall head of management
Sangdon Kim    Director (non-outside), Chief Financial Officer and Senior Vice President    Overall head of finances
Jin Jang    Outside Director    Related to the overall management
Joon Park(2)    Outside Director    Related to the overall management
Sung-Sik Hwang(3)    Outside Director    Related to the overall management
Kun Tai Han(4)    Outside Director    Related to the overall management

 

(1) Yu Sig Kang is also a registered executive of LG Management Development Institute, a member company of the LG Group.
(2) Joon Park was reappointed for another term as an outside director at the annual general meeting of shareholders held on March 11, 2016.
(3) Sung-Sik Hwang is also the president of Samchully Co., Ltd.
(4) Kun Tai Han was appointed as an outside director at the annual general meeting of shareholders held on March 11, 2016. Mr. Han is also the chief executive officer of Hans Consulting.

 

  B. Committees of the board of directors

As of March 31, 2016, we had the following committees that serve under our board of directors: Audit Committee, Outside Director Nomination Committee and Management Committee.

 

 

     (As of March 31, 2016)

Committee

  

Composition

  

Member

Audit Committee    3 outside directors    Joon Park(1), Jin Jang, Sung-Sik Hwang
Outside Director Nomination Committee    1 non-standing director and 2 outside directors    Yu Sig Kang, Jin Jang, Sung-Sik Hwang(2)
Management Committee    2 non-outside directors    Sang Beom Han, Sangdon Kim

 

(1) Joon Park was reappointed for another term as a member of the audit committee of the board of directors at the annual general meeting of shareholders held on March 11, 2016
(2) Sung-Sik Hwang was appointed as a member of the outside director nomination committee of the board of directors by the board of directors on January 26, 2016.

 

  C. Independence of directors

Directors are appointed in accordance with the procedures of the Commercial Act and other relevant laws and regulations. Our board of directors is independent as four out of the seven directors that comprise the board are outside directors. Outside directors candidates are nominated for appointment at a shareholders’ meeting after undergoing rigorous review by the Outside Director Nomination Committee.

All of our current outside directors were nominated by the Outside Director Nomination Committee, and all of our current non-outside directors were nominated by the board of directors.

 

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Table of Contents
15. Information Regarding Shares

 

  A. Total number of shares

 

  (1) Total number of shares authorized to be issued (as of March 31, 2016): 500,000,000 shares.

 

  (2) Total shares issued and outstanding (as of March 31, 2016): 357,815,700 shares.

 

  B. Shareholder list

 

  (1) Largest shareholder and related parties as of March 31, 2016:

 

Name

   Relationship    Number of shares
of common stock
     Equity
interest
 

LG Electronics

   Largest Shareholder      135,625,000         37.9

Sang Beom Han

   Related Party      23,014         0.0

Sangdon Kim

   Related Party      2,500         0.0

 

  (2) Shareholders who are known to us to own 5% or more of our shares as of March 31, 2016:

 

Beneficial owner

   Number of shares
of common stock
     Equity
interest
 

LG Electronics

     135,625,000         37.9

National Pension Service

     32,813,120         9.17

 

16. Directors and Employees

 

  A. Directors

 

  (1) Remuneration for directors in 2016 Q1

 

 

     (Unit: person, in millions of Won)  

Classification

   No. of directors(1)      Amount paid(2)     Per capita average
remuneration paid(4)
 

Non-outside directors

     3         1,376  (3)      459   

Outside directors who are not audit committee members

     1         6.5        6.5   

Outside directors who are audit committee members

     3         58.5        19.5   
  

 

 

    

 

 

   

 

 

 

Total

     7         1,441        —     
  

 

 

    

 

 

   

 

 

 

 

(1) Number of directors as at March 31, 2016.
(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) Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the three months ended March 31, 2016.

 

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Table of Contents
  (2) Remuneration for individual directors and audit committee members

Not required for quarterly reports.

 

  (3) Stock options

Not applicable.

 

  B. Employees

As of March 31, 2016, we had 32,574 employees (excluding our executive officers). On average, our male employees have served 8.1 years and our female employees have served 6.2 years. The total amount of salary paid to our employees for the three months ended March 31, 2016 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act was W655,511 million for our male employees and W163,231 million for our female employees. The following table provides details of our employees as of March 31, 2016:

 

            (Unit: person, in millions of Won, year)  
     Number of
employees(1)
     Total salary in
2016 Q1(2)(3)(4)
     Total salary
per capita(5)
     Average years
of service
 

Male

     23,809         655,511         27         8.1   

Female

     8,765         163,231         18         6.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     32,574         818,742         25         7.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes part-time employees and contract-base professionals.
(2) Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the three months ended March 31, 2016 was W95,841 million and the per capita welfare benefit provided was W2.9 million.
(3) Based on income tax statements, which are submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act.
(4) Includes incentive payments to employees who have transferred from our affiliated companies.
(5) Calculated using the average number of employees (male: 23,845, female: 8,868) for the three months ended March 31, 2016.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2016 and 2015

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

Table of Contents

 

     Page  

Independent Auditors’ Review Report

     29   

Condensed Consolidated Interim Statements of Financial Position

     31   

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

     32   

Condensed Consolidated Interim Statements of Changes in Equity

     33   

Condensed Consolidated Interim Statements of Cash Flows

     34   

Notes to the Condensed Consolidated Interim Financial Statements

     36   

 

28


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 March 31, 2016 and the condensed consolidated interim statements of comprehensive income (loss), changes in equity and cash flows for the three-month periods ended March 31, 2016 and 2015, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Consolidated Interim Financial Statements

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting, and for such internal controls as management determines necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with 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 consolidated financial statements, the Group has been or is named as defendants in a number of individual lawsuits and class actions in the United States and Canada, respectively, in connection with alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these alleged violations. 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.

We audited the consolidated statement of financial position as of December 31, 2015 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 19, 2016, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2015, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

May 4, 2016

 

This report is effective as of May 4, 2016 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 March 31, 2016 and December 31, 2015

 

(In millions of won)    Note      March 31, 2016     December 31, 2015  

Assets

       

Cash and cash equivalents

     9       W 818,322       751,662  

Deposits in banks

     9         1,588,219       1,772,337  

Trade accounts and notes receivable, net

     9,16,19         3,188,049       4,097,836  

Other accounts receivable, net

     9         96,987       105,815  

Other current financial assets

     9         12,161       4,904  

Inventories

     5         2,531,891       2,351,669  

Prepaid income taxes

        3,808       3,469  

Other current assets

        616,690       443,942  
     

 

 

   

 

 

 

Total current assets

        8,856,127       9,531,634  

Deposits in banks

     9         13       13  

Investments in equity accounted investees

     6         347,462       384,755  

Other non-current financial assets

     9         68,055       49,732  

Property, plant and equipment, net

     7,20         10,779,379       10,546,020  

Intangible assets, net

     8,20         827,728       838,730  

Deferred tax assets

     21         989,959       930,629  

Other non-current assets

        309,220       295,647  
     

 

 

   

 

 

 

Total non-current assets

        13,321,816       13,045,526  
     

 

 

   

 

 

 

Total assets

      W 22,177,943       22,577,160  
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

     9,19       W 2,538,435       2,764,694  

Current financial liabilities

     9,10         886,838       1,416,112  

Other accounts payable

     9,19         1,410,506       1,499,722  

Accrued expenses

        426,797       633,113  

Income tax payable

        90,079       91,726  

Provisions

     17         123,048       109,897  

Advances received

     16         62,407       51,127  

Other current liabilities

        238,053       40,321  
     

 

 

   

 

 

 

Total current liabilities

        5,776,163       6,606,712  

Non-current financial liabilities

     9,10         3,382,083       2,808,204  

Non-current provisions

        12,777       11,817  

Defined benefit liabilities, net

     14         410,262       353,798  

Deferred tax liabilities

     21         33,168       34,663  

Other non-current liabilities

        62,853       57,010  
     

 

 

   

 

 

 

Total non-current liabilities

        3,901,143       3,265,492  
     

 

 

   

 

 

 

Total liabilities

        9,677,306       9,872,204  
     

 

 

   

 

 

 

Equity

       

Share capital

     18         1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Retained earnings

        7,981,165       8,158,526  

Reserves

     18         (18,745 )     (5,766 )
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        12,002,612       12,192,952  
     

 

 

   

 

 

 

Non-controlling interests

        498,025       512,004  
     

 

 

   

 

 

 

Total equity

        12,500,637       12,704,956  
     

 

 

   

 

 

 

Total liabilities and equity

      W 22,177,943       22,577,160  
     

 

 

   

 

 

 

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 Comprehensive Income (Loss)

(Unaudited)

For the three-month periods ended March 31, 2016 and 2015

 

(In millions of won, except earnings (loss) per share)    Note      2016     2015  

Revenue

     19,20       W 5,989,201       7,022,349  

Cost of sales

     5,11,19         (5,362,801 )     (5,661,060 )
     

 

 

   

 

 

 

Gross profit

        626,400       1,361,289  

Selling expenses

     12         (166,657 )     (190,077 )

Administrative expenses

     12         (147,924 )     (144,429 )

Research and development expenses

        (272,298 )     (282,883 )
     

 

 

   

 

 

 

Operating profit

        39,521       743,900  
     

 

 

   

 

 

 

Finance income

     15         52,812       28,315  

Finance costs

     15         (72,430 )     (56,143 )

Other non-operating income

     13         440,357       253,064  

Other non-operating expenses

     13         (467,163 )     (343,639 )

Equity in loss of equity accounted investees, net

        (623 )     (1,733 )
     

 

 

   

 

 

 

Profit (loss) before income tax

        (7,526 )     623,764  

Income tax expense (benefit)

     21         (8,713 )     148,013  
     

 

 

   

 

 

 

Profit for the period

        1,187       475,751  
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

     14         (1,460 )     (1,359 )

Other comprehensive income (loss) from asssociates and joint ventures

        210       (595 )

Related income tax

        353       329  
     

 

 

   

 

 

 
        (897 )     (1,625 )

Items that are or may be reclassified to profit or loss

       

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

     15         (77 )     16  

Foreign currency translation differences for foreign operations

        (15,306 )     12,998  

Other comprehensive income from asssociates and joint ventures

        321       775  

Related income tax

        19       24  
     

 

 

   

 

 

 
        (15,043 )     13,813  
     

 

 

   

 

 

 

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

        (15,940 )     12,188  
     

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (14,753 )     487,939  
     

 

 

   

 

 

 

Profit attributable to:

       

Owners of the Controlling Company

      W 2,444       458,224  

Non-controlling interests

        (1,257 )     17,527  
     

 

 

   

 

 

 

Profit for the period

      W 1,187       475,751  
     

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

       

Owners of the Controlling Company

      W (11,432 )     465,708  

Non-controlling interests

        (3,321 )     22,231  
     

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (14,753 )     487,939  
     

 

 

   

 

 

 

Earnings per share (In won)

       

Basic earnings per share

     22       W 7       1,281  
     

 

 

   

 

 

 

Diluted earnings per share

     22       W 7       1,281  
     

 

 

   

 

 

 

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 three-month periods ended March 31, 2016 and 2015

 

    Attributable to owners of the Controlling Company              
    Share     Share     Retained                 Non-controlling     Total  
(In millions of won)   capital     premium     earnings     Reserves     Sub-total     interests     equity  

Balances at January 1, 2015

  W 1,789,079       2,251,113       7,455,063       (63,843 )     11,431,412       351,998       11,783,410  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

             

Profit for the period

    —         —         458,224       —         458,224       17,527       475,751  

Other comprehensive income (loss)

             

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

    —         —         —         12       12       —         12  

Remeasurements of net defined benefit liabilities, net of tax

    —         —         (1,030 )     —         (1,030 )     —         (1,030 )

Foreign currency translation differences for foreign operations, net of tax

    —         —         —         8,322       8,322       4,704       13,026  

Other comprehensive income (loss) from asssociates and joint ventures

    —         —         (595 )     775       180       —         180  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    —         —         (1,625 )     9,109       7,484       4,704       12,188  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

  W —         —         456,599       9,109       465,708       22,231       487,939  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

             

Dividends to equity holders

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

Capital contribution from non-controlling interests

    —         —         —         —         —         100,141       100,141  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2015

  W 1,789,079       2,251,113       7,732,754       (54,734 )     11,718,212       474,370       12,192,582  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2016

  W 1,789,079       2,251,113       8,158,526       (5,766 )     12,192,952       512,004       12,704,956  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

             

Profit (loss) for the period

    —         —         2,444       —         2,444       (1,257 )     1,187  

Other comprehensive income (loss)

             

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

    —         —         —         (58 )     (58 )     —         (58 )

Remeasurements of net defined benefit liabilities, net of tax

    —         —         (1,107 )     —         (1,107 )     —         (1,107 )

Foreign currency translation differences for foreign operations, net of tax

    —         —         —         (13,242 )     (13,242 )     (2,064 )     (15,306 )

Other comprehensive income from asssociates and joint ventures

    —         —         210       321       531       —         531  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

    —         —         (897 )     (12,979 )     (13,876 )     (2,064 )     (15,940 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

  W —         —         1,547       (12,979 )     (11,432 )     (3,321 )     (14,753 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

             

Dividends to equity holders

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

Subsidiaries’ dividends distributed to non-controlling interests

    —         —         —         —         —         (10,658 )     (10,658 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2016

  W 1,789,079       2,251,113       7,981,165       (18,745 )     12,002,612       498,025       12,500,637  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 three-month periods ended March 31, 2016 and 2015

 

(In millions of won)    Note      2016     2015  

Cash flows from operating activities:

       

Profit for the period

      W 1,187       475,751  

Adjustments for:

       

Income tax expense (benefit)

     21         (8,713 )     148,013  

Depreciation

     11         724,659       759,830  

Amortization of intangible assets

     11         88,345       91,307  

Gain on foreign currency translation

        (138,007 )     (51,034 )

Loss on foreign currency translation

        186,178       50,255  

Expenses related to defined benefit plans

     14         55,271       49,765  

Gain on disposal of property, plant and equipment

        (1,958 )     (6,118 )

Loss on disposal of property, plant and equipment

        342       8  

Loss on disposal of intangible assets

        11       11  

Impairment loss on intangible assets

        85       184  

Finance income

        (40,464 )     (13,864 )

Finance costs

        44,605       36,056  

Equity in loss of equity method accounted investees, net

        623       1,733  

Other income

        (659 )     (791 )

Other expenses

        56,234       145,983  
     

 

 

   

 

 

 
        966,552       1,211,338  

Change in trade accounts and notes receivable

        731,316       (22,375 )

Change in other accounts receivable

        14,984       41,840  

Change in other current assets

        (167,036 )     11,837  

Change in inventories

        (180,222 )     108,556  

Change in other non-current assets

        (28,895 )     (55,737 )

Change in trade accounts and notes payable

        (101,551 )     (485,516 )

Change in other accounts payable

        (34,502 )     (276,357 )

Change in accrued expenses

        (206,244 )     (94,211 )

Change in other current liabilities

        19,664       28,146  

Change in other non-current liabilities

        7,072       418  

Change in provisions

        (40,835 )     (34,162 )

Change in defined benefit liabilities, net

        (266 )     (2,330 )
     

 

 

   

 

 

 
        13,485       (779,891 )

Cash generated from operating activities

        981,224       907,198  

Income taxes paid

        (48,679 )     (105,407 )

Interests received

        16,940       15,505  

Interests paid

        (32,715 )     (34,172 )
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 916,770       783,124  
     

 

 

   

 

 

 

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 Cash Flows

(Unaudited)

For the three-month periods ended March 31, 2016 and 2015

 

(In millions of won)    Note    2016     2015  

Cash flows from investing activities:

       

Dividends received

      W 9,770       20,021  

Proceeds from withdrawal of deposits in banks

        762,102       602,805  

Increase in deposits in banks

        (577,984 )     (514,735 )

Acquisition of investments in equity accounted investees

        —         (360 )

Proceeds from disposal of investments in equity accounted investees

        2,820       —    

Acquisition of property, plant and equipment

        (1,005,225 )     (437,398 )

Proceeds from disposal of property, plant and equipment

        6,519       168,164  

Acquisition of intangible assets

        (117,485 )     (82,983 )

Proceeds from disposal of intangible assets

        100       —    

Government grants received

        718       2,511  

Proceeds from settlement of derivatives

        29       —    

Increase in long-term loans

        (18,430 )     —    

Increase in deposits

        (122 )     —    

Decrease in deposits

        1,224       267  

Acquisition of available-for-sale financial assets

        (218 )     (179 )

Proceeds from disposal of available-for-sale financial assets

        404       81  

Acquisition of financial assets at fair value through profit or loss

        (1,500 )     —    
     

 

 

   

 

 

 

Net cash used in investing activities

        (937,278 )     (241,806 )
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Repayments of short-term borrowings

        —         (223,626 )

Proceeds from long-term debt

        955,011       —    

Repayments of long-term debt

        (347,693 )     —    

Repayments of current portion of long-term debt and debentures

        (533,425 )     (39,485 )

Increase in non-controlling interests

        —         100,141  
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        73,893       (162,970 )
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        53,385       378,348  

Cash and cash equivalents at January 1

        751,662       889,839  

Effect of exchange rate fluctuations on cash held

        13,275       22,563  
     

 

 

   

 

 

 

Cash and cash equivalents at March 31

      W 818,322       1,290,750  
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

35


Table of Contents
1. Reporting Entity

 

  (a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of March 31, 2016, the Group is operating TFT-LCD and OLED panel manufacturing plant in Gumi, Paju and China and TFT-LCD OLED module manufacturing plant in Gumi, Paju, China and Poland. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of March 31, 2016, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of March 31, 2016, 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 March 31, 2016, there are 28,998,386 ADSs outstanding.

 

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Table of Contents
1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of March 31, 2016

 

(In millions)                               

Subsidiaries

   Location    Percentage of
ownership
  Fiscal year
end
   Date of
incorporation
   Business    Capital stocks  

LG Display
America, Inc.

   San Jose,

U.S.A.

   100%   December
31
   September 24,
1999
   Sell TFT-LCD products      USD 411   

LG Display
Japan Co., Ltd.

   Tokyo, Japan    100%   December
31
   October 12,
1999
   Sell TFT-LCD products      JPY 95   

LG Display
Germany GmbH

   Ratingen,
Germany
   100%   December
31
   November 5,
1999
   Sell TFT-LCD products      EUR 1   

LG Display
Taiwan Co., Ltd.

   Taipei,
Taiwan
   100%   December
31
   April 12,

1999

   Sell TFT-LCD products      NTD 116   

LG Display
Nanjing Co., Ltd.

   Nanjing,
China
   100%   December
31
   July 15,

2002

   Manufacture and sell
TFT-LCD products
     CNY 2,937   

LG Display
Shanghai Co., Ltd.

   Shanghai,
China
   100%   December
31
   January 16,
2003
   Sell TFT-LCD products      CNY 4   

LG Display
Poland Sp. z o.o.

   Wroclaw,
Poland
   100%   December
31
   September 6,
2005
   Manufacture and sell
TFT-LCD products
     PLN 511   

LG Display
Guangzhou Co., Ltd.

   Guangzhou,
China
   100%   December
31
   June 30,

2006

   Manufacture and sell
TFT-LCD products
     CNY 1,655   

LG Display
Shenzhen Co., Ltd.

   Shenzhen,
China
   100%   December
31
   August 28, 2007    Sell TFT-LCD products      CNY 4   

LG Display
Singapore Pte. Ltd.

   Singapore    100%   December
31
   January 12,
2009
   Sell TFT-LCD products      SGD 1.4   

L&T Display Technology
(Fujian) Limited

   Fujian,

China

   51%   December
31
   January 5, 2010    Manufacture LCD
module and LCD TV
sets
     CNY 116   

LG Display Yantai Co., Ltd

   Yantai,

China

   100%   December
31
   April 19,

2010

   Manufacture and sell
TFT-LCD products
     CNY 1,008   

Nanumnuri Co., Ltd.

   Gumi,

South Korea

   100%   December
31
   March 21, 2012    Janitorial services      KRW 800   

LG Display
(China) Co., Ltd.

   Guangzhou,
China.
   70%   December
31
   December 10,
2012
   Manufacture and sell
TFT-LCD products
     CNY 8,147   

Unified Innovative
Technology, LLC

   Wilmington,
U.S.A.
   100%   December
31
   March 12, 2014    Manage intellectual
property
     USD 9   

LG Display Guangzhou
Trading Co., Ltd.

   Guangzhou,
China
   100%   December
31
   April 28,

2015

   Sell TFT-LCD products      CNY 1.2   

Global OLED
Technology, LLC

   Herndon,
U.S.A.
   100%   December
31
   December 18,
2009
   Manage OLED
intellectual property
     USD 138   

Money Market Trust(*1)

   Seoul,

South Korea

   100%   December
31
      Money market trust      KRW 130,300   

 

(*1) In Mach 2016, the Controlling Company acquired W130,300 million in Money Market Trust.

In March 2016, LG Display U.S.A., Inc., a subsidiary of the Controlling Company, completed its voluntary liquidation.

 

37


Table of Contents
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”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the consolidated financial statements of the Group as of and for the year ended December 31, 2015.

 

  (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 statements of financial position:

 

    Derivative instruments, financial assets at fair value through profit or loss and available-for-sale financial assets measured at fair value, and

 

    liabilities for defined benefit plans are recognized as the present value of defined benefit obligations 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.

 

  (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.

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 consolidated financial statements as of and for the year ended December 31, 2015.

 

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Table of Contents
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, 2015, except for the application of K-IFRS No. 1034, Interim Financial Reporting, and the amended accounting standards explained below:

 

  (a) Change in Accounting Policies

 

  (i) K-IFRS No. 1001, Presentation of Financial Statements

The Group has applied the amendment to K-IFRS No. 1001, Presentation of Financial Statements, effective January 1, 2016. The amendment clarifies that the disclosed line items can be omitted, added, or aggregated based on materiality. In addition, the amendment clarifies that the share in the other comprehensive income of associates and joint ventures should be presented separately in the financial statements based on whether they will or will not subsequently be reclassified to profit or loss. Also, additional requirements for disclosures in the notes and others are provided.

The Group has applied the amendment to K-IFRS No. 1001 and separated the share of other comprehensive income of associates and joint ventures into the share of items that (i) will be reclassified subsequently to profit or loss or (ii) will not be reclassified subsequently to profit or loss.

The Group restated the comparative condensed consolidated interim statements of comprehensive income (loss) and changes in equity for the three-month period ended March 31, 2015.

 

  (b) New Standards and Amendments Not Yet Adopted

 

  (i) K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109, Financial Instruments, provides revised guidance on the classification and measurement of financial instruments and replaces incurred loss model with expected credit losses model for calculating impairment on financial assets. K-IFRS No. 1109 also includes new general hedge accounting requirements including hedged items, hedging instruments and risk being hedged in order to expand applicable risk management strategies being utilized. K-IFRS No. 1109 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. K-IFRS No. 1109 has not been early adopted in preparing the consolidated financial statements.

 

  (ii) K-IFRS No. 1115, Revenue from Contracts with Customers

K-IFRS No. 1115, Revenue from Contracts with Customers, establishes a single new revenue recognition standard for contracts with customers and introduces a five-step model for determining whether, how much and when revenue is recognized. K-IFRS No. 1115 replaces risk-and-reward based model with control-based model. K-IFRS No. 1115 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. K-IFRS No. 1115 has not been early adopted in preparing the consolidated financial statements.

Management is currently assessing the potential impact on its consolidated financial statements resulting from the application of new standards.

 

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Table of Contents
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, 2015.

 

5. Inventories

Inventories as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Finished goods

   W 1,069,488         910,844   

Work-in-process

     756,958         720,221   

Raw materials

     378,866         389,442   

Supplies

     326,579         331,162   
  

 

 

    

 

 

 
   W 2,531,891         2,351,669   
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2016 and 2015, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales is as follows:

 

(In millions of won)              
     2016      2015  

Inventories recognized as cost of sales

   W 5,362,801         5,661,060   

Including: inventory write-downs

     383,778         326,601   

Including: reversal and usage of inventory write-downs

     (363,755      (332,699

 

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Table of Contents
6. Investments in Equity Accounted Investees

Associates and Joint Ventures (Equity Method Investees) as of March 31, 2016 are as follows:

 

(In millions of won)                               

Associates

and joint ventures

   Location    Percentage of
ownership
  Fiscal
year end
   Date of
incorporation
   Business    Carrying
amount
 

Suzhou Raken
Technology Co., Ltd.(*1)

   Suzhou,
China
   51%   December
31
   October

2008

   Manufacture and sell

LCD modules and

LCD TV set

   W 143,698   

Paju Electric
Glass Co., Ltd.

   Paju,

South Korea

   40%   December
31
   January

2005

   Manufacture electric

glass for FPDs

     49,358   

TLI Inc.(*2)

   Seongnam,

South Korea

   10%   December
31
   October

1998

   Manufacture and sell

semiconductor parts
for FPDs

     5,192   

AVACO Co., Ltd.(*2)

   Daegu,

South Korea

   16%   December
31
   January

2001

   Manufacture and sell

equipment for FPDs

     11,807   

New Optics Ltd.

   Yangju,

South Korea

   46%   December
31
   August

2005

   Manufacture back
light

parts for TFT-LCDs

     45,600   

INVENIA Co., Ltd.
(LIG INVENIA Co., Ltd.) (*2)

   Seongnam,

South Korea

   13%   December
31
   January

2001

   Develop and
manufacture
equipment for FPDs
     1,730   

WooRee E&L Co., Ltd.
(*2) (*3)

   Ansan,

South Korea

   14%   December
31
   June

2008

   Manufacture LED
back

light unit packages

     10,268   

LB Gemini New
Growth Fund No. 16 (*4)

   Seoul,

South Korea

   31%   December
31
   December 2009    Invest in small and

middle sized

companies and

benefit from M&A
opportunities

     17,639   

Can Yang
Investments Limited(*2)

   Hong Kong    9%   December
31
   January

2010

   Develop,
manufacture and sell
LED parts
     6,874   

YAS Co., Ltd.(*2)

   Paju,

South Korea

   19%   December
31
   April

2002

   Develop and

manufacture
deposition

equipment for
OLEDs

     11,158   

Narenanotech
Corporation

   Yongin,

South Korea

   23%   December
31
   December 1995    Manufacture and sell

FPD manufacturing

equipment

     25,009   

AVATEC Co., Ltd.(*2)

   Daegu,

South Korea

   16%   December
31
   August

2000

   Process and sell

glass for FPDs

     19,129   

Fuhu, Inc. (*2)

   Los Angeles
U.S.A.
   10%   March

31

   June

2006

   Develop and
manufacture tablet

for kids

     —     
                

 

 

 
                 W 347,462   
                

 

 

 

 

(*1) Despite its 51% ownership, management concluded that the Controlling Company does not have control of Suzhou Raken Technology Co., Ltd. because the Controlling Company and AmTRAN Technology Co., Ltd., which has a 49% equity interest of the investee, jointly control the board of directors of the investee through equal voting powers. Accordingly, investment in Suzhou Raken Technology Co., Ltd. was accounted as an equity method investment.
(*2) Although the Controlling Company’s share interests in TLI Inc., AVACO Co., Ltd., INVENIA Co., Ltd., WooRee E&L Co., Ltd., Can Yang Investments Limited, YAS Co., Ltd., AVATEC Co., Ltd. and Fuhu, Inc. are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee and the transactions between the Controlling Company and the investees are significant. Accordingly, the investments in these investees have been accounted for using the equity method.

 

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6. Investments in Equity Accounted Investees, Continued

 

(*3) In 2016, the Controlling Company’s ownership percentage in WooRee E&L Co., Ltd. (“WooRee E&L”) decreased from 21% to 14% as the Controlling Company did not participate in the capital increase of WooRee E&L. The Controlling Company recognized an impairment loss of W6,137 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in WooRee E&L.

 

(*4) The Controlling Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In February 2016, the Controlling Company received W2,820 million from the Fund as capital distribution. In conjunction with this recovery, there were no changes in the Controlling Company’s ownership percentage in the Fund and the Controlling Company is committed to making future investments of up to an aggregate of W30,000 million.

 

7. Property, Plant and Equipment

For the three-month periods ended March 31, 2016 and 2015, the Group purchased property, plant and equipment of W991,818 million and W516,553 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W2,449 million and 2.41%, and W4,636 million and 3.97% for the three-month periods ended March 31, 2016 and 2015, respectively. Also, for the three-month periods ended March 31, 2016 and 2015, the Group disposed of property, plant and equipment with carrying amounts of W4,903 million and W182,858 million, respectively, and recognized W1,958 million and W342 million as gain and loss, respectively, on disposal of property, plant and equipment for the three-month period ended March 31, 2016 (gain and loss for the three-month period ended March 31, 2015: W6,118 million and W8 million, respectively).

 

8. Intangible Assets

The Group capitalizes 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 March 31, 2016 and December 31, 2015 are W202,689 million and W187,230 million, respectively.

 

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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 March 31, 2016 and December 31, 2015 is as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Cash and cash equivalents

   W 818,322         751,662   

Deposits in banks(*)

     1,588,232         1,772,350   

Trade accounts and notes receivable, net

     3,188,049         4,097,836   

Other accounts receivable, net

     96,987         105,815   

Available-for-sale financial assets

     247         709   

Financial assets at fair value through profit or loss

     1,500         —     

Deposits

     25,369         22,234   

Loans

     34,946         15,856   

Derivatives

     1,917         —     

Other non-current financial assets

     5,361         5,148   
  

 

 

    

 

 

 
   W 5,760,930         6,771,610   
  

 

 

    

 

 

 

 

(*) As of March 31, 2016, the amount of deposits in banks restricted in use is W70,513 million (as of December 31, 2015: W70,513 million).

The maximum exposure to credit risk for trade accounts and notes receivable as of March 31, 2016 and December 31, 2015 by geographic region was as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Domestic

   W 519,247         425,635   

Euro-zone countries

     292,371         382,326   

Japan

     148,781         156,746   

United States

     760,794         1,211,518   

China

     782,090         961,425   

Taiwan

     394,816         654,257   

Others

     289,950         305,929   
  

 

 

    

 

 

 
   W 3,188,049         4,097,836   
  

 

 

    

 

 

 

 

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Table of Contents
9. Financial Instruments, Continued

 

  (ii) Impairment loss

The aging of trade accounts and notes receivable as of March 31, 2016 and December 31, 2015 was as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  
     Book
value
     Impairment
loss
     Book
value
     Impairment
loss
 

Not past due

   W 3,176,022         (1,081      4,076,022         (1,339

Past due 1-15 days

     501         —           6,555         (2

Past due 16-30 days

     187         —           201         —     

Past due 31-60 days

     —           —           —           —     

Past due more than 60 days

     12,545         (125      16,565         (166
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,189,255         (1,206      4,099,343         (1,507
  

 

 

    

 

 

    

 

 

    

 

 

 

The movement in the allowance for impairment in respect of receivables during the three-month period ended March 31, 2016 and the year ended December 31, 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Balance at the beginning of the period

   W 1,507         825   

(Reversal of) bad debt expense

     (301      682   
  

 

 

    

 

 

 

Balance at the reporting date

   W 1,206         1,507   
  

 

 

    

 

 

 

 

44


Table of Contents
9. Financial Instruments, Continued

 

  (b) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of March 31, 2016.

 

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

Non-derivative
financial liabilities:

                    

Secured bank loan

   W 693,375         753,430         12,156         12,089         24,245         704,940         —     

Unsecured bank loans

     1,697,637         1,768,014         15,603         307,293         294,684         1,150,434         —     

Unsecured bond issues

     1,876,673         1,995,355         330,712         316,443         581,707         683,755         82,738   

Trade accounts and notes payables

     2,538,435         2,538,435         2,538,435         —           —           —           —     

Other accounts payable

     1,410,506         1,410,836         1,408,176         2,660         —           —           —     

Other non-current liabilities

     7,182         8,008         —           —           5,348         2,660         —     

Derivative
financial liabilities

                    

Interest rate swap not qualified for hedging

     1,236         1,262         19         300         648         295         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,225,044         8,475,340         4,305,101         638,785         906,632         2,542,084         82,738   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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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 March 31, 2016 and December 31, 2015 is as follows:

 

(In millions)    March 31, 2016  
     USD     JPY     CNY     TWD     EUR     PLN  

Cash and cash equivalents

     369        511        732        19        1        77   

Deposits in banks

     —          —          1,500        —          —          —     

Trade accounts and notes receivable

     2,195        10        1,082        —          —          —     

Other accounts receivable

     9        1,300        39        12        1        —     

Long-term other accounts receivable

     5        —          —          —          —          —     

Other assets denominated in foreign currencies

     1        255        50        6        —          —     

Trade accounts and notes payable

     (895     (16,462     (1,785     —          —          —     

Other accounts payable

     (191     (11,372     (1,274     (5     (12     (4

Debt

     (1,292     —          (1,964     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross statement of financial position exposure

     201        (25,758     (1,620     32        (10     73   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward exchange contracts

     (200     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     1        (25,758     (1,620     32        (10     73   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(In millions)    December 31, 2015  
     USD     JPY     CNY     TWD     EUR     PLN  

Cash and cash equivalents

     578        1,005        866        12        —          45   

Deposits in banks

     —          —          1,200        —          —          —     

Trade accounts and notes receivable

     2,935        12        1,465        —          —          —     

Other accounts receivable

     20        2        101        13        —          —     

Long-term other accounts receivable

     4        —          —          —          —          —     

Other assets denominated in foreign currencies

     1        254        27        6        —          —     

Trade accounts and notes Payable

     (1,207     (17,016     (1,267     —          —          —     

Other accounts payable

     (541     (13,821     (1,352     (7     (2     (11

Debt

     (1,185     —          (1,964     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     605        (29,564     (924     24        (2     34   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
9. Financial Instruments, Continued

Average exchange rates applied for the three-month periods ended March 31, 2016 and 2015 and the exchange rates at March 31, 2016 and December 31, 2015 are as follows:

 

(In won)    Average rate      Reporting date spot rate  
     2016      2015      March 31,
2016
     December 31,
2015
 

USD

   W 1,201.85         1,100.16         1,153.50         1,172.00   

JPY

     10.42         9.23         10.26         9.72   

CNY

     183.12         176.18         177.69         178.48   

TWD

     36.33         34.89         35.85         35.51   

EUR

     1,326.89         1,241.51         1,307.43         1,280.53   

PLN

     304.16         295.99         306.05         300.79   

 

  (ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in foreign currency as of March 31, 2016 and December 31, 2015, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

(In millions of won)    March 31, 2016      December 31, 2015  
     Equity      Profit
or loss
     Equity      Profit
or loss
 

USD (5 percent weakening)

   W (1,574      5,034         24,838         33,152   

JPY (5 percent weakening)

     (10,310      (9,098      (11,340      (9,486

CNY (5 percent weakening)

     (9,869      (14,178      (8,582      1,069   

TWD (5 percent weakening)

     58         4         42         —     

EUR (5 percent weakening)

     (769      430         (214      270   

PLN (5 percent weakening)

     1,084         97         575         (208

A stronger won against the above currencies as of March 31, 2016 and December 31, 2015 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 Group’s interest-bearing financial instruments as of March 31, 2016 and December 31, 2015 is as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Fixed rate instruments

     

Financial assets

   W 2,406,789         2,524,708   

Financial liabilities

     (2,079,721      (2,289,336
  

 

 

    

 

 

 
   W 327,068         235,372   
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (2,189,200      (1,934,895

 

  (ii) Equity and profit or loss sensitivity analysis for variable rate instruments

As of March 31, 2016 and December 31, 2015, 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
 

March 31, 2016

           

Variable rate instruments

   W (13,932      13,932         (13,932      13,932   

December 31, 2015

           

Variable rate instruments

   W (14,667      14,667         (14,667      14,667   

 

48


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)             
     March 31, 2016     December 31, 2015  
     Carrying
amounts
     Fair values     Carrying
amounts
     Fair values  

Assets carried at fair value

          

Available-for-sale financial assets

   W 247         247        709         709   

Financial assets at fair value through profit or loss

     1,500         1,500        —           —     

Derivatives

     1,917         1,917        —           —     

Assets carried at amortized cost

          

Cash and cash equivalents

   W 818,322         ( *)      751,662         ( *) 

Deposits in banks

     1,588,232         ( *)      1,772,350         ( *) 

Trade accounts and notes receivable

     3,188,049         ( *)      4,097,836         ( *) 

Other accounts receivable

     96,987         ( *)      105,815         ( *) 

Deposits

     25,369         ( *)      22,234         ( *) 

Loans

     34,946         ( *)      15,856         ( *) 

Other non-current financial assets

     5,361         ( *)      5,148         ( *) 

Liabilities carried at fair value

          

Derivatives

   W 1,236         1,236        85         85   

Liabilities carried at amortized cost

          

Secured bank loans

   W 693,375         693,375        698,192         698,192   

Unsecured bank loans

     1,697,637         1,701,194        1,239,914         1,239,969   

Unsecured bond issues

     1,876,673         1,927,310        2,286,125         2,337,835   

Trade accounts and notes payable

     2,538,435         ( *)      2,764,694         ( *) 

Other accounts payable

     1,410,506         1,410,796        1,499,722         1,499,963   

Other non-current liabilities

     7,182         7,777        8,402         9,005   

 

(*) Excluded from disclosures as the carrying amount approximates fair value.

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, 2015.

 

49


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Financial Instruments measured at cost

Available-for-sale financial assets measured at cost as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Intellectual Discovery Co., Ltd.

   W 2,673         2,673   

ARCH Venture Fund VIII, L.P

     1,564         1,378   

Henghao Technology Co., Ltd.

     3,372         3,372   

Kyulux, Inc.

     3,266         3,266   
  

 

 

    

 

 

 
   W 10,875         10,689   
  

 

 

    

 

 

 

 

  (iii) Fair values of financial assets and liabilities

 

  i) Fair value hierarchy

The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:

 

    Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

 

    Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

 

    Level 3: inputs for the asset or liability that are not based on observable market data

 

  ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)                            
     Level 1      Level 2      Level 3      Total  

March 31, 2016

           

Assets

           

Available-for-sale financial assets

   W 247         —           —           247   

Financial assets at fair value through profit or loss

     —           —           1,500         1,500   

Derivatives

     —           1,917         —           1,917   

Liabilities

           

Derivatives

     —           —           1,236         1,236   

 

(In millions of won)                            
     Level 1      Level 2      Level 3      Total  

December 31, 2015

           

Assets

           

Available-for-sale financial assets

   W 709         —           —           709   

Liabilities

           

Derivatives

     —           —           85         85   

 

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Table of Contents
9. Financial Instruments, Continued

 

  iii) Financial instruments not measured at fair value but for which the fair value is disclosed

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)    March 31, 2016      Valuation technique    Input

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Secured bank loan

   W —           —           693,375       Discounted cash flow    Discount rate

Unsecured bank loans

     —           —           1,701,194       Discounted cash flow    Discount rate

Unsecured bond issues

     —           —           1,927,310       Discounted cash flow    Discount rate

Other accounts payable

     —           —           1,410,796       Discounted cash flow    Discount rate

Other non-current liabilities

     —           —           7,777       Discounted cash flow    Discount rate

 

(In millions of won)    December 31, 2015      Valuation technique    Input

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Secured bank loan

   W —           —           698,192       Discounted cash flow    Discount rate

Unsecured bank loans

     —           —           1,239,969       Discounted cash flow    Discount rate

Unsecured bond issues

     —           —           2,337,835       Discounted cash flow    Discount rate

Other accounts payable

     —           —           1,499,963       Discounted cash flow    Discount rate

Other non-current liabilities

     —           —           9,005       Discounted cash flow    Discount rate

 

  iv) The significant interest rates applied for determination of the above fair value at the reporting date are as follows:

 

     March 31, 2016   December 31, 2015

Debentures, loans and others

   1.16~2.25%   1.52~2.48%

 

 

51


Table of Contents
9. Financial Instruments, Continued

 

  (f) Capital management

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.

 

(In millions of won)             
     March 31, 2016     December 31, 2015  

Total liabilities

   W 9,677,306        9,872,204   

Total equity

     12,500,637        12,704,956   

Cash and deposits in banks (*1)

     2,406,541        2,523,999   

Borrowings (including bonds)

     4,267,685        4,224,231   

Total liabilities to equity ratio

     77     78

Net borrowings to equity ratio (*2)

     15     13

 

(*1) Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.
(*2) Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds) less cash and current deposits in banks by total equity.

 

52


Table of Contents
10. Financial Liabilities

 

  (a) Financial liabilities as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Current

     

Current portion of long-term debt

   W 886,838         1,416,112   
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 552,626         202,992   

Foreign currency denominated borrowings

     1,546,235         1,323,454   

Bonds

     1,281,986         1,281,673   

Derivatives

     1,236         85   
  

 

 

    

 

 

 
   W 3,382,083         2,808,204   
  

 

 

    

 

 

 

 

  (b) Won denominated long-term debt as of March 31, 2016 and December 31, 2015 is as follows:

 

(In millions of won)                   

Lender

  

Annual interest rate

as of

March 31, 2016 (%)

   March 31,
2016
     December 31,
2015
 

Woori Bank and others

   3-year Korean Treasury Bond rate less 1.25, 2.75    W 4,086         4,452   

Shinhan Bank

   CD rate (91days) + 0.30      200,000         200,000   

Korea Development Bank and others

  

3-year Industrial Financial Debenture rate + 0.55

CD rate (91days) + 0.74

     350,000         —     

Less current portion of long-term debt

        (1,460      (1,460
     

 

 

    

 

 

 
      W 552,626         202,992   
     

 

 

    

 

 

 

 

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Table of Contents
10. Financial Liabilities, Continued

 

  (c) Long-term debt denominated in currencies other than won as of March 31, 2016 and December 31, 2015 is as follows:

 

(In millions of won, CNY and USD)  

Lender

  

Annual interest rate

as of

March 31, 2016 (%)(*)

   March 31, 2016      December 31,
2015
 

China Construction Bank and others

  

USD : 3ML+1.30, 2.00

CNY : 4.28

   W 848,367         854,654   

Mizuho Bank, Ltd. and others

   3ML+0.55~1.78      980,476         879,000   

Standard Chartered Bank Korea Limited.

   6ML+0.62      8,083         —     
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 1,292         USD 1,185   
        CNY 1,964         CNY 1,964   
     

 

 

    

 

 

 

Less current portion of long-term debt

        (290,691      (410,200
     

 

 

    

 

 

 
      W 1,546,235         1,323,454   
     

 

 

    

 

 

 

 

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

 

  (d) Details of bonds issued and outstanding as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)                          
    

Maturity

   Annual interest rate
as of

March 31, 2016 (%)
     March 31,
2016
     December 31,
2015
 

Won denominated bonds (*)

           

Publicly issued bonds

  

August 2016~

May 2022

     2.12~4.51       W 1,880,000         2,290,000   

Less discount on bonds

           (3,327      (3,875

Less current portion

           (594,687      (1,004,452
        

 

 

    

 

 

 
         W 1,281,986         1,281,673   
        

 

 

    

 

 

 

 

(*) Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly in arrears.

 

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11. The Nature of Expenses and Others

The classification of expenses by nature for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Changes in inventories

   W (180,222      108,555   

Purchases of raw materials, merchandise and others

     3,392,172         3,275,924   

Depreciation and amortization

     813,004         851,137   

Outsourcing fees

     209,793         327,351   

Labor cost

     763,148         743,882   

Supplies and others

     235,070         234,766   

Utility

     207,172         207,016   

Fees and commissions

     151,722         135,534   

Shipping costs

     51,731         58,633   

Advertising

     14,062         41,161   

Warranty expenses

     42,015         33,719   

Taxes and dues

     19,398         22,472   

Travel

     17,644         15,929   

Others

     229,510         343,304   
  

 

 

    

 

 

 
   W 5,966,219         6,399,383   
  

 

 

    

 

 

 

 

(*) Total expenses consist of cost of sales, selling, administrative, research and development expenses and other non-operating expenses, excluding foreign exchange differences.

 

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Table of Contents
12. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Salaries

   W 68,515         65,281   

Expenses related to defined benefit plans

     7,514         6,868   

Other employee benefits

     20,659         19,103   

Shipping costs

     43,606         50,784   

Fees and commissions

     48,048         49,687   

Depreciation

     33,831         26,144   

Taxes and dues

     6,927         9,512   

Advertising

     14,062         41,161   

Warranty expenses

     42,015         33,719   

Rent

     6,391         5,672   

Insurance

     2,429         2,807   

Travel

     5,770         5,623   

Training

     3,154         2,738   

Others

     11,660         15,407   
  

 

 

    

 

 

 
   W 314,581         334,506   
  

 

 

    

 

 

 

 

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Table of Contents
13. Other Non-operating Income and Other Non-operating Expenses

 

  (a) Details of other non-operating income for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Rental income

   W 1,388         971   

Foreign currency gain

     434,536         245,031   

Gain on disposal of property, plant and equipment

     1,958         6,118   

Reversal of allowance for doubtful accounts for other receivables

     —           791   

Others

     2,475         153   
  

 

 

    

 

 

 
   W 440,357         253,064   
  

 

 

    

 

 

 

 

  (b) Details of other non-operating expenses for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Other bad debt expense

   W 321         456   

Foreign currency loss

     450,624         222,705   

Loss on disposal of property, plant and equipment

     342         8   

Loss on disposal of intangible assets

     11         11   

Impairment loss on intangible assets

     85         184   

Donations

     2,942         3,208   

Expenses related to legal proceedings or claims and others

     12,838         117,067   
  

 

 

    

 

 

 
   W 467,163         343,639   
  

 

 

    

 

 

 

 

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Table of Contents
14. Employee Benefits

The Controlling Company and certain subsidiaries’ defined benefit plans provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Controlling Company.

 

  (a) Recognized liabilities for defined benefit plans as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Present value of partially funded defined benefit obligations

   W 1,429,520         1,381,648   

Fair value of plan assets

     (1,019,258      (1,027,850
  

 

 

    

 

 

 
   W 410,262         353,798   
  

 

 

    

 

 

 

 

  (b) Expenses recognized in profit or loss for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Current service cost

   W 52,701         46,949   

Net interest cost

     2,570         2,816   
  

 

 

    

 

 

 
   W 55,271         49,765   
  

 

 

    

 

 

 

 

  (c) Plan assets as of March 31, 2016 and December 31, 2015 are as follows:

 

(In millions of won)              
     March 31, 2016      December 31, 2015  

Guaranteed deposits in banks

   W 1,019,258         1,027,850   

As of March 31, 2016, the Group maintains the plan assets primarily with Mirae Asset Securities Co., Ltd. and Shinhan Bank.

 

  (d) Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Remeasurements of the net defined benefit liabilities (assets)

   W (1,460      (1,359

Tax effect

     353         329   
  

 

 

    

 

 

 

Remeasurements of the net defined benefit liabilities (assets), net of income tax

   W (1,107      (1,030
  

 

 

    

 

 

 

 

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15. Finance Income and Finance Costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

(In millions of won)              
     2016      2015  

Finance income

     

Interest income

   W 11,047         13,856   

Foreign currency gain

     38,722         14,459   

Gain on transaction of derivatives

     1,126         —     

Gain on valuation of derivatives

     1,917         —     
  

 

 

    

 

 

 
   W 52,812         28,315   
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   W 31,201         30,212   

Foreign currency loss

     26,518         24,529   

Loss on disposal of investments in equity accounted investees

     5,362         —     

Loss on impairment of investments

     6,137         —     

Loss on sale of trade accounts and notes receivable

     964         1,402   

Loss on transaction of derivatives

     1,012         —     

Loss on valuation of derivatives

     1,236         —     
  

 

 

    

 

 

 
   W 72,430         56,143   
  

 

 

    

 

 

 

 

  (b) Finance income and costs recognized in other comprehensive income for the three-month periods ended March 31, 2016 and 2015 are as follows:

 

                                     
(In millions of won)              
     2016      2015  

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

   W (77      16   

Tax effect

     19         (4
  

 

 

    

 

 

 

Finance income (cost) recognized in other comprehensive income after tax

   W (58      12   
  

 

 

    

 

 

 

 

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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 2,103 million (W2,425,810 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of March 31, 2016, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

The Controlling Company and oversea subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables sales and the amount of sold accounts receivables before maturity by contract are as follows:

 

(In millions of USD and KRW)  

Classification

  

Financial institutions

   Maximum      Not yet due  
          Contractual
amount
     KRW
equivalent
     Amount      KRW
equivalent
 

Controlling Company

   Shinhan Bank      KRW 100,000         100,000         —           —     
   Bank of Tokyo-Mitsubishi UFJ      USD 120         138,420         —           —     

Subsidiaries

              

LG Display Singapore Pte. Ltd.

   Standard Chartered Bank      USD 300         346,050         USD 123         141,661   

LG Display Taiwan Co., Ltd.

   BNP Paribas      USD 75         86,513         USD 11         12,971   
  

Hongkong & Shanghai Banking Corp.

     USD 150         173,025         —           —     
  

Sumitomo Mitsui Banking Corporation

     USD 200         230,700         USD 89         102,356   

LG Display Shanghai Co., Ltd.

   BNP Paribas      USD 125         144,188         —           —     

LG Display Germany GmbH

   Citibank      USD 160         184,560         —           —     
   BNP Paribas      USD 107         123,425         —           —     

LG Display America, Inc.

  

Hongkong & Shanghai Banking Corp.

     USD 800         922,800         USD 577         665,800   
  

Sumitomo Mitsui Banking Corporation

     USD 250         288,375         —           —     

LG Display Japan Co., Ltd.

  

Sumitomo Mitsui Banking Corporation

     USD 90         103,815         —           —     

LG Display Guangzhou Trading Co., Ltd.

  

Industrial and Commercial Bank of China

     USD 64         73,824         —           —     
     

 

 

    

 

 

    

 

 

    

 

 

 
        USD 2,321         2,677,275         USD 800         922,788   
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