LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2006
|
|
|
Intellectual
property
rights
|
|
|
Rights for
usage of
electric and
gas supply
facilities
|
|
|
Rights for
usage of
industrial
water
facilities
|
|
|
Software
|
|
|
Others
|
|
Total
|
|
Balance as of January 1, 2006
|
|
(Won)
|
141,013
|
|
|
(Won)
|
225
|
|
|
(Won)
|
8,653
|
|
|
(Won)
|
9,413
|
|
|
(Won)
|
2
|
|
(Won)
|
159,306
|
|
Increase during the year
|
|
|
8,252
|
|
|
|
270
|
|
|
|
|
|
|
(Won)
|
1,408
|
|
|
|
|
|
|
9,930
|
|
Amortization
|
|
|
(42,941
|
)
|
|
|
(58
|
)
|
|
|
(1,232
|
)
|
|
(Won)
|
(1,179
|
)
|
|
|
|
|
|
(45,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2006
|
|
(Won)
|
106,324
|
|
|
(Won)
|
437
|
|
|
(Won)
|
7,421
|
|
|
(Won)
|
9,642
|
|
|
(Won)
|
2
|
|
(Won)
|
123,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition cost
|
|
(Won)
|
434,406
|
|
|
(Won)
|
583
|
|
|
(Won)
|
12,299
|
|
|
(Won)
|
23,293
|
|
|
(Won)
|
2
|
|
(Won)
|
470,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
(Won)
|
328,082
|
|
|
(Won)
|
146
|
|
|
(Won)
|
4,878
|
|
|
(Won)
|
13,651
|
|
|
(Won)
|
|
|
(Won)
|
346,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has classified the amortization as part of manufacturing overhead cost. The total
amortization expense for the year ended December 31, 2007, amount to (Won)54,468 million (2006: (Won)45,410 million).
The details of
intellectual property rights as of December 31, 2007 and 2006, are as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
Description
|
|
2007
|
|
2006
|
|
Remaining period
|
Intellectual property rights
|
|
Patent relating to TFT-LCD business
|
|
(Won)
|
72,921
|
|
(Won)
|
106,324
|
|
3 ~ 10 years
|
|
|
|
|
|
|
|
|
|
|
|
The Company expensed research and development costs of (Won)415,081 million for the year ended
December 31, 2007 (2006: (Won) 438,867 million).
For the years ended December 31, 2007 and 2006, the significant expenses, which
are expected to have probable future economic benefits but expensed in the year incurred due to the uncertainty in the realization of such benefits, are as follows:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Training expenses
|
|
(Won)
|
9,286
|
|
(Won)
|
16,533
|
Advertising expenses
|
|
|
30,433
|
|
|
24,143
|
Expenses for foreign market expansion
|
|
|
6,254
|
|
|
5,255
|
|
|
|
|
|
|
|
|
|
(Won)
|
45,973
|
|
(Won)
|
45,931
|
|
|
|
|
|
|
|
As of December 31, 2007,
inventories and property, plant and equipment are insured against fire and other casualty losses for up to (Won)19,798,552 million, CNY 6,518 million, US$ 219 million, NTD 7 million and EUR 441 million. Also, as of
December 31, 2007, the Company insured directors and officers liabilities for up to US$ 100 million.
26
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
Changes in warranty reserve for
the years ended December 31, 2007 and 2006, are as follows:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Balance at the beginning of the year
|
|
(Won)
|
31,261
|
|
(Won)
|
24,947
|
Increase
|
|
|
77,852
|
|
|
46,013
|
Decrease
|
|
|
59,818
|
|
|
39,699
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
(Won)
|
49,295
|
|
(Won)
|
31,261
|
|
|
|
|
|
|
|
13.
|
Short-Term Borrowings, Current Portion of Long-Term Debts and Debentures
|
Short-term borrowings as of December 31, 2007 and 2006, are as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
Creditor
|
|
Annual interest
rates (%) as of
December 31, 2007
|
|
2007
|
|
2006
|
Documents against acceptance
|
|
Woori Bank and others
|
|
|
|
|
|
|
|
|
(2006 : US$ 220 million)
|
|
|
|
|
|
(Won)
|
|
|
(Won)
|
204,528
|
General loans of JP¥ 556 million
|
|
Mizuho Bank and others
|
|
Tibor + 0.39 ~ 0.4
|
|
|
|
|
|
|
(2006 : JP¥ 1,520, US$ 13, EUR 8, PLN 39)
|
|
|
|
|
|
|
4,660
|
|
|
45,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
4,660
|
|
(Won)
|
250,105
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debts and debentures as of December 31, 2007 and 2006, consists
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
Type of borrowing
|
|
Annual interest
rate (%) as
of
December 31, 2007
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Long -term debts in won
|
|
5.88 ~ 6.34
|
|
(Won)
|
61,767
|
|
|
(Won)
|
39,267
|
|
Corporate bonds in won
|
|
5.0
|
|
|
250,000
|
|
|
|
300,000
|
|
Corporate bonds in foreign currency
|
|
|
|
|
|
|
|
|
185,920
|
|
Long-term debts in foreign currency of US$ 91million, CNY 100 million (2006: US$ 245 million)
|
|
6ML + 1.20,
3ML + 0.99 ~ 1.35
5.28 - 5.83
|
|
|
98,205
|
|
|
|
42,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409,972
|
|
|
|
567,799
|
|
Less: Discount on debentures
|
|
|
|
|
(890
|
)
|
|
|
(4,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
409,082
|
|
|
(Won)
|
563,630
|
|
|
|
|
|
|
|
|
|
|
|
|
27
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
14.
|
Long-Term Debts and Debentures
|
Long-term debts and
debentures as of December 31, 2007 and 2006, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
Annual interest
rates (%) as of
December 31, 2007
|
|
2007
|
|
|
2006
|
|
Won currency debentures
|
|
|
|
|
|
|
|
|
|
|
Non-guaranteed, payable through 2010
|
|
3.5 ~ 5.0
|
|
(Won)
|
1,180,000
|
|
|
(Won)
|
1,550,000
|
|
Private debentures, payable through 2011
|
|
5.3 ~ 5.89
|
|
|
600,000
|
|
|
|
600,000
|
|
Less: Current portion
|
|
|
|
|
(250,000
|
)
|
|
|
(300,000
|
)
|
Discounts on debentures
|
|
|
|
|
(8,636
|
)
|
|
|
(16,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,521,364
|
|
|
|
1,833,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency debentures
|
|
|
|
|
|
|
|
|
|
|
Floating rate notes, payable through 2007 (2006 : US$ 200 million)
|
|
|
|
|
|
|
|
|
185,920
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion
|
|
|
|
|
|
|
|
|
(185,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds
¹
|
|
|
|
|
|
|
|
|
|
|
US dollar-denominated bond, payable through 2012 of US$ 550million (2006: US$ 475 million)
|
|
|
|
|
511,555
|
|
|
|
483,780
|
|
Add : Call premium
|
|
|
|
|
85,788
|
|
|
|
84,613
|
|
Less : Discount on debentures
|
|
|
|
|
(2,237
|
)
|
|
|
(2,139
|
)
|
Conversion right adjustment
|
|
|
|
|
(118,323
|
)
|
|
|
(80,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
476,783
|
|
|
|
485,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
1,998,147
|
|
|
(Won)
|
2,319,391
|
|
|
|
|
|
|
|
|
|
|
|
|
Won currency loans
|
|
|
|
|
|
|
|
|
|
|
General loans
|
|
5.88 ~ 6.34
|
|
(Won)
|
109,117
|
|
|
(Won)
|
238,383
|
|
|
|
4.25
|
|
|
18,982
|
|
|
|
14,634
|
|
Less : Current portion
|
|
|
|
|
(61,767
|
)
|
|
|
(39,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,332
|
|
|
|
213,750
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency loans
|
|
|
|
|
|
|
|
|
|
|
General loans
|
|
5.28 ~ 5.83,
6ML Euribor + 0.6,
6ML + 0.69 ~ 1.2,
3ML + 0.66 ~ 1.35,
3ML +
0.35 ~ 0.53,
6ML + 0.41
|
|
|
1,025,658
|
|
|
|
816,459
|
|
Less : Current portion
|
|
|
|
|
(98,205
|
)
|
|
|
(42,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
927,453
|
|
|
|
773,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
993,785
|
|
|
(Won)
|
987,597
|
|
|
|
|
|
|
|
|
|
|
|
|
28
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
¹
|
On April 19, 2005, the Company issued US dollar-denominated convertible bonds totaling US$475 million, with a zero coupon rate. On or after June 27, 2005 through
April 4, 2010, the bonds are convertible into common shares at a conversion price of (Won)58,251 per share of common stock, subject to adjustment based on certain events. The bonds will mature in five years from the issue date and will be
repaid at 117.49% of the principal amount at maturity. The bondholders have a put option to be repaid at 108.39% of the principal amount on October 19, 2007. On September 19, 2007, put option for US$459.6 million was exercised and bonds
were paid on October 19, 2007. On the same date, the Company exercised its call option to pay off the rest of convertible bonds amounting to US$15.4 million which were paid in November 2007. For the year ended December 31, 2007, the
Company recorded loss on redemption of debentures of (Won)19,216 million due to the redemption of convertible bonds.
|
On
April 18, 2007, the Company issued US dollar-denominated convertible bonds totalling US$550 million, with a zero coupon rate. On or after April 19, 2008 through April 3, 2012, the bonds are convertible into common shares at a
conversion price of (Won)49,070 per share of common stock, subject to adjustment based on certain events. The bonds will mature in five years from the issue date and will be repaid at 116.77 % of their principal amount at maturity. The
bondholders have a put option to be repaid at 109.75 % of their principal amount on the day in three years from the issue date. As of December 31, 2007, the number of shares convertible from the outstanding convertible bonds is 10,464,234.
The Company is entitled to exercise a call option after three years from the closing date at the amount of the principal and interests, calculated at 3.125% of the yield to maturity from the closing date to the repayment date. The call option can be
exercised only when the market price of the common shares on each of 20 trading days in 30 consecutive trading days ending on the trading day immediately prior to the date upon which notice of such redemption is published exceeds at least 130% of
the conversion price. In addition, in the event that at least 90% of the initial principal amount of the bonds have been redeemed, converted, or purchased and cancelled, the remaining bonds may also be redeemed, at the Companys option, at the
amount of the principal and interests from the closing date to the repayment date prior to their maturity.
As of December 31, 2007,
the foreign currency loans denominated in U.S. dollars, Chinese yuan and EUR amounted to US$ 978 million , CNY 100 million and EUR 70 million (2006 : US$ 845 million and CNY 260 million), respectively.
The aggregate annual maturities of long-term debts outstanding as of December 31, 2007, exclusive of adjustments relating to discounts, are as
follows:
(in millions of Korean won)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
year ending
December 31,
|
|
Won
currency
debentures
|
|
Won
currency
loans
|
|
Convertible
bonds
|
|
Foreign
currency
loans
|
|
Total
|
2009
|
|
(Won)
|
530,000
|
|
(Won)
|
40,451
|
|
(Won)
|
|
|
(Won)
|
40,655
|
|
(Won)
|
611,106
|
2010
|
|
|
600,000
|
|
|
9,873
|
|
|
|
|
|
72,102
|
|
|
681,975
|
2011
|
|
|
400,000
|
|
|
3,797
|
|
|
|
|
|
512,580
|
|
|
916,377
|
2012
|
|
|
|
|
|
3,796
|
|
|
511,555
|
|
|
263,957
|
|
|
779,308
|
2013
|
|
|
|
|
|
3,796
|
|
|
|
|
|
38,159
|
|
|
41,955
|
Thereafter
|
|
|
|
|
|
4,619
|
|
|
|
|
|
|
|
|
4,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
1,530,000
|
|
(Won)
|
66,332
|
|
(Won)
|
511,555
|
|
(Won)
|
927,453
|
|
(Won)
|
3,035,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
The Company entered into various lease
agreements for the rental of certain machinery and equipment. The Company accounts for these leases as operation leases, under which lease payments are charged to expense as incurred.
As of December 31, 2007, future lease payments under these operating lease agreements are as follows:
(in millions of Korean won)
|
|
|
|
For the year
ended December 31,
|
|
Annual
payment
|
2008
|
|
(Won)
|
1,461
|
2009
|
|
|
775
|
2010
|
|
|
428
|
2011
|
|
|
90
|
2012
|
|
|
3
|
|
|
|
|
Total
|
|
(Won)
|
2,757
|
|
|
|
|
16.
|
Accrued Severance Benefits
|
Changes in accrued
severance benefits for the years ended December 31, 2007 and 2006, consist of the following:
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Balance at the beginning of the year
|
|
(Won)
|
136,792
|
|
|
(Won)
|
112,010
|
|
Actual severance payments
|
|
|
(48,202
|
)
|
|
|
(33,932
|
)
|
Transferred from / to affiliated companies, net
|
|
|
2,117
|
|
|
|
3,531
|
|
Provision for severance benefits
|
|
|
62,828
|
|
|
|
55,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,535
|
|
|
|
136,792
|
|
Cumulative deposits to National Pension Fund
|
|
|
(530
|
)
|
|
|
(640
|
)
|
Severance insurance deposit
|
|
|
(99,509
|
)
|
|
|
(54,267
|
)
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
(Won)
|
53,496
|
|
|
(Won)
|
81,885
|
|
|
|
|
|
|
|
|
|
|
The severance benefits are funded approximately 64.8% as of December 31, 2007(2006 : 39.7%),
through severance insurance deposits for the payment of severance benefits, which are deducted from accrued severance benefits liabilities. The beneficiaries of the severance insurance deposits are the Companys employees.
30
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
17.
|
Stock Appreciation Plan
|
On April 7, 2005, the
Company granted 450,000 shares of stock appreciations rights (SARs) to certain executives. Under the terms of this plan, executives, upon exercising their SARs, are entitled to receive cash equal to the excess of the market price of the
Companys common stock over the exercise price of (Won) 44,050 per share. The exercise price decreased from (Won)44,260 to (Won)44,050 per share due to the additional issuance of common stock in 2005. These SARs are exercisable starting
April 8, 2008, through April 7, 2012. Additionally, when the increase rate of the Companys share price is the same or less than the increase rate of the Korea Composite Stock Price Index (KOSPI) over the three-year period
following the grant date, only 50% of the initially granted shares can be exercised.
The options activities under the SARs for the year
ended December 31, 2007 and 2006, consist of the following:
|
|
|
|
|
|
|
2007
|
|
2006
|
Beginning number of shares under SARs
|
|
260,000
|
|
410,000
|
Options granted
|
|
|
|
|
Options cancelled/expired¹
|
|
40,000
|
|
150,000
|
|
|
|
|
|
Ending number of shares under SARs
|
|
220,000
|
|
260,000
|
|
|
|
|
|
|
¹
|
Options were cancelled due to the retirement of several executive officers.
|
The Company recognized compensation costs of (Won)560 million for the year ended December 31, 2007 (2006 : nil).
18.
|
Commitments and Contingencies
|
As of
December 31, 2007, the Controlling Company has bank overdraft agreements with various banks amounting to (Won)59,000 million.
As of
December 31, 2007, the Controlling Company has a revolving credit facility agreement with several banks totaling (Won)200,000 million and US$ 100 million.
As of December 31, 2007, the Controlling Company has agreements with several banks for U.S. dollar denominated accounts receivable negotiating facilities for up to US$ 1,143.5 million. The Controlling Company has
agreements with several banks in relation to the opening of letters of credit amounting to (Won)90,000 million and US$ 35.5 million.
The
Controlling Company receives repayment guarantees from ABN AMRO Bank amounting to US$ 8.5 million relating to tax payments in Poland.
As of December 31, 2007, the Controlling Company entered into a payment guarantee agreements with a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR 90 million term loan credit facility of
LG.Philips LCD Poland Sp. z o.o. LG.Philips LCD America, Inc. and other subsidiaries have entered into short-term facility agreements of
31
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
up to US$ 77 million, EUR 3.6 million, and JP¥ 5,200 million with Comerica Bank and other various banks. LG.Philips LCD Japan Co., Ltd.
and LG.Philips LCD Taiwan Co., Ltd. are provided with repayment guarantees from UFJ Bank and ABN AMRO Bank amounting to JP¥1,300 million and US$ 4 million, respectively, relating to their local tax payments.
As of December 31, 2007, in relation to its TFT-LCD business, the Company has technical license agreements with Hitachi and others, and has trademark
license agreements with LG Corporation and Koninklijke Philips Electronics N.V.
The Company is involved in several legal proceedings and
claims arising in the ordinary course of business. On August 29, 2002, the Company filed a complaint against Chunghwa Picture Tubes, Tatung Company and Tatung Co. of America, alleging patent infringement relating to liquid crystal displays and
the manufacturing process of TFT-LCDs in the United States District Court for the Central District of California. On November 21, 2006, the Jury in California issued a verdict that Chunghwa Picture Tubes, Tatung Company and Tatung Co. of
America had willfully infringed a patent owned by the Company, and awarded the Company US$53.5 million in damages. On September 12, 2007, the United States District Court in California granted the Companys request for enhanced damages,
interest for the damages, and additional damages of continuing infringement and legal fees. On September 17, 2007, the United States District Court in California granted the Companys request for permanent injunction against Chunghwa
Picture Tubes to stop sale or import of infringing products in the United States.
On May 27, 2004, the Company filed a complaint in
the United States District Court for the District of Delaware against Tatung Co., the parent company of Chunghwa Picture Tubes, and ViewSonic Corp., and others claiming patent infringement of rear mountable liquid crystal display devices.
On January 10, 2005, Chunghwa Picture Tubes filed a complaint for patent infringement against LG Electronics Inc. and the Company in
the United States District Court for the Central District of California. On March 29, 2007, the United States District Court for the Central District of California dismissed the case without prejudice.
On May 13, 2005, the Company also filed a complaint against Chunghwa Picture Tubes, Tatung Company and ViewSonic Corporation, alleging patent
infringement related to liquid crystal display and the manufacturing process of TFT-LCDs in the United States District of Delaware. On July 27, 2006, the Jury in Delaware issued a verdict that Chunghwa Picture Tubes had willfully infringed a
patent owned by the Company, and awarded the Company US$52.4 million in damages.
On November 26, 2007, the Company and Chunghwa
Picture Tubes signed a settlement and patent agreement regarding the dismissal of two pending claims, and a cross licensing agreement allowing the companies to share patented technology. As part of the settlement, Chunghwa Picture Tubes will pay a
settlement payment to the Company in compensation. The settlement payment is included in commission earned under non-operating income.
On
January 9, 2006, New Medium Technology LLC, AV Technologies LLC, IP Innovation LLC, and Technology Licensing Corporation filed a complaint for patent infringement against the Company in the United States District Court for the Northern District
of Illinois. On June 28, 2007, the Company settled with IP Innovation LLC and Technology Licensing Corporation, and the case was dismissed on July 6, 2007.
32
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
On December 1, 2006, the Company filed a complaint against Chi Mei Optoelectronics Corp., AU
Optronics Corp., Tatung Company, ViewSonic Corp. and others alleging patent infringement related to liquid crystal display and manufacturing process for TFT-LCDs in the United States District Court for the District of Delaware. On March 8,
2007, AU Optronics Corp. countersued the Company in the United States District Court for the Western District of Wisconsin, but the case was transferred to United States District Court for the District of Delaware due to the Companys motion to
transfer. On May 4, 2007, Chi Mei Optoelectronics Co. countersued the Company for patent infringement in the United States District Court for the Eastern District of Texas.
On December 6, 2007, the Company and Tatung Co. signed a settlement agreement regarding the dismissal of pending claims. On January 19, 2008,
the Company and ViewSonic Corp. signed a settlement agreement regarding the dismissal of pending claims.
On April 14, 2006, Positive
Technologies, Inc. filed a complaint in the United States District Court for the Eastern District of Texas against, among others, several of the Companys customers, including BenQ America Corp., Hitachi America Ltd., Panasonic Corp. of North
America, Philips Electronics North America Corp. and Toshiba America, Inc. for alleged infringement of two of its patents relating to LCD displays. Positive Technologies, Inc. is seeking, among other things, damages for past infringement. On
March 7, 2007, the United States District Court for the Eastern District of Texas granted the Companys intervention in the patent infringement case brought by Positive Technologies, Inc.
On February 2, 2007, Anvik Corporation filed a patent infringement case against the Company, along with other LCD manufacturing companies, in
connection with the usage of photo-masking equipment manufactured by Nikon Corporation.
The Companys management does not expect that
the outcome in any of these legal proceedings and claims, individually or collectively, will have any material adverse effect on the Companys financial condition, results of operations or cash flows.
The Company is currently under investigation by the fair trade or antitrust authorities in Korea, Japan, US and other markets with respect to possible
anti-competitive activities in the LCD industry. As of December 31, 2007, the Company, along with a number of other companies in the LCD industry, has been named as defendants in a number of purported federal class actions in the United States
alleging that the defendants violated the antitrust laws in connection with the sale of LCD panels.
In February 2007, the Company and
certain of its officers and directors have been named as defendants in a federal class action in the United States by the shareholders of the Company alleging violations of the U.S. Securities Exchange Act of 1934, as amended, by the Company and
certain of its officers and directors in connection with possible anti-competitive activities in the LCD industry. The Company and the officers and directors intend to defend themselves vigorously in this matter.
Each of these matters remains in the very early stages and the Company is not in a position to predict their outcome. However, the Company intends to
defend itself vigorously in these matters.
33
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
The Company enters into foreign
currency forward contracts to manage the exposure to changes in currency exchange rates in accordance with its foreign currency risk management policy. The use of foreign currency forward contracts allows the Company to reduce its exposure to the
risk that the eventual Korean won cash outflows resulting from the sale of products, capital expenditures, purchasing of materials and debt service will be adversely affected by changes in exchange rates.
A summary of said contracts is as follows :
(in millions)
|
|
|
|
|
|
|
|
|
|
|
Contracting party
|
|
Selling
position
|
|
Buying
position
|
|
Contract foreign
exchange rate
|
|
Maturity date
|
|
|
|
|
|
ABN Amro Bank and others
|
|
US$
|
1,550
|
|
(Won)
|
1,420,488
|
|
(Won)898.9:US$1~
(Won)938.8:US$1
|
|
January 2, 2008
March 3, 2008
|
|
|
|
|
|
Woori Bank and others
|
|
EUR
|
80
|
|
(Won)
|
104,989
|
|
(Won)1,297.76:EUR1~
(Won)1,352.36:EUR1
|
|
January 2, 2008
February 27, 2008
|
|
|
|
|
|
BNP Paribas and others
|
|
(Won)
|
39,934
|
|
JP¥
|
5,000
|
|
(Won)7.922:JP¥1~
(Won)8.052:JP¥1
|
|
January 14, 2008
February 14, 2008
|
|
|
|
|
|
ABN Amro Bank and others
|
|
US$
|
87
|
|
JP¥
|
10,000
|
|
JP¥113.46:US$1~
JP¥116.05:US$1
|
|
January 14, 2008
February 20, 2008
|
As of December 31, 2007, the Company recorded unrealized gains and losses on outstanding
foreign currency forward contracts of (Won)4,610 million and (Won) 34,974 million, respectively. Total unrealized gains and losses of (Won)2,544 million and (Won)21,409 million, respectively, were charged to operations for the year ended
December 31, 2007, as these contracts did not meet the requirements for a cash flow hedge. Net unrealized gains and losses, net of related taxes, incurred relating to cash flow hedges from forecasted exports and the purchase of materials, were
recorded as accumulated other comprehensive income.
The forecasted hedged transactions are expected to be completed on March 3, 2008.
The aggregate amount of all deferred gains and losses of (Won)2,066 million and (Won)13,565 million, respectively, recorded net of tax under accumulated other comprehensive income, are expected to be included in the determination of gain and loss
within a year from December 31, 2007.
For the year ended December 31, 2007, the Company recorded realized exchange gains of
(Won)55,132 million (2006: (Won)246,904 million) on foreign currency forward contracts upon settlement, and realized exchange losses of (Won)53,562 million (2006 : (Won)78,768 million).
34
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
The Company entered into cross-currency swap contracts to manage the exposure to changes in currency
exchange rates in accordance with its foreign currency risk management policy and to manage the exposure to changes in interest rates related to floating rate notes.
A summary of these contracts is as follows:
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Contracting party
|
|
Buying position
|
|
Selling position
|
|
Contract foreign
exchange rate
|
|
|
Maturity date
|
Kookmin Bank and others
|
|
US$
|
150
|
|
|
|
|
3M Libor
3M Libor+ 0.53%
|
~
|
|
Aug. 29, 2011
Jan. 31, 2012
|
|
|
|
|
|
(Won)
|
143,269
|
|
4.54% - 5.35%
|
|
|
|
As of December 31, 2007, no unrealized gains and unrealized losses of (Won) 3,452 million
were recognized as accumulated other comprehensive income as these contracts fulfilled the requirements for hedge accounting for financial statement purposes, while unrealized losses of (Won)(671) million were charged to current income as these
contracts did not fulfill those requirements.
For the year ended December 31, 2007, the Company recorded realized gains of (Won)919
million (2006: (Won) 361 million) and no realized loss (2006: (Won) 26,174 million) on cross-currency swap contracts upon settlement.
The
Company entered into interest rate swap contracts to manage the exposure to changes in interest rates related to floating rate notes.
A
summary of these contracts is as follows:
(in millions)
|
|
|
|
|
|
|
|
|
|
Contracting party
|
|
Contract
Amount
|
|
Contract Foreign Exchange Rate
|
|
Maturity date
|
SC First Bank
|
|
US$
|
150
|
|
Accept floating rate
Pay fixed rate
|
|
6 M Libor
5.375% -5.644%
|
|
May 21, 2009
May 24, 2010
|
As of December 31, 2007, unrealized losses of (Won)4,910 million were recognized as
accumulated other comprehensive income as these contracts fulfilled the requirements for hedge accounting for financial statement purposes.
For the year ended December 31, 2007, the Company recorded realized gains of (Won)4 million (2006 : (Won)6 million) and realized losses of (Won)257 million (2006 : (Won)27 million) on interest rate swap contracts upon settlement.
35
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
The Company entered into option contracts to manage the exposure to changes in currency exchange
rates in accordance with its foreign currency risk management policy. These transactions did not meet the requirements for hedge accounting for financial statement purposes. Therefore, the resulting realized and unrealized gains or losses, measured
by quoted market prices, are recognized in current income as gains or losses as the exchange rates change.
A summary of such contracts
follows:
(in millions)
|
|
|
|
|
|
|
|
|
|
Contracting party
|
|
USD Put Buying
|
|
USD Call Selling
|
|
Strike Price
|
|
Maturity date
|
KDB and others
|
|
US$
|
180
|
|
US$ 180
|
|
(Won)917.00:US$1 -
(Won)932.00:US$1
|
|
Jan. 11 , 2008 -
Mar. 31, 2008
|
(in millions)
|
|
|
|
|
|
|
|
|
Contracting party
|
|
JPY Call
Buying
|
|
JPY Put
Selling
|
|
Strike Price
|
|
Maturity date
|
Citibank and others
|
|
JP¥ 10,000
|
|
JP¥ 10,000
|
|
(Won)7.850:JP¥1 -
(Won)8.300:JP¥1
|
|
Jan. 11, 2008 -
Feb. 14, 2008
|
As of December 31, 2007, unrealized gains of (Won) 4,080 million and unrealized losses of
(Won) 775 million were charged to current income, as these contracts did not fulfill the requirements for hedge accounting for financial statement purposes.
For the year ended December 31, 2007, the Company recorded realized gains of (Won)54 million (2006: nil) upon settlement of target forward option contracts, and realized gains of (Won)5,808 million and losses of
(Won)832 million (2006 : nil) upon settlement of range forward options.
On February 28, 2007, at their
Annual General Meeting, the shareholders approved the increase in the authorized shares from 400 million to 500 million. The number of issued common shares as of December 31, 2007 and 2006, is 357,815,700.
There was no issuance and other movement in common stock from January 1, 2006 to December 31, 2007.
36
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
21.
|
Capital Surplus and Retained Earnings
|
Capital
surplus as of December 31, 2007 and 2006, consists of:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Additional paid in capital
|
|
(Won)
|
2,251,113
|
|
(Won)
|
2,251,113
|
Conversion right¹
|
|
|
59,958
|
|
|
24,059
|
|
|
|
|
|
|
|
|
|
(Won)
|
2,311,071
|
|
(Won)
|
2,275,172
|
|
|
|
|
|
|
|
Retained earnings as of
December 31, 2007 and 2006, consist of:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Legal reserve
|
|
(Won)
|
60,086
|
|
(Won)
|
60,086
|
Reserve for business rationalization
|
|
|
68,251
|
|
|
68,251
|
Unappropriated retained earnings
|
|
|
4,055,063
|
|
|
2,711,036
|
|
|
|
|
|
|
|
|
|
(Won)
|
4,183,400
|
|
(Won)
|
2,839,373
|
|
|
|
|
|
|
|
The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal
reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued capital stock. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock or used to reduce
accumulated deficit, if any, with the ratification of the Controlling Companys majority shareholders.
22.
|
Accumulated other comprehensive income (loss)
|
Accumulated other comprehensive income as of December 31, 2007 and 2006, consists of:
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Overseas subsidiary translation adjustment
1
|
|
(Won)
|
20,222
|
|
|
(Won)
|
(26,550
|
)
|
Gain on valuation of derivative instruments
1
|
|
|
1,498
|
|
|
|
24,423
|
|
Loss on valuation of derivative instruments
1
|
|
|
(15,897
|
)
|
|
|
(11,821
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
5,823
|
|
|
(Won)
|
(13,948
|
)
|
|
|
|
|
|
|
|
|
|
37
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
Income tax expense (benefit) for the
years ended December 31, 2007 and 2006, consists of:
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Current accrued income taxes
|
|
(Won)
|
86,321
|
|
|
(Won)
|
7,589
|
|
Changes in deferred income taxes from temporary differences
|
|
|
(3,623
|
)
|
|
|
(21,015
|
)
|
Changes in deferred income taxes from tax credit
|
|
|
(126,711
|
)
|
|
|
16,017
|
|
Changes in deferred income taxes added to shareholders equity
1
|
|
|
(5,548
|
)
|
|
|
(6,261
|
)
|
Changes in deferred income taxes from accumulated deficit carryforward
|
|
|
248,493
|
|
|
|
(248,493
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
(Won)
|
198,932
|
|
|
(Won)
|
(252,163
|
)
|
|
|
|
|
|
|
|
|
|
|
1
|
Changes in deferred income taxes added to shareholders equity as of
December 31, 2007 and 2006, are as follows:
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Changes in deferred income taxes
|
|
|
|
|
|
|
|
|
Overseas subsidiary translation adjustment
|
|
(Won)
|
(2,173
|
)
|
|
(Won)
|
(426
|
)
|
Gain on valuation of derivative instruments
|
|
|
8,696
|
|
|
|
(676
|
)
|
Loss on valuation of derivative instruments
|
|
|
1,546
|
|
|
|
(1,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
8,069
|
|
|
|
(2,183
|
)
|
|
|
|
|
|
|
|
|
|
Changes in income tax
|
|
|
|
|
|
|
|
|
Conversion rights
|
|
|
(13,617
|
)
|
|
|
(4,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,617
|
)
|
|
|
(4,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
(5,548
|
)
|
|
(Won)
|
(6,261
|
)
|
|
|
|
|
|
|
|
|
|
The income tax effect of temporary differences, including available net operating loss
carryforwards and tax credits, comprising the deferred income tax assets and liabilities as of December 31, 2007 and 2006, are as follows:
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Inventories
|
|
(Won)
|
5,978
|
|
|
(Won)
|
21,267
|
|
Derivatives
|
|
|
3,898
|
|
|
|
492
|
|
Property, plant and equipment
|
|
|
63,733
|
|
|
|
59,974
|
|
Warranty liabilities
|
|
|
12,348
|
|
|
|
8,840
|
|
Tax credit carryforward
|
|
|
403,670
|
|
|
|
436,486
|
|
Deferred income taxes from net losses carryforward
|
|
|
|
|
|
|
248,493
|
|
Deferred income taxes added to shareholders equity
|
|
|
6,303
|
|
|
|
(10,892
|
)
|
Others
|
|
|
(11,946
|
)
|
|
|
(2,990
|
)
|
Deduction of unrealizable deferred income tax assets
|
|
|
|
|
|
|
(159,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
483,984
|
|
|
(Won)
|
602,143
|
|
|
|
|
|
|
|
|
|
|
38
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
Available tax credits as of December 31, 2007, amounted to (Won)448,522 million. Tax credits can
be carried forward up to four or five years under the Corporate Income Tax Law in Korea.
The reconciliation between income before income
taxes and taxable income (loss) for the years ended December 31, 2007 and 2006, is as follows:
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Income (Loss) before income taxes
|
|
(Won)
|
1,542,959
|
|
|
(Won)
|
(1,021,476
|
)
|
Add (deduct) :
|
|
|
|
|
|
|
|
|
Temporary differences
|
|
|
(12,370
|
)
|
|
|
127,585
|
|
Permanent differences
|
|
|
100,025
|
|
|
|
12,419
|
|
|
|
|
|
|
|
|
|
|
Taxable income (loss)
|
|
(Won)
|
1,630,614
|
|
|
(Won)
|
(881,472
|
)
|
|
|
|
|
|
|
|
|
|
The statutory income tax rate, including resident tax surcharges, applicable to the Controlling
Company is 27.5% for the years ended December 31, 2007 and 2006. The statutory income tax rates applicable to overseas subsidiaries are approximately 15.0%~34.0%.
Under the Foreign Investment Promotion Act of Korea, from September 1999, the Controlling Company is entitled to an exemption from income taxes in proportion to the percentage of foreign equity for seven years
following the registration of each foreign equity investment, and at one-half of that percentage for the subsequent three years.
The
effective income tax rates applicable to the Company differs from the statutory income tax rate due to temporary differences in recognizing certain income and expenses for financial reporting and income tax purposes, and the tax exemption under the
Foreign Investment Promotion Act of Korea. The effective tax rate of the Company for the year ended December 31, 2007, is 12.89% (2006: negative 24.69%).
Changes in accumulated temporary differences for the year ended December 31, 2007, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
January 1, 2007
|
|
|
Increase (decrease)
|
|
|
December 31, 2007
|
Inventories
|
|
(Won)
|
76,962
|
|
|
(Won)
|
(52,726
|
)
|
|
(Won)
|
24,236
|
Derivatives
|
|
|
1,790
|
|
|
|
13,771
|
|
|
|
15,561
|
Property, plant and equipment
|
|
|
196,731
|
|
|
|
193,495
|
|
|
|
390,226
|
Warranty reserve
|
|
|
31,261
|
|
|
|
18,034
|
|
|
|
49,295
|
Others
|
|
|
45,045
|
|
|
|
(12,508
|
)
|
|
|
32,537
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
(Won)
|
351,789
|
|
|
(Won)
|
160,066
|
|
|
(Won)
|
511,855
|
|
|
|
|
|
|
|
|
|
|
|
|
(Addition to) Deduction from capital
|
|
(Won)
|
(39,607
|
)
|
|
(Won)
|
62,529
|
|
|
(Won)
|
22,922
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credit carryforward
|
|
(Won)
|
436,486
|
|
|
(Won)
|
(12,036
|
)
|
|
(Won)
|
448,522
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss carryforward
|
|
(Won)
|
903,610
|
|
|
(Won)
|
(903,610
|
)
|
|
(Won)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
24.
|
Comprehensive Income and Loss
|
Comprehensive income
and loss for the years ended December 31, 2007 and 2006, consist of the following :
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Net income (loss)
|
|
(Won)
|
1,344,027
|
|
|
(Won)
|
(769,313
|
)
|
Gain (loss) on overseas subsidiary translation adjustments (tax effect : (Won)(2,173) million in 2007)
|
|
|
46,772
|
|
|
|
(14,821
|
)
|
Gain on valuation of derivatives (tax effect : (Won)8,696 million in 2007)
|
|
|
(22,925
|
)
|
|
|
(4,870
|
)
|
Loss on valuation of derivatives (tax effect : (Won)1,546 million in 2007)
|
|
|
(4,076
|
)
|
|
|
7,161
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
(Won)
|
1,363,798
|
|
|
(Won)
|
(781,843
|
)
|
|
|
|
|
|
|
|
|
|
Cost of sales for the years ended
December 31, 2007 and 2006, consists of the following :
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
|
2006
|
|
Finished goods
|
|
|
|
|
|
|
|
|
Beginning balance of inventories
|
|
(Won)
|
572,210
|
|
|
(Won)
|
329,378
|
|
Cost of goods manufactured
|
|
|
11,964,674
|
|
|
|
11,157,798
|
|
Ending balance of inventories
|
|
|
(453,034
|
)
|
|
|
(572,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
12,083,850
|
|
|
|
10,914,966
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
31,513
|
|
|
|
17,350
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
12,115,363
|
|
|
(Won)
|
10,932,316
|
|
|
|
|
|
|
|
|
|
|
40
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
26.
|
Selling and Administrative Expenses
|
Selling and
administrative expenses for the years ended December, 2007 and 2006, consist of the following:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Salaries
|
|
(Won)
|
111,150
|
|
(Won)
|
68,393
|
Severance benefits
|
|
|
8,574
|
|
|
5,612
|
Employee benefits
|
|
|
12,888
|
|
|
9,274
|
Freight expenses
|
|
|
194,081
|
|
|
188,796
|
Rental expenses
|
|
|
10,947
|
|
|
13,777
|
Commission expenses
|
|
|
93,090
|
|
|
71,761
|
Entertainment expenses
|
|
|
4,080
|
|
|
3,508
|
Depreciation
|
|
|
15,020
|
|
|
7,003
|
Taxes and dues
|
|
|
6,693
|
|
|
4,317
|
Advertising expenses
|
|
|
30,433
|
|
|
24,143
|
Promotion expenses
|
|
|
17,487
|
|
|
11,301
|
Development costs
|
|
|
3,260
|
|
|
1,553
|
Research expenses
|
|
|
102,864
|
|
|
81,083
|
Bad debt expenses
|
|
|
6,638
|
|
|
|
Product warranty expenses and SVC expenses
|
|
|
77,852
|
|
|
46,013
|
Others
|
|
|
37,539
|
|
|
34,388
|
|
|
|
|
|
|
|
|
|
(Won)
|
732,596
|
|
(Won)
|
570,922
|
|
|
|
|
|
|
|
Earnings (Loss) per share are
computed by dividing net income(loss) by the weighted-average number of common shares outstanding during the year. Ordinary income(loss) per share is computed by dividing ordinary income(loss) allocated to common stock, which is net income allocated
to common stock as adjusted by extraordinary gains or losses, net of related income taxes, by the weighted-average number of common shares outstanding during the year.
Earnings (Loss) per share for the three-month periods and years ended December 31, 2007 and 2006, are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except for per share amount)
|
|
For the three-month
periods ended
December 31,
|
|
|
For the years
ended December 31,
|
|
|
2007
|
|
2006
|
|
|
2007
|
|
2006
|
|
Net income(loss) as reported on the statements of income
|
|
(Won)
|
759,908
|
|
(Won)
|
(174,345
|
)
|
|
(Won)
|
1,344,027
|
|
(Won)
|
(769,313
|
)
|
Weighted-average number of common shares outstanding
|
|
|
358
|
|
|
358
|
|
|
|
358
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings(loss) per share
|
|
(Won)
|
2,124
|
|
(Won)
|
(487
|
)
|
|
(Won)
|
3,756
|
|
(Won)
|
(2,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings(loss) per share
|
|
(Won)
|
2,076
|
|
(Won)
|
(487
|
)
|
|
(Won)
|
3,716
|
|
(Won)
|
(2,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
Diluted earnings (Loss) per share for the three-month period and year ended December 31, are
calculated as follows:
|
|
|
|
|
|
|
(in millions, except for per share amount)
|
|
For the three-month
period ended
December 31, 2007
|
|
For the year
ended
December 31, 2007
|
Net income allocated to common stock
|
|
(Won)
|
759,908
|
|
(Won)
|
1,344,027
|
Add : Interest expense on convertible bonds¹
|
|
|
4,765
|
|
|
13,186
|
Diluted net income allocated to common stock
|
|
|
764,673
|
|
|
1,357,213
|
|
|
|
|
|
|
|
Weighted average number of common shares and diluted securities outstanding during the period
|
|
|
368
|
|
|
365
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
(Won)
|
2,076
|
|
(Won)
|
3,716
|
|
|
|
|
|
|
|
The details of cash dividends for the
year ended December 31, 2007, are as follows:
|
|
|
|
|
(in millions)
|
|
2007
|
|
Number of outstanding shares
|
|
|
357,815,700
|
|
Dividend ratio
|
|
|
15
|
%
|
Dividend amount
|
|
(Won)
|
268,362
|
|
The dividend payout ratio and dividend yield ratio for the year ended December 31, 2007, are
as follows:
|
|
|
|
|
|
2007
|
|
Dividend payout ratio
|
|
19.97
|
%
|
Dividend yield ratio
|
|
1.52
|
%
|
42
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
29.
|
Related Party Transactions
|
The ultimate parent
company is LG Corporation and the parent company of the Company is LG Electronics Inc., which is responsible for the consolidated financial statements.
Significant transactions which occurred in the normal course of business with related companies for the years ended December 31, 2007 and 2006, and the related account balances outstanding as of December 31,
2007 and 2006, are summarized as follows:
Between LG.Philips LCD and consolidated subsidiaries
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Sales
1
|
|
(Won)
|
11,356,386
|
|
(Won)
|
8,632,419
|
Purchases
|
|
|
370,669
|
|
|
149,502
|
Accounts receivable
|
|
|
1,921,164
|
|
|
1,167,626
|
Accounts payable
|
|
|
67,342
|
|
|
27,449
|
|
¹
|
Includes sale of property, plant and equipment amounting to (Won)35,608 million.
|
Between consolidated subsidiaries
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Accounts receivable and payable
|
|
(Won)
|
4,007
|
|
(Won)
|
3,867
|
Sales and purchases
|
|
|
54,619
|
|
|
1,393,359
|
In the normal course of business, the Company purchases raw materials from, and sells its products
to, shareholder companies and other companies within the LG Group. Such transactions and the related accounts receivable and payable, excluding consolidated subsidiaries, during the year ended December 31, 2007 and 2006, and as of
December 31, 2007 and 2006, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
Sales¹
|
|
Purchases
1
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
Parents company
2
|
|
(Won)
|
2,516,874
|
|
(Won)
|
1,729,344
|
|
(Won)
|
81,616
|
|
(Won)
|
134,236
|
Companies that has significant influence over the Company
3
|
|
|
1,704,297
|
|
|
1,331,407
|
|
|
31,011
|
|
|
87,701
|
Equity-method investee
4
|
|
|
|
|
|
6
|
|
|
309,162
|
|
|
162,182
|
Other related parties
5
|
|
|
1,254,798
|
|
|
1,000,729
|
|
|
1,979,849
|
|
|
2,247,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
(Won)
|
5,475,969
|
|
(Won)
|
4,061,486
|
|
(Won)
|
2,401,638
|
|
(Won)
|
2,631,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
Receivables
|
|
Payables
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
Parents company
2
|
|
(Won)
|
400,348
|
|
(Won)
|
138,959
|
|
(Won)
|
26,003
|
|
(Won)
|
13,574
|
Companies that has significant influence over the Company
3
|
|
|
259,580
|
|
|
114,909
|
|
|
8,654
|
|
|
6,411
|
Equity-method investee
4
|
|
|
|
|
|
|
|
|
30,291
|
|
|
22,535
|
Other related parties
5
|
|
|
114,539
|
|
|
73,485
|
|
|
371,079
|
|
|
436,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
(Won)
|
774,467
|
|
(Won)
|
327,353
|
|
(Won)
|
436,027
|
|
(Won)
|
479,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
|
1
|
Includes sale of (Won)85 million and purchases of property, plant and equipment amounting to (Won)302,075 million.
|
|
3
|
LG Corp. , Koninklijke Philips Electronics N.V.
|
|
4
|
Paju Electric Glass Co., Ltd.
|
|
5
|
LG Management Development Institute Co., Ltd., LG Micron Ltd.,
LG Household and
|
Healthcare, LG CNS, LG N-sys, LG Powercom Corp., Serveone, LG Innotek,
LG Telecom Co., Ltd., LG Chem Co., Ltd., LG International, LG Dacom Corporation,
Hi Logistics Co. Ltd., Siltron Inc., Lusem Co., Ltd., and others.
Key management
6
compensation costs for the years ended December 31, 2007 and 2006, consist of:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Officers salaries
|
|
(Won)
|
1,732
|
|
(Won)
|
1,506
|
Post-retirement benefits
|
|
|
688
|
|
|
374
|
Compensation for stock options
|
|
|
560
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
2,980
|
|
(Won)
|
1,880
|
|
|
|
|
|
|
|
|
6
|
Key management refers to the directors who have significant control and responsibilities on the Companys
operations and business. Total ceiling for compensation for such directors in 2007 is (Won)13.4 billion.
|
30.
|
Value Added Information
|
Value added information
for the years ended December 31, 2007 and 2006, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
Cost of Sales
|
|
Selling and
administrative
expenses
|
|
Research and
development
expenses
|
|
Construction-
in-progress
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages
|
|
(Won)
|
591,901
|
|
(Won)
|
111,150
|
|
(Won)
|
45,840
|
|
(Won)
|
214
|
|
(Won)
|
749,105
|
Severance benefits
|
|
|
50,042
|
|
|
8,574
|
|
|
3,691
|
|
|
521
|
|
|
62,828
|
Employee fringe benefits
|
|
|
93,836
|
|
|
12,887
|
|
|
4,932
|
|
|
9
|
|
|
111,664
|
Rent
|
|
|
2,831
|
|
|
10,947
|
|
|
522
|
|
|
|
|
|
14,300
|
Depreciation
1
|
|
|
2,794,790
|
|
|
15,020
|
|
|
20,207
|
|
|
1,296
|
|
|
2,831,313
|
Taxes and dues
|
|
|
7,572
|
|
|
6,693
|
|
|
252
|
|
|
|
|
|
14,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
3,540,972
|
|
(Won)
|
165,271
|
|
(Won)
|
75,444
|
|
(Won)
|
2,040
|
|
(Won)
|
3,783,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2006
|
|
Cost of Sales
|
|
Selling and
administrative
expense
|
|
Research and
development
expenses
|
|
Construction-
in-progress
|
|
Total
|
Salaries and wages
|
|
(Won)
|
549,710
|
|
(Won)
|
68,393
|
|
(Won)
|
26,065
|
|
(Won)
|
10,314
|
|
(Won)
|
654,482
|
Severance benefits
|
|
|
45,833
|
|
|
5,612
|
|
|
2,698
|
|
|
1,040
|
|
|
55,183
|
Employee fringe benefits
|
|
|
92,087
|
|
|
9,274
|
|
|
3,655
|
|
|
1,347
|
|
|
106,363
|
Rent
|
|
|
2,440
|
|
|
13,777
|
|
|
509
|
|
|
|
|
|
16,726
|
Depreciation
1
|
|
|
2,618,279
|
|
|
7,003
|
|
|
13,567
|
|
|
803
|
|
|
2,639,652
|
Taxes and dues
|
|
|
7,477
|
|
|
4,317
|
|
|
216
|
|
|
20
|
|
|
12,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Won)
|
3,315,826
|
|
(Won)
|
108,376
|
|
(Won)
|
46,710
|
|
(Won)
|
13,524
|
|
(Won)
|
3,484,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¹
|
Includes amortization of intangible assets.
|
The Company operates only one
segment, the TFT-LCD division. Export sales represent about 93% of total sales for the year ended December 31, 2007.
The following is
a summary of operations by country based on the location for the years ended December 31, 2007 :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Korea
|
|
|
Asia
|
|
|
America
|
|
|
Europe
|
|
|
Consolidation
Adjustment
|
|
|
Consolidation
|
|
|
Domestic
|
|
Export
|
|
|
|
|
|
|
Total sales
|
|
(Won)
|
1,028,323
|
|
(Won)
|
13,134,808
|
|
|
(Won)
|
7,699,766
|
|
|
(Won)
|
1,561,192
|
|
|
(Won)
|
2,650,445
|
|
|
(Won)
|
(986
|
)
|
|
(Won)
|
26,073,548
|
|
Inter-company sales
|
|
|
|
|
|
(11,301,640
|
)
|
|
|
(302,531
|
)
|
|
|
(698
|
)
|
|
|
(116,713
|
)
|
|
|
|
|
|
|
(11,721,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
(Won)
|
1,028,323
|
|
(Won)
|
1,833,168
|
|
|
(Won)
|
7,397,235
|
|
|
(Won)
|
1,560,494
|
|
|
(Won)
|
2,533,732
|
|
|
(Won)
|
(986
|
)
|
|
(Won)
|
14,351,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
(Won)
|
|
|
|
1,491,135
|
|
|
(Won)
|
12,676
|
|
|
(Won)
|
3,977
|
|
|
(Won)
|
10,466
|
|
|
(Won)
|
(14,247
|
)
|
|
(Won)
|
1,504,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
(Won)
|
|
|
|
13,394,435
|
|
|
(Won)
|
1,766,886
|
|
|
(Won)
|
227,361
|
|
|
(Won)
|
922,059
|
|
|
(Won)
|
(2,530,906
|
)
|
|
(Won)
|
13,779,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.
|
Supplemental Cash Flow Information
|
Significant
transaction not affecting cash flow for the years ended December 31, 2007 and 2006, follows:
|
|
|
|
|
|
|
(in millions of Korean won)
|
|
2007
|
|
2006
|
Other accounts payable arising from the purchase of property, plant and equipment
|
|
(Won)
|
237,648
|
|
(Won)
|
854,019
|
|
|
|
|
|
|
|
45
LG.Philips LCD Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
33.
|
Operating Results for the Final Interim Period
|
Significant operating results for the three-month periods ended December 31, 2007 and 2006, are as follows :
|
|
|
|
|
|
|
|
|
(in millions of Korean won, except per share amount)
|
|
2007
|
|
|
2006
|
|
Sales
|
|
(Won)
|
4,321,864
|
|
|
(Won)
|
3,065,294
|
|
Cost of sales
|
|
|
(3,239,956
|
)
|
|
|
(3,090,235
|
)
|
Operating income (loss)
|
|
|
868,782
|
|
|
|
(176,588
|
)
|
Net income (loss)
|
|
|
759,908
|
|
|
|
(174,345
|
)
|
Basic earnings (loss) per share
|
|
|
2,124
|
|
|
|
(487
|
)
|
Diluted earnings (loss) per share
|
|
|
2,076
|
|
|
|
(487
|
)
|
On January 1, 2008, the
Controlling Company entered into a contract to acquire the Active Matrix-Organic Light Emitting Diodes (AM OLED) business from LG Electronics Inc. its parent company, by taking over the AM OLED business related inventories, intellectual
property rights and employees.
On February 4, 2008, the Board of Directors changed the trade name of the Controlling Company to LG
Display Co., Ltd. This change will be ratified by the shareholders during the 23rd Shareholders Meeting scheduled to be held on February 29, 2008.
46
LG.Philips LCD Co., Ltd.
Non-Consolidated Financial Statements
December 31, 2007 and 2006
LG.Philips LCD Co., Ltd.
Index
December 31, 2007 and 2006
Samil PricewaterhouseCoopers is the Korean member firm of PricewaterhouseCoopers. PricewaterhouseCoopers refers to the
network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
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www.samil.com
Kukje Center Building
191 Hangangno 2-ga, Yongsan-gu
Seoul 140-702, KOREA
(Yongsan P.O. Box 266, 140-600)
|