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 2019

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

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

(Address of principal executive offices)

 

 

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

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes   ☐            No   ☒

 

 

 

Table of Contents

QUARTERLY REPORT

(From January 1, 2019 to March 31, 2019)

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

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

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

Contents

 

  1.   Company      4  
    A.   Name and contact information      4  
    B.   Domestic credit rating      4  
    C.   Capitalization      6  
    D.   Voting rights      6  
    E.   Dividends      6  
  2.   Business      7  
    A.   Business overview      7  
    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      10  
  4.   Production and Equipment      10  
    A.   Production capacity and output      10  
    B.   Production performance and utilization ratio      11  
    C.   Investment plan      11  
  5.   Sales      11  
    A.   Sales performance      11  
    B.   Sales route and sales method      12  
    C.   Purchase orders      13  
  6.   Market Risks and Risk Management      13  
    A.   Market risks      13  
    B.   Risk management      13  
  7.   Derivative Contracts      14  
    A.   Currency risks      14  
    B.   Interest rate risks      14  

 

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Table of Contents
  8.   Major Contracts    14
  9.   Research & Development    15
    A.   Summary of R&D-related expenditures    15
    B.   R&D achievements    15
  10.   Intellectual Property    17
  11.   Environmental and Safety Matters    17
  12.   Financial Information    21
    A.   Financial highlights (Based on consolidated K-IFRS)    21
    B.   Financial highlights (Based on separate K-IFRS)    22
    C.   Consolidated subsidiaries    22
    D.   Status of equity investment    23
  13.   Audit Information    24
    A.   Audit service    24
    B.   Non-audit service    24
  14.   Board of Directors    24
    A.   Members of the board of directors    24
    B.   Committees of the board of directors    24
    C.   Independence of directors    25
  15.   Information Regarding Shares    25
    A.   Total number of shares    25
    B.   Shareholder list    26
  16.   Directors and Employees    26
    A.   Directors    26
    B.   Employees    27
  17.   Other Matters    27
    A.   Legal proceedings    27
    B.   Material events subsequent to the reporting period    28

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.

Credit rating

 

  (1)

Corporate bonds (Domestic)

 

Subject instrument

  

Month of rating

  

Credit rating (1)

  

Rating agency (Rating range)

Corporate bonds    May 2017    AA    NICE Information Service Co., Ltd. (AAA ~ D)
   February 2018
   May 2018
   February 2019    AA-   
   May 2017    AA    Korea Investors Service, Inc. (AAA ~ D)
   October 2017
   May 2018
   February 2019    AA-   
   May 2017    AA    Korea Ratings Corporation (AAA ~ D)
   October 2017
   February 2018
   April 2018
   April 2019    AA-   

 

(1)

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

 

Subject instrument

  

Credit rating

  

Definition

Corporate bonds    AAA    Strongest capacity for timely repayment.
  

 

AA+/AA/AA-

  

 

Very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category

  

 

A+/A/A-

  

 

Strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories.

  

 

BBB+/BBB/BBB-

  

 

Capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity.

  

 

BB+/BB/BB-

  

 

Capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time.

  

 

B+/B/B-

  

 

Lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain.

  

 

CCC

  

 

Lack of capacity for even current repayment and high risk of default.

  

 

CC

  

 

Greater uncertainties than higher ratings.

  

 

C

  

 

High credit risk and lack of capacity for timely repayment.

  

 

D

  

 

Insolvency.

 

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  (2)

Corporate bonds (Overseas)

 

Subject instrument

  

Month of rating

  

Credit rating

  

Rating agency (Rating range)

Corporate bonds (1)    November 2018    AA    Standard & Poor’s Rating Services (AAA ~ D)

 

(1)

Represents credit rating for our overseas corporate bonds guaranteed by the Korea Development Bank.

(2)

Overseas corporate bond credit ratings are generally defined to indicate the following:

 

Subject instrument

  

Credit rating

  

Definition

Corporate bonds    AAA    Highest level of stability.
  

 

AA+/AA/AA-

  

 

Very high level of stability. This stability may be slightly more risky than is the case for the highest rating category but presents no issues.

  

 

A+/A/A-

  

 

High level of stability. There are no issues with repaying the principal, but there are characteristics that could be subject to future deterioration.

  

 

BBB+/BBB/BBB-

  

 

Level of stability is adequate. Current level of stability and profitability is adequate, but requires special attention during times of economic downturns.

  

 

BB+/BB/BB-

  

 

Speculative characteristics. There is no guarantee on future stability. Expected business performance is uncertain.

  

 

B+/B/B-

  

 

Inadequate as an investment target. Ability to make principal repayments or comply with contractual terms and conditions is uncertain.

  

 

CCC/CC/C

  

 

Very low level of stability. Ability to make payments of principal and interest is highly unlikely. Extremely speculative. Currently in default or undergoing a serious problem.

  

 

D

  

 

Bankruptcy.

 

  (3)

Commercial paper

 

Subject instrument

  

Month of rating

  

Credit rating (1)

  

Rating agency (Rating range)

Commercial paper    May 2017    A1    Korea Investors Service, Inc. (A1 ~ D)
   May 2017    A1    Korea Ratings Corporation (A1 ~ D)
   October 2017    A1    Korea Investors Service, Inc. (A1 ~ D)
   December 2017    A1    Korea Ratings Corporation (A1 ~ D)
   May 2018    A1    Korea Investors Service, Inc. (A1 ~ D)
   May 2018    A1    NICE Information Service Co., Ltd. (A1 ~ D)
   November 2018    Cancelled (2)    Korea Investors Service, Inc. (A1 ~ D)
   November 2018    Cancelled (2)    NICE Information Service Co., Ltd. (A1 ~ D)

 

(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.

 

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(2)

Ratings have been cancelled due to repayment of our outstanding commercial paper on October 22, 2018 upon maturity.

 

  C.

Capitalization

 

  (1)

Change in capital stock (as of March 31, 2019)

There were no changes to our issued capital stock during the reporting period ended March 31, 2019.

 

  (2)

Convertible bonds

Not applicable.

 

  D.

Voting rights (as of March 31, 2019)

(Unit: share)

 

Description

   Number of shares  

A. Total number of shares issued (1) :

   Common shares (1)      357,815,700  
   Preferred shares      —    

B. Shares without voting rights:

   Common shares      —    
   Preferred shares      —    

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

   Common shares Preferred shares     

—  

—  

 

 

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

   Common shares Preferred shares     

—  

—  

 

 

E. Shares with restored voting rights:

   Common shares Preferred shares     

—  

—   

 

 

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

   Common shares Preferred shares     

357,815,700

—  

 

 

 

(1)

Authorized: 500,000,000 shares

 

  E.

Dividends

Dividends for the three most recent fiscal years

 

Description (unit)

   2019 Q1      2018      2017  

Par value (Won)

     5,000        5,000        5,000  

Profit (loss) for the year (million Won) (1)

     (60,933 )       (207,239 )       1,802,756  

Earnings (loss) per share (Won) (2)

     (170 )       (579 )       5,038  

Total cash dividend amount for the period (million Won)

     —          —          178,908  

Total stock dividend amount for the period (million Won)

     —          —          —    

Cash dividend payout ratio (%) (3)

     —          —          9.92 % 

Cash dividend yield (%) (4)

   Common shares      —          —          1.69 % 
   Preferred shares      —          —          —    

Stock dividend yield (%)

   Common shares      —          —          —    
   Preferred shares      —          —          —    

Cash dividend per share (Won)

   Common shares      —          —          500  
   Preferred shares      —          —          —    

Stock dividend per share (share)

   Common shares      —          —          —    
   Preferred shares      —          —          —    

 

(1)

Based on profit for the year attributable to the owners of the controlling company.

(2)

Earnings per share is based on par value of W 5,000 per share and is calculated by dividing net income by weighted average number of common shares.

(3)

Cash dividend payout ratio is the percentage that is derived by dividing total cash dividend by profit for the year attributable to the owners of the controlling company.

(4)

Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common shares during the one-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends.

 

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2.

Business

 

  A.

Business overview

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

As of March 31, 2019, in order to support our business activities, we operated TFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.

As of March 31, 2019, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

Consolidated operating results highlights

(Unit: In billions of Won)

 

     2019 Q1      2018      2017 (1)  

Sales Revenue

     5,879        24,337        27,790  

Gross Profit

     633        3,085        5,366  

Operating Profit (loss)

     (132 )       93        2,462  

Total Assets

     35,388        33,176        29,160  

Total Liabilities

     20,098        18,289        14,178  

 

(1)

Figures for 2017 were recorded in accordance with the previously applicable accounting standards, including K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”

 

  B.

Industry

 

  (1)

Industry characteristics

 

  •  

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

 

  •  

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

 

  (2)

Growth Potential

 

  •  

We are focusing on securing profitability through differentiated products such as “Crystal Sound” OLED and “Wallpaper” display panels under our strategic plan to transition our business to center around OLED, which has a strong future growth potential. In the television sector, we are expanding our offerings of premium products such as OLED and UHD products. In particular, with respect to large-sized OLED television display panels, we are continuing to secure additional production capacity of 8.5th generation OLED panels and are planning to further strengthen the fundamentals of our OLED business through building a successful line-up of new products and investments in the 8.5th and 10.5th generation OLED display panel production. In the IT sector, we are increasing the proportion of premium products such as high resolution and wide screen products based on IPS and Oxide technologies. In the mobile sector, we are continuously striving to secure mass production capabilities for 6th generation plastic OLED smartphones through additional investments. We are also strengthening the foundation for the expansion of small- and medium-sized OLED business.

 

  (3)

Cyclicality

 

  •  

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

 

  •  

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

 

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  (4)

Market conditions

 

  •  

Most display panel manufacturers are located in East Asia as set forth below. Chinese panel manufacturers have continued to invest in new fabrication facilities and additional supplies, and although the actual level of oversupply has become less severe than the previously forecast level due to certain delays in investments, the concern over a structural oversupply in the market continues to exist.

 

  a.

Korea: LG Display, Samsung Display, etc.

 

  b.

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

 

  c.

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

 

  d.

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

 

  •  

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

 

     2019 Q1     2018     2017  

Panels for Televisions (1)(2)

     29.5 %      28.3 %      28.1 % 

Panels for Monitors (1)

     30.3 %      30.7 %      36.3 % 

Panels for Notebook Computers (1)

     22.9 %      23.7 %      21.3 % 

Panels for Tablet Computers (1)

     27.7 %      31.0 %      29.1 % 

Total (1)

     28.8 %      28.8 %      29.2 % 

 

(1)

Source: Large-Area Display Market Tracker (IHS Technology). The relevant amounts for the first quarter of 2019 are estimates only, as the actual results for such period have not yet been released.

(2)

Includes panels for public displays.

 

  (5)

Competitiveness and competitive advantages

 

  •  

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

 

  •  

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

 

  •  

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

 

  •  

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

 

  •  

As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing various technologies and products, including display panels with OLED, IPS, in-TOUCH and other technologies. With respect to OLED panels, following our supply of the world’s first 55-inch OLED 3D panels for televisions in January 2013, we have supplied ultra-high definition (“Ultra HD” or “UHD”) OLED panels as well as “Wallpaper” and “Crystal Sound” OLED panels for televisions, plastic OLED panels for smartphones, round OLED panels for wearable devices among others and have shown that we are technologically a step ahead of the competition. With respect to TFT-LCD panels, we are leading the market with our differentiated products with IPS technology, such as our ultra-large and high definition UHD television panels, large sized/borderless monitors, high-resolution/oxide notebooks and automotive and commercial products, and have prepared our production facilities to produce products with in-TOUCH technology.

 

  •  

Moreover, we 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)

 

                         2019 Q1  

Business area

  

Sales type

  

Items (By product)

  

Usage

  

Major
trademark

   Sales
Revenue 		     Percentages
(%) 		 

Display

  

Goods/

Products/ Services/ Other sales

   Televisions    Panels for televisions    LG Display      2,123        36.12 % 
      Desktop monitors    Panels for monitors    LG Display      982        16.70 % 
      Tablet products    Panels for tablets    LG Display      694        11.81 % 
      Notebook computers    Panels for notebook computers    LG Display      626        10.64 % 
      Mobile, etc.    Panels for smartphones, etc.    LG Display      1,454        24.73 % 
              

 

 

    

 

 

 

Total

                 5,879        100.0 % 
              

 

 

    

 

 

 

 

  B.

Average selling price trend of major products

While average selling prices of LCD panels exhibited varying trends according to demand by product category, the average selling price of LCD panels per square meter of net display area shipped in the first quarter of 2019 decreased by approximately 5.5% compared to the fourth quarter of 2018 due to the seasonal influence on our small- and medium-sized panels, which have relatively higher selling prices per square meter of net display area, in our product mix. 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$ / m 2 )

 

Period

   Average Selling Price (1)(2)
(in US$ / m 2 ) 		 

2019 Q1

     528  

2018 Q4

     559  

2018 Q3

     500  

2018 Q2

     501  

2018 Q1

     522  

2017 Q4

     589  

2017 Q3

     600  

2017 Q2

     574  

2017 Q1

     608  

 

(1)

Quarterly average selling price per square meter of net display area shipped.

(2)

Excludes semi-finished products in the cell process.

 

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  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

      Backlights         502        17.0 %     HeeSung Electronics, etc.
      Polarizers         515        17.4 %     LG Chem, etc.
      Printed circuit boards         554        18.7 %     Korea SMT, etc.
Display    Raw materials   

 

Glass

   Display panel manufacturing      294        9.9 %    

Paju Electric Glass Co., Ltd., Asahi Electric Glass Co., Ltd.,

etc.

      Drive IC         215        7.3 %     Silicon Works Co., Ltd., etc.
      Others         877        29.7 %     —  
           

 

 

    

 

 

    
Total               2,955        100.0 %    
           

 

 

    

 

 

    

 

•  

Period: January 1, 2019 ~ March 31, 2019.

 

(1)

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

(2)

Among our major suppliers, LG Chem and Silicon Works Co., Ltd. are member companies of the LG Group, and Paju Electric Glass Co., Ltd. is our affiliate.

 

  •  

The average price of EGI (Electrolytic Galvanized Iron), which is the main raw material for BLU components, increased by 0.3% from 2017 to 2018 but decreased by 7.5% from 2018 to the first quarter of 2019. Such decrease in the first quarter of 2019 was due to the concerns of a slowdown in the economy and a decrease in demand as a result of the prolonged U.S.-China trade dispute. The average price of resin increased by 18.7% from 2017 to 2018 but decreased by 32.0% from 2018 to the first quarter of 2019. Such decrease in the first quarter of 2019 was due to an increase in supply as a result of new investments by suppliers. The average price of copper, the main raw material for PCB components, increased by 5.9% from 2017 to 2018 but decreased by 4.6% from 2018 to the first quarter of 2019. Such decrease in the first quarter of 2019 was due to signs of a global economic slowdown, including the interest rate freeze in the United States and the weakening European economy.

 

4.

Production and Equipment

A. Production capacity and output

 

  (1)

Production capacity

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

(Unit: 1,000 glass sheets)

 

Business area

   Items    Location of facilities   

2019 Q1 (1)

   2018 (2)      2017 (2)  

Display

   Display panel    Gumi, Paju, Guangzhou    2,440      10,161        10,538  

 

(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).

 

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  (2)

Production output

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

(Unit: 1,000 glass sheets)

 

Business area

   Items    Location of facilities    2019 Q1 (1)      2018 (1)      2017 (1)  

Display

   Display panel    Gumi, Paju, Guangzhou      2,296        9,428        9,262  

 

(1)

Based on the production results (input standard) of each plant converted into eighth-generation glass sheets.

 

  B.

Production performance and utilization ratio

(Unit: Hours, except percentages)

 

Production facilities

   Available working hours
in 2019 Q1 		    Actual working hours in
2019 Q1 		    Average utilization ratio  

Gumi

    

2,160

(90 days

(1)  

) (2)  

   

2,160

(90 days

(1)  

) (2)  

    100.0 % 

Paju

    

2,160

(90 days

(1)  

) (2)  

   

2,100

(88 days

(1)  

) (2)  

    97.2 % 

Guangzhou

    

2,160

(90 days

(1)  

) (2)  

   

2,160

(90 days

(1)  

) (2)  

    100.0 % 

 

(1)

Based on the assumption that all 24 hours in a day have been fully utilized.

(2)

Number of days is calculated by averaging the number of working days for each facility.

 

  C.

Investment plan

In 2018, our total capital expenditures on a cash out basis was W 7.9 trillion. In 2019, we plan to continue investing in new technologies for the future, including OLED and oxide technologies, and respond to increases in demand for large-sized panels.

 

5.

Sales

 

  A.

Sales performance

(Unit: In billions of Won)

 

Business area

  

Sales types

  

Items (Market)

   2019 1Q      2018      2017  
   Products    Display panel    Overseas (1)      5,477        22,722        25,763  
         Korea (1)      392        1,572        1,982  
         Total      5,869        24,294        27,745  
   Royalty    LCD, OLED technology patent    Overseas (1)      4        18        20  
         Korea (1)      0        0        0  
         Total      4        18        20  

Display

   Others    Raw materials, components, etc.    Overseas (1)      4        8        11  
         Korea (1)      2        17        14  
         Total      6        25        25  
   Total       Overseas (1)      5,485        25,794        22,747  
         Korea (1)      394        1,996        1,590  
           

 

 

    

 

 

    

 

 

 
         Total      5,879        27,790        24,337  
           

 

 

    

 

 

    

 

 

 

 

(1)

Based on ship-to-party.

(2)

Sales for 2017 were recorded based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”

 

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  B.

Sales organization and sales route

 

  •  

As of March 31, 2019, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions.

 

  •  

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

 

  •  

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

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

2) LG Display Headquarters and overseas manufacturing subsidiaries g System integrators and end-brand customers g End users

 

  •  

Sales performance by sales route

 

Sales performance

   Sales route    Ratio  

Overseas

   Overseas subsidiaries      93.8 % 
   Headquarters      6.2 % 

Overseas sales portion (overseas sales / total sales)

        93.3 % 

Korea

   Overseas subsidiaries      6.5 % 
   Headquarters      93.5 % 

Korea sales portion (Korea sales / total sales)

     6.7 % 

 

  (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.

 

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  (4)

Sales strategy

 

  •  

As part of our sales strategy, we have secured stable sales to major personal computer manufacturers and leading consumer electronics manufacturers globally.

 

  •  

With respect to television products, we have led the premium television market with our OLED TVs and strengthened the differentiation of our OLED products through unique designs and integration of additional technologies (wallpaper, CSO, rollable, etc.). We also strengthened sales of high-resolution, IPS, narrow bezel and other high-end display panels in the monitor, notebook computer and tablet markets.

 

  •  

With respect to smartphones, commercial products (including interactive whiteboards and video wall displays), industrial products (including aviation and medical equipment) and automobile display products, we have continued to build a strong and diversified business portfolio by expanding our business with customers with a global reach on the strength of our differentiated products applying IPS, plastic OLED, high-resolution, high-reliability, Super Narrow bezel, in-TOUCH and other technologies.

 

  (5)

Major customers

 

  •  

Customers “A” and “B” each accounted for more than 10% of our sales revenue in each of 2018 and the first quarter of 2019, and our sales revenue derived from our top ten customers comprised 78% of our total sales revenue in each of the first quarter of 2018 and 2019.

 

  (6)

Purchase orders

 

  •  

We occasionally supply some of our products in accordance with automobile manufacturers’ production plans. However, the actual supply level fluctuates depending on the customers’ actual orders and future market conditions, and it is difficult to accurately predict the changes in the domestic and overseas economic environment and the consequent changes in demand. In addition, we do not have purchase order contracts that recognize unbilled revenue by implementing the cost-based method.

 

6.

Market Risks and Risk Management

 

  A.

Market risks

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

The display industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel manufacturers in Korea, Taiwan, China and Japan coupled with changes in the production mix of such manufacturers.

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

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

 

  B.

Risk management

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

 

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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.

 

  •  

In 2018, in order to avoid risks of interest rate fluctuations and exchange rate fluctuations on foreign currency denominated borrowings with floating interest rates, we entered into an aggregate of $1,535 million in Won/US dollar cross currency swap agreements with Standard Chartered Bank and others, for which we have not applied hedge accounting.

 

  •  

Any rights or obligations arising from derivative contracts that do not apply hedge accounting are measured at fair value and are accounted for as assets and liabilities, whereas any resulting valuation gain or loss is recognized as profit or loss at the time such valuation gain or loss is incurred.

We recognized a gain on valuation of derivative instruments in the amount of W 25,345 million with respect to our foreign exchange derivative instruments held during the reporting period.

 

  B.

Interest rate risks

 

  •  

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

 

8.

Major contracts

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

 

Type of agreement

  

Name of party

  

Term

  

Content

Technology licensing agreement    Semiconductor Energy Laboratory    October 2005 ~    Patent licensing of LCD and OLED related technology
   Hewlett-Packard    January 2011 ~    Patent licensing of semi-conductor device technology
   Ignis Innovation, Inc.    July 2016 ~    Patent licensing of OLED related technology
Technology licensing/supply agreement    HannStar Display Corporation    December 2013 ~    Patent cross-licensing of LCD technology
   AU Optronics Corporation    August 2011~    Patent cross-licensing of LCD technology
   Innolux Corporation    July 2012 ~    Patent cross-licensing of LCD technology
   Universal Display Corporation    January 2015 ~ December 2022    Patent cross-licensing of OLED related technology

 

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9.

Research & Development

 

  A.

Summary of R&D-related expenditures

(Unit: In millions of Won, except percentages)

 

Items (1)

   2019 Q1      2018      2017  

Material Cost

     208,513        656,011        646,622  

Labor Cost

     175,890        667,837        668,429  

Depreciation Expense

     111,053        426,264        298,383  

Others

     65,206        314,007        298,256  

Total R&D-Related Expenditures

     560,662        2,064,119        1,911,690  
   Selling &
Administrative
Expenses 		     249,284        918,512        917,645  

Accounting Treatment (2)

   Manufacturing
Cost 		     214,224        772,772        657,838  
   Development
Cost
(Intangible Assets) 		     97,154        372,835        336,207  

R&D-Related Expenditures / Revenue Ratio

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

     9.5 %       8.5 %       6.9 % 

 

(1)

Calculated based on the total R&D-related expenditures before subtracting government subsidies (state subsidies).

(2)

For accounting treatment purposes, selling & administrative expenses are presented as research and development expenses in our statements of comprehensive income, net of amortization of capitalized intangible asset development costs.

 

  B.

R&D achievements

Achievements in 2017

 

  (1)

Developed 5.7-inch QHD+ full vision display (LG Electronics)

 

  •  

Developed a full vision display smartphone product (G6) through strategic collaboration with other LG Group companies

 

  •  

Applied first 18:9 screen aspect ratio with 4-corner round display

 

  (2)

Developed mobile LTPS 30Hz product (SH 5.1-inch FHD)

 

  •  

Secured 30Hz low-frequency drive technology based on LTPS TFT-LCD

 

  •  

Reduced logic power consumption through 30Hz low-frequency drive (reduced from 96mW to 69mW on 5.1-inch FHD)

 

  (3)

Developed and released the world’s first Crystal Sound OLED, or CSO, television product

 

  •  

Released product with a new platform concept through development of OLED panel product with integrated speakers

 

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  •  

Delivered OLED television product that achieves differentiated value not only in picture quality and design, but also sound quality

 

  (4)

Developed notebook oxide product (13.9-inch, Ultra HD)

 

  •  

Achieved high definition/narrow bezel product through application of oxide BCE GIP technology

 

  •  

Delivered low power consumption product through application of low refresh rate, or LRR, technology

 

  (5)

Developed medical monitor product for surgical endoscope (27.0-inch, Ultra HD)

 

  •  

Newly entered the medical devices market through development and production of medical monitor product for surgical endoscope

 

  •  

Achieved high definition (3,840 x 2,160), high luminance (800 nit) and high contrast ratio (1,300:1)

 

  •  

Implemented coverglass direct bonding applying our own manufacturing processes (M6 line)

 

  (6)

Developed the world’s first four-side borderless monitor with a resolution of 8K4K (31.5-inch 8K4K oxide)

 

  •  

Pioneered Ultra HD Premium MNT market through development of the world’s first four-side borderless monitor with a resolution of 8K4K

 

  •  

Delivered Ultra HD based on oxide GIP (280 PPI with a resolution of 7680x4320)

 

  •  

Delivered wide color gamut (Adobe RGB 100%/DCI 98%), four-side borderless

 

  (7)

Developed the world’s largest automotive Center Information Display (“CID”) product (15.4-inch Widescreen Ultra Extended Graphics Array (“WUXGA”))

 

  •  

Developed the world’s largest auto component display in the automotive industry

 

  •  

Guaranteed the first 1000hr reliability in the automotive industry

 

  (8)

Developed the world’s first 88-inch Ultra Stretch display product

 

  •  

Strengthened competitiveness through application of smart (digital) stepper

 

  (9)

Developed products utilizing U-IPS (75-inch/65-inch/55-inch/49-inch, Ultra HD)

 

  •  

Utilized U-IPS technology to strengthen product competitiveness by improving panel transmittance rate and reflectivity

 

  (10)

Developed the world’s first 65-inch UHD OLED television product utilizing GIP

 

  •  

Strengthened product competitiveness through application of the world’s first oxide based UHD GIP technology

Achievements in 2018

 

  (1)

Developed the world’s first glass-integrated LCD television product (Art Glass Series)

 

  •  

Achieved LCD modular appearance and simplicity in design by using glass material throughout product (including the panel, light guide plate and back cover)

 

  •  

Strengthened competitiveness of frameless design by decreasing bezel size from 7.8mm to 5.9mm

 

  (2)

Developed our first 5.8-inch Ultra HD Mobile 4K product

 

  •  

Developed our first Ultra HD mobile product

 

  •  

Achieved high luminance, low power consumption and HD resolution by applying Ultra HD RGBW (M+) pixel structure

 

  (3)

Developed the world’s first 5.8-inch mobile FHD product applying M+

 

  •  

Our first product applying camera notch concept technology

 

  (4)

Developed the world’s first four-side borderless curved monitor with 1900R curvature radius

 

  •  

Our first product applying glass 0.25T (etching) bezel printing/reverse bonding process technology

 

  •  

Strengthened product competitiveness with our first shared design applying three-side/four-side borderless TFT Mask

 

  •  

Achieved high-speed driving at 144Hz, high color recall (DCI 98%) and HDR (peak luminance 550nit)

 

  (5)

Developed the world’s first 34-inch large-screen monitor/high-resolution four-sided borderless HDR

 

  •  

Pioneered HD Premium 21:9 monitor market through development of the world’s first WUHD(5K2K), four-side borderless monitor

 

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  •  

Delivered Ultra HD (DCI 98Z%, sRGB 135%) by applying Adv. KSF LED PKG technology

 

  •  

Achieved high luminance (HDR 600); typ. 450 nit, maximum 600nit

 

  (6)

Developed LGD 6.01QHD+M+ Full Screen Display (LG Electronics)

 

  •  

Developed a full screen display concept smartphone product (G7) through strategic collaboration with other LG Group companies

 

  •  

Implemented a full screen display product concept through achievement of our first 19.5:9 screen aspect ratio and lower bezel of 2.7mm

 

  (7)

Developed the world’s narrowest bezel videowall product (0.44mm bezel, 55-inch FHD)

 

  •  

Achieved product competitiveness by developing the world’s narrowest bezel (originally 0.9mm g 0.44mm, Even Bezel)

 

  (8)

Developed the world’s first automotive glassless 3D cluster product

 

  •  

Developed FHD glassless barrier type 3D model (12.3 inches, 167 ppi level)

 

  •  

Achieved customers’ eye-tracking movement by applying a top moving barrier panel at the top of the panel

 

  •  

Improved adhesion accuracy of image panel and barrier panel by using OCA bonding technology

 

  •  

Improved barrier contrast ratio by applying a copper-based metal barrier panel

 

  (9)

Developed the world’s first 6th generation a-Si Indirect DXD product (21.9-inch, 14 x 17 resolution, 14㎛ pixel pitches)

 

  •  

Entered the DXD market through development of the world’s first 6th generation a-Si Indirect DXD product

 

  •  

Set up infrastructure for DXD product development through the development of our first DXD product

 

  (10)

Developed the world’s first 17-inch large-sized and lightweight notebook monitor

 

  •  

Developed large-sized (17-inch) product with a new screen aspect ratio (16:10)

 

  •  

Developed light-weight product (268g) through securing 17-inch+ Slim Design model technology

Achievements in 2019

 

  (1)

Developed the world’s first ultra large-sized in-TOUCH product (50-inch UHD)

 

  •  

World’s first to apply in-TOUCH technology on ultra large-sized products (50-inch and larger)

 

  •  

World’s first to apply low temperature PAS to achieve in-TOUCH function

 

10.

Intellectual Property

As of March 31, 2019, our cumulative patent portfolio (including patents that have already expired) included a total of 41,502 patents, consisting of 18,152 in Korea and 23,350 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.

 

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In accordance with the Framework Act on Low Carbon, Green Growth, we implemented the greenhouse gas emission and energy consumption target system from 2012 to 2014. In 2015, we implemented the greenhouse gas trading system, under which we are responsible to meet our emission targets based on the emission credits allocated to us by the Ministry of Environment of the Korean government. As a result, we have been investing in additional equipment and there may be other costs associated with meeting reduction targets, which may have a negative effect on our profitability or production activities.

In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2018 to the Korean government in March 2019 after it was certified by BSI Korea, a government-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:

(Unit: thousand tonnes of CO 2 equivalent; Tetra Joules)

 

Category

   2018      2017      2016  

Greenhouse gases

     6,695        6,314        6,092  

Energy

     64,296        63,451        60,423  

As we were designated as a target company for the greenhouse gas emission trading system in 2015, we submit a plan for allocating and monitoring our greenhouse gas emissions to the government every year. In order to continually promote the reduction of greenhouse gas emissions, we have set a short-term goal to reduce the emission level from 2014 to 2022 by 16.8% and a medium- to long-term goal to reduce the emission level from 2014 to 2040 by 54.6%. To achieve this, we are continually investing in facility improvements and monitoring our emission levels.

We are making extensive investments to replace SF6 gas, which is the main component of greenhouse gases, with NF3 gas. In addition, as a short-term strategy, we are actively implementing measures in compliance with the emission trading system. In 2018, we reduced our carbon dioxide greenhouse gas emission levels by 1.28 million tons, which was 0.63 million tons more than our initial target of 0.65 million tons. As our medium- to long-term goal, we plan to develop low-carbon production technologies in order to eliminate greenhouse gas emission during our manufacturing process and to conserve energy.

The increase in greenhouse gas emission in 2018 is due to the inclusion of certain other greenhouse gas emissions (N2O used in deposition facilities and CO2 in cleaning facilities) during the second planning period (2018 to 2020) that were not included during the first planning period (2015 to 2017) in the overall amount of greenhouse gas emissions in accordance with guidelines issued by the Korean government.

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

 

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In addition, in August 2014, GP1, our newest 8th generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO 14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we were first certified by the Ministry of Environment as a “Green Company” for P1 in 1997, and such certification has since been renewed on a timely basis, most recently in May 2018. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minister of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry & Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued water conservation activities (reuse system investments, etc.) and greenhouse gas emission reduction activities (process gas and energy reduction, etc.), we attained the highest level, Leadership A, and received the grand prize award at the CDP Water Korea Best Awards in 2016 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee. We also attained a Leadership A in the climate change information technology sector and received a carbon management honors award. Our continued efforts to reduce greenhouse gas emissions was recognized again in 2018 following 2017 by becoming the only domestic information technology company to attain the Leadership A level and again receiving carbon management honors by ranking in the top five among all eligible companies. In May 2017, we were awarded a commendation from the Minister of Environment for having scored the highest grade among companies in the low- and medium-volume pollutant emitters category that had entered into voluntary agreements with the Metropolitan Air Quality Management Office, in recognition of having successfully met our voluntary targets for reduction of air pollutants as well as our overall efforts to enhance our relevant facilities and operational systems. In addition, in recognition of efficient control, management and operating systems implemented in our manufacturing facilities, we received the top-level certification, Level 1, in 2017 under the Factory Energy Management System evaluation presided by the Korea Energy Agency. Furthermore, in November 2017, we received the highest commendation, the Presidential Award, in the Korean Energy Efficiency Awards presided by the Ministry of Industry, Trade and Energy in recognition of our energy management practices and energy saving measures. In May 2018, we received the CEM Insight Award, presented at the Clean Energy Ministerial Meetings, and also received certification for our energy business management (Energy Champion) presided by the Ministry of Trade, Industry and Technology and the Korea Energy Agency in November 2018.

In the case of the European Union’s Restriction of Hazardous Substances (RoHS) Directive 2011/65/EU, with the adoption of Directive (EU) 2015/863 in 2016, four additional substances (four phthalate substances) will be added to the six already restricted substances and the additional restrictions are scheduled to come into effect on July 22, 2019. In order to address the latent risk elements of the four phthalate substances scheduled to be restricted in 2019 and to establish a more stable management system, we implemented in 2016 a preemptive response process with respect to such four phthalate substances. In implementing this process, we collaborated with external agencies to ascertain regulatory trends and establish our response strategy, and we formulated and applied effective management measures through the collaborative efforts of our development, procurement and quality teams. Beryllium (Be) was not designated internationally as a mandatorily restricted substance but has continued to be the subject of discussion for restriction, and certain of our customers have designated it as a restricted substance not to be used in products. Accordingly, we have completed verification of the parts used in products for customers who have banned the use of Beryllium. We have also conducted verification of the parts used in products for all customers who are expected to implement a ban and we have established a Beryllium verification process for parts in development. Through such efforts, we have established a voluntary hazardous substance response process that can be expanded to products for all customers, not only those who have requested a response.

In October 2005, we became the first display panel company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Trade, Industry & Energy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Our efforts to keep pace with the increasingly stringent accreditation standards and to receive and maintain such accreditations are part of our on-going efforts to systematically monitor environmentally controlled substances in our component parts inventory. Moreover, we participated in reforming IEC 62321, an international testing standard published by the International Electrotechnical Commission and used by RoHS, and the commission adopted our halogen-free combustion ion chromatography method in as IEC 62321-3-2, which was published in June 2013. In 2017, in a joint effort with the global product testing/accreditation agency SGS, we became the first display panel company to develop Eco Label, an environmentally friendly accreditation program for television display modules, and received the SGS Eco Label accreditation for our OLED and LCD television models in 2017 and 2018. For the IPS Nano Color for LCD, we received the Quality & Performance Mark from Intertek, a global product testing/accreditation agency, by applying a technology to eliminate cadmium (Cd) and indium phosphide (InP). In 2018, we became the first display panel company to receive the “Green Technology Certification” from the Korean Ministry of Science and ICT for improving the light efficiency technology of OLED to promote energy use reduction.

 

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In June 2017, we were assessed a fine of W 1 million, which we subsequently paid, for failure to meet certain waste disposal subcontractor requirements under the Waste Management Act. To prevent such violations from occurring again, we are strengthening the periodic evaluation process for our waste management subcontractors.

In June 2017, we were audited by the Ministry of Employment and Labor in connection with the occurrence of a safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W 2.4 million. In addition, the trial court ordered a fine of W 0.5 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. In relation to the same matter, in May 2018, the Prosecutor’s Office sought a fine of W 3.0 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. The trial court (Goyang Branch of Uijeongbu District Court) issued a summary order confirming the same fine of W 3.0 million on November 22, 2018. We and our chief production officer appealed the trial court’s decision, and the case is currently pending appeal at the Uijeongbu District Court. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

In January 2018, we were audited by the Ministry of Employment and Labor in connection with the occurrence of another safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W 14.4 million. In relation to this matter, in January 2019, the trial court (Goyang Branch of Uijeongbu District Court) assessed a fine of W 1 million as a summary order on each of us and our chief production officer pursuant to certain other provisions of the Industrial Safety and Health Act. In addition, in January 2019, the trial court sought a fine of W 4 million and W 2 million on us and the employee in charge of on-site safety management, respectively, on the basis of certain other provisions of the Industrial Safety and Health Act. Relevant authorities are currently conducting further investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

Also in January 2018, the government of Gyeong-gi Province issued a warning and assessed a fine of W 1 million on us, which we subsequently paid, for the failure to comply with certain requirements relating to air pollutant emission and prevention facilities under the Air Quality Management Act. To prevent such violations from occurring again, we have shortened the air pollutant emission maintenance reporting period and strengthened the verification process for relevant data.

In February 2018, we were assessed a fine of W 0.04 million by Paju City for stopping a vehicle in front of a day care center in violation of certain provisions of the Road Traffic Law. We have since paid the fine and are in the process of strengthening our parking guidance procedures to prevent such recurrence.

In March 2018, we were audited by the Ministry of Employment and Labor in connection with our health and safety training practices, and we were found to have omitted requisite health and safety training sessions for certain employees in our P9 facilities in 2016 and 2017. As a result, we were assessed a fine of W 6.95 million, which we subsequently paid, and have strengthened our efforts to promote health and safety training programs in advance as well as our management and supervision activities to ensure such programs are conducted.

In April 2018, we were assessed a fine of W 0.24 million by Yeongdeungpo-gu Office for our failure to keep one of our rescue vehicles current with its statutory inspection requirements, which we subsequently paid. In order to prevent recurrence, we are continually monitoring the compliance of inspection requirements for our vehicles.

 

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12.

Financial Information

 

  A.

Financial highlights (Based on consolidated K-IFRS). Figures for 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”

(Unit: In millions of Won)

 

Description

   As of
March 31, 2019 		     As of
December 31, 2018 		     As of
December 31, 2017 		 

Current assets

     9,513,621        8,800,127        10,473,703  

Quick assets

     6,883,781        6,108,924        8,123,619  

Inventories

     2,629,840        2,691,203        2,350,084  

Non-current assets

     25,874,360        24,375,583        18,685,984  

Investments in equity accounted investees

     111,132        113,989        122,507  

Property, plant and equipment, net

     23,107,224        21,600,130        16,201,960  

Intangible assets

     986,388        987,642        912,821  

Other non-current assets

     1,669,616        1,673,822        1,448,696  

Total assets

     35,387,981        33,175,710        29,159,687  

Current liabilities

     9,730,825        9,954,483        8,978,682  

Non-current liabilities

     10,367,622        8,334,981        5,199,495  

Total liabilities

     20,098,447        18,289,464        14,178,177  

Share capital

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

Share premium

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

Retained earnings

     10,176,992        10,239,965        10,621,571  

Other equity

     (146,213 )       (300,968 )       (288,280 ) 

Non-controlling interest

     1,218,563        907,057        608,027  

Total equity

     15,289,534        14,886,246        14,981,510  

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

 

Description

   For the three months ended
March 31, 2019 		     For the year ended
December 31, 2018 		     For the year ended
December 31, 2017 		 

Revenue

     5,878,781        24,336,571        27,790,216  

Operating profit (loss)

     (132,018 )       92,891        2,461,618  

Operating profit (loss) from continuing operations

     (62,640 )       (179,443 )       1,937,052  

Profit (loss) for the period

     (62,640 )       (179,443 )       1,937,052  

Profit (loss) attributable to:

        

Owners of the Company

     (60,933 )       (207,239 )       1,802,756  

Non-controlling interest

     (1,707 )       27,796        134,296  

Basic earnings (loss) per share

     (170 )       (579 )       5,038  

Diluted earnings (loss) per share

     (170 )       (579 )       5,038  

Number of consolidated entities

     22        22        20  

 

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  B.

Financial highlights (Based on separate K-IFRS). Figures for 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”

(Unit: In millions of Won)

 

Description

   As of
March 31, 2019 		     As of
December 31, 2018 		     As of
December 31, 2017 		 

Current assets

     6,551,862        6,378,339        8,381,074  

Quick assets

     4,623,455        4,427,184        6,698,829  

Inventories

     1,928,407        1,951,155        1,682,245  

Non-current assets

     22,030,626        20,683,767        17,028,341  

Investments

     4,786,000        3,602,214        2,683,941  

Property, plant and equipment, net

     15,090,909        14,984,564        12,487,001  

Intangible assets

     814,983        816,808        731,373  

Other non-current assets

     1,338,733        1,280,181        1,126,026  

Total assets

     28,582,488        27,062,106        25,409,415  

Current liabilities

     8,061,951        7,416,630        7,394,605  

Non-current liabilities

     7,424,034        6,432,895        4,185,551  

Total liabilities

     15,485,985        13,849,525        11,580,156  

Share capital

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

Share premium

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

Retained earnings

     9,056,311        9,172,389        9,789,067  

Other equity

     0        0        0  

Total equity

     13,096,503        13,212,581        13,829,259  

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

 

Description

   For the three months ended
March 31, 2019 		     For the year ended
December 31, 2018 		     For the year ended
December 31, 2017 		 

Revenue

     5,383,604        22,371,687        25,591,082  

Operating profit (loss)

     (202,781 )       (472,995 )       1,536,730  

Operating profit (loss) from continuing operations

     (113,941 )       (442,291 )       1,779,721  

Profit (loss) for the period

     (113,941 )       (442,291 )       1,779,721  

Basic earnings (loss) per share

     (318 )       (1,236 )       4,974  

Diluted earnings (loss) per share

     (318 )       (1,236 )       4,974  

 

  C.

Consolidated subsidiaries (as of March 31, 2019)

 

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    China      100 % 

LG Display Shanghai Co., Ltd.

   Sales    China      100 % 

LG Display Poland Sp. zo.o.

   Manufacturing    Poland      100 % 

LG Display Guangzhou Co., Ltd.

   Manufacturing    China      100 % 

LG Display Shenzhen Co., Ltd.

   Sales    China      100 % 

LG Display Singapore Pte. Ltd.

   Sales    Singapore      100 % 

L&T Display Technology (Fujian) Limited

   Manufacturing and sales    China      51 % 

LG Display Yantai Co., Ltd.

   Manufacturing    China      100 % 

LG Display (China) Co., Ltd.

   Manufacturing and sales    China      70 % 

Nanumnuri Co., Ltd.

   Workplace services    Korea      100 % 

Unified Innovative Technology, LLC

   Managing intellectual property    U.S.A.      100 % 

Global OLED Technology LLC

   Managing intellectual property    U.S.A.      100 % 

LG Display Guangzhou Trading Co., Ltd.

   Sales    China      100 % 

LG Display Vietnam Haiphong Co., Ltd.

   Manufacturing    Vietnam      100 % 

Suzhou Lehui Display Co., Ltd.

   Manufacturing and sales    China      100 % 

LG Display Fund I LLC

   Investing in new emerging companies    U.S.A      100 % 

LG Display High-Tech (China) Co., Ltd. (3)

   Manufacturing    China      70 % 

MMT (Money Market Trust)

   Money market trust    Korea      100 % 

 

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  D.

Status of equity investments (as of March 31, 2019)

 

  (1)

Consolidated subsidiaries

 

Company

   Investment
Amount
(in millions) 		    

Initial Equity Investment
Date

   Equity
Interest 		 

LG Display America, Inc.

   US$ 411      September 24, 1999      100 % 

LG Display Japan Co., Ltd.

   ¥ 95      October 12, 1999      100 % 

LG Display Germany GmbH

   EUR 1      November 5, 1999      100 % 

LG Display Taiwan Co., Ltd.

   NT$ 116      May 19, 2000      100 % 

LG Display Nanjing Co., Ltd.

   CNY 3,020      July 15, 2002      100 % 

LG Display Shanghai Co., Ltd.

   CNY 4      January 16, 2003      100 % 

LG Display Poland Sp. zo.o.

   PLN 511      September 6, 2005      100 % 

LG Display Guangzhou Co., Ltd.

   CNY 1,655      August 7, 2006      100 % 

LG Display Shenzhen Co., Ltd.

   CNY 4      August 28, 2007      100 % 

LG Display Singapore Pte. Ltd.

   US$ 1.1      January 12, 2009      100 % 

L&T Display Technology (Fujian) Limited

   CNY 116      January 5, 2010      51 % 

LG Display Yantai Co., Ltd.

   CNY 1,008      April 19, 2010      100 % 

Nanumnuri Co., Ltd.

   W 800      March 19, 2012      100 % 

LG Display (China) Co., Ltd.

   CNY 8,232      December 27, 2012      70 % 

Unified Innovative Technology, LLC

   US$ 9      March 21, 2014      100 % 

LG Display Guangzhou Trading Co., Ltd.

   CNY 1.2      May 27, 2015      100 % 

Global OLED Technology LLC

   US$ 138      May 7, 2015      100 % 

LG Display Vietnam Haiphong Co., Ltd. (1)

   US$ 500      May 13, 2016      100 % 

Suzhou Lehui Display Co., Ltd.

   CNY 637      July 1, 2016      100 % 

LG Display Fund I LLC (2)

   USD$ 2.8      May 1, 2018      100 % 

LG Display High-Tech (China) Co., Ltd. (3)

   CNY 116,977      July 11, 2018      70 % 

MMT (Money Market Trust) (2)

   W 347,500      March 31, 2017      100 % 

Changes since December 31, 2018:

 

(1)

During the reporting period, we invested an additional W 226,300 million in LG Display Vietnam Haiphong Co., Ltd.

(2)

During the reporting period, we invested an additional W 842 million in LG DISPLAY FUND I LLC.

(3)

During the reporting period, we invested an additional W 910,041 million in LG Display High-Tech (China) Co., Ltd.

(4)

As a result of our money market trust acquisition and disposal transactions conducted during the reporting period, the amount outstanding in our money market trust accounts as of March 31, 2019 is W 347,500 million.

 

  (2)

Affiliated companies

 

Company

   Carrying Amount
(in millions) 		     Date of
Incorporation 		     Equity
Interest 		 

Paju Electric Glass Co., Ltd.

   W 44,201        January 2005        40 % 

Invenia Co., Ltd.

   W 4,076        January 2001        13 % 

Wooree E&L Co., Ltd.

   W 5,677        June 2008        14 % 

YAS Co., Ltd.

   W 15,877        April 2002        15 % 

Avatec Co., Ltd.

   W 23,934        August 2000        17 % 

Arctic Sentinel, Inc.

     —          June 2008        10 % 

Cynora GmbH (1)

   W 8,668        March 2003        13 % 

Material Science Co., Ltd.

   W 3,372        January 2014        10 % 

Nanosys Inc.

   W 5,327        July 2001        4 % 

Changes since December 31, 2018:

 

(1)

We did not participate in Cynora GmbH’s paid-in capital increase and as a result, our equity interest decreased from 14% as of December 31, 2018 to 13% as of March 31, 2019.

 

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13.

Audit Information

 

  A.

Audit service

(Unit: In millions of Won, hours)

 

Description

   2019 Q1   2018   2017

Auditor

   KPMG Samjong   KPMG Samjong   KPMG Samjong

Activity

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

Compensation (1)

   1,280 (500) (2)   1,170 (450) (2)   1,040 (450) (2)

Time required

   1,800   17,269   17,909

 

(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

(Unit: In millions of Won, hours)

 

Period

   Date of contract      Description of
service 		     Period of service      Compensation  

2018

     September 11, 2018       
Green bond
verification
  		    
September 11, 2018
~ October 9, 2018 		 
  		     45  

 

14.

Board of Directors

 

  A.

Members of the board of directors

As of March 31, 2019, our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.

(As of March 31,2019)

 

Name

  

Position

  

Primary responsibility

Sang Beom Han    Representative Director (non-outside), Chief Executive Officer and Vice Chairman    Overall head of business management
Donghee Suh (1)    Director (non-outside), Chief Financial Officer and Senior Vice President    Overall head of finances
Young-Soo Kwon (1)    Director (non-standing)    Chairman of the board of directors
Sung-Sik Hwang    Outside Director    Related to the overall management
Kun Tai Han (2)    Outside Director    Related to the overall management
Byung Ho Lee    Outside Director    Related to the overall management
Chang-Yang Lee (1)    Outside Director    Related to the overall management

 

(1)

Each of Donghee Suh, Young-Soo Kwon and Chang-Yang Lee was newly appointed at the annual general meeting of shareholders held on March 15, 2019.

(2)

Kun Tai Han was reappointed for another term as an outside director at the annual general meeting of shareholders held on March 15, 2019.

 

  B.

Committees of the board of directors

We have the following committees that serve under our board of directors: Audit Committee, Outside Director Nomination Committee and Management Committee. The Management Committee consists of two non-outside directors, Sang Beom Han and Donghee Suh. As of March 31, 2019, the composition of the Audit Committee and the Outside Director Nomination Committee was as follows.

 

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As of January 29, 2019, the composition of the Outside Director Nomination Committee was as follows.

(As of January 29, 2019)

 

Committee

  

Composition

  

Member

Outside Director Nomination Committee (1)    1 non-standing director and 2 outside directors    Hyun-Hwoi Ha, Joon Park, Sung-Sik Hwang

 

(1)

Each of Hyun-Hwoi Ha, Joon Park and Sung-Sik Hwang was appointed as a member of the outside director nomination committee of the board of directors at the board of directors’ meeting on January 29, 2019.

As of March 15, 2019, the composition of the Outside Director Nomination Committee was as follows.

(As of March 15, 2019)

 

Committee

  

Composition

  

Member

Outside Director Nomination Committee (1)    1 non-standing director and 2 outside directors    Young-Soo Kwon, Kun Tai Han, Byung Ho Lee

 

(1)

Each of Young-Soo Kwon, Kun Tai Han, Byung Ho Lee was appointed as a member of the outside director nomination committee of the board of directors at the board of directors’ meeting on March 15, 2019.

As of the March 31, 2019, the composition of the Audit Committee was as follows.

(As of March 31, 2019)

 

Committee

  

Composition

  

Member

Audit Committee    3 outside directors    Sung-Sik Hwang (1) , Kun Tai Han, Chang-Yang Lee (2)

 

(1)

Sung-Sik Hwang is the audit committee chairman. He was reappointed for another term as an Audit Committee member at the annual general meeting of shareholders held on March 15, 2018.

(2)

Chang-Yang Lee was newly appointed as an audit committee member at the annual general meeting of shareholders held on March 15, 2019.

 

  C.

Independence of directors

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

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

 

15.

Information Regarding Shares

 

  A.

Total number of shares

 

  (1)

Total number of shares authorized to be issued (as of March 31, 2019): 500,000,000 shares.

 

  (2)

Total shares issued and outstanding (as of March 31, 2019): 357,815,700 shares.

 

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  B.

Shareholder list

 

  (1)

Largest shareholder and related parties as of March 31, 2019:

 

Name

  

Relationship

   Number of shares
of common stock 		     Equity interest  

LG Electronics

   Largest shareholder      135,625,000        37.9 % 

Sang Beom Han

   Officer of member company      48,355        0.0 % 

Sang Don Kim

   Officer of member company (resigned)      —          —    

Gi Ryun Jeong

   Relative of LG Corp.’s largest shareholder      400        0.0 % 

Young Soon Hong

   Relative of LG Corp.’s largest shareholder      400        0.0 % 

 

  (2)

Shareholders who are known to us that own 5% or more of our shares as of March 31, 2019:

 

Beneficial owner

   Number of shares
of common stock 		     Equity interest  

LG Electronics

     135,625,000        37.90 % 

National Pension Service

     24,515,566        6.85 % 

 

16.

Directors and Employees

 

  A.

Directors

 

  (1)

Remuneration for directors in 2019 Q1:

(Unit: person, in millions of Won)

 

Classification

   No. of directors (1)      Amount paid (2)      Per capita average
remuneration paid (3) 		 

Non-outside directors

     3        481        160  

Outside directors who are not audit committee members

     1        20        20  

Outside directors who are audit committee members

     3        58        19  
  

 

 

    

 

 

    

 

 

 

Total

     7        559        80  
  

 

 

    

 

 

    

 

 

 

 

(1)

Number of directors as at March 31, 2019.

(2)

Amount paid is calculated on the basis of amount of cash actually paid.

(3)

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, 2019.

 

  (2)

Remuneration for individual directors and audit committee members

Not required for quarterly reports.

 

  (3)

Remuneration for the five highest paid individuals (among those paid over W 500 million per year)

Not required for quarterly reports.

 

  (4)

Stock options

Not applicable.

 

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  B.

Employees

As of March 31, 2019, we had 30,341 employees (excluding our directors). On average, our male employees have served 10.2 years and our female employees have served 8.5 years. The total amount of salary paid to our employees for the three months ended March 31, 2019 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act was W 536,541 million for our male employees and W 92,773 million for our female employees. The following table provides details of our employees as of March 31, 2019:

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

 

     Number of
employees (1) 		     Total salary in
2019 Q1 (2)(3)(4) 		     Average salary
per capita (5) 		     Average years
of service 		 

Male

     24,561        536,541        23        10.2  

Female

     5,780        92,773        16        8.5  

Total

     30,341        629,313        22        9.9  

 

(1)

Includes part-time employees hired for temporary needs or to serve as temporary replacements for employees on parental leave.

(2)

Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the three months ended March 31, 2019 was W 93,667 million and the per capita welfare benefit provided was W 3.2 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: 23,555, female: 5,715) for the three months ended March 31, 2019.

In December 2017, we were audited by the Ministry of Employment and Labor regarding our human resource practices (including in relation to employment contracts, hours of work, outsourcing and employees in pregnancy), and we were found to be in violation of certain provisions of the Labor Standard Act relating to overtime, night and holiday work. As a result, we were issued a corrective order in January 2018 and paid additional overtime wages of W 2,893 million to 16,106 administrative employees of our Paju facilities for their nighttime work between January 1, 2015 to December 31, 2017. In addition, we reviewed nighttime work records of our administrative employees outside of our Paju facilities during the same period and paid additional overtime wages of W 2,166 million to eligible employees. In order to prevent such violation from occurring again, we are periodically monitoring the nighttime work records of our employees.

From December 2017 to January 2018, we were audited by the Ministry of Employment and Labor regarding our human resource practices relating to temporary and part-time employees, and we were found to have omitted certain required information (including the number of break hours and vacation days) in the employment contracts of 82 temporary employees. As a result, we were assessed a fine of W 27 million, which we subsequently paid. In order to prevent such violation from occurring again, we have amended the relevant provisions of the applicable employment contracts.

 

17.

Other Matters

 

  A.

Legal proceedings

We are a defendant in four separate civil lawsuits (comprising two damages claims in the United Kingdom filed by private plaintiffs, one damages claim in Israel filed by private plaintiffs and one unjust enrichment claim in the United States filed by the Commonwealth of Puerto Rico) filed against us and certain other TFT-LCD panel manufacturers in connection with alleged anticompetitive behavior of the defendants. In each of these cases, the amount being sought has not been determined, and no trial has been scheduled. While the expected outcome of each of these cases is unclear, we do not believe that any of these cases would have a material effect on our financial conditions.

 

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Table of Contents
  B.

Material events subsequent to the reporting period

 

  (1)

Private issuance of unsecured floating-rate notes

In April 2019, we issued unsecured floating-rate notes in a private placement, and the following table provides details of such issuance:

 

Issuer

  

Type of
Securities

  

Type of
Offering

  

Issue Date

  

Issue Amount

  

Interest Rate

  

Date of
Maturity

  

Lead
Underwriter

LG Display Co., Ltd.    Floating-rate notes    Private    April 30, 2019    USD 100 million    3 month LIBOR + 1.47%    April 28, 2023    Hong Kong Woori Investment Bank (Woori Global Markets Asia Limited)

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2019 and 2018

(With Independent Auditors’ Review Report Thereon)

 

 

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Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed consolidated interim financial statements of LG Display Co., Ltd. and subsidiaries (the “Group”) which comprise the condensed consolidated interim statement of financial position as of March 31, 2019, the condensed consolidated interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2019 and 2018, and notes comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Consolidated Interim Financial Statements

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

Auditors’ Responsibility

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

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting.

Other Matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

We audited the consolidated statement of financial position as of December 31, 2018 and the related consolidated statements of comprehensive 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 25, 2019, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2018, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

31

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KPMG Samjong Accounting Corp.

Seoul, Korea

May XX, 2019

 

This report is effective as of May XX, 2019 the review report date. Certain subsequent events or circumstances , which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Financial Position

(Unaudited)

As of March 31, 2019 and December 31, 2018

 

(In millions of won)    Note    March 31, 2019     December 31, 2018  

Assets

       

Cash and cash equivalents

   4, 25    W 2,404,196     2,365,022

Deposits in banks

   4, 25      78,400     78,400

Trade accounts and notes receivable, net

   5, 14, 25, 27      3,386,265     2,829,163

Other accounts receivable, net

   5, 25      118,746     169,313

Other current financial assets

   6, 25      96,451     46,301

Inventories

   7      2,629,840     2,691,203

Prepaid income taxes

        1,253     4,516

Non-current assets held for sale

   28      70,166     70,161

Other current assets

   5      728,304     546,048
     

 

 

   

 

 

 

Total current assets

        9,513,621     8,800,127

Deposits in banks

   4, 25      11     11

Investments in equity accounted investees

   8      111,132     113,989

Other non-current accounts receivable, net

   5, 25      10,853     11,448

Other non-current financial assets

   6, 25      111,569     144,214

Property, plant and equipment, net

   9, 17      23,107,224     21,600,130

Intangible assets, net

   10, 17      986,388     987,642

Deferred tax assets

   23      1,231,717     1,136,166

Other non-current assets

   5      315,466     381,983
     

 

 

   

 

 

 

Total non-current assets

        25,874,360     24,375,583
     

 

 

   

 

 

 

Total assets

      W 35,387,981     33,175,710
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   25, 27    W 2,970,179     3,087,461

Current financial liabilities

   11, 25      1,598,823     1,553,907

Other accounts payable

   25      3,333,945     3,566,629

Accrued expenses

        661,651     633,346

Income tax payable

        79,060     105,900

Provisions

   13      110,569     98,254

Advances received

   14      933,486     834,010

Other current liabilities

   13      43,112     74,976
     

 

 

   

 

 

 

Total current liabilities

        9,730,825     9,954,483

Non-current financial liabilities

   11, 25      9,227,767     7,030,628

Non-current provisions

   13      37,723     32,764

Defined benefit liabilities, net

   12      95,416     45,360

Long-term advances received

   14      896,083     1,114,316

Deferred tax liabilities

   23      14,734     15,087

Other non-current liabilities

   13      95,899     96,826
     

 

 

   

 

 

 

Total non-current liabilities

        10,367,622     8,334,981
     

 

 

   

 

 

 

Total liabilities

        20,098,447     18,289,464
     

 

 

   

 

 

 

Equity

       

Share capital

   15      1,789,079     1,789,079

Share premium

        2,251,113     2,251,113

Retained earnings

        10,176,992     10,239,965

Reserves

   15      (146,213 )      (300,968 ) 
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        14,070,971     13,979,189
     

 

 

   

 

 

 

Non-controlling interests

        1,218,563     907,057
     

 

 

   

 

 

 

Total equity

        15,289,534     14,886,246
     

 

 

   

 

 

 

Total liabilities and equity

      W 35,387,981     33,175,710
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Comprehensive Income

(Unaudited)

For the three-month periods ended March 31, 2019 and 2018

 

(In millions of won, except earnings per share)    Note      2019     2018  

Revenue

     16, 17, 27      W 5,878,781     5,675,164

Cost of sales

     7, 18, 27        (5,246,021 )      (5,133,080 ) 
     

 

 

   

 

 

 

Gross profit

        632,760     542,084

Selling expenses

     19        (232,217 )      (172,958 ) 

Administrative expenses

     19        (199,448 )      (182,330 ) 

Research and development expenses

        (333,113 )      (285,119 ) 
     

 

 

   

 

 

 

Operating loss

        (132,018 )      (98,323 ) 
     

 

 

   

 

 

 

Finance income

     22        59,810     120,997

Finance costs

     22        (83,697 )      (130,361 ) 

Other non-operating income

     21        247,394     227,642

Other non-operating expenses

     21        (224,254 )      (212,837 ) 

Equity in income (loss) of equity accounted investees, net

        4,107     (2,893 ) 
     

 

 

   

 

 

 

Loss before income tax

        (128,658 )      (95,775 ) 

Income tax benefit

     23        (66,018 )      (46,793 ) 
     

 

 

   

 

 

 

Loss for the period

        (62,640 )      (48,982 ) 
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

     12        (2,913 )      (6,419 ) 

Other comprehensive income from associates

        137     41

Related income tax

     12        776     2,296
     

 

 

   

 

 

 
        (2,000 )      (4,082 ) 

Items that are or may be reclassified to profit or loss

       

Foreign currency translation differences for foreign operations

        191,132     127,890

Other comprehensive income from associates

        400     1,315

Related income tax

        —       —  
     

 

 

   

 

 

 
        191,532     129,205
     

 

 

   

 

 

 

Other comprehensive income for the period, net of income tax

        189,532     125,123
     

 

 

   

 

 

 

Total comprehensive income for the period

      W 126,892     76,141
     

 

 

   

 

 

 

Profit (loss) attributable to:

       

Owners of the Controlling Company

        (60,933 )      (59,454 ) 

Non-controlling interests

        (1,707 )      10,472
     

 

 

   

 

 

 

Loss for the period

      W (62,640 )      (48,982 ) 
     

 

 

   

 

 

 

Total comprehensive income attributable to:

       

Owners of the Controlling Company

        91,902       42,704

Non-controlling interests

        34,990       33,437
     

 

 

   

 

 

 

Total comprehensive income for the period

      W 126,892     76,141
     

 

 

   

 

 

 

Loss per share (in won)

       

Basic and diluted loss per share

     24      W (170 )      (166 ) 
     

 

 

   

 

 

 

See accompanying notes to the 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, 2019 and 2018

 

     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, 2018

   W 1,789,079      2,251,113      10,621,571     (288,280 )      14,373,483     608,027     14,981,510
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Profit (loss) for the period

     —          —          (59,454 )      —         (59,454 )      10,472     (48,982 ) 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (4,123 )      —         (4,123 )      —         (4,123 ) 

Foreign currency translation differences for foreign operations, net of tax

     —          —          —         104,925     104,925     22,965     127,890

Other comprehensive income from associates

     —          —          41     1,315     1,356     —         1,356
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —          —          (4,082 )      106,240     102,158     22,965     125,123
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —          (63,536 )      106,240     42,704     33,437     76,141
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Dividends to shareholders

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

Subsidiaries’ dividends distributed to non-controlling interests

     —          —          —         —         —         (53,107 )      (53,107 ) 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2018

   W 1,789,079      2,251,113      10,379,127     (182,040 )      14,237,279     588,357     14,825,636
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2019

   W 1,789,079      2,251,113      10,239,965     (300,968 )      13,979,189     907,057     14,886,246
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Loss for the period

     —          —          (60,933 )      —         (60,933 )      (1,707 )      (62,640 ) 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (2,137 )      —         (2,137 )      —         (2,137 ) 

Foreign currency translation differences for foreign operations, net of tax

     —          —          —         154,435     154,435     36,697     191,132

Other comprehensive income from associates

     —          —          137     400     537     —         537
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —          —          (2,000 )      154,835     152,835     36,697     189,532
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —          (62,933 )      154,835     91,902     34,990     126,892
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Capital contribution from non-controlling interests

     —          —          (40 )      (80 )      (120 )      276,516     276,396
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2019

   W 1,789,079      2,251,113      10,176,992     (146,213 )      14,070,971     1,218,563     15,289,534
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the 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, 2019 and 2018

 

(In millions of won)    Note    2019     2018  

Cash flows from operating activities:

       

Loss for the period

      W (62,640 )      (48,982 ) 

Adjustments for:

       

Income tax benefit

   23      (66,018 )      (46,793 ) 

Depreciation

   18      695,764     807,736

Amortization of intangible assets

   18      115,476     102,339

Gain on foreign currency translation

        (104,117 )      (62,852 ) 

Loss on foreign currency translation

        105,805     53,141

Expenses related to defined benefit plans

   12      49,222     51,801

Gain on disposal of property, plant and equipment

        (3,290 )      (4,006 ) 

Loss on disposal of property, plant and equipment

        6,919     8,405

Impairment loss on property, plant and equipment

        4,182     —    

Gain on disposal of intangible assets

        (552 )      (239 ) 

Loss on disposal of intangible assets

        18     —    

Impairment loss on intangible assets

        —         37

Reversal of impairment loss on intangible assets

        (215 )      (130 ) 

Warranty expense

        97,240     35,647

Finance income

        (42,547 )      (35,238 ) 

Finance costs

        54,732     23,395

Equity in loss (income) of equity method accounted investees, net

   8      (4,107 )      2,893

Other income

        (1,728 )      (489 ) 

Other expenses

        2,528     634
     

 

 

   

 

 

 
        909,312     936,281

Changes in:

       

Trade accounts and notes receivable

        (610,551 )      783,501

Other accounts receivable

        49,157     18,759

Inventories

        50,512     (114,588 ) 

Lease receivables

        1,094     —    

Other current assets

        (118,703 )      (131,364 ) 

Other non-current assets

        (11,760 )      (15,822 ) 

Trade accounts and notes payable

        (178,456 )      (46,042 ) 

Other accounts payable

        3,206     (174,431 ) 

Accrued expenses

        26,283     (262,999 ) 

Provisions

        (82,074 )      (52,910 ) 

Other current liabilities

        (27,401 )      (15,138 ) 

Defined benefit liabilities, net

        (2,096 )      (2,734 ) 

Other non-current liabilities

        2,603     7,622
     

 

 

   

 

 

 
        (898,186 )      (6,146 ) 

Cash generated from operating activities

        (51,514 )      881,153

Income taxes paid

        (52,632 )      (55,851 ) 

Interests received

        14,979     17,487

Interests paid

        (86,842 )      (40,574 ) 
     

 

 

   

 

 

 

Net cash provided by (used in) operating activities

      W (176,009 )      802,215
     

 

 

   

 

 

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows, Continued

(Unaudited)

For the three-month periods ended March 31, 2019 and 2018

 

(In millions of won)    Note      2019     2018  

Cash flows from investing activities:

       

Dividends received

      W —         4,712

Increase in deposits in banks

        (500 )      (630,913 ) 

Proceeds from withdrawal of deposits in banks

        500     518,363

Acquisition of available-for-sale financial assets

        (80 )      (39 ) 

Proceeds from disposal of available-for-sale financial assets

        27     —    

Proceeds from disposal of financial assets at fair value through other comprehensive income

        (21 )      —    

Acquisition of investments in equity accounted investees

        —         (4,000 ) 

Proceeds from disposal of investments in equity accounted investees

        600     —    

Acquisition of property, plant and equipment

        (2,106,892 )      (1,815,515 ) 

Proceeds from disposal of property, plant and equipment

        13,508     102,496

Acquisition of intangible assets

        (137,143 )      (130,638 ) 

Proceeds from disposal of intangible assets

        1,945     960

Government grants received

        109,681     —    

Receipt from (payment for) settlement of derivatives

        5,385     (2 ) 

Proceeds from collection of short-term loans

        11,320     7,351

Increase in short-term loans

        (8,225 )      —    

Increase in long-term loans

        (1,500 )      (12,300 ) 

Increase in deposits

        (26,323 )      (517 ) 

Decrease in deposits

        656     294

Proceeds from disposal of emission rights

        —         4,160
     

 

 

   

 

 

 

Net cash used in investing activities

        (2,137,062 )      (1,955,588 ) 
     

 

 

   

 

 

 

Cash flows from financing activities:

     26       

Proceeds from short-term borrowings

        659,894     —    

Repayments of short-term borrowings

        (160,075 )      —    

Proceeds from issuance of bonds

        388,447     388,447

Proceeds from long-term borrowings

        1,682,466     907,850

Repayments of current portion of long-term borrowings and bonds

        (541,391 )      (180,168 ) 

Payment of lease liabilities

        (14,325 )      —    

Capital contribution from non-controlling interests

        276,396     —    
     

 

 

   

 

 

 

Net cash provided by financing activities

        2,291,412     1,116,129
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (21,659 )      (37,244 ) 

Cash and cash equivalents at January 1

        2,365,022     2,602,560

Effect of exchange rate fluctuations on cash held

        60,833     61,373
     

 

 

   

 

 

 

Cash and cash equivalents at March 31

      W 2,404,196     2,626,689
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

37

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, 2019, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of March 31, 2019, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of March 31, 2019, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of March 31, 2019, there are 20,513,988 ADSs outstanding.

 

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Table of Contents
1.

Reporting Entity, Continued

 

  (b)

Consolidated Subsidiaries as of March  31, 2019

 

(In millions)                            

Subsidiaries

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

LG Display America, Inc.

  San Jose, U.S.A.     100 %    December 31   September 24, 1999   Sell Display products   USD 411  

LG Display Germany GmbH

  Eschborn, Germany     100 %    December 31   November 5, 1999   Sell Display products   EUR 1  

LG Display Japan Co., Ltd.

  Tokyo, Japan     100 %    December 31   October 12, 1999   Sell Display products   JPY 95  

LG Display Taiwan Co., Ltd.

  Taipei, Taiwan     100 %    December 31   April 12, 1999   Sell Display products   NTD 116  

LG Display Nanjing Co., Ltd.

  Nanjing, China     100 %    December 31   July 15, 2002   Manufacture Display products   CNY 3,020  

LG Display Shanghai Co., Ltd.

  Shanghai, China     100 %    December 31   January 16, 2003   Sell Display products   CNY 4  

LG Display Poland Sp. z o.o.

  Wroclaw, Poland     100 %    December 31   September 6, 2005   Manufacture Display products   PLN 511  

LG Display Guangzhou Co., Ltd.

  Guangzhou, China     100 %    December 31   June 30, 2006   Manufacture Display products   CNY 1,655  

LG Display Shenzhen Co., Ltd.

  Shenzhen, China     100 %    December 31   August 28, 2007   Sell Display products   CNY 4  

LG Display Singapore Pte. Ltd.

  Singapore     100 %    December 31   January 12, 2009   Sell Display products   USD 1  

L&T Display Technology (Fujian) Limited

  Fujian, China     51 %    December 31   January 5, 2010   Manufacture and sell LCD
module and LCD monitor sets 		  CNY 116  

LG Display Yantai Co., Ltd.

  Yantai, China     100 %    December 31   April 19, 2010   Manufacture Display products   CNY 1,008  

Nanumnuri Co., Ltd.

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

LG Display (China) Co., Ltd.

  Guangzhou, China     70 %    December 31   December 10, 2012   Manufacture and sell Display
products 		  CNY 8,232  

Unified Innovative Technology, LLC

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

LG Display Guangzhou Trading Co., Ltd.

  Guangzhou, China     100 %    December 31   April 28, 2015   Sell Display products   CNY 1  

Global OLED Technology, LLC

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

LG Display Vietnam Haiphong Co., Ltd. (*1)

  Haiphong, Vietnam     100 %    December 31   May 5, 2016   Manufacture Display products   USD 500  

Suzhou Lehui Display Co., Ltd.

  Suzhou, China     100 %    December 31   July 1, 2016   Manufacture and sell LCD
module and LCD monitor sets 		  CNY 637  

LG DISPLAY FUND I LLC(*2)

  Wilmington, U.S.A.     100 %    December 31   May 1, 2018   Invest in venture business and
acquire technologies 		  USD 3  

LG Display High-Tech (China) Co., Ltd. (*3)

  Guangzhou, China     70 %    December 31   July 11, 2018   Manufacture Display products   CNY 11,977  

Money Market Trust(*4)

  Seoul, South Korea     100 %    December 31   —     Money market trust   KRW   347,500  

 

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1.

Reporting Entity, Continued

 

(*1)

For the three-month period ended March 31, 2019, the Controlling Company contributed W 226,300 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”).

(*2)

For the three-month period ended March 31, 2019, the Controlling Company contributed W 841 million in cash for the capital increase of LG DISPLAY FUND I LLC.

(*3)

For the three-month period ended March 31, 2019, the Controlling Company contributed W 633,646 million in cash for the capital increase of LG Display High-Tech (China) Co., Ltd. Meanwhile, additional contribution from non-controlling interest amounted to W 276,396 million.

(*4)

For the three-month period ended March 31, 2019, the Controlling Company acquired and disposed interests in Money Market Trust (“MMT”) and the MMT amount as of March 31, 2019 is W 347,500 million.

W 90,281 million is attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the three-month period ended March 31, 2018.

 

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, 2018.

This is the first set of the Group’s financial statements where K-IFRS No. 1116, Leases , has been applied. Changes to significant accounting policies are described in Note 3.

 

  (b)

Basis of Measurement

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

 

  •  

Derivative financial instruments at fair value, financial assets at fair value through profit or loss (“FVTPL) and financial asset at fair value through other comprehensive income (“FVOCI”), and

 

  •  

net defined benefit liabilities recognized at the present value of defined benefit obligations less the fair value of plan assets.

 

  (c)

Functional and Presentation Currency

Each subsidiary’s financial statements within the Group are presented in the subsidiary’s functional currency, which is the currency of the primary economic environment in which each subsidiary operates. The condensed consolidated interim financial statements are presented in Korean won, which is the Controlling Company’s functional currency.

 

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2.

Basis of Presenting Financial Statements, Continued

 

  (d)

Use of Estimates and Judgments

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

3.

Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in the preparation of its condensed consolidated interim financial statements are the same as those followed by the Group in its preparation of the consolidated financial statements as of and for the year ended December 31, 2018, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the changes in accounting policies explained below . The changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2019.

Changes in Accounting Policies

The Group has initially adopted K-IFRS No. 1116, Leases , from January 1, 2019. A number of other new standards are effective from January 1, 2019 but they do not have a material effect on the Group’s condensed consolidated interim financial statements.

K-IFRS No. 1116 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.

 

  (i)

Definition of a lease

Previously, the Group determined at contract inception whether an arrangement was or contained a lease under K-IFRS No. 2104, Determining Whether an Arrangement contains a Lease . The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under K-IFRS No. 1116, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition to K-IFRS No. 1116, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases for contracts that were previously identified as leases under K-IFRS No. 1017 and K-IFRS No. 2104 as of January 1, 2019.

 

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3.

Summary of Significant Accounting Policies, Continued

 

  (ii)

Accounting as a lessee

The Group leases land, buildings, vehicles, machinery and equipment and others.

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under K-IFRS No. 1116, the Group recognizes right-of-use assets and lease liabilities for most leases on the condensed consolidated interim statements of financial position.

However, as permitted in K-IFRS No. 1116, the Group has elected not to recognize right-of-use assets and lease liabilities for certain short-term leases and leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The carrying amounts of right-of-use assets recognized in the condensed consolidated interim financial statements are as below and those right-of use assets are presented in property, plant and equipment in the condensed consolidated interim statements of financial position.

 

(In millions of won)                                          
     Land      Buildings      Machinery
and equipment 		     Vehicles      Others      Total  

Balance at January 1, 2019

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

Balance at March 31, 2019

   W 53,443        70,071        1,282        10,143        626        135,565  

The Group presents lease liabilities in financial liabilities in the condensed consolidated interim statements of financial position.

 

  i)

Significant accounting policies

The Group recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses. The book value of right-of-use asset is adjusted when there is a remeasurement of the lease liability arising from a change in future lease payments.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the interest rate that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain and asset of a similar value to the right-of-use asset in a similar economic environment.

The lease liability is subsequently increased by the interest expense on the lease liability and decreased by lease payment made. The Group remeasures the lease liability when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

 

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3.

Summary of Significant Accounting Policies, Continued

 

Determination of the lease term for some lease contracts that include renewal options require the Group’s judgment. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

 

  ii)

Initial application

At initial application, the Group measures lease liabilities for leases classified as operating leases under K-IFRS No. 1017, at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The Group used the following practical expedients when applying K-IFRS No. 1116 to leases previously classified as operating leases under K-IFRS No. 1017.

 

  •  

Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term at initial application.

 

  •  

Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

 

  •  

Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

 

  (iii)

Accounting as a lessor

The Group leases out its right-of-use assets. The Group has classified these leases as operating leases.

The accounting policies applicable to the Group as a lessor are not different from those under K-IFRS No. 1017. However, when the Group is an intermediate lessor, the sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

The Group is not required to make any adjustments on initial application to K-IFRS No. 1116 for leases in which it acts as a lessor.

The Group sub-leases some of its buildings. Under K-IFRS No. 1017, the head lease and sub-lease contracts were classified as operating leases. On initial application to K-IFRS No. 1116, the right-of-use assets recognized from the head leases are presented in property, plant and equipment and the sub-lease contracts are classified as finance leases under K-IFRS No. 1116.

 

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3.

Summary of Significant Accounting Policies, Continued

 

  (iv)

Impacts on condensed consolidated interim financial statements

 

  i)

Impacts on initial application

On initial application to K-IFRS No. 1116, the Group recognized additional right-of-use assets and additional lease liabilities. The impact on initial application is summarized below.

 

(In millions of won)   
     January 1, 2019  

Right-of-use assets presented in property, plant and equipment

   W 142,040  

Prepaid expenses

     (61,570 ) 

Lease receivables

     34,649  

Lease liabilities

     115,119  

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 3.36%.

 

  ii)

Impacts for the period

As a result of initially applying K-IFRS No. 1116, in relation to the leases that were previously classified as operating leases, the Group recognized W 135,565 million of right-of-use assets and W 110,274 million of lease liabilities as at March 31, 2019.

Also in accordance with K-IFRS No. 1116, the Group has recognized depreciation and interest expense, instead of operating lease expense in relation to leases. During the three-month period ended March 31, 2019, the Group recognized W 15,007 million of depreciation and W 948 million of interest expense from these leases.

 

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4.

Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 2,404,196        2,365,022  

Deposits in banks

     

Time deposits

   W 4,318        4,318  

Restricted cash (*)

     74,082        74,082  
  

 

 

    

 

 

 
   W 78,400        78,400  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted cash (*)

   W 11        11  
  

 

 

    

 

 

 
   W 2,482,607        2,443,433  
  

 

 

    

 

 

 

 

(*)

Includes funds contributed under agreements on mutually beneficial cooperation between large enterprises and small and medium enterprises to aid LG Group’s second and third-tier suppliers, restricted deposits pledged to enforce the Group’s investment plans upon the receipt of grants from Gumi city and Gyeongsangbuk-do, and others.

 

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5.

Receivables and Other Assets

 

  (a)

Trade accounts and notes receivable as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Trade, net

   W 2,681,422        2,305,368  

Due from related parties

     704,843        523,795  
  

 

 

    

 

 

 
   W 3,386,265        2,829,163  
  

 

 

    

 

 

 

 

  (b)

Other accounts receivable as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Current assets

     

Non-trade receivables, net

   W 99,664        159,238  

Accrued income

     19,082        10,075  
  

 

 

    

 

 

 
   W 118,746        169,313  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivables

     10,853        11,448  
  

 

 

    

 

 

 
   W 129,599        180,761  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of March 31, 2019 and December 31, 2018 are W 7,582 million and W 39,092 million, respectively.

 

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5.

Receivables and Other Assets, Continued

 

  (c)

The aging of trade accounts and note receivable and other accounts receivable as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		 

Not past due

   W 3,383,913        126,430        (479 )       (1,845 ) 

Past due 1-15 days

     2,602        3,882        —          (21 ) 

Past due 16-30 days

     229        116        —          (1 ) 

Past due 31-60 days

     —          108        —          (1 ) 

Past due more than 60 days

     —          971        —          (40 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,386,744        131,507        (479 )       (1,908 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 
(In millions of won)    December 31, 2018  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		 

Not past due

   W 2,807,598        177,689        (473 )       (816 ) 

Past due 1-15 days

     21,558        3,148        (4 )       (26 ) 

Past due 16-30 days

     454        441        —          (4 ) 

Past due 31-60 days

     30        96        —          (1 ) 

Past due more than 60 days

     —          668        —          (434 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,829,640        182,042        (477 )       (1,281 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the three-month period ended March 31, 2019 and the year ended December 31, 2018 are as follows:

 

(In millions of won)    2019      2018  
     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		 

Balance at the beginning of the period

   W 477        1,281        1,632        1,311  

(Reversal of) bad debt expense

     2        627        (1,155 )       (30 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 479        1,908        477        1,281  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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5.

Receivables and Other Assets, Continued

 

  (d)

Other assets as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Current assets

     

Advance payments

   W 11,178        13,259  

Prepaid expenses

     145,223        89,110  

Value added tax refundable

     563,537        436,190  

Right to recover returned goods

     8,366        7,489  
  

 

 

    

 

 

 
   W 728,304        546,048  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 315,466        381,983  

 

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6.

Other Financial Assets

 

  (a)

Other financial assets as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019      December 31, 2018  

Current assets

     

Financial asset at fair value through profit or loss

     

Derivatives(*)

   W 25,272        13,059  

Financial asset at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 113        106  

Financial asset carried at amortized cost

     

Deposits

   W 45,162        17,020  

Short-term loans

     20,255        16,116  

Lease receivables

     5,649        —    
  

 

 

    

 

 

 
   W 71,066        33,136  
  

 

 

    

 

 

 
   W 96,451        46,301  
  

 

 

    

 

 

 

Non-current assets

     

Financial asset at fair value through profit or loss

     

Equity instruments

     

Intellectual Discovery, Ltd.

   W 920        4,598  

Kyulux, Inc.

     2,460        2,460  

Fineeva Co., Ltd.

     4        286  

ARCH Venture Fund Vill, L.P.

     6,506        6,337  
  

 

 

    

 

 

 
   W 9,890        13,681  
  

 

 

    

 

 

 

Convertible bonds

   W 1,327        1,327  

Derivatives(*)

     2,945        —    
  

 

 

    

 

 

 
   W 14,162        15,008  

Financial asset at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 69        55  

Financial asset carried at amortized cost

     

Deposits

   W 21,743        74,103  

Long-term loans

     48,730        55,048  

Lease receivables

     26,865        —    
  

 

 

    

 

 

 
   W 97,338        129,151  
  

 

 

    

 

 

 
   W 111,569        144,214  
  

 

 

    

 

 

 

 

(*)

Represents valuation gain from currency interest rate swap contracts to hedge currency risk related to foreign currency denominated borrowings and bonds. The Contracts are not designated as a hedging instrument

Other financial assets issued by related parties as of March 31, 2019 and December 31, 2018 are W 3,000 million and W 2,000 million, respectively.

 

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7.

Inventories

Inventories as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019      December 31, 2018  

Finished goods

   W 1,028,914        1,084,297  

Work-in-process

     930,313        856,388  

Raw materials

     458,423        554,720  

Supplies

     212,190        195,798  
  

 

 

    

 

 

 
   W 2,629,840        2,691,203  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2019 and 2018, 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 are as follows:

 

(In millions of won)    2019      2018  

Inventories recognized as cost of sales

   W 5,246,021        5,133,080  

Including: inventory write-downs

     352,096        210,188  

Including: reversal and usage of inventory write-downs

     (313,180 )       (206,127 ) 

 

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8.

Investments in Equity Accounted Investees

Associates as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)                                         

Associates

  

Location

  

Fiscal

year end

  

Date of
incorporation

  

Business

   March 31, 2019      December 31, 2018  
   Percentage
of
ownership 		    Carrying
amount 		     Percentage
of
ownership 		    Carrying
amount 		 

Paju Electric Glass Co., Ltd.

  

Paju,

South Korea

   December 31   

January

2005

   Manufacture electric glass for FPDs      40 %    W 44,201        40 %    W 47,823  

INVENIA Co., Ltd.

  

Seongnam,

South Korea

   December 31   

January

2001

   Develop and manufacture equipment for FPDs      13 %      4,076        13 %      4,166  

WooRee E&L Co., Ltd.

  

Ansan,

South Korea

   December 31   

June

2008

   Manufacture LED back light unit packages      14 %      5,677        14 %      4,746  

YAS Co., Ltd.

  

Paju,

South Korea

   December 31   

April

2002

   Develop and manufacture deposition equipment for OLEDs      15 %      15,877        15 %      16,308  

AVATEC Co., Ltd.

  

Daegu,

South Korea

   December 31   

August

2000

   Process and sell electric glass for FPDs      17 %      23,934        17 %      23,441  

Arctic Sentinel, Inc.

   Los Angeles, U.S.A.    March 31   

June

2008

  

Develop and manufacture

tablet for kids

     10 %      —          10 %      —    

CYNORA GmbH (*)

  

Bruchsal,

Germany

   December 31   

March

2003

   Develop organic emitting materials for displays and lighting devices          13 %      8,668        14 %      8,668  

 

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8.

Investments in Equity Accounted Investees, Continued

 

(In millions of won)                                         

Associates

  

Location

  

Fiscal

year end

  

Date of
incorporation

  

Business

   March 31, 2019      December 31, 2018  
   Percentage
of
ownership 		    Carrying
Amount 		     Percentage
of
ownership 		    Carrying
amount 		 

Material Science Co., Ltd.

  

Seoul,

South Korea

   December 31   

January

2014

   Develop, manufacture, and sell materials for display      10 %    W 3,372        10 %    W 3,346  

Nanosys Inc.

  

Milpitas,

U.S.A.

   December 31   

July

2001

   Develop, manufacture, and sell materials for display      4 %      5,327        4 %      5,491  
                

 

 

      

 

 

 
                 W 111,132        W 113,989  
                

 

 

      

 

 

 

 

(*)

In 2019, the Controlling Company’s ownership percentage in CYNORA GmbH decreased from 14% to 13% as the Controlling Company did not participate in the capital increase of CYNORA GmbH.

Although the Controlling Company’s respective share interests in INVENIA Co., Ltd., WooRee E&L Co., Ltd., YAS Co., Ltd., AVATEC Co., Ltd., Arctic Sentinel, Inc., CYNORA GmbH, Material Science and Nanosys Inc. are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee. Accordingly, the investments in these investees have been accounted for using the equity method.

Dividends recognized from equity method investees for the three-month periods ended March 31, 2019 and 2018 amounted to W 7,502 million and W 5,272 million, respectively.

 

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9.

Property, Plant and Equipment

For the three-month periods ended March 31, 2019 and 2018, the Group purchased property, plant and equipment of W 1,979,546 million and W 1,974,223 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W 71,289 million and 3.04%, and W 19,912 million and 2.23% for the three-month periods ended March 31, 2019 and 2018, respectively. In addition, for the three-month period ended March 31, 2019, the Group entered into various new lease agreements for use of buildings, vehicles and others. In relation to these leases, the Group recognized W 8,532 million of right-of-use asset and lease liability, in aggregate, during the three-month period ended March 31, 2019. Also, for the three-month periods ended March 31, 2019 and 2018, the Group disposed of property, plant and equipment with carrying amounts of W 12,211 million and W 61,868 million, respectively, and recognized W 3,290 million and W 6,919 million, respectively, as gain and loss, on disposal of property, plant and equipment for the three-month period ended March 31, 2019 (gain and loss for the three-month period ended March 31, 2018: W 4,006 million and W 8,405 million, respectively).

 

10.

Intangible Assets

 

  (a)

The Group capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of March 31, 2019 and December 31, 2018 are W 380,234 million and W 366,910 million, respectively.

 

  (b)

Development of new projects are divided into research activities and development activities. Expenditures on research activities are recognized in profit or loss and development expenditures are capitalized, respectively.

 

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11.

Financial Liabilities

 

  (a)

Financial liabilities as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Current

     

Short-term borrowings

   W 507,335        —    

Current portion of long-term borrowings and bonds

     1,042,140        1,553,907  

Lease liabilities

     49,348        —    
  

 

 

    

 

 

 
   W 1,598,823        1,553,907  

Non-current

     

Won denominated borrowings

   W 2,941,070        2,700,608  

Foreign currency denominated borrowings

     4,042,298        2,531,663  

Bonds

     2,167,902        1,772,599  

Derivatives(*)

     15,571        25,758  

Lease liabilities

     60,926        —    
  

 

 

    

 

 

 
   W 9,227,767        7,030,628  
  

 

 

    

 

 

 

 

(*)

Represents currency interest rate swap contracts to hedge currency risk related to foreign currency denominated borrowings and bonds. The Contracts are not designated as a hedging instrument.

 

  (b)

Foreign currency denominated short-term borrowings as of March 31, 2019 are as follows:

 

(In millions of won, USD and CNF)                    

Lender

   Annual interest rate
as of March 31, 2019 (%)(*) 		    March 31, 2019      December 31, 2018  

Standard Chartered Bank Korea Limited

     12ML + 0.78~0.88     W 341,340        —    

Standard Chartered Bank Vietnam and others

     3ML + 0.80~0.90       54,859        —    

Standard Chartered Bank (China) Limited

     PBOC*1.05       111,136        —    
    

 

 

    

 

 

 

Foreign currency equivalent

     USD 348        —    
     CNY 659        —    
    

 

 

    

 

 

 
     W 507,335        —    
    

 

 

    

 

 

 

 

(*)

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

 

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11.

Financial Liabilities, Continued

 

  (c)

Won denominated long-term borrowings as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)                    

Lender

   Annual interest rate
as of
March 31, 2019 (%) 		    March 31,
2019 		     December 31,
2018 		 

Woori Bank

     2.75     W 1,096        1,259  

Korea Development Bank and others

    

CD rate (91days) + 0.64,

2.43~3.25

 

 

    3,100,000        2,850,000  

Less current portion of long-term borrowings

       (160,026 )       (150,651 ) 
    

 

 

    

 

 

 
     W 2,941,070        2,700,608  
    

 

 

    

 

 

 

 

  (d)

Foreign currency denominated long-term borrowings as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won, USD and CNY)                     

Lender

   Annual interest rate
as of
March 31, 2019 (%) 		     March 31,
2019 		     December 31,
2018 		 

The Export-Import Bank of Korea and others

    

3ML+0.75~1.70

6ML+1.25

 

 

   W 1,223,135        955,975  

China Construction Bank and others

    

USD: 3ML+0.80~1.43

CNY: PBOC*(0.90~1.05)

 

 

     3,141,464        2,419,286  
     

 

 

    

 

 

 

Foreign currency equivalent

      USD 2,235      USD 2,262  
      CNY  10,798      CNY  5,198  

Less current portion of long-term borrowings

        (322,301 )       (843,598 ) 
     

 

 

    

 

 

 
      W 4,042,298        2,531,663  
     

 

 

    

 

 

 

 

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11.

Financial Liabilities, Continued

 

  (e)

Details of bonds issued and outstanding as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won, USD)                            
     Maturity      Annual interest rate
as of
March 31, 2019 (%) 		     March 31,
2019 		     December 31,
2018 		 

Won denominated bonds(*1)

           

Publicly issued bonds

    

April 2019 ~

February 2024

 

 

     1.80~3.45      W 2,290,000        1,900,000  

Privately issued bonds

    

May 2025 ~

May 2033

 

 

     3.25~4.25        110,000        110,000  

Less discount on bonds

           (4,966 )       (3,949 ) 

Less current portion

           (559,813 )       (559,658 ) 
        

 

 

    

 

 

 
         W 1,835,221        1,446,393  

Foreign currency denominated bond (*2)

           

Publicly issued bond

    
November
2021 		 
  		     3.88      W 341,340        335,430  

Foreign currency equivalent

         USD 300      USD 300  

Less discount on bonds

           (8,659 )       (9,224 ) 
        

 

 

    

 

 

 
           332,681        326,206  
        

 

 

    

 

 

 
         W 2,167,902        1,772,599  
        

 

 

    

 

 

 
           

 

(*1)

Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly.

(*2)

Principal of the foreign currency denominated bond is to be repaid at maturity and interests are paid semi-annually.

 

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12.

Employee Benefits

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

 

  (a)

Net defined benefit liabilities recognized as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Present value of partially funded defined benefit obligations

   W 1,631,146        1,595,423  

Fair value of plan assets

     (1,535,730 )       (1,550,063 ) 
  

 

 

    

 

 

 
   W 95,416        45,360  
  

 

 

    

 

 

 

 

  (b)

Expenses recognized in profit or loss for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
             2019                              2018              

Current service cost

   W 48,918        51,559  

Net interest cost

     304        242  
  

 

 

    

 

 

 
   W 49,222        51,801  
  

 

 

    

 

 

 

 

  (c)

Plan assets as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Guaranteed deposits in banks

   W 1,535,730        1,550,063  

As of March 31, 2019, the Controlling Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.

 

  (d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Remeasurements of the net defined benefit liabilities

   W (2,913 )       (6,419 ) 

Tax effect

     776        2,296  
  

 

 

    

 

 

 

Remeasurements of the net defined benefit liabilities, net of income tax

   W (2,137 )       (4,123 ) 
  

 

 

    

 

 

 

 

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13.

Provisions and Other Liabilities

 

  (a)

Changes in provisions for the three-month period ended March 31, 2019 are as follows:

 

(In millions of won)                            
     Litigations
and claims 		     Warranties (*)      Refund      Total  

Balance at January 1, 2019

   W —          122,088        8,930        131,018  
  

 

 

    

 

 

    

 

 

    

 

 

 

Additions

     2,108        97,240        931        100,279  

Usage

     —          (83,005 )       —          (83,005 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2019

   W 2,108        136,323        9,861        148,292  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 2,108        98,600        9,861-        110,569  

Non-current

   W —          37,723        —          37,723  

 

(*)

The provision for warranties covers defective products and is normally applicable for 18~36 months from the date of purchase. The warranty liability is calculated by using historical and anticipated rates of warranty claims, and costs per claim to satisfy the Group’s warranty obligation.

 

  (b)

Other liabilities as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Current liabilities

     

Withholdings

   W 30,945        30,970  

Unearned revenues

     9,792        43,841  

Security deposits

     2,375        165  
  

 

 

    

 

 

 
   W 43,112        74,976  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 82,557        80,817  

Long-term other accounts payable

     3,164        3,103  

Long-term unearned revenues

     1,728        2,116  

Security deposits

     8,450        10,790  
  

 

 

    

 

 

 
   W 95,899        96,826  
  

 

 

    

 

 

 

 

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14.

Contingencies and Commitments

 

  (a)

Legal Proceedings

Anti-trust Litigations

Claims alleging damages were filed against the Group and other TFT-LCD manufacturers seeking compensation for the effects of the companies’ participation in a cartel, as found by the European Commission’s decision in December 2010. While the Group continues its vigorous defense of the various pending proceedings described above, management’s assessment of the facts and circumstances could change based upon new information, intervening events and the final outcome of the cases. Consequently, the actual results could be materially different from management’s current estimates.

Others

The Group is involved in various disputes in addition to pending proceedings described above. The Group cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the disputes.

 

  (b)

Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,610 million ( W 1,831,858 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of March 31, 2019, 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.

 

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14.

Contingencies and Commitments, Continued

 

The Controlling Company and overseas subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables 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 		     Contractual
amount 		     KRW
equivalent 		 

Controlling Company

   Shinhan Bank    KRW  90,000        90,000        —          —    
      USD 25        28,445        —          —    
   Sumitomo Mitsui Banking Corporation    USD 20        22,756        —          —    
   Bank of Tokyo-Mitsubishi UFJ    KRW  130,000        130,000      KRW  26,770        26,770  
      USD 40        45,512        —          —    
   BNP Paribas    USD 200        227,560      USD 29        32,373  
   ING Bank    USD 150        170,670      USD 34        38,713  
     

 

 

    

 

 

    

 

 

    

 

 

 
      USD 435         USD 63     
      KRW 220,000        714,943      KRW 26,770        97,856  
     

 

 

    

 

 

    

 

 

    

 

 

 

Subsidiaries

              

LG Display Singapore Pte. Ltd.

   Standard Chartered Bank    USD 300        341,340      USD 83        93,991  
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Taiwan Co., Ltd.

   BNP Paribas    USD 52        59,166      USD 2        2,617  
   Australia and New Zealand Banking Group Ltd.    USD 70        79,646      USD 10        11,378  
   Taishin International Bank    USD 289        328,824      USD 30        34,135  
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Germany GmbH

   Citibank    USD 160        182,048        —          —    
   BNP Paribas    USD 75        85,335        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display America, Inc.

   Hongkong & Shanghai Banking Corp.    USD 400        455,120      USD 110        125,158  
   Standard Chartered Bank    USD 600        682,680      USD 230        261,696  
   Sumitomo Mitsui    USD 80        91,024      USD 6        6,827  
   Banking Corporation            
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Japan Co., Ltd.

   Sumitomo Mitsui    USD 20        22,756        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 
   Banking Corporation    USD 2,046        2,327,939      USD 471        535,802  
     

 

 

    

 

 

    

 

 

    

 

 

 
      USD 2,481         USD 534     
      KRW 220,000        3,042,882      KRW 26,770        633,658  
     

 

 

    

 

 

    

 

 

    

 

 

 

In connection with all of the contracts in the above table, the Controlling Company has sold its accounts receivable without recourse.

 

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14.

Contingencies and Commitments, Continued

 

Letters of credit

As of March 31, 2019, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 30 million ( W 34,134 million) with KEB Hana Bank, USD 80 million ( W 91,024 million) with Bank of China and USD 50 million ( W 56,890 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 1,475 million ( W 1,678,255 million) from KEB Hana Bank and others for advance received related to the long-term supply agreements. The Controlling Company also obtained payment guarantees amounting to USD 306 million ( W 347,953 million) from Korea Development Bank for foreign currency denominated bonds and USD 7 million ( W 7,965 million) from Shinhan Bank for value added tax payments in Poland.

LG Display (China) Co., Ltd. and other subsidiaries are provided with payment guarantees from the China Construction Bank Corporation and other various banks amounting to CNY 937 million ( W 158,025 million), JPY 900 million ( W 9,254 million), EUR 2.5 million ( W 3,194 million), VND 41,214 million ( W 2,019 million), USD 0.5 million ( W 569 million) and PLN 0.1 million ( W 30 million), respectively, for their local tax payments and utility payments.

License agreements

As of March 31, 2019, in relation to its LCD business, the Group has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of March 31, 2019, in connection with long-term supply agreements with customers, the Controlling Company recognized USD 1,375 million ( W 1,564,475 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Controlling Company received payment guarantees amounting to USD 1,475 million ( W 1,678,255 million) from KEB Hana Bank and other various banks relating to advances received.

 

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15.

Capital and Reserves

 

  (a)

Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W 5,000), and as of March 31, 2019 and December 31, 2018, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2018 to March 31, 2019.

 

  (b)

Reserves

Reserves consist mainly of the following:

Translation reserve

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

Other comprehensive income (loss) from associates

The other comprehensive income (loss) from associates comprises the amount related to change in equity of investments in equity accounted investees.

Reserves as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)  
     March 31, 2019      December 31, 2018  

Foreign currency translation differences for foreign operations

   W (118,119 )       (272,474 ) 

Other comprehensive loss from associates

     (28,094 )       (28,494 ) 
  

 

 

    

 

 

 
   W (146,213 )       (300,968 ) 
  

 

 

    

 

 

 

 

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16.

Revenue

Details of revenue for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Sales of goods

   W 5,869,005        5,664,450  

Royalties

     3,569        5,408  

Others

     6,207        5,306  
  

 

 

    

 

 

 
   W 5,878,781        5,675,164  
  

 

 

    

 

 

 

 

17.

Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the three-month periods ended March 31, 2019 and 2018.

 

  (a)

Revenue by geography

 

(In millions of won)              

Region

   2019      2018  

Domestic

   W 393,773        434,113  

Foreign

     

China

     3,753,565        3,596,291  

Asia (excluding China)

     610,595        402,274  

America

     490,183        613,913  

Europe (excluding Poland) 685,232

     343,195        346,052  

Poland

     287,470        282,521  
  

 

 

    

 

 

 
   W 5,485,008        5,241,051  
  

 

 

    

 

 

 
   W 5,878,781        5,675,164  
  

 

 

    

 

 

 

Sales to Company A and Company B amount to W 2,040,447 million and W 1,276,564 million, respectively, for the three-month period ended March 31, 2019 (the three-month period ended March 31, 2018: W 1,746,536 million and W 1,376,329 million). The Group’s top ten end-brand customers together accounted for 80% of sales for the three-month period ended March 31, 2019 (the three-month period ended March 31, 2018: 78%).

 

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17.

Geographic and Other Information, Continued

 

  (b)

Non-current assets by geography

 

(In millions of won)  

Region

   March 31, 2019      December 31, 2018  
   Property, plant
and equipment 		     Intangible
assets 		     Property, plant
and equipment 		     Intangible
assets 		 

Domestic

   W 15,091,080        814,983        14,984,688        816,808  

Foreign

           

China

     6,079,935        23,126        5,049,216        12,332  

Others

     1,936,209        148,279        1,566,226        158,502  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,016,144        171,405        6,615,442        170,834  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 23,107,224        986,388        21,600,130        987,642  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c)

Revenue by product and services

 

(In millions of won)       

Product

   2019      2018  

Televisions

   W 2,123,180        2,413,750  

Desktop monitors

     982,022        936,031  

Tablet products

     694,230        476,129  

Notebook computers

     625,658        589,699  

Mobile and others

     1,453,691        1,259,555  
  

 

 

    

 

 

 
   W 5,878,781        5,675,164  
  

 

 

    

 

 

 

 

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18.

The Nature of Expenses and Others

 

The classification of expenses by nature for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Changes in inventories

   W 61,363        (301 ) 

Purchases of raw materials, merchandise and others

     3,159,971        2,748,830  

Depreciation and amortization

     811,240        910,075  

Outsourcing fees

     213,665        269,017  

Labor costs

     787,001        857,684  

Supplies and others

     206,024        244,164  

Utility

     219,628        221,269  

Fees and commissions

     181,033        191,706  

Shipping costs

     53,705        54,425  

Advertising

     14,464        14,944  

Warranty

     97,240        35,647  

Travel

     23,384        26,130  

Taxes and dues

     32,268        28,687  

Others

     163,483        181,613  
  

 

 

    

 

 

 
   W 6,024,469        5,783,890  
  

 

 

    

 

 

 

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

 

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19.

Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Salaries

   W 86,023        91,063  

Expenses related to defined benefit plans

     8,126        7,484  

Other employee benefits

     22,486        23,072  

Shipping costs

     45,140        45,871  

Fees and commissions

     57,493        48,697  

Depreciation

     54,355        39,795  

Taxes and dues

     16,506        13,107  

Advertising

     14,464        14,944  

Warranty

     97,240        35,647  

Rent

     610        6,649  

Insurance

     2,646        2,883  

Travel

     5,491        6,178  

Training

     3,336        2,567  

Others

     17,749        17,331  
  

 

 

    

 

 

 
   W 431,665        355,288  
  

 

 

    

 

 

 

 

20.

Personnel Expenses

Details of personnel expenses for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)       
     2019      2018  

Salaries and wages

   W 656,194        713,434  

Other employee benefits

     123,601        138,184  

Contributions to National Pension plan

     18,150        18,807  

Expenses related to defined benefit plan and defined contribution plan

     49,238        51,801  
  

 

 

    

 

 

 
   W 847,183        922,226  
  

 

 

    

 

 

 

 

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21.

Other Non-operating Income and Expenses

 

  (a)

Details of other non-operating income for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)       
     2019      2018  

Foreign currency gain

   W 241,793        220,470  

Gain on disposal of property, plant and equipment

     3,290        4,006  

Gain on disposal of intangible assets

     552        239  

Reversal of impairment loss on intangible assets

     215        130  

Rental income

     626        333  

Others

     918        2,464  
  

 

 

    

 

 

 
   W 247,394        227,642  
  

 

 

    

 

 

 

 

  (b)

Details of other non-operating expenses for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)       
     2019      2018  

Foreign currency loss

   W 210,583        202,434  

Loss on disposal of property, plant and equipment

     6,919        8,405  

Loss on disposal of intangible assets

     18        —    

Impairment loss on property, plant and equipment

     4,182        —    

Impairment loss on intangible assets

     —          37  

Donations

     14        1,866  

Other bad debt expense

     398        45  

Expenses related to legal proceedings or claims and others

     2,140        50  
  

 

 

    

 

 

 
   W 224,254        212,837  
  

 

 

    

 

 

 

 

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22.

Finance Income and Finance Costs

Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Finance income

     

Interest income

   W 10,798        19,469  

Foreign currency gain

     18,278        101,492  

Gain on transaction of derivatives

     5,385        36  

Gain on valuation of derivatives

     25,345        —    

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

     4        —    
  

 

 

    

 

 

 
   W 59,810        120,997  
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   W 18,701        22,759  

Foreign currency loss

     53,766        106,304  

Loss on sale of trade accounts and notes receivable

     6,303        345  

Loss on transaction of derivatives

     —          38  

Loss on valuation of derivatives

     —          242  

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

     3,960        —    

Others

     967        673  
  

 

 

    

 

 

 
   W 83,697        130,361  
  

 

 

    

 

 

 

 

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23.

Income Taxes

 

  (a)

Details of income tax expense (benefit) for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Current tax expense

   W 29,110        49,384  

Deferred tax benefit

     (95,128 )       (96,177 ) 
  

 

 

    

 

 

 

Income tax benefit

   W (66,018 )       (46,793 ) 
  

 

 

    

 

 

 

 

  (b)

Deferred Tax Assets and Liabilities

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Group’s estimated future taxable income.

Deferred tax assets and liabilities as of March 31, 2019 and December 31, 2018 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     March,
31, 2019 		     December,
31, 2018 		     March,
31, 2019 		    December,
31, 2018 		    March,
31, 2019 		    December,
31, 2018 		 

Other accounts receivable, net

   W —          —          (3,179 )      (1,013 )      (3,179 )      (1,013 ) 

Inventories, net

     66,323        60,606        —         —         66,323       60,606  

Defined benefit liabilities, net

     6,680        —          —         —         6,680       —    

Investments in subsidiaries and associates

     10,526        13,404        —         —         10,526       13,404  

Accrued expenses

     135,209        126,072        —         —         135,209       126,072  

Property, plant and equipment

     448,396        445,721        (3,814 )      (1,495 )      444,582       444,226  

Intangible assets

     2,717        3,468        (14,226 )      (14,588 )      (11,509 )      (11,120 ) 

Provisions

     36,289        32,468        (3,755 )      —         32,534       32,468  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     25,217        20,850        (735 )      (7,665 )      24,482       13,185  

Tax losses

     171,562        134,845        —         —         171,562       134,845  

Tax credit carryforwards

     339,760        308,393        —         —         339,760       308,393  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 1,242,692        1,145,840        (25,709 )      (24,761 )      1,216,983       1,121,079  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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24.

Loss Per Share

 

  (a)

Basic loss per share for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In won and No. of shares)    2019      2018  

Loss attributable to owners of the Controlling Company

   W (60,933,209,389 )       (59,453,887,501 ) 

Weighted-average number of common stocks outstanding

     357,815,700        357,815,700  
  

 

 

    

 

 

 

Loss per share

   W (170 )       (166 ) 
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2019 and 2018, there were no events or transactions that resulted in changes in the number of common stocks used for calculating loss per share.

 

  (b)

Diluted loss per share for the three-month periods ended March 31, 2019 and 2018 are not calculated since there was no potential common stock.

 

25.

Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risks. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below an acceptable level.

 

  (a)

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

 

  (i)

Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Controlling Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, CNY, JPY, etc.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily KRW, USD and CNY.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Meanwhile, the Group entered into currency interest rate swap contracts to hedge currency risk with respect to foreign currency denominated borrowings and bonds.

 

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25.

Financial Risk Management, Continued

 

  i)

Exposure to currency risk

 

The Group’s exposure to foreign currency risk based on notional amounts as of March 31, 2019 and December 31, 2018 is as follows:

 

(In millions)    March 31, 2019  
     USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     580       1,805       7,070       67       3       233       1,146,984  

Trade accounts and notes receivable

     2,607       14       780       —         —         6       —    

Non-trade receivables

     21       798       180       3       2       3       8,730  

Other assets denominated in foreign currencies

     90       2,047       5,460       222       11       22       2,794  

Trade accounts and notes payable

     (654 )      (11,491 )      (2,512 )      —         —         4       (246,686 ) 

Other accounts payable

     (1,047 )      (20,459 )      (2,606 )      (3 )      (4 )      (6 )      (603,287 ) 

Financial liabilities

     (2,875 )      —         (11,457 )      —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Aggregate notional amounts

     (1,278 )      (27,286 )      (3,085 )      289       12       262       308,535  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Currency interest swap contracts

     1,535       —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     257       (27,286 )      (3,085 )      289       12       262       308,535  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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25.

Financial Risk Management, Continued

 

(In millions)    December 31, 2018  
     USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     790       83       5,515       121       8       206       2,070,889  

Trade accounts and notes receivable

     2,175       7       1,098       —         —         —         —    

Non-trade receivables

     21       852       201       3       4       —         23,182  

Other assets denominated in foreign currencies

     33       220       11,157       108       12       23       2,782  

Trade accounts and notes payable

     (863 )      (12,501 )      (2,862 )      —         —         —         (355,390 ) 

Other accounts payable

     (928 )      (20,326 )      (4,762 )      (6 )      (3 )      (4 )      (1,585,130 ) 

Financial liabilities

     (2,571 )      —         (5,198 )      —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Aggregate notional amounts

     (1,343 )      (31,665 )      5,149       226       21       225       156,333  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Currency interest swap contracts

     780       —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (563 )      (31,665 )      5,149       226       21       225       156,333  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average exchange rates applied for the three-month periods ended March 31, 2019 and 2018 and the exchange rates at March 31, 2019 and December 31, 2018 are as follows:

 

(In won)    Average rate      Reporting date spot rate  
     2019      2018      March 31,
2019 		     December 31,
2018 		 

USD

   W 1,124.40        1,072.66        1,137.80        1,118.10  

JPY

     10.22        9.90        10.28        10.13  

CNY

     166.47        168.62        168.74        162.76  

TWD

     36.48        36.59        36.86        36.58  

EUR

     1,277.12        1,317.33        1,277.46        1,279.16  

PLN

     296.99        315.20        297.35        297.33  

VND

     0.0485        0.0472        0.0490        0.0482  

 

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25.

Financial Risk Management, Continued

 

  ii)

Sensitivity analysis

 

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in a foreign currency as of March 31, 2019 and December 31, 2018, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of the 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, 2019      December 31, 2018  
     Equity      Profit or loss      Equity      Profit or loss  

USD (5 percent weakening)

   W (12,528 )       71,613        (46,136 )       38,725  

JPY (5 percent weakening)

     (10,290 )       (9,855 )       (12,060 )       (10,497 ) 

CNY (5 percent weakening)

     (26,090 )       133        41,779        318  

TWD (5 percent weakening)

     531        1        413        1  

EUR (5 percent weakening)

     691        77        1,197        390  

PLN (5 percent weakening)

     3,847        120        3,451        (236 ) 

VND (5 percent weakening)

     548        548        273        273  

A stronger won against the above currencies as of March 31, 2019 and December 31, 2018 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

  (ii)

Interest rate risk

Interest rate risk arises principally from the Group’s debentures and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Group entered into currency interest swap contracts amounting to W 1,405,183 million in notional amount to hedge interest rate risk with respect to variable rate foreign currency denominated borrowings.

 

  i)

Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of March 31, 2019 and December 31, 2018 is as follows:

 

(In millions of won)    March 31, 2019      December 31, 2018  

Fixed rate instruments

     

Financial assets

   W 2,482,778        2,443,583  

Financial liabilities

     (5,678,810 )       (5,033,515 ) 
  

 

 

    

 

 

 
   W (3,196,032 )       (2,589,932 ) 
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (5,021,935 )       (3,525,262 ) 

 

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25.

Financial Risk Management, Continued

 

  ii)

Equity and profit or loss sensitivity analysis for variable rate instruments

 

As of March 31, 2019 and December 31, 2018, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

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

March 31, 2019

           

Variable rate instruments

   W (26,221 )       26,221        (26,221 )       26,221  

December 31, 2018

           

Variable rate instruments

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

 

  (b)

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

The Group’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Group establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

In relation to the impairment of financial assets, the Group recognizes expected credit loss and its changes at each reporting date subsequent to initial recognition of financial asset.

 

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25.

Financial Risk Management, Continued

 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Financial Assets Carried at Amortized Cost

     

Cash and cash equivalents

   W 2,404,196        2,365,022  

Deposits in banks

     78,411        78,411  

Trade accounts and notes receivable

     3,386,265        2,829,163  

Non-trade receivables

     99,664        159,238  

Accrued income

     19,082        10,075  

Deposits

     66,905        91,123  

Short-term loans

     20,255        16,116  

Long-term loans

     48,730        55,048  

Long-term non-trade receivables

     10,853        11,448  

Lease receivables

     32,514        —    
  

 

 

    

 

 

 
   W 6,166,875        5,615,644  

Financial Assets at Fair Value through Profit or Loss

     

Convertible bonds

   W 1,327        1,327  

Derivatives

     28,217        13,059  
  

 

 

    

 

 

 
   W 29,544        14,386  

Financial Assets at Fair Value through Other Comprehensive Income

     

Debt instruments

   W 182        161  
  

 

 

    

 

 

 
   W 6,196,601        5,630,191  
  

 

 

    

 

 

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the sales and investing activities. Trade accounts and notes receivables are insured in order to manage credit risk and uninsured trade accounts and notes receivables are managed in accordance with the Group’s management policy.

 

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25.

Financial Risk Management, Continued

 

  (c)

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flows from operations to meet its capital requirements, the Group may rely on other financing activities, such as external long-term borrowings and offerings of debt instruments, equity-linked and other debt instruments. In addition, the Group maintains a line of credit with various banks.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of March 31, 2019.

 

(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:

                 

Unsecured bank borrowings

   W 7,973,030        8,902,782       580,622        699,460        1,507,036       5,712,446       403,218  

Unsecured bond issues

     2,727,715        2,953,153       294,777        331,349        664,059       1,523,858       139,110  

Trade accounts and notes payable

     2,970,179        2,970,179       2,970,179        —          —         —         —    

Other accounts payable

     3,333,945        3,333,945       3,332,897        1,048        —         —         —    

Long-term other accounts payable

     3,164        3,164       —          —          2,121       1,043       —    

Security deposits

     10,825        10,825       85        2,290        8,450       —         —    

Lease liabilities

     110,274        118,445       30,986        24,247        27,858       24,297       11,057  

Derivative financial liabilities

                 

Derivative financial liabilities

     15,571        (36,787 )      —          —          (8,722 )      (28,065 )      —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 17,144,703        18,255,706       7,209,546        1,058,394        2,200,802       7,233,579       553,385  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

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

 

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25.

Financial Risk Management, Continued

 

  (d)

Capital management

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

 

(In millions of won)             
     March 31, 2019     December 31, 2018  

Total liabilities

   W 20,098,447       18,289,464  

Total equity

     15,289,534       14,886,246  

Cash and deposits in banks (*1)

     2,482,596       2,443,422  

Borrowings (including bonds)

     10,700,745       8,558,777  

Total liabilities to equity ratio

     131 %      123 % 

Net borrowings to equity ratio (*2)

     54 %      41 % 

 

(*1)

Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.

(*2)

Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds and excluding lease liabilities) less cash and current deposits in banks by total equity.

 

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25.

Financial Risk Management, Continued

 

  (e)

Determination of fair value

 

  (i)

Measurement of fair value

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

  i)

Current Assets and Liabilities

The carrying amounts approximate fair value because of the short maturity of these instruments.

 

  ii)

Trade Receivables and Other Receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.

 

  iii)

Investments in Equity and Debt Instruments

The fair value of Marketable financial assets at FVTPL and FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using valuation methods.

 

  iv)

Non-derivative Financial Liabilities

Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

 

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25.

Financial Risk Management, Continued

 

  (ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed consolidated interim statements of financial position as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)                    
     March 31, 2019     December 31, 2018  
     Carrying
amounts 		     Fair Values     Carrying
amounts 		     Fair Values  

Financial Assets carried at amortized cost

          

Cash and cash equivalents

   W 2,404,196        ( *)      2,365,022        ( *) 

Deposits in banks

     78,411        ( *)      78,411        ( *) 

Trade accounts and notes receivable

     3,386,265        ( *)      2,829,163        ( *) 

Non-trade receivables

     99,664        ( *)      159,238        ( *) 

Accrued income

     19,082        ( *)      10,075        ( *) 

Deposits

     66,905        ( *)      91,123        ( *) 

Short-term loans

     20,255        ( *)      16,116        ( *) 

Long-term loans

     48,730        ( *)      55,048        ( *) 

Long-term non-trade receivables

     10,853        ( *)      11,448        ( *) 

Lease receivables

     32,514        ( *)      —          —    

Financial Assets at Fair Value through Profit or Loss

          

Equity instruments

   W 9,890        9,890       13,681        13,681  

Convertible bonds

     1,327        1,327       1,327        1,327  

Derivatives

     28,217        28,217       13,059        13,059  

Financial Assets at Fair Value through Other Comprehensive Income

          

Debt instruments

   W 182        182       161        161  

Financial liabilities at fair value through profit or loss

          

Derivatives

   W 15,571        15,571       25,758        25,758  

Liabilities carried at amortized cost

          

Secured bank borrowings

   W —          —         268,093        268,093  

Unsecured bank borrowings

     7,973,030        8,035,928       5,958,427        6,013,903  

Unsecured bond issues

     2,727,715        2,789,018       2,332,257        2,384,987  

Trade accounts and notes payable

     2,970,179        ( *)      3,087,461        ( *) 

Other accounts payable

     3,333,945        ( *)      3,566,629        ( *) 

Long-term other accounts payable

     3,164        ( *)      3,103        ( *) 

Security deposits

     10,825        ( *)      10,955        ( *) 

Lease liabilities

     110,274        ( *)      —          —    

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

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25.

Financial Risk Management, Continued

 

  (iii)

Fair values of financial assets and liabilities

 

  i)

Fair value hierarchy

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

 

  •  

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

 

  •  

Level 2: inputs other than quoted prices included within Level 1 that are observable for the 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, 2019 and December 31, 2018 are as follows:

 

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

March 31, 2019

           

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          9,890        9,890  

Convertible bonds

     —          —          1,327        1,327  

Derivatives

     —          —          28,217        28,217  

Financial asset at fair value through other comprehensive income

           

Debt instruments

   W 182        —          —          182  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          15,571        15,571  

 

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

December 31, 2018

           

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          13,681        13,681  

Convertible bonds

     —          —          1,327        1,327  

Derivatives

     —          —          13,059        13,059  

Financial asset at fair value through other comprehensive income

           

Debt instruments

   W 161        —          —          161  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          25,758        25,758  

 

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25.

Financial Risk Management, Continued

 

  iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019      Valuation technique      Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Unsecured bank borrowings

   W —          —          8,035,928        Discounted cash flow        Discount rate  

Unsecured bond issues

     —          —          2,789,018        Discounted cash flow        Discount rate  
(In millions of won)    December 31, 2018      Valuation technique      Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Secured bank borrowings

   W —          —          268,093        Discounted cash flow        Discount rate  

Unsecured bank borrowings

     —          —          6,013,903        Discounted cash flow        Discount rate  

Unsecured bond issues

     —          —          2,384,987        Discounted cash flow        Discount rate  

 

  iv)

The discount rates applied for determination of the above fair value as of March 31, 2019 and December 31, 2018 are as follows:

 

     March 31, 2019   December 31, 2018

Borrowings, bonds and others

   2.08~3.72%   2.09~3.37%

 

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26.

Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the three-month period ended March 31, 2019 are as follows:

 

(In millions of won)                           
     January 1,
2019 		           Non-cash transactions         
     Cash flows from
financing activities 		    Reclassification     Gain or loss on
foreign currency
translation 		     Effective
interest
adjustment 		     Others      March 31,
2019 		 

Short-term borrowings

   W —          499,819       —         7,516        —          —          507,335  

Current portion of long-term borrowings and bonds

     1,553,907        (541,391 )      18,138       11,331        155        —          1,042,140  

Long-term borrowings

     5,232,271        1,682,466       (18,138 )      86,769        —          —          6,983,368  

Bonds

     1,772,599        388,447       —         5,760        1,096        —          2,167,902  

Lease liabilities

     —          (14,325 )      —         669        948        122,982        110,274  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,558,777        2,015,016       —         112,045        2,199        122,982        10,811,019  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others

 

  (a)

Related parties

Related parties as of March 31, 2019 are as follows:

 

Classification

  

Description

Associates(*)

   Paju Electric Glass Co., Ltd. and others

Entity that has significant influence over the Controlling Company

   LG Electronics Inc.

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

   Subsidiaries of LG Electronics Inc.

 

(*)

Details of associates are described in note 8.

 

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27.

Related Parties and Others, Continued

 

  (b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)    2019  
     Sales
and others 		            Purchase and others  
     Dividend
income 		     Purchase of
raw material
and others 		     Acquisition of
property,
plant and
equipment 		     Outsourcing
fees 		     Other costs  

Associates

                 

INVENIA Co., Ltd.

   W —          180        343        28,204        —          53  

AVATEC Co., Ltd.

     —          265        —          —          21,157        201  

Paju Electric Glass Co., Ltd.

     —          6,057        90,616        —          —          964  

WooRee E&L Co., Ltd.

     —          —          1,305        —          —          1  

YAS Co., Ltd.

     —          1,000        1,647        80,418        —          958  

Material Science Co., Ltd.

     —          —          —          —          —          313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          7,502        93,911        108,622        21,157        2,490  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 285,534        —          3,833        422,275        —          28,042  

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

                 

LG Electronics India Pvt. Ltd.

   W 22,864        —          —          —          —          1  

LG Electronics Vietnam Haiphong Co., Ltd.

     62,783        —          —          1,515        —          121  

LG Electronics Nanjing New Technology Co., Ltd.

     56,558        —          —          29        —          99  

 

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27.

Related Parties and Others, Continued

 

(In millions of won)    2019  
     Sales
and others 		            Purchase and others  
     Dividend
income 		     Purchase of
raw material
and others 		     Acquisition of
property,
plant and
equipment 		     Outsourcing
fees 		     Other costs  

LG Electronics RUS, LLC

   W 26,978        —          —          —          —          743  

LG Electronics do Brasil Ltda.

     43,354        —          —          —          —          45  

LG Innotek Co., Ltd.

     3,033        —          15,560        —          —          24,731  

Qingdao LG Inspur Digital Communication Co., Ltd.

     2,588        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     20,417        —          —          —          —          —    

LG Electronics Mexicalli S.A. DE C.V.

     38,472        —          —          —          —          27  

LG Electronics Mlawa Sp. z o.o.

     191,510        —          —          —          —          575  

LG Electronics Taiwan Taipei Co., Ltd.

     2,683        —          —          —          —          89  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          27,508        —          —    

LG Electronics Reynosa S.A. DE C.V.

     168,014        —          —          —          —          258  

LG Electronics Air-Conditioning (Shandong) Co., Ltd.

     —          —          33        4,014        —          17  

HiEntech Co., Ltd.

     18        —          —          3,666        —          7,111  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          4,055        —          5,674  

LG Electronics S.A. (Pty) Ltd

     1,728        —          —          —          —          5  

LG Electronics Egypt S.A.E.

     27,913        —          —          —          —          —    

LG Electronics Alabama Inc.

     2,563        —          —          —          —          —    

LG Electronics Japan, Inc.

     —          —          —          3        —          1,552  

LG Electronics USA Inc.

     2,570        —          —          —          —          —    

Others

     543        —          1        —          —          1,592  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 674,589        —          15,594        40,790        —          42,640  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 960,123        7,502        113,338        571,687        21,157        73,172  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

(In millions of won)    2018  
     Sales
and others 		            Purchase and others  
     Dividend
income 		     Purchase of
raw material
and others 		     Acquisition of
property,
plant and
equipment 		     Outsourcing
fees 		     Other costs  

Associates

                 

INVENIA Co., Ltd.

   W —          30        270        7,902        —          72  

AVATEC Co., Ltd.

     —          530        —          —          17,773        119  

Paju Electric Glass Co., Ltd.

     —          4,172        92,497        —          —          920  

WooRee E&L Co., Ltd.

     —          —          —          —          —          47  

YAS Co., Ltd.

     —          —          760        12,417        —          794  

LB Gemini New Growth Fund No. 16

     —          540        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        93,527        20,319        17,773        1,952  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 363,699        —          11,113        221,371        —          19,114  

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

                 

LG Electronics India Pvt. Ltd.

   W 8,355        —          —          —          —          13  

LG Electronics Vietnam Haiphong Co., Ltd.

     32,988        —          —          1,214        —          2  

LG Electronics Nanjing New Technology Co., Ltd.

     71,483        —          —          18        —          125  

 

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27.

Related Parties and Others, Continued

 

(In millions of won)    2018  
     Sales
and others 		            Purchase and others  
     Dividend
income 		     Purchase of
raw material
and others 		     Acquisition of
property,
plant and
equipment 		     Outsourcing
fees 		     Other costs  

LG Electronics RUS, LLC

   W 15,328        —          —          —          —          320  

LG Electronics do Brasil Ltda.

     86,005        —          —          —          —          104  

LG Innotek Co., Ltd.

     6,950        —          39,616        —          —          11,082  

Qingdao LG Inspur Digital Communication Co., Ltd.

     7,656        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     33,987        —          —          —          —          —    

LG Electronics Mexicalli S.A. DE C.V.

     55,028        —          —          —          —          54  

LG Electronics Mlawa Sp. z o.o.

     172,622        —          —          —          —          72  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          119,537        —          491  

LG Electronics Reynosa S.A. DE C.V.

     246,928        —          —          —          —          898  

HiEntech Co., Ltd.

     —          —          —          5,230        —          7,935  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          7,541        —          10,243  

Others

     8,537        —          6        —          —          2,867  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 745,867        —          39,622        133,540        —          34,206  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,109,566        5,272        144,262        375,230        17,773        55,272  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

  (c)

Trade accounts and notes receivable and payable and others as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)       
     Trade accounts and notes
receivable and others 		     Trade accounts and notes
payable and others 		 
     March 31,
2019 		     December 31,
2018 		     March 31,
2019 		     December 31,
2018 		 

Associates

           

INVENIA Co., Ltd.

   W 3,180        2,000        37,040        30,179  

AVATEC Co., Ltd.

     265        —          5,523        4,382  

Paju Electric Glass Co., Ltd.

     6,057        —          63,306        60,566  

WooRee E&L Co., Ltd.

     —          —          1,296        7  

YAS Co., Ltd.

     1,000        —          93,612        6,145  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 10,502        2,000        200,777        101,279  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

           

LG Electronics Inc.

   W 289,267        247,679        501,669        430,677  

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

           

LG Electronics do Brasil Ltda.

   W 20,490        15,608        23        62  

LG Electronics RUS, LLC

     14,673        22,570        508        90  

LG Innotek Co., Ltd.

     1,123        2,885        55,571        47,382  

Inspur LG Digital Mobile Communications Co., Ltd.

     21,175        13,172        —          —    

LG Electronics Mexicalli S.A. DE C.V.

     20,805        15,305        —          —    

LG Electronics Mlawa Sp. z o.o.

     125,806        70,236        123        33  

LG Electronics Nanjing New Technology Co., Ltd.

     37,228        43,463        942        139  

 

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27.

Related Parties and Others, Continued

 

(In millions of won)       
     Trade accounts and notes
receivable and others 		     Trade accounts and notes
payable and others 		 
     March 31,
2019 		     December 31,
2018 		     March 31,
2019 		     December 31,
2018 		 

LG Electronics Reynosa S.A. DE C.V.

   W 93,527        69,189        130        134  

LG Electronics Vietnam Haiphong Co., Ltd.

     40,461        25,544        1,986        —    

LG Hitachi Water Solutions Co., Ltd.

     —          9,100        59,028        50,425  

HiEntech (Tianjin) Co., Ltd.

     —          —          6,826        16,345  

HiEntech Co., Ltd.

     —          —          6,848        16,816  

LG Electronics India Pvt. Ltd.

     14,321        9,047        —          29  

LG Electronics Egypt S.A.E.

     18,760        10,296        —          —    

LG Electronics Air-Conditioning (Shandong) Co., Ltd.

     —          —          7,508        17,654  

Others

     7,287        8,793        1,204        1,246  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 415,656        315,208        140,697        150,355  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 715,425        564,887        843,143        682,311  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

  (d)

Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)       
     2019      2018  

Associates

   Loans      Collection
of loans 		     Loans      Collection
of loans 		 

INVENIA Co., Ltd.

   W 1,000        —          —          125  

YAS Co., Ltd.

     —          —          —          125  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,000        —          —          250  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

  (e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month periods ended March 31, 2019 and 2018 and as of March 31, 2019 and December 31, 2018 are as follows. These entities are not affiliates according to K-IFRS No. 1024, Related Party Disclosures.

 

(In millions of won)  
     For the three-month period
ended March 31, 2019 		     March 31, 2019  
     Sales
and others 		     Purchase
and others 		     Trade accounts and
notes receivable
and others 		     Trade accounts and
notes payable
and others 		 

LG International Corp. and its subsidiaries

   W 195,200        118,145        149,635        180,958  

LG Uplus Corp.

     —          560        —          207  

LG Chem Ltd. and its subsidiaries

     721        286,607        759        232,131  

S&I Corp. and its subsidiaries (Formerly, Serveone)

     84        329,563        21,362        398,048  

Silicon Works Co., Ltd.

     92        150,292        101        158,020  

LG Corp.

     —          13,273        13,201        5,583  

LG Management Development Institute

     —          2,470        3,480        435  

LG CNS Co., Ltd. and its subsidiaries

     5        35,922        2        38,435  

LG Household & Health Care and its subsidiaries

     —          95        —          2  

LG Holdings Japan Co., Ltd.

     —          492        2,185        —    

G2R Inc. and its subsidiaries

     —          1,064        —          1,608  

Robostar Co., Ltd.

     —          5,347        —          5,833  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 196,102        943,830        190,725        1,021,260  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

(In millions of won)  
     For the three-month period
ended March 31, 2018 		     December 31, 2018  
     Sales
and others 		     Purchase
and others 		     Trade accounts and
notes receivable
and others 		     Trade accounts and
notes payable
and others 		 

LG International Corp. and its subsidiaries

   W 200,628        413,836        83,011        146,836  

LG Uplus Corp.

     —          224        —          178  

LG Chem Ltd. and its subsidiaries

     1,564        296,701        173        184,357  

Serveone and its subsidiaries

     104        475,968        21,307        510,132  

Silicon Works Co., Ltd.

     —          143,295        —          140,694  

LG Corp.

     —          12,791        11,246        —    

LG Management Development Institute

     —          2,813        3,480        441  

LG CNS Co., Ltd. and its subsidiaries

     —          37,813        1        95,703  

LG Hausys Ltd.

     1,110        1        —          3  

LG Household & Health Care and its subsidiaries

     —          12        —          —    

LG Holdings Japan Co., Ltd.

     —          456        2,037        —    

G2R Inc. and its subsidiaries

     —          4,041        —          19,773  

Robostar Co., Ltd.

     —          —          —          2,723  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 203,406        1,387,951        121,255        1,100,840  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

Compensation costs of key management for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Short-term benefits

   W 891        888  

Expenses related to the defined benefit plan

     100        273  
  

 

 

    

 

 

 
   W 991        1,161  
  

 

 

    

 

 

 

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

 

28.

Non-current Assets Held for Sale

The Group decided to dispose a part of tangible assets of LG Display Poland Sp. z o.o. based on the management’s approval and began effort to sell the disposal group. The Group expects to complete the sale within the first half of 2019.

 

  (1)

impairment loss of disposal group

Fair value less costs to sell of disposal group is expected to exceed the carrying amount so no impairment loss is recognized to the non-current assets held for sale.

 

  (2)

assets of disposal group

Non-current assets as held for sale at the reporting date is as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Property, plant and equipment

   W 70,166        70,161  

 

29.

Subsequent Event

The Controlling Company issued the following foreign currency denominated privately placed bonds on April 30, 2019:

 

(In millions of USD)  
     Issue date      Maturity date      Interest rate (%)      Face amount  

Privately placed bonds

     April 30, 2019        April 28, 2023        3ML + 1.47        USD 100  

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

March 31, 2019 and 2018

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed separate interim financial statements of LG Display Co., Ltd. (the “Company”) which comprise the condensed separate interim statement of financial position as of March 31, 2019, the condensed separate interim statements of comprehensive loss, changes in equity and cash flows for the three-month periods ended March 31, 2019 and 2018, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Separate Interim Financial Statements

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

Auditors’ Responsibility

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

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the condensed separate interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting .

Other Matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

We audited the separate statement of financial position as of December 31, 2018, and the related separate statements of comprehensive 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 25, 2019, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2018, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

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KPMG Samjong Accounting Corp.

Seoul, Korea

May XX, 2019

 

This report is effective as of May XX, 2019, the review report date. Certain subsequent events or circumstances , which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Financial Position

(Unaudited)    

As of March 31, 2019 and December 31, 2018

 

(In millions of won)    Note    March 31,
2019 		     December 31,
2018 		 

Assets

        

Cash and cash equivalents

   4, 24    W 271,813      473,283

Deposits in banks

   4, 24      77,200      77,200

Trade accounts and notes receivable, net

   5, 14, 24, 26      3,929,130      3,389,108

Other accounts receivable, net

   5, 24      111,734      321,963

Other current financial assets

   6, 24      45,640      29,281

Inventories

   7      1,928,407      1,951,155

Other current assets

   5      187,938      136,349
     

 

 

    

 

 

 

Total current assets

        6,551,862      6,378,339

Deposits in banks

   4, 24      11      11

Investments

   8      4,786,000      3,602,214

Other non-current accounts receivable, net

   5, 24      24,126      25,823

Other non-current financial assets

   6, 24      69,873      77,192

Property, plant and equipment, net

   9      15,090,909      14,984,564

Intangible assets, net

   10      814,983      816,808

Deferred tax assets

   22      926,376      851,936

Other non-current assets

   5      318,348      325,219
     

 

 

    

 

 

 

Total non-current assets

        22,030,626      20,683,767
     

 

 

    

 

 

 

Total assets

      W 28,582,488      27,062,106
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

   24, 26    W 3,595,987      3,186,123

Current financial liabilities

   11, 24      1,145,522      1,044,841

Other accounts payable

   24      1,729,179      1,746,412

Accrued expenses

        546,990      516,970

Income tax payable

        25,700      17,404

Provisions

   13      108,920      96,555

Advances received

   14      886,549      780,906

Other current liabilities

   13      23,104      27,419
     

 

 

    

 

 

 

Total current liabilities

        8,061,951      7,416,630

Non-current financial liabilities

   11, 24      6,295,704      5,139,476

Non-current provisions

   13      37,723      32,764

Defined benefit liabilities, net

   12      94,239      44,187

Long-term advances received

   14      902,690      1,122,015

Other non-current liabilities

   13      93,678      94,453
     

 

 

    

 

 

 

Total non-current liabilities

        7,424,034      6,432,895
     

 

 

    

 

 

 

Total liabilities

        15,485,985      13,849,525
     

 

 

    

 

 

 

Equity

        

Share capital

   15      1,789,079      1,789,079

Share premium

        2,251,113      2,251,113

Retained earnings

        9,056,311      9,172,389
     

 

 

    

 

 

 

Total equity

        13,096,503      13,212,581
     

 

 

    

 

 

 

Total liabilities and equity

      W 28,582,488      27,062,106
     

 

 

    

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Comprehensive Income (Loss)

(Unaudited)

For the three-month periods ended March 31, 2019 and 2018

 

(In millions of won, except earnings per share)    Note      2019     2018  

Revenue

     16, 26      W 5,383,604     5,154,261

Cost of sales

     7, 17, 26        (4,975,246 )      (4,902,524 ) 
     

 

 

   

 

 

 

Gross profit

        408,358     251,737

Selling expenses

     18        (151,929 )      (99,213 ) 

Administrative expenses

     18        (129,600 )      (124,655 ) 

Research and development expenses

        (329,610 )      (281,490 ) 
     

 

 

   

 

 

 

Operating loss

        (202,781 )      (253,621 ) 
     

 

 

   

 

 

 

Finance income

     21        47,870     105,695

Finance costs

     21        (51,996 )      (16,910 ) 

Other non-operating income

     20        141,396     117,004

Other non-operating expenses

     20        (122,203 )      (112,415 ) 
     

 

 

   

 

 

 

Loss before income tax

        (187,714 )      (160,247 ) 

Income tax benefit

     22        (73,773 )      (79,883 ) 
     

 

 

   

 

 

 

Loss for the period

        (113,941 )      (80,364 ) 
     

 

 

   

 

 

 

Other comprehensive loss

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

     12        (2,913 )      (6,419 ) 

Related income tax

     12        776     2,296
     

 

 

   

 

 

 
        (2,137 )      (4,123 ) 
     

 

 

   

 

 

 

Other comprehensive loss for the period, net of income tax

        (2,137 )      (4,123 ) 
     

 

 

   

 

 

 

Total comprehensive loss for the period

      W (116,078 )      (84,487 ) 
     

 

 

   

 

 

 

Loss per share (in Won)

       

Basic and diluted loss per share

     23      W (318 )      (225 ) 
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

For the three-month periods ended March 31, 2019 and 2018

 

(In millions of won)    Share
capital 		     Share
premium 		     Retained
earnings 		    Total equity  

Balances at January 1, 2018

   W 1,789,079      2,251,113      9,789,067     13,829,259
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

          

Loss for the period

     —          —          (80,364 )      (80,364 ) 

Other comprehensive loss

          

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (4,123 )      (4,123 ) 
  

 

 

    

 

 

    

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (4,123 )      (4,123 ) 
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

   W —          —          (84,487 )      (84,487 ) 
  

 

 

    

 

 

    

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

          

Dividends to shareholders

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

 

 

    

 

 

    

 

 

   

 

 

 

Balances at March 31, 2018

   W 1,789,079      2,251,113      9,525,672     13,565,864
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at January 1, 2019

   W 1,789,079      2,251,113      9,172,389     13,212,581
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

          

Loss for the period

     —          —          (113,941 )      (113,941 ) 

Other comprehensive loss

          

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (2,137 )      (2,137 ) 
  

 

 

    

 

 

    

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (2,137 )      (2,137 ) 
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

   W —          —          (116,078 )      (116,078 ) 
  

 

 

    

 

 

    

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

          

Dividends to shareholders

     —          —            —    
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at March 31, 2019

   W 1,789,079      2,251,113      9,056,311     13,096,503
  

 

 

    

 

 

    

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows

(Unaudited)

For the three-month periods ended March 31, 2019 and 2018

 

(In millions of won)    Note    2019      2018  

Cash flows from operating activities:

        

Loss for the period

      W (113,941 )       (80,364 ) 

Adjustments for:

        

Income tax benefit

   22      (73,773 )       (79,883 ) 

Depreciation

   17      455,013      479,483

Amortization of intangible assets

   17      108,219      93,967

Gain on foreign currency translation

        (70,560 )       (39,949 ) 

Loss on foreign currency translation

        81,153      38,035

Expenses related to defined benefit plans

   12      48,777      51,351

Gain on disposal of property, plant and equipment

        (15,100 )       (13,715 ) 

Loss on disposal of property, plant and equipment

        2      3,826

Impairment loss on disposal of property, plant and equipment

        360      —  

Gain on disposal of intangible assets

        (552 )       (239 ) 

Loss on disposal of intangible assets

        18      —  

Impairment loss on intangible assets

        —        37

Reversal of impairment loss on intangible assets

        (215 )       (130 ) 

Warranty expenses

        86,301      29,340

Finance income

        (43,145 )       (104,342 ) 

Finance costs

        49,102      11,621

Other income

        (1,298 )       (364 ) 

Other expenses

        3,192      592
     

 

 

    

 

 

 
        627,494      469,630

Changes in:

        

Trade accounts and notes receivable

        (585,256 )       872,945

Other accounts receivable

        36,351      60,025

Inventories

        22,748      (58,766 ) 

Other current assets

        (37,921 )       (125,476 ) 

Other non-current assets

        (12,530 )       (18,249 ) 

Trade accounts and notes payable

        363,106      131,583

Other accounts payable

        16,024      (153,854 ) 

Accrued expenses

        25,396      (284,578 ) 

Provisions

        (71,085 )       (46,791 ) 

Other current liabilities

        (36,092 )       6,959

Defined benefit liabilities, net

        (1,638 )       (2,348 ) 

Other non-current liabilities

        2,756      8,747
     

 

 

    

 

 

 
        (278,141 )       390,197

Cash generated from operating activities

        235,412      779,463

Income taxes paid

        (360 )       (2,955 ) 

Interests received

        3,087      7,151

Interests paid

        (49,909 )       (27,837 ) 
     

 

 

    

 

 

 

Net cash provided by operating activities

      W 188,230      755,822
     

 

 

    

 

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows, Continued

(Unaudited)

For the three-month periods ended March 31, 2019 and 2018

 

(In millions of won)    Note    2019      2018  

Cash flows from investing activities:

        

Dividends received

      W —          23,576

Increase in deposits in banks

        (500 )       (200,500 ) 

Proceeds from withdrawal of deposits in banks

        500      403,715

Acquisition of financial assets at fair value through profit or loss

        (21 )       —     

Acquisition of investments

        (1,006,277 )       (585,930 ) 

Proceeds from disposal of investments

        600      —     

Acquisition of property, plant and equipment

        (511,321 )       (1,509,104 ) 

Proceeds from disposal of property, plant and equipment

        32,718      102,923

Acquisition of intangible assets

        (132,695 )       (129,298 ) 

Proceeds from disposal of intangible assets

        1,945      960

Receipt from settlement of derivatives

        5,385      (2 ) 

Proceeds from collection of short-term loans

        11,320      5,714

Increase in short-term loans

        (8,225 )       —     

Increase in long-term loans

        (1,500 )       (12,300 ) 

Increase in deposits

        (500 )       (118 ) 

Decrease in deposits

        500      —     

Proceeds from disposal of emission rights

        —           4,160
     

 

 

    

 

 

 

Net cash used in investing activities

        (1,608,071 )       (1,896,204 ) 
     

 

 

    

 

 

 

Cash flows from financing activities:

   25      

Proceeds from short-term borrowings

        496,655      —     

Repayments of short-term borrowings

        (160,075 )       —     

Proceeds from issuance of bonds

        388,447      388,447

Proceeds from long-term borrowings

        759,423      800,000

Repayments of current portion of long-term borrowings and bonds

        (263,144 )       (180,169 ) 

Payment guarantee fee received

        543      519

Repayments of lease liabilities

        (3,478 )       —     
     

 

 

    

 

 

 

Net cash provided by financing activities

        1,218,371      1,008,797
     

 

 

    

 

 

 

Net decrease in cash and cash equivalents

        (201,470 )       (131,585 ) 

Cash and cash equivalents at January 1

        473,283      566,408
     

 

 

    

 

 

 

Cash and cash equivalents at March 31

      W 271,813      434,823
     

 

 

    

 

 

 

See accompanying notes to the separate interim financial statements.

 

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1.

Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of March 31, 2019, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of March 31, 2019, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of March 31, 2019, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of March 31, 2019, there are 20,513,988 ADSs outstanding.

 

2.

Basis of Presenting Financial Statements

 

  (a)

Statement of Compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the separate financial statements of the Company as of and for the year ended December 31, 2018.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, Separate Financial Statements, presented by a parent, an investor in an associate, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

This is the first set of the Company’s financial statements where K-IFRS No. 1116, Leases has been applied. Changes to significant accounting policies are described in Note 3.

 

 

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2.

Basis of Presenting Financial Statements, Continued

 

  (b)

Basis of Measurement

The condensed separate interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

 

  •  

Derivative financial instruments at fair value, financial assets at fair value through profit or loss (“FVTPL”) and financial asset at fair value through other comprehensive income (“FVOCI”) and

 

  •  

net defined benefit liabilities recognized at the present value of defined benefit obligations less the fair value of plan assets.

 

  (c)

Functional and Presentation Currency

The condensed separate interim financial statements are presented in Korean won, which is the Company’s functional currency.

 

  (d)

Use of Estimates and Judgments

The preparation of the condensed separate interim financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

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3.

Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its condensed separate interim financial statements are the same as those followed by the Company in its preparation of the separate financial statements as of and for the year ended December 31, 2018, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the changes in accounting policies explained below. The changes in accounting policies are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2019.

 

   

Changes in Accounting Policies

The Company has initially adopted K-IFRS 1116, Leases, from January 1, 2019. A number of other new standards are effective from January 1, 2019 but they do not have a material effect on the Company’s condensed consolidated interim financial statements.

K-IFRS No. 1116 introduced a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.

 

  (i)

Definition of a lease

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under K-IFRS No. 2104, Determining Whether an Arrangement contains a Lease . The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under K-IFRS No. 1116, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition to K-IFRS No. 1116, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases for contracts that were previously identified as leases under K-IFRS No. 1017 and K-IFRS No. 2104 as of January 1, 2019.

 

  (ii)

Accounting as a lessee

The Company leases land, buildings, vehicles, machinery and equipment and others.

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under K-IFRS No. 1116, the Company recognizes right-of-use assets and lease liabilities for most leases on the condensed separate interim statements of financial position.

However, as permitted in K-IFRS No.1116, the Company has elected not to recognize right-of-use assets and lease liabilities for certain short-term leases and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

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3.

Summary of Significant Accounting Policies, Continued

 

The carrying amounts of right-of-use assets recognized in the condensed separate interim financial statements are as below and those right-of use assets are presented in property, plant and equipment in the condensed separate interim statements of financial position.

 

(In millions of won)

                                  
     Buildings      Machinery
and equipment 		     Vehicles      Others      Total  

Balance at January 1, 2019

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

Balance at March 31, 2019

   W 7,173        1,237        5,737        24        14,171  

The Company presents lease liabilities in financial liabilities in the condensed separate interim statements of financial position.

 

  i)

Significant accounting policies

The Company recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses. The book value of right-of-use asset is adjusted when there is a remeasurement of the lease liability arising from a change in future lease payments.

The lease liability is initially measured at the present value of the lease payments that are no paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the interest rate that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain and asset of a similar value to the right-of-use asset in a similar economic environment.

The lease liability is subsequently increased by the interest expense on the lease liability and decreased by lease payment made. The Company remeasures the lease liability when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Determination of the lease term for some lease contracts that include renewal options require the Company’s judgment. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

 

  ii)

Initial application

At initial application, the Company measures lease liabilities for leases classified as operating leases under K-IFRS No. 1017, at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

 

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3.

Summary of Significant Accounting Policies, Continued

 

The Company used the following practical expedients when applying K-IFRS No. 1116 to leases previously classified as operating leases under K-IFRS No. 1017.

 

  •  

Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term at initial application.

 

  •  

Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

 

  •  

Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

 

  (iii)

Impacts on condensed consolidated interim financial statements

 

  i)

Impacts on initial application

On initial application to K-IFRS No. 1116, the Company recognized additional right-of-use assets and additional lease liabilities. The impact on initial application is summarized below.

 

(In millions of won)       
     January 1, 2019  

Right-of-use assets presented in property, plant and equipment

   W 16,332  

Lease liabilities

     16,332  

When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 2.96%.

 

  ii)

Impacts for the period

As a result of initially applying K-IFRS No. 1116, in relation to the leases that were previously classified as operating leases, the Company recognized W 14,171 million of right-of-use assets and W 14,226 million of lease liabilities as at March 31, 2019.

Also in accordance with K-IFRS No. 1116, the Company has recognized depreciation and interest expense, instead of operating lease expense in relation to leases. During the three-month period ended March 31, 2019, the Company recognized W 3,420 million of depreciation and W 113 million of interest expense from these leases.

 

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4.

Cash and Cash Equivalents and Deposits in Banks

 

Cash and cash equivalents and deposits in banks as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )              
     March 31, 2019      December 31, 2018  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 271,813        473,283  

Deposits in banks

     

Time deposits

   W 3,118        3,118  

Restricted cash (*)

     74,082        74,082  
  

 

 

    

 

 

 
   W 77,200        77,200  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted cash (*)

   W 11        11  
  

 

 

    

 

 

 
   W 349,024        550,494  
  

 

 

    

 

 

 

 

(*)

Includes funds contributed under agreements on mutually beneficial cooperation between large enterprises and small and medium enterprises to aid LG Group’s second and third-tier suppliers, restricted deposits pledged to enforce the Company’s investment plans upon the receipt of grants from Gumi city and Gyeongsangbuk-do, and others.

 

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5.

Receivables and Other Assets

 

  (a)

Trade accounts and notes receivable as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )              
     March 31, 2019      December 31, 2018  

Trade, net

   W 286,958        257,037  

Due from related parties

     3,642,172        3,132,071  
  

 

 

    

 

 

 
   W 3,929,130        3,389,108  
  

 

 

    

 

 

 

 

  (b)

Other accounts receivable as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )              
     March 31, 2019      December 31, 2018  

Current assets

     

Non-trade receivables, net

   W 99,704        316,069  

Accrued income

     12,030        5,894  
  

 

 

    

 

 

 
   W 111,734        321,963  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivables

   W 24,126        25,823  
  

 

 

    

 

 

 
   W 135,860        347,786  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of March 31, 2019 and December 31, 2018 are W 53,680 million and W 247,677 million, respectively.

 

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5.

Receivables and Other Assets, Continued

 

  (c)

The aging of trade accounts and notes receivable and other accounts receivable as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		 

Not past due

   W 3,926,789        136,609        (4 )       (1,592 ) 

Past due 1-15 days

     2,345        317        —          (3 ) 

Past due 16-30 days

     —          113        —          (1 ) 

Past due 31-60 days

     —          102        —          (1 ) 

Past due more than 60 days

     —          354        —          (38 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,929,134        137,495        (4 )       (1,635 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of won)    December 31, 2018  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		 

Not past due

   W 3,387,653        347,669        (5 )       (551 ) 

Past due 1-15 days

     1,353        274        —          (2 ) 

Past due 16-30 days

     79        69        —          (1 ) 

Past due 31-60 days

     28        95        —          (1 ) 

Past due more than 60 days

     —          668        —          (434 ) 
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the three-month periods ended March 31, 2019 and the year ended December 31, 2018 are as follows:

 

(In millions of won)    2019      2018  
     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		     Trade accounts
and notes
receivable 		     Other
accounts
receivable 		 

Balance at the beginning of the period

   W 5        989        570        1,092  

(Reversal of) bad debt expense

     (1 )       646        (565 )       (103 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 4        1,635        5        989  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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5.

Receivables and Other Assets, Continued

 

  (d)

Other assets as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31,
2019 		     December 31,
2018 		 

Current assets

     

Advance payments

   W 2,925        3,354  

Prepaid expenses

     134,095        73,254  

Value added tax refundable

     42,552        52,252  

Right to recover returned goods

     8,366        7,489  
  

 

 

    

 

 

 
   W 187,938        136,349  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 318,348        325,219  

 

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6.

Other Financial Assets

Other financial assets as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )    March 31, 2019      December 31, 2018  

Current assets

     

Financial asset at fair value through profit or loss

     

Derivatives(*)

   W 25,272        13,059  

Financial Asset at Fair Value through Other Comprehensive Income

     

Debt instruments

   W 113        106  

Government bonds

     

Financial Asset Carried at Amortized Cost

     

Short-term loans

   W 20,255        16,116  
  

 

 

    

 

 

 
   W 45,640        29,281  
  

 

 

    

 

 

 

Non-current assets

     

Financial Asset at Fair Value through Profit or Loss

     

Equity instruments

     

Intellectual Discovery, Ltd.

   W 920        4,598  

Kyulux, Inc

     2,460        2,460  

Fineeva Co., Ltd.

     4        286  
  

 

 

    

 

 

 
     3,384        7,344  
  

 

 

    

 

 

 

Convertible bonds

     1,327        1,327  

Derivatives(*)

     2,945        —    
  

 

 

    

 

 

 
   W 7,656        8,671  
  

 

 

    

 

 

 

Financial Asset at Fair Value through Other Comprehensive Income

     

Debt instruments

     

Government bonds

   W 69        55  

Financial Asset Carried at Amortized Cost

     

Deposits

   W 13,418        13,418  

Long-term loans

     48,730        55,048  
  

 

 

    

 

 

 
   W 62,148        68,466  
  

 

 

    

 

 

 
   W 69,873        77,192  
  

 

 

    

 

 

 

 

(*)

Represents valuation gain from currency interest rate swap contracts to hedge currency risk related to foreign currency denominated borrowings and bonds. The contracts are not designated as a hedging instrument.

Other financial assets issued by related parties as of March 31, 2019 and December 31, 2018 are W 3,000 million and W 2,000 million, respectively.

 

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7.

Inventories

Inventories as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019      December 31, 2018  

Finished goods

   W 540,481        539,859  

Work-in-process

     855,834        791,396  

Raw materials

     412,487        500,413  

Supplies

     119,605        119,487  
  

 

 

    

 

 

 
   W 1,928,407        1,951,155  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2019 and 2018, 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 are as follows:

 

(In millions of won)    2019      2018  

Inventories recognized as cost of sales

   W 4,975,246        4,902,524  

Including: inventory write-downs

     317,892        190,761  

Including: reversal and usage of inventory write-downs

     (280,323 )       (184,139 ) 

 

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8.

Investments

 

  (a)

Investments in subsidiaries consist of the following:

 

( In millions of won )                  March 31, 2019      December 31, 2018  

Overseas Subsidiaries

   Location      Business      Percentage
of ownership 		    Book
value 		     Percentage
of ownership 		    Book
Value 		 

LG Display America, Inc.

    

San Jose,

U.S.A.

 

 

     Sell Display products        100 %    W 36,815        100 %    W 36,815  

LG Display Germany GmbH

    
Eschborn,
Germany 		 
  		     Sell Display products        100 %      19,373        100 %      19,373  

LG Display Japan Co., Ltd.

     Tokyo, Japan        Sell Display products        100 %      15,686        100 %      15,686  

LG Display Taiwan Co., Ltd.

     Taipei, Taiwan        Sell Display products        100 %      35,230        100 %      35,230  

LG Display Nanjing Co., Ltd.

     Nanjing, China        Manufacture Display products        100 %      593,726        100 %      593,726  

LG Display Shanghai Co., Ltd.

     Shanghai, China        Sell Display products        100 %      9,093        100 %      9,093  

LG Display Poland Sp. z o.o.

     Wroclaw, Poland        Manufacture Display products        100 %      194,992        100 %      194,992  

LG Display Guangzhou Co., Ltd.

    
Guangzhou,
China 		 
  		     Manufacture Display products        100 %      293,557        100 %      293,557  

LG Display Shenzhen Co., Ltd.

     Shenzhen, China        Sell Display products        100 %      3,467        100 %      3,467  

LG Display Singapore Pte. Ltd.

     Singapore        Sell Display products        100 %      1,250        100 %      1,250  

L&T Display Technology (Fujian) Limited

    

Fujian,

China

 

 

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

LG Display Yantai Co., Ltd.

    

Yantai,

China

 

 

     Manufacture Display products        100 %      169,195        100 %      169,195  

Nanumnuri Co., Ltd.

    

Gumi,

South Korea

 

 

     Janitorial services        100 %      800        100 %      800  

LG Display (China) Co., Ltd.

     Guangzhou,China       
Manufacture and Sell Display
products 		 
  		     51 %      723,086        51 %      723,086  

Unified Innovative Technology, LLC

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

LG Display Guangzhou Trading Co., Ltd.

    
Guangzhou,
China 		 
  		     Sell Display products        100 %      218        100 %      218  

Global OLED Technology LLC

    

Sterling,

U.S.A

 

 

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

LG Display Vietnam Haiphong Co., Ltd.(*1)

    

Haiphong,

Vietnam

 

 

    
Manufacture Display
Products 		 
  		     100 %      556,278        100 %      329,978  

Suzhou Lehui Display Co., Ltd.

    

Suzhou,

China

 

 

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

LG DISPLAY FUND I LLC(*2)

    
Wilmington,
U.S.A 		 
  		    
Invest in venture business and
acquire technologies 		 
  		     100 %      3,090        100 %      2,249  

LG Display High-Tech (China) Co., Ltd.(*3)

    
Guangzhou,
China 		 
  		     Manufacture Display products        70 %      1,382,800        69 %      749,154  

Money Market Trust(*4)

    

Seoul,

South Korea

 

 

     Money market trust        100 %      347,500        100 %      24,501  
          

 

 

      

 

 

 
           W 4,691,730        W 3,507,944  
          

 

 

      

 

 

 

 

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8.

Investments, Continued

 

(*1)

For the three-month period ended March 31, 2019, the Company contributed W 226,300 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Company’s ownership percentage in LGDVN as a result of this additional investment.

(*2)

For the three-month period ended March 31, 2019, the Company contributed W 841 million in cash for the capital increase of LG DISPLAY FUND I LLC. There was no change in the Company’s ownership percentage in LG DISPLAY FUND I LLC as a result of this additional investment.

(*3)

For the three-month period ended March 31, 2019, the Company contributed W 633,646 million in cash, including the right to receive cash dividends amounting to W 177,509 million from LG Display Guangzhou Co., Ltd., for the capital increase of LG Display High-Tech (China) Co., Ltd.(“LGDCO”). The Company’s ownership percentage in LGDCO increased from 69% to 70% as a result.

(*4)

For the three-month period ended March 31, 2019, the Company acquired and disposed Money Market Trust (“MMT”) and the MMT amount as of March 31, 2019 is W 347,500 million.

 

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8.

Investments, Continued

 

  (b)

Investments in associates consist of the following:

 

(In millions of won)                                    
               March 31, 2019      December 31, 2018  

Associates

   Location    Business    Percentage
of ownership 		    Book
Value 		     Percentage
of ownership 		    Book
Value 		 

Paju Electric Glass Co., Ltd.

   Paju,

South Korea

   Manufacture electric
glass for FPDs 		     40 %    W 45,089        40 %    W 45,089  

INVENIA Co., Ltd.

   Seongnam,

South Korea

   Develop and
manufacture the
equipment for FPDs 		     13 %      6,330        13 %      6,330  

WooRee E&L Co., Ltd.

   Ansan,

South Korea

   Manufacture LED
back light unit
packages 		     14 %      4,746        14 %      4,746  

YAS Co., Ltd.

   Paju,

South Korea

   Develop and
manufacture
deposition equipment
for OLEDs 		     15 %      10,000        15 %      10,000  

AVATEC Co., Ltd.

   Daegu,

South Korea

   Process and sell
electric glass for
FPDs 		     17 %      10,600        17 %      10,600  

Arctic Sentinel, Inc.

   Los
Angeles,
U.S.A. 		   Develop and
manufacture tablet

for kids

     10 %      —          10 %      —    

CYNORA GmbH(*)

   Bruchsal,

Germany

   Develop organic
emitting materials for
displays and lighting
devices 		     13 %      8,668        14 %      8,668  

Material science

   Seoul,

South Korea

   Develop, manufacture
and sell material for
display 		     10 %      3,346        10 %      3,346  

Nanosys Inc.

   Milpitas,

U.S.A.

   Develop, manufacture
and sell material for
display 		     4 %      5,491        4 %      5,491  
          

 

 

      

 

 

 
           W 94,270        W 94,270  
          

 

 

      

 

 

 

 

(*)

In 2019, the Company’s ownership percentage in CYNORA GmbH decreased from 14% to 13% as the Company did not participate in the capital increase of CYNORA GmbH.

For the three-month periods ended March 31, 2019 and 2018, the aggregate amount of recognized dividends from subsidiaries and associates are W 7,502 million and W 95,553 million, respectively.

 

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9.

Property, Plant and Equipment

For the three-month periods ended March 31, 2019 and 2018, the Company purchased property, plant and equipment of W 547,808 million and W 1,656,048 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W 41,752 million and 3.01%, and W 18,633 million and 2.33% for the three-month periods ended March 31, 2019 and 2018, respectively. In addition, for the three-month period ended March 31, 2019, the Company entered into various new lease agreements for use of buildings, vehicles and others. In relation to these leases, the Company recognized W 1,260 million of right-of-use asset and lease liability, in aggregate, during the three-month period ended March 31, 2019. Also, for the three-month periods ended March 31, 2019 and 2018, the Company disposed of property, plant and equipment with carrying amounts of W 3,682 million and W 85,393 million, respectively, and recognized W 15,100 million and W 2 million, respectively, as gain and loss on disposal of property, plant and equipment for the three-month period ended March 31, 2019 (gain and loss for the three-month period ended March 31, 2018: W 13,715 million and W 3,826 million, respectively).

 

10.

Intangible Assets

 

  (a)

The Company capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of March 31, 2019 and December 31, 2018, are W 380,234 million and W 366,910 million, respectively.

 

  (b)

Development of new projects are divided into research activities and development activities. Expenditures on research activities are recognized in profit or loss and development expenditures are capitalized, respectively.

 

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11.

Financial Liabilities

 

  (a)

Financial liabilities as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Current

     

Short-term borrowings

   W 341,340        —    

Current portion of long-term borrowings and bonds

     788,107        1,040,148  

Current portion of Payment guarantee

Liabilities

     4,870        4,693  

Lease liabilities

     11,205        —    
  

 

 

    

 

 

 
   W 1,145,522        1,044,841  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 2,941,070        2,700,608  

Foreign currency denominated borrowings

     1,154,867        626,136  

Bonds

     2,167,902        1,772,599  

Payment guarantee liabilities

     13,273        14,375  

Derivatives(*)

     15,571        25,758  

Lease liabilities

     3,021        —    
  

 

 

    

 

 

 
   W 6,295,704        5,139,476  
  

 

 

    

 

 

 

 

(*)

Represents currency interest rate swap contracts to hedge currency risk related to foreign currency denominated borrowings and bonds. The contracts are not designated as a hedging instrument.

 

  (b)

Foreign currency denominated short-term borrowings of the reporting date are as follows:

 

( In millions of won and USD )      

Lender

   Annual interest rate as of March 31,
2019 (%)(*) 		     March 31,
2019 		 

Standard Chartered Bank Korea Limited

     12ML + 0.78~0.88      W 341,340  
     

 

 

 

Foreign currency equivalent

 

   USD  300  

 

(*)

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

(c) Won denominated long-term borrowings as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              

Lender

  

Annual interest rate as of

March 31, 2019 (%)

   March 31,
2019 		     December 31,
2018 		 

Woori Bank

   2.75    W 1,096        1,259  

Korea Development Bank and others

  

CD rate (91days) + 0.64,

2.43~3.25

     3,100,000        2,850,000  

Less current portion of long-term borrowings

        (160,026 )       (150,651 ) 
     

 

 

    

 

 

 
      W 2,941,070        2,700,608  
     

 

 

    

 

 

 

 

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11.

Financial Liabilities, Continued

 

  (d)

Foreign currency denominated long-term borrowings as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won and USD )                   

Lender

  

Annual interest rate as of

March 31, 2019 (%)

   March 31,
2019 		     December 31,
2018 		 

The Export-Import Bank of Korea and Others

  

3ML+0.55 ~1.70,

6ML+1.25

   W 1,223,135        955,975  
     

 

 

    

 

 

 

Foreign currency equivalent

      USD  1,075      USD  855  
     

 

 

    

 

 

 

Less current portion of long-term borrowings

        (68,268 )       (329,839 ) 
     

 

 

    

 

 

 
      W 1,154,867        626,136  
     

 

 

    

 

 

 

 

  (e)

Details of bonds issued and outstanding as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won )                       
     Maturity      Annual interest rate
as of
March 31, 2019 (%) 		     December 31,
2019 		     December 31,
2018 		 

Won denominated bonds(*1)

           

Publicly issued bonds

    

Apr 2019~

Feb 2024

 

 

     1.80~3.45      W 2,290,000        1,900,000  

Privately placed bonds

    

May 2025~

May 2033

 

 

     3.25~4.25        110,000        110,000  

Less discount on bonds

           (4,966 )       (3,949 ) 

Less current portion

           (559,813 )       (559,658 ) 
        

 

 

    

 

 

 
         W 1,835,221        1,446,393  
        

 

 

    

 

 

 

Foreign currency denominated Bonds(*2)

           

Publicly issued bonds

     Nov 2021        3.88      W 341,340        335,430  
        

 

 

    

 

 

 

Foreign currency equivalent

         USD 300      USD  300  
        

 

 

    

 

 

 

Less discount on bonds

           (8,659 )       (9,224 ) 
         W 332,681        326,206  
        

 

 

    

 

 

 
         W 2,167,902        1,772,599  
        

 

 

    

 

 

 

 

(*1)

Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly.

(*2)

Principal of the foreign currency denominated bonds is to be repaid at maturity and interests are paid semi-annually.

 

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12.

Employee Benefits

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

 

  (a)

Net defined benefit liabilities recognized as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)    March 31, 2019      December 31, 2018  

Present value of partially funded defined benefit obligations

   W 1,627,766        1,592,366  

Fair value of plan assets

     (1,533,527 )       (1,548,179 ) 
  

 

 

    

 

 

 
   W 94,239        44,187  
  

 

 

    

 

 

 

 

  (b)

Expenses recognized in profit or loss for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Current service cost

   W 48,473        51,109  

Net interest cost

     304        242  
  

 

 

    

 

 

 
   W 48,777        51,351  
  

 

 

    

 

 

 

 

  (c)

Plan assets as of March 31, 2019 and December 31, 2018 are as follows:

 

(In millions of won)              
     March 31, 2019      December 31, 2018  

Guaranteed deposits in banks

   W 1,533,527        1,548,179  

As of March 31, 2019, the Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.

 

  (d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)    2019      2018  

Remeasurements of the net defined benefit liabilities

   W (2,913 )       (6,419 ) 

Tax effect

     776        2,296  
  

 

 

    

 

 

 

Remeasurements of the net defined benefit liabilities, net of income tax

   W (2,137 )       (4,123 ) 
  

 

 

    

 

 

 

 

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13.

Provisions and Other Liabilities

 

  (a)

Changes in provisions for the three-month period ended March 31, 2019 are as follows:

 

(In millions of won)                            
     Litigations and
claims 		     Warranties (*)      Refund      Total  

Balance at January 1, 2019

   W —          120,389        8,930        129,319  

Additions

     2,108        86,301        931        89,340  

Usage

     —          (72,016 )       —          (72,016 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2019

   W 2,108        134,674        9,861        146,643  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 2,108        96,951        9,861        108,920  

Non-current

   W —          37,723        —          37,723  

 

(*)

The provision for warranties covers defective products and is normally applicable for 18~36 months from the date of purchase. The warranty liability is calculated by using historical and anticipated rates of warranty claims, and costs per claim to satisfy the Company’s warranty obligation.

 

  (b)

Other liabilities as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )              
     March 31, 2019      December 31, 2018  

Current liabilities

     

Withholdings

   W 14,533        16,181  

Unearned revenues

     6,196        11,073  

Security deposits

     2,375        165  
  

 

 

    

 

 

 
   W 23,104        27,419  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 80,365        78,466  

Long-term other accounts payable

     3,135        3,081  

Long-term unearned revenues

     1,728        2,116  

Security deposits

     8,450        10,790  
  

 

 

    

 

 

 
   W 93,678        94,453  
  

 

 

    

 

 

 

 

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14.

Contingencies and Commitments

 

  (a)

Legal Proceedings

Anti-trust litigations

Claims alleging damages were filed against the Company and other TFT-LCD manufacturers seeking compensation for the effects of the companies’ participation in a cartel, as found by the European Commission’s decision in December 2010. While the Company continues its vigorous defense of the various pending proceedings described above, management’s assessment of the facts and circumstances could change based upon new information, intervening events and the final outcome of the cases. Consequently, the actual results could be materially different from management’s current estimates.

Others

The Company is involved in various disputes in addition to pending proceedings described above. The Company cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the disputes.

 

  (b)

Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,610 million ( W 1,831,858 million) in connection with the Company’s export sales transactions with its subsidiaries. As of March 31, 2019, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.

The Company has a credit facility agreement with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts receivables up to an aggregate of W 714,943 million in connection with its domestic and export sales transactions and, as of March 31, 2019, W 97,856 amount of accounts and notes receivable sold to Shinhan Bank were outstanding in connection with the agreement. In connection with the contract above, the Company has sold its accounts receivable without recourse.

Letters of credit

As of March 31, 2019, the Company has agreements in relation to the opening of letters of credit up to USD 30 million ( W 34,134 million) with KEB Hana Bank, USD 80 million ( W 91,024 million) with Bank of China and USD 50 million ( W 56,890 million) with Sumitomo Mitsui Banking Corporation.

 

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14.

Contingencies and Commitments, Continued

 

  (b)

Commitments, Continued

 

Payment guarantees

The Company provides a payment guarantee in connection with the term loan credit facilities of LG Display Vietnam Haiphong, Co., Ltd. amounting to USD 1,160 million ( W 1,319,410 million) for principals.

In addition, the Company obtained payment guarantees amounting to USD 1,475 million ( W 1,678,255 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements. The Company also obtained payment guarantees amounting to USD 306 million ( W 347,953 million) from Korea Development Bank for foreign currency denominated bonds and USD 7 million ( W 7,965 million) from Shinhan bank for value added tax payments in Poland.

License agreements

As of March 31, 2019, in relation to its LCD business, the Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of March 31, 2019, in connection with long-term supply agreements with customers, the Company recognized USD 1,375 million ( W 1,564,475 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Company received payment guarantees amounting to USD 1,475 million ( W 1,678,255 million) from KEB Hana Bank and other various banks relating to advances received.

 

15.

Share capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value W 5,000), and as of March 31, 2019 and December 31, 2018, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2018 to March 31, 2019.

 

16.

Revenue

Details of revenue for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Sales of goods

   W 5,368,122        5,144,426  

Royalties

     9,238        3,726  

Others

     6,244        6,109  
  

 

 

    

 

 

 
   W 5,383,604        5,154,261  
  

 

 

    

 

 

 

 

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17.

The Nature of Expenses and Others

The classification of expenses by nature for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Changes in inventories

   W 22,748        32,189  

Purchases of raw materials, merchandise and others

     2,146,880        1,986,586  

Depreciation and amortization

     563,232        573,450  

Outsourcing fees

     1,464,153        1,338,767  

Labor costs

     629,691        696,245  

Supplies and others

     155,315        191,168  

Utility

     176,720        179,812  

Fees and commissions

     130,435        140,527  

Shipping costs

     18,562        27,308  

Advertising

     14,342        14,929  

Warranty

     86,301        29,340  

Travel

     21,119        24,024  

Taxes and dues

     15,107        15,772  

Others

     144,302        163,529  
  

 

 

    

 

 

 
   W 5,588,907        5,413,646  
  

 

 

    

 

 

 

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

 

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18. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Salaries

   W 58,573        62,795  

Expenses related to defined benefit plans

     7,679        7,034  

Other employee benefits

     14,898        12,081  

Shipping costs

     14,076        20,554  

Fees and commissions

     37,466        27,365  

Depreciation

     28,314        26,424  

Taxes and dues

     547        793  

Advertising

     14,342        14,929  

Warranty

     86,301        29,340  

Rent

     184        2,638  

Insurance

     1,351        1,535  

Travel

     3,999        4,550  

Training

     2,762        2,201  

Others

     11,037        11,629  
  

 

 

    

 

 

 
   W 281,529        223,868  
  

 

 

    

 

 

 

 

19.

Personnel Expenses

Details of personnel expenses for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Salaries and wages

   W 544,153        598,556  

Other employee benefits

     78,777        92,072  

Contributions to National Pension plan

     18,150        18,807  

Expenses related to defined benefit plan and defined contribution plan

     48,793        51,351  
  

 

 

    

 

 

 
   W 689,873        760,786  
  

 

 

    

 

 

 

 

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20.

Other Non-operating Income and Expenses

 

  (a)

Details of other non-operating income for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Foreign currency gain

   W 124,952        100,719  

Gain on disposal of property, plant and equipment

     15,100        13,715  

Gain on disposal of intangible assets

     552        239  

Reversal of impairment loss on intangible assets

     215        130  

Rental income

     487        448  

Others

     90        1,753  
  

 

 

    

 

 

 
   W 141,396        117,004  
  

 

 

    

 

 

 

 

  (b)

Details of other non-operating expenses for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Foreign currency loss

   W 119,683        106,651  

Other bad debt expense

     —          4  

Loss on disposal of property, plant and equipment

     2        3,826  

Impairment loss on property, plant and equipment

     360        —    

Loss on disposal of intangible assets

     18        —    

Impairment loss on intangible assets

     —          37  

Donations

     —          1,850  

Others

     2,140        47  
  

 

 

    

 

 

 
   W 122,203        112,415  
  

 

 

    

 

 

 

 

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21.

Finance Income and Finance Costs

Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Finance income

     

Interest income

   W 2,785        4,783  

Dividend income

     7,502        95,553  

Foreign currency gain

     5,558        4,807  

Gain on transaction of derivatives

     5,385        36  

Gain on valuation of derivatives

     25,345        —    

Others

     1,295        516  
  

 

 

    

 

 

 
   W 47,870        105,695  
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   W 13,072        10,987  

Foreign currency loss

     33,440        4,966  

Loss on sale of trade accounts and notes receivable

     506        —    

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

     3,960        —    

Loss on transaction of derivatives

     —          38  

Loss on valuation of derivatives

     —          242  

Others

     1,018        677  
  

 

 

    

 

 

 
   W 51,996        16,910  
  

 

 

    

 

 

 

 

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22.

Income Taxes

 

  (a)

Details of income tax benefit for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)              
     2019      2018  

Current tax benefit

   W (109 )       (9,304 ) 

Deferred tax benefit

     (73,664 )       (70,579 ) 
  

 

 

    

 

 

 

Income tax benefit

   W (73,773 )       (79,883 ) 
  

 

 

    

 

 

 

 

  (b)

Deferred Tax Assets and Liabilities

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Company’s estimated future taxable income.

Deferred tax assets and liabilities as of March 31, 2019 and December 31, 2018 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     March 31,
2019 		     December 31,
2018 		     March 31,
2019 		    December 31,
2018 		    March 31,
2019 		    December 31,
2018 		 

Other accounts receivable, net

   W —          —          (3,165 )      (1,013 )      (3,165 )      (1,013 ) 

Inventories, net

     58,976        53,882        —         —         58,976       53,882  

Defined benefit liabilities, net

     6,680        —          —         —         6,680       —    

Accrued expenses

     126,517        121,508        —         —         126,517       121,508  

Property, plant and equipment

     189,259        191,073        —         —         189,259       191,073  

Intangible assets

     138        925        —         —         138       925  

Provisions

     36,289        32,468        —         —         36,289       32,468  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     20,399        17,932        —         —         20,399       17,932  

Tax losses

     152,989        126,755        —         —         152,989       126,755  

Tax credit carryforwards

     338,281        308,393        —         —         338,281       308,393  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 929,541        852,949        (3,165 )      (1,013 )      926,376       851,936  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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23.

Loss Per Share

 

  (a)

Basic loss per share for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In won and No. of shares)    2019      2018  

Loss for the period

   W (113,941,204,549 )       (80,364,446,331 ) 

Weighted-average number of common stocks outstanding

     357,815,700        357,815,700  
  

 

 

    

 

 

 

Loss per share

   W (318 )       (225 ) 
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2019 and 2018, there were no events or transactions that resulted in changes in the number of common stocks used for calculating loss per share.

 

  (b)

Diluted loss per share for the three-month periods ended March 31, 2019 and 2018 are not calculated since there was no potential common stock.

 

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24.

Financial Risk Management

The Company is exposed to credit risk, liquidity risk and market risks. The Company identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below a threshold level.

 

  (a)

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

 

  (i)

Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, JPY, etc.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily KRW, USD and CNY.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Meanwhile, the Company entered into currency interest rate swap contracts to hedge currency risk with respect to foreign currency denominated borrowings and bonds.

 

  i)

Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of March 31, 2019 and December 31, 2018 is as follows:

 

(In millions)    March 31, 2019  
     USD     JPY     CNY      PLN     EUR  

Cash and cash equivalents

     175       1,726       —          3       1  

Trade accounts and notes receivable

     3,175       2,529       —          —         —    

Non-trade receivables

     49       796       22        —         —    

Trade accounts and notes payable

     (1,590 )      (10,631 )      —          —         —    

Other accounts payable

     (110 )      (14,247 )      —          (4 )      —    

Financial liabilities

     (1,667 )      —         —            (1 ) 
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Aggregate notional amounts

     32       (19,827 )      22        (1 )      —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Currency interest rate swap contracts

     1,535       —         —          —         —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net exposure

     1,567       (19,827 )      22        (1 )      —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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24.

Financial Risk Management, Continued

 

(In millions)    December 31, 2018  
     USD     JPY     CNY      PLN     EUR  

Cash and cash equivalents

     66       —         54        1       7  

Trade accounts and notes receivable

     2,809       2,937       —          —         —    

Non-trade receivables

     48       836       1,018        —         —    

Trade accounts and notes payable

     (1,392 )      (11,477 )      —          —         —    

Other accounts payable

     (117 )      (13,982 )      —          (18 )      (2 ) 

Financial liabilities

     (1,163 )      —         —          —         —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     251       (21,686 )      1,072        (17 )      5  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Currency interest rate swap contracts

     780       —         —          —         —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net exposure

     1,031       (21,686 )      1,072        (17 )      5  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Average exchange rates applied for the three-month periods ended March 31, 2019 and 2018 and the exchange rates at March 31, 2019 and December 31, 2018 are as follows:

 

(In won)    Average rate      Reporting date spot rate  
     2019      2018      March 31,
2019 		     December 31,
2018 		 

USD

   W 1,124.40        1,072.66        1,137.80        1,118.10  

JPY

     10.22        9.90        10.28        10.13  

CNY

     166.47        168.62        168.74        162.76  

PLN

     296.99        315.20        297.35        297.33  

EUR

     1,277.12        1,317.33        1,277.46        1,279.16  

 

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24.

Financial Risk Management, Continued

 

  ii)

Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in foreign currency as of March 31, 2019 and December 31, 2018, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

( In millions of won )    March 31, 2019      December 31, 2018  
     Equity      Profit
or loss 		     Equity      Profit
or loss 		 

USD (5 percent weakening)

   W 64,631        64,631        41,788        41,788  

JPY (5 percent weakening)

     (7,390 )       (7,390 )       (7,965 )       (7,965 ) 

CNY (5 percent weakening)

     135        135        6,325        6,325  

PLN (5 percent weakening)

     (11 )       (11 )       (183 )       (183 ) 

EUR (5 percent weakening)

     —          —          232        232  

A stronger won against the above currencies as of March 31, 2019 and December 31, 2018 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

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24.

Financial Risk Management, Continued

 

  (ii)

Interest rate risk

Interest rate risk arises principally from the Company’s debentures and borrowings. The Company establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Company entered into a currency interest swap contracts amounting to W 1,405,183 million in notional amount to hedge interest rate risk with respect to variable rate foreign currency denominated borrowings.

 

  i)

Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of March 31, 2019 and December 31, 2018 is as follows:

 

(In millions of won)    March 31, 2019      December 31, 2018  

Fixed rate instruments

     

Financial assets

   W 349,195        550,664  

Financial liabilities

     (5,678,810 )       (5,033,515 ) 
  

 

 

    

 

 

 
   W (5,329,615 )       (4,482,871 ) 
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (1,714,475 )       (1,105,976 ) 

 

  ii)

Equity and profit or loss sensitivity analysis for variable rate instruments

As of March 31, 2019 and December 31, 2018, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

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

March 31, 2019

           

Variable rate instruments

   W (2,242 )       2,242        (2,242 )       2,242  

December 31, 2018

           

Variable rate instruments

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

 

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24.

Financial Risk Management, Continued

 

 

  (b)

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

The Company’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Company establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

In relation to the impairment of financial assets, the Company recognizes expected credit loss and its changes at each reporting date subsequent to initial recognition of financial asset.

 

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24.

Financial Risk Management, Continued

 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )              
     March 31, 2019      December 31, 2018  

Financial assets carried at amortized cost

     

Cash and cash equivalents

   W 271,813        473,283  

Deposits in banks

     77,211        77,211  

Trade accounts and notes receivable, net

     3,929,130        3,389,108  

Non-trade receivables

     99,704        316,069  

Accrued income

     12,030        5,894  

Deposits

     13,418        13,418  

Short-term loans

     20,255        16,116  

Long-term loans

     48,730        55,048  

Long-term non-trade receivables

     24,126        25,823  
  

 

 

    

 

 

 
   W 4,496,417        4,371,970  
  

 

 

    

 

 

 

Financial assets at fair value through profit or loss

     

Convertible bonds

   W 1,327        1,327  

Derivatives

     28,217        13,059  
  

 

 

    

 

 

 
   W 29,544        14,386  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

   W 182        161  
  

 

 

    

 

 

 
   W 4,526,143        4,386,517  
  

 

 

    

 

 

 

In addition to the financial assets above, as of March 31, 2019, the Company provides a payment guarantee of USD 1,160 million ( W 1,319,410 million), for its subsidiary.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the sales and investing activities. Trade accounts and notes receivables are insured in order to manage credit risk and uninsured trade accounts and notes receivables are managed in accordance with the Company’s management policy.

 

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24.

Financial Risk Management, Continued

 

  (c)

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Company does not generate sufficient cash flows from operations to meet its capital requirements, the Company may rely on other financing activities, such as external long-term borrowings and offerings of debt instruments, equity-linked and other debt instruments. In addition, the Company maintains a line of credit with various banks.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of March 31, 2019.

 

( 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

                 

Unsecured bank loans

   W 4,665,571        5,118,744       252,581        464,782        1,226,974       2,985,003       189,404  

Unsecured bond issues

     2,727,715        2,953,153       294,777        331,349        664,059       1,523,858       139,110  

Trade accounts and notes payable

     3,595,987        3,595,987       3,595,987        —          —         —         —    

Other accounts payable

     1,729,179        1,729,179       1,728,131        1,048        —         —         —    

Long-term other accounts payable

     3,135        3,135       —          —          2,092       1,043       —    

Payment guarantee(*)

     18,143        1,501,392       43,030        42,540        196,441       1,005,568       213,813  

Security deposits

     10,825        10,825       85        2,290        8,450       —         —    

Lease liabilities

     14,226        14,545       6,879        4,572        2,232       862       —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Derivatives financial liabilities

                 

Derivatives

     15,571        (36,787 )      —          —          (8,722 )      (28,065 )      —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

   W 12,780,352        14,890,173       5,921,470        846,581        2,091,526       5,488,269       542,327  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*)

Contractual cash flows of payment guarantee is identical to timing of principal payment and represent the maximum amount that the Company could be required to pay the guarantee amount.

 

    

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

 

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24.

Financial Risk Management, Continued

 

  (d)

Capital management

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

 

( In millions of won )             
     March 31, 2019     December 31, 2018  

Total liabilities

   W 15,485,985       13,849,525  

Total equity

     13,096,503       13,212,581  

Cash and deposits in banks (*1)

     349,013       550,483  

Borrowings (including bonds)

     7,393,286       6,139,491  

Total liabilities to equity ratio

     118 %      105 % 

Net borrowings to equity ratio (*2)

     54 %      42 % 

 

(*1)

Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.

(*2)

Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds and excluding lease liabilities) less cash and current deposits in banks by total equity.

 

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24.

Financial Risk Management, Continued

 

  (e)

Determination of fair value

 

  (i)

Measurement of fair value

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

  i)

Current Assets and Liabilities

The carrying amounts approximate fair value because of the short maturity of these instruments.

 

  ii)

Trade Receivables and Other Receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.

 

  iii)

Investments in Equity and Debt Instruments

The fair value of marketable financial assets at FVPL and FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using valuation methods.

 

  iv)

Non-derivative Financial Liabilities

Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

 

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24.

Financial Risk Management, Continued

 

  (ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed separate interim statements of financial position as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )    March 31, 2019      December 31, 2018  
     Carrying amounts      Fair values      Carrying amounts      Fair values  

Financial assets carried at amortized cost

           

Cash and cash equivalents

   W 271,813        (* )       473,283        (* ) 

Deposits in banks

     77,211        (* )       77,211        (* ) 

Trade accounts and notes receivable

     3,929,130        (* )       3,389,108        (* ) 

Non-trade receivables

     99,704        (* )       316,069        (* ) 

Accrued income

     12,030        (* )       5,894        (* ) 

Deposits

     13,418        (* )       13,418        (* ) 

Short-term loans

     20,255        (* )       16,116        (* ) 

Long-term loans

     48,730        (* )       55,048        (* ) 

Long-term non-trade receivables

     24,126        (* )       25,823        (* ) 

Financial assets at fair value through profit or loss

           

Equity instruments

   W 3,384        3,384        7,344        7,344  

Convertible bonds

     1,327        1,327        1,327        1,327  

Derivatives

     28,217        28,217        13,059        13,059  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 182        182        161        161  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W 15,571        15,571        25,758        25,758  

Liabilities carried at amortized cost

           

Unsecured bank borrowings

   W 4,665,571        4,728,468        3,807,234        3,862,709  

Unsecured bond issues

     2,727,715        2,789,018        2,332,257        2,384,987  

Trade accounts and notes payable

     3,595,987        (* )       3,186,123        (* ) 

Other accounts payable

     1,729,179        (* )       1,746,412        (* ) 

Long-term other accounts payable

     3,135        (* )       3,081        (* ) 

Payment guarantee liabilities

     18,143        (* )       19,068        (* ) 

Security deposits

     10825        (* )       10,955        (* ) 

Lease liabilities

     14,226        (* )       —          —    

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

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24.

Financial Risk Management, Continued

 

  (iii)

Fair values of financial assets and liabilities

 

  i)

Fair value hierarchy

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

 

  •  

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

 

  •  

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

 

  •  

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

 

  ii)

Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of March 31, 2019 and December 31, 2018 are as follows:

 

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

March 31, 2019

           

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          3,384        3,384  

Convertible bonds

     —          —          1,327        1,327  

Derivatives

     —          —          28,217        28,217  

Financial asset at fair value through other comprehensive income

           

Debt instruments

     182        —          —          182  

Financial liabilities at fair value through profit or loss

           

Derivatives

     —          —          15,571        15,571  

 

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

December 31, 2018

           

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          7,344        7,344  

Convertible bonds

     —          —          1,327        1,327  

Derivatives

     —          —          13,059        13,059  

Financial asset at fair value through other comprehensive income

           

Debt instruments

     161        —          —          161  

Financial liabilities at fair value through profit or loss

           

Derivatives

     —          —          25,758        25,758  

 

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24.

Financial Risk Management, Continued

 

  iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )    March 31, 2019      Valuation
technique 		     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Unsecured bank borrowings

   W —          —          4,728,468       
Discounted
cash flow 		 
  		     Discount rate  

Unsecured bond issues

     —          —          2,789,018       
Discounted
cash flow 		 
  		     Discount rate  

 

( In millions of won )    December 31, 2018      Valuation
technique 		     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Unsecured bank borrowings

   W —          —          3,862,709       
Discounted
cash flow 		 
  		     Discount rate  

Unsecured bond issues

     —          —          2,384,987       
Discounted
cash flow 		 
  		     Discount rate  

 

  iv)

The discount rates applied for determination of the above fair value as of March 31, 2019 and December 31, 2018 are as follows:

 

     March 31, 2019   December 31, 2018
Debentures, loans and others    2.09~3.72%   2.09~3.37%

 

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25.

Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the three-month period ended March 31, 2019 are as follows:

 

( In millions of won )                 Non-cash transactions  
     January 1,
2019 		     Cash flows
from
financing
activities 		    Reclassification     Gain or loss on
foreign currency
translation 		     Effective
interest
adjustment 		     Others     March 31,
2019 		 

Short-term borrowings

   W —          336,580       —         4,760        —          —         341,340  

Current portion of long-term borrowings and bonds

     1,040,148        (263,144 )      9,538       1,410        155        —         788,107  

Payment guarantee

     19,068        543       —         —          —          (1,468 )      18,143  

Long-term borrowings

     3,326,744        759,423       (9,538 )      19,308        —          —         4,095,937  

Bonds

     1,772,599        388,447       —         5,760        1,096        —         2,167,902  

Lease liabilities

     —          (3,478 )      —         —          113        17,591       14,226  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   W 6,158,559        1,218,371       —         31,238        1,364        16,123       7,425,655  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

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26.

Related Parties and Others

 

  (a)

Related parties

Related parties as of March 31, 2019 are as follows:

 

Classification

  

Description

Subsidiaries(*)    LG Display America, Inc. and others
Associates(*)    Paju Electric Glass Co., Ltd. and others

Entity that has significant influence over the Company

   LG Electronics Inc.

Subsidiaries of the entity that has significant influence over the Company

   Subsidiaries of LG Electronics Inc.

 

(*)

Details of subsidiaries and associates are described in note 8.

 

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26.

Related Parties and Others, Continued

 

  (b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

( In millions of won )    2019  
                   Purchase and others  
     Sales
and others 		     Dividend
income 		     Purchase of raw
material and
others 		     Acquisition of
property, plant
and equipment 		     Outsourcing
fees 		     Other
costs 		 

Subsidiaries

                 

LG Display America, Inc.

   W 2,241,264        —          —          —          —          —    

LG Display Japan Co., Ltd.

     518,697        —          —          —          —          —    

LG Display Germany GmbH

     481,297        —          —          —          —          6,560  

LG Display Taiwan Co., Ltd.

     322,530        —          —          —          —          153  

LG Display Nanjing Co., Ltd.

     2,700        —          1,212        —          378,197        7,742  

LG Display Shanghai Co., Ltd.

     189,495        —          —          —          —          —    

LG Display Poland Sp. z o.o.

     39        —          —          —          4,990        51  

LG Display Guangzhou Co., Ltd.

     19,495        —          3,391        —          512,290        4,375  

LG Display Shenzhen Co., Ltd.

     120,298        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     1,364        —          2,072        —          244,149        2,669  

LG Display (China) Co., Ltd.

     —          —          322,724        —          —          370  

LG Display Singapore Pte. Ltd.

     285,969        —          —          —          —          45  

L&T Display Technology (Fujian) Limited

     87,960        —          —          —          —          1  

Nanumnuri Co., Ltd.

     49        —          —          —          —          5,772  

Global OLED Technology LLC

     —          —          —          —          —          1,450  

LG Display Guangzhou Trading Co., Ltd.

     346,319        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     2,373        —          20,647        —          191,539        8,051  

Suzhou Lehui Display Co., Ltd.

     36,101        —          —          —          —          —    

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

     19,129        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,675,079        —          350,046        —          1,331,165        37,239  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

( In millions of won )    2019  
                   Purchase and others  
     Sales
and others 		     Dividend
income 		     Purchase of raw
material and
others 		     Acquisition of
property, plant
and equipment 		     Outsourcing
fees 		     Other
costs 		 

Associates

                 

WooRee E&L Co., Ltd.

   W —          —          1        —          —          1  

INVENIA Co., Ltd.

     —          180        343        254        —          53  

AVATEC Co., Ltd.

     —          265        —          —          21,157        201  

Paju Electric Glass Co., Ltd.

     —          6,057        90,616        —          —          964  

YAS Co., Ltd.

     —          1,000        1,647        7,342        —          958  

Material Science Co., Ltd.

     —          —          —          —          —          313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          7,502        92,607        7,596        21,157        2,490  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 284,657        —          3,356        61,650        —          27,950  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 22,864        —          —          —          —          1  

LG Electronics Vietnam Haiphong Co., Ltd.

     62,783        —          —          —          —          121  

LG Electronics Reynosa S.A. DE C.V.

     —          —          —          —          —          258  

LG Electronics S.A. (Pty) Ltd

     1,728        —          —          —          —          5  

LG Electronics Mexicalli S.A.DE C.V.

     1,099        —          —          —          —          27  

LG Electronics RUS, LLC

     274        —          —          —          —          743  

LG Electronics Egypt S.A.E.

     27,913        —          —          —          —          —    

 

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26.

Related Parties and Others, Continued

 

( In millions of won )    2019  
                   Purchase and others  
     Sales
and others 		     Dividend
income 		     Purchase of raw
material and
others 		     Acquisition of
property, plant
and equipment 		     Outsourcing
fees 		     Other
costs 		 

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics (Kunshan) Computer Co., Ltd.

   W 385        —          —          —          —          —    

LG Innotek Co., Ltd.

     2,996        —          12,842        —          —          24,731  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          24,361        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     16,930        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     2,588        —          —          —          —          —    

HiEntech Co., Ltd.

     18        —          —          —          —          7,111  

Others

     5,732        —          —          —          —          2,988  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 145,310        —          12,842        24,361        —          35,985  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,105,046        7,502        458,851        93,607        1,352,322        103,664  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

( In millions of won )    2018  
                   Purchase and others  
     Sales
and others 		     Dividend
income 		     Purchase of raw
material and
others 		     Acquisition of
property, plant
and equipment 		     Outsourcing
fees 		     Other
costs 		 

Subsidiaries

                 

LG Display America, Inc.

   W 2,148,447        —          —          —          —          —    

LG Display Japan Co., Ltd.

     436,684        —          —          —          —          2,151  

LG Display Germany GmbH

     425,156        —          —          —          —          329  

LG Display Taiwan Co., Ltd.

     341,212        —          —          —          —          171  

LG Display Nanjing Co., Ltd.

     4,865        —          268        —          262,288        1,385  

LG Display Shanghai Co., Ltd.

     223,520        —          —          —          —          10  

LG Display Poland Sp. z o.o.

     141        —          —          —          9,589        2  

LG Display Guangzhou Co., Ltd.

     5,449        —          2,579        —          441,631        3,468  

LG Display Shenzhen Co., Ltd.

     388,276        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     7,659        —          5,480        —          395,945        5,543  

LG Display (China) Co., Ltd.

     —          90,281        359,221        —          —          424  

LG Display Singapore Pte. Ltd.

     194,264        —          —          —          —          13  

L&T Display Technology (Fujian) Limited

     82,017        —          —          —          8        5  

Nanumnuri Co., Ltd.

     45        —          —          —          —          6,123  

Global OLED Technology LLC

     —          —          —          —          —          1,494  

LG Display Guangzhou Trading Co., Ltd.

     89,520        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     35,740        —          4,165        —          111,669        69  

Suzhou Lehui Display Co., Ltd.

     35,723        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,418,718        90,281        371,713        —          1,221,130        21,187  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

( In millions of won )    2018  
                   Purchase and others  
     Sales
and others 		     Dividend
income 		     Purchase of raw
material and
others 		     Acquisition of
property, plant
and equipment 		     Outsourcing
fees 		     Other
costs 		 

Associates

                 

WooRee E&L Co., Ltd.

   W —          —          —          —          —          47  

INVENIA Co., Ltd.

     —          30        270        7,749        —          72  

AVATEC Co., Ltd.

     —          530        —          —          17,773        119  

Paju Electric Glass Co., Ltd.

     —          4,172        92,497        —          —          920  

LB Gemini New Growth Fund No.16

     —          540        —          —          —          —    

YAS Co., Ltd.

     —          —          760        12,417        —          794  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        93,527        20,166        17,773        1,952  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 361,044        —          10,186        152,490        —          17,466  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 8,355        —          —          —          —          13  

LG Electronics Vietnam Haiphong Co., Ltd.

     32,988        —          —          —          —          2  

LG Electronics Reynosa S.A. DE C.V.

     4,843        —          —          —          —          898  

LG Electronics Almaty Kazakhstan

     2,425        —          —          —          —          8  

LG Electronics S.A. (Pty) Ltd

     2,397        —          —          —          —          2  

LG Electronics Mexicalli S.A.DE C.V.

     1,281        —          —          —          —          54  

LG Electronics RUS, LLC

     603        —          —          —          —          320  

 

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26.

Related Parties and Others, Continued

 

( In millions of won )    2018  
                   Purchase and others  
     Sales
and others 		     Dividend
income 		     Purchase of raw
material and
others 		     Acquisition of
property, plant
and equipment 		     Outsourcing
fees 		     Other
costs 		 

Subsidiaries of the entity that has significant influence over the Company

                 

LG Innotek Co., Ltd.

   W 6,950        —          34,626        —          —          11,082  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          117,814        —          491  

Inspur LG Digital Mobile Communications Co., Ltd.

     12,177        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     7,656        —          —          —          —          —    

HiEntech Co., Ltd.

     —          —          —          —          —          7,935  

Others

     730        —          —          —          —          1,913  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 80,405        —          34,626        117,814        —          22,718  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,860,167        95,553        510,052        290,470        1,238,903        63,323  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

  (c)

Trade accounts and notes receivable and payable and others as of March 31, 2019 and December 31, 2018 are as follows:

 

( In millions of won )              
     Trade accounts and notes receivable
and others 		     Trade accounts and notes payable
and others 		 
     March 31, 2019      December 31, 2018      March 31, 2019      December 31, 2018  

Subsidiaries

           

LG Display America, Inc.

   W 1,246,501        1,031,718        —          —    

LG Display Japan Co., Ltd.

     322,088        349,814        —          5  

LG Display Germany GmbH

     469,046        433,077        2,004        4,332  

LG Display Taiwan Co., Ltd.

     405,969        274,860        86        34  

LG Display Nanjing Co., Ltd.

     2,053        2,448        513,214        272,991  

LG Display Shanghai Co., Ltd.

     141,091        168,117        —          1  

LG Display Poland Sp. z o. o

     26        30        3,132        6,849  

LG Display Guangzhou Co., Ltd.

     3,001        167,814        379,381        196,070  

LG Display Guangzhou Trading Co., Ltd.

     334,184        377,145        —          —    

LG Display Shenzhen Co., Ltd.

     61,891        32,759        —          —    

LG Display Yantai Co., Ltd.

     15        115        241,231        382,448  

LG Display (China) Co., Ltd.

     —          —          322,525        187,004  

LG Display Singapore Pte. Ltd.

     192,629        85,680        —          1  

L&T Display Technology (Fujian) Limited

     58,847        62,336        143,845        139,171  

Nanumnuri Co., Ltd.

     —          —          2,661        2,065  

Global OLED Technology LLC

     —          —          —          1,146  

LG Display Vietnam Haiphong Co., Ltd.

     22,021        22,113        399,141        340,780  

Suzhou Lehui Display Co., Ltd.

     22,469        32,641        —          —    

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

     19,304        17,333        —          3,362  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,301,135        3,058,000        2,007,220        1,536,259  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

( In millions of won )              
     Trade accounts and notes receivable
and others 		     Trade accounts and notes payable
and others 		 
     March 31, 2019      December 31, 2018      March 31, 2019      December 31, 2018  

Associates

           

WooRee E&L Co., Ltd.

   W —          —          2        6  

INVENIA Co., Ltd.

     3,180        2,000        705        1,671  

AVATEC Co., Ltd.

     265        —          5,523        4,382  

Paju Electric Glass Co., Ltd.

     6,057        —          63,306        60,566  

YAS Co., Ltd.

     1,000        —          10,945        2,709  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 10,502        2,000        80,481        69,334  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

           

LG Electronics Inc.

   W 288,747        247,134        104,773        99,574  

 

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28.

Related Parties and Others, Continued

 

( In millions of won )              
     Trade accounts and notes receivable
and others 		     Trade accounts and notes payable
and others 		 
     March 31, 2019      December 31, 2018      March 31, 2019      December 31, 2018  

Subsidiaries of the entity that has significant influence over the Company

           

LG Innotek Co., Ltd.

   W 1,085        2,782        52,243        45,815  

LG Hitachi Water Solutions Co., Ltd.

     —          9,100        52,868        47,463  

Hi Entech Co., Ltd.

     —          —          5,994        4,782  

Inspur LG Digital Mobile Communications Co., Ltd

     17,075        6,137        —          —    

LG Electronics Reynosa S.A. DE C.V

     —          2,572        130        134  

LG Electronics India Pvt. Ltd.

     14,321        9,047        —          29  

LG Electronics Vietnam Haiphong Co., Ltd.

     40,461        25,544        112        —    

LG Electronics S.A. (Pty) Ltd.

     1,442        896        5        5  

LG Electronics Egypt S.A.E

     18,760        10,296        —          —    

LG Electronics (Kunshan) Computer Co., Ltd.

     136        1,370        —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     1,153        3,530        —          —    

Others

     4,035        3,340        1,875        1,275  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 98,468        74,614        113,227        99,503  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,698,852        3,381,748        2,305,701        1,804,670  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

  (d)

Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for three-month periods ended March 31, 2019 and 2018 are as follows:

 

(In millions of won)  
     2019      2018  

Associates

   Loans      Collection
of loans 		     Loans      Collection
of loans 		 

INVENIA Co., Ltd.

   W 1,000        —          —          125  

YAS Co., Ltd.

     —          —          —          125  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,000        —          —          250  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

  (e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month periods ended March 31, 2019 and 2018 and as of March 31, 2018 and December 31, 2018 are as follows. These entities are not affiliates according to K-IFRS No. 1024, Related Party Disclosures.

 

(In millions of won)              
     For the three-month period ended March 31, 2019      March 31, 2019  
     Sales
and others 		     Purchase and
others 		     Trade accounts and
notes receivable
and others 		     Trade accounts and
notes payable and
others 		 

LG International Corp.and its subsidiaries

   W 195,172        32,591        149,541        95,218  

LG Uplus Corp.

     —          558        —          206  

LG Chem Ltd. and its subsidiaries

     19        153,512        20        89,140  

S&I Corp. and its subsidiaries (formerly, Serveone)

     84        170,268        21,307        231,442  

Silicon Works Co., Ltd.

     92        150,292        101        158,020  

LG Corp.

     —          13,273        13,201        5,583  

LG Management Development Institute

     —          2,470        3,480        435  

LG CNS Co., Ltd. and its subsidiaries

     —          18,108        —          21,237  

G2R Inc. and its subsidiaries

     —          1,064        —          1,608  

Robostar Co., Ltd.

     —          714        —          785  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 195,367        542,850        187,650        603,674  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

(In millions of won)  
     For the three-month period ended March 31, 2018      December 31, 2018  
     Sales
and others 		     Purchase and others      Trade accounts and
notes receivable
and others 		     Trade accounts and
notes payable and
others 		 

LG International Corp.and its subsidiaries

   W 184,257        264,777        82,965        82,028  

LG Uplus Corp.

     —          223        —          178  

LG Chem Ltd. and its subsidiaries

     1,564        193,552        14        93,274  

Serveone and its subsidiaries

     97        336,299        21,307        239,091  

Silicon Works Co., Ltd.

     —          143,295        —          140,694  

LG Corp.

     —          412,791        11,246        —    

LG Management Development Institute

     —          2,813        3,480        441  

LG CNS Co., Ltd. and its subsidiaries

     —          30,771        —          72,694  

LG Hausys Ltd.

     1,110        41        —          3  

G2R Inc. and its subsidiaries

     —          4,041        —          19,773  

Robostar Co., Ltd.

     —          —          —          530  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 187,028        988,563        119,012        648,706  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

Compensation costs of key management for the three-month periods ended March 31, 2019 and 2018 are as follows:

 

( In millions of won )              
     2019      2018  

Short-term benefits

   W 891        888  

Expenses related to the defined benefit plan

     100        273  
  

 

 

    

 

 

 
   W 991        1,161  
  

 

 

    

 

 

 

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

 

27.

Subsequent Event

The Company issued the following foreign currency denominated bonds on April 30, 2019:

 

(In millions of USD)  
     Issue date      Maturity date      Interest rate (%)      Face amount  

Privately placed bonds

     April 30, 2019        April 28, 2023        3ML + 1.47        USD 100  

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    LG Display Co., Ltd.
    (Registrant)
Date: May 15, 2019     By:  

/s/ Heeyeon Kim

      (Signature)
    Name:   Heeyeon Kim
    Title:   Head of IR / Vice President

 

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