6-K 1 d83184d6k.htm FORM 6-K Form 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2020

 

 

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, 2020 to September 30, 2020)

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

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

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

Contents

 

1.

 

Company

     4  
  A.   

Name and contact information

     4  
  B.   

Credit rating

     4  
  C.   

Capitalization

     6  
  D.   

Voting rights (as of September 30, 2020)

     6  
  E.   

Dividends

     7  

2.

 

Business

     7  
  A.   

Business overview

     7  
  B.   

Industry

     8  
  C.   

New businesses

     10  

3.

 

Major Products and Raw Materials

     10  
  A.   

Major products

     10  
  B.   

Average selling price trend of major products

     11  
  C.   

Major raw materials

     11  

4.

 

Production and Equipment

     12  
  A.   

Production capacity and output

     12  
  B.   

Production performance and utilization ratio

     12  
  C.   

Investment plan

     13  

5.

 

Sales

     13  
  A.   

Sales performance

     13  
  B.   

Sales organization and sales route

     13  
  C.   

Sales methods and sales terms

     14  
  D.   

Sales strategy

     14  
 

E.

  

Major customers

     15  

6.

 

Purchase Orders

     15  

 

2


Table of Contents

7.

 

Market Risks and Risk Management

     15  
  A.   

Market risks

     15  
  B.   

Risk management

     15  

8.

 

Derivative Contracts

     15  
  A.   

Currency risks

     15  
  B.   

Interest rate risks

     16  

9.

 

Major Contracts

     16  

10.

 

Research & Development

     17  
  A.   

Summary of R&D-related expenditures

     17  
  B.   

R&D achievements

     17  

11.

 

Intellectual Property

     19  

12.

 

Environmental and Safety Matters

     19  

13.

 

Financial Information

     22  
  A.   

Financial highlights (Based on consolidated K-IFRS)

     22  
  B.   

Financial highlights (Based on separate K-IFRS)

     23  
  C.   

Consolidated subsidiaries as of September 30, 2020

     24  
  D.   

Status of equity investments as of September 30, 2020

     24  

14.

 

Audit Information

     26  
  A.   

Audit service

     26  
  B.   

Non-audit service

     26  

15.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     26  

16.

 

Board of Directors

     26  
  A.   

Members of the board of directors

     26  
  B.   

Committees of the board of directors

     27  
  C.   

Independence of directors

     27  

17.

 

Information Regarding Shares

     27  
  A.   

Total number of shares

     27  
  B.   

Shareholder list

     27  

18.

 

Directors and Employees

     28  
  A.   

Directors

     28  
  B.   

Employees

     29  

19.

 

Other Matters

     30  
  A.   

Legal proceedings

     30  
  B.   

Material events subsequent to the reporting period

     30  
  C.   

Material change in management

     30  

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

   February 2018    AA     NICE Information Service Co., Ltd. (AAA ~ D)
   May 2018
   February 2019    AA-
   April 2019
   November 2019
   February 2020    A+
   June 2020
   May 2018    AA     Korea Investors Service, Inc. (AAA ~ D)
   February 2019    AA-
   June 2019
   October 2019
   February 2020    A+
   June 2020
   February 2018    AA     Korea Ratings Corporation (AAA ~ D)
   April 2018
   April 2019    AA-
   November 2019
   February 2020    A+
   May 2020

 

(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(2)   

Rating agency (Rating range)

Corporate bonds(1)

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

 

(2)

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

(3)

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

 

Subject instrument

  

Credit rating

  

Definition

Corporate bonds

   AAA    Highest level of stability.
   AA+/AA/AA-    Very high level of stability. This stability may be slightly more risky than is the case for the highest rating category but presents no issues.
   A+/A/A-    High level of stability. There are no issues with repaying the principal, but there are characteristics that could be subject to future deterioration.
   BBB+/BBB/BBB-    Level of stability is adequate. Current level of stability and profitability is adequate, but requires special attention during times of economic downturns.
   BB+/BB/BB-    Speculative characteristics. There is no guarantee on future stability. Expected business performance is uncertain.
   B+/B/B-    Inadequate as an investment target. Ability to make principal repayments or comply with contractual terms and conditions is uncertain.
   CCC/CC/C    Very low level of stability. Ability to make payments of principal and interest is highly unlikely. Extremely speculative. Currently in default or undergoing a serious problem.
   D    Bankruptcy.

 

(3)

Commercial paper

 

Subject instrument

  

Month of rating

   Credit rating(1)   

Rating agency (Rating range)

Commercial paper

   May 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)

 

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(4)

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

 

Subject instrument

  

Credit rating

  

Definition

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

 

(5)

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

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

 

  C.

Capitalization

 

  (1)

Change in capital stock (as of September 30, 2020)

There were no changes to our issued capital stock during the reporting period ended September 30, 2020.

 

  (2)

Convertible bonds (as of September 30, 2020)

 

Description

  Issue Date     Maturity
Date
    Issue
Amount
(in Won)
    Class of
Shares
Subject to
Conversion
    Conversion
Period
    Conditions for Conversion     Outstanding Bonds     Notes  
  Conversion
Ratio
    Conversion
Price
    Issue
Amount
(in Won)
    Number
of Shares
subject to
conversion
 

Unsecured Foreign Convertible Bonds No. 3

   
Aug. 22,
2019
 
 
   
Aug. 22,
2024
 
 
    813,426,670,000(1)(2)      

Registered
Common
Shares
 
 
 
   


Aug. 23,
2020 ~
Aug. 12,
2024



 
    100   W 19,845       813,426,670,000 (1)      40,988,998      


Listed on
Singapore
Stock
Exchange
 
 
 
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    —         —         813,426,670,000       —         —         100   W 19,845       813,426,670,000       40,988,998       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (6)

The issue amount for Unsecured Foreign Convertible Bonds No. 3 is calculated based on the application of the mid-point of the relevant Won-US dollar exchange rates as of noon, July 30, 2019 (Korea Standard Time) quoted on Bloomberg, which was W1,182.65 per U.S. dollar, to the actual issue amount of USD 687,800,000.

  (7)

The proceeds of our Unsecured Foreign Convertible Bonds No. 3 were used for general corporate purposes.

 

  D.

Voting rights (as of September 30, 2020)

 

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         (Unit: share)  

Description

       Number of shares  

A. Total number of shares issued(1):

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

B. Shares without voting rights:

   Common shares     —    
   Preferred shares     —    

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

   Common shares     —    
   Preferred shares     —    

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

   Common shares     —    
   Preferred shares     —    

E. Shares with restored voting rights:

   Common shares     —    
   Preferred shares     —    
    

 

 

 

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

   Common shares     357,815,700  
    

 

 

 
   Preferred shares     —    
    

 

 

 

 

(8)

Authorized: 500,000,000 shares

 

  E.

Dividends

Dividends for the three most recent fiscal years

 

Description (unit)

          2020 Q1~Q3      2019      2018  

Par value (Won)

        5,000        5,000        5,000  

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

        (691,606      (2,829,705      (207,239

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

        (1,838      (7,908      (579
     

 

 

    

 

 

    

 

 

 

Total cash dividend amount for the period (million Won)

        —          —          —    
     

 

 

    

 

 

    

 

 

 

Total stock dividend amount for the period (million Won)

        —          —          —    
     

 

 

    

 

 

    

 

 

 

Cash dividend payout ratio (%)(3)

        —          —          —    

Cash dividend yield (%)(4)

     Common shares        —          —          —    
     Preferred shares        —          —          —    

Stock dividend yield (%)

     Common shares        —          —          —    
     Preferred shares        —          —          —    

Cash dividend per share (Won)

     Common shares        —          —          —    
     Preferred shares        —          —          —    

Stock dividend per share (share)

     Common shares        —          —          —    
     Preferred shares        —          —          —    

 

(9)

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

(10)

Earnings per share is based on par value of W5,000 per share and is calculated by dividing net income by weighted average number of common shares.

(11)

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

(12)

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

 

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.

 

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As of September 30, 2020, in order to support our business activities, we operated TFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.

As of September 30, 2020, 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)  
     2020 Q1~Q3      2019      2018  

Sales Revenue

     16,769        23,476        24,337  

Gross Profit

     1,252        1,868        3,085  

Operating Profit (loss)

     (715      (1,359      93  
  

 

 

    

 

 

    

 

 

 

Total Assets

     35,497        35,575        33,176  
  

 

 

    

 

 

    

 

 

 

Total Liabilities

     23,323        23,086        18,289  
  

 

 

    

 

 

    

 

 

 

 

  B.

Industry

 

  (1)

Industry characteristics

 

   

From the supply perspective, the display panel industry is technology- and capital-intensive in nature and requires mass production through achieving an economy of scale.

 

   

From the demand perspective, the display panel industry tends to demonstrate a high level of volatility depending on the global macroeconomic conditions, major regional sales events and/or seasonal factors.

 

   

While the overall growth in the market for display panels for televisions in terms of quantity has become somewhat stagnant, there is emerging demand for premium products with high resolution and large-sized display panels in developed countries, while demand for lower-end products has sustained in developing countries.

 

   

While the growth in the market for display panels for IT products, which include laptops, desktop monitors and tablet products, has slowed down or declined in terms of quantity, demand for high-end products has consistently sustained. In addition, there have been increased new opportunities from the demand side of IT products due to an expanding social tendency to avoid face-to-face contact resulting in increased instances of online classes and working from home in light of the COVID-19 pandemic.

 

   

While the growth in the market for small- and medium-sized display panels, which is centered around smartphones, has somewhat slowed down, further growth is expected with the release of new products using plastic OLED panels and products that offer changes in form factors or new customer experiences such as foldable smartphones.

 

   

As the scope of application of display panels gradually expand to products other than traditional IT devices, we also expect to see growth in the market for new and high value-added product segments such as display panels for industrial uses and automobiles.

 

  (2)

Growth Potential

 

   

We are focusing on securing profitability through differentiated products such as “Cinematic 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 business, 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 business, 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 business, we are continuously striving to secure mass production capabilities for 6th generation plastic OLED smartphones through additional investments. We are also strengthening the foundation for the expansion of small- and medium-sized OLED business.

 

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  (3)

Cyclicality

 

   

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

 

   

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

 

  (4)

Market conditions

 

   

Most display panel manufacturers are located in Asia as set forth below. Pursuant to the Chinese government’s initiative and support, Chinese panel manufacturers have continued to invest in new fabrication facilities and additional supplies, and the concern over intensification of a structural oversupply in the LCD industry 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:

 

     2020 Q1~Q3     2019     2018  

Panels for Televisions(1)(2)

     21.4     28.1     28.3

Panels for Monitors(1)

     24.5     27.5     30.7

Panels for Notebook and Tablet Computers(1)

     21.7     23.0     25.8
  

 

 

   

 

 

   

 

 

 

Total(1)

     21.9     27.2     28.8
  

 

 

   

 

 

   

 

 

 

 

(13)

Source: Large-Area Display Market Tracker (OMDIA (formerly known as IHS Technology)). The relevant amounts for the first three quarters of 2020 reflect OMDIA Technology’s estimates only, as the actual results for such period have not yet been released.

(14)

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 the development of new and premium products through technological advances, timely investments, adaptable production capabilities, product pricing, achievement of competitive production costs through enhancements in productivity and supply costs of components and raw materials, our relationship with customers, success in marketing to our end-brand customers, general economic and industry conditions and foreign exchange rates.

 

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In order for us to compete effectively, it is critical to offer differentiated products that enable us to secure profit margins even during times of a mismatch in the market supply and demand, to maintain stable and long-term relationships with customers, and to be cost competitive.

 

   

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 WOLED/POLED, IPS, Oxide, 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 shown that we are technologically a step ahead of the competition by continuing to introduce differentiated products with a variety of unique features specific to OLED technology, such as our “Wallpaper,” “Cinematic Sound,” “Rollable” and “Transparent” large-sized OLED panels for televisions. Moreover, we have continually introduced differentiated plastic OLED products for smartphones, automotive products, wearable devices and foldable notebook computers, among others. With respect to TFT-LCD panels, we are leading the market with our competitive advantages in technology, including through our IPS and Oxide technology-based ultra-large and high-resolution ultra-high definition (“Ultra HD” or “UHD”) television panels, desktop and notebook monitors featuring differentiated designs and high frequency refresh rates, and specialized products for automotive, commercial and medical uses. Our production facilities are also equipped to produce products incorporating in-TOUCH technology.

 

   

Moreover, we are maintaining and strengthening close long-term relationships with major global firms to secure customers and expand partnerships for technology development.

 

  C.

New businesses

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

 

3.

Major Products and Raw Materials

 

  A.

Major products

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

 

 

               (Unit: In billions of Won, except percentages)
                               2020 Q1~Q3  

Business area

  

Sales type

   Items (By product)      Usage      Major
trademark
     Sales
Revenue
     Percentages
(%)
 

Display

   Goods/ Products/ Services/ Other sales      Televisions       
Panels for
televisions
 
 
     LG Display        4,580        27.31
    
Desktop
monitors
 
 
    
Panels for
monitors
 
 
     LG Display        3,152        18.80
    


Notebook
computers
and tablet
products
 
 
 
 
    



Panels for
notebook
computers
and tablet
products
 
 
 
 
 
     LG Display        4,234        25.25
    
Mobile,
etc.
 
 
    

Panels for
smartphones,
etc.
 
 
 
     LG Display        4,802        28.64
              

 

 

    

 

 

 

Total

                 16,769        100.0
              

 

 

    

 

 

 

 

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  B.

Average selling price trend of major products

The average selling prices of display panels are subject to change based on market conditions and demand by product category. The average selling price of display panels per square meter of net display area shipped in the third quarter of 2020 increased by approximately 8% compared to the second quarter of 2020 in part due to an increase in sales of our IT products as a result of increased instances of online classes and working from home in light of the COVID-19 pandemic as well as an increase in the shipment of large-sized OLED and mobile POLED panels. There is no assurance that the average selling prices of display panels per square meter of net display area will not fluctuate in the future due to changes in market conditions.

(Unit: US$ / m2)

 

Period

   Average Selling Price(1)(2)
(in US$ / m2)

2020 Q3

   706

2020 Q2

   654

2020 Q1

   567

2019 Q4

   606

2019 Q3

   513

2019 Q2

   456

2019 Q1

   528

2018 Q4

   559

2018 Q3

   500

2018 Q2

   501

2018 Q1

   522

 

(15)

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

(16)

Excludes semi-finished products in the cell process.

 

  C.

Major raw materials

Prices of major raw materials depend on fluctuations in supply and demand in the market as well as on change in size and quantity of raw materials due to the increased production of large-sized panels.

 

 

                 (Unit: In billions of Won, except percentages)

Business area

   Purchase type      Items    Usage      Cost(1)      Ratio (%)     Suppliers

Display

     Raw materials      Printed
circuit boards
    
Display panel
manufacturing
 
 
     1,921        21.8   Korea SMT Co., Ltd., etc.
   Polarizers      1,475        16.7   LG Chem, etc.
   Backlights      1,245        14.1   Heesung Electronics
LTD., etc.
   Glass      615        7.0   Paju Electric Glass Co.,
Ltd., Asahi Electric Glass
Co., Ltd., etc.
   Drive IC      802        9.1   Silicon Works Co., Ltd.,
MagnaChip
Semiconductor
Corporation, etc.
   Others      2,753        31.2   —  
           

 

 

    

 

 

   

Total

              8,811        100.0  
           

 

 

    

 

 

   

 

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- Period: January 1, 2020 ~ September 30, 2020.

 

(17)

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

(18)

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, decreased by 8.6% from 2018 to 2019 and by 3.8% from 2019 to the third quarter of 2020. Such decrease in the third quarter of 2020 was mainly due to the effects of the COVID-19 pandemic. The average price of resin decreased by 38.2% from 2018 to 2019 and by 15.1% from 2019 to the third quarter of 2020. Such decrease in the third quarter of 2020 was also mainly due to the effects of the COVID-19 pandemic. The average price of copper, the main raw material for PCB components, decreased by 8.0% from 2018 to 2019 but increased by 8.8% from 2019 to the third quarter of 2020. Such increase in the third quarter of 2020 was also mainly due to the effects of the COVID-19 pandemic.

 

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      2020 Q1~Q3(1)      2019(2)      2018(2)  

Display

     Display panel        Gumi, Paju, Guangzhou        6,687        9,408        10,161  

 

(19)

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., 9 months). The production capacity for facilities with adjusted utilization rates have been calculated based on the maximum input capacity during the period.

(20)

Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth-generation glass sheets) during the year multiplied by the number of months in a year (i.e., 12 months). The production capacity for facilities with adjusted utilization rates have been calculated based on the maximum input capacity during the period.

 

  (2)

Production output

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

 

                   (Unit: 1,000 glass sheets)  

Business area

   Items      Location of facilities      2020 Q1~Q3(1)      2019(1)      2018(1)  

Display

     Display panel        Gumi, Paju, Guangzhou        4,937        8,373        9,428  

 

(1)

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

 

  B.

Production performance and utilization ratio

 

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          (Unit: Hours, except percentages)  

Production facilities

   Available working hours
in 2020 Q1~Q3
   Actual working hours
in 2020 Q1~Q3
   Average utilization ratio  

Gumi

   6,576(1)
(24 hours x 274  days)(2)
   6,510(1)
(24 hours x approximately 271 days)(2)
     99.0

Paju

   6,576(1)
(24 hours x 274 days)(2)
   6,548(1)
(24 hours x approximately 273 days)(2)
     99.6

Guangzhou

   6,576(1)
(24 hours x 274 days)(2)
   6,576(1)
(24 hours x 274 days)(2)
     100.0

 

(21)

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

(22)

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

 

  C.

Investment plan

In 2019, our total capital expenditures on a cash out basis was approximately W7 trillion. Given that our significant capital expenditures centered on OLED technology were completed from 2017 to 2019, we have been investing within our EBITDA since 2020, and we expect our total capital expenditures on a cash out basis to be approximately slightly less than W3 trillion for 2020.

 

5.

Sales

 

  A.

Sales performance

 

              (Unit: In billions of Won)  

Business area

   Sales types    Items (Market)   2020 Q1~Q3      2019      2018  

Display

         Overseas(1)     15,991        22,180        22,722  
   Products    Display panel    Korea(1)     746        1,255        1,572  
         Total     16,736        23,435        24,294  
   Royalty    LCD, OLED
technology
patent
   Overseas(1)     11        14        18  
         Korea(1)     0        0        0  
         Total     11        14        18  
   Others    Raw materials,
components,
etc.
   Overseas(1)     18        17        13  
         Korea(1)     5        10        1  
         Total     22        26        25  
   Total       Overseas(1)     16,019        22,211        22,747  
         Korea(1)     750        1,265        1,590  
         Total     16,769        23,476        24,337  

 

(23)

Based on ship-to-party.

 

  B.

Sales organization and sales route

 

   

As of September 30, 2020, 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.

 

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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      95.2
   Headquarters      4.8
Overseas sales portion (overseas sales / total sales)      95.5
Korea    Overseas subsidiaries      2.2
   Headquarters      97.8
Korea sales portion (Korea sales / total sales)      4.5

 

  C.

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 of and demand for panels.

 

  D.

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, cinematic sound, rollable, etc.). We are also continuing to strengthen 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, among others), industrial products (including aviation and medical equipment, among others) 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.

 

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Table of Contents
  E.

Major customers

 

   

Customers “A” and “B” each accounted for more than 10% of our sales revenue in each of the first three quarters of 2019 and 2020, and our sales revenue derived from our top ten customers comprised 84% of our total sales revenue in the first three quarters of 2020 and 79% in the first three quarters of 2019.

 

6.

Purchase Orders

 

   

We do not have purchase order contracts that recognize unbilled revenue by implementing the cost-based method.

 

7.

Market Risks and Risk Management

 

  A.

Market risks

The display industry may experience fluctuations in the average selling prices of TFT-LCD and OLED panels that do not correlate with cyclical patterns in the industry. Our margins would be adversely impacted if our selling prices fall below our costs.

In addition, given that the display industry is highly competitive, it may be difficult to maintain our current market position. We have experienced pressure on the prices of our major products and our margins due largely to additional industry capacity from competitors in Korea, China, Taiwan and Japan coupled with changes in the production mix of such competitors.

Our ability to compete successfully depends on factors both within and outside our control, including the development of products with differentiated technologies, timely investments, adaptable production capabilities, executability and reliability, product pricing, supply costs of components and raw materials, the success of our end-brand customers’ marketing efforts and general economic and industry conditions.

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.

 

8.

Derivative Contracts

 

  A.

Currency risks

 

   

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

 

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Table of Contents
   

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

 

   

In respect of other monetary assets and liabilities denominated in foreign currencies, we have adopted a policy to maintain our net exposure within an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to address short-term imbalances.

 

   

As of the end of the reporting period, 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 $2,125 million in Won/US dollar cross currency swap agreements with Standard Chartered Bank and others, for which we have not applied hedge accounting.

 

   

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

We recognized a net loss on valuation of derivative instruments in the amount of W10,005 million with respect to our currency risk 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.

 

   

As of the end of the reporting period, in order to mitigate risks of interest rate fluctuations and exchange rate fluctuations on foreign currency denominated borrowings with floating interest rates, we have entered into interest rate swap and cross currency swap agreements.

 

   

As of the end of the reporting period, we have entered into an aggregate of W170 billion in interest rate swap agreements with Korean banks, including KB Kookmin Bank, for which we have not applied hedge accounting.

We recognized a net loss on valuation of derivative instruments in the amount of W2,629 million with respect to our interest rate risk derivative instruments held during the reporting period.

 

9.

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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Table of Contents
10.

Research & Development

 

  A.

Summary of R&D-related expenditures

 

 

          (Unit: In millions of Won, except percentages)  

Items(1)

       

2020 Q1~Q3

   2019      2018  

Material Cost

      270,434      388,444        496,789  

Labor Cost

      440,191      618,187        630,695  

Depreciation Expense

      427,145      523,631        351,936  

Others

      190,972      246,027        277,699  
     

 

  

 

 

    

 

 

 

Total R&D-Related Expenditures

      1,328,742      1,776,289        1,757,119  
     

 

  

 

 

    

 

 

 

Accounting Treatment(2)

   Selling & Administrative Expenses    608,399      924,020        918,512  
   Manufacturing Cost    479,515      414,324        465,772  
   Development Cost (Intangible Assets)    240,828      437,945        372,835  
     

 

  

 

 

    

 

 

 

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

   7.9%      7.6      7.2
     

 

  

 

 

    

 

 

 

 

(24)

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

(25)

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 2018

 

  (1)

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

 

   

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

 

   

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

 

  (2)

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

 

   

Developed our first Ultra HD mobile product

 

   

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

 

  (3)

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

 

   

Our first product applying camera notch concept technology

 

  (4)

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

 

   

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

 

   

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

 

   

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

 

  (5)

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

 

   

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

 

   

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

 

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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 ® 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, 14µm 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

 

  (2)

Developed the world’s first transparent WOLED product (55-inch FHD)

 

   

Developed WOLED-based Top Emission OLED device and process technology

 

  (3)

Developed the world’s first OLED 8K product (88-inch 8K)

 

   

Developed gearing technology that secures and compensates aperture ratio for high resolution (8K) product implementation

 

  (4)

Developed the world’s first gaming monitor product applying OLED (55” UHD)

 

   

Developed 55” UHD gaming monitor product using advantages of OLED (latency, gray to gray, color recall)

 

  (5)

Developed the world’s first curved gaming monitor product applying AH-IPS COT (37.5” WQ+)

 

   

Developed and produced the world’s first monitor product applying AH-IPS COT

 

   

Pioneered gaming/curved premium monitor product market

 

  (6)

Developed the world’s first monitor product applying Crystal Sound Display (“CSD”) (27.0” FHD)

 

   

Developed and produced the world’s first monitor product applying CSD

 

   

Developed large-sized, front-oriented stereo speaker through the application of exciter and piezo to the bottom cover of the liquid crystal module

 

  (7)

Developed the world’s first automotive product applying plastic OLED (16.9” + 7.2” / 14.2”)

 

   

Developed and produced the world’s first 1CG multi-display product applying plastic OLED (16.9” + 7.2” / 14.2”)

Achievements in 2020

 

  (1)

Developed the first products in our Guangzhou OLED panel production facility (77” UHD, 48” UHD)

 

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Completed the development of the first products in our Guangzhou OLED panel production facility (77” UHD, 48” UHD)

 

11.

Intellectual Property

As of September 30, 2020, our cumulative patent portfolio (including patents that have already expired) included a total of 48,279 patents, consisting of 20,957 in Korea and 27,322 in other countries.

 

12.

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 and currently operate various types of anti-pollution equipment, consistent with environmental standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations.

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

In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2019 to the Korean government in April 2020 after it was certified by BSI Korea, a government-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:

 

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

Category

   2019      2018      2017  

Greenhouse gases

     5,885        6,696        6,314  

Energy

     62,776        64,296        63,451  

As we were designated as a target company for the greenhouse gas emission trading system in 2015, we submit a plan for allocating and monitoring our greenhouse gas emissions to the government every year. In order to continually promote the reduction of greenhouse gas emissions, we have set a short-term goal to reduce the emission level from 2014 to 2022 by 16.8% and a medium- to long-term goal to reduce the emission level from 2014 to 2045 by 65.1%. To achieve this, we are continually investing in facility improvements and monitoring our emission levels.

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 2019, we reduced our carbon dioxide greenhouse gas emission levels by 1.21 million tons, which was 0.40 million tons more than our initial target of 0.81 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.

 

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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 the operation of our domestic panel and module production facilities and our overseas module production plants in Paju, Gumi, Nanjing, Yantai, Guangzhou and Vietnam, and in December 2013, we have obtained energy management system ISO 50001 certifications for the operation of our domestic panel and module production plants and our overseas module production plants in Nanjing and Guangzhou and are operating such facilities in accordance with such certifications.

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 we currently continue to maintain such certification. 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 and 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.), 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. Since then, we have continued to maintain our excellence in water conservation activities in 2018 and 2019. In addition, our continued efforts to reduce greenhouse gas emissions have been recognized from 2017 to 2019 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 Trade, Industry 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 Energy and the Korea Energy Agency in November 2018. Since 2019, we have been carrying out forest development activities around our manufacturing facilities after signing an agreement with Gyeong-gi Province to surround our facilities with forests to reduce air pollutants such as fine dust and have received a commendation for such efforts.

In the case of the European Union’s Restriction of Hazardous Substances (RoHS) Directive 2011/65/EU, with the adoption of Directive (EU) 2015/863 in 2016, four additional substances (four phthalate substances) have been added to the six already restricted substances, which additional restrictions became effective as of July 22, 2019. In order to address the latent risk elements of the four phthalate substances that became 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.

 

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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 have since continuously received the SGS Eco Label accreditation for our OLED television models. For the IPS Nano Color for LCD, we received the Quality & Performance Mark from Intertek, a global product testing/accreditation agency, by applying a technology to eliminate cadmium (Cd) and indium phosphide (InP). In 2018, we became the first display panel company to receive the “Green Technology Certification” from the Korean Ministry of Science and ICT for improving the light efficiency technology of OLED to promote energy use reduction.

In June 2017, we were assessed a fine of W1 million, which we subsequently paid, for failure to meet certain waste disposal subcontractor requirements under the Waste Management Act. To prevent such violations from occurring again, we are strengthening the periodic evaluation process for our waste management subcontractors.

In June 2017, we were audited by the Ministry of Employment and Labor in connection with the occurrence of a safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W2.4 million. In addition, the trial court ordered a fine of W0.5 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. In relation to the same matter, in May 2018, the Prosecutor’s Office sought a fine of W3.0 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. The trial court (Goyang Branch of Uijeongbu District Court) issued a summary order confirming the same fine of W3.0 million on November 22, 2018. We and our chief production officer appealed the trial court’s decision, and the case is currently pending appeal at the Uijeongbu District Court. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

In January 2018, we were audited by the Ministry of Employment and Labor in connection with the occurrence of another safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W14.4 million. In relation to this matter, in January 2019, the trial court (Goyang Branch of Uijeongbu District Court) assessed a fine of W1 million as a summary order on each of us and our chief production officer pursuant to certain other provisions of the Industrial Safety and Health Act. In addition, in January 2019, the trial court sought a fine of W4 million and W2 million on us and the employee in charge of on-site safety management, respectively, on the basis of certain other provisions of the Industrial Safety and Health Act. Relevant authorities are currently conducting further investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

Also in January 2018, the government of Gyeong-gi Province issued a warning and assessed a fine of W1 million on us, which we subsequently paid, for the failure to comply with certain requirements relating to air pollutant emission and prevention facilities under the Air Quality Management Act. To prevent such violations from occurring again, we have shortened the air pollutant emission maintenance reporting period and strengthened the verification process for relevant data.

 

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In March 2018, we were audited by the Ministry of Employment and Labor in connection with our health and safety training practices, and we were found to have omitted requisite health and safety training sessions for certain employees in our P9 facilities in 2016 and 2017. As a result, we were assessed a fine of W6.95 million, which we subsequently paid, and have strengthened our efforts to promote health and safety training programs in advance as well as our management and supervision activities to ensure such programs are conducted.

In June 2019, the government of Gyeong-gi Province reviewed the operational history and the number of self-measurements of our emission outlets and confirmed that there were certain deficiencies in self-measurements for our reserve facilities. As a result, we were assessed a fine of W1.6 million by the government of Gyeong-gi Province, which we subsequently paid, for the violation of Article 39 of the Air Quality Management Act. To prevent the recurrence, we have established a monthly self-measurement plan for our reserve facilities.

In May 2020, we were assessed a fine of W1.4 million by the National Institute of Chemical Safety for our failure to conduct safety training on hazardous chemicals in violation of Article 33 of the Chemicals Control Act, which we subsequently paid. In order to prevent recurrence, we conducted safety training on hazardous chemicals for the relevant personnel and newly established a working process that complies with safety regulations.

 

13.

Financial Information

 

  A.

Financial highlights (Based on consolidated K-IFRS).

 

 

     (Unit: In millions of Won)  

Description

   As of September 30, 2020      As of December 31, 2019      As of December 31, 2018  

Current assets

     10,920,675        10,248,315        8,800,127  

Quick assets

     8,520,951        8,197,160        6,108,924  

Inventories

     2,399,724        2,051,155        2,691,203  

Non-current assets

     24,576,733        25,326,248        24,375,583  

Investments in equity accounted investees

     115,714        109,611        113,989  

Property, plant and equipment, net

     21,129,880        22,087,645        21,600,130  

Intangible assets

     794,126        873,448        987,642  

Other non-current assets

     2,537,013        2,255,544        1,673,822  

Total assets

     35,497,408        35,574,563        33,175,710  

Current liabilities

     11,202,372        10,984,976        9,954,483  

Non-current liabilities

     12,120,657        12,101,306        8,334,981  

Total liabilities

     23,323,029        23,086,282        18,289,464  

Share capital

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

Share premium

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

Retained earnings

     6,841,972        7,503,312        10,239,965  

Other equity

     48,680        (203,021      (300,968

Non-controlling interest

     1,243,535        1,147,798        907,057  
  

 

 

    

 

 

    

 

 

 

Total equity

     12,174,379        12,488,281        14,886,246  
  

 

 

    

 

 

    

 

 

 

 

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

Description

   For the nine months ended
September 30, 2020
     For the year ended
December 31, 2019
     For the year ended
December 31, 2018
 

Revenue

     16,768,916        23,475,567        24,336,571  

Operating profit (loss)

     (714,582      (1,359,382      92,891  

Operating profit (loss) from continuing operations

     (691,606      (2,872,078      (179,443

Profit (loss) for the period

     (691,606      (2,872,078      (179,443

Profit (loss) attributable to:

        

Owners of the Company

     (657,735      (2,829,705      (207,239

Non-controlling interest

     (33,871      (42,373      27,796  

Basic earnings (loss) per share

     (1,838      (7,908      (579

Diluted earnings (loss) per share

     (1,838      (7,908      (579

Number of consolidated entities

     21        22        22  

 

  B.

Financial highlights (Based on separate K-IFRS).

 

     (Unit: In millions of Won)  

Description

   As of September 30, 2020      As of December 31, 2019      As of December 31, 2018  

Current assets

     6,949,608        7,081,228        6,378,339  

Quick assets

     5,371,060        5,554,929        4,427,184  

Inventories

     1,578,548        1,526,299        1,951,155  

Non-current assets

     19,473,535        20,301,452        20,683,767  

Investments

     4,770,666        4,958,308        3,602,214  

Property, plant and equipment, net

     11,950,791        12,764,175        14,984,564  

Intangible assets

     635,134        708,047        816,808  

Other non-current assets

     2,116,944        1,870,922        1,280,181  

Total assets

     26,423,143        27,382,680        27,062,106  

Current liabilities

     9,695,093        9,140,483        7,416,630  

Non-current liabilities

     6,929,032        7,576,104        6,432,895  

Total liabilities

     16,624,125        16,716,587        13,849,525  

Share capital

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

Share premium

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

Retained earnings

     5,758,826        6,625,901        9,172,389  

Other equity

     0        0        0  

Total equity

     9,799,018        10,666,093        13,212,581  

 

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

Description

   For the nine months ended
September 30, 2020
     For the year ended
December 31, 2019
     For the year ended
December 31, 2018
 

Revenue

     15,841,644        21,658,329        22,371,687  

Operating profit (loss)

     (1,082,477      (1,784,245      (472,995

Operating profit (loss) from continuing operations

     (863,489      (2,639,893      (442,291

Profit (loss) for the period

     (863,489      (2,639,893      (442,291

Basic earnings (loss) per share

     (2,413      (7,378      (1,236

Diluted earnings (loss) per share

     (2,413      (7,378      (1,236

 

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  C.

Consolidated subsidiaries (as of September 30, 2020)

 

Company Interest

   Primary Business    Location    Equity  

LG Display America, Inc.

   Sales    U.S.A.      100

LG Display Germany GmbH

   Sales    Germany      100

LG Display Japan Co., Ltd.

   Sales    Japan      100

LG Display Taiwan Co., Ltd.

   Sales    Taiwan      100

LG Display Nanjing Co., Ltd.

   Manufacturing    China      100

LG Display Shanghai Co., Ltd.

   Sales    China      100

LG Display 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 (1)

   Investing in new emerging companies    U.S.A      100

LG Display High-Tech (China) Co., Ltd. (2)

   Manufacturing and sales    China      72

 

(1)

During the nine-month period ended September 30, 2020, we invested an additional W6,119 million in LG Display Fund I LLC. There has been no change in our percentage equity interest in LG Display Fund I LLC due to such additional investment.

(2)

During the nine-month period ended September 30, 2020, the non-controlling shareholders invested an additional W84,829 million. Due to such additional investment, our interest in LG Display High-Tech (China) Co., Ltd. has decreased from 75% as of the end of 2019 to 72% as of the end of the reporting period.

In addition, the liquidation process of LG Display Poland Sp. z o.o., our former consolidated subsidiary, was completed during nine-month period ended September 30, 2020, and as a result, we have reclassified W72,654 million in accumulated other comprehensive losses due to foreign currency translation losses relating to such overseas operations to losses for the reporting period.

In addition to the subsidiaries listed above, we have invested an aggregate amount of W1,300 million in money market trust accounts.

 

  D.

Status of equity investments (as of September 30, 2020)

 

  (1)

Consolidated subsidiaries

 

Company

   Book Value of Investment
Amount
(in millions of Won)
     Initial Equity
Investment Date
     Equity
Interest
 

LG Display America, Inc.

     36,815        September 24, 1999        100

LG Display Germany GmbH

     19,373        November 5, 1999        100

LG Display Japan Co., Ltd.

     15,686        October 12, 1999        100

LG Display Taiwan Co., Ltd.

     35,230        April 12, 1999        100

LG Display Nanjing Co., Ltd.

     593,726        July 15, 2002        100

LG Display Shanghai Co., Ltd.

     9,093        January 16, 2003        100

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

     —          September 6, 2005        —    

LG Display Guangzhou Co., Ltd.

     293,557        June 30, 2006        100

 

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Company

   Book Value of Investment
Amount
(in millions of Won)
     Initial Equity
Investment Date
     Equity
Interest
 

LG Display Shenzhen Co., Ltd.

     3,467        August 28, 2007        100

LG Display Singapore Pte. Ltd.

     1,250        January 12, 2009        100

L&T Display Technology (Fujian) Limited

     10,123        January 5, 2010        51

LG Display Yantai Co., Ltd.

     169,195        April 19, 2010        100

Nanumnuri Co., Ltd.

     800        March 19, 2012        100

LG Display (China) Co., Ltd.

     723,086        December 10, 2012        70

Unified Innovative Technology, LLC

     9,489        March 12, 2014        100

LG Display Guangzhou Trading Co., Ltd.

     218        April 28, 2015        100

Global OLED Technology LLC

     164,322        December 18, 2009        100

LG Display Vietnam Haiphong Co., Ltd.

     672,658        May 5, 2016        100

Suzhou Lehui Display Co., Ltd.

     121,640        July 1, 2016        100

LG Display Fund I LLC (2)

     12,441        May 1, 2018        100

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

     1,794,547        July 11, 2018        72

MMT (Money Market Trust)

     1,300        January 2, 2018        100

 

(1)

The liquidation process of LG Display Poland Sp. z o.o., our former consolidated subsidiary, was completed during May 2020.

(2)

During the nine-month period ended September 30, 2020, we invested an additional W6,119 million in LG Display Fund I LLC. There has been no change in our interest in LG Display Fund I LLC due to such additional investment.

(3)

During the nine-month period ended September 30, 2020, the non-controlling shareholders invested an additional W84,829 million. Due to such additional investment, our interest in LG Display High-Tech (China) Co., Ltd. has decreased from 75% as of the end of 2019 to 72% as of the end of the reporting period.

 

  (2)

Affiliated companies

 

Company

   Carrying Amount
(in millions)
     Date of
Incorporation
     Equity
Interest
 

Paju Electric Glass Co., Ltd.

   W 48,780        January 2005        40

Wooree E&L Co., Ltd.

   W 7,538        June 2008        14

YAS Co., Ltd.

   W 24,279        April 2002        15

Avatec Co., Ltd.

   W 19,805        August 2000        14

Arctic Sentinel, Inc.

     —          June 2008        10

Cynora GmbH (1)

   W 4,714        March 2003        12

Material Science Co., Ltd.

   W 5,320        January 2014        10

Nanosys Inc. (2)

   W 4,828        July 2001        3

 

(1)

We did not participate in Cynora GmbH’s paid-in capital increase during the nine-month period ended September 30, 2020, and as a result, our equity interest decreased from 12.2% as of December 31, 2019 to 11.6% as of September 30, 2020.

(2)

We did not participate in Nanosys Inc.’s paid-in capital increase during the nine-month period ended September 30, 2020, and as a result, our equity interest decreased from 4% as of December 31, 2019 to 3% as of September 30, 2020.

For the nine-month periods ended September 30, 2019 and 2020, the aggregate amount of dividends we received from our affiliated companies was W7,502 million and W8,239 million, respectively.

 

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14.

Audit Information

 

  A.

Audit service

 

     (Unit: In millions of Won)
               Audit contract details    Actual performance details

Period

   Auditor    Description of service    Compensation    Hours of
service(1)
   Compensation    Hours of
service(1)

2020 Q1~Q3

   KPMG Samjong    Audit by independent
auditor
   1,410 (540)(2)    20,426    680 (140)(2)    11,659

2019

   KPMG Samjong    Audit by independent
auditor
   1,280 (500)(2)    20,000    1,280 (500)(2)    21,194

2018

   KPMG Samjong    Audit by independent
auditor
   1,170 (450)(2)    19,000    1,170 (450)(2)    17,269

 

(26)

Total hours of service includes the number of hours for work related to the English audit and/or review reports and SOX 404 audit.

(27)

Compensation amount in ( ) is for work related to the English audit and/or review reports (including Form 20-F and 6-K filings) 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

2020 Q1~Q3

               

2019

   July 23, 2019    Issuance of comfort
letters
    
July 23, 2019 ~
August 31, 2019
 
 
   120

2018

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

 

15.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Omitted in quarterly and semi-annual reports in accordance with Korean disclosure rules.

 

16.

Board of Directors

 

  A.

Members of the board of directors

As of September 30, 2020, our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.

 

          (As of September 30, 2020)

Name

  

Position

  

Primary responsibility

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

 

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(28)

James (Hoyoung) Jeong was newly appointed as a non-outside director at the annual general meeting of shareholders and as the representative director at the board of directors’ meeting, both held on March 20, 2020.

(29)

Donghee Suh was reappointed for another term as a non-outside director at the annual general meeting of shareholders held on March 20, 2020.

 

  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, James (Hoyoung) Jeong and Donghee Suh.

As of March 20, 2020, the composition of the Outside Director Nomination Committee was as follows.

 

     (As of March 20, 2020)

Committee

  

Composition

  

Member

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

 

(30)

Each of Young-Soo Kwon, Kun Tai Han, Chang-Yang 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 20, 2020.

As of September 30, 2020, the composition of the Audit Committee was as follows.

 

     (As of September 30, 2020)

Committee

  

Composition

  

Member

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

 

(31)

Sung-Sik Hwang is the audit committee chairman.

(32)

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 applicable procedures under the Commercial Act, other relevant laws and regulations, our articles of association and our other internal regulations, and we do not maintain separate independence standards for the election of directors. However, in order to ensure fairness and independence in appointing our directors, our non-outside directors and other non-executive directors are nominated by the board of directors, and our outside directors are nominated by our Outside Director Nomination Committee, in each case for appointment at our shareholders’ meeting, in accordance with the relevant laws and regulations, our articles of association, board regulations and standards governing our Outside Director Nomination Committee. As part of such process, our board of directors and our Outside Director Nomination Committee conducts a rigorous review of each candidate for his or her independence, expertise and suitability as a director, among other factors.

 

17.

Information Regarding Shares

 

  A.

Total number of shares

 

  (1)

Total number of shares authorized to be issued (as of September 30, 2020): 500,000,000 shares.

 

  (2)

Total shares issued and outstanding (as of September 30, 2020): 357,815,700 shares.

 

  B.

Shareholder list

 

  (1)

Largest shareholder and related parties as of September 30, 2020:

 

Name(1)

   Relationship    Number of shares of common stock      Equity interest  

LG Electronics

   Largest
shareholder
     135,625,000        37.9

James (Hoyoung) Jeong

   Officer of
member
company
     10,000        0.0

Donghee Suh(2)

   Officer of
member
company
     9,000        0.0

 

27


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  (2)

Shareholders who are known to us that own 5% or more of our shares as of September 30, 2020:

 

Beneficial owner

   Number of shares of common stock      Equity interest  

LG Electronics

     135,625,000        37.90

National Pension Service(1)

     18,161,082        5.08

 

(33)

As of May 2, 2020.

 

18.

Directors and Employees

 

  A.

Directors

 

  (1)

Remuneration for directors in 2020 Q1~Q3:

 

(Unit: person, in millions of Won)  

Classification

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

Non-outside directors

     3        1,699       566  

Outside directors who are not audit committee members

     1        59       59  

Outside directors who are audit committee members

     3        176       59  
  

 

 

    

 

 

   

 

 

 

Total

     7        1,934 (4)      276  
  

 

 

    

 

 

   

 

 

 

 

(34)

Number of directors as at September 30, 2020.

(35)

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

(36)

Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the nine-month periods ended September 30, 2020.

(37)

Due to Mr. Sang Beom Han’s resignation as a non-outside director and Mr. James (Hoyoung) Jeong’s nomination as a non-outside director at the annual general meeting of shareholders held on March 20, 2020, the total amount paid includes the remuneration paid to both directors.

 

  (2)

Standards of remuneration paid to non-outside and outside directors

 

   

Non-outside directors (excluding outside directors and audit committee members)

The remuneration system for non-outside directors consists of base salary, position salary and performance-related pay. The remuneration for non-outside directors is measured in accordance with the standards established by the board of directors (within the amount approved at the annual general meeting of shareholders), including the non-outside director’s position and job responsibilities.

 

   

Standards for base salary/position salary: relevant position and job responsibilities, among others

 

   

Standards for performance-related pay: financial performance of the company and achievement of individual management goals, among others

 

   

Outside directors, audit committee members and auditor

 

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The remuneration for outside directors, audit committee members and auditor is measured in accordance with the standards established by the board of directors (within the amount approved at the annual general meeting of shareholders), including the individual’s job responsibilities, among others.

 

  (3)

Remuneration for individual directors and audit committee members

Not required for quarterly reports.

 

  (4)

Remuneration for the five highest paid individuals (among those paid over W500 million per year)

Not required for quarterly reports.

 

  (5)

Stock options

Not applicable.

 

  B.

Employees

As of September 30, 2020, we had 26,029 employees (excluding our directors). On average, our male employees have served 11.7 years and our female employees have served 9.7 years. The total amount of salary paid to our employees for the nine months ended September 30, 2020 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act was W1,241,374 million for our male employees and W171,685 million for our female employees. The following table provides details of our employees as of September 30, 2020:

 

(Unit: person, in millions of Won, year)  
     Number of
employees(1)
     Total salary in 2019(2)(3)(4)      Average
salary per
capita(5)
     Average years of
service
 

Male

     21,969        1,241,374        56        11.7  

Female

     4,060        171,685        42        9.7  

Total

     26,029        1,413,059        54        11.4  

 

(38)

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

(39)

Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the nine months ended September 30, 2020 was W236,805 million and the per capita welfare benefit provided was W9.0 million.

(40)

Based on income tax statements, which are submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act.

(41)

Includes incentive payments to employees who have transferred from our affiliated companies.

(42)

Calculated using the cumulative salary and the average number of employees (male: 22,135, female: 4,085) for the nine months ended September 30, 2020.

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 were found to be in violation of certain provisions of the Labor Standard Act relating to overtime, night and holiday work. As a result, we were issued a corrective order in January 2018 and paid additional overtime wages of W2,893 million to 16,106 administrative employees of our Paju facilities for their nighttime work between January 1, 2015 to December 31, 2017. In addition, we reviewed nighttime work records of our administrative employees outside of our Paju facilities during the same period and paid additional overtime wages of W2,166 million to eligible employees. In order to prevent such violation from occurring again, we are periodically monitoring the nighttime work records of our employees.

From December 2017 to January 2018, we were audited by the Ministry of Employment and Labor regarding our human resource practices relating to temporary and part-time employees and were found to have omitted certain required information (including the number of break hours and vacation days) in the employment contracts of 82 temporary employees. As a result, we were assessed a fine of W27 million, which we subsequently paid. In order to prevent such violation from occurring again, we have amended the relevant provisions of the applicable employment contracts.

 

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19.

Other Matters

 

  A.

Legal proceedings

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

We are also a defendant in three patent infringement lawsuits (one in the United States, one in Germany and one in China) filed against us by Solas OLED Ltd. In each of these cases, the amount being sought has not been determined. A pre-trial hearing for the case in the United States was held on May 22, 2020 and the case is currently in the discovery phase. A court hearing for the case in Germany was held on September 11, 2020 and the court ruled against us on November 9, 2020. We are currently planning to appeal the trial court’s decision. In addition, a nullity action seeking invalidation of the patent asserted by Solas OLED Ltd. in the infringement lawsuit in Germany is currently in progress at the German Federal Patent Court. A court trial for the case in China has been scheduled for November 2020. The expected outcome of each of these cases is currently unclear.

 

  B.

Material events subsequent to the reporting period

None.

 

  C.

Material change in management

At our annual general meeting of shareholders held on March 20, 2020, Mr. Sang Beom Han resigned as a non-outside director, Mr. James (Hoyoung) Jeong was newly appointed as a non-outside director and Donghee Suh was reappointed for another term as a non-outside director. At our meeting of the board of directors held on March 20, 2020, Mr. James (Hoyoung) Jeong was appointed as our Representative Director.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2020 and 2019

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed consolidated interim financial statements of LG Display Co., Ltd. and subsidiaries (the “Group”) which comprise the condensed consolidated interim statement of financial position as of September 30, 2020, the condensed consolidated interim statements of comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2020 and 2019, and statements of changes in equity and cash flows for the nine-month periods ended September 30, 2020 and 2019, 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, 2019 and the related consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated March 11, 2020, expressed an unmodified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2019, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

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KPMG Samjong Accounting Corp.

Seoul, Korea

November 13, 2020

 

This report is effective as of November 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Financial Position

(Unaudited)

As of September 30, 2020 and December 31, 2019

 

(In millions of won)    Note      September 30, 2020      December 31, 2019  

Assets

        

Cash and cash equivalents

     4, 25      W 3,289,116      3,336,003

Deposits in banks

     4, 25        78,252      78,757

Trade accounts and notes receivable, net

     5, 14, 25, 27        3,769,138      3,154,080

Other accounts receivable, net

     5, 25        160,106      474,048

Other current financial assets

     6, 25        52,109      70,945

Inventories

     7        2,399,724      2,051,155

Prepaid income tax

        110,891      114,143

Other current assets

     5        1,061,339      969,184
     

 

 

    

 

 

 

Total current assets

        10,920,675      10,248,315

Deposits in banks

     4, 25        11      11

Investments in equity accounted investees

     8        115,714      109,611

Other non-current accounts receivable, net

     5, 25        7,289      9,072

Other non-current financial assets

     6, 25        139,269      111,510

Property, plant and equipment, net

     9, 14, 17        21,129,880      22,087,645

Intangible assets, net

     10, 17        794,126      873,448

Deferred tax assets

     23        2,119,970      1,727,122

Defined benefits assets, net

     12        10,118      127,252

Other non-current assets

     5        260,356      280,577
     

 

 

    

 

 

 

Total non-current assets

        24,576,733      25,326,248
     

 

 

    

 

 

 

Total assets

      W 35,497,408      35,574,563
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

     25, 27      W 4,037,188      2,618,261

Current financial liabilities

     11, 25        2,591,746      1,977,084

Other accounts payable

     25        3,120,624      4,397,121

Accrued expenses

        637,189      675,270

Income tax payable

        30,749      120,034

Provisions

     13        183,538      189,525

Advances received

     14        549,760      925,662

Other current liabilities

     13        51,578      82,019
     

 

 

    

 

 

 

Total current liabilities

        11,202,372      10,984,976

Non-current financial liabilities

     11, 25        11,942,430      11,612,910

Non-current provisions

     13        71,784      67,118

Defined benefit liabilities, net

     12        1,596      1,338

Long-term advances received

     14        —        320,582

Deferred tax liabilities

     23        9,767      11,210

Other non-current liabilities

     13        95,080      88,148
     

 

 

    

 

 

 

Total non-current liabilities

        12,120,657      12,101,306
     

 

 

    

 

 

 

Total liabilities

        23,323,029      23,086,282
     

 

 

    

 

 

 

Equity

        

Share capital

     15        1,789,079      1,789,079

Share premium

        2,251,113      2,251,113

Retained earnings

        6,841,972      7,503,312

Reserves

     15        48,680      (203,021
     

 

 

    

 

 

 

Total equity attributable to owners of the Controlling Company

        10,930,844      11,340,483
     

 

 

    

 

 

 

Non-controlling interests

        1,243,535      1,147,798
     

 

 

    

 

 

 

Total equity

        12,174,379      12,488,281
     

 

 

    

 

 

 

Total liabilities and equity

      W 35,497,408      35,574,563
     

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

(Unaudited)

For the three-month and nine-month periods ended September 30, 2020 and 2019

 

(In millions of won, except earnings per share)    Note      For the three-month period
ended September 30
    For the nine-month period
ended September 30
 
            2020     2019     2020     2019  

Revenue

     16, 17, 27      W 6,737,646     5,821,681     16,768,916     17,053,872

Cost of sales

     7, 18, 27        (5,892,303     (5,520,082     (15,517,233     (15,637,832
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        845,343     301,599     1,251,683     1,416,040

Selling expenses

     19        (220,597     (247,756     (584,242     (722,564

Administrative expenses

     19        (186,843     (272,799     (554,034     (655,805

Research and development expenses

        (273,543     (217,782     (827,989     (975,171
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

        164,360     (436,738     (714,582     (937,500
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     22        117,458     143,943     354,300     267,229

Finance costs

     22        (320,965     (177,376     (567,375     (359,005

Other non-operating income

     21        332,243     308,549     1,055,997     975,549

Other non-operating expenses

     21        (352,949     (441,893     (1,158,478     (1,127,397

Equity in income of equity accounted investees, net

        5,524     3,306     11,989     9,859
     

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax

        (54,329     (600,209     (1,018,149     (1,171,265

Income tax benefit

     23        (65,450     (158,005     (326,543     (116,241
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

        11,121     (442,204     (691,606     (1,055,024
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

           

Items that will never be reclassified to profit or loss

           

Remeasurements of net defined benefit liabilities

     12        (1,042     (1,355     (4,824     (6,203

Other comprehensive income from associates

        —       107     40     240

Related income tax

     12        266     332     1,238     (3,219
     

 

 

   

 

 

   

 

 

   

 

 

 
        (776     (916     (3,546     (9,182

Items that are or may be reclassified to profit or loss

           

Foreign currency translation differences for foreign operations

        63,938     37,529     294,107     226,967

Other comprehensive income (loss) from associates

        (678     2,957     2,314     7,063
     

 

 

   

 

 

   

 

 

   

 

 

 
        63,260     40,486     296,421     234,030
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of income tax

        62,484     39,570     292,875     224,848
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W 73,605     (402,634     (398,731     (830,176
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) attributable to:

           

Owners of the Controlling Company

        30,377     (419,354     (657,735     (1,028,664

Non-controlling interests

        (19,256     (22,850     (33,871     (26,360
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

      W 11,121     (442,204     (691,606     (1,055,024
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

           

Owners of the Controlling Company

        76,469     (379,060     (410,055     (834,801

Non-controlling interests

        (2,864     (23,574     11,324     4,625
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

      W 73,605     (402,634     (398,731     (830,176
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share (in won)

           

Basic and diluted earnings (loss) per share

     24      W 85     (1,172     (1,838     (2,875
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condesned Consolidated Interim Statements of Changes in Equity

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)

 

     Attributable to owners of the Controlling Company              

(In millions of won)

   Share
capital
     Share
premium
     Retained
earnings
    Reserves     Sub-total     Non-controlling
interests
    Total
equity
 

Balances at January 1, 2019

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Loss for the period

     —        —        (1,028,664     —       (1,028,664     (26,360     (1,055,024

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —        —        (9,422     —       (9,422     —       (9,422

Foreign currency translation differences

     —        —        —       195,982     195,982     30,985     226,967

Other comprehensive income from associates

     —        —        240     7,063     7,303     —       7,303
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —        —        (9,182     203,045     193,863     30,985     224,848
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —        (1,037,846     203,045     (834,801     4,625     (830,176
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Subsidiaries’ dividends distributed to non-controlling interests

     —        —        —       —       —       (6,541     (6,541

Capital contribution from non-controlling interests

     —        —        (591     (1,167     (1,758     278,154     276,396
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at September 30, 2019

   W 1,789,079      2,251,113      9,201,528     (99,090     13,142,630     1,183,295     14,325,925
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2020

   W 1,789,079      2,251,113      7,503,312     (203,021     11,340,483     1,147,798     12,488,281
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Loss for the period

     —        —        (657,735     —       (657,735     (33,871     (691,606

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —        —        (3,586     —       (3,586     —       (3,586

Foreign currency translation differences

     —        —        —       248,912     248,912     45,195     294,107

Other comprehensive income from associates

     —        —        40     2,314     2,354     —       2,354
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —        —        (3,546     251,226     247,680     45,195     292,875
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —        (661,281     251,226     (410,055     11,324     (398,731
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Capital contribution from non-controlling interests

     —        —        (59     475     416     84,413     84,829
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at September 30, 2020

   W 1,789,079      2,251,113      6,841,972     48,680     10,930,844     1,243,535     12,174,379
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.    

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

For the nine-month periods ended September 30, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from operating activities:

       

Loss for the period

      W (691,606     (1,055,024

Adjustments for:

       

Income tax benefit

     23        (326,543     (116,241

Depreciation and amortization

     18        3,045,977     2,686,784

Gain on foreign currency translation

        (134,422     (100,605

Loss on foreign currency translation

        135,228     196,923

Expenses related to defined benefit plans

     12        120,467     147,814

Gain on disposal of property, plant and equipment

        (13,334     (13,571

Loss on disposal of property, plant and equipment

        29,328     31,726

Impairment loss on property, plant and equipment

        8,611     36,371

Gain on disposal of intangible assets

        (121     (552

Loss on disposal of intangible assets

        28     139

Impairment loss on intangible assets

        69,293     116,506

Reversal of impairment loss on intangible assets

        (1,260     (480

Gain on disposal of non-current assets held for sale

        —       (8,353

Expense on increase of provisions

        211,576     286,970

Finance income

        (181,678     (183,852

Finance costs

        378,065     290,399

Equity in income of equity method accounted investees, net

     8        (11,989     (9,860

Other income

        (20,211     (18,926

Other expenses

        72,654     4,114
     

 

 

   

 

 

 
        3,381,669     3,345,306

Changes in:

       

Trade accounts and notes receivable

        (1,323,710     (1,138,581

Other accounts receivable

        92,367     10,693

Inventories

        (349,940     (51,755

Lease receivables

        4,071     4,485

Other current assets

        (37,587     (276,791

Other non-current assets

        (52,315     (20,474

Trade accounts and notes payable

        1,511,416     (452,958

Other accounts payable

        (487,351     1,319,025

Accrued expenses

        (18,679     285,349

Provisions

        (201,117     (197,371

Advances received

        (83,466     —  

Other current liabilities

        (36,835     (67,127

Defined benefit liabilities, net

        (7,957     (23,345

Long-term advances received

        —       63,672

Other non-current liabilities

        9,013     9,343
     

 

 

   

 

 

 
        (982,090     (535,835

Cash generated from operating activities

        1,707,973     1,754,447

Income taxes paid

        (142,092     (251,372

Interests received

        50,124     39,566

Interests paid

        (428,308     (299,156
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 1,187,697     1,243,485
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

38


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows, Continued

(Unaudited)

For the nine-month periods ended September 30, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from investing activities:

       

Dividends received

      W 8,239     7,502

Increase in deposits in banks

        (78,052     (111,180

Proceeds from withdrawal of deposits in banks

        78,557     111,580

Acquisition of financial assets at fair value through profit or loss

        (3,226     (708

Proceeds from disposal of financial assets at fair value through profit or loss

        100     213

Acquisition of financial assets at fair value through other comprehensive income

        —       (21

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

        6     99

Proceeds from disposal of investments in equity accounted investees

        1,800     7,039

Acquisition of property, plant and equipment

        (2,167,458     (5,924,316

Proceeds from disposal of property, plant and equipment

        310,539     281,167

Acquisition of intangible assets

        (293,058     (424,142

Proceeds from disposal of intangible assets

        1,550     2,349

Government grants received

        30,046     248,124

Proceeds from disposal of non-current assets held for sale

        —       81,351

Receipt from settlement of derivatives

        25,482     22,852

Proceeds from collection of short-term loans

        10,151     14,656

Increase in short-term loans

        —       (8,725

Increase in long-term loans

        —       (6,465

Increase in deposits

        (1,470     (30,501

Decrease in deposits

        1,285     5,205

Proceeds from disposal of other assets

        11,000     20,416
     

 

 

   

 

 

 

Net cash used in investing activities

        (2,064,509     (5,703,505
     

 

 

   

 

 

 

Cash flows from financing activities:

     26       

Proceeds from short-term borrowings

        1,928,654     1,817,444

Repayments of short-term borrowings

        (1,933,372     (1,131,464

Proceeds from issuance of bonds

        49,949     1,323,239

Proceeds from long-term borrowings

        1,709,775     3,765,753

Repayments of current portion of long-term borrowings and bonds

        (1,036,847     (1,223,299

Repayment of lease liabilities

        (50,702     (45,357

Capital contribution from non-controlling interests

        84,829     276,396

Subsidiaries’ dividends distributed to non-controlling interests

        —       (6,541
     

 

 

   

 

 

 

Net cash provided by financing activities

        752,286     4,776,171
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

        (124,526     316,151

Cash and cash equivalents at January 1

        3,336,003     2,365,022

Effect of exchange rate fluctuations on cash held

        77,639     78,519
     

 

 

   

 

 

 

Cash and cash equivalents at September 30

      W 3,289,116     2,759,692
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

39


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 the Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of September 30, 2020, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of September 30, 2020, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of September 30, 2020, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of September 30, 2020, there are 23,297,750 ADSs outstanding.

 

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Table of Contents
1.

Reporting Entity, Continued

 

  (b)

Consolidated Subsidiaries as of September 30, 2020

 

(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 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.

   Haiphong, Vietnam      100     December 31      May 5, 2016    Manufacture display products      USD 600  

Suzhou Lehui Display Co., Ltd.

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

LG DISPLAY FUND I LLC(*1)

   Wilmington, U.S.A.      100     December 31      May 1, 2018    Invest in venture business and
acquire technologies
     USD 11  

LG Display High-Tech (China) Co., Ltd. (*2)

   Guangzhou, China      72     December 31      July 11, 2018    Manufacture and sell display
products
     CNY 15,070  

 

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Table of Contents
1.

Reporting Entity, Continued

 

  (*1)

For the nine-month period ended September 30, 2020, the Controlling Company contributed W6,119 million in cash for the capital increase by LG DISPLAY FUND I LLC. There was no change in the Controlling Company’s ownership percentage in LG DISPLAY FUND I LLC as a result of this additional investment.

 

  (*2)

For the nine-month period ended September 30, 2020, non-controlling shareholders contributed W84,829 million in cash for the stocks issued by LG Display High-Tech (China) Co., Ltd. (“LGDCO”). The Group’s ownership percentage in LGDCO decreased from 75% to 72% as a result.

Meanwhile, the liquidation process of LG Display Poland Sp. z o.o., a subsidiary of the Controlling Company, was completed during the nine-month period ended September 30, 2020 and the Group reclassified the comprehensive loss amounting to W72,654 million from foreign currency translation differences to profit or loss.

In addition to the above subsidiaries, the Group has invested W1,300 million in MMT (Money Market Trust), which is controlled by the Group.

 

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-IFRS”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the consolidated financial statements of the Group as of and for the year ended December 31, 2019.

 

  (b)

Basis of Measurement

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

 

   

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

   

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

 

  (c)

Functional and Presentation Currency

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

 

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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 accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in the Group’s consolidated financial statements as of and for the year ended December 31, 2019, except for the application of K-IFRS No.1034, Interim Financial Reporting. A number of amended standards are effective from January 1, 2020 but they do not have a material effect on the Group’s consolidated financial statements.

 

4.

Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 3,289,116        3,336,003  

Deposits in banks

     

Time deposits

   W 1,400        1,500  

Restricted deposits (*)

     76,852        77,257  
  

 

 

    

 

 

 
   W 78,252        78,757  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted deposits (*)

   W 11        11  
  

 

 

    

 

 

 
   W 3,367,379        3,414,771  
  

 

 

    

 

 

 

 

(*)

Includes funds deposited under agreements on mutually beneficial cooperation to aid LG Group companies’ suppliers, restricted deposits pledged to enforce the Group’s investment plans upon the receipt of grants from Gumi city and Gyeongsangbuk-do, and others.

 

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5.

Receivables and Other Assets

 

  (a)

Trade accounts and notes receivable as of September 30, 2020 and December 31, 2019 are as follows:

 

               
(In millions of won)    September 30, 2020      December 31, 2019  

Due from third parties

   W 3,108,870        2,576,391  

Due from related parties

     660,268        577,689  
  

 

 

    

 

 

 
   W 3,769,138        3,154,080  
  

 

 

    

 

 

 

 

  (b)

Other accounts receivable as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Current assets

     

Non-trade receivables, net

   W 148,004        463,614  

Accrued income

     12,102        10,434  
  

 

 

    

 

 

 
   W 160,106        474,048  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivables

     7,289        9,072  
  

 

 

    

 

 

 
   W 167,395        483,120  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable as of September 30, 2020 and December 31, 2019 are W19,370 million and W19,431 million, respectively.

 

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Table of Contents
5.

Receivables and Other Assets, Continued

 

  (c)

The aging of trade accounts and notes receivable and other accounts receivable as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30, 2020  
     Book value      Allowance for impairment  
(In millions of won)    Trade accounts
and notes
receivable
     Other
accounts
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable
 

Current

   W 3,762,930        118,397        (1,252     (1,863

1-15 days past due

     5,336        197        (1     —    

16-30 days past due

     2,125        56        —         —    

31-60 days past due

     —          549        —         (3

More than 60 days past due

     —          50,087        —         (25
  

 

 

    

 

 

    

 

 

   

 

 

 
   W 3,770,391        169,286        (1,253     (1,891
  

 

 

    

 

 

    

 

 

   

 

 

 
     December 31, 2019  
     Book value      Allowance for impairment  
(In millions of won)    Trade accounts
and notes
receivable
     Other
accounts
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable
 

Current

   W 3,119,914        208,086        (454     (3,292

1-15 days past due

     34,626        3,512        (6     (1

16-30 days past due

     —          598        —         (4

31-60 days past due

     —          61        —         —    

More than 60 days past due

     —          274,185        —         (25
  

 

 

    

 

 

    

 

 

   

 

 

 
   W 3,154,540        486,442        (460     (3,322
  

 

 

    

 

 

    

 

 

   

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 are as follows:

 

     September 30, 2020      December 31, 2019  
(In millions of won)    Trade accounts and notes
receivable
     Other accounts
receivable
     Trade accounts and notes
receivable
    Other accounts
receivable
 

Balance at the beginning of the period

   W 460        3,322        477       1,281  

(Reversal of) bad debt expense

     793        (367      (17     2,041  

Write-off

     —          (1,064      —         —    
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance at the end of the reporting period

   W 1,253        1,891        460       3,322  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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5.

Receivables and Other Assets, Continued

 

  (d)

Other assets as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Current assets

     

Advanced payments

   W 44,508        6,203  

Prepaid expenses

     165,051        114,145  

Value added tax refundable

     835,991        826,730  

Right to recover returned goods

     15,789        22,106  
  

 

 

    

 

 

 
   W 1,061,339        969,184  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 238,198        272,835  

Long-term advanced payments

     22,158        7,742  
  

 

 

    

 

 

 
   W 260,356        280,577  
  

 

 

    

 

 

 

 

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6.

Other Financial Assets

Other financial assets as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30 2020      December 31, 2019  

Current assets

     

Financial assets at fair value through profit or loss

     

Derivatives(*)

   W 14,367        34,036  

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 24        6  

Financial assets carried at amortized cost

     

Deposits

   W 3,242        9,585  

Short-term loans

     28,414        21,623  

Lease receivables

     6,062        5,695  
  

 

 

    

 

 

 
   W 37,718        36,903  
  

 

 

    

 

 

 
   W 52,109        70,945  
  

 

 

    

 

 

 

Non-current assets

     

Financial assets at fair value through profit or loss

     

Equity instruments

     

Intellectual Discovery, Ltd.

   W 1,104        1,104  

Kyulux, Inc.

     168        1,889  

Fineeva Co., Ltd.

     4        4  

Looksten Inc.

     100        —    

Star Pickers. Inc.

     100        —    

ARCH Venture Fund VIII, L.P

     6,321        6,302  

Sierra Ventures XII, L.P

     2,347        580  
  

 

 

    

 

 

 
   W 10,144        9,879  
  

 

 

    

 

 

 

Convertible securities

   W 2,718        1,544  

Derivatives(*)

     66,610        15,640  
  

 

 

    

 

 

 
   W 79,472        27,063  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 48        70  

Financial assets carried at amortized cost

     

Deposits

   W 21,631        21,451  

Long-term loans

     19,765        40,827  

Lease receivables

     18,353        22,099  
  

 

 

    

 

 

 
   W 59,749        84,377  
  

 

 

    

 

 

 
   W 139,269        111,510  
  

 

 

    

 

 

 

 

(*)

Represents currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. The contracts are not designated as hedging instruments.

 

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Table of Contents
7.

Inventories

Inventories as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Finished goods

   W 930,120        730,009  

Work-in-process

     779,288        756,744  

Raw materials

     520,387        405,854  

Supplies

     169,929        158,548  
  

 

 

    

 

 

 
   W 2,399,724        2,051,155  
  

 

 

    

 

 

 

For the nine-month periods ended September 30, 2020 and 2019, the amounts of inventories recognized as cost of sales including inventory write-downs and usage of inventory write-downs are as follows:

 

(In millions of won)    2020      2019  

Inventories recognized as cost of sales

   W 15,517,233        15,637,832  

Inventory write-downs

     397,045        493,486  

Usage of inventory write-downs

     (472,885      (313,180

 

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8.

Investments in Equity Accounted Investees

Associates as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)

Associates

 

Location

  Fiscal year
end
  Date of
incorporation
 

Business

  September 30, 2020     December 31, 2019  
  Percentage
of ownership
  Carrying
amount
    Percentage
of ownership
  Carrying
amount
 

Paju Electric Glass Co., Ltd.

 

Paju,

South Korea

  December 31   January

2005

  Manufacture glass for display   40%   W     48,780     40%   W 50,697  

WooRee E&L Co., Ltd.

 

Ansan,

South Korea

  December 31   June

2008

  Manufacture LED back light unit packages   14%     7,538     14%     7,310  

YAS Co., Ltd.

 

Paju,

South Korea

  December 31   April

2002

  Develop and manufacture deposition equipment for OLEDs   15%     24,729     15%     19,424  

AVATEC Co., Ltd.

 

Daegu,

South Korea

  December 31   August

2000

  Process and sell glass for display   14%     19,805     14%     19,929  

Arctic Sentinel, Inc.

  Los Angeles, U.S.A.   March 31   June

2008

 

Develop and manufacture

tablet for kids

  10%     —       10%     —    

Cynora GmbH(*1)

 

Bruchsal,

Germany

  December 31   March

2003

  Develop organic emitting materials for displays and lighting devices   12%     4,714     12%     4,714  

 

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8.

Investments in Equity Accounted Investees, Continued

 

(In millions of won)

Associates

 

Location

  Fiscal year
end
    Date of
incorporation
   

Business

  September 30, 2020     December 31, 2019  
  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 5,320       10%     W 2,354  

Nanosys Inc.(*2)

 

Milpitas,

U.S.A.

    December 31      

July

2001

 

 

  Develop, manufacture, and sell materials for display     3%       4,828       4%       5,183  
           

 

 

     

 

 

 
            W 115,714       W     109,611  
           

 

 

     

 

 

 

 

(*1)

For the nine-month period ended September 30, 2020, the Controlling Company’s ownership percentage in Cynora GmbH decreased from 12.2% to 11.6% as the Controlling Company did not participate in the rights issue.

(*2)

For the nine-month period ended September 30, 2020, the Controlling Company’s ownership percentage in Nanosys Inc. decreased from 4% to 3% as the Controlling Company did not participate in the rights issue.

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

Dividends income recognized from equity method investees for the nine-month periods ended September 30, 2020 and 2019 amounted to W8,239 million and W7,502 million, respectively.

 

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9.

Property, Plant and Equipment

For the nine-month periods ended September 30, 2020 and 2019, the Group purchased property, plant and equipment of W1,601,271 million and W4,865,409 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W168,558 million and 3.89%, and W212,218 million and 3.53% for the nine-month periods ended September 30, 2020 and 2019, respectively. In addition, for the nine-month periods ended September 30, 2020 and 2019, the Group disposed of property, plant and equipment with carrying amounts of W100,442 million and W572,664 million, respectively, and recognized W13,334 million and W29,328 million, respectively, as gain and loss on disposal of property, plant and equipment for the nine-month period ended September 30, 2020 (gain and loss for the nine-month period ended September 30, 2019: W13,571 million and W31,726 million, respectively).

 

10.

Intangible Assets

The Group capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of September 30, 2020 and December 31, 2019 are W329,825 million and W375,183 million, respectively. In addition, for the nine-month period ended September 30, 2020, the Group recognized an impairment loss amounting to W68,618 million in connection with development projects.

 

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11.

Financial Liabilities

 

  (a)

Financial liabilities as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Current

     

Short-term borrowings

   W 697,657        696,793  

Current portion of long-term borrowings and bonds

     1,832,888        1,242,904  

Derivatives (*)

     17,000        —    

Lease liabilities

     44,201        37,387  
  

 

 

    

 

 

 
   W 2,591,746        1,977,084  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 2,544,375        2,692,560  

Foreign currency denominated borrowings

     6,808,093        6,107,117  

Bonds

     2,490,657        2,741,516  

Derivatives(*)

     47,527        20,592  

Lease liabilities

     51,778        51,125  
  

 

 

    

 

 

 
   W 11,942,430        11,612,910  
  

 

 

    

 

 

 

 

(*)

Represents currency interest rate swap contracts and others entered into by the Group to hedge currency and interest rate risks with respect to foreign currency denominated borrowings and bonds. The contracts are not designated as hedging instruments.

 

  (b)

Short-term borrowings as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won, USD and CNY)

Lender

  

Annual interest rate

as of

September 30, 2020 (%)(*)

   September 30,
2020
     December 31,
2019
 

Standard Chartered Bank Korea Limited

   12ML + 0.98    W 352,050        347,340  

Bank of China

   6ML + 1.50      80,981        —    

Standard Chartered Bank Vietnam and others

   3ML + 0.90      50,461        61,613  

Standard Chartered Bank (China) Limited and others

  

LPR(1Y) + 0.05~0.45

3.71

     214,165        287,840  
     

 

 

    

 

 

 

Foreign currency equivalent

      USD 412      USD  353  
      CNY 1,246      CNY 1,737
     

 

 

    

 

 

 
      W 697,657        696,793  
     

 

 

    

 

 

 

 

(*)

ML represents Month LIBOR (London Inter-Bank Offered Rates) and LPR represents Loan Prime Rate of People’s Bank of China.

 

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11.

Financial Liabilities, Continued

 

  (c)

Won denominated long-term borrowings as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)

Lender

   Annual interest rate
as of
September 30, 2020 (%)(*)
     September 30,
2020
     December 31,
2019
 

Woori Bank

     2.75      W 120        608  

Korea Development Bank and others

    

CD rate (91days) + 1.00~1.60,

2.21~3.40

 

 

     3,281,875        3,330,000  

Less current portion of long-term borrowings

        (737,620      (638,048
     

 

 

    

 

 

 
      W  2,544,375        2,692,560  
     

 

 

    

 

 

 

 

(*)

CD represents certificate of deposit.

 

  (d)

Foreign currency denominated long-term borrowings as of September 30, 2020 and December 31, 2019 are as follows:

 

                      

(In millions of won, USD and CNY)

Lender

   Annual interest rate
as of
September 30, 2020 (%)
     September 30,
2020
     December 31,
2019
 

The Export-Import Bank of Korea and others

    

3ML+0.75~2.20

6ML+1.25~1.35

 

 

   W 1,730,913        1,696,177  

China Construction Bank and others

    

USD: 3ML+0.65~1.43

CNY: LPR(5Y)+0.44,

LPR(1Y)+0.00~0.50,

4.70


 

 

     5,722,629        4,606,094  
     

 

 

    

 

 

 

Foreign currency equivalent

      USD 2,690      USD 2,767  
      CNY 24,999      CNY 18,699  

Less current portion of long-term borrowings

        (645,449      (195,154
     

 

 

    

 

 

 
      W 6,808,093        6,107,117  
     

 

 

    

 

 

 

 

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11.

Financial Liabilities, Continued

 

  (e)

Details of bonds issued and outstanding as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won and USD)    Maturity    Annual interest rate
as of
September 30, 2020 (%)
     September 30,
2020
    December 31,
2019
 

Won denominated bonds at amortized cost (*1)

          

Publicly issued bonds

   October 2020 ~

February 2024

     1.95~2.95      W 1,470,000       1,730,000  

Privately issued bonds

   May 2022 ~

May 2033

     3.25~4.25        160,000       110,000  

Less discount on bonds

           (2,160     (3,404

Less current portion

           (449,819     (409,702
        

 

 

   

 

 

 
         W 1,178,021       1,426,894  
        

 

 

   

 

 

 

Foreign currency denominated bonds at amortized cost (*2)

          

Publicly issued bonds

   November 2021      3.88      W 352,050       347,340  

Privately issued bonds

   April 2023      3ML+1.47        117,350       115,780  

Foreign currency equivalent

         USD 400     USD 400  

Less discount on bonds

           (4,327     (6,883
        

 

 

   

 

 

 
         W 465,073       456,237  
        

 

 

   

 

 

 

Financial liabilities at fair value through profit or loss

          

Foreign currency denominated convertible bonds

   August 2024      1.50      W 847,563       858,385  

Foreign currency equivalent

         USD 722     USD 741  
        

 

 

   

 

 

 
         W 2,490,657       2,741,516  
        

 

 

   

 

 

 

 

(*1)

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

(*2)

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

 

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11.

Financial Liabilities, Continued

 

  (f)

Details of convertible bonds issued and outstanding by the Controlling Company as of September 30, 2020 are as follows:

 

(In won, USD)

  

Description

Type

   Unsecured foreign currency denominated convertible bonds

Issuance amount

   USD 687,800,000

Annual interest rate (%)

   1.50

Issuance date

   August 22, 2019

Maturity date

   August 22, 2024

Interest payment

   Payable semi-annually in arrear until maturity date

Principal redemption

  

1.  Redemption at maturity:

Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed or converted.

  

2.  Early redemption:

The Controlling Company has a right to redeem before maturity (call option) and the bondholders have a right to require the Controlling Company to redeem before maturity (put option). At exercise of each option, the outstanding principal amount together with accrued but unpaid interest are to be redeemed.

Conversion price

   W    19,845 per common share (subject to adjustment based on diluted effects of certain events)

Conversion period

   From August 23, 2020 to August 12, 2024

Redemption at the option of the issuer (Call option)

  

- On or at any time after 3 years from the issuance, if the closing price of the shares for any 20 trading days out of the 30 consecutive trading days is at least 130% of the applicable conversion price

- The aggregate principal amount of the convertible bonds outstanding is less than 10% of the aggregate principal amount originally issued, or

- In the event of certain changes in laws and other directives resulting in additional taxes for the holders

Redemption at the option of the bondholders (Put option)

   On the day of 3 years from the issuance

The Controlling Company designated the convertible bonds as financial liabilities at fair value through profit of loss and recognized the change in fair value in profit or loss. The Controlling Company measures the convertible bond at fair value using the market price of convertible bonds disclosed on Bloomberg. The number of convertible shares as of September 30, 2020 is as follows:

 

(In won and No. of shares)    September 30, 2020  

Aggregate outstanding amount of the convertible bonds

   W 813,426,670,000  

Conversion price

   W 19,845  

Number of common shares to be issued at conversion

     40,988,998  

 

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12.

Employee Benefits

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

 

  (a)

Net defined benefit liabilities (defined benefit assets) recognized as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Present value of partially funded defined benefit obligations

   W 1,522,899        1,481,339  

Fair value of plan assets

     (1,531,421      (1,607,253
  

 

 

    

 

 

 
   W (8,522      (125,914
  

 

 

    

 

 

 

Defined benefit liabilities, net

     1,596        1,338  

Defined benefit assets, net

     10,118        127,252  

 

  (b)

Expenses recognized in profit or loss for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

     For the three-month
periods ended September 30,
     For the nine-month
periods ended September 30,
 
(In millions of won)    2020      2019      2020      2019  

Current service cost

   W 40,969        49,012        122,796        146,903  

Net interest cost

     (776      303        (2,329      911  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 40,193        49,315        120,467        147,814  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c)

Plan assets as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  

Guaranteed deposits in banks

   W 1,531,421        1,607,253  

As of September 30, 2020, the Group maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.

 

  (d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

     For the three-month
periods ended September 30,
     For the nine-month
periods ended September 30,
 
(In millions of won)    2020      2019      2020     2019  

Remeasurements of net defined benefit liabilities

   W (1,042      (1,355      (4,824     (6,203

Tax effect

     266        332        1,238       (3,219
  

 

 

    

 

 

    

 

 

   

 

 

 

Remeasurements of net defined benefit liabilities, net of income tax

   W (776      (1,023      (3,586