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

 

3


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.

 

4


Table of Contents
  (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)

 

5


Table of Contents
(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)

 

6


Table of Contents
         (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.

 

7


Table of Contents

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.

 

8


Table of Contents
  (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.

 

9


Table of Contents
   

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
              

 

 

    

 

 

 

 

10


Table of Contents
  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  
           

 

 

    

 

 

   

 

11


Table of Contents

- 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

 

12


Table of Contents
          (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.

 

13


Table of Contents
   

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.

 

14


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.

 

15


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

 

16


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

 

17


Table of Contents
   

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)

 

18


Table of Contents
   

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.

 

19


Table of Contents

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.

 

20


Table of Contents

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.

 

21


Table of Contents

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  
  

 

 

    

 

 

    

 

 

 

 

22


Table of Contents
(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

 

23


Table of Contents
  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

 

24


Table of Contents

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.

 

25


Table of Contents
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

 

26


Table of Contents
(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


Table of Contents
  (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

 

28


Table of Contents

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.

 

29


Table of Contents
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.

 

30


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2020 and 2019

(With Independent Auditors’ Review Report Thereon)

 

31


Table of Contents


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.

 

33


Table of Contents

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.

 

34


Table of Contents

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.

 

35


Table of Contents

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.

 

36


Table of Contents

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.    

 

37


Table of Contents

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


Table of Contents

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.

 

40


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  

 

41


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.

 

42


Table of Contents
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.

 

43


Table of Contents
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.

 

44


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  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

45


Table of Contents
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  
  

 

 

    

 

 

 

 

46


Table of Contents
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.

 

47


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

 

48


Table of Contents
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  

 

49


Table of Contents
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.

 

50


Table of Contents
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.

 

51


Table of Contents
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.

 

52


Table of Contents
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  
     

 

 

    

 

 

 

 

53


Table of Contents
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.

 

54


Table of Contents
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  

 

55


Table of Contents
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     (9,422
  

 

 

    

 

 

    

 

 

   

 

 

 

 

56


Table of Contents

13.    Provisions and Other Liabilities

 

  (a)

Changes in provisions for the nine-month period ended September 30, 2020 are as follows:

 

(In millions of won)    Warranties (*)      Others      Total  

Balance at January 1, 2020

   W 230,262        26,381        256,643  

Additions (reversal)

     200,574        (6,498      194,076  

Usage

     (194,619      (778      (195,397
  

 

 

    

 

 

    

 

 

 

Balance at September 30, 2020

   W 236,217        19,105        255,322  
  

 

 

    

 

 

    

 

 

 

Current

   W 164,433        19,105        183,538  

Non-current

   W 71,784        —          71,784  

 

(*)

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

 

  (b)

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

 

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

Current liabilities

     

Withholdings

   W 34,018        28,376  

Unearned revenue

     11,710        44,333  

Security deposits received

     5,850        9,310  
  

 

 

    

 

 

 
   W 51,578        82,019  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 84,758        78,537  

Long-term other accounts payable

     29        1,069  

Long-term unearned revenue

     3,923        6,852  

Security deposits received

     6,370        1,690  
  

 

 

    

 

 

 
   W 95,080        88,148  
  

 

 

    

 

 

 

 

57


Table of Contents
14.

Contingencies and Commitments

 

  (a)

Legal Proceedings

Anti-trust Litigations

Some individual claimants filed “follow-on” damages claims against the Group and other TFT-LCD manufacturers alleging violations of EU competition law. While the Group continues its vigorous defense of the various pending proceedings described above, as of September 30, 2020, the Group cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the proceedings.

Solas OLED Ltd. Litigations

In April 2019, Solas OLED Ltd. filed patent infringement actions against the Controlling Company and television manufacturers in the United States District Court for the Western District of Texas as well as the Controlling Company and its subsidiary, LG Display Germany GmbH, and television manufacturers in the Mannheim District Court in Germany. In addition, in May 2019, Solas OLED Ltd. filed patent infringement actions against the Controlling Company, television manufacturers and others in the Beijing Intellectual Property Court in China. In November 2020, the Mannheim District Court issued a decision in favor of the plaintiff. The Group will appeal Mannheim District Court’s November decision. Furthermore, a nullity action is currently ongoing in the German Federal Patent Court against the asserted patent. As of September 30, 2020, the Group cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the proceedings.

Others

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

 

  (b)

Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,115 million (W1,308,453 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of September 30, 2020, there are no short-term borrowings that are outstanding but past due in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

 

58


Table of Contents
14.

Contingencies and Commitments, Continued

The Controlling Company and overseas subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables that could be sold under the agreements and the amount of sold but not yet due accounts receivables by contract are as follows:

 

          Credit limit     

 

     Not yet due     

 

 

(In millions of USD and KRW)

Classification

  

Financial institutions

   Contractual
amount
     KRW
equivalent
     Contractual
amount
     KRW
equivalent
 

Controlling Company

   Shinhan Bank    KRW  90,000        90,000        —          —    
      USD 60        70,410      USD  30        35,208  
   Sumitomo Mitsui Banking Corporation    USD 20        23,470        —          —    
   MUFG Bank    KRW  130,000        130,000      KRW  24,734        24,734  
      USD 70        82,145        —          —    
   BNP Paribas    USD 125        146,688      USD 15        17,630  
   ING Bank    USD 150        176,025      USD 40        47,129  
     

 

 

    

 

 

    

 

 

    

 

 

 
      USD 425        718,738      USD 85     
        

 

 

       
      KRW 220,000         KRW 24,734        124,701  
     

 

 

    

 

 

    

 

 

    

 

 

 

Subsidiaries

              

LG Display Singapore Pte. Ltd.

   Standard Chartered Bank    USD 300        352,050      USD 117        137,655  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Taiwan Co., Ltd.

   BNP Paribas    USD 15        17,603        —          —    
   Australia and New Zealand Banking Group Ltd.    USD 70        82,145      USD 44        51,634  
   KGI Bank Co., Ltd.    USD 30        35,205      USD 6        7,042  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Germany GmbH

   BNP Paribas    USD 75        88,013      USD 45        53,032  
   DZ Bank AG    USD 18        21,624      USD 10        11,258  
   Commerzbank AG    USD 2        2,010      USD 0        9  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display America, Inc.

   Hong Kong & Shanghai Banking Corp.    USD 400        469,400      USD 300        352,050  
   Standard Chartered Bank    USD 600        704,100      USD 267        313,900  
   Sumitomo Mitsui Banking Corporation    USD 200        234,700      USD 20        23,471  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Japan Co., Ltd.

   Chelsea Capital Corporation Tokyo Branch    USD 120        140,820      USD 1        1,159  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 
      USD 1,830        2,147,670      USD 810        951,210  
     

 

 

    

 

 

    

 

 

    

 

 

 
      USD 2,255        2,866,408      USD 895        1,075,911  
      KRW 220,000         KRW 24,734     
     

 

 

    

 

 

    

 

 

    

 

 

 

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

 

59


Table of Contents
14.

Contingencies and Commitments, Continued

 

Letters of credit

As of September 30, 2020, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 150 million (W176,025 million) with KEB Hana Bank, USD 50 million (W58,675 million) with Sumitomo Mitsui Banking Corporation, USD 100 million (W117,350 million) with Industrial Bank of Korea, USD 100 million (W117,350 million) with Industrial and Commercial Bank of China, USD 200 million (W234,700 million) with Shinhan Bank, USD 100 million (W117,350 million) with KB Kookmin Bank, USD 50 million (W58,675 million) with MUFG Bank and USD 200 million (W234,700 million) with the Export-Import Bank of Korea.

Meanwhile, LG Display Guangzhou Co., Ltd. has an agreement in relation to the opening of letters of credit up to CNY 500 million (W85,950 million) with Bank of China.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 475 million (W557,413 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements. The Controlling Company also obtained payment guarantees amounting to USD 306 million (W358,871 million) from Korea Development Bank for foreign currency denominated bonds.

LG Display (China) Co., Ltd. and other subsidiaries are provided with payment guarantees from the China Construction Bank and other various banks amounting to CNY 1,332 million (W228,971 million), JPY 900 million (W10,009 million), EUR 2.5 million (W3,424 million), VND 47,554 million (W2,406 million), and USD 0.5 million (W587 million), respectively, for their local tax payments and utility payments.

License agreements

As of September 30, 2020, the Group has technical license agreements with Hitachi Display, Ltd. and others in relation to its LCD business and patent cross license agreement with Universal Display Corporation in relation to its OLED business. Also, the Group has a trademark license agreement with LG Corp. and other intellectual properties agreements with various companies as of September 30, 2020.

Long-term supply agreement

As of September 30, 2020, in connection with long-term supply agreements with customers, the Controlling Company recognized USD 338 million (W396,056 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Controlling Company received payment guarantees amounting to USD 475 million (W557,413 million) from KEB Hana Bank and other various banks relating to advances received (see note 14(b) payment guarantees).

Pledged Assets

Regarding the secured bank borrowing amounting to CNY 19,320 million (W3,321,108 million) from China Construction Bank and others, as of September 30, 2020, the Group provided its property, plant and equipment with carrying amount of W678,863 million as pledged assets.

 

60


Table of Contents
15.

Capital and Reserves

 

  (a)

Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), and as of September 30, 2020 and December 31, 2019, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2019 to September 30, 2020.

 

  (b)

Reserves

Reserves consist mainly of the following:

Translation reserve

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

Other comprehensive income (loss) from associates

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

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

 

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

Foreign currency translation differences for foreign operations

   W 70,935        (178,452

Other comprehensive loss from associates

     (22,255      (24,569
  

 

 

    

 

 

 
   W 48,680        (203,021
  

 

 

    

 

 

 

 

61


Table of Contents
16.

Revenue

Details of revenue 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  

Sales of goods

   W 6,726,898        5,813,291        16,736,141        17,026,655  

Royalties

     2,967        3,012        10,666        9,661  

Others

     7,781        5,378        22,109        17,556  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

 

17.

Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the three-month and nine-month periods ended September 30, 2020 and 2019.

 

  (a)

Revenue by geography

 

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

Region

   2020      2019      2020      2019  

Domestic

   W 260,656        275,417        750,144        1,005,263  

Foreign

           

China

     4,591,991        3,848,616        11,438,314        10,971,875  

Asia (excluding China)

     555,275        609,797        1,638,955        1,847,276  

United States

     655,860        502,786        1,393,806        1,476,344  

Europe (excluding Poland)

     334,211        394,782        863,844        1,106,974  

Poland

     339,653        190,283        683,853        646,140  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,476,990        5,546,264        16,018,772        16,048,609  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

Sales to Company A and Company B amount to W6,868,453 million and W2,913,957 million, respectively, for the nine-month period ended September 30, 2020 (the nine-month period ended September 30, 2019: W5,695,420 million and W3,444,284 million). The Group’s top ten end-brand customers together accounted for 84% of revenue for the nine-month period ended September 30, 2020 (the nine-month period ended September 30, 2019: 79%).

 

62


Table of Contents
17.

Geographic and Other Information, Continued

 

  (b)

Non-current assets by geography

 

   
     September 30, 2020      December 31, 2019  

(In millions of won)

Region

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

Domestic

   W 11,951,581        635,134        12,764,240        708,047  

Foreign

           

China

     7,283,929        39,597        7,391,279        34,337  

Vietnam

     1,876,609        8,393        1,923,765        7,630  

Others

     17,761        111,002        8,361        123,434  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 9,178,299        158,992        9,323,405        165,401  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 21,129,880        794,126        22,087,645        873,448  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c)

Revenue by product and services

 

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

Product

   2020      2019      2020      2019  

Televisions

   W 1,901,974        1,888,747        4,580,438        6,183,831  

Desktop monitors

     1,132,246        1,052,998        3,152,401        3,006,075  

Notebook computers & Tablet products

     1,755,426        1,249,156        4,233,736        3,753,648  

Mobile and others

     1,948,000        1,630,780        4,802,341        4,110,318  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

 

63


Table of Contents
18.

The Nature of Expenses and Others

The classification of expenses by nature 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  

Changes in inventories

   W (360,339      (157,973      (348,569      (35,991

Purchases of raw materials, merchandise and others

     3,780,160        3,367,883        9,266,342        9,297,391  

Depreciation and amortization

     1,124,049        973,612        3,045,977        2,686,784  

Outsourcing

     277,529        199,230        701,105        632,772  

Labor

     746,642        894,698        2,138,058        2,457,134  

Supplies and others

     238,696        175,535        608,997        623,799  

Utility

     247,062        246,219        651,418        679,073  

Fees and commissions

     175,656        175,613        478,695        532,586  

Shipping

     47,852        48,304        129,118        155,008  

Advertising

     26,158        49,915        95,616        84,401  

Warranty

     98,456        85,421        200,576        283,778  

Travel

     23,017        24,611        46,338        74,319  

Taxes and dues

     32,809        26,265        105,754        81,277  

Impairment loss on property, plant, and equipment

     —          26,606        8,611        36,371  

Impairment loss on intangible assets

     38,782        116,026        69,293        116,026  

Others

     131,975        161,474        483,732        481,814  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,628,504        6,413,439        17,681,061        18,186,542  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

64


Table of Contents
19.

Selling and Administrative Expenses

Details of selling and administrative expenses 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  

Salaries(*)

   W 72,952        165,045        218,704        337,735  

Expenses related to defined benefit plans

     6,636        8,681        19,892        25,337  

Other employee benefits

     16,145        17,632        49,995        60,464  

Shipping

     38,637        39,952        101,665        129,540  

Fees and commissions

     57,593        54,157        163,126        164,970  

Depreciation

     50,481        60,520        160,975        169,386  

Taxes and dues

     17,764        10,576        62,540        35,513  

Advertising

     26,158        49,915        95,616        84,401  

Warranty

     98,456        85,421        200,576        283,778  

Insurance

     3,452        2,933        9,429        8,420  

Travel

     2,247        6,087        6,839        18,013  

Training

     2,368        3,613        5,423        10,363  

Others

     14,551        16,023        43,496        50,449  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 407,440        520,555        1,138,276        1,378,369  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Expenses recognized in relation to employee termination benefits for the nine-month periods ended September 30, 2020 and 2019 amount to W1,139 million and W84,083 million, respectively.

 

20.

Personnel Expenses

Details of personnel expenses 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  

Salaries and wages

   W 590,328        738,442        1,707,293        2,046,813  

Other employee benefits

     110,565        121,985        320,073        364,307  

Contributions to National Pension plan

     16,674        18,997        50,644        55,150  

Expenses related to defined benefit plans and defined contribution plans

     40,267        49,316        120,942        147,832  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 757,834        928,740        2,198,952        2,614,102  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

65


Table of Contents
21.

Other Non-operating Income and Other Non-operating Expenses

 

  (a)

Details of other non-operating income 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  

Foreign currency gain

   W 304,286        286,581        1,000,386        928,925  

Gain on disposal of property, plant and equipment

     4,288        4,946        13,334        13,571  

Gain on disposal of intangible assets

     121        —          121        552  

Reversal of impairment loss on intangible assets

     660        279        1,260        480  

Rental income

     905        695        2,942        2,085  

Gain on disposal of non-current assets held for sale

     —          —          —          8,353  

Others

     21,983        16,048        37,954        21,583  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Details of other non-operating expenses 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  

Foreign currency loss

   W 297,731        286,873        960,915        932,227  

Other bad debt expense

     —          643        —          1,041  

Loss on disposal of property, plant and equipment

     10,709        9,727        29,328        31,726  

Loss on disposal of intangible assets

     21        —          28        139  

Impairment loss on property, plant and equipment

     —          26,606        8,611        36,371  

Impairment loss on intangible assets

     38,782        116,506        69,293        116,506  

Loss on disposal of investments in subsidiaries

     —          —          72,654        —    

Donations

     327        180        753        605  

Others

     5,379        1,358        16,896        8,782  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 352,949        441,893        1,158,478        1,127,397  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

66


Table of Contents
22.

Finance Income and Finance Costs

Finance income and costs recognized in profit and 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  

Finance income

           

Interest income

   W 16,669        14,089        52,719        36,016  

Foreign currency gain

     100,274        39,548        188,911        86,834  

Gain on disposal of investments in equity accounted investees

     —          4,531        —          4,531  

Gain on transaction of derivatives

     515        9,685        28,066        22,852  

Gain on valuation of derivatives

     —          76,090        50,970        116,990  

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

     —          —          —          6  

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

     —          —          33,634        —    
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   W 111,944        57,398        258,238        108,980  

Foreign currency loss

     57,875        97,782        234,870        206,095  

Loss on repayment of borrowings

     296        —          794        —    

Loss on sale of trade accounts and notes receivable

     1,194        3,713        4,135        15,937  

Loss on transaction of derivatives

     2,585        —          2,585        —    

Loss on valuation of derivatives

     46,550        —          63,603        3,564  

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

     228        —          1,721        3,960  

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

     99,945        9,059        —          9,059  

Others

     348        9,424        1,429        11,410  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 320,965        177,376        567,375        359,005  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

67


Table of Contents
23.

Income Taxes

 

  (a)

Details of income tax expense (benefit) 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 tax expense (benefit)

   W (4,767      34,217        66,510        145,445  

Deferred tax expense (benefit)

     (60,683      (192,222      (393,053      (261,686
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense (benefit)

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

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Deferred Tax Assets and Liabilities

The carrying amount of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Group’s estimated future taxable income. The Group’s deferred tax assets and liabilities may differ from actual refundable or payable amount.

Deferred tax assets and liabilities as of September 30, 2020 and December 31, 2019 are attributable to the following:

 

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

Other accounts receivable, net

   W —          —          (689     (4,364     (689     (4,364

Inventories, net

     114,997        89,522        —         —         114,997       89,522  

Defined benefit liabilities, net

     —          —          (13,766     —         (13,766     —    

Investments in subsidiaries and associates

     —          —          (75,817     (20,015     (75,817     (20,015

Accrued expenses

     121,864        131,196        —         —         121,864       131,196  

Property, plant and equipment

     702,892        691,599        (76,384     (21,690     626,508       669,909  

Intangible assets

     19,686        21,886        (9,291     (10,759     10,395       11,127  

Provisions

     51,792        59,875        —         (4,446     51,792       55,429  

Other temporary differences

     117,559        137,667        (789     (328     116,770       137,339  

Tax losses carryforwards

     1,068,072        607,432        —         —         1,068,072       607,432  

Tax credit carryforwards

     90,077        38,337        —         —         90,077       38,337  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 2,286,939        1,777,514        (176,736     (61,602     2,110,203       1,715,912  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

68


Table of Contents
24.

Earnings (Loss) Per Share

 

  (a)

Basic earnings (loss) per share 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 won and number of shares)    2020      2019      2020      2019  

Profit (loss) attributable to owners of the Controlling Company

   W 30,377,146,594        (419,353,052,881      (657,734,674,606      (1,028,663,506,656

Weighted-average number of common stocks outstanding

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

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (loss) per share

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

 

 

    

 

 

    

 

 

    

 

 

 

For the three-month and nine-month periods ended September 30, 2020 and 2019, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.

 

  (b)

Diluted earnings (loss) per share is not different from basic earnings (loss) per share as there is no dilution effects of potential common stocks for the nine-month period ended September 30, 2020. As of September 30, 2020, 40,988,998 shares of potential common stock to be issued from conversion were excluded from the calculation of weighted-average number of common stocks due to antidilution.

 

69


Table of Contents
25.

Financial Risk Management

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

 

  (a)

Market risk

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

 

  (i)

Currency risk

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

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

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

 

70


Table of Contents
25.

Financial Risk Management, Continued

 

i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts as of September 30, 2020 and December 31, 2019 is as follows:

 

     September 30, 2020  
(In millions)    USD     JPY     CNY     TWD     EUR     PLN      VND  

Cash and cash equivalents

     1,199       406       10,362       21       3       2        79,762  

Trade accounts and notes receivable

     3,048       2       509       —         —         —          —    

Non-trade receivables

     53       120       244       1       2       —          8,767  

Other assets denominated in foreign currencies

     —         207       54       6       —         —          4,538  

Trade accounts and notes payable

     (1,598     (9,808     (2,143     —         —         —          (436,319

Other accounts payable

     (194     (5,748     (1,808     (3     (4     —          (498,873

Financial liabilities

     (4,220     —         (26,245     —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
     (1,712     (14,821     (19,027     25       1       2        (842,125
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Currency interest rate swap contracts

     2,125       —         —         —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net exposure

     413       (14,821     (19,027     25       1       2        (842,125
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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

Cash and cash equivalents

     1,594       68       8,360       33       5       25        28,663  

Trade accounts and notes receivable

     2,485       19       550       —         —         —          —    

Non-trade receivables

     276       455       230       3       2       —          13,131  

Other assets denominated in foreign currencies

     29       526       5,668       369       5       503        4,032  

Trade accounts and notes payable

     (628     (9,043     (2,289     —         —         —          (291,891

Other accounts payable

     (488     (12,396     (3,239     (4     (10     —          (786,356

Financial liabilities

     (4,255     —         (20,436     —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
     (987     (20,371     (11,156     401       2       528        (1,032,421
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Currency interest rate swap contracts

     2,085       —         —         —         —         —          —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net exposure

     1,098       (20,371     (11,156     401       2       528        (1,032,421
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

71


Table of Contents
25.

Financial Risk Management, Continued

 

Average exchange rates applied for the nine-month periods ended September 30, 2020 and 2019 and the exchange rates at September 30, 2020 and December 31, 2019 are as follows:

 

     Average rate      Reporting date spot rate  
(In won)    2020      2019      September 30, 2020      December 31, 2019  

USD

   W 1,200.52        1,161.69      W 1,173.50        1,157.80  

JPY

     11.16        10.65        11.12        10.63  

CNY

     171.46        169.11        171.90        165.74  

TWD

     40.33        37.44        40.31        38.48  

EUR

     1,349.23        1,305.11        1,369.42        1,297.43  

PLN

     305.16        303.51        298.51        304.87  

VND

     0.0516        0.0500        0.0506        0.0500  

ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in foreign currency as of September 30, 2020 and December 31, 2019, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

     September 30, 2020      December 31, 2019  
(In millions of won)    Equity      Profit or loss      Equity     Profit or loss  

USD (5 percent weakening)

   W (6,521      81,041        23,570       105,398  

JPY (5 percent weakening)

     (6,311      (5,088      (8,397     (6,418

CNY (5 percent weakening)

     (163,647      312        (92,454     11  

TWD (5 percent weakening)

     50        —          772       —    

EUR (5 percent weakening)

     (12      206        221       (278

PLN (5 percent weakening)

     25        25        8,036       28  

VND (5 percent weakening)

     (1,545      (1,545      (1,871     (1,871

A stronger won against the above currencies as of September 30, 2020 and December 31, 2019 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

72


Table of Contents
25.

Financial Risk Management, Continued

 

(ii) Interest rate risk

Interest rate risk arises principally from the Group’s variable interest-bearing bonds and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Group entered into currency interest rate swap contracts amounting to USD 1,825 million (W2,141,638 million) and interest rate swap contracts amounting to W170,000 million in notional amount to hedge interest rate risk with respect to variable interest bearing borrowings.

i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of September 30, 2020 and December 31, 2019 is as follows:

 

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

Fixed rate instruments

     

Financial assets

   W 3,367,439        3,414,838  

Financial liabilities

     (6,368,500      (6,066,554
  

 

 

    

 

 

 
   W (3,001,061      (2,651,716
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (8,005,170      (7,414,336

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

As of September 30, 2020 and December 31, 2019, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

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

September 30, 2020

           

Variable rate instruments (*)

   W (43,833      43,833        (43,833      43,833  

December 31, 2019

           

Variable rate instruments (*)

   W (38,774      38,774        (38,774      38,774  

 

(*)

Financial instruments related to non-hedging interest rate swaps are excluded.

 

73


Table of Contents
25.

Financial Risk Management, Continued

 

  (b)

Credit risk

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

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

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

In relation to the impairment of financial assets subsequent to initial recognition, the Group recognizes the changes in expected credit loss (“ECL”) in profit or loss at each reporting date.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposures to credit risk as of September 30, 2020 and December 31, 2019 are as follows:

 

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

Financial assets carried at amortized cost

     

Cash and cash equivalents

   W 3,289,116        3,336,003  

Deposits in banks

     78,263        78,768  

Trade accounts and notes receivable, net

     3,769,138        3,154,080  

Non-trade receivables

     148,004        463,614  

Accrued income

     12,102        10,434  

Deposits

     24,873        31,036  

Short-term loans

     28,414        21,623  

Long-term loans

     19,765        40,827  

Long-term non-trade receivables

     7,289        9,072  

Lease receivables

     24,415        27,794  
  

 

 

    

 

 

 
   W 7,401,379        7,173,251  
  

 

 

    

 

 

 

Financial assets at fair value through profit or loss

     

Convertible securities

   W 2,718        1,544  

Derivatives

     80,977        49,676  
  

 

 

    

 

 

 
   W 83,695        51,220  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

   W 72        76  
  

 

 

    

 

 

 
   W 7,485,146        7,224,547  
  

 

 

    

 

 

 

Trade accounts and notes receivable are insured in order for the Group to manage credit risk if they do not meet the Group’s internal credit ratings. Uninsured trade accounts and notes receivables are managed by continuous monitoring of internal credit rating standards established by the Group and seeking insurance coverage, if necessary.

 

74


Table of Contents
25.

Financial Risk Management, Continued

 

  (c)

Liquidity risk

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

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

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of September 30, 2020.

 

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

Non-derivative financial liabilities

                    

Borrowings

   W 11,433,194        12,396,515        1,466,203        959,519        2,990,082        6,188,791        791,920  

Bonds

     2,940,476        3,057,276        383,964        129,863        1,952,914        497,505        93,030  

Trade accounts and notes payable

     4,037,188        4,037,188        3,651,538        385,650        —          —          —    

Other accounts payable

     1,223,104        1,223,104        1,222,027        1,077        —          —          —    

Other accounts payable

(enterprise procurement cards/tax payment cards)(*)

     1,897,520        1,919,697        1,271,444        648,253        —          —          —    

Long-term other accounts payable

     29        29        —          —          29        —          —    

Security deposits received

     12,220        12,220        5,590        260        6,370        —          —    

Lease liabilities

     95,979        104,176        29,409        18,347        19,348        27,949        9,123  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial liabilities

                    

Derivatives

     64,527        26,630        7,662        8,175        5,932        4,861        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 21,704,237        22,776,835        8,037,837        2,151,144        4,974,675        6,719,106        894,073  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents the amount of utility expenses and others paid by enterprise procurement cards and national taxes paid by tax payment cards and the outstanding payables are settled at the end of the billing cycle. The payments to the card company arise from operating activities of purchasing of goods and services thus the related cash flow is presented as operating activities.

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

 

75


Table of Contents
25.

Financial Risk Management, Continued

 

  (d)

Capital management

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

 

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

Total liabilities

   W 23,323,029       23,086,282  

Total equity

     12,174,379       12,488,281  

Cash and deposits in banks (*1)

     3,367,368       3,414,760  

Borrowings (including bonds)

     14,373,670       13,480,889  

Total liabilities to equity ratio

     192     185

Net borrowings to equity ratio (*2)

     90     81

 

(*1)

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

(*2)

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

 

76


Table of Contents
25.

Financial Risk Management, Continued

 

  (e)

Determination of fair value

 

  (i)

Measurement of fair value

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

 

  i)

Current assets and liabilities

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

 

  ii)

Trade receivables and other receivables

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

 

  iii)

Investments in equity and debt instruments

The fair value of marketable financial assets at FVTPL and FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using the results of fair value assessment performed by external valuation institution and others.

 

  iv)

Non-derivative financial liabilities

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

 

77


Table of Contents
25.

Financial Risk Management, Continued

 

  (ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed consolidated interim statements of financial position as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30, 2020      December 31, 2019  
(In millions of won)    Carrying amounts      Fair values      Carrying amounts      Fair values  

Financial assets carried at amortized cost

           

Cash and cash equivalents

   W 3,289,116        (*)        3,336,003        (*)  

Deposits in banks

     78,263        (*)        78,768        (*)  

Trade accounts and notes receivable

     3,769,138        (*)        3,154,080        (*)  

Non-trade receivables

     148,004        (*)        463,614        (*)  

Accrued income

     12,102        (*)        10,434        (*)  

Deposits

     24,873        (*)        31,036        (*)  

Short-term loans

     28,414        (*)        21,623        (*)  

Long-term loans

     19,765        (*)        40,827        (*)  

Long-term non-trade receivables

     7,289        (*)        9,072        (*)  

Lease receivables

     24,415        (*)        27,794        (*)  

Financial assets at fair value through profit or loss

           

Equity instruments

   W 10,144        10,144        9,879        9,879  

Convertible securities

     2,718        2,718        1,544        1,544  

Derivatives

     80,977        80,977        49,676        49,676  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 72        72        76        76  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W 64,527        64,527        20,592        20,592  

Convertible bonds

     847,563        847,563        858,385        858,385  

Financial liabilities carried at amortized cost

           

Borrowings

   W 11,433,194        11,452,786        10,329,671        10,394,498  

Bonds

     2,092,913        2,115,473        2,292,833        2,345,867  

Trade accounts and notes payable

     4,037,188        (*)        2,618,261        (*)  

Other accounts payable

     3,120,624        (*)        4,397,121        (*)  

Long-term other accounts payable

     29        (*)        1,069        (*)  

Security deposits received

     12,220        (*)        11,000        (*)  

Lease liabilities

     95,979        (*)        88,512        (*)  

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

78


Table of Contents
25.

Financial Risk Management, Continued

 

  (iii)

Fair values of financial assets and liabilities

i) Fair value hierarchy

Financial instruments carried at fair value are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques. The levels have been defined as follows:

 

   

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

 

   

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

 

   

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

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30, 2020  
(In millions of won)    Level 1      Level 2      Level 3      Total  

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          10,144        10,144  

Convertible securities

     —          —          2,718        2,718  

Derivatives

     —          —          80,977        80,977  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 72        —          —          72  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          64,527        64,527  

Convertible bonds

     847,563        —          —          847,563  

 

     December 31, 2019  
(In millions of won)    Level 1      Level 2      Level 3      Total  

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          9,879        9,879  

Convertible securities

     —          —          1,544        1,544  

Derivatives

     —          —          49,676        49,676  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 76        —          —          76  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          20,592        20,592  

Convertible bonds

     858,385        —          —          858,385  

 

79


Table of Contents
25.

Financial Risk Management, Continued

 

  iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Borrowings

   W  —          —          11,452,786       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Bonds

     —          —          2,115,473       
Discounted
cash flow
 
 
    
Discount
rate
 
 
(In millions of won)    December 31, 2019      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Borrowings

   W  —          —          10,394,498       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Bonds

     —          —          2,345,867       
Discounted
cash flow
 
 
    
Discount
rate
 
 

 

  iv)

The interest rates applied for determination of the above fair value as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30, 2020     December 31, 2019  

Borrowings, bonds and others

     2.32~4.37     1.87~3.56

 

80


Table of Contents
26.

Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the nine-month period ended September 30, 2020 are as follows:

 

                 
                  Non-cash transactions        
(In millions of won)    January 1,
2020
     Cash flows from
financing
activities
    Reclassification     Gain or loss on
foreign currency
translation
     Effective interest
adjustment
     Others     September 30,
2020
 

Short-term borrowings

   W 696,793        (4,718     —         5,582        —          —         697,657  

Current portion of long-term borrowings and bonds

     1,242,904        (1,036,847     1,605,014       20,526        497        794       1,832,888  

Long-term borrowings

     8,799,677        1,709,775       (1,305,394     148,410        —          —         9,352,468  

Bonds(*)

     2,741,516        49,949       (299,620     17,257        15,189        (33,634     2,490,657  

Lease liabilities

     88,512        (50,702     —         23,212        —          34,957       95,979  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   W 13,569,402        667,457       —         214,987        15,686        2,117       14,469,649  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(*)

Others include gain on valuation of financial liabilities at fair value through profit or loss amounting to W33,634 million.

 

81


Table of Contents
27.

Related Parties and Others

 

  (a)

Related parties

Related parties as of September 30, 2020 are as follows:

 

Classification

  

Description

Associates(*)

   Paju Electric Glass Co., Ltd. and others

Entity that has significant influence over the Controlling Company

   LG Electronics Inc.

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

   Subsidiaries of LG Electronics Inc.

 

(*)

Details of associates are described in note 8.

 

82


Table of Contents
27.

Related Parties and Others, Continued

 

  (b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

     For the three-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

AVATEC Co., Ltd.

   W —          —          —          —          21,054        360  

Paju Electric Glass Co., Ltd.

     —          —          79,426        —          —          495  

WooRee E&L Co., Ltd.

     —          —          4,852        —          —          13  

YAS Co., Ltd.

     —          —          1,935        3,495        —          395  

Material Science Co., Ltd.

     —          —          24        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          86,237        3,495        21,054        1,263  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 209,265        —          5,067        39,010        —          32,323  

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

                 

LG Electronics India Pvt. Ltd.

   W 23,364        —          —          —          —          48  

LG Electronics Vietnam Haiphong Co., Ltd.

     110,146        —          —          —          —          379  

 

83


Table of Contents
27.

Related Parties and Others, Continued

 

     For the three-month period ended September 30, 2020  
     Sales
and others
            Purchase and others  
(In millions of won)    Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

LG Electronics Nanjing New Technology Co., Ltd.

   W 128,090        —          —          —          —          420  

LG Electronics RUS, LLC

     30,885        —          —          —          —          80  

LG Electronics do Brasil Ltda.

     27,183        —          —          —          —          82  

LG Innotek Co., Ltd.

     1,402        —          6,308        —          —          17,776  

Qingdao LG Inspur Digital Communication Co., Ltd.

     400        —          —          —          —          —    

LG Electronics Mexicali, S.A. DE C.V.

     40,437        —          —          —          —          15  

LG Electronics Mlawa Sp. z o.o.

     219,908        —          —          —          —          188  

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

     278,593        —          —          —          —          105  

LG Electronics Egypt S.A.E.

     12,541        —          —          —          —          50  

LG Electronics Japan, Inc.

     —          —          —          15        —          1,357  

P.T. LG Electronics Indonesia

     40,134        —          —          —          —          38  

Others

     1,270        —          28        —          —          2,194  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 914,353        —          6,336        15        —          22,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,123,618        —          97,640        42,520        21,054        56,318  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

84


Table of Contents
27.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

AVATEC Co., Ltd.

   W —          200        —          —          54,869        776  

Paju Electric Glass Co., Ltd.

     —          7,739        217,803        —          —          2,121  

WooRee E&L Co., Ltd.

     —          —          10,170        —          —          32  

YAS Co., Ltd.

     —          300        5,263        7,153        —          2,046  

Material Science Co., Ltd.

     —          —          93        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          8,239        233,329        7,153        54,869        4,975  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W   539,537        —          15,436        194,085        —          100,086  

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

                 

LG Electronics India Pvt. Ltd.

   W 40,369        —          —          —          —          113  

LG Electronics Vietnam Haiphong Co., Ltd.

     236,066        —          —          —          —          825  

LG Electronics Nanjing New Technology Co., Ltd.

     320,717        —          —          —          —          917  

LG Electronics RUS, LLC

     65,342        —          —          —          —          235  

LG Electronics do Brasil Ltda.

     84,728        —          —          —          —          166  

LG Innotek Co., Ltd.

     4,494        —          21,179        —          —          58,494  

 

85


Table of Contents
27.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2020  
     Sales
and others
            Purchase and others  
(In millions of won)    Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Qingdao LG Inspur Digital Communication Co., Ltd.

   W 7,299        —          —          —          —          —    

LG Electronics Mexicali, S.A. DE C.V.

     93,831        —          —          —          —          32  

LG Electronics Mlawa Sp. z o.o.

     426,470        —          —          —          —          994  

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

     484,053        —          —          —          —          777  

LG Electronics Egypt S.A.E

     48,430        —          —          —          —          352  

LG Electronics Japan, Inc.

     —          —          —          23        —          4,218  

P.T. LG Electronics Indonesia

     74,667        —          —          —          —          160  

Others

     3,915        —          181        —          —          5,789  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,890,381        —          21,360        23        —          73,072  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,429,918        8,239        270,125        201,261        54,869        178,133  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

86


Table of Contents
27.

Related Parties and Others, Continued

 

 

     For the three-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

INVENIA Co., Ltd.(*1)

   W —          —          262        9,520        —          195  

AVATEC Co., Ltd.

     2,639        —          —          —          17,720        196  

Paju Electric Glass Co., Ltd.

     —          —          87,211        —          —          1,107  

WooRee E&L Co., Ltd.

     —          —          1,852        —          —          —    

YAS Co., Ltd.

     —          —          1,225        9,530        —          839  

Material Science Co., Ltd.

     —          —          21        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        —          90,571        19,050        17,720        2,337  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 211,026        —          2,950        63,498        —          36,903  

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

                 

LG Electronics India Pvt. Ltd.

   W 31,515        —          —          —          —          79  

LG Electronics Vietnam Haiphong Co., Ltd.

     76,909        —          —          42        —          221  

 

87


Table of Contents
27.

Related Parties and Others, Continued

 

 

     For the three-month period ended September 30, 2019  
     Sales
and others
            Purchase and others  
(In millions of won)    Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

LG Electronics Nanjing New Technology Co., Ltd.

   W 86,179        —          —          —          —          101  

LG Electronics RUS, LLC

     21,936        —          —          —          —          137  

LG Electronics do Brasil Ltda.

     38,672        —          —          —          —          47  

LG Innotek Co., Ltd.

     1,465        —          13,520        —          —          15,531  

Qingdao LG Inspur Digital Communication Co., Ltd.

     10,755        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     1,452        —          —          —          —          —    

LG Electronics Mexicali, S.A. DE C.V.

     24,359        —          —          —          —          15  

LG Electronics Mlawa Sp. z o.o.

     93,527        —          —          —          —          784  

LG Electronics Taiwan Taipei Co., Ltd.

     533        —          —          —          —          104  

LG Hitachi Water Solutions Co., Ltd.(*2)

     —          —          —          29,011        —          —    

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

     212,403        —          —          —          —          149  

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

     —          —          286        10,394        —          13  

HiEntech Co., Ltd.(*2)

     11        —          —          1,251        —          7,385  

HiEntech (Tianjin) Co., Ltd.(*2)

     —          —          —          9,984        —          5,633  

LG Electronics Egypt S.A.E.

     22,027        —          —          —          —          2  

LG Electronics Alabama Inc.

     3,932        —          —          —          —          —    

LG Electronics Japan, Inc.

     —          —          —          —          —          1,610  

Others

     1,981        —          —          1        —          2,032  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 627,656        —          13,806        50,683        —          33,843  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 841,321        —          107,327        133,231        17,720        73,083  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents transactions occurred prior to the Group’s disposal of the entire investments.

(*2)

Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments.

 

88


Table of Contents
27.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

INVENIA Co., Ltd.(*1)

   W —          180        1,024        45,580        —          297  

AVATEC Co., Ltd.

     2,639        265        —          —          54,939        616  

Paju Electric Glass Co., Ltd.

     —          6,057        267,065        —          —          3,209  

WooRee E&L Co., Ltd.

     —          —          4,539        —          —          1  

YAS Co., Ltd.

     —          1,000        4,795        100,142        —          2,822  

Material Science Co., Ltd.

     —          —          21        —          —          313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        7,502        277,444        145,722        54,939        7,258  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 743,075        —          10,730        677,932        —          109,505  

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

                 

LG Electronics India Pvt. Ltd.

   W 76,950        —          —          —          —          119  

LG Electronics Vietnam Haiphong Co., Ltd.

     205,520        —          —          2,982        —          346  

LG Electronics Nanjing New Technology Co., Ltd.

     220,569        —          —          30        —          275  

LG Electronics RUS, LLC

     64,129        —          —          —          —          1,562  

LG Electronics do Brasil Ltda.

     118,900        —          —          —          —          178  

LG Innotek Co., Ltd.

     5,699        —          46,232        —          —          57,602  

 

89


Table of Contents
27.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2019  
     Sales
and others
            Purchase and others  
(In millions of won)    Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Qingdao LG Inspur Digital Communication Co., Ltd.

   W 13,551        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     41,876        —          —          —          —          —    

LG Electronics Mexicali, S.A. DE C.V.

     93,095        —          —          —          —          65  

LG Electronics Mlawa Sp. z o.o.

     402,384        —          —          —          —          1,648  

LG Electronics Taiwan Taipei Co., Ltd.

     4,172        —          —          31        —          282  

LG Hitachi Water Solutions Co., Ltd.(*2)

     —          —          —          79,986        —          —    

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

     557,029        —          —          —          —          672  

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

     —          —          445        14,553        —          88  

HiEntech Co., Ltd.(*2)

     47        —          —          7,264        —          21,576  

HiEntech (Tianjin) Co., Ltd.(*2)

     —          —          —          32,335        —          15,423  

LG Electronics Egypt S.A.E

     80,553        —          —          —          —          2  

LG Electronics Alabama Inc.

     9,032        —          —          —          —          —    

LG Electronics Japan, Inc.

     —          —          —          14        —          4,672  

Others

     8,716        —          1        1        —          5,168  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,902,222        —          46,678        137,196        —          109,678  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,647,936        7,502        334,852        960,850        54,939        226,441  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents transactions occurred prior to the Group’s disposal of the entire investments.

(*2)

Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments.

 

90


Table of Contents
27.

Related Parties and Others, Continued

 

(c) Trade accounts and notes receivable and payable and others as of September 30, 2020 and December 31, 2019 are as follows:

 

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

Associates and their subsidiaries

           

AVATEC Co., Ltd.

   W —          —          4,942        1,029  

Paju Electric Glass Co., Ltd.

     —          —          64,544        62,853  

WooRee E&L Co., Ltd.

     —          —          4,696        1,888  

YAS Co., Ltd.

     —          —          5,624        27,489  

Material Science Co., Ltd.

     —          —          17        8  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          79,823        93,267  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

           

LG Electronics Inc.

   W 143,574        209,939        62,536        157,713  

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

           

LG Electronics India Pvt. Ltd.

   W 16,711        6,113        —          —    

LG Electronics Vietnam Haiphong Co., Ltd.

     39,662        47,740        1        75  

LG Electronics Nanjing New Technology Co., Ltd.

     109,041        55,343        183        49  

LG Electronics RUS, LLC

     20,883        17,600        —          83  

LG Electronics do Brasil Ltda.

     19,063        14,805        6        26  

LG Innotek Co., Ltd.

     241        267        31,278        36,426  

 

91


Table of Contents
27.

Related Parties and Others, Continued

 

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

LG Electronics Mexicali, S.A. DE C.V.

   W 20,028        11,195        5        17  

LG Electronics Mlawa Sp. z o.o.

     116,111        124,390        55        75  

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

     161,100        82,927        45        62  

P.T. LG Electronics Indonesia

     29,043        7,696        7        16  

Others

     4,181        19,105        2,583        3,548  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 536,064        387,181        34,163        40,377  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 679,638        597,120        176,522        291,357  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

92


Table of Contents
27.

Related Parties and Others, Continued

 

  (d)

Details of significant financing transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the nine-month period ended September 30, 2019 are as follows:

 

(In millions of won)    2019  

Associates

   Loans      Collection of loans  

INVENIA Co., Ltd.(*)

   W 1,000        —    

 

(*)

Excluded from related parties due to disposal of equity investments during the year-ended December 31, 2019.

 

93


Table of Contents
27.

Related Parties and Others, Continued

 

  (e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and nine-month periods ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.

 

     For the three-month
period ended
September 30, 2020
     For the nine-month period
ended
September 30, 2020
     September 30, 2020  
(In millions of won)    Sales
and others
     Purchase
and others
     Sales
and others
     Purchase and
others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG International Corp. and its subsidiaries

   W 101,824        62,526        273,839        205,992        91,864        31,862  

LG Uplus Corp.

     —          480        —          1,598        —          173  

LG Chem Ltd. and its subsidiaries

     92        230,536        1,231        637,212        162        185,933  

S&I Corp. and its subsidiaries

     79        86,356        246        169,451        21,307        97,828  

Silicon Works Co., Ltd.

     —          279,396        36        583,725        —          174,510  

LG Corp.

     —          15,705        —          40,122        8,483        5,110  

LG Management Development Institute

     —          2,078        —          5,662        3,480        363  

LG CNS Co., Ltd. and its subsidiaries

     6        42,575        19        101,873        2        28,042  

LG Household & Health Care and its subsidiaries

     —          162        —          246        —          132  

LG Holdings Japan Co., Ltd.

     —          545        —          1,631        2,367        —    

G2R Inc. and its subsidiaries

     —          11,850        —          22,357        —          9,498  

Robostar Co., Ltd.

     —          164        —          701        —          178  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 102,001        732,373        275,371        1,770,570        127,665        533,629  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

94


Table of Contents
27.

Related Parties and Others, Continued

 

     For the three-month
period ended
September 30, 2019
     For the nine-month period
ended
September 30, 2019
     December 31, 2019  
(In millions of won)    Sales
and others
     Purchase
and others
     Sales
and others
     Purchase
and others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG International Corp. and its subsidiaries

   W 146,375        96,796        498,204        321,579        93,623        77,721  

LG Uplus Corp.

     —          622        —          1,761        —          208  

LG Chem Ltd. and its subsidiaries

     65        288,422        82,400        877,573        97        128,636  

S&I Corp. and its subsidiaries(*)

     84        111,788        267        626,010        21,307        159,202  

Silicon Works Co., Ltd.

     —          209,633        92        516,189        —          126,856  

LG Corp.

     —          13,849        —          40,218        8,781        —    

LG Management Development Institute

     —          2,239        —          6,624        3,480        231  

LG CNS Co., Ltd. and its subsidiaries

     5        64,158        14        157,763        2        75,850  

LG Hausys Ltd.

     —          —          1        1        —          —    

LG Household & Health Care and its subsidiaries

     —          112        —          209        —          6  

LG Holdings Japan Co., Ltd.

     —          542        —          1,529        2,264        —    

G2R Inc. and its subsidiaries

     —          18,853        —          20,756        —          29,540  

Robostar Co., Ltd.

     —          196        —          7,096        —          2,332  

Others(*)

     1        71,251        5        191,014        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 146,530        878,461        580,983        2,768,322        129,554        600,582  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Due to S&I Corp.’s disposal of partial interests in Serveone in May 2019, Serveone was reclassified from one of the S&I Corp.’s subsidiaries to associates. Accordingly, transactions with S&I Corp. after the disposal are classified as other.

 

95


Table of Contents
27.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

Compensation costs of key management 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  

Short-term benefits

   W 530        769        1,629        2,590  

Expenses related to the defined benefit plan

     83        103        262        450
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 613        872        1,891        3,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

96


Table of Contents

 

LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2020 and 2019

(With Independent Auditors’ Review Report Thereon)

 

97


Table of Contents


Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed separate interim financial statements of LG Display Co., Ltd. (the “Company”) which comprise the condensed separate interim statement of financial position as of September 30, 2020, the condensed separate interim statements of comprehensive 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 Separate Interim Financial Statements

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

Auditors’ Responsibility

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

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

Conclusion

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

Other Matters    

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

We audited the separate statement of financial position as of December 31, 2019, and the related separate statements of comprehensive loss, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated March 11, 2020, expressed an unmodified opinion. The accompanying condensed separate statement of financial position of the Company 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.

 

99


Table of Contents

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 separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

100


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate 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, 24      W 298,709      1,105,245

Deposits in banks

     4, 24        76,852      77,257

Trade accounts and notes receivable, net

     5, 14, 24, 26        4,433,619      3,565,860

Other accounts receivable, net

     5, 24        144,257      439,940

Other current financial assets

     6, 24        42,805      55,665

Inventories

     7        1,578,548      1,526,299

Prepaid income tax

        110,307      111,129

Other current assets

     5        264,511      199,833
     

 

 

    

 

 

 

Total current assets

        6,949,608      7,081,228

Deposits in banks

     4, 24        11      11

Investments

     8        4,770,666      4,958,308

Other non-current accounts receivable, net

     5, 24        14,666      19,899

Other non-current financial assets

     6, 24        101,640      74,203

Property, plant and equipment, net

     9        11,950,791      12,764,175

Intangible assets, net

     10        635,134      708,047

Deferred tax assets

     22        1,730,397      1,367,714

Defined benefits assets, net

     12        10,118      127,252

Other non-current assets

     5        260,112      281,843
     

 

 

    

 

 

 

Total non-current assets

        19,473,535      20,301,452
     

 

 

    

 

 

 

Total assets

      W 26,423,143      27,382,680
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

     24, 26      W 4,110,551      2,682,403

Current financial liabilities

     11, 24        1,626,124      1,474,589

Other accounts payable

     24        2,721,565      3,329,040

Accrued expenses

        488,232      520,395

Provisions

     13        182,101      188,238

Advances received

     14        529,049      898,447

Other current liabilities

     13        37,471      47,371
     

 

 

    

 

 

 

Total current liabilities

        9,695,093      9,140,483

Non-current financial liabilities

     11, 24        6,764,690      7,094,405

Non-current provisions

     13        71,784      67,118

Long-term advances received

     14        —        328,677

Other non-current liabilities

     13        92,558      85,904
     

 

 

    

 

 

 

Total non-current liabilities

        6,929,032      7,576,104
     

 

 

    

 

 

 

Total liabilities

        16,624,125      16,716,587
     

 

 

    

 

 

 

Equity

        

Share capital

     15        1,789,079      1,789,079

Share premium

        2,251,113      2,251,113

Retained earnings

        5,758,826      6,625,901
     

 

 

    

 

 

 

Total equity

        9,799,018      10,666,093
     

 

 

    

 

 

 

Total liabilities and equity

      W 26,423,143      27,382,680
     

 

 

    

 

 

 

See accompanying notes to the separate interim financial statements.

 

101


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Comprehensive Loss

(Unaudited)

For the 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, 26    W 6,469,115     5,432,573     15,841,644     15,752,138

Cost of sales

   7, 17, 26      (5,921,321     (5,441,111     (15,414,857     (15,066,015
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (loss)

        547,794     (8,538     426,787     686,123

Selling expenses

   18      (142,397     (166,991     (372,164     (479,202

Administrative expenses

   18      (114,257     (203,221     (322,400     (453,090

Research and development expenses

        (268,640     (213,974     (814,700     (963,995
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

        22,500     (592,724     (1,082,477     (1,210,164
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

   21      88,132     106,117     174,096     201,120

Finance costs

   21      (207,852     (186,379     (300,533     (308,941

Other non-operating income

   20      153,327     199,365     733,412     645,078

Other non-operating expenses

   20      (218,184     (296,702     (784,143     (734,043
     

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax

        (162,077     (770,323     (1,259,645     (1,406,950

Income tax benefit

   22      (92,249     (195,277     (396,156     (310,198
     

 

 

   

 

 

   

 

 

   

 

 

 

Loss for the period

        (69,828     (575,046     (863,489     (1,096,752
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive 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

Related income tax

   12      266     332     1,238     (3,219
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss for the period, net of income tax

        (776     (1,023     (3,586     (9,422
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss for the period

      W (70,604     (576,069     (867,075     (1,106,174
     

 

 

   

 

 

   

 

 

   

 

 

 

Loss per share (in won)

           

Basic and diluted loss per share

   23    W (195     (1,607     (2,413     (3,065
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

102


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

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

 

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

Balances at January 1, 2019

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

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

          

Loss for the period

     —        —        (1,096,752     (1,096,752

Other comprehensive loss

          

Remeasurements of net defined benefit liabilities, net of tax

     —        —        (9,422     (9,422
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

   W —          —        (1,106,174     (1,106,174
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at September 30, 2019

   W 1,789,079      2,251,113      8,066,215     12,106,407
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at January 1, 2020

   W 1,789,079      2,251,113      6,625,901     10,666,093
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

          

Loss for the period

     —        —        (863,489     (863,489

Other comprehensive loss

          

Remeasurements of net defined benefit liabilities, net of tax

     —        —        (3,586     (3,586
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

   W —          —        (867,075     (867,075
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at September 30, 2020

   W 1,789,079      2,251,113      5,758,826     9,799,018
  

 

 

    

 

 

    

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

103


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate 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 (863,489     (1,096,752

Adjustments for:

       

Income tax benefit

   22      (396,156     (310,198

Depreciation and amortization

   17      1,916,165     1,866,814

Gain on foreign currency translation

        (74,710     (73,717

Loss on foreign currency translation

        100,866     140,748

Expenses related to defined benefit plans

   12      119,095     146,330

Gain on disposal of property, plant and equipment

        (16,758     (34,624

Loss on disposal of property, plant and equipment

        28,525     16,408

Impairment loss on disposal of property, plant and equipment

        4,871     18,047

Gain on disposal of intangible assets

        —       (552

Loss on disposal of intangible assets

        28     18

Impairment loss on intangible assets

        69,293     116,506

Reversal of impairment loss on intangible assets

        (1,260     (480

Expense on increase of provisions

        188,031     247,826

Finance income

        (149,321     (180,135

Finance costs

        269,737     292,235

Other income

        (19,836     (18,945

Other expenses

        —       5,325
     

 

 

   

 

 

 
        2,038,570     2,231,606

Changes in

       

Trade accounts and notes receivable

        (1,556,641     (1,468,471

Other accounts receivable

        71,475     (47,051

Inventories

        (52,249     (61,308

Other current assets

        (16,456     (36,108

Other non-current assets

        (50,807     (24,984

Trade accounts and notes payable

        1,481,420     (204,078

Other accounts payable

        (496,592     1,364,558

Accrued expenses

        (17,895     244,276

Provisions

        (177,724     (158,073

Advances received

        (85,056     —  

Other current liabilities

        (16,295     (52,115

Defined benefit liabilities, net

        (6,785     (21,997

Long-term advances received

        —       63,672

Other non-current liabilities

        8,733     9,893
     

 

 

   

 

 

 
        (914,872     (391,786

Cash generated from operating activities

        260,209     743,068

Income taxes refunded

        35,533     15,746

Interests received

        8,732     9,070

Interests paid

        (226,558     (169,711
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 77,916     598,173
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

104


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate 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 investing activities:

       

Dividends received

      W 8,239     18,622

Increase in deposits in banks

        (76,851     (111,180

Proceeds from withdrawal of deposits in banks

        77,257     111,180

Acquisition of financial asset at fair value through profit or loss

        (200     —  

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

Acquisition of investments

        —       (1,342,937

Proceeds from disposal of investments

        197,834     7,039

Acquisition of property, plant and equipment

        (930,233     (1,884,476

Proceeds from disposal of property, plant and equipment

        314,120     327,652

Acquisition of intangible assets

        (276,506     (404,429

Proceeds from disposal of intangible assets

        1,260     2,349

Government grants received

        —       3,979

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

        (358     (4,463

Decrease in deposits

        1,285     5,242

Proceeds from disposal of other assets

        11,000     20,416
     

 

 

   

 

 

 

Net cash used in investing activities

        (637,514     (3,228,610
     

 

 

   

 

 

 

Cash flows from financing activities:

   25     

Proceeds from short-term borrowings

        855,095     1,264,915

Repayments of short-term borrowings

        (850,356     (928,335

Proceeds from issuance of bonds

        49,949     1,323,239

Proceeds from long-term borrowings

        628,256     1,569,148

Repayments of current portion of long-term borrowings and bonds

        (926,316     (708,260

Payment guarantee fee received

        5,717     5,043

Repayments of lease liabilities

        (9,283     (10,415
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        (246,938     2,515,335
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (806,536     (115,102

Cash and cash equivalents at January 1

        1,105,245     473,283
     

 

 

   

 

 

 

Cash and cash equivalents at September 30

      W 298,709     358,181
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

105


Table of Contents
1.

Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of September 30, 2020, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of September 30, 2020, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

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

 

2.

Basis of Presenting Financial Statements

 

  (a)

Statement of Compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the separate financial statements of the Company as of and for the year ended December 31, 2019.

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

 

  (b)

Basis of Measurement

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

 

   

derivative financial instruments at fair value, financial assets at fair value through profit or loss (“FVTPL”), 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

 

106


Table of Contents
2.

Basis of Presenting Financial Statements, Continued

 

  (c)

Functional and Presentation Currency

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

 

  (d)

Use of Estimates and Judgments

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

 

3.

Summary of Significant Accounting Policies

The accounting policies applied in these condensed separate interim financial statements are the same as those applied in the Company’s separate 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 Company’s financial statements.

 

107


Table of Contents
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 298,709        1,105,245  

Deposits in banks

     

Restricted deposits (*)

   W 76,852        77,257  

Non-current assets

     

Deposits in banks

     

Restricted deposits (*)

   W 11        11  
  

 

 

    

 

 

 
   W 375,572        1,182,513  
  

 

 

    

 

 

 

 

(*)

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

 

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 217,403        221,243  

Due from related parties

     4,216,216        3,344,617  
  

 

 

    

 

 

 
   W 4,433,619        3,565,860  
  

 

 

    

 

 

 

 

  (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 136,536        438,659  

Accrued income

     7,721        1,281  
  

 

 

    

 

 

 
   W 144,257        439,940  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivables

   W 14,666        19,899  
  

 

 

    

 

 

 
   W 158,923        459,839  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable as of September 30, 2020 and December 31, 2019 are W55,622 million and W45,518 million, respectively.

 

108


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 4,427,577        110,019        (11      (1,561

1-15 days past due

     3,928        164        —          —    

16-30 days past due

     2,125        56        —          —    

31-60 days past due

     —          183        —          —    

More than 60 days past due

     —          50,087        —          (25
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,433,630        160,509        (11      (1,586
  

 

 

    

 

 

    

 

 

    

 

 

 
     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 3,565,795        184,991        (5      (2,952

1-15 days past due

     70        3,488        —          (1

16-30 days past due

     —          94        —          —    

31-60 days past due

     —          61        —          —    

More than 60 days past due

     —          274,183        —          (25
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,565,865        462,817        (5      (2,978
  

 

 

    

 

 

    

 

 

    

 

 

 

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 5        2,978        5        989  

(Reversal of) bad debt expense

     6        (328      —          1,989  

Write-off

     —          (1,064      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the end of the reporting period

   W 11        1,586        5        2,978  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

109


Table of Contents
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 42,451        1,849  

Prepaid expenses

     147,199        100,561  

Value added tax refundable

     59,072        75,317  

Right to recover returned goods

     15,789        22,106  
  

 

 

    

 

 

 
   W  264,511        199,833  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 237,954        274,101  

Long-term advanced payments

     22,158        7,742  
  

 

 

    

 

 

 
   W 260,112        281,843  
  

 

 

    

 

 

 

 

110


Table of Contents
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

     

Short-term loans

   W 28,414        21,623  
  

 

 

    

 

 

 
   W 42,805        55,665  
  

 

 

    

 

 

 

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        —    
  

 

 

    

 

 

 
   W 1,476        2,997  
  

 

 

    

 

 

 

Convertible bonds

   W 1,544        1,544  

Derivatives(*)

     66,610        15,640  
  

 

 

    

 

 

 
   W 69,630        20,181  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

     

Government bonds

   W 48        70  

Financial assets carried at amortized cost

     

Deposits

   W 12,197        13,125  

Long-term loans

     19,765        40,827  
  

 

 

    

 

 

 
   W 31,962        53,952  
  

 

 

    

 

 

 
   W 101,640        74,203  
  

 

 

    

 

 

 

 

(*)

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

 

111


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 434,226        394,069  

Work-in-process

     619,218        696,993  

Raw materials

     425,713        341,004  

Supplies

     99,391        94,233  
  

 

 

    

 

 

 
   W 1,578,548        1,526,299  
  

 

 

    

 

 

 

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 15,414,857        15,066,015  

Inventory write-downs

     327,019        403,197  

Usage of inventory write-downs

     (408,567      (280,323

 

112


Table of Contents
8.

Investments

 

  (a)

Investments in subsidiaries consist of the following:

 

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

Subsidiaries

   Location      Business      Percentage
of
ownership
    Book
Value
     Percentage
of
ownership
    Book
Value
 

LG Display America, Inc.

    

San Jose,

U.S.A.

 

 

     Sell display products        100   W 36,815        100   W 36,815  

LG Display Germany GmbH

    
Eschborn,
Germany
 
 
     Sell display products        100     19,373        100     19,373  

LG Display Japan Co., Ltd.

    
Tokyo,
Japan
 
 
     Sell display products        100     15,686        100     15,686  

LG Display Taiwan Co., Ltd.

    
Taipei,
Taiwan
 
 
     Sell display products        100     35,230        100     35,230  

LG Display Nanjing Co., Ltd.

    
Nanjing,
China
 
 
    
Manufacture display
products
 
 
     100     593,726        100     593,726  

LG Display Shanghai Co., Ltd.

    
Shanghai,
China
 
 
     Sell display products        100     9,093        100     9,093  

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

    
Wroclaw,
Poland
 
 
    
Manufacture display
products
 
 
     —         —          100     160,361  

LG Display Guangzhou Co., Ltd.

    
Guangzhou,
China
 
 
    
Manufacture display
products
 
 
     100     293,557        100     293,557  

LG Display Shenzhen Co., Ltd.

    
Shenzhen,
China
 
 
     Sell display products        100     3,467        100     3,467  

LG Display Singapore Pte. Ltd.

     Singapore        Sell display products        100     1,250        100     1,250  

L&T Display Technology (Fujian) Limited

    

Fujian,

China

 

 

    


Manufacture and
sell LCD module
and LCD monitor
sets
 
 
 
 
     51     10,123        51     10,123  

LG Display Yantai Co., Ltd.

    

Yantai,

China

 

 

    
Manufacture display
products
 
 
     100     169,195        100     169,195  

Nanumnuri Co., Ltd.

    

Gumi,

South Korea

 

 

    
Provide janitorial
services
 
 
     100     800        100     800  

LG Display (China) Co., Ltd.

    

Guangzhou,

China

 

 

    
Manufacture and
sell display products
 
 
     51     723,086        51     723,086  

Unified Innovative Technology, LLC

    
Wilmington,
U.S.A.
 
 
    
Manage intellectual
property
 
 
     100     9,489        100     9,489  

LG Display Guangzhou Trading Co., Ltd.

    
Guangzhou,
China
 
 
     Sell display products        100     218        100     218  

Global OLED Technology LLC

    

Sterling,

U.S.A

 

 

    
Manage OLED
intellectual property
 
 
     100     164,322        100     164,322  

LG Display Vietnam Haiphong Co., Ltd.

    
Haiphong,
Vietnam

 
    
Manufacture display
products
 
 
     100     672,658        100     672,658  

Suzhou Lehui Display Co., Ltd.

    

Suzhou,

China

 

 

    


Manufacture and
sell LCD module
and LCD monitor
sets
 
 
 
 
     100     121,640        100     121,640  

LG DISPLAY FUND I LLC(*2)

    
Wilmington,
U.S.A
 
 
    

Invest in venture
business and acquire
technologies
 
 
 
     100     12,441        100     6,322  

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

    
Guangzhou,
China
 
 
    
Manufacture and
sell display products
 
 
     71     1,794,547        74     1,794,547  

Money Market Trust

    

Seoul,

South Korea

 

 

     Money market trust        100     1,300        100     34,700  
          

 

 

      

 

 

 
           W  4,688,016        W  4,875,658  
          

 

 

      

 

 

 

 

113


Table of Contents
8.

Investments, Continued

 

  (*1)

In May 2020, LG Display Poland Sp. z o.o. completed the liquidation process.

 

  (*2)

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

 

  (*3)

For the 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 Company’s ownership percentage in LGDCO decreased from 74% to 71% as a result.

 

114


Table of Contents
8.

Investments, Continued

 

  (b)

Investments in associates consist of the following:

 

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

Associates

  

Location

  

Business

   Percentage
of
ownership
     Book
Value
     Percentage
of
ownership
     Book
Value
 

Paju Electric Glass Co., Ltd.

  

Paju,

South Korea

   Manufacture glass for display      40    W 45,089        40    W 45,089  

WooRee E&L Co., Ltd.

  

Ansan,

South Korea

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

YAS Co., Ltd.

  

Paju,

South Korea

   Develop and manufacture deposition equipment for OLEDs      15      10,000        15      10,000  

AVATEC Co., Ltd.

  

Daegu,

South Korea

   Process and sell glass for display      14      8,000        14      8,000  

Arctic Sentinel, Inc.

   Los Angeles, U.S.A.    Develop and manufacture tablet for kids      10      —          10      —    

Cynora GmbH(*1)

  

Bruchsal

Germany

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

Material Science Co., Ltd.

  

Seoul,

South Korea

   Develop, manufacture and sell materials for display      10      2,354        10      2,354  

Nanosys Inc.(*2)

  

Milpitas,

U.S.A.

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

 

 

       

 

 

 
            W  82,650         W  82,650  
           

 

 

       

 

 

 

 

  (*1)

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

 

  (*2)

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

Dividends income recognized from subsidiaries and associates for the nine-month periods ended September 30, 2020 and 2019 amounted to W8,239 million and W18,622 million, respectively.

 

115


Table of Contents
9.

Property, Plant and Equipment

For the nine-month periods ended September 30, 2020 and 2019, the Company purchased property, plant and equipment of W917,400 million and W1,378,503 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W74,975 million and 2.90%, and W105,272 million and 2.77%, 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 Company disposed of property, plant and equipment with carrying amounts of W99,573 million and W541,708 million, respectively, and recognized W16,758 million and W28,525 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: W34,624 million and W16,408 million, respectively).

 

10.

Intangible Assets

The Company capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of 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 Company recognized an impairment loss amounting to W68,618 million in connection with development projects.

 

116


Table of Contents
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 352,050        347,340  

Current portion of long-term borrowings and bonds

     1,246,114        1,117,218  

Current portion of payment guarantee liabilities

     5,193        5,674  

Derivatives(*)

     17,000        —    

Lease liabilities

     5,767        4,357  
  

 

 

    

 

 

 
   W  1,626,124        1,474,589  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W  2,544,375        2,692,560  

Foreign currency denominated borrowings

     1,672,238        1,626,709  

Bonds

     2,490,657        2,741,516  

Payment guarantee liabilities

     7,377        10,828  

Derivatives(*)

     47,527        20,592  

Lease liabilities

     2,516        2,200  
  

 

 

    

 

 

 
   W  6,764,690        7,094,405  
  

 

 

    

 

 

 

 

(*)

Represents currency interest rate swap contracts and others entered into by the Company 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 and USD)

 

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  
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 300        USD 300  
     

 

 

    

 

 

 
      W  352,050        347,340  
     

 

 

    

 

 

 

 

(*)

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

 

117


Table of Contents
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 (91 days)
+ 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 and USD)                     

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  
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 1,475        USD 1,465  

Less current portion of long-term borrowings

        (58,675      (69,468
     

 

 

    

 

 

 
      W  1,672,238        1,626,709  
     

 

 

    

 

 

 

 

118


Table of Contents
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.

 

119


Table of Contents
11.

Financial Liabilities, Continued

 

  (f)

Details of convertible bonds issued and outstanding 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 Company has a right to redeem before maturity (call option) and the bondholders have a right to require the 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 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 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  

 

120


Table of Contents
12.

Employee Benefits

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

 

  (a)

Net defined benefit liabilities (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 1,517,642        1,476,866  

Fair value of plan assets

     (1,527,760      (1,604,118
  

 

 

    

 

 

 
   W (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 40,475        48,473        121,424        145,419  

Net interest cost

     (777      303        (2,329      911  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 39,698        48,776        119,095        146,330  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (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 1,527,760        1,604,118  

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

 

  (d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month 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      (9,422
  

 

 

    

 

 

    

 

 

    

 

 

 

 

121


Table of Contents
13.

Provisions and Other Liabilities

 

  (a)

Changes in provisions for the nine-month period ended September 30, 2020 are as follows:

 

(In millions of won)    Warranties (*)      Others      Total  

Balance at January 1, 2020

   W 228,975        26,381        255,356  

Additions (reversal)

     177,031        (6,498      170,533  

Usage

     (171,226      (778      (172,004
  

 

 

    

 

 

    

 

 

 

Balance at September 30, 2020

   W 234,780        19,105        253,885  
  

 

 

    

 

 

    

 

 

 

Current

   W 162,996        19,105        182,101  

Non-current

   W 71,784        —          71,784  

 

(*)

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

 

  (b)

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

 

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

Current liabilities

     

Withholdings

   W 23,347        13,049  

Unearned revenue

     8,274        25,012  

Security deposits received

     5,850        9,310  
  

 

 

    

 

 

 
   W 37,471        47,371  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 82,265        76,300  

Long-term other accounts payable

     —          1,062  

Long-term unearned revenue

     3,923        6,852  

Security deposits received

     6,370        1,690  
  

 

 

    

 

 

 
   W 92,558        85,904  
  

 

 

    

 

 

 

 

122


Table of Contents
14.

Contingencies and Commitments

 

  (a)

Legal Proceedings

Anti-trust Litigations

Some individual claimants filed “follow-on” damages claims against the Company and other TFT-LCD manufacturers alleging violations of EU competition law. While the Company continues its vigorous defense of the various pending proceedings described above, as of September 30, 2020, the Company cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the proceedings.

Solas OLED Ltd. Litigations

Solas OLED Ltd. filed patent infringement actions in the United States District Court for the Western District of Texas and the Mannheim District Court in Germany in April 2019 and in the Beijing Intellectual Property Court in China in May 2019 against the Company, television manufactures and others. In November 2020, the Mannheim District Court issued a decision in favor of the plaintiff. The Company will appeal Mannheim District Court’s November decision. Furthermore, a nullity action is currently ongoing in the German Federal Patent Court against the asserted patent. As of September 30, 2020, the Company cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the proceedings.

Others

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

 

  (b)

Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,115 million (W1,308,453 million) in connection with the Company’s export sales transactions with its subsidiaries. As of September 30, 2020, there are no short-term borrowings that are outstanding but past due in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.

The Company has credit facility agreements with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts receivables up to an aggregate of W718,738 million in connection with its domestic and export sales transactions and, as of September 30, 2020, W124,701 million accounts and notes receivable sold were outstanding in connection with the agreement. In connection with the contracts above, the Company has sold its accounts receivable without recourse.

 

123


Table of Contents
14.

Contingencies and Commitments, Continued

 

Letters of credit

As of September 30, 2020, the Company has agreements in relation to the opening of letters of credit up to USD 150 million (W176,025 million) with KEB Hana Bank, USD 50 million (W58,675 million) with Sumitomo Mitsui Banking Corporation, USD 100 million (W117,350 million) with Industrial Bank of Korea, USD 100 million (W117,350 million) with Industrial and Commercial Bank of China, USD 200 million (W234,700 million) with Shinhan Bank, USD 100 million (W117,350 million) with KB Kookmin Bank, USD 50 million (W58,675 million) with MUFG Bank and USD 200 million (W234,700 million) with the Export-Import Bank of Korea.

Payment guarantees

The Company provides payment guarantees to LG Display Vietnam Haiphong Co., Ltd. in connection with the principal amount of term loan credit facilities amounting to USD 1,215 million (W1,425,301 million).

In addition, the Company obtained payment guarantees amounting to USD 475 million (W557,413 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements. The Company also obtained payment guarantees amounting to USD 306 million (W358,871 million) from Korea Development Bank for foreign currency denominated bonds.

License agreements

As of September 30, 2020, the Company has technical license agreements with Hitachi Display, Ltd. and others in relation to its LCD business and patent cross license agreement with Universal Display Corporation in relation to its OLED business. Also, the Company has a trademark license agreement with LG Corp. and other intellectual properties agreements with various companies as of September 30, 2020.

Long-term supply agreement

As of September 30, 2020, in connection with long-term supply agreements with customers, the Company recognized USD 338 million (W396,056 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Company received payment guarantees amounting to USD 475 million (W557,413 million) from KEB Hana Bank and other various banks relating to advances received (see note 14(b) payment guarantees).

 

15.

Share Capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), and as of September 30, 2020 and December 31, 2019, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2019 to September 30, 2020.

 

124


Table of Contents
16.

Revenue

Details of revenue for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Sales of goods

   W 6,447,529        5,417,502        15,785,453        15,707,148  

Royalties

     14,748        9,890        34,913        28,911  

Others

     6,838        5,181        21,278        16,079  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,469,115        5,432,573        15,841,644        15,752,138  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

17.

The Nature of Expenses and Others

The classification of expenses by nature for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Changes in inventories

   W (129,955      (154,959      (52,249     (61,308

Purchases of raw materials, merchandise and others

     2,557,901        2,297,856        6,098,010       6,410,588  

Depreciation and amortization

     619,678        657,755        1,916,165       1,866,814  

Outsourcing

     2,168,192        1,758,873        5,420,921       4,499,514  

Labor

     539,945        709,854        1,596,680       1,952,977  

Supplies and others

     153,968        124,969        438,937       472,819  

Utility

     176,639        196,821        495,626       540,738  

Fees and commissions

     88,903        120,862        275,988       372,146  

Shipping

     14,601        17,922        41,392       56,119  

Advertising

     26,087        49,836        94,911       84,147  

Warranty

     88,876        68,924        177,031       244,635  

Travel

     22,028        22,056        43,076       66,793  

Taxes and dues

     14,554        15,421        41,709       45,043  

Impairment loss on property, plant and equipment

     —          12,103        4,871       18,047  

Impairment loss on intangible assets

     38,782        116,506        69,293       116,506  

Others

     121,401        151,141        373,076       438,195  
  

 

 

    

 

 

    

 

 

   

 

 

 
   W 6,501,600        6,165,940        17,035,437       17,123,773  
  

 

 

    

 

 

    

 

 

   

 

 

 

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

 

125


Table of Contents
18.

Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Salaries(*)

   W 47,529        137,368        142,830        254,359  

Expenses related to defined benefit plans

     6,204        7,798        18,519        23,851  

Other employee benefits

     9,972        10,812        31,113        38,147  

Shipping

     10,459        13,333        28,207        42,728  

Fees and commissions

     31,007        35,485        94,791        103,811  

Depreciation

     20,004        28,591        63,733        84,030  

Taxes and dues

     1,029        536        2,085        1,823  

Advertising

     26,087        49,836        94,911        84,147  

Warranty

     88,876        68,924        177,031        244,635  

Insurance

     2,127        1,551        5,690        4,418  

Travel

     1,792        4,529        5,125        13,226  

Training

     1,827        2,933        4,358        8,287  

Others

     9,741        8,516        26,171        28,830  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 256,654        370,212        694,564        932,292  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (*)

Expenses recognized in relation to employee termination benefits for the nine-month periods ended September 30, 2020 and 2019 amount to W1,139 million and W84,083 million, respectively.

 

19.

Personnel Expenses

Details of personnel expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Salaries and wages

   W 435,081        602,331        1,300,338        1,682,577  

Other employee benefits

     59,545        73,780        187,022        225,860  

Contributions to National Pension plan

     16,674        18,997        50,644        55,150  

Expenses related to defined benefit plans and defined contribution plans

     39,836        48,776        119,570        146,346  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 551,136        743,884        1,657,574        2,109,933  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

126


Table of Contents
20.

Other Non-operating Income and Other Non-operating Expenses

 

  (a)

Details of other non-operating income for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Foreign currency gain

   W 138,419        186,288        702,441        600,310  

Gain on disposal of property, plant and equipment

     4,610        6,661        16,758        34,624  

Gain on disposal of intangible assets

     —          —          —          552  

Reversal of impairment loss on intangible assets

     660        279        1,260        480  

Rental income

     411        402        1,259        1,412  

Others

     9,227        5,735        11,694        7,700  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 153,327        199,365        733,412        645,078  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Details of other non-operating expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Foreign currency loss

   W 163,199        156,059        672,827        572,572  

Other bad debt expense

     —          1,188        —          1,198  

Loss on disposal of property, plant and equipment

     10,639        9,661        28,525        16,408  

Impairment loss on property, plant and equipment

     —          12,103        4,871        18,047  

Loss on disposal of intangible assets

     21        —          28        18  

Impairment loss on intangible assets

     38,782        116,506        69,293        116,506  

Donations

     —          138        318        520  

Others

     5,543        1,047        8,281        8,774  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 218,184        296,702        784,143        734,043  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

127


Table of Contents
21.

Finance Income and Finance Costs

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

 

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

Finance income

           

Interest income

   W 1,398        3,784        8,061        9,053  

Dividend income

     —          —          8,239        18,622  

Foreign currency gain

     84,679        9,807        31,948        24,259  

Gain on disposal of investments

     —          5,408        8,392        5,408  

Gain on transaction of derivatives

     515        9,685        28,066        22,852  

Gain on valuation of derivatives

     —          76,090        50,970        116,990  

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

     —          —          33,634        —    

Others

     1,540        1,343        4,786        3,936  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 88,132        106,117        174,096        201,120  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   W 45,874        45,941        152,949        85,630  

Foreign currency loss

     11,487        92,739        75,686        164,606  

Loss on repayment of borrowings

     296        —          794        —    

Impairment loss on investments

     —          28,938        —          28,938  

Loss on sale of trade accounts and notes receivable

     563        269        1,768        1,716  

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

     229        —          1,721        3,960  

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

     99,945        9,059        —          9,059  

Loss on transaction of derivatives

     2,585        —          2,585        —    

Loss on valuation of derivatives

     46,550        —          63,603        3,564  

Others

     323        9,433        1,427        11,468  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 207,852        186,379        300,533        308,941  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

128


Table of Contents
22.

Income Taxes

 

  (a)

Details of income tax expense (benefit) for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

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

Current tax expense (benefit)

   W (34,964      1,569        (34,711     (123,389

Deferred tax expense (benefit)

     (57,285      (196,846      (361,445     (186,809
  

 

 

    

 

 

    

 

 

   

 

 

 

Income tax expense (benefit)

   W (92,249      (195,277      (396,156     (310,198
  

 

 

    

 

 

    

 

 

   

 

 

 

 

  (b)

Deferred Tax Assets and Liabilities

The carrying amount of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Company’s estimated future taxable income. The Company’s deferred tax assets and liabilities may differ from actual refundable or payable amount.

Deferred tax assets and liabilities as of September 30, 2020 and December 31, 2019 are attributable to the following:

 

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

Other accounts receivable, net

   W —          —          (689     (4,364     (689     (4,364

Inventories, net

     78,174        78,730        —         —         78,174       78,730  

Defined benefit liabilities, net

     —          —          (13,767     —         (13,767     —    

Accrued expenses

     112,036        120,854        —         —         112,036       120,854  

Property, plant and equipment

     494,087        465,883        —         —         494,087       465,883  

Intangible assets

     16,278        19,422        —         —         16,278       19,422  

Provisions

     59,603        59,875        —         —         59,603       59,875  

Other temporary differences

     42,135        52,293        —         —         42,135       52,293  

Tax losses carryforwards

     852,463        536,684        —         —         852,463       536,684  

Tax credit carryforwards

     90,077        38,337        —         —         90,077       38,337  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 1,744,853        1,372,078        (14,456     (4,364     1,730,397       1,367,714  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

129


Table of Contents
23.

Loss Per Share

 

  (a)

Basic loss per share for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

(In won and number of shares)    For the three-month
periods ended September 30
     For the nine-month
periods ended September 30
 
   2020      2019      2020     2019  

Loss for the period

   W (69,828,838,537      (575,046,871,311      (863,489,424,163     (1,096,752,176,951

Weighted-average number of common stocks outstanding

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

 

 

    

 

 

    

 

 

   

 

 

 

Loss per share

   W (195      (1,607      (2,413     (3,065
  

 

 

    

 

 

    

 

 

   

 

 

 

For the three-month and nine-month periods ended September 30, 2020 and 2019, there were no events or transactions that resulted in changes in the number of common stocks used for calculating loss per share.

 

  (b)

Diluted loss per share is not different from basic loss per share due to loss for the nine-month period ended September 30, 2020. As of September 30, 2020, 40,988,998 shares of potential common stock to be issued from conversion were excluded from the calculation of weighted-average number of common stocks due to antidilution.

 

24.

Financial Risk Management

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

 

  (a)

Market risk

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

 

  (i)

Currency risk

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

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

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

 

130


Table of Contents
24.

Financial Risk Management, Continued

 

i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of September 30, 2020 and December 31, 2019 is as follows:

 

(In millions)    September 30, 2020  
   USD      JPY      CNY      EUR  

Cash and cash equivalents

     178        88        8        —    

Trade accounts and notes receivable

     3,660        2,290        —          —    

Non-trade receivables

     75        119        42        2  

Trade accounts and notes payable

     (1,992      (8,982      —          —    

Other accounts payable

     (157      (4,474      —          —    

Financial liabilities

     (2,894      —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     (1,130      (10,959      50        2  
  

 

 

    

 

 

    

 

 

    

 

 

 

Currency interest rate swap contracts

     2,125        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net exposure

     995        (10,959      50        2  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions)    December 31, 2019  
   USD     JPY     CNY      PLN      EUR  

Cash and cash equivalents

     907       3       2        1        2  

Trade accounts and notes receivable

     2,880       3,974       —          —          —    

Non-trade receivables

     306       452       —          —          —    

Trade accounts and notes payable

     (1,035     (7,346     —          —          —    

Other accounts payable

     (145     (3,619     —          —          (9

Financial liabilities

     (2,900     —         —          —          —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     13       (6,536     2        1        (7
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Currency interest rate swap contracts

     2,085       —         —          —          —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net exposure

     2,098       (6,536     2        1        (7
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

131


Table of Contents
24.

Financial Risk Management, Continued

 

Average exchange rates applied for the nine-month periods ended September 30, 2020 and 2019 and the exchange rates at September 30, 2020 and December 31, 2019 are as follows:

 

(In won)    Average rate      Reporting date spot rate  
   2020      2019      September 30, 2020      December 31, 2019  

USD

   W 1,200.52        1,161.69        1,173.50        1,157.80  

JPY

     11.16        10.65        11.12        10.63  

CNY

     171.46        169.11        171.90        165.74  

PLN

     305.16        303.51        298.51        304.87  

EUR

     1,349.23        1,305.11        1,369.42        1,297.43  

 

  ii)

Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in foreign currency as of September 30, 2020 and December 31, 2019, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

(In millions of won)    September 30, 2020      December 31, 2019  
   Equity      Profit or loss      Equity     Profit or loss  

USD (5 percent weakening)

   W 42,327        42,327        88,054       88,054  

JPY (5 percent weakening)

     (4,418      (4,418      (2,520     (2,520

CNY (5 percent weakening)

     312        312        12       12  

PLN (5 percent weakening)

     —          —          11       11  

EUR (5 percent weakening)

     99        99        (329     (329

A stronger won against the above currencies as of September 30, 2020 and December 31, 2019 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

132


Table of Contents
24.

Financial Risk Management, Continued

 

  (ii)

Interest rate risk

Interest rate risk arises principally from the Company’s variable interest-bearing bonds and borrowings. The Company establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Company entered into currency interest rate swap contracts amounting to USD 1,825 million (W2,141,638 million) and interest rate swap contracts amounting to W170,000 million in notional amount to hedge interest rate risk with respect to variable interest bearing borrowings.

 

  i)

Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of September 30, 2020 and December 31, 2019 is as follows:

 

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

Fixed rate instruments

     

Financial assets

   W 375,633        1,182,579  

Financial liabilities

     (5,987,576      (6,066,554
  

 

 

    

 

 

 
   W (5,611,943      (4,883,975
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (2,317,858      (2,458,789

 

  ii)

Equity and profit or loss sensitivity analysis for variable rate instruments

As of September 30, 2020 and December 31, 2019, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

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

September 30, 2020

          

Variable rate instruments (*)

   W (2,600      2,600        (2,600     2,600  

December 31, 2019

          

Variable rate instruments (*)

   W (2,847      2,847        (2,847     2,847  

 

  (*)

Financial instruments related to non-hedging interest rate swaps are excluded.

 

133


Table of Contents
24.

Financial Risk Management, Continued

 

  (b)

Credit risk

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

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

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

In relation to the impairment of financial assets subsequent to initial recognition, the Company recognizes the changes in expected credit loss (“ECL”) in profit or loss at each reporting date.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposures to credit risk as of September 30, 2020 and December 31, 2019 are as follows:

 

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

Financial assets carried at amortized cost

     

Cash and cash equivalents

   W 298,709        1,105,245  

Deposits in banks

     76,863        77,268  

Trade accounts and notes receivable, net

     4,433,619        3,565,860  

Non-trade receivables

     136,536        438,659  

Accrued income

     7,721        1,281  

Deposits

     12,197        13,125  

Short-term loans

     28,414        21,623  

Long-term loans

     19,765        40,827  

Long-term non-trade receivables

     14,666        19,899  
  

 

 

    

 

 

 
   W 5,028,490        5,283,787  
  

 

 

    

 

 

 

Financial assets at fair value through profit or loss

     

Convertible bonds

   W 1,544        1,544  

Derivatives

     80,977        49,676  
  

 

 

    

 

 

 
   W 82,521        51,220  
  

 

 

    

 

 

 

Financial assets at fair value through other comprehensive income

     

Debt instruments

   W 72        76  
  

 

 

    

 

 

 
   W 5,111,083        5,335,083  
  

 

 

    

 

 

 

 

134


Table of Contents
24.

Financial Risk Management, Continued

 

In addition to the financial assets above, as of September 30, 2020, the Company provides payment guarantees in connection with the principal amount of credit facilities amounting to USD 1,215 million (W1,425,301 million) (see note 14).

Trade accounts and notes receivable are insured in order for the Company to manage credit risk if they do not meet the Company’s internal credit ratings. Uninsured trade accounts and notes receivable are managed by continuous monitoring of internal credit rating standards established by the Company and seeking insurance coverage, if necessary.

 

  (c)

Liquidity risk

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

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

 

135


Table of Contents
24.

Financial Risk Management, Continued

 

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of September 30, 2020.

 

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

Non-derivative financial liabilities

                    

Borrowings

   W 5,364,958        5,642,788        875,067        393,193        1,599,263        2,775,265        —    

Bonds

     2,940,476        3,057,276        383,964        129,863        1,952,914        497,505        93,030  

Trade accounts and notes payable

     4,110,551        4,110,551        3,724,901        385,650        —          —          —    

Other accounts payable

     824,046        824,046        822,969        1,077        —          —          —    

Other accounts payable (enterprise procurement cards/tax payment cards)(*1)

     1,897,519        1,919,697        1,271,444        648,253        —          —          —    

Payment guarantee(*2)

     12,570        1,470,494        108,355        120,843        445,343        795,953        —    

Security deposits received

     12,220        12,220        5,590        260        6,370        —          —    

Lease liabilities

     8,283        8,496        4,512        1,412        1,889        683        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial liabilities

                    

Derivatives

   W 64,527        26,630        7,662        8,175        5,932        4,861        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 15,235,150        17,072,198        7,204,464        1,688,726        4,011,711        4,074,267        93,030  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents the amount of utility expenses and others paid by enterprise procurement cards and national taxes paid by tax payment cards and the outstanding payables are settled at the end of the billing cycle. The payments to the card company arise from operating activities of purchasing of goods and services thus the related cash flow is presented as operating activities.

(*2)

Contractual cash flows of payment guarantee is identical to timing of principal and interest payment and represent the maximum amount that the Company could be required to pay the guarantee amount.

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

 

136


Table of Contents
24.

Financial Risk Management, Continued

 

  (d)

Capital management

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

 

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

Total liabilities

   W 16,624,125       16,716,587  

Total equity

     9,799,018       10,666,093  

Cash and deposits in banks (*1)

     375,561       1,182,502  

Borrowings (including bonds)

     8,305,434       8,525,343  

Total liabilities to equity ratio

     170     157

Net borrowings to equity ratio (*2)

     81     69

 

(*1)

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

(*2)

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

 

137


Table of Contents
24.

Financial Risk Management, Continued

 

 

  (e)

Determination of fair value

(i) Measurement of fair value

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

i) Current assets and liabilities

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

ii) Trade receivables and other receivables

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

iii) Investments in equity and debt instruments

The fair value of marketable financial assets at FVTPL and FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using the results of fair value assessment performed by external valuation institution and others.

iv) Non-derivative financial liabilities

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

 

138


Table of Contents
24.

Financial Risk Management, Continued

 

  (ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed separate interim statements of financial position as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30, 2020      December 31, 2019  
(In millions of won)    Carrying amounts      Fair values      Carrying amounts      Fair values  

Financial assets carried at amortized cost

           

Cash and cash equivalents

   W 298,709        (*)        1,105,245        (*)  

Deposits in banks

     76,863        (*)        77,268        (*)  

Trade accounts and notes receivable

     4,433,619        (*)        3,565,860        (*)  

Non-trade receivables

     136,536        (*)        438,659        (*)  

Accrued income

     7,721        (*)        1,281        (*)  

Deposits

     12,197        (*)        13,125        (*)  

Short-term loans

     28,414        (*)        21,623        (*)  

Long-term loans

     19,765        (*)        40,827        (*)  

Long-term non-trade receivables

     14,666        (*)        19,899        (*)  

Financial assets at fair value through profit or loss

           

Equity instruments

   W 1,476        1,476        2,997        2,997  

Convertible bonds

     1,544        1,544        1,544        1,544  

Derivatives

     80,977        80,977        49,676        49,676  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 72        72        76        76  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W 64,527        64,527        20,592        20,592  

Convertible bonds

     847,563        847,563        858,385        858,385  

Financial liabilities carried at amortized cost

           

Borrowings

   W 5,364,958        5,384,550        5,374,125        5,438,952  

Bonds

     2,092,913        2,115,473        2,292,833        2,345,867  

Trade accounts and notes payable

     4,110,551        (*)        2,682,403        (*)  

Other accounts payable

     2,721,565        (*)        3,329,040        (*)  

Long-term other accounts payable

     —          (*)        1,062        (*)  

Payment guarantee liabilities

     12,570        (*)        16,502        (*)  

Security deposits received

     12,220        (*)        11,000        (*)  

Lease liabilities

     8,283        (*)        6,557        (*)  

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

139


Table of Contents
24.

Financial Risk Management, Continued

 

  (iii)

Fair values of financial assets and liabilities

i) Fair value hierarchy

Financial instruments carried at fair value are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques. The levels have been defined as follows:

 

   

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

 

   

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

 

   

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

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30, 2020  
(In millions of won)    Level 1      Level 2      Level 3      Total  

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          1,476        1,476  

Convertible bonds

     —          —          1,544        1,544  

Derivatives

     —          —          80,977        80,977  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 72        —          —          72  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          64,527        64,527  

Convertible bonds

     847,563        —          —          847,563  

 

     December 31, 2019  
(In millions of won)    Level 1      Level 2      Level 3      Total  

Financial assets at fair value through profit or loss

           

Equity instruments

   W —          —          2,997        2,997  

Convertible bonds

     —          —          1,544        1,544  

Derivatives

     —          —          49,676        49,676  

Financial assets at fair value through other comprehensive income

           

Debt instruments

   W 76        —          —          76  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W —          —          20,592        20,592  

Convertible bonds

     858,385        —          —          858,385  

 

140


Table of Contents
24

Financial Risk Management, Continued

 

  iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of September 30, 2020 and December 31, 2019 are as follows:

 

(In millions of won)    September 30, 2020      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Borrowings

   W  —          —          5,384,550       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Bonds

     —          —          2,115,473       
Discounted
cash flow
 
 
    
Discount
rate
 
 
(In millions of won)    December 31, 2019      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Borrowings

   W  —          —          5,438,952       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Bonds

     —          —          2,345,867       
Discounted
cash flow
 
 
    
Discount
rate
 
 

 

  iv)

The interest rates applied for determination of the above fair value as of September 30, 2020 and December 31, 2019 are as follows:

 

     September 30,
2020
    December 31,
2019
 

Borrowings, bonds and others

     2.32~4.37     1.87~3.56

 

141


Table of Contents
25.

Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the nine-month period ended September 30, 2020 are as follows:

 

                
                  Non-cash transactions        
(In millions of won)    January 1,
2020
     Cash flows
from
financing
activities
    Reclassification     Gain or loss on
foreign currency
translation
    Effective
interest
adjustment
     Others     September 30,
2020
 

Short-term borrowings

   W 347,340        4,739       —         (29     —          —         352,050  

Current portion of long-term borrowings and bonds

     1,117,218        (926,316     1,050,961       2,960       497        794       1,246,114  

Payment guarantee liabilities

     16,502        5,717       —         —         —          (9,649     12,570  

Long-term borrowings

     4,319,269        628,256       (751,341     20,429       —          —         4,216,613  

Bonds (*)

     2,741,516        49,949       (299,620     17,257       15,189        (33,634     2,490,657  

Lease liabilities

     6,557        (9,283     —         —         —          11,009       8,283  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   W   8,548,402        (246,938     —         40,617       15,686        (31,480     8,326,287  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

(*)

Others include gain on valuation of financial liabilities at fair value through profit or loss amounting to W33,634 million.

 

142


Table of Contents
26.

Related Parties and Others

 

  (a)

Related parties

Related parties as of September 30, 2020 are as follows:

 

Classification

  

Description

Subsidiaries(*)

  

LG Display America, Inc. and others

Associates(*)

  

Paju Electric Glass Co., Ltd. and others

Entity that has significant influence over the Company

  

LG Electronics Inc.

Subsidiaries of the entity that has significant influence over the
Company

  

Subsidiaries of LG Electronics Inc.

 

(*)

Details of subsidiaries and associates are described in note 8.

 

143


Table of Contents
26.

Related Parties and Others, Continued

 

  (b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

 

     For the three-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)     Sales and
others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 3,304,064        —          —          —          —          —    

LG Display Japan Co., Ltd.

     523,284        —          —          —          —          —    

LG Display Germany GmbH

     465,923        —          —          —          —          128  

LG Display Taiwan Co., Ltd.

     497,471        —          —          —          —          416  

LG Display Nanjing Co., Ltd.

     2,225        —          2,447        650        408,889        9,025  

LG Display Shanghai Co., Ltd.

     70,793        —          —          —          —          —    

LG Display Guangzhou Co., Ltd.

     3,274        —          1,980        —          486,754        8,706  

LG Display Shenzhen Co., Ltd.

     119,712        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     39        —          3,405        —          278,512        5,399  

LG Display (China) Co., Ltd.

     1,743        —          439,613        —          —          653  

LG Display Singapore Pte. Ltd.

     258,503        —          —          —          —          131  

L&T Display Technology (Fujian) Limited

     100,342        —          —          —          —          92  

Nanumnuri Co., Ltd.

     52        —          —          —          —          2,585  

Global OLED Technology LLC

     —          —          —          —          —          1,408  

LG Display Guangzhou Trading Co., Ltd.

     417,277        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     4,246        —          12,641        —          485,098        6,821  

Suzhou Lehui Display Co., Ltd.

     96,522        —          876        —          —          —    

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

     12,821        —          499        —          438,128        1,653  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   5,878,291        —          461,461        650        2,097,381        37,017  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

144


Table of Contents
26.

Related Parties and Others, Continued

 

     For the three-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)     Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

   W —          —          3        —          —          13  

AVATEC Co., Ltd.

     —          —          —          —          21,054        360  

Paju Electric Glass Co., Ltd.

     —          —          79,426        —          —          495  

YAS Co., Ltd.

     —          —          1,935        3,157        —          395  

Material Science Co., Ltd.

     —          —          24        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          81,388        3,157        21,054        1,263  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W   208,388        —          2,323        16,238        —          31,290  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 23,364        —          —          —          —          48  

LG Electronics Vietnam Haiphong Co., Ltd.

     110,146        —          —          —          —          379  

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

     —          —          —          —          —          105  

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

     6,044        —          —          —          —          15  

LG Electronics RUS, LLC

     —          —          —          —          —          80  

 

145


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the three-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)     Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics Egypt S.A.E.

   W 12,541        —          —          —          —          50  

LG Innotek Co., Ltd.

     1,164        —          4        —          —          17,776  

Qingdao LG Inspur Digital Communication Co., Ltd.

     400        —          —          —          —          —    

Others

     45,799        —          3        —          —          2,946  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 199,458        —          7        —          —          21,399  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   6,286,137        —          545,179        20,045        2,118,435        90,969  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

146


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)     Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 7,525,931        —          —          —          —          —    

LG Display Japan Co., Ltd.

     1,394,688        —          —          —          —          —    

LG Display Germany GmbH

     1,002,627        —          —          —          —          5,877  

LG Display Taiwan Co., Ltd.

     1,042,811        —          —          —          —          731  

LG Display Nanjing Co., Ltd.

     5,851        —          3,740        650        1,038,176        20,888  

LG Display Shanghai Co., Ltd.

     587,262        —          —          —          —          —    

LG Display Poland Sp. z o.o.

     8,392        —          —          —          —          —    

LG Display Guangzhou Co., Ltd.

     12,980        —          7,039        —          1,420,299        22,641  

LG Display Shenzhen Co., Ltd.

     508,945        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     145        —          7,240        —          741,379        25,280  

LG Display (China) Co., Ltd.

     3,541        —          1,101,726        —          —          1,864  

LG Display Singapore Pte. Ltd.

     827,192        —          —          —          —          369  

L&T Display Technology (Fujian) Limited

     259,824        —          —          —          —          369  

Nanumnuri Co., Ltd.

     156        —          —          —          —          14,000  

Global OLED Technology LLC

     —          —          —          —          —          4,076  

LG Display Guangzhou Trading Co., Ltd.

     860,819        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     14,221        —          54,374        —          1,226,621        20,246  

Suzhou Lehui Display Co., Ltd.

     191,373        —          1,023        —          —          —    

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

     24,885        —          1,792        —          782,234        4,523  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 14,271,643        —          1,176,934        650        5,208,709        120,864  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

147


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)     Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

   W —          —          33        —          —          32  

AVATEC Co., Ltd.

     —          200        —          —          54,869        776  

Paju Electric Glass Co., Ltd.

     —          7,739        217,803        —          —          2,121  

YAS Co., Ltd.

     —          300        5,263        5,509        —          2,046  

Material Science Co., Ltd.

     —          —          93        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          8,239        223,192        5,509        54,869        4,975  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 534,837        —          7,301        49,127        —          97,131  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 40,369        —          —          —          —          113  

LG Electronics Vietnam Haiphong Co., Ltd.

     236,066        —          —          —          —          825  

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

     —          —          —          —          —          777  

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

     22,081        —          —          —          —          32  

LG Electronics RUS, LLC

     —          —          —          —          —          235  

 

148


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2020  
                   Purchase and others  
(In millions of won)     Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics Egypt S.A.E.

   W 48,430        —          —          —          —          352  

LG Innotek Co., Ltd.

     3,925        —          657        —          —          58,494  

Qingdao LG Inspur Digital Communication Co., Ltd.

     7,065        —          —          —          —          —    

Others

     94,466        —          10        —          —          8,539  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 452,402        —          667        —          —          69,367  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 15,258,882        8,239        1,408,094        55,286        5,263,578        292,337  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

149


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the three-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 2,422,394        —          —          —          —          —    

LG Display Japan Co., Ltd.

     581,374        —          —          —          —          —    

LG Display Germany GmbH

     397,136        —          —          —          —          4,997  

LG Display Taiwan Co., Ltd.

     424,667        —          —          —          —          91  

LG Display Nanjing Co., Ltd.

     1,063        —          1,025        —          377,658        5,786  

LG Display Shanghai Co., Ltd.

     268,607        —          —          —          —          —    

LG Display Poland Sp. z o.o.

     —          —          —          —          —          418  

LG Display Guangzhou Co., Ltd.

     28,045        —          2,966        —          545,512        9,556  

LG Display Shenzhen Co., Ltd.

     81,253        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     186        —          4,866        —          394,088        1,150  

LG Display (China) Co., Ltd.

     4        —          386,990        —          —          1,609  

LG Display Singapore Pte. Ltd.

     288,844        —          —          —          —          779  

L&T Display Technology (Fujian) Limited

     86,349        —          2        —          —          457  

Nanumnuri Co., Ltd.

     47        —          —          —          —          5,519  

Global OLED Technology LLC

     —          —          —          —          —          1,475  

LG Display Guangzhou Trading Co., Ltd.

     191,060        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     2,449        —          57,528        —          364,306        4,711  

Suzhou Lehui Display Co., Ltd.

     45,647        —          101        —          —          —    

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

     7,299        —          883        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,826,424        —          454,361        —          1,681,564        36,548  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

150


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the three-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

   W —          —          11        —          —          —    

INVENIA Co., Ltd.(*1)

     —          —          262        1,018        —          195  

AVATEC Co., Ltd.

     2,639        —          —          —          17,720        196  

Paju Electric Glass Co., Ltd.

     —          —          87,211        —          —          1,107  

YAS Co., Ltd.

     —          —          1,225        —          —          839  

Material Science Co., Ltd.

     —          —          21        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        —          88,730        1,018        17,720        2,337  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 209,998        —          2,036        17,972        —          37,867  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 31,515        —          —          —          —          79  

LG Electronics Vietnam Haiphong Co., Ltd.

     76,909        —          —          —          —          219  

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

     —          —          —          —          —          149  

LG Electronics S.A. (Pty) Ltd.

     267        —          —          —          —          6  

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

     —          —          —          —          —          15  

LG Electronics RUS, LLC

     85        —          —          —          —          137  

 

151


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the three-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics Egypt S.A.E.

   W 22,027        —          —          —          —          2  

LG Innotek Co., Ltd.

     1,314        —          9,600        —          —          15,531  

LG Hitachi Water Solutions Co., Ltd.(*2)

     —          —          —          22,023        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     924        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     10,346        —          —          —          —          —    

HiEntech Co., Ltd.(*2)

     11        —          —          —          —          7,385  

Others

     13,278        —          —          —          —          3,669  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 156,676        —          9,600        22,023        —          27,192  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,195,737        —          554,727        41,013        1,699,284        103,944  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents transactions occurred prior to the Company’s disposal of the entire investments

(*2)

Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments

 

152


Table of Contents
26.

Related Parties and Others, Continued

 

 

     For the nine-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 6,449,061        —          —          —          —          5  

LG Display Japan Co., Ltd.

     1,736,365        —          —          —          —          5  

LG Display Germany GmbH

     1,231,933        —          —          —          —          11,557  

LG Display Taiwan Co., Ltd.

     1,065,101        —          —          —          —          373  

LG Display Nanjing Co., Ltd.

     9,004        —          3,650        —          1,087,038        20,911  

LG Display Shanghai Co., Ltd.

     748,674        —          —          —          —          —    

LG Display Poland Sp. z o.o.

     47        —          —          —          7,535        1,717  

LG Display Guangzhou Co., Ltd.

     80,978        —          9,640        —          1,553,397        24,251  

LG Display Shenzhen Co., Ltd.

     280,046        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     2,065        —          12,444        —          789,084        7,238  

LG Display (China) Co., Ltd.

     4        11,120        1,064,552        —          —          2,094  

LG Display Singapore Pte. Ltd.

     830,889        —          —          —          —          1,139  

L&T Display Technology (Fujian) Limited

     272,499        —          2        —          —          1,037  

Nanumnuri Co., Ltd.

     144        —          —          —          —          16,848  

Global OLED Technology LLC

     —          —          —          —          —          4,384  

LG Display Guangzhou Trading Co., Ltd.

     916,136        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     16,340        —          100,541        —          716,768        18,891  

Suzhou Lehui Display Co., Ltd.

     117,519        —          101        —          —          —    

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

     33,637        —          883        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,790,442        11,120        1,191,813        —          4,153,822        110,450  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

153


Table of Contents
26.

Related Parties and Others, Continued

 

     For the nine-month period ended September 30, 2019  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

   W —          —          23        —          —          1  

INVENIA Co., Ltd.(*1)

     —          180        1,024        8,700        —          297  

AVATEC Co., Ltd.

     2,639        265        —          —          54,939        616  

Paju Electric Glass Co., Ltd.

     —          6,057        267,065        —          —          3,209  

YAS Co., Ltd.

     —          1,000        4,795        11,908        —          2,822  

Material Science Co., Ltd.

     —          —          21        —          —          313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,639        7,502        272,928        20,608        54,939        7,258  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 739,773        —          8,580        150,797        —          102,164  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 76,950        —          —          —          —          119  

LG Electronics Vietnam Haiphong Co., Ltd.

     205,520        —          —          —          —          344  

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

     —          —          —          —          —          672  

LG Electronics S.A. (Pty) Ltd.

     2,384        —          —          —          —          15  

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

     1,266        —          —          —          —          65  

LG Electronics RUS, LLC

     361        —          —          —          —          1,562  

 

154


Table of Contents
26.

Related Parties and Others, Continued

 

     For the nine-month period ended September 30, 2019  
     Sales
and others
     Dividend
income
     Purchase and others  
(In millions of won)    Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics Egypt S.A.E.

   W 80,553        —          —          —          —          2  

LG Electronics (Kunshan) Computer Co., Ltd.

     385        —          —          —          —          —    

LG Innotek Co., Ltd.

     5,347        —          32,636        —          —          57,602  

LG Hitachi Water Solutions Co., Ltd.(*2)

     —          —          —          68,282        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     36,182        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     13,142        —          —          —          —          —    

HiEntech Co., Ltd.(*2)

     47        —          —          —          —          21,576  

Others

     22,614        —          —          —          —          9,245  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 444,751        —          32,636        68,282        —          91,202  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 14,977,605        18,622        1,505,957        239,687        4,208,761        311,074  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents transactions occurred prior to the Company’s disposal of the entire investments.

(*2)

Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments.

 

155


Table of Contents
26.

Related Parties and Others, Continued

 

  (c)

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

 

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

Subsidiaries

           

LG Display America, Inc.

   W 1,643,145        937,409        —          —    

LG Display Japan Co., Ltd.

     450,479        274,964        —          5  

LG Display Germany GmbH

     410,520        382,463        5        2,794  

LG Display Taiwan Co., Ltd.

     252,594        454,563        67        104  

LG Display Nanjing Co., Ltd.

     915        1,358        271,484        220,327  

LG Display Shanghai Co., Ltd.

     372,796        172,259        1        3  

LG Display Guangzhou Co., Ltd.

     5,603        12,465        206,496        313,756  

LG Display Guangzhou Trading Co., Ltd.

     500,189        351,322        —          —    

LG Display Shenzhen Co., Ltd.

     99,221        116,494        3        2  

LG Display Yantai Co., Ltd.

     41        —          157,289        149,715  

LG Display (China) Co., Ltd.

     1,741        22        161,303        112,053  

LG Display Singapore Pte. Ltd.

     123,440        298,132        42        21  

L&T Display Technology (Fujian) Limited

     69,884        46,375        169,212        199,349  

Nanumnuri Co., Ltd.

     —          —          1,807        3,866  

LG Display Vietnam Haiphong Co., Ltd.

     21,075        24,385        434,083        395,429  

Suzhou Lehui Display Co., Ltd.

     67,714        24,830        551        46  

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

     12,658        1,722        197,485        54,662  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,032,015        3,098,763        1,599,828        1,452,132  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

156


Table of Contents
26.

Related Parties and Others, Continued

 

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

Associates and their subsidiaries

           

WooRee E&L Co., Ltd.

   W —          —          9        8  

AVATEC Co., Ltd.

     —          —          4,942        1,029  

Paju Electric Glass Co., Ltd.

     —          —          64,544        62,853  

YAS Co., Ltd.

     —          —          5,124        4,533  

Material Science Co., Ltd.

     —          —          17        8  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          74,636        68,431  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

           

LG Electronics Inc.

   W 143,090        208,870        51,346        110,784  

 

157


Table of Contents
26.

Related Parties and Others, Continued

 

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

Subsidiaries of the entity that has significant influence over the Company

           

LG Innotek Co., Ltd.

   W 6        4        24,532        29,613  

LG Electronics Reynosa S.A. DE C.V

     —          —          45        62  

LG Electronics India Pvt. Ltd.

     16,711        6,113        —          —    

LG Electronics Vietnam Haiphong Co., Ltd.

     39,662        47,740        1        29  

LG Electronics RUS, LLC

     —          —          —          67  

LG Electronics Egypt S.A.E

     3,827        9,432        —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     317        6,456        —          —    

Others

     36,210        12,757        1,696        1,768  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 96,733        82,502        26,274        31,539  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,271,838        3,390,135        1,752,084        1,662,886  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

158


Table of Contents
26.

Related Parties and Others, Continued

 

Details of significant financing transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the nine-month period ended September 30, 2019 are as follows:

 

     2019  

(In millions of won)

Associates

   Loans      Collection
of loans
 

INVENIA Co., Ltd.(*)

   W 1,000        —    

 

(*)

Excluded from related parties due to disposal of equity investments during the year ended December 31, 2019.

 

159


Table of Contents
26.

Related Parties and Others, Continued

 

  (e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act, for the three-month and nine-month periods ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.

 

     For the three-month period
ended September 30, 2020
     For the nine-month period
ended September 30, 2020
     September 30, 2020  
(In millions of won)    Sales and
others
     Purchase
and others
     Sales and
others
     Purchase
and others
     Trade accounts and
notes receivable
and others
     Trade accounts and
notes payable and
others
 

LG International Corp. and its subsidiaries

   W 101,775        23,138        273,790        67,796        91,864        14,849  

LG Uplus Corp.

     —          478        —          1,593        —          173  

LG Chem Ltd. and its subsidiaries

     38        115,580        1,071        342,451        29        93,835  

S&I Corp. and its subsidiaries

     79        58,544        246        127,579        21,307        60,717  

Silicon Works Co., Ltd

     —          174,979        36        372,172        —          162,989  

LG Corp.

     —          15,705        —          40,122        8,483        5,110  

LG Management Development Institute

     —          2,078        —          5,662        3,480        363  

LG CNS Co., Ltd. and its subsidiaries

     —          28,691        —          63,365        —          22,056  

G2R Inc. and its subsidiaries

     —          11,826        —          21,833        —          9,472  

Robostar Co., Ltd.

     —          130        —          253        —          135  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 101,892        431,149        275,143        1,042,826        125,163        369,699  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

160


Table of Contents
26.

Related Parties and Others, Continued

 

(In millions of won)    For the three-month period
ended September 30, 2019
     For the nine-month period
ended September 30, 2019
     December 31,
2019
 
   Sales
and others
     Purchase
and others
     Sales
and others
     Purchase
and others
     Trade accounts and
notes receivable
and others
     Trade accounts
and notes payable and
others
 

LG International Corp. and its subsidiaries

   W 146,375        26,478        498,170        91,019        93,622        45,363  

LG Uplus Corp.

     —          621        —          1,756        —          208  

LG Chem Ltd. and its subsidiaries

     65        160,262        131        460,489        23        53,428  

S&I Corp. and its subsidiaries(*)

     84        58,504        251        304,372        21,307        85,312  

Silicon Works Co., Ltd

     —          207,055        92        513,561        —          88,355  

LG Corp.

     —          13,849        —          40,218        8,781        —    

LG Management Development Institute

     —          2,239        —          6,624        3,480        231  

LG CNS Co., Ltd. and its subsidiaries

     —          40,795        —          99,111        —          58,967  

LG Hausys Ltd

     —          —          1        1        —          —    

G2R Inc. and its subsidiaries

     —          17,364        —          19,251        —          29,540  

Robostar Co., Ltd.

     —          155        —          2,143        —          —    

Others(*)

     —          29,573        —          86,549        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 146,524        556,895        498,645        1,625,094        127,213        361,404  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Due to S&I Corp.’s disposal of partial interests in Serveone in May 2019, Serveone was reclassified from one of the S&I Corp.’s subsidiaries to associates. Accordingly, transactions with S&I Corp. after the disposal are classified as other.

 

161


Table of Contents
26.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

Compensation costs of key management 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  

Short-term benefits

   W 530        769        1,629        2,590  

Expenses related to the defined benefit plan

     83        103        262        450  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 613        872        1,891        3,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

162


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   LG Display Co., Ltd.   
   (Registrant)   
Date: November 16, 2020    By:   

/s/ Heeyeon Kim

  
      (Signature)   
   Name:   

Heeyeon Kim

  
   Title:    Head of IR / Vice President   

 

163