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 August 2011

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

65-228 Hangangno 3-ga, Yongsan-gu, Seoul 140-716, Republic of Korea

(Address of principal executive offices)

 

 

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

Form 20-F  x            Form 40-F  ¨

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

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

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

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

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

Yes  ¨            No  x

 

 

 


Table of Contents

SEMIANNUAL REPORT

(From January 1, 2011 to June 30, 2011)

THIS IS A TRANSLATION OF THE SEMIANNUAL 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.

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. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES IN THIS DOCUMENT.

 

Contents   

1.      Company

  

A.     Name and contact information

  

B.     Domestic credit rating

  

C.     Capitalization

  

D.     Voting rights

  

E.     Dividends

  

2.      Business

  

A.     Business overview

  

B.     Industry

  

C.     New businesses

  

3.      Major Products and Raw Materials

  

A.     Major products in 2011 (H1)

  

B.     Average selling price trend of major products

  

C.     Major raw materials

  

4.      Production and Equipment

  

A.     Production capacity and output

  

B.     Production performance and utilization ratio

  

C.     Investment plan

  

5.      Sales

  

A.     Sales performance

  

B.     Sales route and sales method

  

6.      Market Risks and Risk Management

  

A.     Market risks

  

B.     Risk management

  

7.      Derivative Contracts

  

A.     Currency risks

  

B.     Interest rate risks

  

8.      Major Contracts

  

9.      Research & Development

  

A.     Summary of R&D expenses

  

B.     R&D achievements

  

10.    Customer Service

  


Table of Contents

11.    Intellectual Property

  

12.    Environmental Matters

  

13.    Financial Information

  

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

  

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

  

C.     Consolidated subsidiaries

  

D.     Status of equity investment

  

14.    Audit Information

  

A.     Audit service

  

B.     Non-audit service

  

15.    Board of Directors

  

A.     Independence of directors

  

B.     Members of the board of directors

  

C.     Committees of the board of directors

  

16.    Information Regarding Shares

  

A.     Total number of shares

  

B.     Shareholder list

  

17.    Directors and Employees

  

A.     Directors

  

B.     Employees

  

Attachment: 1. Financial Statements in accordance with K-IFRS


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 65-228 Hangangno 3-ga, Yongsan-gu, Seoul 140-716, Republic of Korea, and our telephone number is +82-2-3777-1114. Our website address is http://www.lgdisplay.com.

 

  B. Domestic credit rating

 

Subject

  

Month of rating

   Credit
rating
  

Rating agency

(Rating range)

   January 2006    A1   

National Information & Credit Evaluation, Inc.

(A1 ~ D)

   June 2006      
   December 2006      
   June 2007      
   December 2007      

Commercial

   September 2008      

Paper

   December 2008      
  

 

   June 2006    A1   

Korea Investors Service, Inc.

(A1 ~ D)

   January 2007      
   June 2007      
   December 2007      
   September 2008      

 

   June 2006    AA-   

National Information & Credit Evaluation, Inc.

(AAA ~ D)

  

 

  
  

 

December 2006

   A+   
   June 2007      
   September 2008      
  

 

  

Corporate

  

 

July 2009

   AA-   
  

 

  

Debenture

  

 

October 2009

   AA-   
   February 2010      
   May 2010      
   December 2010      
   July 2011      
  

 

   June 2006    AA-   

Korea Investors Service, Inc.

(AAA ~ D)

  

 

  
  

 

January 2007

   A+   
   June 2007      
   September 2008      
  

 

  
  

 

July 2009

   AA-   
   December 2009      
   February 2010      
   May 2010      
   August 2010      
   February 2011      
   April 2011      
   July 2011      
  

 

  

 

October 2009

   AA-   

Korea Ratings, Inc.

(AAA ~ D)

   December 2009      
   August 2010      
   December 2010      
   February 2011      
   April 2011      
   July 2011      


Table of Contents
  C. Capitalization

(1) Change in capital stock (as of June 30, 2011)

(Unit: Won, Share)

 

Date

  

Description

   Change in number of
common shares
     Face amount
per share
 

July 23, 2004

  

Offering (1)

     33,600,000         5,000   

September 8, 2004

  

Follow-on offering (2)

     1,715,700         5,000   

July 27, 2005

  

Follow-on offering (3)

     32,500,000         5,000   

 

(1) ADSs offering: 24,960,000 shares (US$30 per share, US$15 per ADS) / Initial public offering in Korea: 8,640,000 shares ((Won)34,500 per share)
(2) ADSs offering: 1,715,700 shares ((Won)34,500 per share) pursuant to the exercise of greenshoe option by the underwriters
(3) ADSs offering: 32,500,000 shares (US$42.64 per share, US$21.32 per ADS)

(2) Convertible bonds (as of June 30, 2011)

(Unit: In millions of Won, Share)

 

Item

  

Content

Issue date

   April 18, 2007

Maturity

   April 18, 2012

Face amount (1)

   (Won)513,480

Conversion shares

   Registered common shares

Conversion period

   Convertible into shares of common stock during the period from April 19, 2008 to April 3, 2012

Conversion price (2)

   (Won)47,892 per share

Outstanding

   Face amount    (Won)61,618
   Number of convertible shares (2)    1,286,594 shares if all are converted

Remarks

  

- Registered form

- Listed on Singapore Exchange


Table of Contents
(1) Face amount translated from US$550 million at the noon buying rate of the Federal Reserve Bank of New York in effect on April 10, 2007 (which was the date the convertible bond purchase agreement was entered into), which was (Won)933.6 = US$1.00.
(2) Conversion price was adjusted from (Won)49,070 to (Won)48,760 and the number of convertible shares was adjusted from 10,464,234 to 10,530,762 following the approval by the shareholders of a cash dividend of (Won)750 per share at the annual general meeting of shareholders on February 29, 2008. Conversion price was further adjusted from (Won)48,760 to (Won)48,251 and the number of shares issuable upon conversion was adjusted from 10,530,762 to 10,641,851 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 13, 2009. Conversion price was further adjusted from (Won)48,251 to (Won)48,075 and the number of shares issuable upon conversion was adjusted from 10,641,851 to 10,680,811 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 12, 2010. In April 2010, certain holders of our US$550 million convertible bonds due 2012 exercised their put option for an aggregate principal amount of US$484 million and were repaid at 109.75% of their principal amount. The remaining US$66 million matures in 2012 at 116.77% of their principal amount. Accordingly, the number of shares issuable upon conversion changed from 10,680,811 to 1,281,697. Conversion price was further adjusted from (Won)48,075 to (Won)47,892 and the number of shares issuable upon conversion was adjusted from 1,281,697 to 1,286,594 following the approval by the shareholders of a cash dividend of (Won)500 per share at the annual general meeting of shareholders on March 11, 2011.

 

  D. Voting rights (as of June 30, 2011)

(Unit: share)

 

Description

   Number of shares  

1. Shares with voting rights [A-B]

     357,815,700   

A. Total shares issued

     357,815,700   

B. Shares without voting rights

     —     

2. Shares with restricted voting rights

     —     

Total number of shares with voting rights [1-2]

     357,815,700   

 

  E. Dividends

At the annual general meeting of shareholders on March 11, 2011, our shareholders approved a cash dividend of (Won)500 per share of common stock and payment of the dividends was made in April 2011.

Dividends during the recent three fiscal years

 

Description (unit)

   2010     2009     2008  

Par value (Won)

     5,000        5,000        5,000   

Profit for the period / Net income (million Won)

     1,002,648 (3)      1,067,947 (4)      1,086,896 (4) 

Earnings per share (Won) (1)

     2,802        2,985        3,038   

Total cash dividend amount (million Won)

     178,908        178,908        178,908   

Total stock dividend amount (million Won)

     —          —          —     

Cash dividend payout ratio (%)

     17.8        16.8        16.5   

Cash dividend yield (%) (2)

     1.3        1.3        2.2   

Stock dividend yield (%)

     —          —          —     

Cash dividend per share (Won)

     500        500        500   

Stock dividend per share (share)

     —          —          —     


Table of Contents
(1) Earnings per share is based on par value of (Won)5,000 per share and is calculated by dividing net income by weighted average number of common stock.
(2) 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 stock 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.
(3) Profit for the period based on separate K-IFRS.
(4) Net income based on non-consolidated Korean GAAP.

 

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, LTPS-LCD and OLED.

As of June 30, 2011, we operated TFT-LCD and OLED production facilities in Paju and Gumi, Korea and a LCD research center in Paju, Korea. We have also established subsidiaries in the United States, Europe and Asia.

As of June 30, 2011, our business consisted of (i) the manufacture and sale of LCD panels, (ii) the manufacture and sale of OLED panels and (iii) the manufacture and sale of television sets and monitors that utilize our LCD panels. Because our OLED, television set and monitor businesses represent an extremely small portion of our assets and revenues, we have included them as part of our LCD reporting business segment.

Financial highlights by business (based on K-IFRS)

(Unit: In billions of Won)

 

2011 (H1)

   LCD business  

Sales Revenue

     11,413   

Gross Profit

     684   

Operating Profit (Loss)

     (288

 

  B. Industry

 

  (1) Industry characteristics and growth potential

 

   

TFT-LCD technology is one of the widely used technologies in the manufacture of flat panel displays, and the demand for flat panel displays is growing. The flat panel display industry is characterized by entry barriers due to rapidly evolving technology, capital-intensive characteristics, and the significant investments required to achieve economies of scale, among other factors. There is intense competition among the players in the industry, and the industry’s production capacity, including ours, is continually increasing.


Table of Contents
   

The demand for LCD panels for notebook computers and desktop monitors has grown, to a degree, in tandem with the growth in the information technology industry. The demand for LCD panels for television sets has been growing as digital broadcasting is becoming more common and as LCD television has come to play an important role in the digital display market. In addition, markets for small- to medium-sized LCD panels, such as those used in mobile phones, P-A/V, medical applications, automobile navigation systems and e-books, among others, have shown continued growth.

 

   

The average selling prices of LCD panels may continue to decline with time irrespective of general business cycles as a result of, among other factors, technology advancements and cost reductions.

 

  (2) Cyclicality

 

   

The TFT-LCD business is highly cyclical. In spite of the increased demand for products, this industry has experienced periodic volatility caused by imbalances between supply and demand due to capacity expansion within the industry.

 

   

Intense competition and expectations of demand growth may lead panel manufacturers to invest in manufacturing capacity on similar schedules, resulting in a surge in capacity when production is ramped up at new fabrication facilities.

 

   

During such surges in production capacity, the average selling prices of display panels may decline. Conversely, demand surges and inability of supply to meet such demand may lead to price increases.

 

  (3) Market conditions

 

   

The TFT-LCD industry is highly competitive due largely to additional capacity expansion driven by TFT-LCD panel makers.

 

   

Most TFT-LCD panel makers are located in Asia.

 

  a. Korea: LG Display, Samsung Electronics (including a joint venture between Samsung Electronics and Sony Corporation), Samsung Mobile Display, Hydis Technologies

 

  b. Taiwan: AU Optronics, Chi Mei Innolux, CPT, Hannstar, etc.

 

  c. Japan: Sharp, Panasonic LCD, etc.

 

  d. China: SVA-NEC, BOE-OT, etc.

 

  (4) Market shares

 

   

Our worldwide market share for large-sized TFT-LCD panels based on revenue is as follows:

 

     2011 (H1) (1) (4)     2010 (2) (4)     2009 (3) (5)  

Panels for Notebook Computers (6)

     34.8     33.2     30.3

Panels for Monitors

     28.7     26.5     23.9

Panels for Televisions

     23.1     23.4     24.4
  

 

 

   

 

 

   

 

 

 

Total

     26.3     25.4     25.2
  

 

 

   

 

 

   

 

 

 


Table of Contents
(1) Source: 2011 Q2 DisplaySearch Quarterly Large-Area TFT LCD Shipment Report (advanced version with LED backlight
(2) Source: 2010 Q4 DisplaySearch Large-Area TFT LCD Shipment Report (advanced version with LED backlight).
(3) Source: 2009 Q4 DisplaySearch Large-Area TFT LCD Shipment Report.
(4) Based on TFT-LCD panels that are 9 inches or larger.
(5) Based on TFT-LCD panels that are 10 inches or larger.
(6) Includes panels for netbooks.

 

  (5) Competitiveness

 

   

Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, successful and timely investment and product development, cost competitiveness, success in marketing to our end-brand customers, component and raw material supply costs, foreign exchange rates and general economic and industry conditions.

 

   

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

 

   

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

 

   

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

 

   

As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing new technologies and products, including in the categories of 3D, touch screens and next generation displays. With respect to 3D technology, we have commenced mass production of high definition 3D panels with reduced degrees of “crosstalk,” or the degree of 3D image overlapping, of less than 1% (which is less than what the human eye can perceive). We have also acquired the technical skills and have established a supply chain management system that enables us to provide one-stop solutions to our customers with respect to touch module products. In addition, we have shown that we are technologically a step ahead of the competition by developing products such as 10.1-inch flexible LCDs, 2.6 mm thin televisions (the thinnest in the world at the time) and 19-inch flexible e-papers.

 

   

Moreover, we entered into long-term sales contracts with major global firms, including those in the United States and Japan, to secure customers and expand partnerships for technology development.

 

  C. New businesses

 

   

In order to meet the rapidly increasing market demand for large TFT-LCD panels, we decided in March 2010 to further expand P8 by investing in P83, which successfully commenced mass production in March 2011. In January 2011, we also decided to invest in a new eighth generation production facility, P98.

 

   

We also plan to strengthen our market position in future display technologies by strengthening our OLED business, accelerating the development of flexible display technologies and maintaining our leadership position in the LED backlight LCD market.


Table of Contents
   

We are making an effort to increase our competitiveness, including in the LCD component parts market, by forming cooperative relationships with suppliers and purchasers of our products. As part of this effort, in March 2005, we established a joint venture company, Paju Electric Glass Co., Ltd., with Nippon Electric Glass Co., Ltd. We invested (Won)14.4 billion in return for a 40% interest in Paju Electric Glass Co., Ltd. In November 2010 and April 2011, we invested an additional (Won)14.8 billion and (Won)4.4 billion, respectively, in Paju Electric Glass Co., Ltd. but the additional investments did not change our percentage interest in Paju Electric Glass Co., Ltd. In July 2008, we purchased 6,850,000 shares of common stock of New Optics Ltd. at a purchase price of (Won)9.7 billion, and in February 2010, we purchased an additional 1,000,000 shares of common stock of New Optics at a purchase price of (Won)2.5 billion. In addition, in February 2009, we purchased 3,000,000 shares of common stock of LIG ADP Co., Ltd. (formerly ADP Engineering Co., Ltd.) at a purchase price of (Won)6.3 billion. In May 2009, we purchased 6,800,000 shares of common stock of Wooree LED Co., Ltd. at a purchase price of (Won)11.9 billion. In November 2009, we purchased TWD212.5 million in convertible bonds from Everlight Electronics Co., Ltd. In December 2009, we purchased 420,000 global depositary shares representing 420,000 shares of Prime View International Co., Ltd’s common stock at a purchase price of US$9.9 million. In January 2010, we purchased 10.8 million shares of Can Yang Investment Limited representing a 15% interest at a purchase price of US$10.8 million. In October 2010, we invested an additional US$4.5 million and acquired 4.8 million additional shares of Can Yang Investment Limited, but the additional investment did not change our percentage interest in Can Yang Investment Limited.

 

   

In October 2008, we established a joint venture company, Suzhou Raken Technology Ltd., with AmTRAN Technology Co., Ltd., a Taiwan corporation. We invested US$10.4 million in return for a 51% interest in Suzhou Raken Technology Ltd. Suzhou Raken Technology Ltd. will supply both parties with TFT-LCD modules and TFT-LCD televisions. Through the establishment of this joint venture, we are able to further expand our customer base by securing a stable long-term panel dealer. It also allows us to produce LCD modules and LCD television sets in a single factory, which enables us to provide our customers with products that are more competitive both in terms of technology and price. In 2009 and 2010, we invested an additional US$58.7 million and US$14.5 million, respectively, in Suzhou Raken Technology Ltd., but the additional investments did not change our percentage interest in Suzhou Raken Technology Ltd.

 

   

As part of our strategy to expand our production capacity overseas, we signed an investment agreement and a joint venture agreement in November 2009 with the City of Guangzhou, China, to build an eighth-generation panel fabrication facility in China.

 

   

In December 2009, certain LG affiliates and we entered into a joint venture investment agreement and established a joint venture company, Global OLED Technology LLC, for purposes of managing the patent assets relating to OLED technology that we acquired from Eastman Kodak Company in December 2009. As of December 31, 2009, we had invested (Won)72.3 billion in return for a 49% equity interest in the joint venture company. In June 2010, we sold (Won)19.0 billion worth of our equity interest in the joint venture company. After such sale, our equity interest was reduced to 32.73%.

 

   

In December 2009, we acquired a 30.6% limited partnership interest in LB Gemini New Growth Fund No. 16. Under the limited partnership agreement, we have agreed to invest a total amount of (Won)30 billion in the fund, and as of December 31, 2010, we had invested (Won)8.3 billion in the fund. By becoming a limited partner of this fund, our aim is to seek direct investment opportunities as well as to receive benefits from the investment. In February 2011, we received a distribution of (Won)1.4 billion from the fund, and in March and April 2011, we invested an additional (Won)1.9 billion and (Won)3.1 billion, respectively, in the fund. In June 2011, we received a further distribution of (Won)0.7 billion as return of principal and (Won)0.9 billion as dividends and we invested an additional (Won)1.2 billion in the fund. The additional investments did not change our investment commitment amount of (Won)30 billion or our limited partnership interest in the fund, which remained at 30.6%.

 

   

In order to establish a production base for LCD modules, LCD television sets and LCD monitors, we entered into a joint investment agreement with Top Victory Investment Ltd. in January 2010 and established L&T Display Technology (Xiamen) Ltd. and L&T Display Technology (Fujian) Ltd. in Xiamen and Fujian, China, respectively. We invested (i) (Won)7.1 billion and acquired a 51% equity interest in L&T Display Technology (Xiamen) Ltd. and (ii) (Won)10.1 billion and acquired a 51% equity interest in L&T Display Technology (Fujian) Ltd.


Table of Contents
   

In May 2010, we completed the acquisition of the LCD module division of LG Innotek Co., Ltd. Through this acquisition, we expect to improve our module manufacturing process and simplify our supply chain which will increase our efficiency and competitiveness.

 

   

In August 2010, in order to strengthen our competitiveness in the LED backlight LCD market, we entered into a joint venture with Everlight Electronics Co., Ltd. and AmTRAN Technology Co., Ltd. and established Eralite Optoelectronics (Jiangsu) Co., Ltd., a company that specializes in LED packaging and manufacturing, in Suzhou, China. We invested US$4 million and acquired a 20% equity interest in Eralite Optoelectronics (Jiangsu) Co., Ltd.

 

   

In September 2010, in order to strengthen our OLED business, we acquired a 20% equity interest in YAS Co., Ltd., which develops and manufactures OLED deposition equipment components, at a purchase price of (Won)10 billion.

 

   

In November 2010, in order to strengthen our e-book business, we acquired a 100% equity interest in Image & Materials, Inc., a company that develops and manufactures e-book deposition equipment components, at a purchase price of (Won)35 billion. In June 2011, we invested an additional (Won)3 billion in Image & Materials, Inc.

 

   

In October 2010, in order to strengthen our competitiveness in the e-book market, we entered into a joint venture with Iriver Ltd. and established L&I Electronics Technology (Dongguan) Limited, a company that specializes in e-book manufacturing, in Dongguan, China. We invested US$2.6 million and acquired a 51% equity interest in L&I Electronics Technology (Dongguan) Limited.

 

   

In November 2010, in order to build Backlight-Module-System (BMS) lines that would help differentiate our technical skills from those of our competitors and increase our cost competitiveness, we entered into a joint venture with Compal Electronics, Inc., a Taiwanese company, and established LUCOM Display Technology (Kunshan) Ltd. in Kunshan, China. We invested US$2.3 million and acquired a 51% equity interest in LUCOM Display Technology (Kunshan) Ltd. In February and April 2011, we invested an additional US$ 3.1 million and US$2.3 million, respectively, in LUCOM Display Technology (Kunshan) Ltd., but the additional investments did not change our percentage interest in LUCOM Display Technology (Kunshan) Ltd.

 

   

In April 2011, in order to enhance the product quality and assist the local development of coaters, a component used in our TFT-LCD products, we invested (Won)20 billion and acquired a 16.6% interest in Narae Nanotech Corporation, a Korean equipment manufacturer. In June 2011, we invested an additional (Won)10 billion and acquired a further 7.7% interest in Narae Nanotech Corporation. As of June 30, 2011, we held a 23% equity interest in Narae Nanotech Corporation.


Table of Contents
3. Major Products and Raw Materials

 

  A. Major products in 2011 (H1)

We manufacture TFT-LCD panels, of which a significant majority is exported overseas.

(Unit: In billions of Won)

 

Business area

  

Sales types

  

Items (Market)

  

Specific use

  

Major trademark

   Sales (%)  

TFT-LCD

   Product/ Service/ Other Sales   

TFT-LCD

(Overseas (1))

   Panels for Notebook Computer, Monitor, Television, etc    LG Display      10,505 (92.0 %) 
     

TFT-LCD

(Korea (1))

   Panels for Notebook Computer, Monitor, Television, etc    LG Display      908 (8.0 %) 
              

 

 

 

Total

                 11,413 (100 %) 
              

 

 

 

- Period: January 1, 2011 ~ June 30, 2011.

 

(1) Based on ship-to-party.

 

  B. Average selling price trend of major products

The average selling price of LCD panels per square meter of net display area in the second quarter of 2011 increased by 6% from the first quarter of 2011 due to an increase in sales of 3D Film Patterned Retarder (FPR) panels, high-end monitors, smartbooks, smartphones and other high value-added products. However, there is no assurance that the average selling prices of LCD panels will not fluctuate in the future due to imbalances in supply and demand.

(Unit: US$ / m2)

 

Description

   2011 Q2      2011 Q1      2010 Q4      2010 Q3  

TFT-LCD panel (1)(2)

     743         702         707         785   

 

(1) Quarterly average selling price per square meter of net display area shipped.
(2) Includes 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)

 

Business area

  

Purchase
types

  

Items

  

Specific use

   Purchase
price
     Ratio (%)    

Suppliers

TFT-LCD

   Raw Materials    Glass   

LCD panel

manufacturing

     1,789         22.91  

Samsung Corning Precision

Glass Co., Ltd., Nippon Electric Glass Co., Ltd., etc.

      Backlight         2,404         30.77   Heesung Electronics Ltd., etc.
      Polarizer         1,202         15.39   LG Chem, etc.
      Others         2,416         30.93   -
           

 

 

    

 

 

   

Total

     7,811         100   -
           

 

 

    

 

 

   

- Period: January 1, 2011 ~ June 30, 2011.


Table of Contents
4. Production and Equipment

 

  A. Production capacity and output

 

  (1) Production capacity

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

(Unit: 1,000 Glass sheets)

 

Business area

  

Items

   Business place      2011 (H1) (1)      2010 (2)      2009 (2)  

TFT-LCD

   TFT-LCD      Gumi, Paju         3,936         7,509         6,219   

 

(1) Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth generation glass sheets) during the period multiplied by the number of months in the period (i.e., 6 months).
(2) Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth generation glass sheets) during the year multiplied by the number of months in a year (i.e., 12 months).

 

  (2) Production output

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

(Unit: 1,000 Glass sheets)

 

Business area

  

Items

   Business place      2011 (H1)      2010      2009  

TFT-LCD

   TFT-LCD      Gumi, Paju         3,428         6,490         5,231   

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

 

  B. Production performance and utilization ratio

(Unit: Hours)

 

Business place (area)

  

Available working hours

of 2011 (H1)

  

Actual working hours

of 2011 (H1)

   Average
utilization ratio
 

Gumi

(TFT-LCD)

  

4,344

(24 hours x 181 days)

  

4,344

(24 hours x 181 days)

     100.0

Paju

(TFT-LCD)

  

4,344

(24 hours x 181 days)

  

4,344

(24 hours x 181 days)

     100.0

 

  C. Investment plan

In connection with our strategy to expand our TFT-LCD production capacity, we estimate that we will incur capital expenditures on a cash out basis slightly in excess of (Won)4.0 trillion in 2011. Such amount is subject to change depending on business conditions and market environment.


Table of Contents
5. Sales

 

  A. Sales performance

(Unit: In billions of Won)

 

Business area

  

Sales types

  

Items (Market)

   2011 (H1)      2010      2009  

TFT-LCD

   Products, etc.    TFT-LCD   

Overseas (1)

     10,505         23,806         18,833   
        

Korea (1)

     908         1,706         1,205   
        

Total

     11,413         25,512         20,038   

 

(1) Based on ship-to-party.

 

  B. Sales route and sales method

 

  (1) Sales organization

 

   

As of June 30, 2011, each of our IT Business Unit, Television Business Unit and Mobile/OLED Business Unit had individual sales and customer support functions.

 

   

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

 

  (2) Sales route

One of the following:

 

   

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

 

   

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

 

  (3) Sales methods and sales terms

 

   

Direct sales and sales through overseas subsidiaries, etc. Sales terms are subject to change depending on the fluctuation in the supply and demand of LCD panels.

 

  (4) Sales strategy

 

   

To secure stable sales to major personal computer makers and leading consumer electronics makers globally. To increase sales of premium notebook computer products (including smartbooks), to strengthen sales of the high-end monitor segment (such as LED, IPS and slim monitors), to lead in the large and wide television market (including the LED television market) and to continually increase our market share in the 3D television market by utilizing film patterned retarder technology.

 

   

In the small- to medium-sized products segment, which is centered on high-end products applying IPS technology, to strengthen our business portfolio by developing a diverse range of products, such as mobile phone (including smart phone), smartbook, car navigation, e-book, industrial products (including aviation and medical equipment), etc.


Table of Contents
  (5) Purchase orders

 

   

Customers generally place purchase orders with us one month prior to delivery. Our customary practice for procuring orders from our customers and delivering our products to such customers is as follows:

 

   

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

 

6. Market Risks and Risk Management

 

  A. Market risks

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

The TFT-LCD industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel makers in Korea, Taiwan, China and Japan. Our main competitors in the industry include Samsung Electronics (including its joint venture with Sony), Samsung Mobile Display, Infovision, Hydis Technologies, AU Optronics, Chi Mei Innolux, Chunghwa Picture Tubes, HannStar, SVA-NEC, BOE-OT, Sharp, Hitachi, TMDisplay, Mitsubishi and Panasonic LCD.

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

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

 

  B. Risk management

The average selling prices of display panels have declined in general and could continue to decline with time irrespective of industry-wide cyclical fluctuations. Certain contributing factors for this decline will be beyond our ability to control and manage. However, in anticipation of such price decline we have continued to develop new technologies and have implemented various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we have entered into cross-currency interest rate swap contracts and foreign currency forward contracts.

 

7. Derivative Contracts

 

  A. Currency risks

 

   

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

 

   

We generally use forward exchange contracts with a maturity of less than one year to hedge against currency risks.


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, the Japanese Yen and the Chinese Renminbi.

 

   

In respect of other monetary assets and liabilities denominated in foreign currencies, we ensure that our net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to address short-term imbalances. In addition, we also adjust the factoring volumes of foreign currency denominated receivables and utilize usances as means of settling accounts payables relating to capital expenditures for our facilities, in response to currency fluctuations.

 

  B. Interest rate risks

Our exposure to interest rate risks relates primarily to our long term debt obligations. To the extent necessary, we hedge our interest rate risks by entering into interest swap contracts. As of June 30, 2011, we had no interest swap contracts outstanding.

 

8. Major contracts

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

 

Type of agreement

  

Name of party

  

Term

  

Content

Technology licensing agreement

   Semiconductor Energy Laboratory    October 2005 ~    Patent licensing of LCD and OLED related technology
   Fergason Patent Properties    October 2007 ~    Patent licensing of LCD driving technology
   Hewlett-Packard    January 2011 ~    Patent licensing of semi-conductor device technology

Technology licensing/supply agreement

   Chunghwa Picture Tubes    November 2007 ~    Patent cross-licensing of LCD technology
   Hannstar Display Corporation    November 2009 ~    Patent cross-licensing of LCD technology

 

9. Research & Development

 

  A. Summary of R&D expenses

(Unit: In millions of Won)

 

Account

   2011 (H1)     2010     2009  

Material Cost

     289,874        616,072        400,467   

Labor Cost

     195,050        285,212        191,507   

Depreciation Expense

     95,000        93,365        89,459   

Others

     88,837        122,619        92,905   

Total R&D Expense

     668,761        1,117,268        774,338   

Accounting

Treatment

   Selling & Administrative Expenses      134,779        264,073        168,081   
  

Manufacturing Cost

     463,336        717,848        505,585   
  

Development Cost (Intangible Assets)

     70,646        135,347        100,672   

R&D Expense / Sales Ratio

[Total R&D Expense÷Sales for the period×100]

     5.9     4.4     3.8


Table of Contents
  B. R&D achievements

[Achievements in 2009]

 

  1) Developments of 15.6-inch, 18.5-inch HD monitors for emerging market

 

   

Achieving cost reduction by focusing on basic functions and by applying GIP and DRD

 

  2) Development of 22-inch WSXGA+ monitor applying White LED backlight

 

   

Development of our first environmentally friendly slim model (14.5mm in thickness)

 

   

Reduces power consumption by 47% compared to conventional CCFL model by applying White LED backlight

 

  3) Development of 24-inch WUXGA+ monitor applying GIP

 

   

Development of the world’s first monitor applying IPS GIP technology

 

   

Increased cost competitiveness by applying 960ch source driver integrated circuits chip, which reduces the number of integrated circuits: 8ea g 6ea

 

  4) Development of 55/47/42-inch FHD LED models

 

   

Development of “Direct thicker” LED model MP

 

   

Realization of TM240Hz

 

  5) 240Hz driving technology development

 

   

Development of the world’s first 1 Gate 1 Drain 240Hz driving technology

 

  6) Development of low voltage liquid crystal development

 

   

Improving contrast ratio by 2.7%

 

   

Decreases voltage used in liquid crystals reducing circuit heat; decreases voltage by 6.9%

 

  7) Development of Ez (Easy) Gamma technology

 

   

Minimize Gamma difference by using new measuring algorithm: 2.2±0.6 g 2.2±0.25

 

  8) Development of 22-inch White+ technology

 

   

Increases transmissivity by 66% by using White+ Quad type pixel structure

 

  9) Development of 55FHD direct slim LED model

 

   

Development of the world’s first direct-mounted 16.3mm depth slim LCM

 

   

Realization of 240 block local dimming and Trumotion 240Hz

 

  10) Development of 42HD GIP +TRD technology

 

   

The world’s first application of the 42HD GIP + TRD structure

 

   

Removal of gate drive integrated circuits: 3ea g 0ea

 

   

Reduction in source drive integrated circuits: 6ea g 2ea


Table of Contents
  11) Development of TV3 CR5 Color PR

 

   

Realization of 100% BT709 reiteration rate by applying RGB Color Locus

 

   

Achieving a 5% increase in CR by decreasing size of Color PR pigment

 

  12) Development of the world’s first slim 27W FHD TN monitors

 

   

Reduces thickness by applying edge-mounted backlight: 37.2t g 21.6t

 

   

Reduces power consumption by 60% compared to conventional models by applying 4Lamp

 

   

Realization of MPRT 8ms by applying BDI technology

 

  13) Development of the world’s first 25W FHD TN new size monitors

 

   

Development of new aspect ratio model: 16:9 wide-format

 

   

Reduction in the number of driver integrated circuits by applying 960ch Source Driver: 8ea g 6ea

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

  14) Development of 16:9 wide-format power consumption saving monitors (200W HD+, 215W FHD, 230W FHD)

 

   

Reduces power consumption by 40% compared to conventional models by applying 2Lamp

 

   

Slim design which reduces thickness: 17.0t g 14.5t

 

   

To meet Energy Star 5.0 standards

 

  15) Development of the world’s first 22-inch WSXGA+ DRD (Double Rate Driving) monitors

 

   

A 50% reduction in source driver integrated circuits by applying Double Rate Driving technology: 8ea g - 4ea

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

   

Application of optimum thin-film transistor structure for Double Rate Driving monitors

 

  16) Development of the world’s first 23W e-IPS monitors

 

   

Slim design: Reduces thickness by applying edge-mounted backlight: 35.7t g 17t

 

   

Reduces power consumption by 50% compared to conventional model by applying 4Lamp

 

   

Realization of high aperture ratio by applying UH-IPS technology

 

   

Reduction in the number of integrated circuits by applying 960ch source driver: 8ea g 6ea

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

   

To meet Energy Star 5.0 standards

 

  17) Development of high efficiency backlight technology

 

   

Removal of DBDEF-D Sheet by increasing backlight luminance level by more than 30% g development of high efficiency lamp and improvement of optics sheet optical efficiency

 

  18) Development of GIP and high aperture ratio technology for QHD IPS model

 

   

Stable GIP output in QHD IPS models

 

   

Maximizing transmissivity by applying UH-IPS technology and asymmetric pixel design


Table of Contents
  19) Development of three-dimensional display technology using the shutter glasses method.

 

   

Realization of stable rate of 172Hz

 

   

Realization of 4port low voltage differential signaling frequencies at a rate of 400MHz

 

   

Realization of ODC (Over Driver Circuit) tuning of GTG 3.5ms which is optimum for three-dimensional display

 

  20) Development of 17.1-inch wide-format slim (flat type) panel applying COG (Chip On Panel) chip, our largest slim (flat type) panel

 

   

Development of our largest size slim (flat type) model (previously, our largest model was the 15.4-inch wide-format)

 

   

Reduction in thickness: 6.5mm g 4.3mm

 

  21) Development of new high resolution 101W model (1024x600, 1366x768)

 

   

Achieving higher resolution: 1024x576 g1024x600, 1366x768

 

  22) Development of world’s first 17.3-inch HD+ LED panel for notebook computers

 

   

New size and resolution for 16:9 wide-format

 

   

Existing model: 17.1-inch WXGA+ 1400x900 / New model: 17.3-inch HD+ 1600x900

 

  23) Development of 13.3-inch HD LED panel for notebook computers

 

   

New size and resolution for 16:9 wide-format

 

  24) Development of world’s first 14.0-inch HD+ LED panel for notebook computers

 

   

New size and HD+ resolution (1600x900) for 16:9 wide-format

 

  25) Development of world’s first 15.6-inch HD+ LED panel for notebook computers

 

   

First HD+ resolution (1600x900) for 16:9 wide-format

 

  26) Development of world’s first 15.6-inch FHD LED panel for notebook computers

 

   

First FHD resolution (1920x1080) for 16:9 wide-format

 

  27) Development of the first Green PC models (13.3-inch, 14.0-inch, 15.6-inch)

 

   

First models applying Green product concept (halogen free, low power consumption)

 

  28) Development of DRD (Double Rate Driving) technology applying COG (Chip on Glass)

 

   

Development of the first COG that applies DRD technology (a 50% reduction in the number of COG drive integrated circuits)

 

  29) Development of 10.1-inch SD (1024 x 600) model for netbooks

 

   

Improved resolution: 1024 x 576g1024 x 600

 

   

Reduction in cost by applying COG instead of COF

 

  30) Development of 10.1-inch HD (1366 x 768) model for netbooks

 

   

Highest resolution among 10.1-inch models

 

   

Reduction in cost by applying GIP technology

 

  31) Development of 17.1-inch WUXGA flat type model

 

   

Development of largest flat type model (previously, largest model was 15.4-inch)

 

   

The thinnest among 17.1-inch models

 

   

Reduction in thickness: 6.5t g 4.3t


Table of Contents
  32) Developments of 11.6-inch HD monitor for netbooks

 

   

Development of largest/ highest resolution monitor for netbooks

 

   

Reduction in cost by applying GIP technology

 

  33) Development of low-cost 26-inch and 32-inch HD model for televisions

 

   

World’s first monitor without a cover shield

 

   

Application of sheet type support side

 

   

Reduction in cost by applying low-cost single bottom covers for mold frames

 

  34) Development of large-sized (42-inch/47-inch) edge type LED LCD model for televisions

 

   

Development of our first model for televisions applying edge type LED backlight (mass production commenced in September 2009)

 

   

Slim depth (11.9mm in thickness) & narrow bezel (18mm in thickness)

 

  35) Development of world’s first S/D-IC + Tcon merging technology applicable to television monitors

 

   

Minimizing size of printed circuit board by applying 1380ch S/D-IC + ASIC technology and removing ASIC chip

 

   

A 49% cost reduction in manufacturing circuits

 

  36) Achieving a full product line-up for netbook monitors

 

   

A full product line-up that covers the full spectrum of netbook monitor sizes from 8.9-inch to 11.6-inch models

 

  37) Development of our first flat type monitor for netbooks

 

   

Development of 11.6-inch flat type HD monitor

 

  38) Development of new LED-applied model utilizing vertical LED array technology

 

   

Development of 15.6-inch HD model applying vertical LED array technology (technology applied in existing models: horizontal LED array)

 

   

Reduction in power consumption and raw material costs

 

  39) Development of world’s first 21.5W FHD IPS monitor applying white LED backlight technology

 

   

Application of environmentally friendly components including white LED backlight and halogen free parts

 

   

Achievement of high luminance (more than 330nit) by applying high efficiency white LED backlight

 

   

A 100% sRGB coverage

 

  40) Development of world’s first 27W QHD IPS monitor applying white LED backlight technology

 

   

Application of environmentally friendly components including white LED backlight and halogen free parts

 

   

Achievement of high luminance (more than 380nit) by applying high efficiency white LED backlight

 

   

A 100% sRGB coverage

 

   

Realization of high resolution (2560x1440)

 

   

Removal of gate driver integrated circuits by applying GIP technology


Table of Contents
  41) Development of world’s first 19-inch WXGA monitor applying DRD (Double Rate Driver)

 

   

A 50% reduction in the number of source driver integrated circuits by applying DRD (Double Rate Driving) technology

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

   

Optimization of TFT design structure for DRD (Double Rate Driver) technology

 

  42) Development of world’s first 22W e-IPS monitor applying GIP technology

 

   

Achievement of high aperture ratio by applying UH-IPS technology

 

   

Reduction in the number of source driver integrated circuits by applying 960 channel chip (8eag6ea)

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

  43) Development of world’s first QHD new high resolution monitor (27W QHD)

 

   

Achievement of high resolution (2560 x 1440)

 

   

Maximization of aperture ratio applying UH-IPS technology and elimination of gate driver integrated circuits by applying GIP technology

 

   

Achievement of high luminance and sRGB coverage of 100% applying high efficiency white LED

 

  44) Development of world’s first monitor applying GIP, DRD (Double Rate Driver) and I-VCOM monitor (185W HD)

 

   

50% reduction in the number of source driver integrated circuits by applying DRD (Double Rate Driving) technology

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Elimination of DBEF Optical sheet by applying I-VCOM technology and optical efficiency improvement in backlight

 

  45) Development of shutter glasses type three-dimensional monitor with full high definition

 

   

172Hz operation frame rate

 

   

Highest data interface speed of over 400MHz in 4port LVDS interface and achievement of GTG 3.5ms by optimal tuning of ODC (Over Driving Circuit)

 

  46) One layer vertical LED monitor development and reinforcement of monitor product line up (200W HD+, 215W FHD, 230W FHD)

 

   

Minimization of the number of LED PKG applying vertical array structure

 

   

Elimination of DBEF Sheet applying two-in-one LED PKG

 

   

Slim design: optimization of mechanical structure

 

  47) Development of world’s first notebook monitor applying 2ea Sheet Backlight

 

   

Achieving cost competitiveness by switching from conventional 3~4ea sheet to 2ea complex sheet backlight (with the Diffuser Sheet eliminated)


Table of Contents

[Achievements in 2010]

 

  48) Development of 9.7-inch AH-IPS model for Apple’s i-Pad.

 

   

Development of the world’s first IPS Tablet

 

   

Achieving the following viewing angles by applying AH-IPS: top (80°) / bottom (80°) / left (80°) / right (80°)

 

  49) Development of second Green PC products (13.3-inch, 14.0-inch and 15.6-inch in high-definition)

 

   

Thin and light; low electricity consumption thereby increasing battery life

 

   

Development of Company-led flat product market

 

  50) Development of world’s first TruMotion 480Hz product (47-inch and 55-inch in full high-definition)

 

   

World’s first application of 240hz driving technology and scanning technology to achieve TruMotion 480Hz.

 

   

50% reduction in source driver integrated circuits (from 16ea to 8ea) by applying 1 gate 1 drain technology

 

  51) World’s first full high-definition 47-inch three-dimensional display panels using Glass Patterned Retarder (GPR) technology

 

   

Achieving full high-definition for three-dimensional display panels using GPR technology

 

  52) Development of our first large-sized display panels viewable in three-dimension using shutter glasses (42-inch, 47-inch, 55-inch in full high-definition)

 

   

Achieving high aperture ratio by applying S-IPS V technology

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

   

Reduction in the number of integrated circuits (from 8ea to 6ea) by applying 960Ch source driver integrated circuits

 

  53) World’s first LCD product which uses the LCD monitor’s bottom cover as the back cover of a television set (32-inch, 37-inch and 42-inch in full high-definition)

 

   

Removal of the television set back cover by replacing it with the LCD monitor’s bottom cover. Co-designed with a third party

 

  54) Development of 42-inch and 47-inch full high-definition display panels for television to be sold in emerging markets

 

   

Focusing on basic functions and removing functions that are costly

 

   

Achieving cost reduction by applying GIP technology

 

  55) Development of intra interface technology for large-sized, high resolution, high frequency display panels

 

   

Improved data transmission rate (from 660Mbps to 1.6Gbps)

 

   

Developing slim PCBs by decreasing the number of transmission lines

 

  56) Development of our first 21.5-inch and 26-inch full high-definition Edge LED products

 

   

Application of 21.5-inch, 26-inch full high-definition TV LED BL and mid-sized full high-definition model Slim TCON (176Pin g 88Pin)

 

  57) Development of our first 32 high-definition Edge LED product

 

   

Application of 32-inch high-definition TV Edge LED BL

 

  58) Development of our first 37-inch full high-definition M240Hz product

 

   

Development of 37-inch full high-definition 240Hz panel. Development and mass production of MEMC 240Hz with TCON model.


Table of Contents
  59) Development of 240Hz panel for LG Electronics’ Borderless TV

 

   

Development of Narrow Bezel 240Hz panel (Bezel 14mm g 7mm) for LG Electronics’ Borderless TV

 

  60) Development of the world’s first slim 23W full high-definition monitor in IPS mode

 

   

Slim design by applying slim-type LED backlight (thickness: 14.5t g 11.5t)

 

   

Cost saving by applying low voltage liquid crystal

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

  61) Development of the world’s first slim 185W high-definition monitor in TN mode

 

   

Slim design by applying slim-type LED backlight (thickness: 11.5t g 9.7t)

 

   

50% reduction in source driver integrated circuits by applying DRD (Double Rate Driving) technology

 

   

Elimination of optical sheet by applying new TFT structure technology (I-VCOM)

 

   

Removal of gate driver integrated circuits by applying GIP technology

 

  62) Development of 42-inch, 47-inch and 55-inch full high-definition monitors applying low cell gap (3.1 g 2.8um) technology

 

   

Enhanced 3D performance (3D CrossTalk 10.x% g 5.x%)

 

   

World’s first application of this technology in 42-inch, 47 inch and 55-inch full high-definition products

 

  63) Development of ultra slim 0.2t glass 12.1-inch notebook computer

 

   

Realization of ultra slim product by applying 0.2t glass and flat screen backlight structure

 

  64) Development of world’s first ultra slim 19SX TN monitor

 

   

Slim design by applying slim type LED backlight (thickness: 15.5 g 9.9t)

 

   

50% reduction (6ea to 3ea) in the number of source driver integrated circuits by applying DRD (Double Rate Driving) technology

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

  65) Development of 215FHD e-IPS monitor products applying LED PKG

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Realization of 2 sheet structure by adopting I-VCOM resulting in increased transmittance and backlight luminance

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Minimization of LCM thickness by applying thin LED array structure (14.5t g 10.2t)

 

  66) Development and application of LED PKG in 215FHD TN monitor products

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Elimination of DBEF sheet by adopting I-VCOM resulting in increased transmittance and backlight luminance

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Minimization of LCM thickness by applying thin LED array structure (14.5t g 10.2t)


Table of Contents
  67) Development of world’s first slim TN monitor (185W HD, 20W HD+, 215W/23W FHD)

 

   

Developing ultra slim monitor by cooperating with set makers in the design process (SET standard: over 20t g 12.9t)

 

   

Minimization of LCM thickness by applying thin LED array structure (11.5t g 8.2t)

 

   

Simplification of circuit by developing T-con + Scaler 1chip

 

  68) Development of world’s first ultra slim 215W FHD TN monitor

 

   

Developing ultra slim monitor by cooperating with set makers in the design process (SET standard: 12.9t g 7.2t)

 

   

Minimization of LCM thickness by applying thin LED array structure (8.2t g 6t) 104) Development of the world’s first 3D FPR type 42-inch, 47-inch and 55-inch full high definition panels

 

   

Improved 3D performance (cross talk 1.0% i, 3D luminance 170 nit)

 

  69) Development of our first 42-inch, 47-inch and 55-inch full high definition panels with built-in 3D formatters

 

   

Development of our first products with built-in MEMC and 3D formatters

 

  70) Development of the world’s first real 240Hz applying GIP driving technology

 

   

First to develop real 240Hz applying GIP driving technology

 

   

Reduced the number of driver integrated circuits by applying 960ch Source Driver: 8ea g 6 ea

 

  71) Development of panels for Macbook Air

 

   

Development and mass production of 116HD, 133 WXGA+ panels

 

   

Application of Z-inversion technology for low energy consumption

 

  72) Introduction of the world’s first high definition shutter glasses type 3D notebook product (17.3 inch full high definition)

 

   

Development of 172Hz high recharging speed notebook LCD panel

 

   

Development of Timing Controller (TC) driving technology

 

  73) The first all-in-one touch panel notebook from an LCD panel manufacturer (15.6 inch high definition add-on touch notebook)

 

   

The world’s first large size (15.6-inch) notebook panel to receive Win7 Touch certification (received on July 23, 2010)

 

   

The world’s first LCD and touch panel integrated add-on touch module developed by an LCD panel manufacturer

 

  74) Introduction of the world’s first Micro Film 3D notebook (15.6-inch full high definition)

 

   

The world’s first 3D FPR type notebook (developed timely to win market share in the 3D market)

 

  75) Development of the world’s first 240Hz 23W IPS monitor

 

   

The world’s first to realize 240Hz by application of 120Hz panel driving and scanning technologies

 

   

Achievement of Motion Picture Response Time (MPRT) of 8ms


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  76) Development of the world’s first add-on infrared camera type 215W IPS monitor

 

   

Realization of thin LCM (20.5t) by application of the world’s first add-on infrared camera

 

   

Improved touch capabilities (dead zone free and multi-touch) and the first in the world to receive Win 7 Logo certification

 

   

Touch location auto correction by applying auto calibration

 

  77) Development of 20-inch high definition and 23-inch full high definition e-IPS monitor products applying widescreen LED PKG

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Cost reduction and lower power consumption (20% reduction for driver integrated circuits) by using low voltage driver integrated circuits

 

   

Minimization of LCM thickness by applying thin LED array structure (for 20-inch high definition panels: 14.5t g 10.2t)

 

  78) Development of 20-inch high definition and 23-inch full high definition TN monitor products applying widescreen LED PKG

 

   

Reduction in the number of LED and LED array cost through optimization of LED PKG’s beam and size

 

   

Elimination of DBEF sheet by adopting I-VCOM resulting in increased transmittance and backlight luminance (for 20-inch high definition monitors)

 

   

50% reduction in the number of source driver integrated circuits by applying DRD technology (for 23- inch full high definition panels)

 

   

Elimination of gate driver integrated circuits by applying GIP technology

 

   

Minimization of LCM thickness by applying thin LED array structure (11.5t g 10.2t)

[Achievements in 2011]

 

  79) Introduction of glass-free mobile 3D product (4.3-inch WVGA)

 

   

Development and preparation for mass production of our first glass-free 3D product (utilizing barrier cell)

 

  80) Introduction of the world’s first 12.5-inch AH-IPS notebook product

 

   

Development of the world’s first 12.5-inch notebook utilizing AH-IPS technology

 

   

Achievement of a maximum circuit logic power of 1.0W

 

   

Development of a slim and light AH-IPS model (development of a model that utilizes IPS and flat PCB)

 

  81) Introduction of an integrated 14.0-inch touch panel notebook product

 

   

Development of a 14.0-inch touch panel notebook product as part of our plan to develop and expand our integrated touch panel products portfolio

 

  82) Introduction of our 15.6-inch dream color IPS notebook product

 

   

Development of a notebook utilizing H-IPS technology

 

   

Realization of a 100% color reproduction rate by applying RGB LED technology

 

   

Realization of 1.073G color by applying 10-bit color depth technology

 

  83) Development and mass production of 9.7-inch LCD panels for i-Pad 2

 

   

Application of AH-IPS and slim LCD technology

 

   

Decreased thickness by 20% and weight by 7% compared to LCD panel for i-Pad 1


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  84) Development of the world’s first 3D FPR 23-inch FHD TN monitor product

 

   

Minimization of flicker / crosstalk by applying FPR technology

 

   

Minimization of cost increase by applying one layer 3D film

 

   

Realization of high luminance 3D images (two times the luminance compared to images from monitors utilizing shutter glass technology)

 

  85) Introduction of our first 50-inch Cinema TV product

 

   

Application of 21:9 screen display ratio (2560 x 1080 resolution)

 

   

Application of 960ch + EPI source driver integrated circuits for optimal high-resolution

 

   

Application of scanning technology under the Horizontal 2Edge structure

 

  86) Development of the world’s first 3D FPR 23-inch IPS FHD monitor product

 

   

Minimization of flicker / crosstalk by applying FPR technology

 

   

Minimization of cost increase by applying one layer 3D film

 

   

Realization of high luminance 3D images (two times the luminance compared to images from monitors utilizing shutter glass technology)

 

  87) Development and introduction of the world’s first 15.6-inch HD FPR 3D notebook product

 

   

Realization of the world’s first 15.6-inch HD FPR 3D product

 

   

Realization of high luminance 3D images (two times the luminance compared to images from notebooks utilizing shutter glass technology)

 

   

Minimization of cost increase by applying one layer 3D film

 

  88) Development and introduction of the world’s first 17.3-inch Dream Color AH-IPS notebook product

 

   

Development of the world’s first 17.3-inch notebook computer applying AH-IPS

 

   

Realization of Dream Color (100% color reproduction rate) by applying RGB LED

 

   

Realization of 1.073G color by applying Color Depth 10-bit technology

 

   

Realization of 89 degrees viewing angle (up/down/left/right) by applying IPS technology

 

  89) Development and introduction of a 15.6-inch HD product with the world’s lowest (at the time) power consumption from logic circuit (0.5W).

 

   

Application of DRD Z-inversion, HVDD and low voltage process

 

   

Application of high intensity LED (2.3cd) and Vcut light guide plate

 

   

Increase in battery life due to logic circuit power consumption reduction

 

  90) Development of the world’s smallest (at the time) Narrow Bezel Notebook Model

 

   

The first in the world to apply 4.5 mm narrow bezel

 

   

Formation of camera hole by B/M mask patterning

 

  91) Development of a new 10.1-inch WX smartbook LCD

 

   

Development of the our first 10.1-inch WXGA LCD following in the footsteps of our 9.7-inch XGA model

 

   

Realization of reduced power consumption, high permeability and increased viewing angle by application of IPS technology.


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10. Customer Service

In order to highlight the importance of creating customer value, we have formulated a roadmap toward creating customer value and have shared this information with all of our employees. Through our “Voice of Customer” campaign, we have responded to customer feedback including complaints, suggestions, praises, enquiries and requests as soon as they were made and we have made efforts to change any negative feedback made by a customer into a positive feedback through such prompt response. In addition, in order to support our customers, we have established IPS camps and have cooperated with our customers to promote IPS technology. Furthermore, we have hosted “Why LGD” campaigns in order to provide superior products and services to our customers including in the areas of technology, quality, responsiveness, delivery and cost. We also monitor customer opinion through annual customer satisfaction surveys and customer interviews, and the results of such surveys and interviews are reflected in the performance evaluation of our executive officers.

 

11. Intellectual Property

As of June 30, 2011, we held a total of 15,592 patents, including 6,927 in Korea and 8,665 in other countries.

 

12. Environmental Matters

We are subject to strict environmental 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 a variety of laws and regulations relating to the use, storage, discharge and disposal of such chemical by-products and waste substances. We have installed various types of anti-pollution equipment, consistent with industry 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.

We have also voluntarily agreed to reduce emission of greenhouse gases, such as triflouride oxide and perfluoro compounds, or PFCs, including sulfur hexafluoride, or SF6, gases, by installing abatement systems to meet voluntary emissions targets for the TFT-LCD industry for 2010. As part of our voluntary activities to reduce emission of greenhouse gases, we installed triflouride oxide abatement systems at all of our production lines. We also installed an SF6 abatement system in P1 in April 2005, and we have taken steps to install additional SF6 abatement systems through the use of Clean Development Mechanism, or CDM, projects. On July 10, 2010, after becoming the first TFT-LCD company to receive the UNFCCC CDM Executive Board’s approval of our CDM project, we installed an SF6 abatement system in P6. In June 2011, we received 144,222 tons of certified emission reduction credits from the UN for the reduction of greenhouse gas emissions during the period from August 1, 2010 to September 30, 2010. We were the first LCD company to receive such certified emission reduction credits pursuant to an SF6 decomposition CDM project. Currently, a third party accreditation agency is also examining the reduction of our greenhouse gas emissions during the period from October 1, 2010 to April 30, 2011 as part of our application for receiving certified emission reduction credits from the UN. Beginning in August 2011, we intend to install an SF6 abatement system in P7 through the implementation of CDM projects.

Currently, the Korean government is implementing the greenhouse gas emission reduction target system under the Framework Act on Low Carbon, Green Growth and is expected to assign greenhouse gas emission reduction targets to individual companies in 2011. Once such greenhouse gas emission reduction targets have been assigned, certain companies may need to invest in additional equipment and there may be other costs associated with meeting the reduction target, which may have a negative effect on such companies’ profitability or production activities. In addition, if a company fails to meet its reduction target, it may be subject to fines or penalties or may even be forced to shut down its production facilities.


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In connection with the greenhouse gas emission reduction target system, we have prepared a statement of our domestic emissions and energy usage and have submitted it to the government-designated accreditation agency. In addition, in order to improve the efficiency and reliability of measuring our greenhouse gas emission reduction activities, we plan to make improvements in our electronic greenhouse gas inventory system.

In addition, as of June 30, 2011, we were party to voluntary agreements, which reflect a coordinated energy conservation initiative between government and industry, with respect to our operation of P1 through P8, the Gumi module production plant and the Paju module production plant. In accordance with such agreements, we have implemented a variety of energy-saving measures in those facilities, including installation of energy saving devices and consulting with energy conservation specialists.

Operations at our manufacturing plants are subject to regulation and periodic monitoring by the Korean Ministry of Environment and local environmental protection authorities. We believe that we have adopted adequate anti-pollution measures for the effective maintenance of environmental protection standards consistent with local industry practice, and 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 for each environmental area, including air quality, water quality, toxic materials and radiation. We currently have ISO 14001 certifications with respect to the environmental record for P1 through P8, our OLED production facility in Gumi, Korea, our Gumi module production plant and our Paju module production plant, as well as our module production plants in Nanjing and Guangzhou, China. In addition, with respect to P1 through P8 and our module production plants in Gumi and Paju, we are currently participating and setting up a pilot environment management system called the green management certification system. We have been certified by the Korean Ministry of Environment as a “Green Company”, with respect to our environmental record for P1 and our module production plant in Gumi since 1997, with respect to our operations at P2 and P3 since 2006, and with respect to our operations at P4, P5 and P6 since 2008.

We also have an internal monitoring system to control the use of hazardous substances in the manufacture of our products as we are committed to compliance with all applicable environmental laws and regulations, including European Union Restriction of Hazardous Substances (RoHS) Directive 2002/95/EC, which took effect in July 2006, and restricts the use of certain hazardous substances in the manufacture of electrical and electronic equipment.

In October 2005, we became the first TFT-LCD company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Knowledge Economy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Moreover, we participated in reforming IEC 62321 by 2012, a RoHS international testing standard, by including a halogen-free combustion ion chromatography method in our committee draft that we submitted in June 2010.

In addition, we have implemented a green purchasing system that prevents the use of hazardous materials from the purchasing stage. As a result of the green purchasing system, we are in compliance with RoHS and other applicable environmental laws and regulation, and we became the first TFT-LCD company to receive the Hazardous Substance Process Management QC080000 certification, or HSPM, from the International Electrotechnical Commission. HSPM is used to help companies manage their hazardous materials and be in compliance with RoHS.


Table of Contents
13. Financial Information

 

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

(Unit: In millions of Won)

 

Description

   As of June 30,
2011
    As of December 31,
2010
    As of December 31,
2009
 

Current assets

     8,035,832        8,840,433        8,226,142   

Quick assets

     5,213,886        6,625,216        6,558,362   

Inventories

     2,821,946        2,215,217        1,667,780   

Non-current assets

     16,634,367        15,017,225        11,477,335   

Investments in equity accounted investees

     335,664        325,532        282,450   

Property, plant and equipment, net

     14,286,783        12,815,401        9,596,497   

Intangible assets

     535,214        539,901        352,393   

Other non-current assets

     1,476,706        1,336,391        1,245,995   
  

 

 

   

 

 

   

 

 

 

Total assets

     24,670,199        23,857,658        19,703,477   
  

 

 

   

 

 

   

 

 

 

Current liabilities

     9,709,950        8,881,829        6,495,071   

Non-current liabilities

     4,184,653        3,914,862        3,168,657   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     13,894,603        12,796,691        9,663,728   
  

 

 

   

 

 

   

 

 

 

Share capital

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

Share premium

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

Reserves

     (53,291     (35,298     (51,005

Retained earnings

     6,762,833        7,031,163        6,050,562   

Non-controlling interest

     25,862        24,910        0   
  

 

 

   

 

 

   

 

 

 

Total equity

     10,775,596        11,060,967        10,039,749   
  

 

 

   

 

 

   

 

 

 

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

 

Description

   For the six months ended
June 30, 2011
    For the six months ended
June 30, 2010
     For the six months ended
June 30, 2009 (1)
 

Revenue

     11,412,578        12,330,543         8,314,678   

Results from operating activities

     (287,548     1,515,410         34,807   

Income (Loss) from continuing operation

     (94,123     1,203,413         20,316   

Profit (Loss) for the period

     (94,123     1,203,413         20,316   

Basic earnings (looses) per share

     (252     3,366         57   

Diluted earnings (losses) per share

     (252     3,277         57   

 

(1) Although our financial statements for the year ended December 31, 2009 have been audited by our independent auditors in accordance with K-IFRS, our half-year financial statements for 2009 have not been reviewed by our independent auditors.


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

(Unit: In millions of Won)

 

Description

   As of June 30,
2011
    As of December 31,
2010
    As of December 31,
2009
 

Current assets

     7,522,351        8,499,873        7,973,355   

Quick assets

     5,097,611        6,739,908        6,687,050   

Inventories

     2,424,740        1,759,965        1,286,305   

Non-current assets

     16,361,648        14,658,125        11,283,512   

Investments

     1,358,329        1,279,831        1,075,229   

Property, plant and equipment, net

     13,157,130        11,688,061        8,730,263   

Intangible assets

     479,282        483,260        340,885   

Other non-current assets

     1,366,907        1,206,973        1,137,135   
  

 

 

   

 

 

   

 

 

 

Total assets

     23,883,999        23,157,998        19,256,867   
  

 

 

   

 

 

   

 

 

 

Current liabilities

     9,153,585        8,453,869        6,120,663   

Non-current liabilities

     4,135,769        3,833,454        3,102,006   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     13,289,354        12,287,323        9,222,669   
  

 

 

   

 

 

   

 

 

 

Share capital

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

Share premium

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

Reserves

     (5,739     (7,795     (17,366

Retained earnings

     6,560,192        6,838,278        6,011,372   

Non-controlling interest

     0        0        0   
  

 

 

   

 

 

   

 

 

 

Total equity

     10,594,645        10,870,675        10,034,198   
  

 

 

   

 

 

   

 

 

 

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

 

Description

   For the six months ended
June 30, 2011
    For the six months ended
June 30, 2010
     For the six months ended
June 30, 2009 (1)
 

Revenue

     10,950,409        12,379,226         8,234,951   

Results from operating activities

     (373,131     1,407,744         (28,653

Income (Loss) from continuing operation

     (100,014     1,130,351         (8,321

Profit (Loss) for the period

     (100,014     1,130,351         (8,321

Basic earnings (losses) per share

     (280     3,159         (23

Diluted earnings (losses) per share

     (280     3,072         (23

 

(1) Although our financial statements for the year ended December 31, 2009 have been audited by our independent auditors in accordance with K-IFRS, our half-year financial statements for 2009 have not be reviewed by our independent auditors.


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  C. Consolidated subsidiaries (as of June 30, 2011)

 

Company

   Primary Business      Location      Ownership
Ratio
 

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 and sales         China         100

LG Display Shanghai Co., Ltd.

     Sales         China         100

LG Display Poland Sp. zo.o.

     Manufacturing and sales         Poland         80

LG Display Guangzhou Co., Ltd.

     Manufacturing and sales         China         90

LG Display Shenzhen Co., Ltd.

     Sales         China         100

LG Display Singapore Pte. Ltd.

     Sales         Singapore         100

L&T Display Technology (Xiamen) Co., Ltd.

     Manufacturing and sales         China         51

L&T Display Technology (Fujian) Co., Ltd.

     Manufacturing and sales         China         51

LG Display Yantai Co., Ltd.

     Manufacturing and sales         China         100

L&I Electronic Technology (Dongguan) Limited

     Manufacturing and sales         China         51

Image & Materials, Inc.

     Manufacturing and sales         Korea         100

LUCOM Display Technology (Kunshan) Limited

     Manufacturing and sales         China         51


Table of Contents
  D. Status of equity investment

 

   

Status of equity investment as of June 30, 2011:

 

Company

   Paid-in Capital      Initial Equity
Investment Date
     Ownership
Ratio
 

LG Display America, Inc.

   US$ 185,000,000         September 24, 1999         100

LG Display Germany GmbH

   EUR 960,000         November 5, 1999         100

LG Display Japan Co., Ltd.

   ¥ 95,000,000         October 12, 1999         100

LG Display Taiwan Co., Ltd.

   NT$ 115,500,000         May 19, 2000         100

LG Display Nanjing Co., Ltd.

   CNY 2,552,191,315         July 15, 2002         100

LG Display Shanghai Co., Ltd.

   CNY 4,138,650         January 16, 2003         100

LG Display Poland Sp. zo.o.

   PLN 410,327,700         September 6, 2005         80

LG Display Guangzhou Co., Ltd.

   CNY 895,904,754         August 7, 2006         90

LG Display Shenzhen Co., Ltd.

   CNY 3,775,250         August 28, 2007         100

LG Display Singapore Pte. Ltd.

   SGD 1,400,000         January 12, 2009         100

L&T Display Technology (Xiamen) Co., Ltd.

   CNY 41,785,824         January 5, 2010         51

L&T Display Technology (Fujian) Co., Ltd.

   CNY 59,197,026         January 5, 2010         51

LG Display Yantai Co., Ltd.

   CNY 273,048,000         April 19, 2010         100

L&I Electronic Technology (Dongguan) Limited

   CNY 17,062,560         October 25, 2010         51

Image & Materials, Inc.

   (Won) 38,000,000,000         November 29, 2010         100

LUCOM Display Technology (Kunshan) Limited

   CNY 50,353,677         December 27, 2010         51

Suzhou Raken Technology Co., Ltd.

   CNY 569,455,395         October 7, 2008         51

Paju Electric Glass Co., Ltd.

   (Won) 33,648,000,000         March 25, 2005         40

TLI Co., Ltd.

   (Won) 14,073,806,250         May 16, 2008         13

AVACO Co., Ltd.

   (Won) 6,172,728,120         June 9, 2008         20

Guangzhou Vision Display Technology Research and Development Limited

   CNY 25,000,000         July 11, 2008         50

NEW OPTICS, Ltd.

   (Won) 12,199,600,000         July 30, 2008         42

LIG ADP Co., Ltd.

   (Won) 6,330,000,000         February 24, 2009         13

Wooree LED Co., Ltd.

   (Won) 11,900,000,000         May 22, 2009         30

Dynamic Solar Design Co., Ltd.

   (Won) 6,066,658,000         June 24, 2009         40

RPO, Inc.

   US$ 12,285,022         November 3, 2009         26

Global OLED Technology LLC

   US$ 45,170,000         December 23, 2009         33

LB Gemini New Growth Fund No. 16

   (Won) 12,444,647,109         December 7, 2009         31

Can Yang Investment Ltd.

   US$ 15,300,000         January 27, 2010         15

YAS Co., Ltd.

   (Won) 10,000,000,000         September 16, 2010         19

Eralite Optoelectronics (Jiangsu) Co., Ltd.

   US$ 4,000,000         September 28, 2010         20

Narae Nanotech Corporation

   (Won) 30,000,000,000         April 22, 2011         23

 

14. Audit Information

 

  A. Audit service

(Unit: In millions of Won, hours)

 

Description

   2011 (H1)    2010    2009

Auditor

   KPMG Samjong    KPMG Samjong    KPMG Samjong

Activity

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

Compensation (1)

   850 (285) (2)    850 (585) (3)    700 (540) (4)

Time required

   5,548    16,646    17,569

 

(1) Compensation amount is the contracted amount for the full fiscal year.
(2) Compensation amount in ( ) is for Form 20-F filing and SOX 404 audit.


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(3) Compensation amount in ( ) is for K-IFRS audit, Form 20-F filing and SOX 404 audit.
(4) Compensation amount in ( ) is for US-GAAP audit, Form 20-F filing and SOX 404 audit.

 

  B. Non-audit service

Not applicable.

 

15. Board of Directors

 

  A. Independence of directors

 

   

Outside director: Independent

 

   

Non-outside director: Not independent

 

   

Each of our outside directors meets the applicable independence standards set forth under the applicable laws and regulations. Each of our outside directors was nominated by the Outside Director Nomination and Corporate Governance Committee, was approved by the board of directors and was appointed at the general meeting of shareholders. None of our outside directors has or had any business transaction or any related party transactions with us. Our outside directors are comprised of four persons including three who are members of our audit committee. As of June 30, 2011, our non-outside directors were comprised of the chief executive officer, the chief financial officer and a non-standing director.

 

  B. Members of the board of directors (as of June 30, 2011)

 

Name

  

Date of birth

  

Position

  

Business experience

  

First Elected

Young Soo Kwon    February 6, 1957   

Representative Director, President and

Chief Executive Officer

   President and Chief Financial Officer of LG Electronics    January 1, 2007
James (Hoyoung) Jeong    November 2, 1961   

Director and

Chief Financial Officer

   Executive Vice President and Chief Financial Officer of LG Electronics    January 1, 2008
Yu Sig Kang    November 3, 1948    Director    Vice Chairman, Representative Director, LG Corp.    March 11, 2011
Tae Sik Ahn    March 21, 1956    Outside Director    Dean, College of Business Administration and Graduate School of Business, Seoul National University    March 12, 2010
William Y. Kim    June 6, 1956    Outside Director    Partner at Ropes & Gray LLP    February 29, 2008
Jin Jang    November 28, 1954    Outside Director    Chair Professor, Department of Information Display, Kyung Hee University    March 11, 2011
Sunny Yi (1)    March 25, 1962    Outside Director    Partner, Bain & Company Korea    March 11, 2011

 

(1) Resigned on July 1, 2011.


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  C. Committees of the board of directors (as of June 30, 2011)

 

Committee

  

Composition

 

Member

Audit Committee    3 outside directors   Tae Sik Ahn, Sunny Yi  (1), William Y. Kim
Outside Director Nomination and Corporate Governance Committee   

1 non-outside director and

2 outside directors

  James (Hoyoung) Jeong, Jin Jang,
William Y. Kim
Remuneration Committee   

1 non-outside director and

2 outside directors

  James (Hoyoung) Jeong, Sunny Yi (2),
Tae Sik Ahn

 

(1) Replaced by Jin Jang on July 15, 2011.
(2) Replaced by William Y. Kim on July 20, 2011.

 

16. Information Regarding Shares

 

  A. Total number of shares

 

  (1) Total number of shares authorized to be issued (as of June 30, 2011): 500,000,000 shares.

 

  (2) Total shares issued and outstanding (as of June 30, 2011): 357,815,700 shares.

 

  B. Shareholder list

 

  (1) Largest shareholder and related parties:

(Unit: share)

 

Name

   Relationship    As of June 30, 2011  

LG Electronics

   Largest
Shareholder
    

 

135,625,000

(37.9

  

%) 

Young Soo Kwon

   Related

Party

    

 

23,000

(0.0

  

%) 

 

  (2) Shareholders who are known to us to own 5% or more of our shares as of June 30, 2011:

 

Beneficial Owner

   Number of Shares of Common Stock      Percentage  

LG Electronics

     135,625,000         37.9

National Pension Service

     23,101,658         6.5

Citibank ADR

     17,881,825         5.0


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17. Directors and Employees

 

  A. Directors

 

  (1) Remuneration for directors in 2011 (H1)

(Unit: In millions of Won)

 

Classification

   Amount
paid (1)
    Per capita average
remuneration  paid (5)
     Remarks  

Non-outside directors

     1,246  (2)      415         —     

Outside directors who are not audit committee members

     38.5  (3)      33         —     

Outside directors who are audit committee members

     89.5  (4)      28         —     
  

 

 

   

 

 

    

 

 

 

Total

     1,374        —           —     
  

 

 

   

 

 

    

 

 

 

- Period: January 1, 2011 ~ June 30, 2011

 

(1) Amount paid is calculated on the basis of actually paid amount except accrued salary and severance benefits.
(2) Among the non-outside directors, Yu Sig Kang does not receive any remuneration.
(3) Includes remuneration for Dongwoo Chun whose term expired on March 11, 2011.
(4) Includes remuneration for Yoshihide Nakamura whose term expired on March 11, 2011.
(5) Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the six months ended June 30, 2011.


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  (2) Stock option

The following table sets forth certain information regarding our stock options as of June 30, 2011.

(Unit: Won, Stock)

 

Executive

Officers (including Former

Officers)

   Grant Date      Exercise Period      Exercise
Price
     Number of
Granted
Options
     Number of
Exercised
Options
     Number of
Cancelled
Options (1)
     Number of
Exercisable
Options (1)
 
      From      To                 

Ron H.Wirahadiraksa

     April 7, 2005         April 8, 2008         April 7, 2012       (Won) 44,050         100,000         0         50,000         50,000   

Duke M. Koo

     April 7, 2005         April 8, 2008         April 7, 2012       (Won) 44,050         40,000         0         20,000         20,000   

Sang Deog Yeo

     April 7, 2005         April 8, 2008         April 7, 2012       (Won) 44,050         40,000         0         20,000         20,000   

Jae Geol Ju

     April 7, 2005         April 8, 2008         April 7, 2012       (Won) 44,050         40,000         0         20,000         20,000   
              

 

 

    

 

 

    

 

 

    

 

 

 

Total

                 220,000            110,000         110,000   
              

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) When the increase rate of our share price is the same or less than the increase rate of the Korea Composite Stock Price Index (“KOSPI”) over the three-year period following the grant date, only 50% of the initially granted shares are exercisable. Since the increase rate of our share price was lower than the increase rate of KOSPI during the period from April 7, 2005 to April 7, 2008, only 50% of the 220,000 initially granted shares are exercisable.

 

  B. Employees

As of June 30, 2011, we had 34,118 employees (excluding our executive officers). The total amount of salary paid to our employees for the six months ended June 30, 2011 based on cash payment (excluding welfare benefits and retirement expenses) was (Won)869,415 million. The following table provides details of our employees as of June 30, 2011:

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

 

     Number of
Employees
     Total Salary in 2011 (H1) (1) (2) (3)      Per Capita
Salary (4)
     Average
Service Year
 

Male

     23,982         663,204         29         4.5   

Female

     10,136         206,211         21         3.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     34,118         869,415         27         4.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the six months ended June 30, 2011 was (Won)152,094 million and the per capita welfare benefit provided was (Won)4.7 million.
(2) Based on cash payment made in Korea.
(3) Includes incentive payments to employees who have transferred from our affiliated companies.
(4) Per Capita Salary is calculated using the average number of employees (total: 32,320, male: 22,549, female: 9,771) for the six months ended June 30, 2011.


Table of Contents
   LG DISPLAY CO., LTD. AND SUBSIDIARIES   
   Condensed Consolidated Interim Financial Statements   
   (Unaudited)   
   June 30, 2011 and 2010   
   (With Independent Auditors’ Review Report Thereon)   


Table of Contents

Table of Contents

 

     Page  

Independent Auditors’ Review Report

     1   

Condensed Consolidated Statements of Financial Position

     3   

Condensed Consolidated Statements of Comprehensive Income

     4   

Condensed Consolidated Statements of Changes in Equity

     5   

Condensed Consolidated Statements of Cash Flows

     6   

Notes to the Condensed Consolidated interim Financial Statements

     8   


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.:

Introduction

We have reviewed the accompanying condensed consolidated statement of financial position of LG Display Co., Ltd. and subsidiaries (the “Group”) as of June 30, 2011, and the related condensed consolidated statements of comprehensive income for each of the three-month and six-month periods ended June 30, 2011 and 2010, changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010, and a summary of significant accounting policies and other explanatory notes.

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 control as management determines is 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 express a conclusion on these condensed consolidated interim financial statements based on our reviews.

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

Conclusion

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

Emphasis of Matter

As discussed in note 17 to the consolidated financial statements, the European Commission issued a decision finding that LG Display Co., Ltd. engaged in anti-competitive activities in the Liquid Crystal Display (LCD) industry in violation of European competition laws and imposed a fine of EUR215 million on December 8, 2010. LG Display Co., Ltd., along with its subsidiaries, is under investigations by the Korea Fair Trade Commission and antitrust authorities in other countries with respect to possible anti-competitive activities in the LCD industry. In addition, LG Display Co., Ltd., along with its subsidiaries, has been named as defendants in a number of federal class actions in the United States and Canada and related individual lawsuits in connection with the alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Group.


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Other Considerations

We audited the consolidated statement of financial position as of December 31, 2010 and the consolidated statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2010, not accompanying this review report, in accordance with auditing standards generally accepted in the Republic of Korea, and our report thereon, dated February 24, 2011, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Group as of December 31, 2010, presented for comparative purposes, is not different from that audited by us in all material respects.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

August 8, 2011

This report is effective as of August 8, 2011, 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 there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Position

(Unaudited)

As of June 30, 2011 and December 31, 2010

 

(In millions of won)    Note    2011     2010  

Assets

       

Cash and cash equivalents

   9    (Won) 2,248,695       1,631,009  

Deposits in banks

   9      115,080       1,503,000  

Trade accounts and notes receivable, net

   9, 16      2,262,104       3,000,661  

Other accounts receivable, net

   9      211,362       244,662  

Other current financial assets

   9      20,911       35,370  

Inventories

   5      2,821,946       2,215,217  

Other current assets

        355,734       210,514  
     

 

 

   

 

 

 

Total current assets

        8,035,832       8,840,433  

Investments in equity accounted investees

   6      335,664       325,532  

Other non-current financial assets

   9      85,657       83,246  

Deferred tax assets

   22      1,224,812       1,074,853  

Property, plant and equipment, net

   7, 20      14,286,783       12,815,401  

Intangible assets, net

   8, 20      535,214       539,901  

Other non-current assets

        166,237       178,292  
     

 

 

   

 

 

 

Total non-current assets

        16,634,367       15,017,225  
     

 

 

   

 

 

 

Total assets

      (Won) 24,670,199       23,857,658  
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   9    (Won) 2,881,962       2,961,995  

Current financial liabilities

   9, 10      1,774,976       2,100,979  

Other accounts payable

   9      3,797,615       2,592,527  

Accrued expenses

        355,747       373,717  

Income taxes payable

        36,966       153,890  

Provisions

        267,847       634,815  

Other current liabilities

        594,837       63,906  
     

 

 

   

 

 

 

Total current liabilities

        9,709,950       8,881,829  

Non-current financial liabilities

   9, 10      2,864,318       2,542,900  

Non-current provisions

        8,329       8,773  

Deferred tax liabilities

   22      —          6,640  

Employee benefits

   14      128,970       78,715  

Long-term advances received

   16      625,298       945,287  

Other non-current liabilities

        557,738       332,547  
     

 

 

   

 

 

 

Total non-current liabilities

        4,184,653       3,914,862  
     

 

 

   

 

 

 

Total liabilities

        13,894,603       12,796,691  
     

 

 

   

 

 

 

Equity

       

Share capital

   18      1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Reserves

   18      (53,291 )     (35,298 )

Retained earnings

        6,762,833       7,031,163  
     

 

 

   

 

 

 

Total equity attributable to equity holders of the Company

        10,749,734       11,036,057  
     

 

 

   

 

 

 

Non-controlling interest

        25,862       24,910  
     

 

 

   

 

 

 

Total equity

        10,775,596       11,060,967  
     

 

 

   

 

 

 

Total liabilities and equity

      (Won) 24,670,199       23,857,658  
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

3


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statement of Comprehensive Income

(Unaudited)

For the three-month and six-month periods ended June 30, 2011 and 2010

 

(In millions of Won, except earnings per share)    Note    For the three-month periods
ended June 30
    For the six-month periods
ended June 30
 
          2011     2010     2011     2010  

Revenue

      (Won) 6,047,062       6,454,196     (Won) 11,412,578       12,330,543  

Cost of sales

        (5,595,933 )     (5,125,271 )     (10,728,519 )     (9,764,925 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        451,129       1,328,925       684,059       2,565,618  

Other income

   13      292,884       512,207       581,516       747,664  

Selling expenses

   12      (197,163 )     (215,526 )     (374,479 )     (405,860 )

Administrative expenses

   12      (144,984 )     (127,987 )     (285,981 )     (247,479 )

Research and development expenses

        (187,079 )     (167,736 )     (356,719 )     (304,386 )

Other expenses

   13      (263,095 )     (603,896 )     (535,944 )     (840,147 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Results from operating activities

        (48,308 )     725,987       (287,548 )     1,515,410  
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

   15      77,606       99,185       202,399       137,109  

Finance costs

   15      (77,466 )     (221,011 )     (159,601 )     (205,191 )

Other non-operating loss, net

        (3,008 )     (1,708 )     (6,231 )     (3,299 )

Equity income(loss) on investments, net

        265       1,806       (1,729 )     1,962  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before income tax

        (50,911 )     604,259       (252,710 )     1,445,991  

Income tax expense (benefit)

   22      (72,214 )     49,471       (158,587 )     242,578  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

        21,303       554,788       (94,123 )     1,203,413  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

           

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

        3,206       (11,809 )     1,691       6,646  

Defined benefit plan actuarial gain or loss

   14      467       159       1,072       6  

Cumulative translation differences

        (5,031 )     16,521       (19,734 )     (1,825 )

Gain (loss) on sales of own shares of associate accounted for using the equity method

        (499 )     1,039       (228 )     1,039  

Income tax on other comprehensive income (loss)

        (896 )     2,553       (850 )     (2,798 )
     

 

 

   

 

 

   

 

 

   

 

 

 

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

     (2,753 )     8,463       (18,049 )     3,068  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      (Won) 18,550       563,251     (Won) (112,172 )     1,206,481  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) attributable to:

           

Owners of the Company

        24,931       555,517       (90,258 )     1,204,583  

Non-controlling interest

        (3,628 )     (729 )     (3,865 )     (1,170 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

      (Won) 21,303       554,788     (Won) (94,123 )     1,203,413  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

           

Owners of the Company

        22,541       562,853       (107,415 )     1,207,040  

Non-controlling interest

        (3,991 )     398       (4,757 )     (559 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      (Won) 18,550       563,251     (Won) (112,172 )     1,206,481  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earning per share

           

Basic earnings (loss) per share

   23    (Won) 70       1,553     (Won) (252 )     3,366  
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

   23    (Won) 67       1,542     (Won) (252 )     3,277  
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

4


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited)

For the six-month periods ended June 30, 2011 and 2010

 

(In millions of won)    Share capital      Share
premium
     Gain on sale of
own shares of
associates
    Fair
value
reserve
    Translation
reserve
    Retained
earnings
    Minority
interest
    Total
equity
 

Balances at January 1, 2010

   (Won) 1,789,079        2,251,113        —          (14,636 )     (36,369 )     6,050,562       —          10,039,749  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                  

Profit (loss) for the period

     —           —           —          —          —          1,204,583       (1,170 )     1,203,413  

Other comprehensive income (loss)

                  

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

     —           —           —          4,654       —          —          —          4,654  

Defined benefit plan actuarial gain

     —           —           —          —          —          6       —          6  

Cumulative translation differences

     —           —           —          —          (3,242 )     —          611       (2,631 )

Gain on sales of own shares of associates

                  

accounted for using the equity method

     —           —           1,039       —          —          —          —          1,039  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —           —           1,039       4,654       (3,242 )     6       611       3,068  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   (Won) —           —           1,039       4,654       (3,242 )     1,204,589       (559 )     1,206,481  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

                  

Dividends to equity holders

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

Changes in ownership interests in subsidiaries

     —           —           —          —          —          —          16,592       16,592  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2010

   (Won) 1,789,079        2,251,113        1,039       (9,982 )     (39,611 )     7,076,243       16,033       11,083,914  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2011

   (Won) 1,789,079        2,251,113        810       (5,560 )     (30,548 )     7,031,163       24,910       11,060,967  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                  

Loss for the period

     —           —           —          —          —          (90,258 )     (3,865 )     (94,123 )

Other comprehensive income (loss)

                  

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

     —           —           —          1,077       —          —          —          1,077  

Defined benefit plan actuarial gain

     —           —           —          —          —          836       —          836  

Cumulative translation differences

     —           —           —          —          (18,842 )     —          (892 )     (19,734 )

Loss on sales of own shares of associates

                  

accounted for using the equity method

     —           —           (228 )     —          —          —          —          (228 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —           —           (228 )     1,077       (18,842 )     836       (892 )     (18,049 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   (Won) —           —           (228 )     1,077       (18,842 )     (89,422 )     (4,757 )     (112,172 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

                  

Dividends to equity holders

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

Changes in ownership interests in subsidiaries

     —           —           —          —          —          —          5,709       5,709  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2011

   (Won) 1,789,079        2,251,113        582       (4,483 )     (49,390 )     6,762,833       25,862       10,775,596  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

 

5


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

For the six-month periods ended June 30, 2011 and 2010

 

(In millions of won)    Note    2011     2010  

Cash flows from operating activities:

       

Profit (loss) for the period

      (Won) (94,123 )     1,203,413  

Adjustments for:

       

Income tax expense (benefit)

   22      (158,587 )     242,578  

Depreciation

        1,599,474       1,261,495  

Amortization of intangible assets

        109,933       76,874  

Gain on foreign currency translation

        (105,698 )     (165,873 )

Loss on foreign currency translation

        42,472       221,121  

Gain on disposal of property, plant and equipment

        (425 )     (1,309 )

Loss on disposal of property, plant and equipment

        462       88  

Finance income

        (129,347 )     (95,436 )

Finance costs

        85,120       167,894  

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

        1,729       (1,962 )

Other income

        (18,919 )     —     

Other expenses

        91,631       207,396  

Other non-operating loss

        7       —     
     

 

 

   

 

 

 
        1,423,729       3,116,279  

Change in trade accounts and notes receivable

        717,383       (567,186 )

Change in other accounts receivable

        (97,818 )     1,848  

Change in other current assets

        (81,268 )     (110,750 )

Change in inventories

        (606,729 )     (551,360 )

Change in other non-current accounts receivable

        —          (386 )

Change in other non-current assets

        (25,124 )     (34,735 )

Change in trade accounts and notes payable

        (61,222 )     593,640  

Change in other accounts payable

        35,597       (116,450 )

Change in accrued expenses

        (34,363 )     91,207  

Change in other current liabilities

        (7,700 )     (7,016 )

Change in long-term advances received

        281,975       —     

Change in other non-current liabilities

        (3,333 )     96,088  

Change in provisions

        (65,613 )     (122,523 )

Change in defined benefit obligation

   14      (5,618 )     (71,054 )
     

 

 

   

 

 

 

Cash generated from operating activities

        1,469,896       2,317,602  

Income taxes paid

        (127,281 )     (158,591 )

Interest received

        43,744       62,773  

Interest paid

        (69,581 )     (53,350 )
     

 

 

   

 

 

 

Net cash from operating activities

      (Won) 1,316,778       2,168,434  
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

6


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows, Continued

(Unaudited)

For the six-month periods ended June 30, 2011 and 2010

 

(In millions of won)    Note    2011     2010  

Cash flows from investing activities:

       

Dividends received

      (Won) 6,130       729  

Proceeds from withdrawal of deposits in banks

        2,300,000       2,600,000  

Increase in deposits in banks

        (912,080 )     (2,200,000 )

Acquisition of investments in equity accounted investees

        (40,610 )     (21,413 )

Proceed from disposal of investments in equity accounted investees

        2,045       20,530  

Acquisition of property, plant and equipment

        (1,989,295 )     (1,579,740 )

Proceeds from disposal of property, plant and equipment

        678       1,783  

Acquisition of intangible assets

        (113,128 )     (81,075 )

Grant received

        1,560       38  

Proceeds from settlement of derivatives

        26,797       6,331  

Proceeds from collection of short-term loans

        64       33  

Acquisition of other non-current financial assets

        (29,533 )     (35,466 )

Proceed from disposal of other non-current financial assets

        123,286       1,715  

Acquisition of LCD module business

        —          (204,181 )
     

 

 

   

 

 

 

Net cash used in investing activities

        (624,086 )     (1,490,716 )
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        937,044       302,336  

Repayment of short-term borrowings

        (1,193,235 )     (457,755 )

Issuance of debentures

        597,453       780,753  

Proceeds from long-term borrowings

        219,014       335,476  

Repayment of long-term borrowings

        —          (120,000 )

Repayment of current portion of long-term debts

        (472,027 )     (1,053,188 )

Increase in non-controlling interest

        5,709       16,592  

Payment of cash dividend

        (178,908 )     (178,908 )
     

 

 

   

 

 

 

Net cash used in financing activities

        (84,950 )     (374,694 )
     

 

 

   

 

 

 

Net Increase in cash and cash equivalents

        607,742       303,024  

Cash and cash equivalents at January 1

        1,631,009       817,982  

Effect of exchange rate fluctuations on cash held

        9,944       (9,386 )
     

 

 

   

 

 

 

Cash and cash equivalents at June 30

      (Won) 2,248,695       1,111,620  
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

7


Table of Contents
1. Reporting Entity

 

  (a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) related business to the Controlling Company. The main business of the Controlling Company and its subsidiaries is to manufacture and sell TFT-LCD panels. The Controlling Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 65-228 Hangang-ro 3-ga, Yongsan-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Controlling Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Controlling Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders’ meeting on the same date as a result of the decrease in Philips’s share interest in the Controlling Company and the possibility of its business expansion to Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of June 30, 2011, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common shares.

As of June 30, 2011, the Controlling Company has its TFT-LCD manufacturing plants, OLED manufacturing plant and LCD Research & Development Center in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Controlling Company has overseas subsidiaries located in the United States of America, Europe and Asia.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of June 30, 2011, 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 June 30, 2011, there are 52,720,872 ADSs outstanding.

 

  (b) Consolidated Subsidiaries

In January and June 2011, the Controlling Company invested (Won)14,363 million and (Won)35,618 million, respectively, in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ”). There were no changes in the Controlling Company’s ownership percentage in LGDNJ as a result of these additional investments.

In February and April 2011, the Controlling Company invested (Won)3,417 million and (Won)2,525 million, respectively in cash for the capital increase of LUCOM Display Technology (Kunshan) Limited(“LUCOM”). There were no changes in the Controlling Company’s ownership percentage in LUCOM as a result of these additional investments.

In June 2011, the Controlling Company invested (Won)86,520 million in cash for the capital increase of LG Display America, Inc. (“LGDUS”). There were no changes in the Controlling Company’s ownership percentage in LGDUS as a result of this additional investment.


Table of Contents
1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries, Continued

In June 2011, the Controlling Company invested (Won)3,000 million in cash for the capital increase of Image&Materials, Inc. (“I&M”). There were no changes in the Controlling Company’s ownership percentage in I&M as a result of this additional investment.

 

2. Basis of Presenting Financial Statements

 

  (a) Statement of Compliance

The condensed interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) 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 consolidated financial statements of the Group as of and for the year ended December 31, 2010.

The condensed consolidated interim financial statements were authorized for issue by the Board of Directors on July 20, 2011.

 

  (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 measured at fair value;

 

   

financial instruments at fair value through profit or loss measured at fair value;

 

   

available-for-sale financial assets measured at fair value;

 

   

liabilities for cash-settled share-based payment arrangements measured at fair value; and

 

   

liabilities for defined benefit plans recognized at the net total of present value of defined benefit obligation 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. All amounts in Korean won are in millions unless otherwise stated.

 

  (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.


Table of Contents
2. Basis of Presenting Financial Statements, Continued

 

  (d) Use of Estimates and Judgments, Continued

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied in its financial statements as of and for the year ended December 31, 2010.

 

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in the preparation of its consolidated interim financial statements are the same as those followed by the Group in its preparation of the consolidated financial statements as of and for the year ended December 31, 2010, except for the application of the Statements of K-IFRS 1034 Interim Financial Reporting.

 

4. Financial Risk Management

The objectives and policies on financial risk management followed by the Group are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2010.

 

5. Inventories

Inventories as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Finished goods

   (Won) 1,174,508         978,386   

Work-in-process

     999,242         612,497   

Raw materials

     465,760         421,593   

Supplies

     182,436         202,741   
  

 

 

    

 

 

 
   (Won) 2,821,946         2,215,217   
  

 

 

    

 

 

 

For the six-month periods ended June 30, 2011 and 2010, changes in finished goods, work in process raw materials and supplies recognized as cost of sales and write-downs of inventories to net realizable value and reversal of such write-downs also included in cost of sales are as follows:

 

(In millions of won)             
     2011     2010  

Inventories recognized as cost of sales

   (Won) 10,728,519        9,764,925   

Including: Inventory write-downs (reversals)

     (2,098     2,631   


Table of Contents
6. Investments in Equity Accounted Investees

The Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). The Controlling Company is paid (Won)1,356 million and (Won)689 million in February and June 2011, respectively by the Fund and made additional cash investment of (Won)6,210 million during the six-month period ended June 30, 2011. As of June 30, 2011, the Controlling Company has a 30.6% equity interest in the Fund and is committed to make investment of up to an aggregate of (Won)30,000 million.

In April 2011, the Controlling Company acquired 1,600,000 common shares of Narenanotech Corporation (‘NARENANOTECH’), which manufactures components used in image display and wireless communications apparatus, at (Won)20,000 million in cash. In June 2011, the Controlling Company acquired additional 800,000 common shares at (Won)10,000 million in cash. As of June 30, 2011, 23% of NARENANOTECH is owned by the Controlling Company and the Controlling Company has the right to assign a director in the board of directors of the NARENANOTECH.

In April 2011, the Controlling Company acquired 440,000 common shares of Paju Electric Glass Co., Ltd. (‘PEG’) at (Won)4,400 million in cash. There were no changes in the Controlling Company’s ownership percentage in PEG as a result of this additional investment.

The entire carrying amount of the investment in RPO, Inc. of (Won)10,866 million, which was acquired for research and development on Digital Waveguide Touch technology in 2009, has been impaired fully as of June 30, 2011 as the recovery of the investment is no longer probable. In addition, the Controlling Company recognized an impairment loss of (Won)3,378 million for the difference between the carrying amount of and the recoverable amount from the investment in Dynamic Solar Design Co., Ltd., which was acquired for develop, manufacture and sell solar battery and flat-panel display in 2009.

 

7. Property, Plant and Equipment

For the six-month periods ended June 30, 2011 and 2010, the Group purchased property, plant and equipment of (Won)3,101,529 million and (Won)3,081,066 million, respectively. The capitalized borrowing costs and capitalization rate are (Won)8,663 million and 2.26%, and (Won)19,906 million and 5.44% for the six-month periods ended June 30, 2011 and 2010, respectively. Also for the six-month periods ended June 30, 2011 and 2010, the Group disposed property, plant and equipment with carrying amounts of (Won)722 million and (Won)562 million, respectively. The Group recognized (Won)425 million and (Won)462 million as gain and loss, respectively, on disposal of property, plant and equipment for the six-month period ended June 30, 2011 (gain and loss for the six-month period ended on June 30, 2010: (Won)1,309 million and (Won)88 million, respectively).

 

8. Intangible Assets

The Group capitalizes the expenses related to development activities, such as expense incurred on designing, manufacturing and testing of products that are ultimately selected for production. The balances of capitalized development costs as of June 30, 2011 and December 31, 2010 are (Won)160,919 million and (Won)151,697 million, respectively.


Table of Contents
9. Financial Instruments

 

  (a) Credit risk

 

  (i) Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions of won)              
     2011      2010  

Cash and cash equivalents

   (Won) 2,248,695         1,631,009   

Trade accounts and notes receivable, net

     2,262,104         3,000,661   

Other accounts receivable, net

     211,962         244,662   

Available-for-sale financial assets

     46,626         42,753   

Financial assets at fair value through profit or loss

     15,726         16,804   

Deposits

     41,969         49,792   

Derivatives

     1,634         9,254   

Deposits in banks

     115,080         1,503,000   

Guarantee deposits with banks

     13         13   
  

 

 

    

 

 

 
   (Won) 4,943,809         6,497,948   
  

 

 

    

 

 

 

The maximum exposure to credit risk for trade accounts and notes receivable as of June 30, 2011 and December 31, 2010 by geographic region is as follows:

 

(In millions of won)              
     2011      2010  

Domestic

   (Won) 109,202         79,275   

Euro-zone countries

     270,542         456,145   

Japan

     150,686         265,732   

United States

     421,570         546,364   

China

     810,975         823,020   

Taiwan

     386,250         720,918   

Others

     112,879         109,207   
  

 

 

    

 

 

 
   (Won) 2,262,104         3,000,661   
  

 

 

    

 

 

 

Approximately, 95% of the Group’s trade accounts and notes receivables from the third parties are insured against credit risks associated with the collection of receivables.


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Impairment loss

The aging of trade accounts and notes receivable and the related allowance for impairment as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)             
     2011     2010  
     Book
Value
     Impairment
loss
    Book
Value
     Impairment
loss
 

Not past due

   (Won) 2,180,909         (204     2,905,600         (514

Past due 1-15 days

     61,934         (6     25,628         (4

Past due 16-30 days

     4,454         (1     43,820         (6

Past due 31-60 days

     7,294         (1     21,369         (4

More than 60 days

     7,730         (5     4,776         (4
  

 

 

    

 

 

   

 

 

    

 

 

 
   (Won) 2,262,321         (217     3,001,193         (532
  

 

 

    

 

 

   

 

 

    

 

 

 

The movement in the allowance for impairment in respect of receivables during the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Balance at the beginning of the year

   (Won) 532        365   

Bad debt expense (reversal of allowance for doubtful accounts)

     (315     167   
  

 

 

   

 

 

 

Balance at the reporting date

   (Won) 217        532   
  

 

 

   

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

  (b) Liquidity risk

 

  (i) The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements as of June 30, 2011:

 

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

Non-derivative financial liabilities

                    

Secured bank loan

   (Won) 53,905         57,207         600         600         1,201         54,806         —     

Unsecured bank loans

     2,302,447         2,342,173         1,358,615         354,111         389,338         236,189         3,920   

Unsecured bond issues

     2,200,846         2,509,268         48,663         48,663         1,095,084         1,316,858         —     

Financial liabilities at fair value through profit or loss

     82,096         83,087         —           83,087         —           —           —     

Trade accounts and notes payable

     2,881,962         2,881,962         2,881,962         —           —           —           —     

Other accounts payable

     3,797,615         3,797,615         3,797,615         —           —           —           —     

Other non-current payable

     52,939         57,381         —           —           57,381         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 11,371,810         11,728,693         8,087,455         486,461         1,543,004         1,607,853         3,920   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

  (ii) As of June 30, 2011, there is no derivative designated as a cash flow hedge.


Table of Contents
9. Financial Instruments, Continued

 

  (c) Currency risk

 

  (i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions)    2011  
     USD     JPY     CNY     TWD     EUR     PLN     SGD  

Cash and cash equivalents

     1,391        4,356        281        18        28        9        —     

Trade accounts and notes receivable

     1,670        1,778        1,052        —          17        24        —     

Other accounts receivable

     82        360        160        132        —          1        —     

Available-for-sale financial assets

     8        —          —          74        —          —          —     

Financial assets at fair value through profit or loss

     —          —          —          422        —          —          —     

Other assets denominated in foreign currencies

     1        181        19        15        —          —          1   

Trade accounts and notes payable

     (1,522     (16,389     (1,356     —          (3     —          —     

Other accounts payable

     (126     (16,780     (499     (18     (21     (12     —     

Other non-current accounts payable

     (12     —          —          —          (25     —          —     

Debts

     (1,793     (21,737     (299     —          (38     —          —     

Bonds

     (346     (9,976     —          —          —          —          —     

Financial liabilities at fair value through profit or loss

     (76     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross statement of financial position exposure

     (723     (58,207     (642     643        (42     22        1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward exchange contracts

     (100     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (823     (58,207     (642     643        (42     22        1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

(In millions)    2010  
     USD     JPY     CNY     TWD     EUR     PLN     SGD  

Cash and cash equivalents

     954        151        342        2        23        8        —     

Trade accounts and notes receivable

     2,570        7        69        —          14        —          —     

Other accounts receivable

     10        5        62        3,172        —          —          —     

Available-for-sale financial assets

     9        —          —          118        —          —          —     

Financial assets at fair value through profit or loss

     —          —          —          430        —          —          —     

Other assets denominated in foreign currencies

     1        196        13        12        —          67        1   

Trade accounts and notes payable

     (1,638     (15,683     (90     —          (2     —          —     

Other accounts payable

     (73     (16,622     (270     (18     (12     (12     —     

Other non-current accounts payable

     (12     —          —          —          (25     —          —     

Debts

     (1,192     (71,889     (412     —          (48     —          —     

Bonds

     (345     (9,965     —          —          —          —          —     

Financial liabilities at fair value through profit or loss

     (74     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross statement of financial position exposure

     210        (113,800     (286     3,716        (50     63        1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Forward exchange contracts

     (420     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (210     (113,800     (286     3,716        (50     63        1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Significant exchange rates applied for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

 

(In won)    Average rate      Spot rate  
     2011      2010      June 30,
2011
     December 31,
2010
 

USD

   (Won) 1,102.28         1,154.11       (Won) 1,078.10         1,138.90   

JPY

     13.45         12.63         13.36         13.97   

CNY

     168.49         169.06         166.80         172.50   

TWD

     37.92         36.20         37.30         39.08   

EUR

     1,545.96         1,532.86         1,560.50         1,513.60   

PLN

     391.08         383.35         390.76         381.77   

SGD

     875.51         825.99         874.23         884.00   


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Sensitivity analysis

A weakening of the won, as indicated below, against the following currencies which comprise the Group’s financial assets or liabilities denominated in foreign currency as of June 30, 2011 and December 31, 2010 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 considered to be reasonably possible at the end of each reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The changes in equity and profit or loss are as follows:

 

(In millions of won)    June 30, 2011     December 31, 2010  
     Equity     Profit
or loss
    Equity     Profit
or loss
 

USD (5 percent weakening)

     (34,118     (14,994     (9,119     (29,823

JPY (5 percent weakening)

     (29,894     (26,406     (60,256     (59,738

CNY (5 percent weakening)

     (4,115     —          (1,867     —     

TWD (5 percent weakening)

     921        443        5,504        4,859   

EUR (5 percent weakening)

     (2,518     (2,199     (2,923     (3,666

PLN (5 percent weakening)

     12        —          928        1,065   

SGD (5 percent weakening)

     —          —          23        —     

A strengthening of the won against the above currencies as of June 30, 2011 and December 31, 2010 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.


Table of Contents
9. Financial Instruments, Continued

 

  (d) Interest rate risk

 

  (i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Fixed rate instruments

    

Financial assets

   (Won) 2,377,459        3,268,887   

Financial liabilities

     (1,781,849     (1,584,533
  

 

 

   

 

 

 
   (Won) 595,610        1,684,354   
  

 

 

   

 

 

 

Variable rate instruments

    

Financial liabilities

   (Won) (2,857,445     (3,058,390

 

  (ii) Fair value sensitivity analysis for fixed rate instruments

The Group has recognized some fixed rate financial assets as financial assets at fair value through profit or loss. The increase of the interest rate by 100 basis points would have decreased the Group’s equity and profit and loss by (Won)497 million and the decrease of the interest rate by 100 basis points would have had an opposite effect.

 

  (iii) Cash flow sensitivity analysis for variable rate instruments

As of June 30, 2011 and December 31, 2010, 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 year 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%
increase
    1%
decrease
     1%
increase
    1%
decrease
 

June 30, 2011

         

Variable rate instruments

   (Won) (21,974     21,974         (21,974     21,974   

December 31, 2010

         

Variable rate instruments

   (Won) (23,183     23,183         (23,183     23,183   


Table of Contents
9. Financial Instruments, Continued

 

  (e) Fair values

 

  (i) Fair values versus carrying amounts

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

 

(In millions of won)                            
     June 30, 2011      December 31, 2010  
     Carrying
amounts
     Fair values      Carrying
amounts
     Fair values  

Assets carried at fair value

           

Available-for-sale financial assets

   (Won) 46,626         46,626         42,753         42,753   

Financial assets at fair value through profit or loss

     15,726         15,726         16,804         16,804   

Forward exchange contracts

     1,634         1,634         9,254         9,254   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 63,986         63,986         68,811         68,811   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets carried at amortized cost

           

Cash and cash equivalents

   (Won) 2,248,695         2,248,695         1,631,009         1,631,009   

Trade accounts and notes receivable

     2,262,104         2,262,104         3,000,661         3,000,661   

Other accounts receivable

     211,962         211,962         244,662         244,662   

Deposits in banks

     115,080         115,080         1,503,000         1,503,000   

Deposits

     41,969         41,969         49,792         49,792   

Others

     13         13         13         13   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 4,879,823         4,879,823         6,429,137         6,429,137   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at fair value

           

Financial liabilities at fair value through profit or loss

   (Won) 82,096         82,096         84,338         84,338   

Forward exchange contracts

     —           —           956         956   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 82,096         82,096         85,294         85,294   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at amortized cost

           

Secured bank loans

   (Won) 53,905         53,905         56,945         56,945   

Unsecured bank loans

     2,302,447         2,301,905         2,673,146         2,672,790   

Unsecured bond issues

     2,200,846         2,244,358         1,828,494         1,859,102   

Trade accounts and notes payable

     2,881,962         2,881,962         2,961,995         2,961,995   

Other accounts payable

     3,797,615         3,797,615         2,592,527         2,592,527   

Other non-current liabilities

     52,939         55,210         51,409         55,920   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 11,289,714         11,334,955         10,164,516         10,199,279   
  

 

 

    

 

 

    

 

 

    

 

 

 

The basis for determining fair values above by the Group are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2010.


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Interest rates used for determining fair value

The significant interest rates applied for determination of the above fair value as of June 30, 2011 and December 31, 2010 are as follows:

 

     2011     2010  

Derivatives

     3.91     3.31

Debts and bonds

     3.91     3.58

 

  (iii) Fair value hierarchy

The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

 

   

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

 

   

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

 

   

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

 

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

June 30, 2011

         

Available-for-sale financial assets

   (Won) 14,003        —          32,623         46,626   

Financial assets at fair value through profit or loss

     15,726        —          —           15,726   

Derivative financial assets

     —          1,634        —           1,634   
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) 29,729        1,634        32,623         63,986   
  

 

 

   

 

 

   

 

 

    

 

 

 

Financial liabilities at fair value through profit or loss

     (82,096     —          —           (82,096
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) (82,096     —          —           (82,096
  

 

 

   

 

 

   

 

 

    

 

 

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

December 31, 2010

         

Available-for-sale financial assets

   (Won) 16,668        —          26,085         42,753   

Financial assets at fair value through profit or loss

     16,804        —          —           16,804   

Derivative financial assets

     —          9,254        —           9,254   
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) 33,472        9,254        26,085         68,811   
  

 

 

   

 

 

   

 

 

    

 

 

 

Derivative financial liabilities

   (Won) —          (956     —           (956

Financial liabilities at fair value through profit or loss

     (84,338     —          —           (84,338
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) (84,338     (956     —           (85,294
  

 

 

   

 

 

   

 

 

    

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

The derivative financial assets and liabilities are classified as Level 2 since all significant inputs to compute the fair value of the over-the-counter derivatives were observable.

In order to determine the fair value of Level 3 instruments, management used a valuation technique in which all significant inputs were based on unobservable market data. The fair values of the Level 3 instruments have been computed using discounted cash flow and option pricing model considering the financial conditions of the invested companies and by discounting estimated future cash flows from stock using yield rate that reflects invested companies’ credit risks.

Changes in Level 3 instruments are as follows:

 

(In millions of won)    December 31,
2010
            Net realized/unrealized
gains included in
            June  30,
2011
 
        Purchases,
disposal

and others
     Profit or
loss
     Other
comprehensive
income
     Transfer
to other
levels
    

Available-for-sale financial assets

   (Won) 26,085         2,674         —           3,864         —           32,623   

 

  (f) Capital Management

Management’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowing to equity ratio and other financial ratios are used by management to achieve optimal capital structure. Management also monitors the level of dividends to ordinary shareholders. Equity, defined by K-IFRS, is identical to the definition of capital, managed by management.

 

(In millions of won)             
     June 30, 2011     December 31, 2010  

Total liabilities

   (Won) 13,894,603        12,796,691   

Total equity

     10,775,596        11,060,967   

Cash and deposits in banks(*)

     2,363,775        3,134,009   

Borrowings

     4,639,294        4,642,923   

Liabilities to equity ratio

     129     116

Net borrowing to equity ratio

     21     14

 

(*) Cash and deposits in banks consist of cash and cash equivalents and deposit in banks.


Table of Contents
10. Financial Liabilities

 

  (a) Financial liabilities as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)              
      2011      2010  

Current

     

Short-term borrowings

   (Won) 953,011         1,213,462   

Current portion of long-term debt

     739,869         886,561   

Derivatives not designated in a hedging relationship

     —           956   

Convertible bonds

     82,096         —     
  

 

 

    

 

 

 
   (Won) 1,774,976         2,100,979   
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   (Won) 18,918         19,143   

Foreign currency denominated borrowings

     644,554         810,925   

Bonds

     2,200,846         1,628,494   

Convertible bonds

     —           84,338   
  

 

 

    

 

 

 
   (Won) 2,864,318         2,542,900   
  

 

 

    

 

 

 

Above financial liabilities, except for convertible bonds which are designated as financial liabilities at fair value through profit or loss and derivative liabilities, are measured at amortized cost.

 

  (b) Short-term borrowings as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won, USD, JPY and CNY)                   

Lender

   Annual interest rate as  of
June 30, 2011(*)
   2011      2010  

Shinhan Bank and others

   LIBOR+0.6~0.65%    (Won) 754,672         12,139   

China Communication Bank and others

   3ML+1.2~1.9%,

6ML+0.65%,

90% of the Basic
Rate published by
the People’s Bank
of China

     14,141         162,115   

Mizuho Bank

   3ML+1.1%      60,106         55,574   

Shinhan Bank and others

   —        —           97,796   
   6ML+0.7%      49,918         545,419   
   5.29%      711         711   

Bank of Tokyo-Mitsubishi UFJ

   3ML+1.0%      66,785         69,854   
   —        —           69,854   
   0.68%      6,678         —     

Woori Bank

   5.13%      —           200,000   
     

 

 

    

 

 

 

Foreign currency equivalent

      USD 708       USD 95   
      JPY 13,737       JPY 63,889   
      CNY 31       CNY 71   
     

 

 

    

 

 

 
      (Won) 953,011         1,213,462   
     

 

 

    

 

 

 

 

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


Table of Contents
10. Financial Liabilities, Continued

 

  (c) Local currency long-term debt as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions of won)  

Lender

   Annual interest rate
as  of
June 30, 2011
   2011     2010  

Shinhan Bank

   3-year Korean Treasury Bond
rate less 1.25%
   (Won) 14,110        16,008   

Woori Bank

   3-year Korean Treasury Bond
rate less 1.25%
     4,048        4,048   
   2.75%      4,557        2,883   

Hana Bank

   1.23%, 4.18%      300        300   

Less current portion of long-term debt

        (4,097     (4,096
     

 

 

   

 

 

 
      (Won) 18,918        19,143   
     

 

 

   

 

 

 

 

  (d) Foreign currency denominated long-term debt as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions of won, USD, JPY, CNY and EUR)  

Lender

   Annual interest rate
as of
June 30, 2011
   2011     2010  

China Communication Bank and others

   6ML+1.99%

3M EURIBOR+0.6%,

90%~95% of the Basic Rate
published by the People’s
Bank of China

   (Won) 109,123        145,917   

The Export-Import Bank of Korea

   6ML+0.69%      43,124        51,251   
   6ML+1.78%      53,905        56,945   

Korea Development Bank

   3ML+0.66%      257,789        271,212   
   3ML+2.79%     

Kookmin Bank and others

   3ML+0.35~1.88%      646,860        683,340   

Sumitomo Bank Ltd.

   3ML+1.80%      269,525        284,725   
     

 

 

   

 

 

 

Foreign currency equivalent

      USD 1,085      USD 1,097   
      CNY 268      CNY 341   
      EUR 38      EUR 48   
      JPY 8,000      JPY 8,000   
     

 

 

   

 

 

 

Less current portion of long-term debt

        (735,772     (682,465
     

 

 

   

 

 

 
      (Won) 644,554        810,925   
     

 

 

   

 

 

 


Table of Contents
10. Financial Liabilities, Continued

 

  (e) Details of the Controlling Company’s debentures issued and outstanding as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won, JPY and USD)                       
     Maturity    Annual interest
rate as of

June 30, 2011
   2011     2010  

Local currency debentures(*)

          

Publicly issued debentures

   November
2012~

February 2016

   4.42~5.89%    (Won) 1,700,000        1,100,000   

Privately issued debentures

   May 2011    5.30%      —          200,000   

Less discount on debentures

           (5,515     (3,699

Less current portion of debentures

           —          (200,000
        

 

 

   

 

 

 
         (Won) 1,694,485        1,096,301   
        

 

 

   

 

 

 

Foreign currency debentures(*)

          

Floating-rate bonds

   August 2012 ~
April 2013
   3ML+1.80

~2.40%

   (Won) 510,903        538,323   
        

 

 

   

 

 

 

Foreign currency equivalent

         USD 350      USD 350   
         JPY 10,000      JPY 10,000   
        

 

 

   

 

 

 

Less discount on bonds

           (4,542     (6,130
        

 

 

   

 

 

 
         (Won) 506,361        532,193   
        

 

 

   

 

 

 

Financial liabilities at fair value through profit or loss

          

Convertible bonds

   April 2012    Zero coupon    (Won) 82,096        84,338   
        

 

 

   

 

 

 

Foreign currency equivalent

         USD 76      USD 74   
        

 

 

   

 

 

 

Less current portion of convertible bonds

           (82,096     —     
        

 

 

   

 

 

 
         (Won) —          84,338   
        

 

 

   

 

 

 
         (Won) 2,200,846        1,712,832   
        

 

 

   

 

 

 

 

(*) Principal of the local currency debentures is to be repaid at maturity and interests are paid quarterly. In February and April 2011, the Controlling Company publicly issued debentures amounting to (Won)300,000 million (maturity: 5 years, annual interest rate: 4.95%) and (Won)300,000 million (maturity: 3 years, annual interest rate: 4.42%), respectively.


Table of Contents
10. Financial Liabilities, Continued

 

  (f) Details of the convertible bonds are as follows:

 

     Terms and Conditions

Issue date

   April 18, 2007

Maturity date

   April 18, 2012

Conversion period

   April 19, 2008~April 3, 2012

Coupon interest rate

   0%

Conversion price (in won) per share

   (Won)47,892

The Group designated foreign currency denominated convertible bonds as financial liabilities at fair value through profits or loss and recognizes the convertible bonds at fair value with changes in fair value recognized in profit or loss.

The bonds will be repaid at 116.77% of the principal amount at maturity unless the bonds are converted. During the year ended December 31, 2010, put options attached to the convertible bonds amounting to USD484 million were exercised and the Group repaid USD531 million for the convertible bonds at 109.75% of the principal amount. Put options not exercised were expired.

The Group measured the convertible bonds at their fair value using the market quotes available at Bloomberg and it was assumed that the remaining convertible bonds will be repaid in full at maturity and they were reclassified as current liabilities.

The Group is entitled to exercise a call option after three years from the date of issue at the amount of the principal and interest, calculated at 3.125% of the annual yield to maturity, from the issue date to the repayment date. The call option can be exercised only when the market price of the common shares on each of 20 trading days in 30 consecutive trading days ending on the trading day immediately prior to the date upon which notice of such redemption is published exceeds at least 130% of the conversion price. In addition, in the event that at least 90% of the initial principal amount of the bonds has been redeemed, converted, or purchased and cancelled, the remaining bonds may also be redeemed, at the Group’s option, at the amount of the principal and interest (3.125% per annum) from the date of issue to the repayment date prior to their maturity.

Based on the terms and conditions of the bond, the conversion price was decreased from (Won)48,075 to (Won)47,892 per share due to the Controlling Company’s declaration of cash dividends of (Won)500 per share for the year ended December 31, 2010.

As of June 30, 2011 and December 31, 2010, the number of common shares to be issued if the outstanding convertible bonds are fully converted is as follows:

 

(In won and share)              
      2011      2010  

Convertible bonds (*)

   (Won) 61,617,600,000         61,617,600,000   

Conversion price

   (Won) 47,892         48,075   

Common shares to be issued

     1,286,594         1,281,697   


Table of Contents
10. Financial Liabilities, Continued

 

(*) The exchange rate for the conversion is fixed at (Won)933.6 to USD1. The face value of the convertible bonds amounted to USD66 million as of June 30, 2011 and December 31, 2010.

 

  (g) Aggregate maturities of the Group’s financial liabilities as of June 30, 2011 are as follows:

 

(In millions of won)                                   

Period

   Local currency
long-term debt
     Foreign currency
long-term debt
     Debentures      Convertible
bonds
     Total  

Within 1 year

   (Won) 4,097         735,772         —           82,096         821,965   

1~5 year

     15,195         644,554         2,200,846         —           2,860,595   

Thereafter

     3,723         —           —           —           3,723   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 23,015         1,380,326         2,200,846         82,096         3,686,283   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

11. The Nature of Expenses

The nature of expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Changes in inventories

   (Won) (606,730     (588,464

Purchase of raw material and merchandise

     7,597,005        7,463,333   

Depreciation and amortization

     1,709,407        1,338,370   

Outsourcing fee

     67,475        43,557   

Labor costs

     1,169,690        890,862   

Supplies and others

     601,643        472,168   

Utility expense

     263,489        211,153   

Fees and commissions

     215,262        168,859   

Shipping costs

     162,207        214,916   

After-sale service expenses

     40,122        92,136   

Others

     527,685        481,662   
  

 

 

   

 

 

 
   (Won) 11,747,255        10,788,552   
  

 

 

   

 

 

 

Total expenses consist of cost of sales, selling, administrative, research and development expenses and others (except foreign exchange difference).

For the six-month period ended June 30, 2011, other income and other expenses contained exchange differences amounting to (Won)570,620 million and (Won)534,388 million, respectively (six-month period ended June 30, 2010 : (Won)742,628 million and (Won)774,245 million, respectively).

The expenses for the six-month period ended June 30, 2010 are reclassified to conform to the criteria of classification for the six-month period ended June 30, 2011.


Table of Contents
12. Selling and Administrative Expenses

Details of selling and administrative expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Salaries

   (Won) 114,619         99,747   

Expenses related to defined benefit plan

     9,330         8,606   

Other employee benefit

     34,052         25,664   

Shipping costs

     135,229         176,000   

Fees and commissions

     83,900         74,454   

Depreciation and amortization

     87,424         68,822   

Taxes and dues

     21,325         9,337   

Advertising

     62,530         38,883   

After-sale service expenses

     40,122         92,136   

Others

     71,929         59,690   
  

 

 

    

 

 

 
   (Won) 660,460         653,339   
  

 

 

    

 

 

 

 

13. Other Income and Other Expenses

 

  (a) Details of other income for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)       
     2011      2010  

Rental income

   (Won) 3,114         2,010   

Foreign currency gain

     570,620         742,628   

Gain on disposal of property, plant and equipment

     425         1,309   

Reversal of allowance for doubtful accounts for other receivables

     301         —     

Reversal of stock compensation cost

     421         —     

Commission earned

     2,069         644   

Others

     4,566         1,073   
  

 

 

    

 

 

 
   (Won) 581,516         747,664   
  

 

 

    

 

 

 

 

  (b) Details of other expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)       
     2011      2010  

Other bad debt expenses

   (Won) 975         43   

Foreign currency loss

     534,388         774,245   

Loss on disposal of property, plant and equipment

     462         88   

Others

     119         65,771   
  

 

 

    

 

 

 
   (Won) 535,944         840,147   
  

 

 

    

 

 

 


Table of Contents
14. Employee Benefits

The Controlling Company and some of its subsidiaries maintain defined benefit plans that provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Group. The Controlling Company’s defined benefit plan, if legal requirements are satisfied, allows interim settlement upon the employee’s election. Subsequent to the interim settlement, service term used for severance payment calculation is remeasured from the settlement date.

 

  (a) Recognized liabilities for defined benefit obligations as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)             
      2011     2010  

Present value of partially funded defined benefit obligations

   (Won) 408,945        360,540   

Fair value of plan assets

     (279,975     (281,825
  

 

 

   

 

 

 
   (Won) 128,970        78,715   
  

 

 

   

 

 

 

 

  (b) Expenses recognized in profit and loss for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Current service cost

   (Won) 53,629        44,037   

Interest cost

     9,492        7,355   

Expected return on plan assets

     (6,177     (6,473

Past service cost

     —          12,778   
  

 

 

   

 

 

 
   (Won) 56,944        57,697   
  

 

 

   

 

 

 

 

  (c) Plan assets as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Deposits with financial institutions

   (Won) 279,975         281,825   

 

  (d) Actuarial gain and loss recognized in other comprehensive income for the six-month periods ended June 30, 2011 and 2010 is as follows:

 

(In millions of won)    2011     2010  

Defined benefit plan actuarial gain or loss

   (Won) 1,072        6   

Income tax

     (236     —     
  

 

 

   

 

 

 

Defined benefit plan actuarial gain or loss, net of income tax

   (Won) 836        6   
  

 

 

   

 

 

 


Table of Contents
15. Finance income and Finance costs

 

  (a) Finance income and costs recognized in profit and loss for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Finance income

     

Interest income

   (Won) 31,090         54,001   

Foreign currency gain

     171,020         80,596   

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

     145         6   

Gain on disposal of investments in equity accounted investees

     144         2,506   
  

 

 

    

 

 

 
   (Won) 202,399         137,109   
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   (Won) 67,119         35,528   

Foreign currency loss

     66,909         157,864   

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

     864         1,872   

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

     2,261         1,844   

Loss on sale of trade accounts and notes receivable

     8,204         3,524   

Loss on redemption of debenture

     —           4,138   

Loss on disposal of investments in equity accounted investees

     —           421   

Impairment loss on investments in equity accounted investees

     14,244         —     
  

 

 

    

 

 

 
   (Won) 159,601         205,191   
  

 

 

    

 

 

 

 

  (b) Finance income and costs recognized in other comprehensive income (loss) for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)       
     2011     2010  

Gain on valuation of available-for-sale securities

     1,691        6,646   

Tax effect

     (614     (1,992
  

 

 

   

 

 

 
   (Won) 1,077        4,654   
  

 

 

   

 

 

 


Table of Contents
16. Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Shinhan Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD1,397 million ((Won)1,506,472 million) in connection with its export sales transactions. As of June 30, 2011, the amount of accounts and notes receivable amounting to USD700 million ((Won)754,672 million) were sold but are not past due.

In October 2006, LG Display America, Inc., LG Display Germany GmbH, LG Display Shanghai Co., Ltd. and others entered into a five-year accounts receivable selling program with Standard Chartered Bank on a revolving basis, of up to USD600 million ((Won)646,860 million). The Controlling Company joined this program in April 2007. For the six-month period ended June 30, 2011, no accounts and notes receivable were sold under this program.

LG Display Singapore Pte. Ltd., the Controlling Company’s subsidiary, has agreements with Standard Chartered Bank and Citibank for accounts receivable sales negotiating facilities of up to an aggregate of USD250 million ((Won)269,525 million) and USD100 million ((Won)107,810 million), respectively, and as of June 30, 2011, accounts and notes receivable amounting to USD200 million ((Won)215,620 million) and USD21 million ((Won)22,640 million) were sold but are not past due, respectively. LG Display Taiwan Co., Ltd. has agreements with Taishin International Bank and BNP Paribas for accounts receivable sales negotiating facilities of up to an aggregate of USD1,062 million ((Won)1,144,942 million) and USD65 million ((Won)70,077 million), respectively, and, as of June 30, 2011, accounts and notes receivable amounting to USD275 million ((Won)296,478 million) and USD65 million ((Won)70,077 million) were sold but are not past due, respectively. In addition, LG Display Taiwan Co., Ltd. has agreements with Citibank and Standard Chartered Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD125 million ((Won)134,763 million) and USD260 million ((Won)280,306 million), respectively, and, as of June 30, 2011, accounts and notes receivable amounting to USD36 million ((Won)38,812 million) were sold to Citibank but are not past due. LG Display Shanghai Co., Ltd. has an agreement with BNP Paribas for accounts receivable sales negotiating facilities of up to an aggregate of USD140 million ((Won)150,934 million), and, as of June 30, 2011, accounts and notes receivable amounting to USD90 million ((Won)97,029 million) were sold but are not past due. In July 2010, LG Display Shenzhen Co., Ltd. and LG Display Shanghai Co., Ltd. entered into agreements with Bank of China Limited, and, as of June 30, 2011, accounts and notes receivable amounting to USD135 million ((Won)145,544 million) were sold but are not past due. In June 2010, LG Display Germany GmbH entered into an agreement with Citibank for accounts receivable sales negotiating facilities of up to an aggregate of USD307 million ((Won)330,977 million), and, as of June 30, 2011, accounts and notes receivable amounting to USD226 million ((Won)243,651 million) were sold but are not past due. LG Display America, Inc. has agreements with Australia and New Zealand Banking Group Limited and Standard Chartered Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD80 million ((Won)86,248 million) and USD50 million ((Won)53,905 million), respectively, and, as of June 30, 2011, the amount of accounts and notes receivable amounting to USD71 million ((Won)76,545 million) and USD47 million ((Won)50,671 million) were sold but not past due, respectively. In addition, LG Display America, Inc. has agreements with Citibank for accounts receivable sales negotiating facilities of up to an aggregate of USD300 million ((Won)323,430 million) and as of June 30, 2011, the amount of accounts and notes receivable amounting to USD300 million ((Won)323,430 million) were sold but not past due.


Table of Contents
16. Commitments, Continued

 

The Controlling Company has a credit facility agreement with Shinhan Bank pursuant to which the Controlling Company could negotiate its accounts receivables up to an aggregate of (Won)50,000 million in connection with its domestic sales transactions and as of June 30, 2011, the amount of accounts and notes receivable amounting to USD10 million ((Won)10,562 million) were sold but not past due. In addition, The Controlling Company has agreement with Citibank, N.A. and Standard Chartered Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD100 million ((Won)107,810 million) and USD30 million ((Won)32,343 million), respectively, and as of June 30, 2011, accounts and notes receivable amounting to USD27 million ((Won)29,264 million) were sold to Standard Chartered Bank but are not past due. In connection with all the above contracts in this paragraph, the Group has sold its accounts receivable without recourse.

Letters of credit

As of June 30, 2011, the Controlling Company has agreements with Korea Exchange Bank in relation to the opening of letters of credit up to USD110 million ((Won)118,591 million), USD20 million ((Won)21,562 million) with China Construction Bank, USD210 million ((Won)226,401 million) with Shinhan Bank, JPY10,000 million ((Won)133,569 million) with Woori Bank, USD80 million ((Won)86,248 million) with Bank of China, USD104 million ((Won)112,122 million) with Hana Bank and JPY6,893 million ((Won)92,066 million) and USD60 million ((Won)64,686 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company receives payment guarantees amounting to USD8.5 million ((Won)9,164 million) and EUR215 million ((Won)335,508) from Royal Bank of Scotland and other various banks in connection with value added tax payments in Poland. As of June 30, 2011, the Controlling Company is providing a payment guarantee to a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR38 million ((Won)58,819 million) term loan credit facility of LG Display Poland Sp. zo.o. In addition, the Controlling Company provides payment guarantees in connection with LG Display America, Inc.’s term loan credit facilities with an aggregate amount of USD7 million ((Won)7,547 million) for principals and related interests.

LG Display Japan Co., Ltd. and other subsidiaries have entered into short-term credit facility agreements of up to USD96 million ((Won)102,959 million), JPY8,000 million ((Won)106,855 million), and CNY500 million ((Won)83,400 million), respectively, with Mizuho Corporate Bank and other various banks. LG Display Japan Co., Ltd. and other subsidiaries are provided with repayment guarantees from the Bank of Tokyo-Mitsubishi UFJ and other various banks amounting to USD5 million ((Won)5,391 million), JPY1,300 million ((Won)17,364 million) and CNY1,200 million ((Won)200,160 million) respectively, for their local tax payments.

License agreements

As of June 30, 2011, in relation to its TFT-LCD business, the Controlling Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.


Table of Contents
16. Commitments, Continued

 

Long-term supply agreement

In connection with a long-term supply agreements, as of June 30, 2011, the Controlling Company’s advances received from customer amount to USD1,080 million ((Won)1,164,348 million) in aggregate. The advances received will offset against outstanding accounts receivable balance after a given period of time, as well as those arising from the supply of products thereafter. The Controlling Company received a payment guarantee amounting to USD200 million ((Won)215,620 million) from Industrial Bank of Korea relating to advances received.

Pledged Assets

Regarding the line of credit up to USD50 million ((Won)53,905 million), the Controlling Company provided with part of its OLED machinery as pledged assets to the Export-Import Bank of Korea.

 

17. Contingencies

Patent infringement lawsuit against Chi Mei Optoelectronics Corp, and others

On December 1, 2006, the Group filed a complaint in the United States District Court for the District of Delaware against Chi Mei Optoelectronics Corp. and AU Optronics Corp. claiming infringement of patents related to liquid crystal displays and the manufacturing processes for TFT-LCDs. On March 8, 2007, AU Optronics Corp. filed a counter-claim against the Group in the United States District Court for the Western District of Wisconsin for alleged infringement of patents related to the manufacturing processes for TFT-LCDs but the suit was transferred to the United States District Court for the District of Delaware on May 30, 2007. On May 4, 2007, Chi Mei Optoelectronics Corp. filed a counter-claim against the Group for patent infringement in the United States District Court for the Eastern District of Texas, but the suit was transferred to the United States District Court for the District of Delaware (the “Court”) on March 31, 2008.

The Court bifurcated the trial between AU Optronics Corp. and Chi Mei Optoelectronics Corp. holding the first trial against AU Optronics Corp. on June 2, 2009. Although the Group had a total of nine patents to be tried and AU Optronics Corp. had a total of seven patents to be tried in the first trial against AU Optronics Corp., the trial was further bifurcated so that only four patents from each side were tried. On February 16, 2010, the Court found that the four AU Optronics Corp. patents were valid and were infringed by the Group, and on April 30, 2010, the Court further found that the Group’s four patents were valid but were not infringed by AU Optronics Corp. In October and November 2010, the Group filed a motion for reconsideration as to the court’s findings on the AU Optronics Corp.’s patents and the Group’s patents respectively. However, the final judgment has not yet been rendered. Once all findings by the Court have been issued, the Group will review all available options including appeal. The Group is unable to predict the ultimate outcome of the above matters.

Anvik Corporation’s lawsuit for infringement of patent

On February 2, 2007, Anvik Corporation filed a patent infringement case against the Group, along with other LCD manufacturing companies in the United States District Court for the Southern District of New York, in connection with the usage of photo-masking equipment manufactured by Nikon Corporation. While there is no significant progress on this case in 2011, the Group is unable to predict the ultimate outcome of this case.


Table of Contents
17. Contingencies, Continued

 

Antitrust investigations and litigations

In December 2006, the Controlling Company received notices of investigation by the Korea Fair Trade Commission, the Japan Fair Trade Commission, the U.S. Department of Justice, and the European Commission with respect to possible anti-competitive activities in the TFT-LCD industry. The Controlling Company subsequently received similar notices from the Canadian Bureau of Competition Policy, the Federal Competition Commission of Mexico, the Secretariat of Economic Law of Brazil and the Taiwan Fair Trade Commission.

In November 2008, the Controlling Company executed an agreement with the U.S. Department of Justice (“DOJ”) whereby the Controlling Company and its U.S. subsidiary, LG Display America, Inc. (“LGDUS”), pleaded guilty to a Sherman Antitrust Act violation and agreed to pay a single total fine of USD400 million. In December 2008, the U.S. District Court for the Northern District of California accepted the terms of the plea agreement and entered a judgment against the Controlling Company and LGDUS and ordered the payment of USD400 million according to the following schedule: USD20 million plus any accrued interest by June 15, 2009, and USD76 million plus any accrued interest by each of June 15, 2010, June 15, 2011, June 15, 2012, June 15, 2013 and December 15, 2013. The agreement resolved all federal criminal charges against the Controlling Company and LGDUS in the United States in connection with this matter.

On December 8, 2010, the European Commission (“the EC”) issued a decision finding that the Controlling Company engaged in anti-competitive activities in the LCD industry in violation of European competition laws and imposed a fine of EUR215 million. On February 23, 2011, the Controlling Company filed with the European Union General Court an application for partial annulment and reduction of the fine imposed by the EC. The European Union General Court has not ruled on our application.

In November 2009, the Taiwan Fair Trade Commission terminated its investigation without any finding of violations or levying of fines. Investigations by the Canadian Bureau of Competition Policy, the Japan Fair Trade Commission, the Korea Fair Trade Commission, the Federal Competition Commission of Mexico and the Secretariat of Economic Law of Brazil are ongoing.

Subsequent to the commencement of the DOJ investigation, a number of class action complaints were filed against the Controlling Company and other TFT-LCD panel manufacturers in the U.S. and Canada alleging violation of respective antitrust laws and related laws. The class action lawsuits in the U.S. were transferred to the Northern District of California for pretrial proceedings (“MDL Proceedings”). On March 28, 2010, the court certified the class action complaints filed by direct purchasers and indirect purchasers. In January 2011, 78 entities (including groups of affiliated entities) submitted requests for exclusion from the direct purchaser class. The time period for submitting requests for exclusion from the indirect purchaser class has not yet begun. In June 2011, the Controlling Company reached a settlement with the direct purchaser class, which is subject to and pending court approval. Trial against the indirect purchaser plaintiff class is set to begin in February 2012.


Table of Contents
17. Contingencies, Continued

 

Similar claims were filed separately by ATS. Claim, LLC, (assignee of Ricoh Electronics, Inc.), AT&T Corp. and its affiliates, Motorola, Inc., Electrograph Technologies Corp. and their respective related entities, all of which have been transferred to the MDL Proceedings. In November 2010, ATS Claim, LLC dismissed its action as to the Controlling Company pursuant to a settlement agreement. In addition, in 2010, TracFone Wireless Inc., Best Buy Co., Inc. and its affiliates, Target Corp., Sears, Roebuck and Co., Kmart Corp., Old Comp Inc., Good Guys, Inc., RadioShack Corp., Newegg Inc., Costco Wholesale Corp., Sony Electronics, Inc., Sony Computer Entertainment America LLC, SB Liquidation Trust, and the trustee of the Circuit City Stores, Inc. Liquidation Trust, filed claims in the United States. In addition, in 2011, Office Depot, Inc. and T-Mobile U.S.A., Inc., Interbond Corp. of America (Brandsmart), Jaco Electronics, Inc., P.C. Richard & Son Long Island Corp., MARTA Cooperative of America, Inc., ABC Appliance (ABC Warehouse), Schultze Agency Services, LLC (Tweeter) filed similar claims. To the extent these claims were not filed in the MDL Proceedings, they have been transferred to the MDL Proceedings or motions have been made to transfer them to the MDL Proceedings.

In addition, in 2010 and 2011, the attorneys general of Arkansas, California, Florida, Illinois, Michigan, Mississippi, Missouri, New York, Oregon, South Carolina, Washington, West Virginia and Wisconsin filed similar complaints against the Controlling Company and other LCD producers.

In Canada, the Ontario Superior Court of Justice certified the class action complaints filed by the direct and indirect purchasers.

In February 2007, the Controlling Company and certain of its current and former officers and directors were named as defendants in a purported shareholder class action filed in the U.S. District Court for the Southern District of New York, alleging violation of the U.S. Securities Exchange Act of 1934. In May 2010, the Controlling Company reached an agreement in principle with the class plaintiffs to settle the action and the District Court granted final approval of the settlement on March 17, 2011.

While the Group continues its vigorous defense of the various pending proceedings described above, there is a possibility that one or more proceedings may result in an unfavorable outcome to the Group. The Group has established provisions with respect to certain of the contingencies. However, actual liability may be materially different from the provisions estimated by the Group.


Table of Contents
18. Capital and Reserves

 

  (a) Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value (Won)5,000), and as of June 30, 2011 and December 31, 2010, the number of issued common shares is 357,815,700.

There have been no changes in the capital stock for the six-month period ended June 30, 2011.

 

  (b) Reserves

Translation reserve

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

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired.

 

  (c) Dividends

During the six-month period ended June 30, 2011, the Group declared dividends of (Won)178,908 million ((Won)500 per share). The dividend has been paid in April, 2011 and there are no income tax consequences.


Table of Contents
19. Related Parties

 

  (a) Key management personnel compensation

Compensation costs of key management for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Short-term benefits

   (Won) 934         1,135   

Expenses related to defined benefit plan

     266         176   

Other long-term benefits

     319         303   
  

 

 

    

 

 

 
   (Won) 1,519         1,614   
  

 

 

    

 

 

 

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

 

  (b) Significant transactions with related companies

Significant transactions which occurred in the normal course of business with related companies for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)    Sales and other      Purchases and other  
     2011      2010      2011      2010  

Subsidiaries

   (Won) 10,042,426         10,846,676         1,681,210         1,427,384   

Joint ventures

     320,578         501,794         1,174         27,605   

Associates

     5,304         6         744,473         802,454   

LG Electronics

     2,536,845         3,036,775         174,006         215,920   

Other related parties

     20         174,500         18,714         295,343   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 12,905,173         14,559,751         2,619,577         2,768,706   
  

 

 

    

 

 

    

 

 

    

 

 

 

Account balances with related companies as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)    Trade accounts and
notes receivable and other
     Trade accounts and
notes payable and other
 
     2011      2010      2011      2010  

Subsidiaries

   (Won) 2,824,080         3,609,801         518,537         405,814   

Joint ventures

     120,784         145,093         174,351         478,009   

Associates

     26         —           348,360         243,357   

LG Electronics

     585,368         634,570         138,399         138,484   

Other related parties

     —           —           3,698         3,870   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 3,530,258         4,389,464         1,183,345         1,269,534   
  

 

 

    

 

 

    

 

 

    

 

 

 


Table of Contents
20. Geographic and Other Information

The Group manufactures and sells TFT-LCD and AM-OLED products. The segment of AM-OLED is not presented separately, as the sales of AM-OLED products are insignificant to total sales.

Export sales represent approximately 92% of total sales for the six-month period ended June 30, 2011.

 

  (a) Revenue by geography

 

(In millions of won)              

Region(*)

   Revenue  
   2011      2010  

Domestic

   (Won) 908,032         821,808   

Foreign

     

China

     6,564,991         6,506,879   

Asia (excluding China)

     1,174,103         1,264,947   

United States

     1,169,638         1,659,681   

Europe

     1,595,814         2,077,228   
  

 

 

    

 

 

 

Sub total

   (Won) 10,504,546         11,508,735   
  

 

 

    

 

 

 

Total

   (Won) 11,412,578         12,330,543   
  

 

 

    

 

 

 

Sales to LG Electronics constituted about 21% of total revenue for the six-month period ended June 30, 2011.

 

  (b) Non-current assets by geography

 

(In millions of won)                            

Region

   June 30, 2011      December 31, 2010  
   Property, plant
and equipment
     Intangible
assets
     Property, plant
and equipment
     Intangible
assets
 

Domestic

   (Won) 13,161,066         517,370         11,690,716         520,152   

Foreign

           

China

     942,325         17,775         945,864         19,105   

Others

     183,392         69         178,821         644   
  

 

 

    

 

 

    

 

 

    

 

 

 

Sub total

   (Won) 1,125,717         17,844         1,124,685         19,749   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   (Won) 14,286,783         535,214         12,815,401         539,901   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c) Revenue by product

 

(In millions of won)              

Product

   2011      2010  

Panels for:

     

Notebook computers

   (Won) 2,357,541         2,275,736   

Desktop monitors

     2,450,794         2,873,988   

TFT-LCD televisions

     5,484,967         6,662,109   

Mobile and others

     1,119,276         518,710   
  

 

 

    

 

 

 
   (Won) 11,412,578         12,330,543   
  

 

 

    

 

 

 


Table of Contents
21. Share-Based Payment

 

  (a) The terms and conditions of share-based payment arrangement as of June 30, 2011 are as follows:

 

    

Descriptions

Settlement method

   Cash settlement

Type of arrangement

   Stock appreciation rights (granted to senior executives)

Date of grant

   April 7, 2005

Weighted-average exercise price (*1)

   (Won)44,050

Number of rights granted

   450,000

Number of rights forfeited (*2)

   230,000

Number of rights cancelled (*3)

   110,000

Number of rights outstanding

   110,000

Exercise period

   From April 8, 2008 to April 7, 2012

Remaining contractual life

   0.75 years

Vesting conditions

   Two years of service from the date of grant

 

(*1) The exercise price at the grant date was (Won)44,260 per stock appreciation right (“SARs”). However, the exercise price was subsequently adjusted to (Won)44,050 due to additional issuance of common shares in 2005.
(*2) SARs were forfeited in connection with senior executives who left the Group before meeting the vesting requirement.
(*3) If the appreciation of the Controlling Company’s share price is equal or less than that of the Korea Composite Stock Price Index (“KOSPI”) over the three-year period following the grant date, only 50% of the outstanding SARs are exercisable. As the actual increase rate of the Controlling Company’s share price for the three-year period ending April 7, 2008 was less than that of the KOSPI for the same three-year period, 50% (110,000 shares) of then outstanding SARs were cancelled in 2008.

 

  (b) The changes in the number of SARs outstanding for the six-month period ended June 30, 2011 are as follows:

 

(Number of shares)       
      2011  

Balance at beginning of year

     110,000   

Forfeited or cancelled

     —     

Outstanding as of June 30, 2011

     110,000   

Exercisable as of June 30, 2011

     110,000   


Table of Contents
21. Share-Based Payment, Continued

 

  (c) The fair value of SARs was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

     June 30, 2011   December 31, 2010

Risk free rate (*1)

   3.56%   2.89%

Expected term (*2)

   0.75 year   1.0 year

Expected volatility

   32.66%   35.20%

Expected dividends (*3)

   0%   0%

Fair value per share

   (Won)467   (Won)4,296

Total carrying amount of liabilities (*4)

   (Won)51,353,794   (Won)472,527,182

 

(*1) Risk-free rates are interest rates of Korean government bonds.
(*2) As of June 30, 2011, the remaining contractual life is 9 months and the expected term is determined as 0.75 year.
(*3) The Controlling Company did not pay any dividends from 2000 through 2006 and accordingly, expected dividend used is 0% despite recent dividend yield was 1.6%, 2.2%, 1.3% and 1.3% in 2007, 2008, 2009 and 2010, respectively.
(*4) As of June 30, 2011, the market price of the stock does not exceed the exercise price and accordingly, the intrinsic value of the share-based payments is zero.

 

  (d) The Group recognized reversal of stock compensation cost of (Won)421 million as other income for the six-month period ended June 30, 2011.

 

22. Income Taxes

 

  (a) Details of Income tax expense (benefit) for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current tax expense

   (Won) (1,138     263,936   

Deferred tax benefit

     (157,449     (21,358
  

 

 

   

 

 

 

Income tax expense (benefit)

   (Won) (158,587     242,578   
  

 

 

   

 

 

 


Table of Contents
22. Income Taxes, Continued

 

  (b) Deferred tax assets and liabilities as of June 30, 2011 and December 31, 2010 are attributable to the following:

 

(In millions of won)

   Assets      Liabilities     Total  
     2011      2010      2011     2010     2011     2010  

Other accounts receivable, net

   (Won) —           —           (2,817     (5,919     (2,817     (5,919

Inventories, net

     17,338         17,942         —          —          17,338        17,942   

Available-for-sale financial assets

     1,619         2,199         (249     (6,983     1,370        (4,784

Defined benefit obligation

     2,935         3,829         —          —          2,935        3,829   

Investments in equity accounted investees

     4,663         12,041         —          —          4,663        12,041   

Derivative instruments

     —           —           —          (2,008     —          (2,008

Accrued expense

     63,353         78,396         —          —          63,353        78,396   

Property, plant and equipment

     114,046         112,286         —          —          114,046        112,286   

Provisions

     14,364         17,962         —          —          14,364        17,962   

Gain or loss on foreign currency

     19,253         81,075         (17,454     (61,031     1,799        20,044   

Debentures

     5,580         5,049         —          —          5,580        5,049   

Others

     20,486         24,134         (6,006     (6,006     14,480        18,128   

Tax credit carryforwards

     987,701         795,247         —          —          987,701        795,247   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax assets (liabilities)

   (Won) 1,251,338         1,150,160         (26,526     (81,947     1,224,812        1,068,213   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Controlling Company is 24.2% for the six-month period ended June 30, 2011. Statutory tax rate applicable to the Controlling Company is 24.2% until 2011 and 22% thereafter.

 

23. Earnings (loss) Per Share

 

  (a) Basic earnings (loss) per share for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won, except earnings per

share and share information)

   For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2011      2010      2011     2010  

Net income (loss) attributable to owners of the Controlling Company

   (Won) 24,931         555,517         (90,258     1,204,583   

Weighted-average number of common shares outstanding

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

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per share

   (Won) 70         1,553         (252     3,366   
  

 

 

    

 

 

    

 

 

   

 

 

 

There were no events or transactions that result in changes in the number of common shares used for calculating earnings per share.


Table of Contents
23. Earnings (loss) Per Share, Continued

 

  (b) There is no effect of dilutive potential ordinary shares due to net loss for the six-month period ended June 30, 2011. Diluted earnings per share for the three-month period ended June 30, 2011 and for the six-month period ended June 30, 2010 were as follows:

 

(In millions of won, except earnings per

share and share information)

   For the three-month
periods ended June 30,
    For the six-month
periods ended June 30,
 
     2011     2010     2010  

Profit for the period

   (Won) 24,931        555,517        1,204,583   

Interest on convertible bond, net of tax

     (737     (1,828     (14,888

Adjusted income

     24,194        553,689        1,189,695   

Weighted-average number of common shares outstanding and common equivalent shares(*)

     359,102,294        359,097,397        363,095,914   
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   (Won) 67        1,542        3,277   
  

 

 

   

 

 

   

 

 

 

 

(*) Weighted-average number of common shares outstanding for the three-month period ended June 30, 2011 and for the six-month period ended June 30, 2010 is calculated as follows:

 

(In shares)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2011      2010      2010  

Weighted-average number of common shares (basic)

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

Effect of conversion of convertible bonds

     1,286,594         1,281,697         5,280,214   
  

 

 

    

 

 

    

 

 

 

Weighted-average number of common shares (diluted)

     359,102,294         359,097,397         363,095,914   
  

 

 

    

 

 

    

 

 

 

 

  (c) The number of dilutive potential ordinary shares outstanding for the three-month period ended June 30, 2011 and for the six-month period ended June 30, 2010 is calculated as follows:

 

  (i) 2011

 

(Number of shares)   

For the three-month

periods ended June 30
Convertible bonds

Common shares to be issued

   1,286,594

Period

  

April 1, 2011

~June 30, 2011

Weight

   91 days / 91 days

Weighted-average number of common shares to be issued

   1,286,594


Table of Contents
23. Earnings (loss) Per Share, Continued

 

  (ii) 2010

 

(Number of shares)   

For the three-month

periods ended June 30

  

For the six-month

periods ended June 30,

    

Convertible bonds

   Convertible bonds    Convertible bonds

Common shares to be issued

   1,281,697    1,281,697    9,399,113

Period

  

April 1, 2010

~June 30, 2010

   January 1, 2010

~June 30, 2010

   January 1, 2010

~March 19, 2010

Weight

   91 days /91 days    181 days /181 days    77 days /181 days

Weighted-average number of common shares to be issued

   1,281,697    5,280,214


Table of Contents

LG DISPLAY CO., LTD.

 

Condensed Separate Interim Financial Statements

 

(Unaudited)

 

June 30, 2011 and 2010

 

(With Independent Auditors’ Review Report Thereon)


Table of Contents

Table of Contents

 

     Page  

Independent Auditors’ Review Report

     1   

Condensed Separate Statements of Financial Position

     3   

Condensed Separate Statements of Comprehensive Income

     4   

Condensed Separate Statements of Changes in Equity

     5   

Condensed Separate Statements of Cash Flows

     6   

Notes to the Condensed Separate interim Financial Statements

     8   


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.:

Introduction

We have reviewed the accompanying condensed separate statement of financial position of LG Display Co., Ltd. (the “Company”) as of June 30, 2011, and the related condensed separate statements of comprehensive income for each of the three-month and six-month periods ended June 30, 2011 and 2010, changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Condensed 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 are 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 express a conclusion on these condensed separate interim financial statements based on our reviews.

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

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the condensed 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.

Emphasis of Matter

As discussed in note 17 to the financial statements, the European Commission issued a decision finding that LG Display Co., Ltd. engaged in anti-competitive activities in the Liquid Crystal Display (LCD) industry in violation of European competition laws and imposed a fine of EUR215 million on December 8, 2010. LG Display Co., Ltd., along with its subsidiaries, is under investigations by the Korea Fair Trade Commission and antitrust authorities in other countries with respect to possible anti-competitive activities in the LCD industry. In addition, LG Display Co., Ltd., along with its subsidiaries, has been named as defendants in a number of federal class actions in the United States and Canada and related individual lawsuits in connection with the alleged antitrust violations concerning the sale of LCD panels. The Company estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Company.


Table of Contents

Other Considerations

We audited the separate statement of financial position as of December 31, 2010, and the separate statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2010, not accompanying this review report, in accordance with auditing standards generally accepted in the Republic of Korea, and our report thereon, dated February 24, 2011, expressed an unqualified opinion. The accompanying separate statement of financial position of the Company as of December 31, 2010, presented for comparative purposes, is not different from that audited by us in all material respects.

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

August 8, 2011

This report is effective as of August 8, 2011, 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 interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Statements of Financial Position

(Unaudited)

As of June 30, 2011 and December 31, 2010

 

(In millions of won)    Note    2011     2010  

Assets

       

Cash and cash equivalents

   9    (Won) 1,456,298       889,784  

Deposits in banks

   9      115,000       1,503,000  

Trade accounts and notes receivable, net

   9, 16      3,099,857       3,883,433  

Other accounts receivable, net

   9      178,329       301,543  

Other current financial assets

   9      20,669       34,828  

Inventories

   5      2,424,740       1,759,965  

Other current assets

        227,458       127,320  
     

 

 

   

 

 

 

Total current assets

        7,522,351       8,499,873  

Investments

   6      1,358,329       1,279,831  

Other non-current financial assets

   9      68,602       64,020  

Deferred tax assets

   21      1,135,546       979,323  

Property, plant and equipment, net

   7      13,157,130       11,688,061  

Intangible assets, net

   8      479,282       483,260  

Other non-current assets

        162,759       163,630  
     

 

 

   

 

 

 

Total non-current assets

        16,361,648       14,658,125  
     

 

 

   

 

 

 

Total assets

      (Won) 23,883,999       23,157,998  
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   9    (Won) 2,732,255       2,986,383  

Current financial liabilities

   9, 10      1,630,364       1,906,112  

Other accounts payable

   9      3,586,249       2,373,083  

Accrued expenses

        356,235       374,177  

Income taxes payable

        —          104,044  

Provisions

        267,014       634,815  

Other current liabilities

        581,468       75,255  
     

 

 

   

 

 

 

Total current liabilities

        9,153,585       8,453,869  

Non-current financial liabilities

   9, 10      2,817,871       2,470,667  

Non-current provisions

        8,329       8,773  

Employee benefits

   14      128,698       78,406  

Long-term advances received

   16      625,298       945,287  

Other non-current liabilities

        555,573       330,321  
     

 

 

   

 

 

 

Total non-current liabilities

        4,135,769       3,833,454  
     

 

 

   

 

 

 

Total liabilities

        13,289,354       12,287,323  
     

 

 

   

 

 

 

Equity

       

Share capital

   18      1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Reserves

   18      (5,739 )     (7,795 )

Retained earnings

        6,560,192       6,838,278  
     

 

 

   

 

 

 

Total equity

        10,594,645       10,870,675  
     

 

 

   

 

 

 

Total liabilities and equity

      (Won) 23,883,999       23,157,998  
     

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

3


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Interim Statement of Comprehensive Income (Loss)

(Unaudited)

For the three-month and six-month periods ended June 30, 2011 and 2010

 

(In millions of Won, except earnings per share)    Note    For the three-month periods
ended June 30
    For the six-month periods
ended June 30
 
          2011     2010     2011     2010  

Revenue

      (Won) 5,898,658       6,538,482     (Won) 10,950,409       12,379,226  

Cost of sales

        (5,582,800 )     (5,281,418 )     (10,583,546 )     (10,075,238 )

Gross profit

        315,858       1,257,064       366,863       2,303,988  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other income

   13      203,280       395,711       408,770       564,959  

Selling expenses

   12      (96,612 )     (138,738 )     (184,805 )     (253,295 )

Administrative expenses

   12      (116,410 )     (106,451 )     (229,335 )     (209,962 )

Research and development expenses

        (184,622 )     (166,868 )     (352,317 )     (303,436 )

Other expenses

   13      (192,921 )     (537,063 )     (382,307 )     (694,510 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Results from operating activities

        (71,427 )     703,655       (373,131 )     1,407,744  
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

   15      100,727       122,517       217,510       146,959  

Finance costs

   15      (49,323 )     (200,708 )     (112,035 )     (171,699 )

Other non-operating income (loss), net

        (2,403 )     (1,450 )     (5,439 )     (2,914 )
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before income taxes

        (22,426 )     624,014       (273,095 )     1,380,090  

Income tax expense (benefit)

   21      (76,762 )     92,707       (173,081 )     249,739  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

        54,336       531,307       (100,014 )     1,130,351  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

           

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

        3,736       (11,603 )     2,636       7,747  

Defined benefit plan actuarial gain or loss (loss)

   14      467       159       1,072       6  

Income tax on other comprehensive income

        (925 )     2,553       (816 )     (1,704 )
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        3,278       (8,891 )     2,892       6,049  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      (Won) 57,614       522,416     (Won) (97,122 )     1,136,400  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share

           

Basic earnings (loss) per share

   22    (Won) 152       1,485     (Won) (280 )     3,159  
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

   22    (Won) 149       1,474     (Won) (280 )     3,072  
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

4


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

For the six-month periods ended June 30, 2011 and 2010

 

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

Balances at January 1, 2010

   (Won) 1,789,079        2,251,113        (17,366 )     6,011,372       10,034,198  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

            

Profit for the period

     —           —           —          1,130,351       1,130,351  

Other comprehensive income

            

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

     —           —           6,043       —          6,043  

Defined benefit plan actuarial gain

     —           —           —          6       6  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           —           6,043       6       6,049  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

   (Won) —           —           6,043       1,130,357       1,136,400  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

            

Dividends to equity holders

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at June 30, 2010

   (Won) 1,789,079        2,251,113        (11,323 )     6,962,821       10,991,690  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at January 1, 2011

   (Won) 1,789,079        2,251,113        (7,795 )     6,838,278       10,870,675  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

            

Loss for the period

     —           —           —          (100,014 )     (100,014 )

Other comprehensive income (loss)

            

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

     —           —           2,056       —          2,056  

Defined benefit plan actuarial gain

     —           —           —          836       836  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           —           2,056       836       2,892  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   (Won) —           —           2,056       (99,178 )     (97,122 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Transaction with owners, recorded directly in equity

            

Dividends to equity holders

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at June 30, 2011

   (Won) 1,789,079        2,251,113        (5,739 )     6,560,192       10,594,645  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

5


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows

(Unaudited)

For the six-month periods ended June 30, 2011 and 2010

 

(In millions of won)    Note    2011     2010  

Cash flows from operating activities:

       

Profit (loss) for the period

      (Won) (100,014 )     1,130,351  

Adjustments for:

       

Income tax expense (benefit)

   21      (173,081 )     249,739  

Depreciation

        1,475,060       1,152,781  

Amortization of intangible assets

        105,765       73,675  

Gain on foreign currency translation

        (90,020 )     (134,973 )

Loss on foreign currency translation

        29,655       190,087  

Gain on disposal of property, plant and equipment

        (463 )     (1,187 )

Loss on disposal of property, plant and equipment

        —          4  

Finance income

        (167,290 )     (139,865 )

Finance costs

        87,229       159,898  

Other income

        (29,119 )     —     

Other expenses

        89,712       256,627  

Other non-operating loss

        7       —     
     

 

 

   

 

 

 
        1,227,441       2,937,137  

Change in trade accounts and notes receivable

        766,252       (764,586 )

Change in other accounts receivable

        (8,769 )     12,669  

Change in other current assets

        (52,328 )     (97,896 )

Change in inventories

        (664,775 )     (472,172 )

Change in other non-current assets

        (25,264 )     (34,713 )

Change in trade accounts and notes payable

        (244,074 )     637,811  

Change in other accounts payable

        134,704       (7,927 )

Change in accrued expenses

        (35,130 )     86,519  

Change in other current liabilities

        (32,416 )     (5,608 )

Change in long-term advances received

        281,975       —     

Change in other non-current liabilities

        —          94,461  

Change in provisions

        (65,613 )     (122,523 )

Change in defined benefit obligation

   14      (5,471 )     (70,900 )
     

 

 

   

 

 

 

Cash generated from operating activities

        1,276,532       2,192,272  

Income taxes paid

        (93,354 )     (135,424 )

Interest received

        41,388       63,111  

Interest paid

        (64,224 )     (48,482 )
     

 

 

   

 

 

 

Net cash from operating activities

      (Won) 1,160,342       2,071,477  
     

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

6


Table of Contents

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows, Continued

(Unaudited)

For the six-month periods ended June 30, 2011 and 2010

 

(In millions of won)    Note    2011     2010  

Cash flows from investing activities:

       

Dividends received

      (Won) 42,620       45,148  

Proceeds from withdrawal of deposits in banks

        2,300,000       2,600,000  

Increase in deposits in banks

        (912,000 )     (2,200,000 )

Acquisition of investments

        (186,053 )     (257,640 )

Proceeds from disposal of investments

        2,045       20,530  

Acquisition of property, plant and equipment

        (1,839,177 )     (1,398,900 )

Proceeds from disposal of property, plant and equipment

        678       1,613  

Acquisition of intangible assets

        (109,026 )     (72,239 )

Grants received

        1,560       38  

Proceeds from settlement of derivatives

        26,797       6,331  

Acquisition of other non-current financial assets

        (29,340 )     (34,321 )

Proceeds from disposal of non-current financial assets

        123,286       1,715  

Acquisition of LCD module business

        —          (72,472 )
     

 

 

   

 

 

 

Net cash used in investing activities

      (Won) (578,610 )     (1,360,197 )
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        805,321       142,844  

Repayment of short-term borrowings

        (1,022,725 )     (457,755 )

Issuance of debentures

        597,453       780,753  

Proceeds from issuance of long-term debt

        219,014       316,339  

Repayment of long-term debt

        —          (120,000 )

Repayment of current portion of long-term debt

        (435,373 )     (989,422 )

Payment of cash dividend

        (178,908 )     (178,908 )
     

 

 

   

 

 

 

Net cash used in financing activities

      (Won) (15,218 )     (506,149 )
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        566,514       205,131  

Cash and cash equivalents at January 1

        889,784       704,324  
     

 

 

   

 

 

 

Cash and cash equivalents at June 30

      (Won) 1,456,298       909,455  
     

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

7


Table of Contents
1. Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) related business to the Company. The main business of the Company is to manufacture and sell TFT-LCD panels. The Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 65-228, Hangang-ro 3-ga, Yongsan-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders’ meeting on the same date as a result of the decrease in Philips’s share interest in the Company and the possibility of its business expansion to Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of June 30, 2011, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Company’s common shares.

As of June 30, 2011, the Company has its TFT-LCD manufacturing plants, OLED manufacturing plant and LCD Research & Development Center in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Company has overseas subsidiaries located in the United States of America, Europe and Asia.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of June 30, 2011, 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 June 30, 2011, there are 52,720,872 ADSs outstanding.

 

2. Basis of Presenting Financial Statements

 

  (a) Statement of Compliance

The condensed interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) 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 financial statements of the Company as of and for the year ended December 31, 2010.

When the condensed interim financial statements are prepared, investments in subsidiaries, jointly controlled entities and associated are accounted for at deemed cost under K-IFRS 1101 or acquisition cost, not based on the investee’s financial performance and net assets in accordance with K-IFRS 1027.

The condensed interim financial statements were authorized for issue by the Board of Directors on July 20, 2011.


Table of Contents
2. Basis of Presenting Financial Statements, Continued

 

  (b) Basis of Measurement

The condensed 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 measured at fair value;

 

   

financial instruments at fair value through profit or loss measured at fair value;

 

   

available-for-sale financial assets measured at fair value;

 

   

liabilities for cash-settled share-based payment arrangements measured at fair value; and

 

   

liabilities for defined benefit plans recognized at the net total of present value of defined benefit obligation less the fair value of plan assets

 

  (c) Functional and Presentation Currency

The condensed interim financial statements are presented in Korean won, which is the Company’s functional currency. All amounts in Korean won are in millions unless otherwise stated.

 

  (d) Use of Estimates and Judgments

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

In preparing these condensed interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied in its financial statements as of and for the year ended December 31, 2010.

 

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its condensed interim financial statements are the same as those followed by the Company in its preparation of the financial statements as of and for the year ended December 31, 2010, except for the application of the Statements of K-IFRS 1034 Interim Financial Reporting.

 

4. Financial Risk Management

The objectives and policies on financial risk management followed by the Company are consistent with those disclosed in the financial statements as of and for the year ended December 31, 2010.


Table of Contents
5. Inventories

Inventories as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)       
     2011      2010  

Finished goods

   (Won) 872,966         630,374   

Work-in-process

     994,383         606,486   

Raw materials

     413,351         364,160   

Supplies

     144,040         158,945   
  

 

 

    

 

 

 
   (Won) 2,424,740         1,759,965   
  

 

 

    

 

 

 

For the six-month periods ended June 30, 2011 and 2010, changes in finished goods, work in process, raw materials and supplies recognized as cost of sales and write-downs of inventories to net realizable value also included in cost of sales are as follows:

 

(In millions of won)              
     2011      2010  

Inventories recognized as cost of sales

   (Won) 10,583,546         10,075,238   

Including: inventory write-downs

     3,939         1,270   

 

6. Investments

 

  (a) Investments in subsidiaries

In January and June 2011, the Company invested (Won)14,363 million and (Won)35,618 million, respectively, in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ”). There were no changes in the Company’s ownership percentage in LGDNJ as a result of these additional investments.

In February and April 2011, the Company invested (Won)3,417 million and (Won)2,525 million, respectively in cash for the capital increase of LUCOM Display Technology (Kunshan) Limited (“LUCOM”). There were no changes in the Company’s ownership percentage in LUCOM as a result of these additional investments.

In June 2011, the Company invested (Won)3,000 million in cash for the capital increase of Image & Materials, Inc. (“I&M”). There were no changes in the Company’s ownership percentage in I&M as a result of this additional investment.

In June 2011, the Company invested (Won)86,520 million in cash for the capital increase of LG Display America, Inc. (“LGDUS”). There were no changes in the Company’s ownership percentage in LGDUS as a result of this additional investment.

 

  (b) Investments in associates

The Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). The Company is paid (Won)1,356 million and (Won)689 million in February and June 2011, respectively, by the Fund and made additional cash investment of (Won)6,210 million during the six-month period ended June 30, 2011. As of June 30, 2011, the Company has a 30.6% equity interest in the Fund and is committed to make investment of up to an aggregate of (Won)30,000 million.


Table of Contents
6. Investments, Continued

 

In April 2011, the Company acquired 1,600,000 common shares of Narenanotech Corporation (‘NARENANOTECH’), which manufactures components used in image display and wireless communications apparatus, at (Won)20,000 million in cash. In June 2011, the Controlling Company acquired additional 800,000 common shares at (Won)10,000 million in cash. As of June 30, 2011, 23% of NARENANOTECH is owned by the Company and the Company has the right to assign a director in the board of directors of the NARENANOTECH.

In April 2011, the Company acquired 440,000 common shares of Paju Electric Glass Co., Ltd. (‘PEG’) at (Won)4,400 million in cash. There were no changes in the Company’s ownership percentage in PEG as a result of this additional investment.

The entire carrying amount of the investment in RPO, Inc. of (Won)14,538 million, which was acquired for research and development on Digital Waveguide Touch technology in 2009, has been impaired fully as of June 30, 2011 as the recovery of the investment is no longer probable. In addition, the Company recognized an impairment loss of (Won)4,452 million for the difference between the carrying amount of and the recoverable amount from the investment in Dynamic Solar Design Co., Ltd., which was acquired for develop, manufacture and sell solar battery and flat-panel display in 2009.

 

7. Property, Plant and Equipment

For the six-month periods ended June 30, 2011 and 2010, the Company purchased property, plant and equipment of (Won)2,945,912 million and (Won)2,701,036 million, respectively. The capitalized borrowing costs and capitalization rate are (Won)8,355 million and 2.26%, and (Won)19,771 million and 5.44% for the six-month periods ended June 30, 2011 and 2010, respectively. Also for the six-month periods ended June 30, 2011 and 2010, the Company disposed property, plant and equipment with carrying amounts of (Won)215 million and (Won)430 million, respectively. The Company recognized (Won)463 million as gain on disposal of property, plant and equipment for the six-month period ended June 30, 2011 (gain and loss for the six-month period ended on June 30, 2010: (Won)1,187 million and (Won)4 million, respectively).

 

8. Intangible Assets

The Company capitalizes the expenses related to development activities, such as expense incurred on designing, manufacturing and testing of products that are ultimately selected for production. The balances of capitalized development costs as of June 30, 2011 and December 31, 2010 are (Won)132,170 million and (Won)124,140 million respectively.


Table of Contents
9. Financial Instruments

 

  (a) Credit risk

 

  (i) Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions of won)              
     2011      2010  

Cash and cash equivalents

   (Won) 1,456,298         889,784   

Trade accounts and notes receivable, net

     3,099,857         3,883,433   

Other accounts receivable, net

     178,929         301,543   

Available-for-sale financial assets

     43,867         38,132   

Financial assets at fair value through profit or loss

     8,354         8,927   

Deposits

     34,803         42,522   

Derivatives

     1,634         9,254   

Deposits in banks

     115,000         1,503,000   

Guarantee deposits with banks

     13         13   
  

 

 

    

 

 

 
   (Won) 4,938,755         6,676,608   
  

 

 

    

 

 

 

The maximum exposure to credit risk for trade accounts and notes receivable as of June 30, 2011 and December 31, 2010 by geographic region is as follows:

 

(In millions of won)              
     2011      2010  

Domestic

   (Won) 109,202         79,275   

Euro-zone countries

     413,477         713,217   

Japan

     124,854         246,753   

United States

     839,990         710,026   

China

     915,261         1,167,903   

Taiwan

     543,407         815,360   

Others

     153,666         150,899   
  

 

 

    

 

 

 
   (Won) 3,099,857         3,883,433   
  

 

 

    

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Impairment loss

The aging of trade accounts and notes receivable and the related allowance for impairment as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)    2011     2010  
     Book Value      Impairment
loss
    Book Value      Impairment
loss
 

Not past due

   (Won) 3,081,393         (16     3,864,433         (20

Past due 1-15 days

     9,813         (1     10,833         —     

Past due 16-30 days

     3,983         (1     6,098         (1

Past due 31-60 days

     559         —          228         (1

More than 60 days

     4,131         (4     1,865         (2
  

 

 

    

 

 

   

 

 

    

 

 

 
   (Won) 3,099,879         (22     3,883,457         (24
  

 

 

    

 

 

   

 

 

    

 

 

 

The movement in the allowance for impairment in respect of receivables during the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Balance at the beginning of the year

   (Won) 24        33   

Reversal of allowance for doubtful accounts

     (2     (9
  

 

 

   

 

 

 

Balance at the reporting date

   (Won) 22        24   
  

 

 

   

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

  (b) Liquidity risk

 

  (i) The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements as of June 30, 2011:

 

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

Non-derivative financial liabilities

                    

Secured bank loan

   (Won) 53,905         57,207         600         600         1,201         54,806         —     

Unsecured bank loans

     2,111,388         2,147,052         1,238,373         326,596         344,351         233,812         3,920   

Unsecured bond issues

     2,200,846         2,509,268         48,663         48,663         1,095,084         1,316,858         —     

Financial liabilities at fair value through profit or loss

     82,096         83,087         —           83,087         —           —           —     

Trade accounts and notes payables

     2,732,255         2,732,255         2,732,255         —           —           —           —     

Other accounts payable

     3,586,249         3,586,249         3,586,249         —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 10,766,739         11,115,118         7,606,140         458,946         1,440,636         1,605,476         3,920   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

  (ii) As of June 30, 2011, there is no derivative designated as a cash flow hedge.


Table of Contents
9. Financial Instruments, Continued

 

  (c) Currency risk

 

  (i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions)    2011  
     USD     JPY     TWD      PLN      EUR  

Cash and cash equivalents

     742        4,328        —           7         1   

Trade accounts and notes receivable

     2,641        1,768        —           —           2   

Other accounts receivable

     2        7        159         —           —     

Available-for-sale financial assets

     8        —          —           —           —     

Financial assets at fair value through profit or loss

     —          —          224         —           —     

Other assets denominated in foreign currencies

     59        51        —           —           —     

Trade accounts and notes payable

     (1,630     (14,419     —           —           (2

Other accounts payable

     (33     (16,423     —           —           (10

Debts

     (1,780     (16,737     —           —           —     

Bonds

     (346     (9,976     —           —           —     

Financial liabilities at fair value through profit or loss

     (76     —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Gross statement of financial position exposure

     (413     (51,401     383         7         (9
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Forward exchange contracts

     (100     —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net exposure

     (513     (51,401     383         7         (9
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

(In millions)    2010  
     USD     JPY     TWD      PLN      EUR  

Cash and cash equivalents

     389        133        —           6         —     

Trade accounts and notes receivable

     3,328        4,659        —           —           2   

Other accounts receivable

     11        7        3,170         —           —     

Available-for-sale financial assets

     9        —          —           —           —     

Financial assets at fair value through profit or loss

     —          —          228         —           —     

Other assets denominated in foreign currencies

     59        72        —           67         —     

Trade accounts and notes payable

     (1,618     (15,683     —           —           (1

Other accounts payable

     (45     (15,430     —           —           (9

Debts

     (1,085     (71,889     —           —           —     

Bonds

     (345     (9,965     —           —           —     

Financial liabilities at fair value through profit or loss

     (74     —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Gross statement of financial position exposure

     629        (108,096     3,398         73         (8
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Forward exchange contracts

     (420     —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net exposure

     209        (108,096     3,398         73         (8
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Significant exchange rates applied for the six-month period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

 

(In won)    Average rate      Spot rate  
     2011      2010      June 30, 2011      December 31, 2010  

USD

   (Won) 1,102.28         1,154.11       (Won) 1,078.10         1,138.90   

JPY

     13.45         12.63         13.36         13.97   

TWD

     37.92         36.20         37.30         39.08   

EUR

     1,545.96         1,532.86         1,560.50         1,513.60   

PLN

     391.08         383.35         390.76         381.77   


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Sensitivity analysis

A weakening of the won, as indicated below, against the following currencies which comprise the Company’s financial assets or liabilities denominated in foreign currency as of June 30, 2011 and December 31, 2010, 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 considered to be reasonably possible at the end of each reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The changes in equity and profit or loss are as follows:

 

(In millions of won)    June 30, 2011     December 31, 2010  
     Equity     Profit
or loss
    Equity     Profit
or loss
 

USD (5 percent weakening)

     (21,265     (21,591     9,022        8,633   

JPY (5 percent weakening)

     (26,399     (26,399     (57,236     (57,236

TWD (5 percent weakening)

     549        549        5,033        5,033   

PLN (5 percent weakening)

     105        105        1,056        1,056   

EUR (5 percent weakening)

     (540     (540     (459     (459

A strengthening of the won against the above currencies as of June 30, 2011 and December 31, 2010 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.

 

  (d) Interest rate risk

 

  (i) Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Fixed rate instruments

    

Financial assets

   (Won) 1,584,982        2,527,662   

Financial liabilities

     (1,781,138     (1,583,522
  

 

 

   

 

 

 
   (Won) (196,156     944,140   
  

 

 

   

 

 

 

Variable rate instruments

    

Financial assets

   (Won) 63,608        67,195   

Financial liabilities

     (2,667,097     (2,792,301
  

 

 

   

 

 

 
   (Won) (2,603,489     (2,725,106
  

 

 

   

 

 

 


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Fair value sensitivity analysis for fixed rate instruments

The Company has recognized some fixed rate financial assets as financial assets at fair value through profit or loss. The increase of the interest rate by 100 basis points would have decreased the Company’s equity and profit and loss by (Won)497 million and the decrease of the interest rate by 100 basis points would have had an opposite effect.

 

  (iii) Cash flow sensitivity analysis for variable rate instruments

As of June 30, 2011 and December 31, 2010, 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 year 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%
increase
    1%
decrease
     1%
increase
    1%
decrease
 

June 30, 2011

         

Variable rate instruments

   (Won) (20,021     20,021         (20,021     20,021   

December 31, 2010

         

Variable rate instruments

   (Won) (20,656     20,656         (20,656     20,656   


Table of Contents
9. Financial Instruments, Continued

 

  (e) Fair values

 

  (i) Fair values versus carrying amounts

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

 

(In millions of won)    June 30, 2011      December 31, 2010  
     Carrying
amounts
     Fair
values
     Carrying
amounts
     Fair
values
 

Assets carried at fair value

           

Available-for-sale financial assets

   (Won) 43,867         43,867         38,132         38,132   

Financial assets at fair value through profit or loss

     8,354         8,354         8,927         8,927   

Forward exchange contracts

     1,634         1,634         9,254         9,254   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 53,855         53,855         56,313         56,313   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets carried at amortized cost

           

Cash and cash equivalents

   (Won) 1,456,298         1,456,298         889,784         889,784   

Trade accounts and notes receivable

     3,099,857         3,099,857         3,883,433         3,883,433   

Other accounts receivable

     178,929         178,929         301,543         301,543   

Deposits in banks

     115,000         115,000         1,503,000         1,503,000   

Deposits

     34,803         34,803         42,522         42,522   

Others

     13         13         13         13   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 4,884,900         4,884,900         6,620,295         6,620,295   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at fair value

           

Financial liabilities at fair value through profit or loss

   (Won) 82,096         82,096         84,338         84,338   

Forward exchange contracts

     —           —           956         956   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 82,096         82,096         85,294         85,294   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities carried at amortized cost

           

Secured bank loans

   (Won) 53,905         53,905         56,945         56,945   

Unsecured bank loans

     2,111,388         2,110,846         2,406,046         2,405,690   

Unsecured bond issues

     2,200,846         2,244,358         1,828,494         1,859,102   

Trade accounts and notes payable

     2,732,255         2,732,255         2,986,383         2,986,383   

Other accounts payable

     3,586,249         3,586,249         2,373,083         2,373,083   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 10,684,643         10,727,613         9,650,951         9,681,203   
  

 

 

    

 

 

    

 

 

    

 

 

 

The basis for determining fair values above by the Company are consistent with those disclosed in the financial statements as of and for the year ended December 31, 2010.


Table of Contents
9. Financial Instruments, Continued

 

  (ii) Interest rates used for determining fair value

The significant interest rates applied for determination of the above fair value as of June 30, 2011 and December 31, 2010 are as follows:

 

     2011     2010  

Derivatives

     3.91     3.31

Debts and bonds

     3.91     3.58

 

  (iii) Fair value hierarchy

The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

 

•      Level 1:

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

•      Level 2:

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

•      Level 3:

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

 

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

June 30, 2011

          

Available-for-sale financial assets

   (Won) 11,244        —           32,623         43,867   

Financial assets at fair value through profit or loss

     8,354        —           —           8,354   

Derivative financial assets

     —          1,634         —           1,634   
  

 

 

   

 

 

    

 

 

    

 

 

 
   (Won) 19,598        1,634         32,623         53,855   
  

 

 

   

 

 

    

 

 

    

 

 

 

Financial liabilities at fair value through profit or loss

     (82,096     —           —           (82,096
  

 

 

   

 

 

    

 

 

    

 

 

 
   (Won) (82,096     —           —           (82,096
  

 

 

   

 

 

    

 

 

    

 

 

 

 

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

December 31, 2010

         

Available-for-sale financial assets

   (Won) 12,047        —          26,085         38,132   

Financial assets at fair value through profit or loss

     8,927        —          —           8,927   

Derivative financial assets

     —          9,254        —           9,254   
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) 20,974        9,254        26,085         56,313   
  

 

 

   

 

 

   

 

 

    

 

 

 

Derivative financial liabilities

   (Won) —          (956     —           (956

Financial liabilities at fair value through profit or loss

     (84,338     —          —           (84,338
  

 

 

   

 

 

   

 

 

    

 

 

 
   (Won) (84,338     (956     —           (85,294
  

 

 

   

 

 

   

 

 

    

 

 

 

The derivative financial assets and liabilities are classified as Level 2 since all significant inputs to compute the fair value of the over-the-counter derivatives were observable.


Table of Contents
9. Financial Instruments, Continued

 

In order to determine the fair value of Level 3 instruments, management used a valuation technique in which all significant inputs were based on unobservable market data. The fair values of the Level 3 instruments have been computed using discounted cash flow and option pricing model considering the financial conditions of the invested companies and by discounting estimated future cash flows from stock using yield rate that reflects invested companies’ credit risks.

Changes in Level 3 instruments are as follows:

 

(In millions of won)    December 31,
2010
     Purchases,
disposal

and others
     Net realized/unrealized
gains included in
     Transfer
to other
level
     June 30, 2011  
           Profit or
loss
     Other
comprehensive
income
       

Available-for-sale financial assets

   (Won) 26,085         2,674         —           3,864         —           32,623   

 

  (f) Capital Management

Management’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowing to equity ratio and other financial ratios are used by management to achieve optimal capital structure. Management also monitors the level of dividends to ordinary shareholders. Equity, defined by K-IFRS, is identical to the definition of capital, managed by management.

 

(In millions of won)             
     June 30, 2011     December 31, 2010  

Total liabilities

   (Won) 13,289,354        12,287,323   

Total equity

     10,594,645        10,870,675   

Cash and deposits in banks (*)

     1,571,298        2,392,784   

Borrowings

     4,448,235        4,375,823   

Liabilities to equity ratio

     125     113

Net borrowing to equity ratio

     27     18

 

(*) Cash and deposits in banks consist of cash and cash equivalents and deposit in banks.


Table of Contents
10. Financial Liabilities

 

  (a) Financial liabilities as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Current

     

Short-term borrowings

   (Won) 871,375         1,092,579   

Current portion of long-term debt

     676,893         812,577   

Derivatives not designated in a hedging relationship

     —           956   

Convertible bonds

     82,096         —     
  

 

 

    

 

 

 
   (Won) 1,630,364         1,906,112   
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   (Won) 18,918         19,143   

Foreign currency denominated borrowings

     598,107         738,692   

Bonds

     2,200,846         1,628,494   

Convertible bonds

     —           84,338   
  

 

 

    

 

 

 
   (Won) 2,817,871         2,470,667   
  

 

 

    

 

 

 

Above financial liabilities, except for convertible bonds which are designated as financial liabilities at fair value through profit or loss and derivative liabilities, are measured at amortized cost.

 

  (b) Short-term borrowings as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won and JPY)                  

Lender

   Annual interest rate
as  of June 30, 2011(*)
  2011      2010  

Shinhan Bank and others

   LIBOR+0.6 ~ 0.65   (Won) 754,672         12,139   

Shinhan Bank and others

   —       —           97,796   
   6ML+0.7%     49,918         545,419   

Bank of Tokyo-Mitsubishi UFJ

   3ML+1.0%     66,785         69,854   
   —       —           69,854   

Mizuho Bank

   —       —           55,574   

Bank of China

   —       —           41,943   

Woori Bank

   —       —           200,000   
    

 

 

    

 

 

 

Foreign currency equivalent

     JPY 8,737       JPY 63,889   
     USD 700         —     
    

 

 

    

 

 

 
     (Won) 871,375         1,092,579   
    

 

 

    

 

 

 

 

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


Table of Contents
10. Financial Liabilities, Continued

 

  (c) Local currency long-term debt as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions of won)                 

Lender

   Annual interest rate
as of June 30, 2011
  2011     2010  

Shinhan Bank

   3-year Korean Treasury
Bond rate less 1.25%
  (Won) 14,110        16,008   

Woori Bank

   3-year Korean Treasury
Bond rate less 1.25%
    4,048        4,048   
   2.75%     4,557        2,883   
    

 

 

   

 

 

 

Less current portion of long-term debt

       (3,797     (3,796
    

 

 

   

 

 

 
     (Won) 18,918        19,143   
    

 

 

   

 

 

 

 

  (d) Foreign currency denominated long-term debt as of June 30, 2011 and December 31, 2010 is as follows:

 

(In millions of won, USD and JPY)                 

Lender

   Annual interest rate
as of June 30, 2011
  2011     2010  

The Export-Import Bank of Korea

   6ML+0.69%   (Won) 43,124        51,251   
   6ML+1.78%     53,905        56,945   

Korea Development Bank

   3ML+0.66~2.79%     257,789        271,212   

Kookmin Bank and others

   3ML+0.35~1.88%     646,860        683,340   

Sumitomo Bank Ltd.

   3ML+1.80%     269,525        284,725   
    

 

 

   

 

 

 

Foreign currency equivalent

     USD 1,080      USD 1,085   
     JPY 8,000      JPY 8,000   
    

 

 

   

 

 

 

Less current portion of long-term debt

    (673,096     (608,781
    

 

 

   

 

 

 
     (Won) 598,107        738,692   
    

 

 

   

 

 

 


Table of Contents
10. Financial Liabilities, Continued

 

  (e) Details of the Company’s debentures issued and outstanding as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won, JPY and USD)                      
     Maturity    Annual
interest rate
as of June 30,
2011
  2011     2010  

Local currency debentures(*)

         

Publicly issued debentures

   November 2012~

February 2016

   4.42~

5.89%

  (Won) 1,700,000        1,100,000   

Privately issued debentures

   May 2011    5.30%     —          200,000   

Less discount on debentures

          (5,515     (3,699

Less current portion of debentures

          —          (200,000
       

 

 

   

 

 

 
        (Won) 1,694,485        1,096,301   
       

 

 

   

 

 

 

Foreign currency debentures

         

Floating-rate bonds

   August 2012~

April 2013

   3ML+1.80~

2.40%

  (Won) 510,903        538,323   
       

 

 

   

 

 

 

Foreign currency equivalent

        USD 350      USD 350   
        JPY 10,000      JPY 10,000   
       

 

 

   

 

 

 

Less discount on bonds

          (4,542     (6,130
       

 

 

   

 

 

 
        (Won) 506,361        532,193   
       

 

 

   

 

 

 

Financial liabilities at fair value through profit or loss

         

Convertible bonds

   April 2012    Zero coupon   (Won) 82,096        84,338   
       

 

 

   

 

 

 

Foreign currency equivalent

        USD 76      USD 74   
       

 

 

   

 

 

 

Less current portion of convertible bonds

          (82,096     —     
       

 

 

   

 

 

 
        (Won) —          84,338   
       

 

 

   

 

 

 
        (Won) 2,200,846        1,712,832   
       

 

 

   

 

 

 

 

(*) Principal of the local currency debentures is to be repaid at maturity and interests are paid quarterly. In February and April 2011, the Company publicly issued debentures amounting to (Won)300,000 million (maturity: 5 years, annual interest rate : 4.95%) and (Won)300,000 million (maturity: 3 years, annual interest rate : 4.42%), respectively.


Table of Contents
10. Financial Liabilities, Continued

 

  (f) Details of the convertible bonds are as follows:

 

     Terms and Conditions

Issue date

   April 18, 2007

Maturity date

   April 18, 2012

Conversion period

   April 19, 2008~April 3, 2012

Coupon interest rate

   0%

Conversion price (in won) per share

   (Won)47,892

The Company designated foreign currency denominated convertible bonds as financial liabilities at fair value through profits or loss and recognizes the convertible bonds at fair value with changes in fair value recognized in profit or loss.

The bonds will be repaid at 116.77% of the principal amount at maturity unless the bonds are converted. During the year ended December 31, 2010, put options attached to the convertible bonds amounting to USD484 million were exercised and the Company repaid USD531 million for the convertible bonds at 109.75% of the principal amount. Put options not exercised were expired.

The Company measured the convertible bonds at their fair value using the market quotes available at Bloomberg and it was assumed that the remaining convertible bonds will be repaid in full at maturity and they were reclassified as current liabilities.

The Company is entitled to exercise a call option after three years from the date of issue at the amount of the principal and interest, calculated at 3.125% of the annual yield to maturity, from the issue date to the repayment date. The call option can be exercised only when the market price of the common shares on each of 20 trading days in 30 consecutive trading days ending on the trading day immediately prior to the date upon which notice of such redemption is published exceeds at least 130% of the conversion price. In addition, in the event that at least 90% of the initial principal amount of the bonds has been redeemed, converted, or purchased and cancelled, the remaining bonds may also be redeemed, at the Company’s option, at the amount of the principal and interest (3.125% per annum) from the date of issue to the repayment date prior to their maturity.

Based on the terms and conditions of the bond, the conversion price was decreased from (Won)48,075 to (Won)47,892 per share due to the Company’s declaration of cash dividends of (Won)500 per share for the year ended December 31, 2010.

As of June 30, 2011 and December 31, 2010, the number of common shares to be issued if the outstanding convertible bonds are fully converted is as follows:

 

(In won and share)              
     2011      2010  

Convertible bonds (*)

   (Won) 61,617,600,000         61,617,600,000   

Conversion price

   (Won) 47,892         48,075   

Common shares to be issued

     1,286,594         1,281,697   

 

(*) The exchange rate for the conversion is fixed at (Won)933.6 to USD1. The face value of the convertible bonds amounted to USD66 million as of June 30, 2011 and December 31, 2010.


Table of Contents
10. Financial Liabilities, Continued

 

  (g) Aggregate maturities of the Company’s financial liabilities as of June 30, 2011 are as follows:

 

(In millions of won)                                   

Period

   Local currency
long-term
debt
     Foreign  currency
long-term

debt
     Debentures      Convertible
bonds
     Total  

Within 1 year

   (Won) 3,797         673,096         —           82,096         758,989   

1~5 year

     15,195         598,107         2,200,846         —           2,814,148   

Thereafter

     3,723         —           —           —           3,723   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 22,715         1,271,203         2,200,846         82,096         3,576,860   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

11. The Nature of Expenses

The nature of expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Changes in inventories

   (Won) (664,775     (490,282

Purchase of raw material and merchandise

     6,616,158        6,895,682   

Depreciation and amortization

     1,580,825        1,226,456   

Outsourcing fee

     1,370,836        1,085,897   

Labor costs

     962,525        774,975   

Supplies and others

     513,392        428,137   

Utility expense

     239,466        192,116   

Fees and commissions

     166,226        149,478   

Shipping costs

     77,955        122,902   

After-sale service expenses

     26,567        84,561   

Others

     460,835        487,057   
  

 

 

   

 

 

 
   (Won) 11,350,010        10,956,979   
  

 

 

   

 

 

 

Total expenses consist of cost of sales, selling, administrative, research and development expenses and others (except foreign exchange difference).

For the six-month period ended June 30, 2011, other income and other expenses contained exchange differences amounting to (Won)385,303 million and (Won)382,300 million, respectively (six-month period ended June 30, 2010 : (Won)561,088 million and (Won)579,462 million, respectively).

The expenses for the six-month period ended June 30, 2010 are reclassified to conform to the criteria of classification for the six-month ended June 30, 2011.


Table of Contents
12. Selling and Administrative Expenses

Details of selling and administrative expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Salaries

   (Won) 68,733         63,726   

Expenses related to defined benefit plan

     9,104         8,447   

Other employee benefit

     17,469         12,668   

Shipping costs

     52,791         85,205   

Fees and commissions

     51,995         65,559   

Depreciation and amortization

     80,882         62,553   

Taxes and dues

     1,231         1,560   

Advertising

     62,492         38,851   

After-sale service expenses

     26,567         84,561   

Others

     42,876         40,127   
  

 

 

    

 

 

 
   (Won) 414,140         463,257   
  

 

 

    

 

 

 

 

13. Other Income and Other Expenses

 

  (a) Details of other income for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Rental income

   (Won) 1,917         2,010   

Foreign currency gain

     385,303         561,088   

Gain on disposal of property, plant and equipment

     463         1,187   

Reversal of allowance for doubtful accounts for other receivables

     1         30   

Reversal of stock compensation cost

     421         —     

Commission earned

     2,026         644   

Others

     18,639         —     
  

 

 

    

 

 

 
   (Won) 408,770         564,959   
  

 

 

    

 

 

 

 

  (b) Details of other expenses for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Other bad debt expenses

   (Won) —           8   

Foreign currency loss

     382,300         579,462   

Loss on disposal of property, plant and equipment

     —           4   

Others

     7         115,036   
  

 

 

    

 

 

 
   (Won) 382,307         694,510   
  

 

 

    

 

 

 


Table of Contents
14. Employee Benefits

The Company maintains a defined benefit plan that provides a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Company. The Company’s defined benefit plan, if legal requirements are satisfied, allows interim settlement upon the employee’s election. Subsequent to the interim settlement, service term used for severance payment calculation is remeasured from the settlement date.

 

  (a) Recognized liabilities for defined benefit obligations as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)    2011     2010  

Present value of partially funded defined benefit obligations

   (Won) 408,673        360,231   

Fair value of plan assets

     (279,975     (281,825
  

 

 

   

 

 

 
   (Won) 128,698        78,406   
  

 

 

   

 

 

 

 

  (b) Expenses recognized in profit and loss for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current service cost

   (Won) 53,518        43,879   

Interest cost

     9,492        7,355   

Expected return on plan assets

     (6,177     (6,473

Past service cost

     —          12,778   
  

 

 

   

 

 

 
   (Won) 56,833        57,539   
  

 

 

   

 

 

 

 

  (c) Plan assets as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Deposits with financial institutions

   (Won) 279,975         281,825   

 

  (d) Actuarial gain and loss recognized in other comprehensive income for the six-month periods ended June 30, 2011 and 2010 is as follows:

 

(In millions of won)    2011     2010  

Defined benefit plan actuarial gain or loss

   (Won) 1,072        6   

Income tax

     (236     —     
  

 

 

   

 

 

 

Defined benefit plan actuarial gain or loss, net of income tax

   (Won) 836        6   
  

 

 

   

 

 

 


Table of Contents
15. Finance income and Finance costs

 

  (a) Finance income and costs recognized in profit and loss for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
      2011      2010  

Finance income

     

Interest income

   (Won) 28,813         54,986   

Dividend income

     42,620         45,148   

Gain on disposal of Investments

     —           1,562   

Foreign currency gain

     146,077         45,263   
  

 

 

    

 

 

 
   (Won) 217,510         146,959   
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   (Won) 61,565         30,144   

Foreign currency loss

     28,613         134,705   

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

     573         868   

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

     2,261         1,844   

Loss on redemption of debenture

     —           4,138   

Impairment loss on investments

     18,990         —     

Loss on sale of trade accounts and notes receivable

     33         —     
  

 

 

    

 

 

 
   (Won) 112,035         171,699   
  

 

 

    

 

 

 

 

  (b) Finance income and costs recognized in other comprehensive income (loss) for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)             
     2011     2010  

Loss on valuation of available-for-sale securities

   (Won) 2,636        7,747   

Tax effect

     (580     (1,704
  

 

 

   

 

 

 
   (Won) 2,056        6,043   
  

 

 

   

 

 

 


Table of Contents
16. Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Shinhan Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD1,397 million ((Won)1,506,472 million) in connection with its export sales transactions. As of June 30, 2011, accounts and notes receivable amounting to USD700 million((Won)754,672 million) were sold but are not past due.

In October 2006, LG Display America, Inc., LG Display Germany GmbH, LG Display Shanghai Co., Ltd. and others entered into a five-year accounts receivable selling program with Standard Chartered Bank on a revolving basis, of up to USD600 million ((Won)646,860 million). The Company joined this program in April 2007. For the six-month ended June 30, 2011, no accounts and notes receivable were sold under this program.

The Company has a credit facility agreement with Shinhan Bank pursuant to which the Company could negotiate its accounts receivables up to an aggregate of (Won)50,000 million in connection with its domestic sales transactions and as of June 30, 2011, accounts and notes receivable amounting to USD10 million ((Won)10,562 million) were sold but are not past due. In addition, since August 2010 and April 2011, the Company has entered into an accounts receivable selling program of up to USD100 million ((Won)107,810 million) and USD30 million ((Won)32,343 million) with Citibank, N.A. and Standard Chartered Bank, respectively. As of June 30, 2011, accounts and notes receivable amounting to USD27 million ((Won)29,264 million) were sold to Standard Chartered Bank but are not past due. In connection with all the above contracts, the Company has sold its accounts receivable without recourse.

Letters of credit

As of June 30, 2011, the Company has agreements with Korea Exchange Bank in relation to the opening of letters of credit up to USD110 million ((Won)118,591 million), USD20 million ((Won)21,562 million) with China Construction Bank, USD210 million ((Won)226,401 million) with Shinhan Bank, JPY10,000 million ((Won)133,569 million) with Woori Bank, USD80 million ((Won)86,248 million) with Bank of China, USD104 million ((Won)112,122 million) with Hana Bank, and JPY6,893 million ((Won)92,066 million) and USD60 million ((Won) 64,686 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Company receives payment guarantees amounting to USD8.5 million ((Won)9,164 million) and EUR215 million ((Won)335,508 million) from Royal Bank of Scotland and other various banks in connection with value added tax payments in Poland. As of June 30, 2011, the Company is providing a payment guarantee to a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR38 million ((Won)58,819 million) term loan credit facility of LG Display Poland Sp. zo. o. In addition, the Company provides payment guarantees in connection with LG Display America, Inc.’s term loan credit facilities with an aggregate amount of USD7 million ((Won)7,547 million) for principals and related interests.

License agreements

As of June 30, 2011, in relation to its TFT-LCD business, the Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.


Table of Contents
16. Commitments, Continued

 

Long-term supply agreement

In connection with a long-term supply agreements, as of June 30, 2011, the Company’s advance received from customer amount to USD1,080 million ((Won)1,164,348 million) in aggregate. The advances received will offset against outstanding accounts receivable balance after a given period of time, as well as those arising from the supply of products thereafter. The Company received a payment guarantee amounting to USD200 million ((Won)215,620 million) from Industrial Bank of Korea relating to advances received.

Pledged Assets

Regarding the line of credit up to USD50 million ((Won)53,905 million), the Company provided with part of its OLED machinery as pledged assets to the Export-Import Bank of Korea.

 

17. Contingencies

Patent infringement lawsuit against Chi Mei Optoelectronics Corp. and others

On December 1, 2006, the Company filed a complaint in the United States District Court for the District of Delaware against Chi Mei Optoelectronics Corp. and AU Optronics Corp. claiming infringement of patents related to liquid crystal displays and the manufacturing processes for TFT-LCDs. On March 8, 2007, AU Optronics Corp. filed a counter-claim against the Company in the United States District Court for the Western District of Wisconsin for alleged infringement of patents related to the manufacturing processes for TFT-LCDs but the suit was transferred to the United States District Court for the District of Delaware on May 30, 2007. On May 4, 2007, Chi Mei Optoelectronics Corp. filed a counter-claim against the Company for patent infringement in the United States District Court for the Eastern District of Texas, but the suit was transferred to the United States District Court for the District of Delaware (the “Court”) on March 31, 2008.

The Court bifurcated the trial between AU Optronics Corp. and Chi Mei Optoelectronics Corp. holding the first trial against AU Optronics Corp. on June 2, 2009. Although the Company had a total of nine patents to be tried and AU Optronics Corp. had a total of seven patents to be tried in the first trial against AU Optronics Corp., the trial was further bifurcated so that only four patents from each side were tried. On February 16, 2010, the Court found that the four AU Optronics Corp. patents were valid and were infringed by the Company, and on April 30, 2010, the Court further found that the Company’s four patents were valid but were not infringed by AU Optronics Corp. In October and November 2010, the Company filed a motion for reconsideration as to the court’s findings on the AU Optronics Corp.’s patents and the Company’s patents respectively. However, the final judgment has not yet been rendered. Once all findings by the Court have been issued, the Company will review all available options including appeal. The Company is unable to predict the ultimate outcome of the above matters.

Anvik Corporation’s lawsuit for infringement of patent

On February 2, 2007, Anvik Corporation filed a patent infringement case against the Company, along with other LCD manufacturing companies in the United States District Court for the Southern District of New York, in connection with the usage of photo-masking equipment manufactured by Nikon Corporation. While there is no significant progress on this case in 2010, the Company is unable to predict the ultimate outcome of this case.


Table of Contents
17. Contingencies, Continued

 

Anti-trust investigations and litigations

In December 2006, the Company received notices of investigation by the Korea Fair Trade Commission, the Japan Fair Trade Commission, the U.S. Department of Justice, and the European Commission with respect to possible anti-competitive activities in the TFT-LCD industry. The Company subsequently received similar notices from the Canadian Bureau of Competition Policy, the Federal Competition Commission of Mexico, the Secretariat of Economic Law of Brazil and the Taiwan Fair Trade Commission.

In November 2008, the Company executed an agreement with the U.S. Department of Justice (“DOJ”) whereby the Company and its U.S. subsidiary, LG Display America, Inc. (“LGDUS”), pleaded guilty to a Sherman Antitrust Act violation and agreed to pay a single total fine of USD400 million. In December 2008, the U.S. District Court for the Northern District of California accepted the terms of the plea agreement and entered a judgment against the Company and LGDUS and ordered the payment of USD400 million according to the following schedule: USD20 million plus any accrued interest by June 15, 2009, and USD76 million plus any accrued interest by each of June 15, 2010, June 15, 2011, June 15, 2012, June 15, 2013 and December 15, 2013. The agreement resolved all federal criminal charges against the Company and LGDUS in the United States in connection with this matter.

On December 8, 2010, the European Commission (“the EC”) issued a decision finding that the Company engaged in anti-competitive activities in the LCD industry in violation of European competition laws and imposed a fine of EUR215 million. On February 23, 2011, the Company filed with the European Union General Court an application for partial annulment and reduction of the fine imposed by the EC. The European Union General Court has not ruled on our application.

In November 2009, the Taiwan Fair Trade Commission terminated its investigation without any finding of violations or levying of fines. Investigations by the Canadian Bureau of Competition Policy, the Japan Fair Trade Commission, the Korea Fair Trade Commission, the Federal Competition Commission of Mexico and the Secretariat of Economic Law of Brazil are ongoing.

Subsequent to the commencement of the DOJ investigation, a number of class action complaints were filed against the Company and other TFT-LCD panel manufacturers in the U.S. and Canada alleging violation of respective antitrust laws and related laws. The class action lawsuits in the U.S. were transferred to the Northern District of California for pretrial proceedings (“MDL Proceedings”). On March 28, 2010, the court certified the class action complaints filed by direct purchasers and indirect purchasers. In January 2011, 78 entities (including groups of affiliated entities) submitted requests for exclusion from the direct purchaser class. The time period for submitting requests for exclusion from the indirect purchaser class has not yet begun. In June 2011, the Company reached a settlement with the direct purchaser class, which is subject to and pending court approval. Trial against the indirect purchaser plaintiff class is set to begin in February 2012.


Table of Contents
17. Contingencies, Continued

 

Similar claims were filed separately by ATS. Claim, LLC, (assignee of Ricoh Electronics, Inc.), AT&T Corp. and its affiliates, Motorola, Inc., Electrograph Technologies Corp. and their respective related entities, all of which have been transferred to the MDL Proceedings. In November 2010, ATS Claim, LLC dismissed its action as to the Company pursuant to a settlement agreement. In addition, in 2010, TracFone Wireless Inc., Best Buy Co., Inc. and its affiliates, Target Corp., Sears, Roebuck and Co., Kmart Corp., Old Comp Inc., Good Guys, Inc., RadioShack Corp., Newegg Inc., Costco Wholesale Corp., Sony Electronics, Inc., Sony Computer Entertainment America LLC, SB Liquidation Trust, and the trustee of the Circuit City Stores, Inc. Liquidation Trust, filed claims in the United States. In addition, in 2011, Office Depot, Inc. and T-Mobile U.S.A., Inc., Interbond Corp. of America (Brandsmart), Jaco Electronics, Inc., P.C. Richard & Son Long Island Corp., MARTA Cooperative of America, Inc., ABC Appliance (ABC Warehouse), Schultze Agency Services, LLC (Tweeter) filed similar claims. To the extent these claims were not filed in the MDL Proceedings, they have been transferred to the MDL Proceedings or motions have been made to transfer them to the MDL Proceedings.

In addition, in 2010 and 2011, the attorneys general of Arkansas, California, Florida, Illinois, Michigan, Mississippi, Missouri, New York, Oregon, South Carolina, Washington, West Virginia and Wisconsin filed similar complaints against the Company and other LCD producers.

In Canada, the Ontario Superior Court of Justice certified the class action complaints filed by the direct and indirect purchasers.

In February 2007, the Company and certain of its current and former officers and directors were named as defendants in a purported shareholder class action filed in the U.S. District Court for the Southern District of New York, alleging violation of the U.S. Securities Exchange Act of 1934. In May 2010, the Company reached an agreement in principle with the class plaintiffs to settle the action and the District Court granted final approval of the settlement on March 17, 2011.

While the Company continues its vigorous defense of the various pending proceedings described above, there is a possibility that one or more proceedings may result in an unfavorable outcome to the Company. The Company has established provisions with respect to certain of the contingencies. However, actual liability may be materially different from the provisions estimated by the Company.

 

18. Capital and Reserves

 

  (a) Share capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value (Won)5,000), and as of June 30, 2011 and December 31, 2010, the number of issued common shares is 357,815,700.

There have been no changes in the capital stock for the six-month period ended June 30, 2011.

 

  (b) Reserve

The reserve consists of the fair value reserve which comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired.

 

  (c) Dividends

During the six-month period ended June 30, 2011, the Company declared dividends of (Won)178,908 million ((Won)500 per share). The dividend has been paid in April 2011 and there are no income tax consequences.


Table of Contents
19. Related Parties

 

  (a) Key management personnel compensation

Compensation costs of key management for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Short-term benefits

   (Won) 934         1,135   

Expenses related to defined benefit plan

     266         176   

Other long-term benefits

     319         303   
  

 

 

    

 

 

 
   (Won) 1,519         1,614   
  

 

 

    

 

 

 

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

 

  (b) Significant transactions with related companies

Significant transactions which occurred in the normal course of business with related companies for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)                            
      Sales and other      Purchases and other  
     2011      2010      2011      2010  

Subsidiaries

   (Won) 10,042,426         10,846,676         1,681,210         1,427,384   

Joint ventures

     320,578         501,794         1,174         27,605   

Associates

     5,304         6         744,473         802,454   

LG Electronics

     556,149         517,605         173,759         215,868   

Other related parties

     20         174,500         10,434         289,674   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 10,924,477         12,040,581         2,611,050         2,762,985   
  

 

 

    

 

 

    

 

 

    

 

 

 

Account balances with related companies as of June 30, 2011 and December 31, 2010 are as follows:

 

(In millions of won)                            
     Trade accounts and
notes receivable and other
     Trade accounts and
notes payable and other
 
     2011      2010      2011      2010  

Subsidiaries

   (Won) 2,824,080         3,609,801         518,537         405,814   

Joint ventures

     120,784         145,093         174,351         478,009   

Associates

     26         —           348,360         243,357   

LG Electronics

     148,817         111,408         138,356         138,479   

Other related parties

     —           —           2,052         1,847   
  

 

 

    

 

 

    

 

 

    

 

 

 
   (Won) 3,093,707         3,866,302         1,181,656         1,267,506   
  

 

 

    

 

 

    

 

 

    

 

 

 


Table of Contents
20. Share-Based Payment

 

  (a) The terms and conditions of share-based payment arrangement as of June 30, 2011 are as follows:

 

   

Descriptions

Settlement method

  Cash settlement

Type of arrangement

  Stock appreciation rights (granted to senior executives)

Date of grant

  April 7, 2005

Weighted-average exercise price (*1)

  (Won)44,050

Number of rights granted

  450,000

Number of rights forfeited (*2)

  230,000

Number of rights cancelled (*3)

  110,000

Number of rights outstanding

  110,000

Exercise period

  From April 8, 2008 to April 7, 2012

Remaining contractual life

  0.75 years

Vesting conditions

  Two years of service from the date of grant

 

(*1) The exercise price at the grant date was (Won)44,260 per stock appreciation right (“SARs”). However, the exercise price was subsequently adjusted to (Won)44,050 due to additional issuance of common shares in 2005.
(*2) SARs were forfeited in connection with senior executives who left the Company before meeting the vesting requirement.
(*3) If the appreciation of the Company’s share price is equal or less than that of the Korea Composite Stock Price Index (“KOSPI”) over the three-year period following the grant date, only 50% of the outstanding SARs are exercisable. As the actual increase rate of the Company’s share price for the three-year period ending April 7, 2008 was less than that of the KOSPI for the same three-year period, 50% of then outstanding SARs were cancelled in 2008.

 

  (b) The changes in the number of SARs outstanding for the six-month period ended June 30, 2011 are as follows:

 

(Number of shares)       
     2011  

Balance at beginning of year

     110,000   

Forfeited or cancelled

     —     

Outstanding as of June 30, 2011

     110,000   

Exercisable as of June 30, 2011

     110,000   


Table of Contents
20. Share-Based Payment, Continued

 

  (c) The fair value of SARs was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

     June 30, 2011   December 31, 2010

Risk free rate (*1)

   3.56%   2.89%

Expected term (*2)

   0.75 year   1 year

Expected volatility

   32.66%   35.20%

Expected dividends (*3)

   0%   0%

Fair value per share

   (Won)467   (Won)4,296

Total carrying amount of liabilities (*4)

   (Won)51,353,794   (Won)472,527,182

 

(*1) Risk-free rates are interest rates of Korean government bonds.
(*2) As of June 30, 2011, the remaining contractual life is 9 months and the expected term is determined as 0.75 year.
(*3) The Company did not pay any dividends from 2000 through 2006 and accordingly, expected dividend used is 0% despite recent dividend yield was 1.6%, 2.2%, 1.3% and 1.3% in 2007, 2008, 2009 and 2010, respectively.
(*4) As of June 30, 2011, the market price of the stock does not exceed the exercise price and accordingly, the intrinsic value of the share-based payments is zero.

 

  (d) The Company recognized reversal of stock compensation cost of (Won)421 million as other income for the six-month period ended June 30, 2011.


Table of Contents
21. Income Taxes

 

  (a) Details of Income tax expense (benefit) for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current tax expense

   (Won) (15,384     234,626   

Deferred tax expense (benefit)

     (157,697     15,113   
  

 

 

   

 

 

 

Income tax expense (benefit)

   (Won) (173,081     249,739   
  

 

 

   

 

 

 

 

  (b) Deferred tax assets and liabilities as of June 30, 2011 and December 31, 2010 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     2011      2010      2011     2010     2011     2010  

Other accounts receivable, net

   (Won) —           —           (2,817     (5,919     (2,817     (5,919

Inventories, net

     16,211         15,039         —          —          16,211        15,039   

Available-for-sale financial assets

     1,619         2,199         (249     (6,983     1,370        (4,784

Defined benefit obligation

     2,935         3,829         —          —          2,935        3,829   

Derivative instruments

     —           —           —          (2,008     —          (2,008

Accrued expense

     63,353         78,396         —          —          63,353        78,396   

Property, plant and equipment

     37,227         40,685         —          —          37,227        40,685   

Provisions

     14,364         17,962         —          —          14,364        17,962   

Gain or loss on foreign currency

     19,253         81,075         (17,454     (61,031     1,799        20,044   

Debentures

     5,580         5,049         —          —          5,580        5,049   

Others

     7,823         15,783         —          —          7,823        15,783   

Tax credit carryforwards

     987,701         795,247         —          —          987,701        795,247   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax assets(liabilities)

   (Won) 1,156,066         1,055,264         (20,520     (75,941     1,135,546        979,323   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Company is 24.2% for the six-month period ended June 30, 2011. Statutory tax rate applicable to the Company is 24.2% until 2011 and 22% thereafter.

 

22. Earnings (loss) Per Share

 

  (a) Basic earnings (loss) per share for the six-month periods ended June 30, 2011 and 2010 are as follows:

 

(In millions of won, except earnings per share and share information)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2011      2010      2011     2010  

Profit (loss) for the period

   (Won) 54,336         531,306         (100,014     1,130,351   

Weighted-average number of common shares outstanding

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

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per share

   (Won) 152         1,485         (280     3,159   
  

 

 

    

 

 

    

 

 

   

 

 

 

There were no events or transactions that result in changes in the number of common shares used for calculating earnings per share.


Table of Contents
22. Earnings (loss) Per Share, Continued

 

  (b) There is no effect of dilutive potential ordinary shares due to net loss for the six-month period ended June 30, 2011. Diluted earnings per share for the three-month period ended June 30, 2011 and for the six-month period ended June 30, 2010 was as follows:

 

(In millions of won, except earnings per share and share information)    For the three-month
periods ended June 30,
    For the six-month
periods  ended June 30,
 
     2011     2010     2010  

Profit (loss) for the period

   (Won) 54,336        531,306        1,130,351   

Interest on convertible bond, net of tax

     (738     (1,828     (14,888

Adjusted income

     53,598        529,478        1,115,463   

Weighted-average number of common shares outstanding and common equivalent shares(*1)

     359,102,294        359,097,397        363,095,914   
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share(*2)

   (Won) 149        1,474        3,072   
  

 

 

   

 

 

   

 

 

 

 

(*1) Weighted-average number of common shares outstanding for the three-month period ended June 30, 2011 and for the six-month period ended June 30, 2010 is calculated as follows:

 

(In shares)    For the three-month
periods ended June 30,
     For the six-month
periods  ended June 30,
 
     2011      2010      2010  

Weighted-average number of common shares (basic)

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

Effect of conversion of convertible bonds

     1,286,594         1,281,697         5,280,214   
  

 

 

    

 

 

    

 

 

 

Weighted-average number of common shares (diluted) at June 30, 2011 and 2010

     359,102,294         359,097,397         363,095,914   
  

 

 

    

 

 

    

 

 

 

 

  (c) The number of dilutive potential ordinary shares outstanding for the three-month period ended June 30 2011 and for the six-month period ended June 30, 2010 is calculated as follows:

 

  (i) 2011

 

(Number of shares)    For the three-month
periods  ended June 30
Convertible bonds

Common shares to be issued

   1,286,594

Period

   April 1, 2011

~June 30, 2011

Weight

   91 days / 91 days

Weighted-average number of common shares to be issued

   1,286,594


Table of Contents
22. Earnings (loss) Per Share, Continued

 

  (ii) 2010

 

(Number of shares)   

For the three-month

periods ended June 30

  

For the six-month

periods ended June 30,

     Convertible bonds    Convertible bonds    Convertible bonds

Common shares to be issued

   1,281,697    1,281,697    9,399,113

Period

   April 1, 2010

~June 30, 2010

   January 1, 2010

~June 30, 2010

   January 1, 2010

~March 19, 2010

Weight

   91 days /91 days    181 days / 181 days    77 days / 181 days

Weighted-average number of common shares to be issued for the period

   1,281,697    5,280,214


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: August 30 2011   By:  

/s/ Heeyeon Kim

    (Signature)
  Name:   Heeyeon Kim
  Title:   Senior Manager/Head of IR

 

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