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 May 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

QUARTERLY REPORT

(From January 1, 2011 to March 31, 2011)

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

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED AND CERTAIN NUMBERS WERE ROUNDED FOR THE CONVENIENCE OF READERS.

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 (Q1)

 

  B. Average selling price trend of major products

 

  C. Major raw materials

 

  4. Production and Equipment

 

  A. Production capacity and calculation

 

  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

 

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  9. Research & Development

 

  A. Summary of R&D expenses

 

  B. R&D achievements

 

  10. Customer Service

 

  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

 

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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)

 

 

Commercial Paper

 

 

 

 

 

 

Corporate Debenture

   January 2006    A1   

National Information & Credit Evaluation, Inc.

(A1 ~ D)

   June 2006      
   December 2006      
   June 2007      
   December 2007      
   September 2008      
   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      
   July 2009    AA-   
   October 2009    AA-   
   February 2010      
   May 2010      
   December 2010      
   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      
   October 2009    AA-   

Korea Ratings, Inc.

(AAA ~ D)

   December 2009      
   August 2010      
   December 2010      
   February 2011      

 

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  C. Capitalization

 

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

 

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(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 March 31, 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)

     —          —          —     

 

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(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 March 31, 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 March 31, 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, only our LCD business has been categorized as a reporting business segment.

Financial highlights by business (based on K-IFRS)

 

     (Unit: In billions of Won)  

2011 (Q1)

   LCD business  

Sales Revenue

     5,366   

Gross Profit

     233   

Operating Profit (Loss)

     (239

 

  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.

 

   

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.

 

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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 (Q1) (1) (4)     2010 (2) (4)     2009 (3) (5)  

Panels for Notebook Computers (6)

     33.0     33.2     30.3

Panels for Monitors

     29.2     26.5     23.9

Panels for Televisions

     23.4     23.4     24.4

Total

     26.2     25.4     25.2

 

(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.

 

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  (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 such as Dell, Hewlett Packard and Kodak of the United States and Japan’s Toshiba, among others, to secure customers and expand partnerships for technology development. In January 2009 and April and December 2010, we entered into separate long-term supply agreements with Apple Inc. to supply display panels for three to five years.

 

  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.

 

   

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.

 

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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. Our total net investment amount in the fund as of March 31, 2011 was (Won)8.8 billion. The additional investments did not change 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.

 

   

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.

 

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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 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 U.S. $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, a Korean equipment manufacturer.

 

3. Major Products and Raw Materials

 

  A. Major products in 2011 (Q1)

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      4,978 (92.8 %) 
      TFT-LCD (Korea (1))    Panels for Notebook Computer, Monitor, Television, etc    LG Display      388 (7.2 %) 

Total

                 5,366 (100 %) 

- Period: January 1, 2011 ~ March 31, 2011.

 

(1) Based on ship-to-party.

 

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  B. Average selling price trend of major products

The average selling prices of LCD panels did not substantially change during the first quarter of 2011 compared to the fourth quarter of 2010. However, there is no assurance that the average selling prices of LCD panels in the future will not fluctuate due to imbalances in supply and demand.

 

     (Unit: US$ /  m2)  

Description

   2011 Q1      2010 Q4      2010 Q3      2010 Q2  

TFT-LCD panel (1) (2)

     694         695         778         863   

 

(1) Semi-finished products in the cell process have been excluded.
(2) Quarterly average selling price per square meter of net display area shipped.

 

  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

  

  

     907         23.92  

Samsung Corning Precision

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

      Backlight         1,116         29.43   Heesung Electronics Ltd., etc.
      Polarizer         581         15.32   LG Chem, etc.
      Others         1,187         31.33   -

Total

  

     3,791         100   -

- Period: January 1, 2011 ~ March 31, 2011.

 

4. Production and Equipment

 

  A. Production capacity and calculation

 

  (1) Calculation method of production capacity

Quarter: Maximum monthly input capacity (based on glass input substrate size for eighth generation glass sheets) during the quarter multiplied by the number of months (3 months).

Year: Maximum monthly input capacity (based on glass input substrate size for eighth generation glass sheets) during the year multiplied by the number of months (12 months).

 

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  (2) Production capacity

 

     (Unit: 1,000 Glass sheets)  

Business area

   Items    Business place    2011 (Q1)      2010      2009  

TFT-LCD

   TFT-LCD    Gumi, Paju      1,856         7,509         6,219   

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

 

  B. Production performance and utilization ratio

 

  (1) Production performance

 

     (Unit: 1,000 Glass sheets)  

Business area

   Items    Business place    2011 (Q1)      2010      2009  

TFT-LCD

   TFT-LCD    Gumi, Paju      1,694         6,490         5,231   

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

 

  (2) Utilization ratio

 

     (Unit: Hours)  

Business place (area)

   Available working hours
of 2011  (Q1)
  Actual working hours
of 2011  (Q1)
  Average
utilization ratio
 

Gumi

(TFT-LCD)

   2,160

(24 hours x 90 days)

  2,160

(24 hours x 90 days)

    100.0

Paju

(TFT-LCD)

   2,160

(24 hours x 90 days)

  2,160

(24 hours x 90 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 of approximately (Won)5.0 trillion in 2011. Such amount is subject to change depending on business conditions and market environment.

 

5. Sales

 

  A. Sales performance

 

     (Unit: In billions of Won)  

Business area

   Sales types    Items (Market)   2011 (Q1)      2010      2009  

TFT-LCD

   Products,
etc.
   TFT-LCD    Overseas (1)     4,978         23,806         18,833   
         Korea (1)     388         1,706         1,205   
         Total     5,366         25,512         20,038   

 

(1) Based on ship-to-party.

 

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  B. Sales route and sales method

 

  (1) Sales organization

 

   

As of March 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 g Overseas 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, 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.

 

  (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.

 

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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 and the Japanese Yen.

 

   

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

 

   

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

 

   

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 March 31, 2011, we had no interest swap contracts outstanding.

 

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8. Major contracts

 

   

In January 2009 and April and December 2010, we entered into separate long-term supply agreements with Apple Inc. to supply LCD panels for three to five years. We have received long-term advances from Apple Inc. in the amount of US$1,080 million ((Won)1,196 billion) in connection with these agreements, which will be offset as consideration for products supplied to Apple Inc. Furthermore, the Industrial Bank of Korea provided us with a payment guarantee in the amount of US$200 million ((Won)221 billion) relating to the long-term advances received from Apple Inc.

 

9. Research & Development

 

  A. Summary of R&D expenses

 

          (Unit: In millions of Won)  

Account

   2011
(Q1)
    2010     2009  
   Material Cost      138,981        616,072        400,467   
   Labor Cost      92,527        285,212        191,507   
   Depreciation Expense      45,471        93,365        89,459   
   Others      49,509        122,619        92,905   
   Total R&D Expense      326,488        1,117,268        774,338   

Accounting Treatment

   Selling & Administrative Expenses      68,252        264,073        168,081   
   Manufacturing Cost      226,066        717,848        505,585   
   Development Cost (Intangible Assets)      32,170        135,347        100,672   

R&D Expense / Sales Ratio

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

     6.1     4.4     3.8

 

  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

 

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  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

 

  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

 

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  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

 

  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 g 1024x600, 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

 

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  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

 

  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

 

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  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

 

  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

 

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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)

[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

 

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  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.

 

  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

 

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  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)

 

  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 Film Patterned Retarder (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

 

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  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

 

  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)

 

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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

 

  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)

 

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.

 

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11. Intellectual Property

As of March 31, 2011, we held a total of 15,049 patents, including 6,724 in Korea and 8,325 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 perfluoro compounds, or PFCs, and sulfur hexafluoride, or SF6, gases, by installing PFC abatement systems to meet voluntary emissions targets for the TFT-LCD industry for 2010. We expect to conduct a review on whether we have met such voluntary emission targets in 2011. We installed PFC abatement systems at all of our production lines when the production facilities were being constructed. We also installed a SF6 abatement system in P1 in April 2005 and in P6 in December 2009 and we intend to install similar abatement systems in our other production facilities through implementation of Clean Development Mechanism, or CDM, projects. On July 10, 2010, we became the first TFT-LCD company to receive the CDM Executive Board’s approval on its CDM project design document for SF6 decomposition. In November 2010 and February 2011, TUV SUD, a third party accreditation agency, examined and verified our reduction of greenhouse gas emissions and is currently conducting a final review as part of its procedure for issuing certified emission reduction credits.

In addition, as of March 31, 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. We also established an overall greenhouse gas emissions inventory system for our domestic sites, which was verified by Lloyd’s Register Quality Assurance, which is certified as the designated operational entity for CDM by the CDM Executive Board. We are also involved in the Korean government’s ongoing drafting of greenhouse gas emissions and energy usage statements. In May 2011, we expect to submit our emissions and usage statement to a government designated entity after it has examined and verified our greenhouse gas emissions and energy usage.

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. 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.

 

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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.

 

13. Financial Information

 

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

 

     (Unit: In millions of Won)  

Description

   As of March 31,
2011
    As of December 31,
2010
    As of December 31,
2009
 

Current assets

     8,540,971        8,840,433        8,226,142   

Quick assets

     6,035,777        6,625,216        6,558,362   

Inventories

     2,505,194        2,215,217        1,667,780   

Non-current assets

     15,784,464        15,017,225        11,477,335   

Investments in equity accounted investees

     302,596        325,532        282,450   

Property, plant and equipment, net

     13,544,978        12,815,401        9,596,497   

Intangible assets

     533,711        539,901        352,393   

Other non-current assets

     1,403,179        1,336,391        1,245,995   

Total assets

     24,325,435        23,857,658        19,703,477   

Current liabilities

     10,015,280        8,881,829        6,495,071   

Non-current liabilities

     3,555,535        3,914,862        3,168,657   

Total liabilities

     13,570,815        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

     (50,537     (35,298     (51,005

Retained earnings

     6,737,538        7,031,163        6,050,562   

Non-controlling interest

     27,427        24,910        0   

Total equity

     10,754,620        11,060,967        10,039,749   

 

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

Description

   For the three months ended
March 31, 2011
    For the three months ended
March 31, 2010
     For the three months ended
March 31, 2009 (1)
 

Revenue

     5,365,516        5,876,347         3,542,309   

Results from operating activities

     (239,240     789,423         (317,280

Income (Loss) from continuing operation

     (115,426     648,625         (346,633

Profit (Loss) for the period

     (115,426     648,625         (346,633

Basic earnings (looses) per share

     (322     1,814         (969

Diluted earnings (losses) per share

     (322     1,732         (969

 

(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 quarterly financial statements for 2009 have not be reviewed by our independent auditors.

 

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

 

     (Unit: In millions of Won)  

Description

   As of March 31,
2011
    As of December 31,
2010
    As of December 31,
2009
 

Current assets

     8,124,547        8,499,873        7,973,355   

Quick assets

     6,001,220        6,739,908        6,687,050   

Inventories

     2,123,327        1,759,965        1,286,305   

Non-current assets

     15,464,677        14,658,125        11,283,512   

Investments

     1,283,625        1,279,831        1,075,229   

Property, plant and equipment, net

     12,407,538        11,688,061        8,730,263   

Intangible assets

     479,475        483,260        340,885   

Other non-current assets

     1,294,039        1,206,973        1,137,135   

Total assets

     23,589,224        23,157,998        19,256,867   

Current liabilities

     9,563,488        8,453,869        6,120,663   

Non-current liabilities

     3,488,705        3,833,454        3,102,006   

Total liabilities

     13,052,193        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

     (8,653     (7,795     (17,366

Retained earnings

     6,505,492        6,838,278        6,011,372   

Non-controlling interest

     0        0        0   

Total equity

     10,537,031        10,870,675        10,034,198   

 

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

Description

   For the three months ended
March 31, 2011
    For the three months ended
March 31, 2010
     For the three months ended
March 31, 2009 (1)
 

Revenue

     5,051,751        5,840,744         3,426,949   

Results from operating activities

     (301,704     704,089         (408,456

Income (Loss) from continuing operation

     (154,350     599,044         (433,567

Profit (Loss) for the period

     (154,350     599,044         (433,567

Basic earnings (losses) per share

     (431     1,674         (1,212

Diluted earnings (losses) per share

     (431     1,596         (1,212

 

(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 quarterly financial statements for 2009 have not be reviewed by our independent auditors.

 

  C. Consolidated subsidiaries (as of March 31, 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

 

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  D. Status of equity investment

 

   

Status of equity investment as of March 31, 2011:

 

Company

   Paid-in Capital      Initial Equity
Investment Date
     Ownership
Ratio
 

LG Display America, Inc.

   US$ 105,000,000         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 2,338,229,215         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) 35,000,000,000         November 29, 2010         100

LUCOM Display Technology (Kunshan) Limited

   CNY 35,367,098         December 27, 2010         51

Suzhou Raken Technology Co., Ltd.

   CNY 569,455,395         October 7, 2008         51

Paju Electric Glass Co., Ltd.

   (Won) 29,248,000,000         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) 8,832,125,639         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         20

Eralite Optoelectronics (Jiangsu) Co., Ltd.

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

 

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14. Audit Information

 

  A. Audit service

 

     (Unit: In millions of Won, hours)

Description

   2011 (Q1)   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

   3,216   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.
(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

 

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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 March 31, 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 March 31, 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    March 25, 1962    Outside Director    Partner, Bain &
Company Korea
   March 11, 2011

 

  C. Committees of the board of directors (as of March 31, 2011)

 

Committee

  

Composition

  

Member

Audit Committee    3 outside directors    Tae Sik Ahn, Sunny Yi, 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,

Tae Sik Ahn

 

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16. Information Regarding Shares

 

  A. Total number of shares

 

  (1) Total number of shares authorized to be issued (as of March 31, 2011): 500,000,000 shares.

 

  (2) Total shares issued and outstanding (as of March 31, 2011): 357,815,700 shares.

 

  B. Shareholder list

 

  (1) Largest shareholder and related parties:

 

     (Unit: share)  

Name

   Relationship    As of March 31, 2011  

LG Electronics

   Largest
Shareholder
    

 

135,625,000

(37.9

  

%) 

Young Soo Kwon

   Related
Party
    

 

13,000

(0.0

  

%) 

 

  (2) Shareholders who are known to us to own 5% or more of our shares as of March 31, 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

 

17. Directors and Employees

 

  A. Directors

 

  (1) Remuneration for directors in 2011 (Q1)

 

     (Unit: In millions of Won)  

Classification

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

Non-outside directors

     927  (2)      309         —     

Outside directors who are not audit committee members

     22  (3)      17         —     

Outside directors who are audit committee members

     48  (4)      14         —     

Total

     997        —           —     

 

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- Period: January 1, 2011 ~ March 31, 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 three months ended March 31, 2011.

 

  (2) Stock option

The following table sets forth certain information regarding our stock options as of March 31, 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.

 

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  B. Employees

As of March 31, 2011, we had 32,321 employees (excluding our executive officers). The total amount of salary paid to our employees for the three months ended March 31, 2011 based on cash payment (excluding welfare benefits and retirement expenses) was (Won)516,829 million. The following table provides details of our employees as of March 31, 2011:

 

     (Unit: person, in millions of Won, year)  
     Number of
Employees
     Total Salary in 2011 (Q1) (1) (2) (3)      Per Capita
Salary  (4)
     Average
Service Year
 

Male

     22,503         394,419         18         4.6   

Female

     9,818         122,410         13         3.1   

Total

     32,321         516,829         16         4.1   

 

(1) Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the three months ended March 31, 2011 was (Won)75,936 million and the per capita welfare benefit provided was (Won)2.4 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 (31,524) for the 3 months ended March 31, 2011.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2011 and 2010

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  

Independent Auditors’ Review Report

     38   

Condensed Consolidated Statements of Financial Position

     40   

Condensed Consolidated Statements of Comprehensive Income

     41   

Condensed Consolidated Statements of Changes in Equity

     42   

Condensed Consolidated Statements of Cash Flows

     43   

Notes to the Condensed Consolidated interim Financial Statements

     45   

 

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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 March 31, 2011, and the related condensed consolidated statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 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 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 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

May 18, 2011

This report is effective as of May 18, 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 March 31, 2011 and December 31, 2010

 

(In millions of won)    Note    2011     2010  

Assets

       

Cash and cash equivalents

   9    (Won) 1,808,378       1,631,009  

Deposits in banks

   9      1,204,000       1,503,000  

Trade accounts and notes receivable, net

   9, 16      2,449,089       3,000,661  

Other accounts receivable, net

   9      172,877       256,028  

Other current financial assets

   9      54,163       35,370  

Inventories

   5      2,505,194       2,215,217  

Other current assets

        347,270       199,148  
                   

Total current assets

        8,540,971       8,840,433  

Investments in equity accounted investees

   6      302,596       325,532  

Other non-current financial assets

   9      81,662       83,246  

Deferred tax assets

   22      1,146,435       1,074,853  

Property, plant and equipment, net

   7, 20      13,544,978       12,815,401  

Intangible assets, net

   8, 20      533,711       539,901  

Other non-current accounts receivable

        —          11,045  

Other non-current assets

        175,082       167,247  
                   

Total non-current assets

        15,784,464       15,017,225  
                   

Total assets

      (Won) 24,325,435       23,857,658  
                   

Liabilities

       

Trade accounts and notes payable

   9    (Won) 3,002,615       2,961,995  

Current financial liabilities

   9, 10      2,109,822       2,100,979  

Other accounts payable

   9      3,079,431       2,592,527  

Accrued expenses

        299,112       373,717  

Income taxes payable

        90,756       153,890  

Provisions

        618,852       634,815  

Other current liabilities

        814,692       63,906  
                   

Total current liabilities

        10,015,280       8,881,829  

Non-current financial liabilities

   9, 10      2,495,101       2,542,900  

Non-current provisions

        7,521       8,773  

Deferred tax liabilities

   22      —          6,640  

Employee benefits

   14      103,404       78,715  

Long-term advances received

   16      642,176       945,287  

Other non-current liabilities

        307,333       332,547  
                   

Total non-current liabilities

        3,555,535       3,914,862  
                   

Total liabilities

        13,570,815       12,796,691  
                   

Equity

       

Share capital

   18      1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Reserves

   18      (50,537 )     (35,298 )

Retained earnings

        6,737,538       7,031,163  
                   

Total equity attributable to equity holders of the Company

     10,727,193       11,036,057  
                   

Non-controlling interest

        27,427       24,910  
                   

Total equity

        10,754,620       11,060,967  
                   

Total liabilities and equity

      (Won) 24,325,435       23,857,658  
                   

See accompanying notes to the condensed consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Comprehensive Income

(Unaudited)

For the three-month periods ended March 31, 2011 and 2010

 

(In millions of won, except earnings per share)    Note      2011     2010  

Revenue

      (Won) 5,365,516       5,876,347  

Cost of sales

        (5,132,586 )     (4,639,654 )
                   

Gross profit

        232,930       1,236,693  

Other income

     13         333,044       244,822  

Selling expenses

     12         (177,316 )     (190,334 )

Administrative expenses

     12         (140,997 )     (119,492 )

Research and development expenses

        (169,640 )     (136,650 )

Other expenses

     13         (317,261 )     (245,616 )
                   

Results from operating activities

        (239,240 )     789,423  
                   

Finance income

     15         124,793       114,637  

Finance costs

     15         (82,135 )     (60,893 )

Other non-operating income, net

        (3,223 )     (1,591 )

Equity income (loss) on investments, net

        (1,994 )     156  
                   

Profit (loss) before income taxes

        (201,799 )     841,732  

Income tax expense (benefit)

     22         (86,373 )     193,107  
                   

Profit (loss) for the period

        (115,426 )     648,625  
                   

Other comprehensive income (loss)

       

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

        (1,515 )     18,455  

Defined benefit plan actuarial gain or loss

     14         605       (153 )

Cumulative translation differences

        (14,703 )     (18,346 )

Gain on sales of own shares of associate accounted

        271       —     

Income taxes on other comprehensive income

        46       (5,351 )
                   

Other comprehensive loss for the period, net of income taxes

        (15,296 )     (5,395 )
                   

Total comprehensive income (loss) for the period

      (Won) (130,722 )     643,230  
                   

Profit (loss) attributable to:

       

Owners of the Company

        (115,189 )     649,066  

Non-controlling interest

        (237 )     (441 )
                   

Profit (loss) for the period

      (Won) (115,426 )     648,625  
                   

Total comprehensive income (loss) attributable to:

       

Owners of the Company

        (129,956 )     644,187  

Non-controlling interest

        (766 )     (957 )
                   

Total comprehensive income (loss) for the period

      (Won) (130,722 )     643,230  
                   

Earning (loss) per share

       

Basic earnings (loss) per share

     23       (Won) (322 )     1,814  
                   

Diluted earnings (loss) per share

     23       (Won) (322 )     1,732  
                   

See accompanying notes to the condensed consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited)

For the three-month periods ended March 31, 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

    —          —          —          —          —          649,066       (441 )     648,625  

Other comprehensive income (loss)

               

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

    —          —          —          13,910       —          —          —          13,910  

Defined benefit plan actuarial loss

    —          —          —          —          —          (153 )     —          (153 )

Cumulative translation differences

    —          —          —          —          (18,636 )     —          (516 )     (19,152 )
                                                               

Total other comprehensive income (loss)

    —          —          —          13,910       (18,636 )     (153 )     (516 )     (5,395 )
                                                               

Total comprehensive income (loss) for the period

  (Won) —          —          —          13,910       (18,636 )     648,913       (957 )     643,230  
                                                               

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 March 31, 2010

  (Won) 1,789,079       2,251,113       —          (726 )     (55,005 )     6,520,567       15,635       10,520,663  
                                                               

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

    —          —          —          —          —          (115,189 )     (237 )     (115,426 )

Other comprehensive income (loss)

               

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

    —          —          —          (1,336 )     —          —          —          (1,336 )

Defined benefit plan actuarial gain

    —          —          —          —          —          472       —          472  

Cumulative translation differences

    —          —          —          —          (14,174 )     —          (529 )     (14,703 )

Gain on sales of own shares of associates accounted for using the equity method

    —          —          271       —          —          —          —          271  
                                                               

Total other comprehensive income (loss)

    —          —          271       (1,336 )     (14,174 )     472       (529 )     (15,296 )
                                                               

Total comprehensive income (loss) for the period

  (Won) —          —          271       (1,336 )     (14,174 )     (114,717 )     (766 )     (130,722 )
                                                               

Transaction with owners, recorded directly in equity

               

Dividends to equity holders

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

Changes in ownership interests in subsidiaries

    —          —          —          —          —          —          3,283       3,283  
                                                               

Balances at March 31, 2011

  (Won) 1,789,079       2,251,113       1,081       (6,896 )     (44,722 )     6,737,538       27,427       10,754,620  
                                                               

See accompanying notes to the condensed consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

For the three-month periods ended March 31, 2011 and 2010

 

(In millions of won)    Note      2011     2010  

Cash flows from operating activities:

       

Profit (loss) for the period

      (Won) (115,426 )     648,625  

Adjustments for:

       

Income tax expense (benefit)

     22         (86,373 )     193,107  

Depreciation

        763,824       595,813  

Amortization of intangible assets

        52,015       35,856  

Gain on foreign currency translation

        (111,935 )     (104,952 )

Loss on foreign currency translation

        80,008       77,341  

Gain on disposal of property, plant and equipment

        (158 )     (931 )

Loss on disposal of property, plant and equipment

        80       76  

Finance income

        (108,396 )     (113,181 )

Finance costs

        45,508       34,188  

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

        1,994       (156 )

Other income

        (2,576 )     (121 )

Other expenses

        41,387       11,641  
                   
        559,952       1,377,306  

Change in trade accounts and notes receivable

        490,298       (354,106 )

Change in other accounts receivable

        (23,703 )     10,834  

Change in other current assets

        (138,073 )     (90,193 )

Change in inventories

        (289,977 )     (48,597 )

Change in other non-current accounts receivable

        —          328  

Change in other non-current assets

        (21,242 )     (29,151 )

Change in trade accounts and notes payable

        92,502       188,484  

Change in other accounts payable

        43,596       (68,813 )

Change in accrued expenses

        (92,812 )     (8,465 )

Change in other current liabilities

        18,544       6,505  

Change in long-term advances received

        281,975       —     

Change in other non-current liabilities

        (3,355 )     2,636  

Change in provisions

        (35,314 )     (4,784 )

Change in defined benefit obligation

     14         (3,173 )     33,640  
                   

Cash generated from operating activities

        879,218       1,015,624  

Income taxes paid

        (56,363 )     (63,412 )

Interest received

        22,806       33,053  

Interest paid

        (31,222 )     (26,880 )
                   

Net cash from operating activities

      (Won) 814,439       958,385  
                   

See accompanying notes to the condensed consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows, Continued

(Unaudited)

For the three-month periods ended March 31, 2011 and 2010

 

(In millions of won)    Note      2011     2010  

Cash flows from investing activities:

       

Dividends received

      (Won) 242       729  

Proceeds from withdrawal of deposits in banks

        1,100,000       1,300,000  

Increase in deposits in banks

        (801,000 )     (800,000 )

Acquisition of investments in equity accounted investees

        (1,908 )     (14,933 )

Proceed from disposal of investments in equity accounted investees

  

     1,356       —     

Acquisition of property, plant and equipment

        (1,039,187 )     (715,079 )

Proceeds from disposal of property, plant and equipment

        157       1,250  

Acquisition of intangible assets

        (58,970 )     (50,368 )

Grants received

        940       4  

Proceeds from settlement of derivatives

        9,844       9,600  

Proceeds from short-term loans

        49       28  

Acquisition of other non-current financial assets

        (25,188 )     (98 )

Proceed from disposal of other non-current financial assets

        121,651       3,422  
                   

Net cash used in investing activities

        (692,014 )     (265,445 )
                   

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        106,580       120,566  

Repayment of short-term borrowings

        (328,655 )     (282,395 )

Issuance of debentures

        298,726       199,117  

Proceeds from long-term debts

        —          5,301  

Repayment of current portion of long-term debts

        (24,839 )     (417,050 )

Increase in non-controlling interest

        3,283       16,592  
                   

Net cash provided (used) in financing activities

        55,095       (357,869 )
                   

Net Increase in cash and cash equivalents

        177,520       335,071  

Cash and cash equivalents at January 1

        1,631,009       817,982  

Effect of exchange rate fluctuations on cash held

        (151 )     (8,817 )
                   

Cash and cash equivalents at March 31

      (Won) 1,808,378       1,144,236  
                   

See accompanying notes to the condensed consolidated interim financial statements.

 

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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 March 31, 2011, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common shares.

As of March 31, 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 March 31, 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 March 31, 2011, there are 34,262,102 ADSs outstanding.

 

  (b) Consolidated Subsidiaries

In January 2011, the Controlling Company invested (Won)14,363 million in cash for the capital increase of LG Display Nanjing Co., Ltd , which is wholly owned by the Controlling Company.

In February 2011, the Controlling Company invested (Won)3,417 million in cash for the capital increase of LUCOM Display Technology (Kunshan) Limited. There were no changes in the Controlling Company’s ownership percentage in LUCOM as a result of this additional investment.

 

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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 April 15, 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.

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.

 

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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 March 31, 2011 and December 31, 2010 are as follows:

 

(In millions of won)    2011      2010  

Finished goods

   (Won) 1,011,957         978,386   

Work-in-process

     881,273         612,497   

Raw materials

     434,830         421,593   

Supplies

     177,134         202,741   
                 
   (Won) 2,505,194         2,215,217   
                 

For the three-month periods ended March 31, 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) 5,132,586         4,639,654   

Including: Inventory write-downs (reversals)

     23,287         (12,280

 

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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 in February 2011 by the Fund and made additional cash investment of (Won)1,908 million in March 2011. As of March 31, 2011, the Controlling Company has a 30.6% equity interest in the Fund and is committed to make investment of (Won)30,000 million in future.

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 March 31, 2011 as the recovery of the investment is no longer probable.

 

7. Property, Plant and Equipment

For the three-month periods ended March 31, 2011 and 2010, the Group purchased property, plant and equipment of (Won)1,509,914 million and (Won)1,423,507 million, respectively. The capitalized borrowing costs and capitalization rate are (Won)4,762 million and 2.03%, and (Won)6,885 million and 2.78% for the three-month period ended March 31, 2011 and 2010, respectively. Also for the three-month periods ended March 31, 2011 and 2010, the Group disposed property, plant and equipment with carrying amounts of (Won)79 million and (Won)395 million, respectively. The Group recognized (Won)158 million and (Won)80 million as gain and loss on disposal of property, plant and equipment for the three-month period ended March 31, 2011 (gain and loss for the three-month period ended on March 31, 2010: (Won)931 million and (Won)76 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 March 31, 2011 and December 31, 2010 are (Won)154,153 million and (Won)151,697 million, respectively.

 

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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 March 31, 2011 and December 31, 2010 is as follows:

 

(In millions of won)    2011      2010  

Cash and cash equivalents

   (Won) 1,808,378         1,631,009   

Trade accounts and notes receivable, net

     2,449,089         3,000,661   

Other accounts receivable, net

     151,271         256,028   

Available-for-sale financial assets

     41,397         42,753   

Financial assets at fair value through profit or loss

     16,065         16,804   

Deposits

     68,805         49,792   

Derivatives

     9,545         9,254   

Deposits in banks

     1,204,000         1,503,000   

Guarantee deposits with banks

     13         13   
                 
   (Won) 5,748,563         6,509,314   
                 

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

 

(In millions of won)    2011      2010  

Domestic

   (Won) 81,973         79,275   

Euro-zone countries

     308,497         456,145   

Japan

     155,019         265,732   

United States

     669,368         546,364   

China

     722,698         823,020   

Taiwan

     432,770         720,918   

Others

     78,764         109,207   
                 
   (Won) 2,449,089         3,000,661   
                 

 

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9. Financial Instruments, Continued

 

  (ii) Impairment loss

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

 

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

Not past due

   (Won) 2,371,168         (299     2,905,600         (514

Past due 1-15 days

     20,138         (2     25,628         (4

Past due 16-30 days

     53,128         (7     43,820         (6

Past due 31-60 days

     4,090         —          21,369         (4

More than 60 days

     875         (2     4,776         (4
                                  
   (Won) 2,449,399         (310     3,001,193         (532
                                  

The movement in the allowance for impairment in respect of receivables during the three-month period ended March 31, 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)

     (222     167   
                

Balance at the reporting date

   (Won) 310        532   
                

 

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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 March 31, 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) 55,360         59,385         619         619         1,239         56,908         —     

Unsecured bank loans

     2,355,764         2,396,972         1,512,678         427,688         161,414         292,161         3,031   

Unsecured bond issues

     2,110,730         2,403,541         244,810         42,160         711,732         1,404,839         —     

Financial liabilities at fair value through profit or loss

     83,069         85,330         —           —           85,330         —           —     

Trade accounts and notes payables

     3,002,615         3,002,615         3,002,615         —           —           —           —     

Other accounts payables

     3,079,431         3,079,431         3,079,431         —           —           —           —     

Other non-current payable

     52,802         52,802         —           —           52,802         —           —     
                                                              
   (Won) 10,739,771         11,080,076         7,840,153         470,467         1,012,517         1,753,908         3,031   
                                                              

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 March 31, 2011, there is no derivative designated as a cash flow hedge.

 

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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 March 31, 2011 and December 31, 2010 is as follows:

 

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

Cash and cash equivalents

     913        37,701        143        2        20        5        —     

Trade accounts and notes receivable

     2,062        6,255        159        —          19        29        —     

Other accounts receivable

     22        208        187        159        4        1        —     

Available-for-sale financial assets

     7        —          —          103        —          —          —     

Financial assets at fair value through profit or loss

     —          —          —          430        —          —          —     

Other assets denominated in foreign currencies

     1        186        17        16        —          67        1   

Trade accounts and notes payable

     (1,498     (20,804     (992     (111     (6     —          (1

Other accounts payable

     (132     (16,540     (452     (14     (16     (120     —     

Other non-current accounts payable

     (12     —          —          —          (25     —          —     

Debts

     (1,162     (57,536     (398     —          (43     —          —     

Bonds

     (346     (9,971     —          —          —          —          —     

Financial liabilities at fair value through profit or loss

     (75     —          —          —          —          —          —     
                                                        

Gross statement of financial position exposure

     (220     (60,501     (1,336     585        (47     (18     —     
                                                        

Forward exchange contracts

     (260     —          —          —          —          —          —     
                                                        

Net exposure

     (480     (60,501     (1,336     585        (47     (18     —     
                                                        

 

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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 three-month period ended March 31, 2011 and the year ended December 31, 2010 are as follows:

 

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

USD

   (Won) 1,121.04         1,144.84       (Won) 1,107.20         1,138.90   

JPY

     13.63         12.62         13.32         13.97   

CNY

     170.29         167.67         168.88         172.50   

TWD

     38.31         35.86         37.57         39.08   

EUR

     1,532.38         1,584.77         1,563.48         1,513.60   

PLN

     388.16         396.61         389.44         381.77   

SGD

     877.20         815.76         877.55         884.00   

 

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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 March 31, 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)    March 31, 2011     December 31, 2010  
     Equity     Profit
or loss
    Equity     Profit
or loss
 

USD (5 percent weakening)

     (15,400     (10,515     (9,119     (29,823

JPY (5 percent weakening)

     (23,317     (20,819     (60,256     (59,738

CNY (5 percent weakening)

     (6,529     —          (1,867     —     

TWD (5 percent weakening)

     635        307        5,504        4,859   

EUR (5 percent weakening)

     (2,140     (2,408     (2,923     (3,666

PLN (5 percent weakening)

     (209     768        928        1,065   

SGD (5 percent weakening)

     4        —          23        —     

A strengthening of the won against the above currencies as of March 31, 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.

 

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9. Financial Instruments, Continued

 

 

  (d) Interest rate risk

 

  (i) Profile

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

 

(In millions of won)    2011     2010  

Fixed rate instruments

    

Financial assets

   (Won) 3,024,176        3,268,887   

Financial liabilities

     (1,882,292     (1,584,533
                
   (Won) 1,141,884        1,684,354   
                

Variable rate instruments

    

Financial liabilities

   (Won) (2,722,631     (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)646 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 March 31, 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
 

March 31, 2011

         

Variable rate instruments

   (Won) (20,787     20,787         (20,787     20,787   

December 31, 2010

         

Variable rate instruments

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

 

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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:

 

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

Assets carried at fair value

           

Available-for-sale financial assets

   (Won) 41,397         41,397         42,753         42,753   

Financial assets at fair value through profit or loss

     16,065         16,065         16,804         16,804   

Forward exchange contracts

     9,545         9,545         9,254         9,254   
                                   
   (Won) 67,007         67,007         68,811         68,811   
                                   

Assets carried at amortized cost

           

Cash and cash equivalents

   (Won) 1,808,378         1,808,378         1,631,009         1,631,009   

Trade accounts and notes receivable

     2,449,089         2,449,089         3,000,661         3,000,661   

Other accounts receivable

     151,271         151,271         256,028         256,028   

Deposits in banks

     1,204,000         1,204,000         1,503,000         1,503,000   

Deposits

     68,805         68,805         49,792         49,792   

Others

     13         13         13         13   
                                   
   (Won) 5,681,556         5,681,556         6,440,503         6,440,503   
                                   

Liabilities carried at fair value

           

Financial liabilities at fair value through profit or loss

   (Won) 83,069         83,069         84,338         84,338   

Forward exchange contracts

     —           —           956         956   
                                   
   (Won) 83,069         83,069         85,294         85,294   
                                   

Liabilities carried at amortized cost

           

Secured bank loans

   (Won) 55,360         55,360         56,945         56,945   

Unsecured bank loans

     2,355,764         2,355,425         2,673,146         2,672,790   

Unsecured bond issues

     2,110,730         2,140,519         1,828,494         1,859,102   

Trade accounts and notes payable

     3,002,615         3,002,615         2,961,995         2,961,995   

Other accounts payable

     3,079,431         3,079,431         2,592,527         2,592,527   

Other non-current liabilities

     52,802         55,740         51,409         55,920   
                                   
   (Won) 10,656,702         10,689,090         10,164,516         10,199,279   
                                   

The basis for determining fair values is disclosed in note 4.

 

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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 March 31, 2011 and December 31, 2010 are as follows:

 

     2011     2010  

Derivatives

     3.79     3.31

Debts and bonds

     4.01     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  

March 31, 2011

          

Available-for-sale financial assets

   (Won) 14,230        —           27,167         41,397   

Financial assets at fair value through profit or loss

     16,065        —           —           16,065   

Derivative financial assets

     —          9,545         —           9,545   
                                  
   (Won) 30,295        9,545         27,167         67,007   
                                  

Financial liabilities at fair value through profit or loss

     (83,069     —           —           (83,069
                                  
   (Won) (83,069     —           —           (83,069
                                  

 

(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

     —          (956     —           (956

Financial liabilities at fair value through profit or loss

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

 

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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 binominal tree model considering the financial conditions of the invested companies and by discounting estimated cash flows from stock using yield rate that reflects invested companies’ credit risks.

Changes in Level 3 instruments are as follows:

 

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

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

Available-for-sale financial assets

   (Won) 26,085         —           —           1,082         —           27,167   

 

  (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. Management also monitors the level of dividends to ordinary shareholders.

 

(In millions of won)    March 31, 2011     December 31, 2010  

Total liabilities

   (Won) 13,570,815        12,796,691   

Total equity

     10,754,620        11,060,967   

Cash and deposits in banks(*)

     3,012,378        3,134,009   

Borrowings

     4,604,923        4,642,923   

Liabilities to equity ratio

     126     116

Net borrowing to equity ratio

     15     14

 

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

 

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10. Financial Liabilities

 

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

 

(In millions of won)    2011      2010  

Current

     

Short-term borrowings

   (Won) 958,000         1,213,462   

Current portion of long-term debt

     1,151,822         886,561   

Derivatives

     —           956   
                 
   (Won) 2,109,822         2,100,979   
                 

Non-current

     

Won denominated borrowings

   (Won) 18,194         19,143   

Foreign currency denominated borrowings

     483,108         810,925   

Bonds

     1,910,730         1,628,494   

Convertible bonds

     83,069         84,338   
                 
   (Won) 2,495,101         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 March 31, 2011 and December 31, 2010 are as follows:

 

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

Lender

  

Annual interest rate

as of

March 31, 2011(*)

   2011      2010  

Korea Development Bank and others

   —      (Won) —           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

     137,505         162,115   

Mizuho Bank

   —        —           55,574   
   3ML+1.6%      93,232         97,796   

Shinhan Bank and others

   6ML+0.65~0.9%      459,957         545,419   
   5.29%      711         711   

Bank of Tokyo-Mitsubishi UFJ

   3ML+1.0%      66,595         69,854   
   —        —           69,854   

Woori Bank

   5.13%      200,000         200,000   
                    

Foreign currency equivalent

      USD 77       USD 95   
      JPY 49,536       JPY 63,889   
      CNY 71       CNY 71   
                    
      (Won) 958,000         1,213,462   
                    

 

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

 

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10. Financial Liabilities, Continued

 

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

 

(In millions of won)  

Lender

  

Annual interest rate

as of

March 31, 2011

   2011     2010  

Shinhan Bank

  

3-year Korean Treasury Bond

rate less 1.25%

   (Won) 15,059        16,008   

Woori Bank

  

3-year Korean Treasury Bond

rate less 1.25%

     4,048        4,048   
   2.75%      2,883        2,883   

Hana Bank

   1.23%, 4.18%      300        300   

Less current portion of long-term debt

        (4,096     (4,096
                   
      (Won) 18,194        19,143   
                   

 

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

 

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

Lender

 

Annual interest rate

as of

March 31, 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) 128,507        145,917   

The Export-Import Bank of Korea

  6ML+0.69%     44,288        51,251   
  6ML+1.78%     55,360        56,945   

Korea Development Bank

  3ML+0.66%     261,559        271,212   
  3ML+2.79%    

Kookmin Bank and others

  3ML+0.35~0.53%     442,880        455,560   
  6ML+0.41%     221,440        227,780   

Sumitomo Bank Ltd.

  3ML+1.80%     276,800        284,725   
                 
    USD 1,085      USD 1,097   

Foreign currency equivalent

    CNY 327      CNY 341   
    EUR 43      EUR 48   
    JPY 8,000      JPY 8,000   
                 

Less current portion of long-term debt

      (947,726     (682,465
                 
    (Won) 483,108        810,925   
                 

 

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10. Financial Liabilities, Continued

 

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

 

(In millions of won, JPY and USD)    Maturity      Annual interest
rate as of
March 31, 2011
    2011     2010  

Local currency debentures(*)

         

Publicly issued debentures

    
 

 

November
2012~

February 2016

  
  

  

     4.77~5.89%      (Won) 1,400,000        1,100,000   

Privately issued debentures

     May 2011         5.30%        200,000        200,000   

Less discount on debentures

          (4,671     (3,699

Less current portion of debentures

          (200,000     (200,000
                     
        (Won) 1,395,329        1,096,301   
                     

Foreign currency debentures(*)

         

Floating-rate bonds

    
 
August 2012 ~
April 2013
  
  
    

 

3ML+1.80

~2.40%

  

  

  (Won) 520,709        538,323   
                     

Foreign currency equivalent

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

Less discount on bonds

          (5,308     (6,130
                     
        (Won) 515,401        532,193   
                     

Financial liabilities at fair value through profit or loss

         

Convertible bonds

     April 2012         Zero coupon      (Won) 83,069        84,338   
                     

Foreign currency equivalent

        USD 75      USD 74   
                     
        (Won) 83,069        84,338   
                     
        (Won) 1,993,799        1,712,832   
                     

 

(*) Principal of the local currency debentures is to be repaid at maturity and interests are paid quarterly. The Controlling Company publicly issued debentures amounting to (Won)300,000 million (maturity: 5 years, annual interest rate: 4.95%) during the three-month period ended March 31, 2011.

 

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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 non-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 March 31, 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   

 

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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 March 31, 2011 and December 31, 2010.

 

  (g) Aggregate maturities of the Group’s financial liabilities as of March 31, 2011 are as follows:

 

(In millions of won)                                   

Period

   Local currency
long-term debt
     Foreign currency
long-term debt
     Local currency
debentures
     Foreign currency
debentures
     Total  

Within 1 year

   (Won) 4,096         947,726         200,000         —           1,151,822   

1~5 year

     15,300         483,108         1,910,730         83,069         2,492,207   

Thereafter

     2,894         —           —           —           2,894   
                                            
   (Won) 22,290         1,430,834         2,110,730         83,069         3,646,923   
                                            

 

11. The Nature of Expenses

The nature of expenses for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Changes in inventories

   (Won) (289,977     (48,597

Purchase of raw material and merchandise

     3,790,682        3,445,618   

Depreciation and amortization

     815,839        631,669   

Outsourcing fee

     28,261        18,784   

Labor costs

     575,937        424,809   

Supplies and others

     276,803        211,332   

Utility expense

     134,356        103,577   

Fees and commissions

     108,002        82,385   

Shipping costs

     79,944        104,314   

After-sale service expenses

     15,854        38,566   

Others

     85,227        84,101   
                
   (Won) 5,620,928        5,096,558   
                

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

For the three-month period ended March 31, 2011, other income and other expenses contained exchange differences amounting to (Won)329,601 million and (Won)316,872 million, respectively (three-month period ended March 31, 2010 : (Won)241,541 million and (Won)235,188 million, respectively).

 

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12. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Salaries

   (Won) 59,384         46,477   

Expenses related to defined benefit plan

     4,844         5,352   

Other employee benefit

     14,579         10,993   

Shipping costs

     67,450         88,086   

Fees and commissions

     43,584         25,654   

Depreciation and amortization

     41,297         32,754   

Taxes and dues

     10,904         4,158   

Advertising

     25,259         16,827   

After-sale service expenses

     15,854         38,566   

Others

     35,158         40,959   
                 
   (Won) 318,313         309,826   
                 

 

13. Other Income and Other Expenses

 

  (a) Details of other income for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Rental income

   (Won) 1,461         1,034   

Foreign currency gain

     329,601         241,541   

Gain on disposal of property, plant and equipment

     158         931   

Reversal of allowance for doubtful accounts for other receivables

     211         121   

Reversal of stock compensation cost

     267         —     

Others

     1,346         1,195   
                 
   (Won) 333,044         244,822   
                 

 

  (b) Details of other expenses for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Other bad debt expenses

   (Won) 285         1,281   

Foreign currency loss

     316,872         235,188   

Loss on disposal of property, plant and equipment

     80         76   

Others

     24         9,071   
                 
   (Won) 317,261         245,616   
                 

 

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14. Employee Benefits

The Group 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 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 March 31, 2011 and December 31, 2010 are as follows:

 

(In millions of won)    2011     2010  

Present value of partially funded defined benefit obligations

   (Won) 384,500        360,540   

Fair value of plan assets

     (281,096     (281,825
                
   (Won) 103,404        78,715   
                

 

  (b) Expenses recognized in profit and loss for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current service cost

   (Won) 26,809        22,025   

Interest cost

     4,746        3,678   

Expected return on plan assets

     (3,088     (3,236

Past service cost

     —          12,778   
                
   (Won) 28,467        35,245   
                

 

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

 

(In millions of won)    2011      2010  

Deposits with financial institutions

   (Won) 281,096         281,825   

 

  (d) Actuarial gain and loss recognized in other comprehensive income for the three-month periods ended March 31, 2011 and 2010 is as follows:

 

(In millions of won)    2011     2010  

Defined benefit plan actuarial gain or loss

   (Won) 605        (153

Income tax

     (133     —     
                

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

   (Won) 472        (153
                

 

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15. Finance income and Finance costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Finance income

     

Interest income

   (Won) 16,888         28,738   

Foreign currency gain

     107,869         85,791   

Gain on derivatives

     —           102   

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

     36         6   
                 
   (Won) 124,793         114,637   
                 

Finance costs

     

Interest expense

   (Won) 30,272         23,833   

Foreign currency loss

     35,843         29,284   

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

     393         1,512   

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

     1,079         4,829   

Loss on sale of trade accounts and notes receivable

     3,682         1,435   

Impairment loss on investments in equity accounted investees

     10,866         —     
                 
   (Won) 82,135         60,893   
                 

 

  (b) Finance income and costs recognized in other comprehensive income (loss) for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Loss on valuation of available-for-sale securities

     (1,515     18,455   

Tax effect

     179        (4,545
                
   (Won) (1,336     13,910   
                

 

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16. Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Exchange Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD1,425 million ((Won)1,577,760 million) in connection with its export sales transactions. As of March 31, 2011, the amount of accounts and notes receivable sold but not past due is zero.

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)664,320 million). The Controlling Company joined this program in April 2007. For the three-month period ended March 31, 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 Citiibank for accounts receivable sales negotiating facilities of up to an aggregate of USD250 million ((Won)276,800 million) and USD100 million ((Won)110,720 million), respectively, and, as of March 31, 2011, accounts and notes receivable amounting to USD190 million ((Won)210,368 million) and USD48 million ((Won)53,146 million) were sold but are not past due. LG Display Taiwan Co., Ltd. has an agreement with Taishin International Bank for accounts receivable sales negotiating facilities of up to an aggregate of USD710 million ((Won)786,112 million), and, as of March 31, 2011, accounts and notes receivable amounting to USD251 million ((Won)277,907 million) were sold but are not past due. 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 USD56 million ((Won)62,003 million) and USD260 million ((Won)287,872 million), respectively, and, as of March 31, 2011, accounts and notes receivable amounting to USD33 million ((Won)36,538 million) and USD105 million ((Won)116,256 million) were sold but are not past due, respectively. 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)155,008 million), and, as of March 31, 2011, accounts and notes receivable amounting to USD92 million ((Won)101,862 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 March 31, 2011, accounts and notes receivable amounting to USD120 million ((Won)132,864 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)339,910 million), and, as of March 31, 2011, accounts and notes receivable amounting to USD296 million ((Won)327,731 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)88,576 million) and USD35 million ((Won)38,752 million), respectively, and, as of March 31, 2011, the amount of accounts and notes receivable amounting to USD79 million ((Won)87,469 million) and USD19 million ((Won)21,037 million) were sold but not past due, respectively. 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. In addition, since August 2010, the Controlling Company has entered into an accounts receivable selling program of up to USD100 million ((Won)110,720 million) with Citibank, N.A., and, as of March 31, 2011, the amount of accounts and notes receivable sold but not past due is zero. In connection with all the contracts in this paragraph, the Group has sold its accounts receivable without recourse.

 

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16. Commitments, Continued

Letters of credit

As of March 31, 2011, the Controlling Company has agreements with Korea Exchange Bank in relation to the opening of letters of credit up to USD110 million ((Won)121,792 million), USD20 million ((Won)22,144 million) with China Construction Bank, USD210 million ((Won)232,512 million) with Shinhan Bank, JPY10,000 million ((Won)133,189 million) with Woori Bank, USD80 million ((Won)88,576 million) with Bank of China, USD104 million ((Won)115,149 million) with Hana Bank and JPY1,893 million ((Won)25,210 million), USD60 million ((Won)66,432 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company receives payment guarantees amounting to USD8.5 million ((Won)9,411 million) and EUR215 million((Won) 336,148) from Royal Bank of Scotland and other various banks in connection with value added tax payments in Poland. As of March 31, 2011, the Controlling Company is providing a payment guarantee to a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR43 million ((Won)67,350 million) term loan credit facility of LG Display Poland Sp. zo.o. LG Display Poland Sp. zo.o. is provided with a payment guarantee amounting to PLN250 million ((Won)97,360 million) by Nordea Bank and others for the “Simplified Procedure” (deferral of VAT payment), and the Controlling Company provides payment guarantee to Nordea Bank and others in connection with their payment guarantee. In addition, the Controlling Company provides payment guarantees in connection with LG Display Singapore Ltd.’s and other subsidiaries’ term loan credit facilities with an aggregate amount of USD17 million ((Won)18,822 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 USD159 million ((Won)175,491 million), JPY8,000 million ((Won)106,551 million), and CNY200 million ((Won)33,776 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)5,536 million), JPY1,300 million ((Won)17,315 million), CNY1,200 million ((Won)202,656 million) and PLN250 million ((Won)97,360 million) respectively, for their local tax payments.

License agreements

As of March 31, 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.

Long-term supply agreement

In January 2009 and April and December 2010, the Controlling Company entered into long-term supply agreements with Apple, Inc. to supply LCD panels for three or five years, respectively. In connection with the agreements, the Controlling Company received advances of USD830 million ((Won)918,976 million) from Apple, Inc. in aggregate. In addition, the Controlling Company has received advance of USD250 million ((Won) 276,800 million) from Apple, Inc. in February 2011. 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)221,440 million) from Industrial Bank of Korea relating to advances received from Apple, Inc.

Pledged Assets

Regarding the line of credit up to USD50 million ((Won)55,360 million), the Controlling Company provided with part of its OLED machinery as pledged assets to the Export-Import Bank of Korea.

 

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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.

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.

 

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17. Contingencies, Continued

 

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 June 2010, the Ninth Circuit Court of Appeals denied the defendants’ petitions appealing the class certification decisions. 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. Trial is set to begin in the two class action lawsuits on February 13, 2012. In January 2011, a hearing was held regarding the Canadian direct and indirect purchasers’ motion for class certification. The court has not yet ruled on the motion.

Additionally separate claims were filed by ATS. Claim, LLC, (assignee of Ricoh Electronics, Inc.), AT&T Corp., 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. filed similar claims in the United States. 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 complaints against the Controlling Company, alleging similar antitrust violations as alleged in the MDL Proceedings.

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 defendants, including LG Display, 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.

 

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17. Contingencies, Continued

 

While the Controlling 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 Controlling Company. The Controlling Company has established provisions with respect to certain of the contingencies. However, actual liability may be materially different from the provisions estimated by the Controlling Company.

 

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 March 31, 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 three-month period ended March 31, 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 three-month period ended March 31, 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.

 

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19. Related Parties

 

  (a) Key management personnel compensation

Compensation costs of key management for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Short-term benefits

   (Won) 540         551   

Expenses related to defined benefit plan

     42         59   

Other long-term benefits

     155         145   
                 
   (Won) 737         755   
                 

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 three-month periods ended March 31, 2011 and 2010 are as follows:

 

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

Subsidiaries

   (Won) 4,463,861         5,052,295         811,279         574,433   

Joint ventures

     149,065         239,761         1,174         22,101   

Associates

     5,280         —           388,864         372,884   

LG Electronics

     1,203,070         1,562,530         64,324         68,111   

Other related parties

     10         128,890         9,693         168,571   
                                   
   (Won) 5,821,286         6,983,476         1,275,334         1,206,100   
                                   

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

 

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

Subsidiaries

   (Won) 2,912,544         3,609,801         590,139         405,814   

Joint ventures

     140,408         145,093         282,645         478,009   

Associates

     5,038         —           314,494         243,357   

LG Electronics

     500,571         634,570         104,689         138,484   

Other related parties

     —           —           3,440         3,870   
                                   
   (Won) 3,558,561         4,389,464         1,295,407         1,269,534   
                                   

 

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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 93% of total sales for the year ended March 31, 2011.

The following is a summary of sales by region based on the location of the customers for the three-month periods ended March 31, 2011 and 2010.

 

  (a) Revenue by geography

 

(In millions of won)    Revenue  

Region

   March 31, 2011      December 31, 2010  

Domestic

   (Won) 388,010         353,794   

Foreign

     

China

     3,000,178         3,143,517   

Asia (excluding China)

     597,266         580,160   

United States

     556,699         765,687   

Europe

     823,363         1,033,189   
                 

Sub total

   (Won) 4,977,506         5,522,553   
                 

Total

   (Won) 5,365,516         5,876,347   
                 

Sales to LG Electronics constituted about 22% of total revenue for the three-month period ended March 31, 2011.

 

  (b) Non-current assets by geography

 

(In millions of won)    March 31, 2011      December 31, 2010  

Region

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

Domestic

   (Won) 12,411,048         516,423         11,690,716         520,152   

Foreign

           

China

     951,466         17,190         945,864         19,105   

Others

     182,464         98         178,821         644   
                                   

Sub total

   (Won) 1,133,930         17,288         1,124,685         19,749   
                                   

Total

   (Won) 13,544,978         533,711         12,815,401         539,901   
                                   

 

  (c) Revenue by product

 

(In millions of won)              

Product

   March 31, 2011      December 31, 2010  

Panels for:

     

Notebook computers

   (Won) 997,501         1,072,217   

Desktop monitors

     1,278,460         1,387,064   

TFT-LCD televisions

     2,583,671         3,210,649   

Mobile and others

     505,884         206,417   
                 
   (Won) 5,365,516         5,876,347   
                 

 

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21. Share-Based Payment

 

  (a) The terms and conditions of share-based payment arrangement as of March 31, 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

   1 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 three-month period ended March 31, 2011 are as follows:

 

(Number of shares)    2011  

Balance at beginning of year

     110,000   

Forfeited or cancelled

     —     

Outstanding as of March 31, 2011

     110,000   

Exercisable as of March 31, 2011

     110,000   

 

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21. Share-Based Payment, Continued

 

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

 

     March 31, 2011   December 31, 2010

Risk free rate (*1)

   3.42%   2.89%

Expected term (*2)

   1.0 year   1.0 year

Expected volatility

   32.20%   35.20%

Expected dividends (*3)

   0%   0%

Fair value per share

   (Won)1,870   (Won)4,296

Total carrying amount of liabilities (*4)

   (Won)205,700,394   (Won)472,527,182

 

(*1) Risk-free rates are interest rates of Korean government bonds.
(*2) As of March 31, 2011, the remaining contractual life is 12 months and the expected term is determined as 1 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 March 31, 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)267 million as other income for the three-month period ended March 31, 2011.

 

22. Income Taxes

 

  (a) Details of Income tax expense (benefit) for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current tax expense

   (Won) 9,305        136,088   

Deferred tax expense (benefit)

     (95,678     57,019   
                

Income tax expense (benefit)

   (Won) (86,373     193,107   
                

 

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22. Income Taxes, Continued

 

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

 

     Assets      Liabilities     Total  
(In millions of won)    2011      2010      2011     2010     2011     2010  

Other accounts receivable, net

   (Won) —           —           (3,219     (5,919     (3,219     (5,919

Inventories, net

     18,089         17,942         —          —          18,089        17,942   

Available-for-sale financial assets

     2,441         2,199         (276     (6,983     2,165        (4,784

Defined benefit obligation

     3,037         3,829         —          —          3,037        3,829   

Investments in equity accounted investees

     8,471         12,041         —          —          8,471        12,041   

Derivative instruments

     —           —           (168     (2,008     (168     (2,008

Accrued expense

     66,645         78,396         —          —          66,645        78,396   

Property, plant and equipment

     111,334         112,286         —          —          111,334        112,286   

Provisions

     14,667         17,962         —          —          14,667        17,962   

Gain or loss on foreign currency

     39,590         81,075         (23,528     (61,031     16,062        20,044   

Debentures

     5,320         5,049         —          —          5,320        5,049   

Others

     27,894         24,134         (6,006     (6,006     21,888        18,128   

Tax credit carryforwards

     882,144         795,247         —          —          882,144        795,247   
                                                  

Deferred income tax assets (liabilities)

   (Won) 1,179,632         1,150,160         (33,197     (81,947     1,146,435        1,068,213   
                                                  

Statutory tax rate applicable to the Controlling Company is 24.2% for the three-month period ended March 31, 2011. In accordance with the revised Corporate Income Tax Law, 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 three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In won and No. of shares)    2011     2010  

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

   (Won) (115,189,230,246     649,066,027,139   

Weighted-average number of common shares outstanding

     357,815,700        357,815,700   
                

Earnings (loss) per share

   (Won) (322     1,814   
                

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

 

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23. Earnings (loss) Per Share, Continued

 

  (b) There is no effect of dilutive potential ordinary shares due to net loss for the three-month period ended March 31, 2011. Diluted earnings per share for the three-month period ended March 31, 2010 was as follows:

 

(In won and No. of shares)    2010  

Net income

   (Won) 649,066,027,139   

Interest on convertible bond, net of tax

     (13,059,178,980

Adjusted income

     636,006,848,159   

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

     367,138,860   
        

Diluted earnings per share

   (Won) 1,732   
        

 

(*) Weighted-average number of common shares outstanding for the three-month period ended March 31, 2010 is calculated as follows:

 

(Number of shares)    2010  

Weighted-average number of common shares (basic)

     357,815,700   

Effect of conversion of convertible bonds

     9,323,160   
        

Weighted-average number of common shares (diluted)

     367,138,860   
        

 

  (c) The number of dilutive potential ordinary shares outstanding for the three-month period ended March 31, 2010 is calculated as follows:

 

(Number of shares)    Convertible bonds    Convertible bonds

Common shares to be issued

   1,281,697    9,399,113

Period

   January 1, 2010

~March 31, 2010

   January 1, 2010

~March 19, 2010

Weight

   90 days / 90 days    77 days / 90 days

Weighted-average number of common shares to be issued

   1,281,697    8,041,463

 

24. Subsequent event

The Controlling Company publicly issued debentures amounting to (Won)300,000 million (maturity: 3 years, annual interest rate: 4.31%) on April, 12, 2011.

 

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LG DISPLAY CO., LTD.

Condensed Interim Financial Statements

(Unaudited)

March 31, 2011 and 2010

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  
Independent Auditors’ Review Report      80   
Condensed Statements of Financial Position      82   
Condensed Statements of Comprehensive Income      83   
Condensed Statements of Changes in Equity      84   
Condensed Statements of Cash Flows      85   
Notes to the Condensed interim Financial Statements      87   

 

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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 statement of financial position of LG Display Co., Ltd. (the “Company”) as of March 31, 2011, and the related condensed statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 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 interim financial statements and for such internal controls as management determines are necessary to enable the preparation of condensed 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 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 interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards 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.

 

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Other Considerations

We audited the statement of financial position as of December 31, 2010, and the 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 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
May 18, 2011

This report is effective as of May 18, 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.

 

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LG DISPLAY CO., LTD.

Condensed Statements of Financial Position

(Unaudited)

As of March 31, 2011 and December 31, 2010

 

(In millions of won)    Note      2011     2010  

Assets

       

Cash and cash equivalents

     9       (Won) 983,428       889,784  

Deposits in banks

     9         1,203,000       1,503,000  

Trade accounts and notes receivable, net

     9, 16         3,319,871       3,883,433  

Other accounts receivable, net

     9         192,203       301,543  

Other current financial assets

     9         53,752       34,828  

Inventories

     5         2,123,327       1,759,965  

Other current assets

        248,966       127,320  
                   

Total current assets

        8,124,547       8,499,873  

Investments

     6         1,283,625       1,279,831  

Other non-current financial assets

        63,435       64,020  

Deferred tax assets

     21         1,058,823       979,323  

Property, plant and equipment, net

     7         12,407,538       11,688,061  

Intangible assets, net

     8         479,475       483,260  

Other non-current assets

        171,781       163,630  
                   

Total non-current assets

        15,464,677       14,658,125  
                   

Total assets

      (Won) 23,589,224       23,157,998  
                   

Liabilities

       

Trade accounts and notes payable

     9       (Won) 2,935,434       2,986,383  

Current financial liabilities

     9, 10         1,947,242       1,906,112  

Other accounts payable

     9         2,879,932       2,373,083  

Accrued expenses

        311,470       374,177  

Income taxes payable

        47,193       104,044  

Provisions

        617,660       634,815  

Other current liabilities

        824,557       75,255  
                   

Total current liabilities

        9,563,488       8,453,869  

Non-current financial liabilities

     9, 10         2,430,644       2,470,667  

Non-current provisions

        7,521       8,773  

Employee benefits

     14         103,110       78,406  

Long-term advances received

     16         642,176       945,287  

Other non-current liabilities

        305,254       330,321  
                   

Total non-current liabilities

        3,488,705       3,833,454  
                   

Total liabilities

        13,052,193       12,287,323  
                   

Equity

       

Share capital

     18         1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Reserves

     18         (8,653 )     (7,795 )

Retained earnings

        6,505,492       6,838,278  
                   

Total equity

        10,537,031       10,870,675  
                   

Total liabilities and equity

      (Won) 23,589,224       23,157,998  
                   

See accompanying notes to the condensed interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Interim Statements of Comprehensive Income

(Unaudited)

For the three-month periods ended March 31, 2011 and 2010

 

(In millions of won, except earnings per share)    Note      2011     2010  

Revenue

      (Won) 5,051,751       5,840,744  

Cost of sales

        (5,000,746 )     (4,793,820 )
                   

Gross profit

        51,005       1,046,924  

Other income

     13         249,915       191,174  

Selling expenses

     12         (88,201 )     (114,708 )

Administrative expenses

     12         (112,925 )     (103,511 )

Research and development expenses

        (167,695 )     (136,568 )

Other expenses

     13         (233,803 )     (179,222 )
                   

Results from operating activities

        (301,704 )     704,089  
                   

Finance income

     15         116,783       97,207  

Finance costs

     15         (62,712 )     (43,756 )

Other non-operating income loss, net

        (3,036 )     (1,464 )
                   

Profit (loss) before income taxes

        (250,669 )     756,076  

Income tax expense (benefit)

     21         (96,319 )     157,032  
                   

Profit (loss) for the period

        (154,350 )     599,044  
                   

Other comprehensive income (loss)

       

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

        (1,100 )     19,350  

Defined benefit plan actuarial gain or loss

     14         605       (153 )

Income taxes on other comprehensive income

        109       (4,257 )
                   

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

        (386 )     14,940  
                   

Total comprehensive income (loss) for the period

      (Won) (154,736 )     613,984  
                   

Earnings (loss) per share

       

Basic earnings (loss) per share

     22       (Won) (431 )     1,674  
                   

Diluted earnings (loss) per share

     22       (Won) (431 )     1,596  
                   

See accompanying notes to the condensed interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Interim Statements of Changes in Equity

(Unaudited)

For the three-month periods ended March 31, 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

     —           —           —          599,044       599,044  

Other comprehensive income

            

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

     —           —           15,093       —          15,093  

Defined benefit plan actuarial loss

     —           —           —          (153 )     (153 )
                                          

Total other comprehensive income (loss)

     —           —           15,093       (153 )     14,940  
                                          

Total comprehensive income for the period

   (Won) —           —           15,093       598,891       613,984  
                                          

Transaction with owners, recorded directly in equity

            

Dividends to equity holders

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

Balances at March 31, 2010

   (Won) 1,789,079        2,251,113        (2,273 )     6,431,355       10,469,274  
                                          

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

     —           —           —          (154,350 )     (154,350 )

Other comprehensive income (loss)

            

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

     —           —           (858 )     —          (858 )

Defined benefit plan actuarial gain

     —           —           —          472       472  
                                          

Total other comprehensive income (loss)

     —           —           (858 )     472       (386 )
                                          

Total comprehensive income (loss) for the period

   (Won) —           —           (858 )     (153,878 )     (154,736 )
                                          

Transaction with owners, recorded directly in equity

            

Dividends to equity holders

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

Balances at March 31, 2011

   (Won) 1,789,079        2,251,113        (8,653 )     6,505,492       10,537,031  
                                          

See accompanying notes to the condensed interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Interim Statements of Cash Flows

(Unaudited)

For the three-month periods ended March 31, 2011 and 2010

 

(In millions of won)    Note      2011     2010  

Cash flows from operating activities:

       

Profit (loss) for the period

      (Won) (154,350 )     599,044  

Adjustments for:

       

Income tax expense (benefit)

     21         (96,319 )     157,032  

Depreciation

        699,300       540,367  

Amortization of intangible assets

        49,706       34,471  

Gain on foreign currency translation

        (93,553 )     (81,291 )

Loss on foreign currency translation

        66,850       55,578  

Gain on disposal of property, plant and equipment

        (158 )     (928 )

Loss on disposal of property, plant and equipment

        —          1  

Finance income

        (110,946 )     (96,812 )

Finance costs

        45,317       27,423  

Other income

        (11,610 )     (12,382 )

Other expenses

        39,934       11,635  
                   
        434,171       1,234,138  

Change in trade accounts and notes receivable

        507,936       (264,151 )

Change in other accounts receivable

        (9,468 )     16,184  

Change in other current assets

        (113,200 )     (81,308 )

Change in inventories

        (363,362 )     (102,892 )

Change in other non-current assets

        (21,559 )     (29,175 )

Change in trade accounts and notes payable

        (10,908 )     249,372  

Change in other accounts payable

        66,182       (63,112 )

Change in accrued expenses

        (80,579 )     (38,390 )

Change in other current liabilities

        17,057       19,076  

Change in long-term advances received

        281,975       —     

Change in other non-current liabilities

        —          1,611  

Change in provisions

        (35,314 )     (4,784 )

Change in defined benefit obligation

     14         (3,107 )     33,653  
                   

Cash generated from operating activities

        669,824       970,222  

Income taxes paid

        (39,924 )     (59,407 )

Interest received

        21,575       32,757  

Interest paid

        (29,140 )     (25,388 )
                   

Net cash from operating activities

      (Won) 622,335       918,184  
                   

See accompanying notes to the condensed interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Interim Statements of Cash Flows, Continued

(Unaudited)

For the three-month periods ended March 31, 2011 and 2010

 

(In millions of won)    Note      2011     2010  

Cash flows from investing activities:

       

Dividends received

      (Won) 242       729  

Proceeds from withdrawal of deposits in banks

        1,100,000       1,300,000  

Increase in deposits in banks

        (800,000 )     (800,000 )

Acquisition of investments

        (19,688 )     (38,824 )

Proceeds from disposal of investments

        1,356       —     

Acquisition of property, plant and equipment

        (949,309 )     (642,255 )

Proceeds from disposal of property, plant and equipment

        159       1,250  

Acquisition of intangible assets

        (58,707 )     (43,680 )

Grants received

        940       4  

Proceeds from settlement of derivatives

        9,843       9,600  

Acquisition of other non-current financial assets

        (25,179 )     (53 )

Proceeds from disposal of non-current financial assets

        121,649       3,422  
                   

Net cash used in investing activities

        (618,694 )     (209,807 )

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        50,649       113,082  

Repayment of short-term borrowings

        (252,728 )     (282,395 )

Issuance of debentures

        298,726       199,117  

Repayment of current portion of long-term debt

        (6,644 )     (397,800 )
                   

Net cash from (used in) financing activities

        90,003       (367,996 )
                   

Net increase in cash and cash equivalents

        93,644       340,381  

Cash and cash equivalents at January 1

        889,784       704,324  
                   

Cash and cash equivalents at March 31

      (Won) 983,428       1,044,705  
                   

See accompanying notes to the condensed interim financial statements.

 

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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 March 31, 2011, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Company’s common shares.

As of March 31, 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 March 31, 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 March 31, 2011, there are 34,262,102 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 April 15, 2011.

 

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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.

 

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5. Inventories

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

 

(In millions of won)    2011      2010  

Finished goods

   (Won) 719,017         630,374   

Work-in-process

     868,683         606,486   

Raw materials

     390,737         364,160   

Supplies

     144,890         158,945   
                 
   (Won) 2,123,327         1,759,965   
                 

For the three-month periods ended March 31, 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) 5,000,746         4,793,820   

Including: inventory write-downs (reversals)

     27,876         (9,991

 

6. Investments

 

  (a) Investments in subsidiaries

In January 2011, the Company invested (Won)14,363 million in cash for the capital increase of LG Display Nanjing Co., Ltd, which is wholly owned by the Company.

In February 2011, the Company invested (Won)3,417 million 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 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 in February 2011 by the Fund and made additional cash investment of (Won)1,908 million in March 2011. As of March 31, 2011, the Company has a 30.6% equity interest in the Fund and is committed to make investment of (Won)30,000 million in future.

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 March 31, 2011 as the recovery of the investment is no longer probable.

 

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7. Property, Plant and Equipment

For the three-month periods ended March 31, 2011 and 2010, the Company purchased property, plant and equipment of (Won)1,419,716 million and (Won)1,342,989 million, respectively. The capitalized borrowing costs and capitalization rate are (Won)4,668 million and 2.03%, and (Won)6,821 million and 2.78% for the three-month period ended March 31, 2011 and 2010, respectively. Also for the three-month periods ended March 31, 2011 and 2010, the Company disposed property, plant and equipment with carrying amounts of (Won)1 million and (Won)323 million, respectively. The Company recognized (Won)158 million as gain on disposal of property, plant and equipment for the three-month period ended March 31, 2011 (gain and loss for the three-month period ended on March 31, 2010: (Won)928 million and (Won)1 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 March 31, 2011 and December 31, 2010 are (Won)126,542 million and (Won)124,140 million respectively.

 

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 March 31, 2011 and December 31, 2010 is as follows:

 

(In millions of won)    2011      2010  

Cash and cash equivalents

   (Won) 983,428         889,784   

Trade accounts and notes receivable, net

     3,319,871         3,883,433   

Other accounts receivable, net

     192,203         301,543   

Available-for-sale financial assets

     37,436         38,132   

Financial assets at fair value through profit or loss

     8,534         8,927   

Deposits

     61,659         42,522   

Derivatives

     9,545         9,254   

Deposits in banks

     1,203,000         1,503,000   

Guarantee deposits with banks

     13         13   
                 
   (Won) 5,815,689         6,676,608   
                 

 

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

 

(In millions of won)    2011      2010  

Domestic

   (Won) 81,973         79,275   

Euro-zone countries

     373,717         713,217   

Japan

     144,861         246,753   

United States

     760,274         710,026   

China

     1,432,304         1,167,903   

Taiwan

     423,391         815,360   

Others

     103,351         150,899   
                 
   (Won) 3,319,871         3,883,433   
                 

 

  (ii) Impairment loss

The aging of trade accounts and notes receivable and the related allowance for impairment as of March 31, 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) 3,311,316         (13     3,864,433         (20

Past due 1-15 days

     4,400         —          10,833         —     

Past due 16-30 days

     2,548         —          6,098         (1

Past due 31-60 days

     786         —          228         (1

More than 60 days

     836         (2     1,865         (2
                                  
   (Won) 3,319,886         (15     3,883,457         (24
                                  

The movement in the allowance for impairment in respect of receivables during the three-month period ended March 31, 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

     (9     (9
                

Balance at the reporting date

   (Won) 15        24   
                

 

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  (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 March 31, 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) 55,360         59,385         619         619         1,239         56,908         —     

Unsecured bank loans

     2,128,727         2,164,673         1,374,727         399,187         98,002         289,726         3,031   

Unsecured bond issues

     2,110,730         2,403,541         244,810         42,160         711,732         1,404,839         —     

Financial liabilities at fair value through profit or loss

     83,069         85,330         —           —           85,330         —           —     

Trade accounts and notes payables

     2,935,434         2,935,434         2,935,434         —           —           —           —     

Other accounts payable

     2,879,932         2,879,932         2,879,932         —           —           —           —     
                                                              
   (Won) 10,193,252         10,528,295         7,435,522         441,966         896,303         1,751,473         3,031   
                                                              

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 March 31, 2011, there is no derivative designated as a cash flow hedge.

 

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  (c) Currency risk

 

  (i) Exposure to currency risk

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

 

(In millions)    2011  
     USD     JPY     TWD      PLN      EUR  

Cash and cash equivalents

     220        37,688        —           1         —     

Trade accounts and notes receivable

     2,906        6,234        —           —           2   

Other accounts receivable

     5        11        159         —           —     

Available-for-sale financial assets

     7        —          —           —           —     

Financial assets at fair value through profit or loss

     —          —          227         —           —     

Other assets denominated in foreign currencies

     59        51        —           67         —     

Trade accounts and notes payable

     (1,677     (14,568     —           —           (5

Other accounts payable

     (36     (15,895     —           —           (9

Debts

     (1,080     (57,536     —           —           —     

Bonds

     (346     (9,971     —           —           —     

Financial liabilities at fair value through profit or loss

     (75     —          —           —           —     
                                          

Gross statement of financial position exposure

     (17     (53,986     386         68         (12
                                          

Forward exchange contracts

     (260     —          —           —           —     
                                          

Net exposure

     (277     (53,986     386         68         (12
                                          

 

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(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 three-month period ended March 31, 2011 and the year ended December 31, 2010 are as follows:

 

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

USD

   (Won) 1,121.04         1,144.84       (Won) 1,107.20         1,138.90   

JPY

     13.63         12.62         13.32         13.97   

TWD

     38.31         35.86         37.57         39.08   

EUR

     1,532.38         1,584.77         1,563.48         1,513.60   

PLN

     388.16         396.61         389.44         381.77   

 

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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 March 31, 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)    March 31, 2011     December 31, 2010  
     Equity     Profit
or loss
    Equity     Profit
or loss
 

USD (5 percent weakening)

     (11,709     (11,996     9,022        8,633   

JPY (5 percent weakening)

     (27,449     (27,449     (57,236     (57,236

TWD (5 percent weakening)

     553        553        5,033        5,033   

PLN (5 percent weakening)

     1,013        1,013        1,056        1,056   

EUR (5 percent weakening)

     (695     (695     (459     (459

A strengthening of the won against the above currencies as of March 31, 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 March 31, 2011 and December 31, 2010 are as follows:

 

(In millions of won)    2011     2010  

Fixed rate instruments

    

Financial assets

   (Won) 2,198,226        2,527,662   

Financial liabilities

     (1,881,281     (1,583,522
                
   (Won) 316,945        944,140   
                

Variable rate instruments

    

Financial assets

   (Won) 65,325        67,195   

Financial liabilities

     (2,496,605     (2,792,301
                
   (Won) (2,431,280     (2,725,106
                

 

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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)646 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 March 31, 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
 

March 31, 2011

         

Variable rate instruments

   (Won) (18,563     18,563         (18,563     18,563   

December 31, 2010

         

Variable rate instruments

   (Won) (20,656     20,656         (20,656     20,656   

 

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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)    March 31, 2011      December 31, 2010  
     Carrying
amounts
     Fair
values
     Carrying
amounts
     Fair
values
 

Assets carried at fair value

           

Available-for-sale financial assets

   (Won) 37,436         37,436         38,132         38,132   

Financial assets at fair value through profit or loss

     8,534         8,534         8,927         8,927   

Forward exchange contracts

     9,545         9,545         9,254         9,254   
                                   
   (Won) 55,515         55,515         56,313         56,313   
                                   

Assets carried at amortized cost

           

Cash and cash equivalents

   (Won) 983,428         983,428         889,784         889,784   

Trade accounts and notes receivable

     3,319,871         3,319,871         3,883,433         3,883,433   

Other accounts receivable

     192,203         192,203         301,543         301,543   

Deposits in banks

     1,203,000         1,203,000         1,503,000         1,503,000   

Deposits

     61,659         61,659         42,522         42,522   

Others

     13         13         13         13   
                                   
   (Won) 5,760,174         5,760,174         6,620,295         6,620,295   
                                   

Liabilities carried at fair value

           

Financial liabilities at fair value through profit or loss

   (Won) 83,069         83,069         84,338         84,338   

Forward exchange contracts

     —           —           956         956   
                                   
   (Won) 83,069         83,069         85,294         85,294   
                                   

Liabilities carried at amortized cost

           

Secured bank loans

   (Won) 55,360         55,360         56,945         56,945   

Unsecured bank loans

     2,128,727         2,128,388         2,406,046         2,405,690   

Unsecured bond issues

     2,110,730         2,140,519         1,828,494         1,859,102   

Trade accounts and notes payable

     2,935,434         2,935,434         2,986,383         2,986,383   

Other accounts payable

     2,879,932         2,879,932         2,373,083         2,373,083   
                                   
   (Won) 10,110,183         10,139,633         9,650,951         9,681,203   
                                   

The basis for determining fair values is disclosed in note 4.

 

  (ii) Interest rates used for determining fair value

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

 

     2011     2010  

Derivatives

     3.79     3.31

Debts and bonds

     4.01     3.58

 

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9. Financial Instruments, Continued

 

 

  (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: Ÿ

 

   

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  

March 31, 2011

          

Available-for-sale financial assets

   (Won) 10,269        —           27,167         37,436   

Financial assets at fair value through profit or loss

     8,534        —           —           8,534   

Derivative financial assets

     —          9,545         —           9,545   
                                  
   (Won) 18,803        9,545         27,167         55,515   
                                  

Financial liabilities at fair value through profit or loss

     (83,069     —           —           (83,069
                                  
   (Won) (83,069     —           —           (83,069
                                  

 

(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.

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 binominal tree model considering the financial conditions of the invested companies and by discounting estimated cash flows from stock using yield rate that reflects invested companies’ credit risks.

 

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9. Financial Instruments, Continued

 

  (e) Fair values, Continued

 

Changes in Level 3 instruments are as follows:

 

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

and others
     Profit or
loss
     Other
comprehensive
income
     Transfer
to other
level
     March 31,
2011
 

Available-for-sale financial assets

   (Won) 26,085         —           —           1,082         —           27,167   

 

  (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. Management also monitors the level of dividends to ordinary shareholders.

 

(In millions of won)    March 31, 2011      December 31, 2010  

Total liabilities

   (Won) 13,052,193         12,287,323   

Total equity

     10,537,031         10,870,675   

Cash and deposits in banks (*)

     2,186,428         2,392,784   

Borrowings

     4,377,886         4,375,823   

Liabilities to equity ratio

     124%         113%   

Net borrowing to equity ratio

     21%         18%   

 

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

 

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10. Financial Liabilities

 

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

 

(In millions of won)    2011      2010  

Current

     

Short-term borrowings

   (Won) 859,770         1,092,579   

Current portion of long-term debt

     1,087,472         812,577   

Derivatives

     —           956   
                 
   (Won) 1,947,242         1,906,112   
                 

Non-current

     

Won denominated borrowings

   (Won) 18,194         19,143   

Foreign currency denominated borrowings

     418,651         738,692   

Bonds

     1,910,730         1,628,494   

Convertible bonds

     83,069         84,338   
                 
   (Won) 2,430,644         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 March 31, 2011 and December 31, 2010 are as follows:

 

(In millions of won and JPY)                     

Lender

   Annual interest rate
as of March 31, 2011 (*)
     2011      2010  

Korea Development Bank and others

           (Won) —           12,139   

Shinhan Bank and others

     3ML+1.6%         93,232         97,796   
     6ML+0.65~0.9%         459,957         545,419   

Bank of Tokyo-Mitsubishi UFJ

     3ML+1.0%         66,595         69,854   
             —           69,854   

Mizuho Bank

             —           55,574   

Bank of China

     6ML+0.65%         39,986         41,943   

Woori Bank

     5.13%         200,000         200,000   
                    

Foreign currency equivalent

        
      JPY 49,536       JPY 63,889   
                    
      (Won) 859,770         1,092,579   
                    

 

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

 

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10. Financial Liabilities, Continued

 

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

 

(In millions of won)                  

Lender

   Annual interest rate
as of  March 31, 2011
   2011     2010  

Shinhan Bank

   3-year Korean Treasury
Bond rate less 1.25%
   (Won) 15,059        16,008   

Woori Bank

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

Less current portion of long-term debt

        (3,796     (3,796
                   
      (Won) 18,194        19,143   
                   

 

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

 

(In millions of won, USD and JPY)                   

Lender

   Annual interest rate
as of March 31, 2011
    2011     2010  

The Export-Import Bank of Korea

     6ML+0.69%      (Won) 44,288        51,251   
     6ML+1.78%        55,360        56,945   

Korea Development Bank

     3ML+0.66~2.79%        261,559        271,212   

Kookmin Bank and others

     3ML+0.35~0.53%        442,880        455,560   
     6ML+0.41%        221,440        227,780   

Sumitomo Bank Ltd.

     3ML+1.80%        276,800        284,725   
                  

Foreign currency equivalent

     USD 1,080      USD 1,085   
     JPY 8,000      JPY 8,000   
                  

Less current portion of long-term debt

       (883,676     (608,781
                  
     (Won) 418,651        738,692   
                  

 

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10. Financial Liabilities, Continued

 

 

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

 

(In millions of won, JPY and USD)    Maturity      Annual interest rate
as of March 31, 2011
     2011     2010  

Local currency debentures(*)

          

Publicly issued debentures

     November 2012~ February 2016         4.77~ 5.89%       (Won) 1,400,000        1,100,000   

Privately issued debentures

     May 2011         5.30%         200,000        200,000   

Less discount on debentures

           (4,671     (3,699

Less current portion of debentures

           (200,000     (200,000
                      
         (Won) 1,395,329        1,096,301   
                      

Foreign currency debentures

          

Floating-rate bonds

     August 2012~ April 2013         3ML+1.80~ 2.40%       (Won) 520,709        538,323   
                      

Foreign currency equivalent

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

Less discount on bonds

           (5,308     (6,130
                      
         (Won) 515,401        532,193   
                      

Financial liabilities at fair value through profit or loss

          

Convertible bonds

     April 2012         Zero coupon       (Won) 83,069        84,338   
                      

Foreign currency equivalent

         USD 75      USD 74   
                      
         (Won) 83,069        84,338   
                      
         (Won) 1,993,799        1,712,832   
                      

 

(*) Principal of the local currency debentures is to be repaid at maturity and interests are paid quarterly. The Company publicly issued debentures amounting to (Won)300,000 million (maturity: 5 years, annual interest rate : 4.95%) during the three-month period ended March 31, 2011.

 

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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 non-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 March 31, 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 March 31, 2011 and December 31, 2010.

 

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10. Financial Liabilities, Continued

 

  (g) Aggregate maturities of the Company’s financial liabilities as of March 31, 2011 are as follows:

 

(In millions of won)                                   

Period

   Local currency
long-term debt
     Foreign currency
long-term debt
     Local currency
debentures
     Foreign currency
debentures
     Total  

Within 1 year

   (Won) 3,796         883,676         200,000         —           1,087,472   

1~5 year

     15,300         418,651         1,910,730         83,069         2,427,750   

Thereafter

     2,894         —           —           —           2,894   
                                            
   (Won) 21,990         1,302,327         2,110,730         83,069         3,518,116   
                                            

 

11. The Nature of Expenses

The nature of expenses for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Changes in inventories

   (Won) (363,362     (102,892

Purchase of raw material and merchandise

     3,225,748        3,332,960   

Depreciation and amortization

     749,006        574,838   

Outsourcing fee

     669,586        417,757   

Labor costs

     479,707        381,834   

Supplies and others

     259,953        198,233   

Utility expense

     122,472        95,004   

Fees and commissions

     88,569        68,512   

Shipping costs

     38,221        61,934   

After-sale service expenses

     9,535        35,458   

Others

     90,211        95,289   
                
   (Won) 5,369,646        5,158,927   
                

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

For the three-month period ended March 31, 2011, other income and other expenses contained exchange differences amounting to (Won)231,980 million and (Won)233,724 million, respectively (three-month period ended March 31, 2010 : (Won)176,056 million and (Won)168,902 million, respectively).

 

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12. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Salaries

   (Won) 34,760         28,512   

Expenses related to defined benefit plan

     4,756         5,266   

Other employee benefit

     8,061         6,287   

Shipping costs

     26,638         46,339   

Fees and commissions

     32,860         29,819   

Depreciation and amortization

     37,629         29,439   

Taxes and dues

     730         811   

Advertising

     25,232         16,796   

After-sale service expenses

     9,535         35,458   

Others

     20,925         19,492   
                 
   (Won) 201,126         218,219   
                 

 

13. Other Income and Other Expenses

 

  (a) Details of other income for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Rental income

   (Won) 940         1,034   

Foreign currency gain

     231,980         176,056   

Gain on disposal of property, plant and equipment

     158         928   

Reversal of allowance for doubtful accounts for other receivables

     9         235   

Reversal of stock compensation cost

     267         —     

Others

     16,561         12,921   
                 
   (Won) 249,915         191,174   
                 

 

  (b) Details of other expenses for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Other bad debt expenses

   (Won) 74         1,272   

Foreign currency loss

     233,724         168,902   

Loss on disposal of property, plant and equipment

     —           1   

Others

     5         9,047   
                 
   (Won) 233,803         179,222   
                 

 

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.

 

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

 

(In millions of won)    2011     2010  

Present value of partially funded defined benefit obligations

   (Won) 384,206        360,231   

Fair value of plan assets

     (281,096     (281,825
                
   (Won) 103,110        78,406   
                

 

  (b) Expenses recognized in profit and loss for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current service cost

   (Won) 26,759        21,939   

Interest cost

     4,746        3,678   

Expected return on plan assets

     (3,088     (3,236

Past service cost

     —          12,778   
                
   (Won) 28,417        35,159   
                

 

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

 

(In millions of won)    2011      2010  

Deposits with financial institutions

   (Won) 281,096         281,825   

 

  (d) Actuarial gain and loss recognized in other comprehensive income for the three-month periods ended March 31, 2011 and 2010 is as follows:

 

(In millions of won)    2011     2010  

Defined benefit plan actuarial gain or loss

   (Won) 605        (153

Income tax

     (133     —     
                

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

   (Won) 472        (153
                

 

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15. Finance income and Finance costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011      2010  

Finance income

     

Interest income

   (Won) 15,524         28,763   

Dividend income

     5,280         729   

Foreign currency gain

     95,979         67,613   

Gain on derivatives

     —           102   
                 
   (Won) 116,783         97,207   
                 

Finance costs

     

Interest expense

   (Won) 27,276         21,330   

Foreign currency loss

     19,426         16,714   

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

     393         883   

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

     1,079         4,829   

Impairment loss on Investments

     14,538         —     
                 
   (Won) 62,712         43,756   
                 

 

  (b) Finance income and costs recognized in other comprehensive income (loss) for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Loss on valuation of available-for-sale securities

   (Won) (1,100     19,350   

Tax effect

     242        (4,257
                
   (Won) (858     15,093   
                

 

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16. Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Exchange Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD1,425 million ((Won)1,577,760 million) in connection with its export sales transactions. As of March 31, 2011, the amount of accounts and notes receivable sold but not past due is zero.

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)664,320 million). The Company joined this program in April 2007. For the three-month ended March 31, 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. In addition, since August 2010, the Company has entered into an accounts receivable selling program of up to USD100 million ((Won)110,720 million) with Citibank, N.A., and, as of March 31, 2011, the amount of accounts and notes receivable sold but not past due is zero. In connection with all the contracts with Shinhan Bank and Citibank, N.A.,, the Company has sold its accounts receivable without recourse.

Letters of credit

As of March 31, 2011, the Company has agreements with Korea Exchange Bank in relation to the opening of letters of credit up to USD110 million ((Won)121,792 million), USD20 million ((Won)22,144 million) with China Construction Bank, USD210 million ((Won)232,512 million) with Shinhan Bank, JPY10,000 million ((Won)133,189 million) with Woori Bank, USD80 million ((Won)88,576 million) with Bank of China, USD104 million ((Won)115,149 million) with Hana Bank, and JPY1,893 million ((Won)25,210 million), USD60 million ((Won) 66,432 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Company receives payment guarantees amounting to USD8.5 million ((Won)9,411 million) and EUR215 million ((Won)336,148 million) from Royal Bank of Scotland and other various banks in connection with value added tax payments in Poland. As of March 31, 2011, the Company is providing a payment guarantee to a syndicate of banks including Kookmin Bank and Societe Generale in connection with a EUR43 million ((Won)67,350 million) term loan credit facility of LG Display Poland Sp. zo. o. LG Display Poland Sp. zo. o. is provided with a payment guarantee amounting to PLN250 million ((Won)97,360 million) by Nordea Bank and others for the “Simplified Procedure” (deferral of VAT payment), and the Company provides payment guarantee to Nordea Bank and others in connection with their payment guarantee. In addition, the Company provides payment guarantees in connection with LG Display Singapore Ltd.’s and other subsidiaries’ term loan credit facilities with an aggregate amount of USD17 million ((Won)18,822 million) for principals and related interests.

License agreements

As of March 31, 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.

 

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16. Commitments, Continued

 

Long-term supply agreement

In January 2009 and April and December 2010, the Company entered into long-term supply agreements with Apple, Inc. to supply LCD panels for three or five years, respectively. In connection with the agreements, the Company received advances of USD830 million ((Won)918,976 million) from Apple, Inc. in aggregate. In addition, the Company has received advance of USD250 million ((Won) 276,800 million) from Apple, Inc. in February 2011. 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)221,440 million) from Industrial Bank of Korea relating to advances received from Apple, Inc.

Pledged Assets

Regarding the line of credit up to USD50 million ((Won)55,360 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.

 

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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 June 2010, the Ninth Circuit Court of Appeals denied the defendants’ petitions appealing the class certification decisions. 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. Trial is set to begin in the two class action lawsuits on February 13, 2012. In January 2011, a hearing was held regarding the Canadian direct and indirect purchasers’ motion for class certification. The court has not yet ruled on the motion.

 

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17. Contingencies, Continued

 

Additionally separate claims were filed by ATS. Claim, LLC, (assignee of Ricoh Electronics, Inc.), AT&T Corp., 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. filed similar claims in the United States. 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 complaints against the Company, alleging similar antitrust violations as alleged in the MDL Proceedings.

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.

 

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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 March 31, 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 three-month period ended March 31, 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 three-month period ended March 31, 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.

 

19. Related Parties

 

  (a) Key management personnel compensation

Compensation costs of key management for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)              
     2011      2010  

Short-term benefits

   (Won) 540         551   

Expenses related to defined benefit plan

     42         59   

Other long-term benefits

     155         145   
                 
   (Won) 737         755   
                 

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

 

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19. Related Parties, Continued

 

 

  (b) Significant transactions with related companies

Significant transactions which occurred in the normal course of business with related companies for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

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

Subsidiaries

   (Won) 4,463,861         5,052,295         811,279         574,433   

Joint ventures

     149,065         239,761         1,174         22,101   

Associates

     5,280         —           388,864         372,884   

LG Electronics

     218,143         223,081         64,252         67,994   

Other related parties

     10         128,890         5,376         165,611   
                                   
   (Won) 4,836,359         5,644,027         1,270,945         1,203,023   
                                   

Account balances with related companies as of March 31, 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) 2,912,544         3,609,801         590,139         405,814   

Joint ventures

     140,408         145,093         282,645         478,009   

Associates

     5,038         —           314,494         243,357   

LG Electronics

     114,806         111,408         104,689         138,479   

Other related parties

     —           —           1,733         1,847   
                                   
   (Won) 3,172,796         3,866,302         1,293,700         1,267,506   
                                   

 

20. Share-Based Payment

 

  (a) The terms and conditions of share-based payment arrangement as of March 31, 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

   1 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.

 

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20. Share-Based Payment, Continued

 

(*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 three-month period ended March 31, 2011 are as follows:

 

(Number of shares)    2011  

Balance at beginning of year

     110,000   

Forfeited or cancelled

     —     

Outstanding as of March 31, 2011

     110,000   

Exercisable as of March 31, 2011

     110,000   

 

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

 

     March 31, 2011   December 31, 2010

Risk free rate (*1)

   3.42%   2.89%

Expected term (*2)

   1 year   1 year

Expected volatility

   32.20%   35.20%

Expected dividends (*3)

   0%   0%

Fair value per share

   (Won)1,870   (Won)4,296

Total carrying amount of liabilities (*4)

   (Won)205,700,394   (Won)472,527,182

 

(*1) Risk-free rates are interest rates of Korean government bonds.

 

(*2) As of March 31, 2011, the remaining contractual life is 12 months and the expected term is determined as 1 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 March 31, 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)267 million as other income for the three-month period ended March 31, 2011.

 

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21. Income Taxes

 

  (a) Details of Income tax expense (benefit) for the three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In millions of won)    2011     2010  

Current tax expense

   (Won) 574        119,405   

Deferred tax expense (benefit)

     (96,893     37,627   
                

Income tax expense (benefit)

   (Won) (96,319     157,032   
                

 

  (b) Deferred tax assets and liabilities as of March 31, 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) —           —           (3,219     (5,919     (3,219     (5,919

Inventories, net

     17,115         15,039         —          —          17,115        15,039   

Available-for-sale financial assets

     2,441         2,199         (276     (6,983     2,165        (4,784

Defined benefit obligation

     3,037         3,829         —          —          3,037        3,829   

Derivative instruments

     —           —           (168     (2,008     (168     (2,008

Accrued expense

     66,645         78,396         —          —          66,645        78,396   

Property, plant and equipment

     36,393         40,685         —          —          36,393        40,685   

Provisions

     14,667         17,962         —          —          14,667        17,962   

Gain or loss on foreign currency

     39,590         81,075         (23,528     (61,031     16,062        20,044   

Debentures

     5,320         5,049         —          —          5,320        5,049   

Others

     18,662         15,783         —          —          18,662        15,783   

Tax credit carryforwards

     882,144         795,247         —          —          882,144        795,247   
                                                  

Deferred income tax assets(liabilities)

   (Won) 1,086,014         1,055,264         (27,191     (75,941     1,058,823        979,323   
                                                  

Statutory tax rate applicable to the Company is 24.2% for the three-month period ended March 31, 2011. In accordance with the revised Corporate Income Tax Law, 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 three-month periods ended March 31, 2011 and 2010 are as follows:

 

(In won, and No. of shares)    2011     2010  

Net income (loss)

   (Won) (154,350,084,341     599,044,474,412   

Weighted-average number of common shares outstanding

     357,815,700        357,815,700   
                

Earnings (loss) per share

   (Won) (431     1,674   
                

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

 

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22. Earnings (loss) Per Share, Continued

 

 

  (b) There is no effect of dilutive potential ordinary shares due to net loss for the three-month period ended March 31, 2011. Diluted earnings per share for the three-month period ended March 31, 2010 was as follows:

 

(In won and No. of shares)    2010  

Net income

   (Won) 599,044,474,412   

Interest on convertible bond, net of tax

     (13,059,178,980

Adjusted income

     585,985,295,432   

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

     367,138,860   
        

Diluted earnings per share

   (Won) 1,596   
        

 

(*) Weighted-average number of common shares outstanding for the three-month period ended March 31, 2010 is calculated as follows:

 

(Number of shares)    2010  

Weighted-average number of common shares (basic)

     357,815,700   

Effect of conversion of convertible bonds

     9,323,160   
        

Weighted-average number of common shares (diluted)

     367,138,860   
        

 

  (c) The number of dilutive potential ordinary shares outstanding for the three-month period ended March 31 2010 is calculated as follows:

 

(Number of shares)    Convertible bonds    Convertible bonds

Common shares to be issued

   1,281,697    9,399,113

Period

   January 1, 2010~March 31, 2010    January 1, 2010~March 19, 2010

Weight

   90 days / 90 days    77 days / 90 days

Weighted-average number of common shares to be issued

   1,281,697    8,041,463

 

23. Subsequent event

The Company publicly issued debentures amounting to (Won)300,000 million (maturity: 3 years, annual interest rate: 4.31%) on April, 12, 2011.

 

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SIGNATURES

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

 

  LG Display Co., Ltd.
  (Registrant)
Date: May 24 2011   By:  

/s/ Heeyeon Kim

    (Signature)
  Name:   Heeyeon Kim
  Title:   Senior Manager/IR Department

 

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