Form 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2018

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

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

(Address of principal executive offices)

 

 

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

Form 20-F  ☒        Form 40-F  ☐

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

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

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

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

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

Yes  ☐        No  ☒

 

 

 


Table of Contents

SEMI-ANNUAL REPORT

(From January 1, 2018 to June 30, 2018)

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

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED AND CERTAIN NUMBERS WERE ROUNDED FOR THE CONVENIENCE OF READERS. REFERENCES TO “Q1”, “Q2”, “Q3” AND “Q4” OF A FISCAL YEAR ARE REFERENCES TO THE THREE-MONTH PERIODS ENDED MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31, RESPECTIVELY, OF SUCH FISCAL YEAR. REFERENCES TO “H1” OF A FISCAL YEAR ARE REFERENCES TO THE SIX-MONTH PERIOD ENDED JUNE 30 OF SUCH FISCAL YEAR.

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

Contents

 

1.

 

Company

   4
  A.   

Name and contact information

   4
  B.   

Domestic credit rating

   4
  C.   

Capitalization

   6
  D.   

Voting rights

   6
  E.   

Dividends

   6

2.

 

Business

   7
  A.   

Business overview

   7
  B.   

Industry

   7
  C.   

New businesses

   9

3.

 

Major Products and Raw Materials

   9
  A.   

Major products

   9
  B.   

Average selling price trend of major products

   10
  C.   

Major raw materials

   10

4.

 

Production and Equipment

   11
  A.   

Production capacity and output

   11
  B.   

Production performance and utilization ratio

   11
  C.   

Investment plan

   11

5.

 

Sales

   12
  A.   

Sales performance

   12
  B.   

Sales route and sales method

   12

6.

 

Market Risks and Risk Management

   13
  A.   

Market risks

   13
  B.   

Risk management

   14

7.

 

Derivative Contracts

   14
  A.   

Currency risks

   14
  B.   

Interest rate risks

   14

 

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Table of Contents

8.

  Major Contracts    15

9.

  Research & Development    15
 

A.

   Summary of R&D-related expenditures    15
 

B.

   R&D achievements    15

10.

  Intellectual Property    18

11.

  Environmental and Safety Matters    18

12.

  Financial Information    21
 

A.

   Financial highlights (Based on consolidated K-IFRS)    21
 

B.

   Financial highlights (Based on separate K-IFRS)    22
 

C.

   Consolidated subsidiaries    23
 

D.

   Status of equity investment    23

13.

  Audit Information    24
 

A.

   Audit service    24
 

B.

   Non-audit service    24

14.

  Board of Directors    24
 

A.

   Members of the board of directors    24
 

B.

   Committees of the board of directors    25
 

C.

   Independence of directors    25

15.

  Information Regarding Shares    26
 

A.

   Total number of shares    26
 

B.

   Shareholder list    26

16.

  Directors and Employees    26
 

A.

   Directors    26
 

B.

   Employees    32

17.

  Other Matters    33
 

A.

   Material Events Subsequent to the Reporting Period    33

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

 

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Table of Contents
1.

Company

 

  A.

Name and contact information

The name of our company is “EL-GI DISPLAY CHUSIK HOESA,” which shall be “LG Display Co., Ltd.” in English.

Our principal executive office is located at LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 07336, Republic of Korea, and our telephone number is +82-2-3777-1010. Our website address is http://www.lgdisplay.com.

 

  B.

Domestic credit rating

 

  (1)

Corporate bonds

 

Subject instrument

  

Month of rating

   Credit rating(1)   

Rating agency (Rating range)

Corporate bonds

   June 2016    AA    NICE Information Service Co., Ltd. (AAA ~ D)
   September 2016
   May 2017
   February 2018
   May 2018
   April 2016    AA
  

Korea Investors Service, Inc. (AAA ~ D)

   May 2017
   October 2017
   May 2018
   April 2016    AA    Korea Ratings Corporation (AAA ~ D)
   September 2016
   May 2017
   October 2017
   February 2018
   April 2018

 

(1)

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

 

Subject instrument

  

Credit rating

  

Definition

Corporate bonds

   AAA    Strongest capacity for timely repayment.
   AA+/AA/AA-    Very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category
   A+/A/A-    Strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories.
   BBB+/BBB/BBB-    Capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity.
   BB+/BB/BB-    Capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time.
   B+/B/B-    Lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain.
   CCC    Lack of capacity for even current repayment and high risk of default.
   CC    Greater uncertainties than higher ratings.
   C    High credit risk and lack of capacity for timely repayment.
   D    Insolvency.

 

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  (2)

Commercial paper

 

Subject instrument

  

Month of rating

   Credit rating(1)   

Rating agency (Rating range)

Commercial paper

   June 2016    A1    Korea Ratings Corporation (A1 ~ D)
   June 2016    A1    NICE Information Service Co., Ltd. (A1 ~ D)
   September 2016    A1    NICE Information Service Co., Ltd. (A1 ~ D)
   September 2016    A1    Korea Ratings Corporation (A1 ~ D)
   May 2017    A1    Korea Investors Service, Inc. (A1 ~ D)
   May 2017    A1    Korea Ratings Corporation (A1 ~ D)
   October 2017    A1    Korea Investors Service, Inc. (A1 ~ D)
   December 2017    A1    Korea Ratings Corporation (A1 ~ D)
   May 2018    A1    Korea Investors Service, Inc. (A1 ~ D)
   May 2018    A1    NICE Information Service Co., Ltd. (A1 ~ D)

 

(1)

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

 

Subject instrument

  

Credit rating

  

Definition

Commercial paper

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

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

 

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  C.

Capitalization

 

  (1)

Change in capital stock (as of June 30, 2018)

There were no changes to our issued capital stock during the reporting period ended June 30, 2018.

 

  (2)

Convertible bonds

Not applicable.

 

  D.

Voting rights (as of June 30, 2018)

 

         (Unit: share)  

Description

       Number of shares  

A. Total number of shares issued(1):

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

B. Shares without voting rights:

   Common shares     —    
   Preferred shares     —    

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

   Common shares     —    
   Preferred shares     —    

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

   Common shares     —    
   Preferred shares     —    

E. Shares with restored voting rights:

   Common shares     —    
   Preferred shares     —    
    

 

 

 

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

   Common shares     357,815,700  
    

 

 

 
   Preferred shares     —    
    

 

 

 

 

(1)

Authorized: 500,000,000 shares

 

  E.

Dividends

Dividends for the three most recent fiscal years

 

Description (unit)

          2018 H1      2017     2016  

Par value (Won)

        5,000        5,000       5,000  

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

        (356,839      1,802,756       906,713  

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

        (997      5,038       2,534  
     

 

 

    

 

 

   

 

 

 

Total cash dividend amount for the period (million Won)

        —          178,908       178,908  
     

 

 

    

 

 

   

 

 

 

Total stock dividend amount for the period (million Won)

        —          —         —    
     

 

 

    

 

 

   

 

 

 

Cash dividend payout ratio (%)(3)

        —          9.92     19.73

Cash dividend yield (%)(4)

     Common shares        —          1.69     1.58
     Preferred shares        —          —         —    

Stock dividend yield (%)

     Common shares        —          —         —    
     Preferred shares        —          —         —    

Cash dividend per share (Won)

     Common shares        —          500       500  
     Preferred shares        —          —         —    

Stock dividend per share (share)

     Common shares        —          —         —    
     Preferred shares        —          —         —    

 

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(1)

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

(2)

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

(3)

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

(4)

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

 

2.

Business

 

  A.

Business overview

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

As of June 30, 2018, in order to support our business activities, we operated TFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.

As of June 30, 2018, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

2018 H1 consolidated operating results highlights

 

     (Unit: In billions of Won)  

2018 H1

   Display business  

Sales Revenue

     11,286  

Gross Profit

     1,009  

Operating Profit (loss)

     (326

Total Assets

     31,444  

Total Liabilities

     16,911  

 

  B.

Industry

 

  (1)

Industry characteristics

 

   

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

 

   

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

 

  (2)

Growth Potential

 

   

We are focusing on securing profitability through differentiated products such as Crystal Sound OLED and Wallpapers, pursuant to our strategic plan to transition into the OLED business, which has strong future growth potential. In the television sector, we are expanding our premium products such as OLED and UHD products. In addition, we are continuing to secure additional production capacity of 8.5th generation OLED television displays and are planning to further strengthen the fundamentals of our OLED business through a successful line-up of new products and investments in the 8.5th and 10.5th generation OLED. In the IT sector, we are expanding the proportion of premium products such as high resolution and wide screen products, based on IPS and Oxide technologies. In the mobile sector, we are continuously striving to secure mass production capabilities for 6th generation OLED smartphones through additional investments. We are also strengthening the foundation for the expansion of small- and medium-sized OLED business.

 

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  (3)

Cyclicality

 

   

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

 

   

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

 

  (4)

Market conditions

 

   

Most display panel manufacturers are located in Asia as set forth below. There is a concern over continued increases in the structural oversupply of the LCD industry led by continued investments in new fabrication facilities and additional supplies by Chinese panel manufacturers, which have been driven by the Chinese government.

 

  a.

Korea: LG Display, Samsung Display, etc.

 

  b.

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

 

  c.

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

 

  d.

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

 

   

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

 

     2018 H1     2017     2016  

Panels for Televisions(1)(2)

     28.1     28.1     28.2

Panels for Monitors(1)

     34.5     36.3     36.6

Panels for Notebook Computers(1)

     23.5     21.3     27.8

Panels for Tablet Computers(1)

     30.8     29.1     24.1
  

 

 

   

 

 

   

 

 

 

Total(1)

     29.7     29.2     29.4
  

 

 

   

 

 

   

 

 

 

 

(1)

Source: Large-Area Display Market Tracker (IHS Technology). The relevant amounts for the second quarter of 2018 are estimates only, as the actual results for such period are not yet released.

(2)

Includes panels for public displays.

 

  (5)

Competitiveness

 

   

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

 

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

 

   

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

 

   

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

 

   

As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing various technologies and products, including display panels with OLED, IPS, in-TOUCH and other technologies. With respect to OLED panels, following our supply of the world’s first 55-inch OLED 3D panels for televisions in January 2013, we have supplied ultra-high definition (“Ultra HD” or “UHD”) OLED panels as well as “Wallpaper” and “Crystal Sound” OLED panels for televisions, flexible plastic OLED panels for smartphones, round OLED panels for wearable devices among others and have shown that we are technologically a step ahead of the competition. With respect to TFT-LCD panels, we are leading the market with our differentiated products with IPS technology, such as our ultra-large and high definition UHD television panels and 21:9 screen aspect ratio ultra-wide IPS curved monitors, and have prepared our production facilities to produce products with in-TOUCH technology.

 

   

Moreover, we entered into long-term sales contracts with major global firms to secure customers and expand partnerships for technology development.

 

  C.

New businesses

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

 

3.

Major Products and Raw Materials

 

  A.

Major products

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

 

               (Unit: In billions of Won, except percentages)
                               2018 H1  

Business area

  

Sales type

   Items (By product)      Usage      Major
trademark
     Sales
Revenue
     Percentages  

Display

   Goods/ Products/ Services/ Other sales      Televisions       
Panels for
televisions
 
 
     LG Display        4,745        42.0
    
Desktop
monitors
 
 
    
Panels for
monitors
 
 
     LG Display        1,919        17.0
    
Tablet
products
 
 
    
Panels for
tablets
 
 
     LG Display        888        7.9
    
Notebook
computers
 
 
    

Panels for
notebook
computers
 
 
 
     LG Display        1,219        10.8
    
Mobile,
etc.
 
 
    

Panels for
smartphones,
etc.
 
 
 
     LG Display        2,515        22.3
              

 

 

    

 

 

 

Total

                 11,286        100.0
              

 

 

    

 

 

 

 

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  B.

Average selling price trend of major products

While average selling prices of LCD panels exhibited varying trends according to demand by product category, the average selling price of LCD panels per square meter of net display area shipped in the second quarter of 2018 decreased by approximately 4% compared to the first quarter of 2018 due to a continued decline in the overall average selling prices of our panels. There is no assurance that the average selling prices of LCD panels will not fluctuate in the future due to changes in market conditions.

 

Period

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

2018 Q2

   501

2018 Q1

   522

2017 Q4

   589

2017 Q3

   600

2017 Q2

   574

2017 Q1

   608

2016 Q4

   642

2016 Q3

   555

2016 Q2

   504

2016 Q1

   525

 

(1)

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

(2)

Excludes semi-finished products in the cell process.

 

  C.

Major raw materials

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

 

                 (Unit: In billions of Won, except percentages)  

Business area

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

Display

     Raw materials      Backlights     
Display panel
manufacturing
 
 
     1,098        17.7     HeeSung Electronics, etc.  
   Polarizers      1,032        16.7     LG Chem, etc.  
   Printed

circuit boards

     775        12.5     Korea SMT, etc.  
   Glass      621        10.0    


Paju Electric Glass Co.,
Ltd.,

Asahi Electric Glass Co.,
Ltd.

 
 

 
 

   Others      2,674        43.1     —    
           

 

 

    

 

 

   

Total

              6,200        100.0  
           

 

 

    

 

 

   

- Period: January 1, 2018 ~ June 30, 2018.

(1)

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

(2)

Among major suppliers, LG Chem is a member company of the LG Group and Paju Electric Glass Co., Ltd. is our affiliate.

 

   

The average price of EGI (Electrolytic Galvanized Iron), the main raw material for BLU components, increased by 24% from 2016 to 2017 but decreased by 0.3% from 2017 to the second quarter 2018 due to seasonal influences. The average price of resin increased by 18% from 2016 to 2017 and further increased by 34% from 2017 to the second quarter of 2018 due to the rise in petroleum prices. The average price of copper, the main raw material for PCB components, increased by 27% from 2016 to 2017 and increased by 12% from 2017 to the second quarter of 2018 due to the impact of global supply and demand conditions.

 

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4.

Production and Equipment

 

  A.

Production capacity and output

 

  (1)

Production capacity

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

 

                   (Unit: 1,000 glass sheets)  

Business area

   Items      Location of facilities      2018 H1(1)      2017(2)      2016(2)  

Display

     Display panel        Gumi, Paju, Guangzhou        4,892        10,538        9,906  

 

(1)

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

(2)

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

 

  (2)

Production output

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

 

               (Unit: 1,000 glass sheets)  

Business area

   Items    Location of facilities    2018 H1      2017      2016  

Display

   Display panel    Gumi, Paju, Guangzhou      4,581        9,262        8,996  

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

 

  B.

Production performance and utilization ratio

 

          (Unit: Hours, except percentages)

Production facilities

   Available working hours
in 2018 H1
   Actual working hours
in 2018 H1
   Average utilization ratio

Gumi

   4,344(1)
(181 days)(2)
   4,344(1)
(181 days)(2)
   100.0%

Paju

   4,344(1)
(181 days)(2)
   4,344(1)
(181 days)(2)
   100.0%

Guangzhou

   4,344(1)
(181 days)(2)
   4,344(1)
(181 days)(2)
   100.0%

 

(1)

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

(2)

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

 

  C.

Investment plan

In 2017, our total capital expenditures on a cash out basis was W6.6 trillion. In 2018, we plan to continue capital expenditures to invest in new OLED and oxide technologies and respond to increases in demand for large-sized panels.

 

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5.

Sales

 

  A.

Sales performance

 

               (Unit: In billions of Won)  

Business area

   Sales types    Items (Market)    2018 H1      2017      2016  

Display

   Products    Display panel    Overseas(1)      10,401        25,763        24,648  
   Korea(1)      866        1,982        1,815  
     

 

 

    

 

 

    

 

 

 
   Total      11,266        27,745        26,464  
           

 

 

    

 

 

    

 

 

 
   Royalty    LCD, OLED
technology
patent
   Overseas(1)      10        20        17  
   Korea(1)      —          —          —    
     

 

 

    

 

 

    

 

 

 
   Total      10        20        17  
           

 

 

    

 

 

    

 

 

 
   Others    Raw materials,
components,
etc.
   Overseas(1)      5        11        14  
   Korea(1)      6        14        10  
     

 

 

    

 

 

    

 

 

 
   Total      11        25        23  
           

 

 

    

 

 

    

 

 

 
         Overseas(1)      10,415        25,794        24,679  
      Total    Korea(1)      871        1,996        1,825  
           

 

 

    

 

 

    

 

 

 
         Total      11,286        27,790        26,504  
           

 

 

    

 

 

    

 

 

 

 

(1)

Based on ship-to-party.

(2)

Sales for 2017 and 2016 were recorded based on previously applicable accounting standards of K-IFRS 1018, “Revenue.”

 

  B.

Sales organization and sales route

 

   

As of June 30, 2018, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions.

 

   

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

 

   

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

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

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

 

   

Sales performance by sales route

 

Sales Performance

  

Sales route

   Ratio  
Overseas    Overseas subsidiaries      92.8
   Headquarters      7.2
   Total      100.0
Korea    Overseas subsidiaries      2.1
   Headquarters      97.9
   Total      100.0

 

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  (1)

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.

 

  (2)

Sales strategy

 

   

As part of our sales strategy, we have secured stable sales to major personal computer manufacturers and leading consumer electronics manufacturers globally, led the television market with our OLED and other market leading television panels, increased the proportion of sales of our differentiated television panels, such as our Ultra HD and large television panels, in our product mix and strengthened sales of high-resolution, IPS, narrow bezel and other high-end display panels in the monitor, notebook computer and tablet markets.

 

   

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

 

  (3)

Major customers

 

   

Customers “A” and “B” each accounted for more than 10% of our sales revenue for the first half of 2018, and our sales revenue derived from our top ten customers comprised 77% of our total sales revenue.

 

  (4)

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

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

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

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

 

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

 

  B.

Risk management

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

 

7.

Derivative Contracts

 

  A.

Currency risks

 

   

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

 

   

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

 

   

In respect of other monetary assets and liabilities denominated in foreign currencies, we ensure that our net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to address short-term imbalances.

 

   

As of June 30, 2018, we had no outstanding amounts to be settled under any foreign currency derivative instruments.

 

  B.

Interest rate risks

 

   

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

 

   

As of June 30, 2018, we have entered into an aggregate of W350 billion in interest rate swap agreements with Shinhan Bank and NongHyup Bank, for which we have not applied hedge accounting.

We recognized a loss on valuation of derivative instruments in the amount of W501 million with respect to interest rate derivative instruments held as of June 30, 2018.

 

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8.

Major contracts

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

 

Type of agreement

  

Name of party

  

Term

  

Content

Technology licensing agreement

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

January 2015 ~

December 2022

   Patent cross-licensing of OLED related technology

 

9.

Research & Development

 

  A.

Summary of R&D-related expenditures

 

   (Unit: In millions of Won, except percentages)

 

Items(1)

   2018 H1     2017     2016  

Material Cost

     281,377       646,622       677,423  

Labor Cost

     370,280       668,429       479,650  

Depreciation Expense

     200,284       298,383       136,826  

Others

     169,912       298,256       129,348  
     

 

 

   

 

 

   

 

 

 

Total R&D-Related Expenditures

     1,021,853       1,911,690       1,423,247  
     

 

 

   

 

 

   

 

 

 
   Selling & Administrative Expenses      436,918       917,645       880,794  

Accounting Treatment(2)

   Manufacturing Cost      385,886       786,494       220,165  
   Development Cost (Intangible Assets)      199,049       207,551       322,288  
     

 

 

   

 

 

   

 

 

 

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

     9.1     6.9     5.4
     

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

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

 

  B.

R&D achievements

Achievements in 2016

 

  (1)

Developed the world’s narrowest, at the time, bezel videowall product (55-inch/49-inch FHD, bezel to bezel 1.8mm)

 

   

Delivered 0.9mm even bezel, four-sided borderless product (bezel to bezel 1.8mm)

 

  (2)

Developed the world’s first ultra-stretch format display product (86-inch, 58:9 screen aspect ratio)

 

   

Developed new display panel size and screen aspect ratio (86-inch, 58:9 screen aspect ratio)

 

   

Applied next-generation stain (per pixel) offset technology

 

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  (3)

Developed the world’s first ultra-large display product utilizing data single bank and GIP technology (86-inch Ultra HD)

 

   

Achieved cost-competitiveness by developing world’s first ultra-large display product utilizing data single bank and GIP technology

 

  (4)

Developed the world’s first in-TOUCH monitor product (23-inch)

 

   

Improved touch functionality and strengthened cost-competitiveness by applying the world’s first in-TOUCH technology to monitor display products

 

   

Simplified customer software configuration management by providing touch total solution

 

  (5)

Developed ultra-slim OLED television display product applying high dynamic range (65-inch, 800 nit luminance, 2.52 mm module thickness)

 

   

Applied high dynamic range (HDR) technology to achieve 800 nit peak luminance and improved display quality

 

   

Achieved module thickness of 2.52mm (without back cover) and 5.92mm (with back cover)

 

  (6)

Developed combined 5.3-inch QHD in-TOUCH + 3D cover glass product for LG Electronics

 

   

Developed world class smartphone product (G5) through collaboration with other LG Group companies

 

   

Strengthened competitiveness of design by achieving processability and productivity for 0.4t 3D cover glass

 

   

Improved power consumption of AoD Mode from Self Font Generation technology and operation optimization

 

  (7)

Developed the world’s first large-scale outdoor high luminance 3000 nit product (75-inch Ultra HD)

 

   

Developed the world’s first large-scale outdoor 75-inch Ultra HD, high luminance 3000 nit product

 

   

Achieved cost competitiveness and power consumption reduction through utilization of high transmittance M+ panel

 

  (8)

Developed the world’s first FHD/Ultra HD multi-input Interactive Whiteboard product (75-inch Ultra HD)

 

   

Strengthened product competitiveness through delivery of customer FHD/Ultra HD selective input functionality

 

  (9)

Developed 4.9mm depth Art Slim2 Ultra HD television (55-inch/65-inch Ultra HD)

 

   

Strengthened design competitiveness through delivery of ultra-slim product with application of Glass Light Guide Plate

 

  (10)

Developed the world’s largest 21:9 screen aspect ratio curved monitor (37.5-inch UltraWide Quad HD (“WQHD”)+)

 

   

Continued pioneering of the market with the world’s largest 21:9 screen aspect ratio IPS curved monitor lineup (37.5-inch, 2300R curvature radius, 44mm curvature depth)

 

   

Established flagship line through application of new high definition technology (WQHD+, 3840 x 1600 resolution)

 

   

Improved panel transmittance and backlight bleeding through our first-time application of a Super-IPS COT panel structure to monitor models

 

  (11)

Developed the world’s first in-TOUCH GIP/DRD notebook product (15.6-inch FHD)

 

   

Strengthened competitiveness through application of GIP/DRD technology to FHD-quality notebook in-TOUCH products

 

  (12)

Developed a transparent 32-inch FHD product

 

   

Achieved high transmittance of transparent panel through application of RGBW(M+) panel technology

 

  (13)

Developed the world’s first Light Absorption Polarizer (“LAP”) product (65-inch/60-inch Ultra HD)

 

   

Developed differentiated wide color gamut solution

 

  (14)

Developed the world’s first UHD DRD product (50-inch UHD)

 

   

Utilized UHD RGBW(M+) pixel structure-based DRD technology to strengthen product competitiveness and optimize picture quality (high definition, high luminance, low energy consumption and HDR)

 

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  (15)

Developed a 5.7-inch QHD flexible display product

 

   

Developed a flexible display smartphone product through collaboration with other LG Group companies

 

   

Reduced the lower bezel size by 0.59mm and improved power consumption by applying VESA Display Stream Compression 1.1

 

  (16)

Developed the world’s first wallpaper OLED television product (65-inch Ultra HD)

 

   

Achieved an ultra-slim wallpaper-style design that completely sticks to walls (65-inch, 3.9 mm hindmost thickness, 7.4 kg)

 

   

Achieved long-distance signal and power transmission technology for the separation of the driver circuit

Achievements in 2017

 

  (1)

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

 

   

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

 

   

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

 

  (2)

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

 

   

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

 

   

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

 

  (3)

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

 

   

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

 

   

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

 

  (4)

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

 

   

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

 

   

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

 

  (5)

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

 

   

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

 

   

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

 

   

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

 

  (6)

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

 

   

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

 

   

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

 

   

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

 

  (7)

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

 

   

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

 

   

Guaranteed the first 1000hr reliability in the automotive industry

 

  (8)

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

 

   

Strengthened competitiveness through application of smart (digital) stepper

 

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  (9)

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

 

   

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

 

  (10)

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

 

   

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

Achievements in 2018

 

  (1)

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

 

   

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

 

   

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

 

  (2)

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

 

   

Developed our first Ultra HD mobile product

 

   

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

 

  (3)

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

 

   

Our first product applying camera notch concept technology

 

  (4)

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

 

   

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

 

   

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

 

   

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

 

  (5)

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

 

   

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

 

   

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

 

   

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

 

  (6)

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

 

   

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

 

   

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

 

10.

Intellectual Property

As of June 30, 2018, our cumulative patent portfolio (including patents that have already expired) included a total of 35,966 patents, consisting of 16,720 in Korea and 19,246 in other countries.

 

11.

Environmental and Safety Matters

We are subject to a variety of environmental laws and regulations, and we may be subject to fines or restrictions that could cause our operations to be interrupted. Our manufacturing processes generate worksite waste, including water and air pollutants, at various stages in the manufacturing process, and we are subject to relevant laws and regulations in each area of the environment, including with respect to the treatment of chemical by-products. We have installed various types of anti-pollution equipment, consistent with environmental standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations.

 

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

In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2017 to the Korean government in March 2018 after it was certified by BSI Korea, a government-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:

 

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

Category

   2017      2016      2015  

Greenhouse gases

     6,303        5,851        7,348  

Energy

     63,451        60,423        60,146  

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

In addition, in August 2014, GP1, our newest eighth-generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO 14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we have been certified by the Ministry of Environment as a “Green Company” for P1 and our Gumi module production plant since 1997, P2 and P3 since 2006 and P4, P5 and P6 since 2008. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minister of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry & Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued water conservation activities (reuse system investments, etc.) and greenhouse gas emission reduction activities (process gas and energy reduction, etc.), we attained the highest level, Leadership A, and received the grand prize award at the CDP Water Korea Best Awards in 2016 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee. We also attained a Leadership A in the climate change information technology sector and received a carbon management honors award. Our continued efforts to reduce greenhouse gas emissions was recognized again in 2017 by becoming the only domestic information technology company to attain the Leadership A level and again receiving carbon management honors by ranking in the top five among all eligible companies. In May 2017, we were awarded a commendation from the Minister of Environment for having scored the highest grade among companies in the low- and medium-volume pollutant emitters category that had entered into voluntary agreements with the Metropolitan Air Quality Management Office, in recognition of having successfully met our voluntary targets for reduction of air pollutants as well as our overall efforts to enhance our relevant facilities and operational systems. In addition, in recognition of efficient control, management and operating systems implemented in our manufacturing facilities, we received the top-level certification, Level 1, in 2017 under the Factory Energy Management System evaluation presided by the Korea Energy Agency. Furthermore, in November 2017, we received the highest commendation, the Presidential Award, in the Korean Energy Efficiency Awards presided by the Ministry of Industry, Trade and Energy in recognition of our energy management practices and energy saving measures, and we also obtained a certificate of excellence in the Energy Management System Evaluation.

 

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

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

In December 2016, we were assessed a fine of W0.2 million, which we subsequently paid, for failure to meet certain reporting obligations under the Industrial Safety and Health Act. To prevent such violations from occurring again, we have strengthened our monitoring process and management and employee education training initiatives.

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

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

In January 2018, we were audited by the Ministry of Employment and Labor in connection with the occurrence of another safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W14.4 million. Relevant authorities are currently conducting further investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

 

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

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

In April 2018, we were assessed a fine of W0.24 million by Yeongdeungpo-gu Office for our failure to keep one of our rescue vehicles current with its statutory inspection requirements, which we subsequently paid. In order to prevent recurrence, we are continually monitoring the compliance of inspection requirements for our vehicles.

 

12.

Financial Information

 

  A.

Financial highlights (Based on consolidated K-IFRS). Figures for 2016 and 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”

 

     (Unit: In millions of Won)  

Description

   As of June 30, 2018      As of December 31, 2017      As of December 31, 2016  

Current assets

     9,716,846        10,473,703        10,484,186  

Quick assets

     7,286,539        8,123,619        8,196,401  

Inventories

     2,430,307        2,350,084        2,287,785  

Non-current assets

     21,727,365        18,685,984        14,400,150  

Investments in equity accounted investees

     131,496        122,507        172,683  

Property, plant and equipment, net

     19,032,682        16,201,960        12,031,449  

Intangible assets

     946,426        912,821        894,937  

Other non-current assets

     1,616,761        1,448,696        1,301,081  

Total assets

     31,444,211        29,159,687        24,884,336  

Current liabilities

     9,768,584        8,978,682        7,058,219  

Non-current liabilities

     7,142,779        5,199,495        4,363,729  

Total liabilities

     16,911,363        14,178,177        11,421,948  

Share capital

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

Share premium

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

Retained earnings

     10,078,081        10,621,571        9,004,283  

Other equity

     (169,686      (288,280      (88,478

Non-controlling interest

     584,261        608,027        506,391  
  

 

 

    

 

 

    

 

 

 

Total equity

     14,532,848        14,981,510        13,462,388  
  

 

 

    

 

 

    

 

 

 

 

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

Description

   For the six months ended
June 30, 2018
     For the year ended
December 31, 2017
     For the year ended
December 31, 2016
 

Revenue

     11,286,412        27,790,216        26,504,074  

Operating profit (loss)

     (326,431      2,461,618        1,311,416  

Operating profit (loss) from continuing operations

     (349,525      1,937,052        931,508  

Profit (loss) for the period

     (349,525      1,937,052        931,508  

Profit (loss) attributable to:

        

Owners of the Company

     (356,839      1,802,756        906,713  

Non-controlling interest

     7,314        134,296        24,795  

Basic earnings (loss) per share

     (997      5,038        2,534  

Diluted earnings (loss) per share

     (997      5,038        2,534  

Number of consolidated entities

     21        20        19  

 

  B.

Financial highlights (Based on separate K-IFRS). Figures for 2016 and 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”

 

     (Unit: In millions of Won)  

Description

   As of June 30, 2018      As of December 31, 2017      As of December 31, 2016  

Current assets

     7,080,194        8,381,074        8,712,575  

Quick assets

     5,340,103        6,698,829        7,005,592  

Inventories

     1,740,091        1,682,245        1,706,983  

Non-current assets

     19,861,978        17,028,341        13,100,175  

Investments

     3,234,203        2,683,941        2,656,026  

Property, plant and equipment, net

     14,589,494        12,487,001        8,757,973  

Intangible assets

     770,962        731,373        673,966  

Other non-current assets

     1,267,319        1,126,026        1,012,210  

Total assets

     26,942,172        25,409,415        21,812,750  

Current liabilities

     8,191,149        7,394,605        6,176,344  

Non-current liabilities

     5,606,041        4,185,551        3,400,959  

Total liabilities

     13,797,190        11,580,156        9,577,303  

Share capital

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

Share premium

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

Retained earnings

     9,104,790        9,789,067        8,195,255  

Other equity

     0        0        0  

Total equity

     13,144,982        13,829,259        12,235,447  

 

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

Description

   For the six months ended
June 30, 2018
     For the year ended
December 31, 2017
     For the year ended
December 31, 2016
 

Revenue

     10,189,227        24,419,295        25,856,426  

Operating profit (loss)

     (662,689      709,138        770,856  

Operating profit (loss) from continuing operations

     (497,603      967,078        968,209  

Profit (loss) for the period

     (497,603      967,078        968,209  

Basic earnings (loss) per share

     (1,391      2,703        2,706  

Diluted earnings (loss) per share

     (1,391      2,703        2,706  

 

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  C.

Consolidated subsidiaries (as of June 30, 2018)

 

Company Interest

   Primary Business    Location    Equity  

LG Display America, Inc.

   Sales    U.S.A.      100

LG Display Japan Co., Ltd.

   Sales    Japan      100

LG Display Germany GmbH

   Sales    Germany      100

LG Display Taiwan Co., Ltd.

   Sales    Taiwan      100

LG Display Nanjing Co., Ltd.

   Manufacturing    China      100

LG Display Shanghai Co., Ltd.

   Sales    China      100

LG Display Poland Sp. zo.o.

   Manufacturing    Poland      100

LG Display Guangzhou Co., Ltd.

   Manufacturing    China      100

LG Display Shenzhen Co., Ltd.

   Sales    China      100

LG Display Singapore Pte. Ltd.

   Sales    Singapore      100

L&T Display Technology (Fujian) Limited

   Manufacturing and sales    China      51

LG Display Yantai Co., Ltd.

   Manufacturing    China      100

LG Display (China) Co., Ltd.

   Manufacturing and sales    China      70

Nanumnuri Co., Ltd.

   Workplace services    Korea      100

Unified Innovative Technology, LLC

   Managing intellectual property    U.S.A.      100

Global OLED Technology LLC

   Managing intellectual property    U.S.A.      100

LG Display Guangzhou Trading Co., Ltd.

   Sales    China      100

LG Display Vietnam Haiphong Co., Ltd.

   Manufacturing    Vietnam      100

Suzhou Lehui Display Co., Ltd.

   Manufacturing and sales    China      100

LG Display Fund I LLC

   Investing in new emerging
companies
   U.S.A      100

MMT (Money Market Trust)

   Money market trust    Korea      100

 

  D.

Status of equity investments (as of June 30, 2018)

 

  (1)

Consolidated subsidiaries

 

Company

   Investment Amount
(in millions)
     Initial Equity
Investment Date
     Equity
Interest
 

LG Display America, Inc.

   US$ 411        September 24, 1999        100

LG Display Japan Co., Ltd.

   ¥ 95        October 12, 1999        100

LG Display Germany GmbH

   EUR 1        November 5, 1999        100

LG Display Taiwan Co., Ltd.

   NT$ 116        May 19, 2000        100

LG Display Nanjing Co., Ltd.

   CNY  3,020        July 15, 2002        100

LG Display Shanghai Co., Ltd.

   CNY 4        January 16, 2003        100

LG Display Poland Sp. zo.o.

   PLN 511        September 6, 2005        100

LG Display Guangzhou Co., Ltd.

   CNY 1,655        August 7, 2006        100

LG Display Shenzhen Co., Ltd.

   CNY 4        August 28, 2007        100

LG Display Singapore Pte. Ltd.

   US$ 1.1        January 12, 2009        100

L&T Display Technology (Fujian) Limited

   CNY 116        January 5, 2010        51

LG Display Yantai Co., Ltd.

   CNY 1,008        April 19, 2010        100

Nanumnuri Co., Ltd.

   W 800        March 19, 2012        100

LG Display (China) Co., Ltd.

   CNY 8,232        December 27, 2012        70

Unified Innovative Technology, LLC

   US$ 9        March 21, 2014        100

LG Display Guangzhou Trading Co., Ltd.

   CNY 1.2        May 27, 2015        100

Global OLED Technology LLC

   US$ 138        May 7, 2015        100

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

   US$ 300        May 13, 2016        100

Suzhou Lehui Display Co., Ltd.

   CNY 637        July 1, 2016        100

LG Display Fund I LLC

     —          May 1, 2018        100

 

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Company

   Investment Amount
(in millions)
     Initial Equity
Investment Date
     Equity
Interest
 

MMT (Money Market Trust) (2)

   W  384,401        March 31, 2017        100

Changes since December 31, 2017:

 

(1)

During the reporting period, we invested an additional W212,600 million in LG Display Vietnam Haiphong Co., Ltd.

(2)

As a result of our money market trust acquisition and disposal transactions conducted during the reporting period, the amount outstanding in our money market trust accounts as of June 30, 2018 is W384,401 million.

 

  (2)

Affiliated companies

 

Company

  Carrying Amount
(in millions)
    Date of
Incorporation
    Equity
Interest
 

Paju Electric Glass Co., Ltd.

  W  46,165       January 2005       40

Invenia Co., Ltd.

  W 2,788       January 2001       13

Wooree E&L Co., Ltd.

  W 3,607       June 2008       14

LB Gemini New Growth Fund No. 16(1)

  W 4,509       December 2009       31

YAS Co., Ltd.

  W 16,423       April 2002       18

Avatec Co., Ltd.

  W 23,009       August 2000       17

Arctic Sentinel, Inc.

    —         June 2008       10

CYNORA GmbH

  W 20,309       March 2003       14

Material Science Co., Ltd.(2)

  W 3,954       January 2014       10

Nanosys Inc.(3)

  W 10,732       July 2001       4

Changes since December 31, 2017:

 

(1)

We participate as a limited member in LB Gemini New Growth Fund No. 16. Upon a general meeting, the members have decided to dissolve the fund, which is currently under liquidation.

(2)

In March 2018, we acquired 10,767 voting common shares of Material Science Co., Ltd. for W4,000 million. As of June 30, 2018, our percentage ownership interest in Material Science Co., Ltd. is 10%, and we are entitled to appoint one director of Material Science Co., Ltd.

(3)

In May 2018, we acquired 5,699,954 voting common shares of Nanosys Inc. for W10,732 million. As of June 30, 2018, our percentage ownership interest in Nanosys Inc. is 4%, and we are entitled to appoint one director of Nanosys Inc.

 

13.

Audit Information

 

  A.

Audit service

 

     (Unit: In millions of Won, hours)

Description

   2018 H1   2017   2016

Auditor

   KPMG Samjong   KPMG Samjong   KPMG Samjong

Activity

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

Compensation(1)

   1,170 (450)(2)   1,040 (450)(2)   1,020 (440)(2)

Time required

   5,700   17,909   18,291

 

(1)

Compensation amount is the contracted amount for the full fiscal year.

(2)

Compensation amount in ( ) is for Form 20-F filing and SOX 404 audit.

 

  B.

Non-audit service

None.

 

14.

Board of Directors

 

  A.

Members of the board of directors

As of June 30, 2018, our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.

 

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          (As of June 30, 2018)

Name

  

Position

  

Primary responsibility

Sang Beom Han(1)    Representative Director (non-outside), Chief Executive Officer and Vice Chairman    Chairman of the board of directors
Sang Don Kim    Director (non-outside), Chief Financial Officer and Senior Vice President    Overall head of finances
Hyun-Hwoi Ha(2)    Director (non-standing)    Related to the overall management
Joon Park(3)    Outside Director    Related to the overall management
Sung-Sik Hwang(4)    Outside Director    Related to the overall management
Kun Tai Han(5)    Outside Director    Related to the overall management
Byoung Ho Lee(6)    Outside Director    Related to the overall management

 

(1)

Sang Beom Han was reappointed for another term as a non-outside director at the annual general meeting of shareholders held on March 15, 2018.

(2)

Hyun Hwoi Ha is also a standing director of LG Corp., a non-standing director of LG Hausys, Ltd., a non-standing director of LG International Corp., a non-standing director of LG Uplus Corp., a non-standing director of LG Economic Research Institute and a non-standing director of LG CNS Co., Ltd.

(3)

Joon Park is also an outside director of Green Cross Holdings Corp .

(4)

Sung-Sik Hwang was reappointed for another term as an outside director at the annual general meeting of shareholders held on March 15, 2018. Mr. Hwang is also an outside director of Kyobo Life Insurance Co., Ltd.

(5)

Kun Tai Han is also the chief executive officer of Hans Consulting.

(6)

Byoung Ho Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2018.

 

  B.

Committees of the board of directors

We have the following committees that serve under our board of directors: Audit Committee, Outside Director Nomination Committee and Management Committee. The Management Committee consists of two non-outside directors, Sang Beom Han and Sang Don Kim.

During the reporting period, one meeting of the Outside Director Nomination Committee was held and the composition of the Outside Director Nomination Committee was as follows:

 

     (As of January 22, 2018)

Committee

  

Composition

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

 

(1)

Each of Hyun-Hwoi Ha, Joon Park and Sung-Sik Hwang was appointed as a member of the outside director nomination committee of the board of directors by the board of directors on January 22, 2018.

As of the June 30, 2018, the composition of the Audit Committee is as follows.

 

          (As of June 30, 2018)

Committee

  

Composition

   Member
Audit Committee    3 outside directors    Sung-Sik Hwang(1), Joon Park, Kun Tai
Han

 

(1)

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

 

  C.

Independence of directors

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

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

 

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15.

Information Regarding Shares

 

  A.

Total number of shares

 

  (1)

Total number of shares authorized to be issued (as of June 30, 2018): 500,000,000 shares.

 

  (2)

Total shares issued and outstanding (as of June 30, 2018): 357,815,700 shares.

 

  B.

Shareholder list

 

  (1)

Largest shareholder and related parties as of June 30, 2018:

 

Name

   Relationship    Number of shares of common stock      Equity interest  

LG Electronics

   Largest
Shareholder
     135,625,000        37.9

Sang Beom Han

   Related
Party
     48,355        0.0

Sang Don Kim

   Related
Party
     6,000        0.0

 

  (2)

Shareholders who are known to us to own 5% or more of our shares as of June 30, 2018:

 

Beneficial owner

   Number of shares of common stock      Equity interest  

LG Electronics

     135,625,000        37.9

National Pension Service

     29,275,136        8.18

 

16.

Directors and Employees

 

  A.

Directors

 

  (1)

Remuneration for directors in 2018 H1:

 

     (Unit: person, in millions of Won)  

Classification

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

Non-outside directors

     3        2,516       839  

Outside directors who are not audit committee members

     1        46       46  

Outside directors who are audit committee members

     3        117       39  
  

 

 

    

 

 

   

 

 

 

Total

     7        2,679 (4)       383  
  

 

 

    

 

 

   

 

 

 

 

(1)

Number of directors as at June 30, 2018.

(2)

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

(3)

Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the six months ended June 30, 2018.

(4)

As Jin Jang resigned as an outside director on March 14, 2018 and Byoung Ho Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2018, the total amount paid includes remuneration paid to both Mr. Jang and Mr. Lee.

 

  (2)

Remuneration for individual directors and audit committee members

 

   

Individual amount of remuneration paid in 2018 H1

 

     (Unit: in millions of Won)  

Name

   Position      Total remuneration      Payment not included in
total remuneration
 

Sang Beom Han

     Chief Executive Officer        2,058        —    

 

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Method of calculation

 

Name

  

Method of calculation

Sang Beom Han

  

Total remuneration

 

•  W2,058 million (consisting of W738 million in salary and W1,320 million in bonus).

 

Salary

 

•  Basic salary is set in accordance with the executive compensation regulations established by the board of directors. Annual salary is paid on a monthly basis (W67 million per month from January to March and W70 million per month from April to June).

 

•  Position salary is calculated based on the significance of the position and responsibilities. Position salary is paid on a monthly basis (W53 million per month from January to March and W56 million per month from April to June).

 

Bonus

 

•  Bonus is awarded by the board of directors based on performance and evaluation standards derived from the special bonus provisions of the executive compensation regulations.

 

•  Bonus in the range of 0 to 150% of annual salary may be awarded by evaluating the previous year’s performance through certain financial indicators, such as revenue and operating profit, and non-financial indicators, such as meeting our medium- to long-term expectations, leadership and other contributions.

 

•  Financial indicators: Revenue increased from W26.5 trillion for the year ended December 31, 2016 to W27.8 trillion for the year ended December 31, 2017, and operating profit increased from W1.3 trillion for the year ended December 31, 2016 to W2.5 trillion for the year ended December 31, 2017.

 

•  Non-financial indictors: We maintained industry-leading technology through the continual release of differentiated technologies and products. We are preparing for a successful transition to OLED business through stable production of OLED TVs and by securing a base for our plastic OLED business, while improving profit structure and market position. Mr. Han showed leadership in leading us to achieve our management goals. W1,320 million was calculated as bonus based on the reasons stated above.

 

  (3)

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

 

   

Individual remuneration amount

 

     (Unit: in millions of Won)  

Name

   Position    Total remuneration      Payment not included in
total remuneration
 

Sang Beom Han

   Chief Executive Officer      2,058        —    

Yong Kee Hwang

   President      839        —    

Sang Deok Yeo

   Advisor      3,878        —    

Byung Chul Ahn

   Outside Advisor      1,283        —    

Gi Seong Chae

   Outside Advisor      606        —    

 

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Method of calculation

 

Name

  

Method of calculation

Sang Beom Han

  

Total remuneration

 

•  W2,058 million (consisting of W738 million in salary and W1,320 million in bonus).

 

Salary

 

•  Basic salary is set in accordance with the executive compensation regulations established by the board of directors. Annual salary is paid on a monthly basis (W67 million per month from January to March and W70 million per month from April to June).

 

•  Position salary is calculated based on the significance of the position and responsibilities. Position salary is paid on a monthly basis (W53 million per month from January to March and W56 million per month from April to June).

 

Bonus

 

•  Bonus is awarded by the board of directors based on performance and evaluation standards derived from the special bonus provisions of the executive compensation regulations.

 

•  Bonus in the range of 0 to 150% of annual salary may be awarded by evaluating the previous year’s performance through certain financial indicators, such as revenue and operating profit, and non-financial indicators, such as meeting our medium- to long-term expectations, leadership and other contributions.

 

•  Financial indicators: Revenue increased from W26.5 trillion for the year ended December 31, 2016 to W27.8 trillion for the year ended December 31, 2017, and operating profit increased from W1.3 trillion for the year ended December 31, 2016 to W2.5 trillion for the year ended December 31, 2017.

 

•  Non-financial indictors: We maintained industry-leading technology through the continual release of differentiated technologies and products. We are preparing for a successful transition to OLED business through stable production of OLED TVs and by securing a base for our plastic OLED business, while improving profit structure and market position. Mr. Han showed leadership in leading us to achieve our management goals. W1,320 million was calculated as bonus based on the reasons stated above.

 

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Yong Kee Hwang

  

Total remuneration

 

•  W839 million (consisting of W523 million in salary and W316 million in bonus).

 

Salary

 

•  Basic salary is set in accordance with the executive compensation regulations established by the board of directors. Annual salary is paid on a monthly basis (W57 million per month from January to March and W59 million per month from April to June).

 

•  Position salary is calculated based on the significance of the position and responsibilities. Position salary is paid on a monthly basis (W23 million per month from January to March and W24 million per month from April to June).

 

•  A total of W34 million is paid on an annual basis in accordance with welfare benefits standards.

 

Bonus

 

•  Bonus is awarded by the board of directors based on performance and evaluation standards derived from the special bonus provisions of the executive compensation regulations.

 

•  Bonus in the range of 0 to 150% of annual salary may be awarded by evaluating the previous year’s performance through certain financial indicators, such as revenue and operating profit, and non-financial indicators, such as meeting our medium- to long-term expectations, leadership and other contributions.

 

•  Financial indicators: Revenue increased from W26.5 trillion for the year ended December 31, 2016 to W27.8 trillion for the year ended December 31, 2017, and operating profit increased from W1.3 trillion for the year ended December 31, 2016 to W2.5 trillion for the year ended December 31, 2017.

 

•  Non-financial indictors: We maintained industry-leading technology through the continual release of differentiated technologies and products. We are preparing for a successful transition to OLED business through stable production of OLED TVs and by securing a base for our plastic OLED business, while improving profit structure and market position. Mr. Hwang showed leadership in leading us to achieve our management goals. W316 million was calculated as bonus based on the reasons stated above.

 

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Sang Deok Yeo(1)   

Total remuneration

 

•  W3,878 million (consisting of W319 million in salary, W438 million in bonus and W3,121 million in retirement pay).

 

Salary

 

•  Basic salary is set in accordance with the executive compensation regulations established by the board of directors. Annual salary is paid on a monthly basis (W57 million per month from January to March and W45 million per month from April to June).

 

•  A total of W13 million is paid on an annual basis in accordance with welfare benefits standards.

 

Bonus

 

•  Bonus is awarded by the board of directors based on performance and evaluation standards derived from the special bonus provisions of the executive compensation regulations.

 

•  Bonus in the range of 0 to 150% of annual salary may be awarded by evaluating the previous year’s performance through certain financial indicators, such as revenue and operating profit, and non-financial indicators, such as meeting our medium- to long-term expectations, leadership and other contributions.

 

•  Financial indicators: Revenue increased from W26.5 trillion for the year ended December 31, 2016 to W27.8 trillion for the year ended December 31, 2017, and operating profit increased from W1.3 trillion for the year ended December 31, 2016 to W2.5 trillion for the year ended December 31, 2017.

 

•  Non-financial indictors: We maintained industry-leading technology through the continual release of differentiated technologies and products. We are preparing for a successful transition to OLED business through stable production of OLED TVs and by securing a base for our plastic OLED business, while improving profit structure and market position. Mr. Yeo showed leadership in leading us to achieve our management goals. W438 million was calculated as bonus based on the reasons stated above.

 

Retirement pay

 

•  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (18 years), monthly basic salary at the time of retirement and payment rate per position (2.5 to 4.5%).

 

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Table of Contents
Byung Chul Ahn(1)   

Total remuneration

 

•  W1,283 million (consisting of W168 million in salary, W213 million in bonus and W902 million in retirement pay).

 

Salary

 

•  Basic salary is set in accordance with the executive compensation regulations established by the board of directors. Annual salary is paid on a monthly basis (W28 million per month from January to March and W2 million per month from April to June).

 

•  A total of W18 million is paid on an annual basis in accordance with regulations of other welfare benefits.

 

Bonus

 

•  Bonus is awarded by the board of directors based on performance and evaluation standards derived from the special bonus provisions of the executive compensation regulations.

 

•  Bonus in the range of 0 to 150% of annual salary may be awarded by evaluating the previous year’s performance through certain financial indicators, such as revenue and operating profit, and non-financial indicators, such as meeting our medium- to long-term expectations, leadership and other contributions.

 

•  Financial indicators: Revenue increased from W26.5 trillion for the year ended December 31, 2016 to W27.8 trillion for the year ended December 31, 2017, and operating profit increased from W1.3 trillion for the year ended December 31, 2016 to W2.5 trillion for the year ended December 31, 2017.

 

•  Non-financial indictors: We maintained industry-leading technology through the continual release of differentiated technologies and products. We are preparing for a successful transition to OLED business through stable production of OLED TVs and by securing a base for our plastic OLED business, while improving profit structure and market position. Mr. Ahn showed leadership in leading us to achieve our management goals. W213 million was calculated as bonus based on the reasons stated above.

 

Retirement pay

 

•  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (12 years), monthly basic salary at the time of retirement and payment rate per position (2.5 to 4.5%).

 

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Gi Seong Chae(1)   

Total remuneration

 

•  W606 million (consisting of W117 million in salary, W59 million in bonus and W430 million in retirement pay).

 

Salary

 

•  Basic salary is set in accordance with the executive compensation regulations established by the board of directors. Annual salary is paid on a monthly basis (W21 million per month from January to March and W17 million per month from April to June).

 

•  A total of W3 million is paid on an annual basis in accordance with welfare benefits standards.

 

Bonus

 

•  Bonus is awarded by the board of directors based on performance and evaluation standards derived from the special bonus provisions of the executive compensation regulations.

 

•  Bonus in the range of 0 to 150% of annual salary may be awarded by evaluating the previous year’s performance through certain financial indicators, such as revenue and operating profit, and non-financial indicators, such as meeting our medium- to long-term expectations, leadership and other contributions.

 

•  Financial indicators: Revenue increased from W26.5 trillion for the year ended December 31, 2016 to W27.8 trillion for the year ended December 31, 2017, and operating profit increased from W1.3 trillion for the year ended December 31, 2016 to W2.5 trillion for the year ended December 31, 2017.

 

•  Non-financial indictors: We maintained industry-leading technology through the continual release of differentiated technologies and products. We are preparing for a successful transition to OLED business through stable production of OLED TVs and by securing a base for our plastic OLED business, while improving profit structure and market position. Mr. Chae showed leadership in leading us to achieve our management goals. W59 million was calculated as bonus based on the reasons stated above.

 

Retirement pay

 

•  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (8 years), monthly basic salary at the time of retirement and payment rate per position (2.5 to 4.5%).

 

(1) 

Advisors Sang Deok Yeo, Ahn Byung Chul and Gi Seong Chae retired effective as of March 30, 2018.

 

  (4)

Stock options

Not applicable.

 

  B.

Employees

As of June 30, 2018, we had 33,434 employees (excluding our directors). On average, our male employees have served 9.6 years and our female employees have served 8.1 years. The total amount of salary paid to our employees for the six months ended June 30, 2018 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act was W1,197,320 million for our male employees and W269,951 million for our female employees. The following table provides details of our employees as of June 30, 2018:

 

(Unit: person, in millions of Won, year)  
     Number of
employees(1)
     Total salary in 2018 Q1 (2)(3)(4)      Average salary
per capita(5)
     Average years of
service
 

Male

     25,448        1,197,320        48.0        9.6  

Female

     7,986        269,951        33.7        8.1  

Total

     33,434        1,467,271        44.5        9.2  

 

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Table of Contents
(1)

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

(2)

Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the six months ended June 30, 2018 was W197,940 million and the per capita welfare benefit provided was W6.0 million.

(3)

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

(4)

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

(5)

Calculated using the average number of employees (male: 24,945, female: 8,006) for the six months ended June 30, 2018.

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

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

 

17.

Other Matters

 

  A.

Material Events Subsequent to the Reporting Period

 

  (1)

Matters Concerning Acquisition of Stocks and Investment Securities

In July 2018, we established LG Display (China) High-tech, Co., Ltd. in Guangzhou, China, in which we own 70% of the shares, for purposes of producing display panels.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2018 and 2017

(With Independent Auditors’ Review Report Thereon)

 

34


Table of Contents

Table of Contents

 

    

Page

 

 

Independent Auditors’ Review Report

     36  

Condensed Consolidated Interim Statements of Financial Position

     38  

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

     39  

Condensed Consolidated Interim Statements of Changes in Equity

     40  

Condensed Consolidated Interim Statements of Cash Flows

     41  

Notes to the Condensed Consolidated Interim Financial Statements

     43  

 

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Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed consolidated interim financial statements of LG Display Co., Ltd. and subsidiaries (the “Group”) which comprise the condensed consolidated interim statement of financial position as of June 30, 2018, the condensed consolidated interim statements of comprehensive income (loss) for each of the three-month and six-month periods ended June 30, 2018 and 2017, and statements of changes in equity and cash flows for the six-month periods ended June 30, 2018 and 2017, and notes comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Consolidated Interim Financial Statements

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

Auditors’ Responsibility

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

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

Conclusion

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

Other Matters

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

We audited the consolidated statement of financial position as of December 31, 2017 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 22, 2018, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2017, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

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Table of Contents

KPMG Samjong Accounting Corp.

Seoul, Korea

August 10, 2018

 

This report is effective as of August 10, 2018 the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Financial Position

(Unaudited)

As of June 30, 2018 and December 31, 2017

 

(In millions of won)    Note      June 30, 2018     December 31, 2017  

Assets

       

Cash and cash equivalents

     4, 25      W 2,851,481     2,602,560

Deposits in banks

     4, 25        346,164     758,078

Trade accounts and notes receivable, net

     5, 14, 25, 27        3,491,024     4,325,120

Other accounts receivable, net

     5, 25        154,596     164,827

Other current financial assets

     6, 25        14,460     27,252

Inventories

     7        2,430,307     2,350,084

Prepaid income taxes

        3,221     3,854

Other current assets

     5        425,593     241,928
     

 

 

   

 

 

 

Total current assets

        9,716,846     10,473,703

Deposits in banks

     4, 25        11     11

Investments in equity accounted investees

     8        131,496     122,507

Other non-current financial assets

     6, 25        74,413     68,574

Property, plant and equipment, net

     9, 17        19,032,682     16,201,960

Intangible assets, net

     10, 17        946,426     912,821

Deferred tax assets

     23        1,158,628     985,352

Other non-current assets

     5        383,709     394,759
     

 

 

   

 

 

 

Total non-current assets

        21,727,365     18,685,984
     

 

 

   

 

 

 

Total assets

      W 31,444,211     29,159,687
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

     25, 27      W 2,969,607     2,875,090

Current financial liabilities

     11, 25        2,182,368     1,452,926

Other accounts payable

     25        3,244,839     3,169,937

Accrued expenses

        688,294     812,615

Income tax payable

        59,987     321,978

Provisions

     13        79,724     76,016

Advances received

     14        429,565     194,129

Other current liabilities

     13        114,200     75,991
     

 

 

   

 

 

 

Total current liabilities

        9,768,584     8,978,682

Non-current financial liabilities

     11, 25        5,384,085     4,150,192

Non-current provisions

     13        22,188     28,312

Defined benefit liabilities, net

     12        205,427     95,447

Long-term advances received

     14        1,430,168     830,335

Deferred tax liabilities

     23        15,854     24,646

Other non-current liabilities

     13        85,057     70,563
     

 

 

   

 

 

 

Total non-current liabilities

        7,142,779     5,199,495
     

 

 

   

 

 

 

Total liabilities

        16,911,363     14,178,177
     

 

 

   

 

 

 

Equity

       

Share capital

     15        1,789,079     1,789,079

Share premium

        2,251,113     2,251,113

Retained earnings

        10,078,081     10,621,571

Reserves

     15        (169,686     (288,280
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        13,948,587     14,373,483
     

 

 

   

 

 

 

Non-controlling interests

        584,261     608,027
     

 

 

   

 

 

 

Total equity

        14,532,848     14,981,510
     

 

 

   

 

 

 

Total liabilities and equity

      W 31,444,211     29,159,687
     

 

 

   

 

 

 

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 (Loss)

(Unaudited)

For the three-month and six-month periods ended June 30, 2018 and 2017

 

(In millions of won, except earnings per share)    Note      For the three-month period
ended June 30
    For the six-month period
ended June 30
 
            2018     2017     2018     2017  

Revenue

     16, 17, 27      W 5,611,248     6,628,886     11,286,412     13,691,048

Cost of sales

     7, 18, 27        (5,144,505     (5,115,018     (10,277,585     (10,457,900
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        466,743     1,513,868     1,008,827     3,233,148

Selling expenses

     19        (203,853     (222,526     (376,811     (465,729

Administrative expenses

     19        (196,083     (175,457     (378,413     (340,407

Research and development expenses

        (294,915     (311,613     (580,034     (595,863
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

        (228,108     804,272     (326,431     1,831,149
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     22        32,886     48,346     153,883     128,424

Finance costs

     22        (61,966     (94,026     (192,327     (147,007

Other non-operating income

     21        370,513     156,123     598,061     540,482

Other non-operating expenses

     21        (455,055     (87,558     (667,798     (668,021

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

        1,710     4,662     (1,183     4,912
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before income tax

        (340,020     831,819     (435,795     1,689,939

Income tax expense (benefit)

     23        (39,477     95,151     (86,270     273,774
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

        (300,543     736,668     (349,525     1,416,165
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

           

Items that will never be reclassified to profit or loss

           

Remeasurements of net defined benefit liabilities

     12        (4,973     (3,599     (11,392     (8,324

Other comprehensive income (loss) from associates

        (18     736     23     493

Related income tax

     12        1,330     871     3,626     2,014
     

 

 

   

 

 

   

 

 

   

 

 

 
        (3,661     (1,992     (7,743     (5,817

Items that are or may be reclassified to profit or loss

           

Foreign currency translation differences for foreign operations

     22        12,042     138,890     139,932     (110,787

Other comprehensive income (loss) from associates

        (626     2,715     689     2,163
        11,416     141,605     140,621     (108,624
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        7,755     139,613     132,878     (114,441
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (292,788     876,281     (216,647     1,301,724
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) attributable to:

           

Owners of the Controlling Company

        (297,385     690,300     (356,839     1,323,790

Non-controlling interests

        (3,158     46,368     7,314     92,375
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

      W (300,543     736,668     (349,525     1,416,165
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

           

Owners of the Controlling Company

        (288,692     811,434     (245,988     1,224,366

Non-controlling interests

        (4,096     64,847     29,341     77,358
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (292,788     876,281     (216,647     1,301,724
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share (In won)

           

Basic earnings (loss) per share

     24      W (831     1,929     (997     3,700
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

     24      W (831     1,929     (997     3,700
     

 

 

   

 

 

   

 

 

   

 

 

 

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 six-month periods ended June 30, 2018 and 2017

 

     Attributable to owners of the Controlling Company              
(In millions of won)    Share
capital
     Share
premium
     Retained
earnings
    Reserves     Sub-total     Non-controlling
interests
    Total equity  

Balances at January 1, 2017

   W 1,789,079      2,251,113      9,004,283     (88,478     12,955,997     506,391     13,462,388
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Profit for the period

     —          —          1,323,790     —         1,323,790     92,375     1,416,165

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (6,310     —         (6,310     —         (6,310

Foreign currency translation differences for foreign operations, net of tax

     —          —          —         (95,770     (95,770     (15,017     (110,787

Other comprehensive income from asssociates

     —          —          493     2,163     2,656     —         2,656
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (5,817     (93,607     (99,424     (15,017     (114,441
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —          1,317,973     (93,607     1,224,366     77,358     1,301,724
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Dividends to equity holders

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

Capital contribution from non-controlling interests

     —          —          —         —         —         4,251     4,251
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2017

   W 1,789,079      2,251,113      10,143,348     (182,085     14,001,455     588,000     14,589,455
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2018

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Profit (loss) for the period

     —          —          (356,839     —         (356,839     7,314     (349,525

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (7,766     —         (7,766     —         (7,766

Foreign currency translation differences for foreign operations, net of tax

     —          —          —         117,905     117,905     22,027     139,932

Other comprehensive income from associates

     —          —          23     689     712     —         712
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —          —          (7,743     118,594     110,851     22,027     132,878
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —          (364,582     118,594     (245,988     29,341     (216,647
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Dividends to equity holders

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

Subsidiaries’ dividends distributed to non-controlling interests

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2018

   W 1,789,079      2,251,113      10,078,081     (169,686     13,948,587     584,261     14,532,848
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

40


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

For the six-month periods ended June 30, 2018 and 2017

 

(In millions of won)    Note    2018     2017  

Cash flows from operating activities:

       

Profit (loss) for the period

      W (349,525     1,416,165

Adjustments for:

       

Income tax expense (benefit)

   23      (86,270     273,774

Depreciation

   18      1,606,315     1,278,965

Amortization of intangible assets

   18      212,796     216,031

Gain on foreign currency translation

        (236,639     (107,947

Loss on foreign currency translation

        285,901     64,887

Expenses related to defined benefit plans

   12      103,671     99,047

Gain on disposal of property, plant and equipment

        (4,330     (13,352

Loss on disposal of property, plant and equipment

        10,568     5,370

Impairment loss on property, plant and equipment

        27,491     —    

Gain on disposal of intangible assets

        (239     (308

Impairment loss on intangible assets

        301     1,677

Reversal of impairment loss on intangible assets

        (36     —    

Warranty expense

        92,062     126,251

Finance income

        (40,690     (84,461

Finance costs

        84,412     95,052

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

   8      1,183     (4,912

Other income

        (2,161     (16,378

Other expenses

        617     78
     

 

 

   

 

 

 
        2,054,952     1,933,774

Changes in

       

Trade accounts and notes receivable

        1,052,117     526,666

Other accounts receivable

        (16,472     23,594

Inventories

        (188,410     (51,845

Other current assets

        (137,809     (58,998

Other non-current assets

        (27,362     (105,697

Trade accounts and notes payable

        (112,186     (412,353

Other accounts payable

        (163,479     (132,376

Accrued expenses

        (131,698     (101,307

Provisions

        (104,267     (89,191

Other current liabilities

        (9,222     (8,157

Defined benefit liabilities, net

        (5,141     (4,557

Other non-current liabilities

        12,184     3,265

Long-term advances received

        767,830     565,950
     

 

 

   

 

 

 
        936,085     154,994

Cash generated from operating activities

        2,641,512     3,504,933

Income taxes paid

        (353,564     (270,431

Interests received

        41,863     24,080

Interests paid

        (91,479     (64,227
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 2,238,332     3,194,355
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows, Continued

(Unaudited)

For the six-month periods ended June 30, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from investing activities:

       

Dividends received

      W 5,272     8,639

Increase in deposits in banks

        (740,720     (1,025,475

Proceeds from withdrawal of deposits in banks

        1,152,277     1,127,131

Acquisition of available-for-sale financial assets

        —         (112

Acquisition of financial assets at fair value through profit or loss

        (391     —    

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

        6     —    

Acquisition of investments in equity accounted investees

        (14,732     —    

Proceeds from disposal of investments in equity accounted investees

        2,382     6,697

Acquisition of property, plant and equipment

        (3,965,992     (3,321,907

Proceeds from disposal of property, plant and equipment

        105,323     76,506

Acquisition of intangible assets

        (254,527     (207,303

Proceeds from disposal of intangible assets

        960     750

Government grants received

        1,210     1,505

Receipt from settlement of derivatives

        71     2,895

Proceeds from collection of short-term loans

        7,908     430

Increase in long-term loans

        (19,420     (300

Increase in deposits

        (3,523     (1,753

Decrease in deposits

        685     3,051

Proceeds from disposal of emission rights

        10,200     —    
     

 

 

   

 

 

 

Net cash used in investing activities

        (3,713,011     (3,329,246
     

 

 

   

 

 

 

Cash flows from financing activities:

     26       

Repayments of short-term borrowings

        —         (113,209

Proceeds from issuance of bonds

        498,170     298,780

Proceeds from long-term borrowings

        1,982,289     511,402

Repayments of current portion of long-term borrowings and bonds

        (646,476     (364,431

Capital contribution from non-controlling interests

        —         4,251

Dividends paid

        (178,908     (178,908
     

 

 

   

 

 

 

Net cash provided by financing activities

        1,655,075     157,885
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        180,396     22,994

Cash and cash equivalents at January 1

        2,602,560     1,558,696

Effect of exchange rate fluctuations on cash held

        68,525     (42,216
     

 

 

   

 

 

 

Cash and cash equivalents at June 30

      W 2,851,481     1,539,474
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

42


Table of Contents
1.

Reporting Entity

 

  (a)

Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of June 30, 2018, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of June 30, 2018, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of June 30, 2018, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of June 30, 2018, there are 20,572,122 ADSs outstanding.

 

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Table of Contents
1.

Reporting Entity, Continued

 

(b) Consolidated Subsidiaries as of June 30, 2018

 

(In millions)                                 

Subsidiaries

  

Location

   Percentage of
ownership
   

Fiscal year
end

  

Date of incorporation

  

Business

   Capital stocks  

LG Display America, Inc.

  

San Jose,

U.S.A.

     100   December 31    September 24, 1999    Sell Display products      USD 411  

LG Display Japan Co., Ltd.

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

LG Display Germany GmbH

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

LG Display Taiwan Co., Ltd.

   Taipei, Taiwan      100   December 31   

April 12,

1999

   Sell Display products      NTD 116  

LG Display Nanjing Co., Ltd.

   Nanjing, China      100   December 31   

July 15,

2002

   Manufacture Display products      CNY 3,020  

LG Display Shanghai Co., Ltd.

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

LG Display Poland Sp. z o.o.

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

LG Display Guangzhou Co., Ltd.

   Guangzhou, China      100   December 31   

June 30,

2006

   Manufacture Display products      CNY 1,655  

LG Display Shenzhen Co., Ltd.

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

LG Display Singapore Pte. Ltd.

   Singapore      100   December 31    January 12, 2009    Sell Display products      USD 1.1  

L&T Display Technology (Fujian) Limited

  

Fujian,

China

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

LG Display Yantai Co., Ltd

  

Yantai,

China

     100   December 31   

April 19,

2010

   Manufacture Display products      CNY 1,008  

Nanumnuri Co., Ltd.

  

Gumi,

South Korea

     100   December 31   

March 21,

2012

   Janitorial services      KRW 800  

LG Display (China) Co., Ltd.(*1)

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

Unified Innovative Technology, LLC

   Wilmington, U.S.A.      100   December 31   

March 12,

2014

   Manage intellectual property      USD 9  

LG Display Guangzhou Trading Co., Ltd.

   Guangzhou, China      100   December 31   

April 28,

2015

   Sell Display products      CNY 1.2  

Global OLED Technology, LLC

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

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

  

Haiphong

Vietnam

     100   December 31   

May 5,

2016

   Manufacture Display products      USD 300  

Suzhou Lehui Display Co., Ltd.

   Suzhou, China      100   December 31   

July 1,

2016

   Manufacture and sell LCD module and LCD monitor sets      CNY 637  

LG DISPLAY FUND I LLC(*2)

   Wilmington, U.S.A.      100   December 31   

May 1,

2018

   Invest in venture business and obtain technologies      —    

Money Market Trust(*3)

  

Seoul,

South Korea

     100   December 31    —      Money market trust      KRW 384,401  

 

44


Table of Contents
1.

Reporting Entity, Continued

 

  (*1)

For the six-month period ended June 30, 2018, the Controlling Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Controlling Company’s ownership percentage in LGDVN as a result of this additional investment.

 

  (*2)

For the six-month period ended June 30, 2018, the Controlling Company established LG DISPLAY FUND I LLC in Wilmington, U.S.A. to invest in venture business and the Controlling Company has a 100% equity interest of this subsidiary.

 

  (*3)

For the six-month period ended June 30, 2018, the Controlling Company acquired and disposed interests in Money Market Trust (“MMT”) and the MMT amount as of June 30, 2018 is W384,401 million.

W90,281 million is attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the six-month period ended June 30, 2018.

 

2.

Basis of Presenting Financial Statements

 

  (a)

Statement of Compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the consolidated financial statements of the Group as of and for the year ended December 31, 2017.    

This is the first set of the Group’s financial statements where K-IFRS No. 1109, K-IFRS No. 1115, and K-IFRS No. 2122 have been applied. Changes to significant accounting policies are described in Note 3.

 

  (b)

Basis of Measurement

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

 

   

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

 

   

net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

 

  (c)

Functional and Presentation Currency

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

 

45


Table of Contents
2.

Basis of Presenting Financial Statements, Continued

 

  (d)

Use of Estimates and Judgments

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

During the six-month period ended June 30, 2018, based on the review of the past accumulated usage information that became available, the Group management reassessed the economic useful life of the Mask and Mold which had previously been classified as inventory. The balances of such Mask and Mold inventories amounted to W111,456 million as of December 31, 2017. Based on the results of the reassessment, the Group changed useful lives of Mask and Mold to two years and accounted for the change as a change in accounting estimate. The Group also changed the classification of Mask and Mold to property, plant and equipment.

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 the last annual financial statements, except for new significant judgments and key sources of estimation uncertainty related to the application of K-IFRS No. 1109, K-IFRS No. 1115 in Note 3 and the change in useful life of Mask and Mold.

 

3.

Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in the preparation of its condensed consolidated interim financial statements are the same as those followed by the Group in its preparation of the consolidated financial statements as of and for the year ended December 31, 2017, except for the application of K-IFRS No. 1034, Interim Financial Reporting, and the amended accounting standards explained below. The changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2018.

 

  (a)

Changes in Accounting Policies

The Group has initially adopted K-IFRS No. 1115, Revenue from Contracts with Customers, K-IFRS No. 1109, Financial Instruments, and K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration from January 1, 2018.

 

  (i)

K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109 set out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standards replaces K-IFRS No. 1039 Financial Instruments: Recognition and Measurement. The Group adopted K-IFRS No. 1109, Financial Instruments, from January 1, 2018, and the Group has taken an exemption not to restate the financial statements for prior years with respects to transition requirements.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below. There is no impact on the opening balance of retained earnings at January 1, 2018.

 

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Table of Contents
3.

Summary of Significant Accounting Policies, Continued

 

(a) Changes in Accounting Policies, Continued

 

i) Classification and measurement of financial assets and financial liabilities

K-IFRS No. 1109 largely retains the existing requirements in K-IFRS No. 1039 for the classification and measurement of financial liabilities. However, it eliminates the previous K-IFRS No. 1039 categories for financial assets of held to maturity, loans and receivables and available for sale.

The adoption K-IFRS No. 1109 has not had a significant effect on the Group’s accounting policies related to financial liabilities and derivative financial instruments. The impact of K-IFRS No. 1109 on the classification and measurement of financial assets is set out below.

Under K-IFRS No. 1109, on initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI-debt investment; FVOCI-equity investment; or FVTPL. The classification of financial assets under K-IFRS 1109 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

- It is held within a business model whose objective is to hold assets to collect contractual cash flow; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

- It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

 

 

47


Table of Contents
3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

The following accounting policies apply to the subsequent measurement of financial assets.

 

Financial assets at FVTPL    These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost    These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI    These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

The following table below explain the original measurement categories under K-IFRS No. 1039 and the changes in measurement categories under K-IFRS No. 1109 for each class of the Group’s financial assets as at January 1, 2018 are as below.

 

(In millions of won)

   Classification
under
K-IFRS No.
1039
     Classification
under

K-IFRS No. 1109
     Carrying amount
under K-IFRS
No. 1039
     Carrying amount
under

K-IFRS No. 1109
     Difference  

Financial assets

              

Cash and cash equivalents

    

Loans and

receivables

 

 

     Amortized cost      W 2,602,560        2,602,560        —    

Deposits

    

Loans and

receivables

 

 

     Amortized cost        758,089        758,089        —    

Trade receivables

    

Loans and

receivables

 

 

     Amortized cost        4,325,120        4,325,120        —    

Other receivables

    

Loans and

receivables

 

 

     Amortized cost        164,827        164,827        —    

Debt instrument

     Available-for-sale       
FVOCI-debt
instrument
 
 
     162        162        —    

Equity instrument

     Available-for-sale       

Mandatorily at

FVTPL

 

 

     4,980        4,980        —    

Convertible bonds

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     1,552        1,552        —    

Derivatives

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     842        842        —    

Others

    

Loans and

receivables

 

 

     Amortized cost        88,290        88,290        —    
        

 

 

    

 

 

    

 

 

 

Total financial assets

         W 7,946,422        7,946,422        —    
        

 

 

    

 

 

    

 

 

 

As of January 1, 2018, there were no financial liabilities measured at FVTPL.

 

 

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Table of Contents
3.

Summary of Significant Accounting Policies, Continued

 

(a) Changes in Accounting Policies, Continued

 

  ii)

Impairment of financial assets

K-IFRS No. 1109 replaces the ‘incurred loss’ model in K-IFRS No. 1039 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under K-IFRS No. 1109, credit losses are recognized earlier than under K-IFRS No. 1039.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt instruments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt instruments at FVOCI, the loss allowance is recognized in OCI, instead of reducing the carrying amount of the asset.

As a result of applying the loss allowances model under K-IFRS No. 1109, as of January 1, 2018, there are no additional loss allowances as compared with the loss allowances under K-IFRS No. 1039.

 

  iii)

Hedge Accounting

When initially applying K-IFRS No. 1109, the Group elected as its accounting policy to continue to apply hedge accounting requirements under K-IFRS No. 1039 instead of the requirements in K-IFRS No. 1109. As of January 1, 2018, there is no impact on the condensed consolidated interim financial statement of the Group resulting from the application of the requirements in K-IFRS No. 1109.

 

  (ii)

K-IFRS No. 1115, Revenue from Contracts with Customers

K-IFRS No. 1115, Revenue from contracts with customers, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. K-IFRS No. 1115 replaces existing revenue recognition guidance, including K-IFRS No. 1018 Revenue, K-IFRS No. 1011, Construction Contracts, K-IFRS No. 2031, Revenue: Barter Transactions Involving Advertising Services, K-IFRS No. 2113, Customer Loyalty Programmes, K-IFRS No. 2115, Agreements for the Construction of Real Estate and K-IFRS No. 2118, Transfers of Assets from Customers.

The Group has initially applied K-IFRS No. 1115, Revenue from contracts with customers, from January 1, 2018. Regarding transition to K-IFRS No.1115, the Group has decided to apply the cumulative effect method, i.e. recognizing the cumulative effect of applying K-IFRS No. 1115 at the date of initial application, which is January 1, 2018, without restatement of the comparative periods presented. The impact on its condensed consolidated interim financial statements resulting from the application of the new standard is as follows.

 

 

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Table of Contents
3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

Variable Consideration

The consideration received from customers may be variable as the Group allows its customers to return their products according to the contracts. For the year-ended December 31, 2017, the Group recognizes a provision measured at the gross profit for products sold which are expected to be returned. Under K-IFRS No. 1115, the Group shall estimate an amount of variable consideration by using the expected value or the most likely amount, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled and include in the transaction price some or all of an amount of variable consideration estimated only to the extent that is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when return period expires. The Group shall recognize refund liability measured at the amount of consideration received (or receivable) to which the Group does not expect to be entitled and a new asset for the right to recover returned goods. As a result of this change, the refund liability and a new asset for the right to recover returned goods increased by W9,789 million, respectively, as of January 1, 2018. There is no impact on the opening balance of retained earnings at January 1, 2018. (Note 5(d), 13(a))

The effect of the application of K-IFRS No. 1115 on the Group’s consolidated interim statement of financial position as of June 30, 2018 is as follows. There is no impact on the condensed consolidated interim statement of comprehensive income and the cash flows for the six-month period ended June 30, 2018.

 

(in millions won)

Categories

   Adoption of
K-IFRS No. 1115
     Adjustments      Adoption of
K-IFRS No. 1018
 

Current Assets

        

Other current assets

     W425,593        (5,360      420,233  

Current Liabilities

        

Provisions

     W79,724        (5,360      74,364  

 

  (iii)

K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration

According to the new interpretation, K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. There is no significant impact on the condensed consolidated interim financial statements of the Group.

 

 

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Table of Contents
3.

Summary of Significant Accounting Policies, Continued

 

  (b)

New Standards and Amendments Not Yet Adopted

The following new standard is effective for annual periods beginning after January 1, 2018 and earlier application is permitted; however, the Group has not early adopted the following new standard in preparing these condensed consolidated interim financial statements.

 

  (i)

K-IFRS No. 1116, Leases

The Group plans to adopt K-IFRS No. 1116, Leases, in its consolidated financial statements for annual period beginning on January 1, 2019, assess the financial impact of the adoption of K-IFRS No. 1116 and disclose the results in its consolidated financial statements for the year ending December 31, 2018. As of June 30, 2018, other than the potential impacts described in the consolidated financial statements as of and for the year ended December 31, 2017, there are no significant changes in relation to preparation for the adoption of this new standard.

 

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4.

Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 2,851,481        2,602,560  

Deposits in banks

     

Time deposits

     W 272,082        685,238  

Restricted cash (*)

     74,082        72,840  
  

 

 

    

 

 

 
   W 346,164        758,078  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted cash (*)

   W 11        11  
  

 

 

    

 

 

 
   W 3,197,656        3,360,649  
  

 

 

    

 

 

 

 

(*)

Restricted cash includes mutual growth fund to aid LG Group’s second and third-tier suppliers, pledge to enforce investment plans according to the receipt of subsidies from Gumi city and Gyeongsangbuk-do and others.

 

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5.

Receivables and Other Assets

 

  (a)

Trade accounts and notes receivable as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Trade, net

   W 2,736,700        3,275,902  

Due from related parties

     754,324        1,049,218  
  

 

 

    

 

 

 
   W 3,491,024        4,325,120  
  

 

 

    

 

 

 

 

  (b)

Other accounts receivable as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Non-trade receivable, net

   W 142,991        150,554  

Accrued income

     11,605        14,273  
  

 

 

    

 

 

 
   W 154,596        164,827  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of June 30, 2018 and December 31, 2017 are W378 million and W10,821 million, respectively.

 

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5.

Receivables and Other Assets, Continued

 

  (c)

The aging of trade accounts and note receivable, other accounts receivable and long-term non-trade receivable as of June 30, 2018 and December 31, 2017 are as follows:

 

     June 30, 2018  
     Book value      Impairment loss  
(In millions of won)    Trade accounts
and notes
receivable
     Other
accounts
receivable (*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable (*)
    Long-term
non-trade
receivable
 

Not past due

   W 3,456,114        130,697        637        (502     (384     (6

Past due 1-15 days

     5,263        8,024        —          —         (29     —    

Past due 16-30 days

     28,563        1,338        —          —         —         —    

Past due 31-60 days

     1,586        301        —          —         (2     —    

Past due more than 60 days

     —          15,196        —          —         (545     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 3,491,526        155,556        637        (502     (960     (6
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*)

Other accounts receivable includes non-trade receivable and accrued income.

 

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5.

Receivables and Other Assets, Continued

 

     December 31, 2017  
     Book value      Impairment loss  
(In millions of won)    Trade accounts
and notes
receivable
     Other
accounts
receivable (*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable (*)
    Long-term
non-trade
receivable
 

Not past due

   W 4,323,465        164,755        8,738        (1,631     (905     —    

Past due 1-15 days

     2,652        488        —          (1     (3     —    

Past due 16-30 days

     631        65        —          —         (1     —    

Past due 31-60 days

     —          208        —          —         (2     —    

Past due more than 60 days

     4        622        —          —         (400     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 4,326,752        166,138        8,738        (1,632     (1,311     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable, other accounts receivable and long-term non-trade receivable for the six-month periods ended June 30, 2018 and the year ended December 31, 2017 are as follows:

 

     2018      2017  
(In millions of won)    Trade accounts
and notes
receivable
    Other accounts
receivable
    Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
     Other
accounts
receivable
     Long-term
non-trade
receivable
 

Balance at the beginning of the period

   W 1,632       1,311       —          1,488        1,093        23  

(Reversal of) bad debt expense

     (1,130     (351     6        144        218        (23
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 502       960       6        1,632        1,311        —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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5.

Receivables and Other Assets, Continued

 

  (d)

Other assets as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Current assets

     

Advance payments

   W 12,163        7,973  

Prepaid expenses

     161,602        83,626  

Value added tax refundable

     246,468        148,351  

Emission rights

     —          1,978  

Right to recover returned goods(*)

     5,360        —    
  

 

 

    

 

 

 
   W 425,593        241,928  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 383,709        394,759  
  

 

 

    

 

 

 
   W 383,709        394,759  
  

 

 

    

 

 

 

 

(*)

As a result from the initial application of K-IFRS No. 1115, the Group recognized an asset for right to recover returned goods returned by the customer.

 

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6.

Other Financial Assets

 

  (a)

Other financial assets as of June 30, 2018 are as follows:

 

(In millions of won)    June 30, 2018  

Current assets

  

Financial asset carried at amortized cost

  

Deposits

   W 1,313  

Short-term loans

     13,147  
  

 

 

 
   W 14,460  
  

 

 

 

Non-current assets

  

Financial asset at fair value through profit or loss

  

Equity instrument

  

Intellectual Discovery, Ltd.

   W 729  

Kyulux, Inc

     1,968  

Fineeva Co., Ltd.

     285  

ARCH Venture Fund Vill, L.P.

     2,498  
  

 

 

 
   W 5,480  
  

 

 

 

Convertible bonds

   W 1,552  

Derivatives(*)

     341  

Financial asset at fair value through

other comprehensive income

  

Debt instrument

  

Government bonds

   W 158  

Financial asset carried at amortized cost

  

Deposits

   W 22,284  

Long-term loans

     43,967  

Long-term non-trade receivable

     631  
  

 

 

 
   W 74,413  
  

 

 

 

 

(*)

Represents interest rate swap contracts related to borrowings with variable interest rate.

 

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6.

Other Financial Assets, Continued

 

  (b)

Other financial assets as of December 31, 2017 are as follows:

 

(In millions of won)    December 31, 2017  

Current assets

  

Available-for-sale financial assets Debt instrument Government bonds

   W  6  

Deposits

     10,480  

Short-term loans

     16,766  
  

 

 

 
   W  27,252  
  

 

 

 

Non-current assets

  

Financial asset at fair value through profit or loss

   W  1,552  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W  156  

Equity instrument

  

Intellectual Discovery, Ltd.

   W  729  

Kyulux, Inc

     1,968  

ARCH Venture Fund Vill, LP.

     2,283  
  

 

 

 
   W  4,980  
  

 

 

 

Deposits

   W  19,898  

Long-term loans

     32,408  

Long-term non-trade receivable

     8,738  

Derivatives(*)

     842  
  

 

 

 
   W  68,574  
  

 

 

 

 

  (*)

Represents interest rate swap contracts related to borrowings with variable interest rate.

Other financial assets of related parties as of June 30, 2018 and December 31, 2017 are W2,250 million and W2,750 million, respectively.

 

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7.

Inventories

Inventories as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Finished goods

   W 1,068,182        965,643  

Work-in-process

     789,972        748,592  

Raw materials

     394,018        344,997  

Supplies

     178,135        290,852  
  

 

 

    

 

 

 
   W 2,430,307        2,350,084  
  

 

 

    

 

 

 

For the six-month periods ended June 30, 2018 and 2017, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:

 

(In millions of won)    2018      2017  

Inventories recognized as cost of sales

   W 10,277,585        10,457,900  

Including: inventory write-downs

     261,036        234,880  

Including: reversal and usage of inventory write-downs

     (206,127      (204,123

 

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8.

Investments in Equity Accounted Investees

Associates as of June 30, 2018 are as follows:

 

(In millions of won)

Associates

 

Location

  Fiscal year
end
  Date of
incorporation
 

Business

  2018     2017  
  Percentage
of ownership
        Carrying
amount
    Percentage
of ownership
        Carrying
amount
 

Paju Electric Glass Co., Ltd.

 

Paju,

South Korea

  December
31
  January

2005

  Manufacture electric glass for FPDs   40%  

W

 

    46,165     40%   W       46,511  

INVENIA Co., Ltd.

 

Seongnam,

South Korea

  December
31
  January

2001

  Develop and manufacture equipment for FPDs   13%       2,788     13%       2,887  

WooRee E&L Co., Ltd.

 

Ansan,

South Korea

  December
31
  June

2008

  Manufacture LED back light unit packages   14%       3,607     14%       7,270  

LB Gemini New Growth Fund No. 16 (*1)

 

Seoul,

South Korea

  December
31
  December

2009

  Invest in small and middle sized companies and benefit from M&A opportunities   31%       4,509     31%       5,910  

YAS Co., Ltd.

 

Paju,

South Korea

  December
31
  April

2002

  Develop and manufacture deposition equipment for OLEDs   18%       16,423     15%       15,888  

AVATEC Co., Ltd.

 

Daegu,

South Korea

  December
31
  August

2000

  Process and sell electric glass for FPDs   17%       23,009     17%       23,732  

Arctic Sentinel, Inc.

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

2008

 

Develop and manufacture

tablet for kids

  10%       —       10%       —    

 

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8.

Investments in Equity Accounted Investees, Continued

 

                         

(In millions of won)

Associates

 

Location

  Fiscal
year end
  Date of
incorporation
 

Business

  2018     2017  
  Percentage
of
ownership
  Carrying
amount
    Percentage
of
ownership
  Carrying
amount
 

CYNORA GmbH

 

Bruchsal,

Germany

  December 31   March

2003

  Develop organic emitting materials for displays and lighting devices   14%   W 20,309     14%   W 20,309  

Material Science Co., Ltd. (*2)

 

Seoul,

South Korea

  December 31   January

2014

  Develop, manufacture, and sell materials for display   10%     3,954     —       —    

Nanosys Inc. (*3)

 

Milpitas,

U.S.A.

  December 31   July

2001

  Develop, manufacture, and sell materials for display   4%     10,732     —       —    
           

 

 

     

 

 

 
            W 131,496       W 122,507  
           

 

 

     

 

 

 

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

 

  (*1)

The Controlling Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). On the other hand, a resolution to dissolve the fund was approved at the general meeting and the fund is in process of liquidation as of June 30, 2018.

 

  (*2)

In March 2018, the Controlling Company invested W4,000 million and acquired 10,767 shares of common stock with voting rights in Material Science Co., Ltd. As of June 30, 2018, the Controlling Company‘s ownership percentage in Material Science Co., Ltd. is 10% and the Controlling Company has the right to appoint a director to the board of directors of the investee.

 

  (*3)

In May 2018, the Controlling Company invested W10,732 million and acquired 5,699,954 shares of preferred stock with voting rights in Nanosys Inc. As of June 30, 2018, the Controlling Company‘s ownership percentage in Nanosys Inc. is 4% and the Controlling Company has the right to appoint a director to the board of directors of the investee.

 

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8.

Investments in Equity Accounted Investees, Continued

 

Dividends received from equity method investees for the six-month periods ended June 30, 2018 and 2017 amounted to W5,272 million and W8,639 million, respectively.

 

9.

Property, Plant and Equipment

For the six-month periods ended June 30, 2018 and 2017, the Group purchased property, plant and equipment of W4,267,244 million and W3,531,056 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W54,323 million and 2.67%, and W16,983 million and 1.93% for the six-month periods ended June 30, 2018 and 2017, respectively. Also, for the six-month periods ended June 30, 2018 and 2017, the Group disposed of property, plant and equipment with carrying amounts of W66,931 million and W30,445 million, respectively, and recognized W4,330 million and W10,568 million as gain and loss, respectively, on disposal of property, plant and equipment for the six-month period ended June 30, 2018 (gain and loss for the six-month period ended June 30, 2017: W13,352 million and W5,370 million, respectively).

 

10.

Intangible Assets

 

  (a)

The Group capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of June 30, 2018 and December 31, 2017 are W352,694 million and W296,760 million, respectively.

 

  (b)

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

 

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11.

Financial Liabilities

(a) Financial liabilities as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Current

     

Current portion of long-term borrowings and bonds

   W 2,182,368        1,452,926  

Non-current

     

Won denominated borrowings

   W 1,980,933        1,251,258  

Foreign currency denominated borrowings

     1,657,827        1,392,931  

Bonds

     1,745,325        1,506,003  
  

 

 

    

 

 

 
   W 5,384,085        4,150,192  
  

 

 

    

 

 

 

(b) Won denominated long-term borrowings as of June 30, 2018 and December 31, 2017 are as follows:

 

                    

(In millions of won)

Lender

  

Annual interest rate

as of

June 30, 2018 (%)

   June 30, 2018      December 31,
2017
 

Woori Bank

   2.75    W 1,584        1,922  

Shinhan Bank

   CD rate (91days) + 0.30      200,000        200,000  

Korea Development Bank and others

  

CD rate (91days) + 0.64~0.74

2.28~3.25

     2,480,000        1,250,000  

Less current portion of long-term borrowings

        (700,651      (200,664
     

 

 

    

 

 

 
      W 1,980,933        1,251,258  
     

 

 

    

 

 

 

 

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11.

Financial Liabilities, Continued

 

(c) Foreign currency denominated long-term borrowings as of June 30, 2018 and December 31, 2017 are as follows:

 

   

(In millions of won, USD and CNY)

Lender

   Annual interest rate
as of
June 30, 2018 (%)(*)
     June 30, 2018      December 31,
2017
 

The ExportImport Bank of Korea

     3ML+0.55~1.04      W 790,799        755,337  

China Construction Bank and others

    

USD: 3ML+0.80~2.00

CNY: PBOC X 0.90

 

 

     1,974,038        1,385,097  
        

 

 

 

Foreign currency equivalent

      USD    2,170      USD   1,500  
      CNY    1,954      CNY    3,263  

Less current portion of long-term borrowings

      W (1,107,010      (747,503
     

 

 

    

 

 

 
      W 1,657,827        1,392,931  
     

 

 

    

 

 

 

 

  (*)

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

 

  (d)

Details of bonds issued and outstanding as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    Maturity      Annual interest rate
as of

June 30, 2018 (%)
     June 30, 2018      December 31, 2017  

Won denominated bonds (*)

           

Publicly issued bonds

    

November 2018 ~

February 2023

 

 

     1.80~3.73      W 2,015,000        2,015,000  

Privately placed bonds

    

May 2025 ~

May 2033

 

 

     3.25~4.25        110,000        —    

Less discount on bonds

           (4,968      (4,238

Less current portion

           (374,707      (504,759
        

 

 

    

 

 

 
         W 1,745,325        1,506,003  
        

 

 

    

 

 

 

 

  (*)

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

 

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12.

Employee Benefits

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

 

  (a)

Net defined benefit liabilities recognized as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Present value of partially funded defined benefit obligations

   W 1,633,438        1,562,424  

Fair value of plan assets

     (1,428,011      (1,466,977
  

 

 

    

 

 

 
   W 205,427        95,447  
  

 

 

    

 

 

 

 

  (b)

Expenses recognized in profit or loss for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Current service cost

   W 51,628        49,100        103,187        97,851  

Net interest cost

     242        598        484        1,196  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 51,870        49,698        103,671        99,047  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c)

Plan assets as of June 30, 2018 and December 31, 2017 are as follows:

 

               
(In millions of won)    June 30, 2018      December 31, 2017  

Guaranteed deposits in banks

   W  1,428,011        1,466,977  

As of June 30, 2018, the Controlling Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., Shinhan Bank and others.

 

  (d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Remeasurements of net defined benefit liabilities

   W (4,973      (3,599      (11,392      (8,324

Tax effect

     1,330        871        3,626        2,014  
  

 

 

    

 

 

    

 

 

    

 

 

 

Remeasurements of net defined benefit liabilities, net of income tax

   W (3,643      (2,728      (7,766      (6,310
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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13.

Provisions and Other Liabilities

 

  (a)

Changes in provisions for the six-month period ended June 30, 2018 are as follows:

 

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

Balance at January 1, 2018

   W 43        102,450        1,835        104,328  
     

 

 

    

 

 

    

 

 

 

Adjustment from adoption of
K-IFRS No. 1115

     —          —          9,789        9,789  

Additions (reversals)

     —          92,062        (5,744      86,318  

Usage

     —          (98,523      —          (98,523
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2018

   W 43        95,989        5,880        101,912  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 43        73,801        5,880        79,724  

Non-current

   W —          22,188        —          22,188  

 

  (*)

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

 

  (b)

Other liabilities as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Current liabilities

     

Withholdings

   W 51,741        63,766  

Unearned revenues

     8,823        12,225  

Security deposits

     1,020        —    

Dividends payable

     52,616        —    
  

 

 

    

 

 

 
   W 114,200        75,991  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 79,392        70,561  

Security deposits

     5,664        —    

Long-term other accounts payable

     1        2  
  

 

 

    

 

 

 
   W 85,057        70,563  
  

 

 

    

 

 

 

 

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14.

Contingencies and Commitments

(a) Legal Proceedings

Anti-trust litigations

Argos Limited and affiliated companies (“Argos”) filed a Notice of Claim against the Controlling Company and LG Display Taiwan Co., Ltd. in the High Court of Justice in London alleging infringement of Treaty on the Functioning of the European Union and Agreement on the European Economic Area. Prior to Argos’ filing of Particulars of Claim and service, the Controlling Company and LG Display Taiwan Co., Ltd. reached a settlement in principle with Argos in December 2017. The parties expect to execute a settlement agreement in 2018.

Others

The Group is defending against various claims in addition to pending proceedings described above. The Group does not have a present obligation for these matters and has not recognized any provision at June 30, 2018.

(b) Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,743 million (W1,955,662 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of June 30, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

 

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14. Contingencies and Commitments, Continued

 

The Controlling Company and oversea subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables sales and the amount of sold accounts receivables before maturity by contract are as follows:

 

(In millions of USD and KRW)                                 
          Maximum      Not yet due  
Classification   

Financial institutions

   Contractual
amount
     KRW
equivalent
     Contractual
amount
     KRW
equivalent
 

Controlling

   Shinhan Bank    KRW   90,000        90,000        —          —    

Company

   Sumitomo Mitsui Banking Corporation    USD   20        22,434        —          —    
   Bank of Tokyo-Mitsubishi UFJ    USD   70        78,519        USD 47        49,904  
   BNP Paribas    USD   150        168,255        —          —    
   ING Bank    USD   150        168,255        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 
      USD   390           USD 47     
      KRW   90,000        527,463        —          49,904  
     

 

 

    

 

 

    

 

 

    

 

 

 

Subsidiaries

              

LG Display Singapore

    Pte. Ltd.

   Standard Chartered Bank    USD   300        336,510        USD 110        123,387  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Taiwan

    Co., Ltd.

   BNP Paribas    USD   82        91,979        —          —    
  

Hongkong & Shanghai

    Banking Corp.

   USD   50        56,085        —          —    
   Taishin International Bank    USD   289        324,171        —          —    
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Germany GmbH

   Citibank    USD   160        179,472        —          —    
   BNP Paribas    USD   75        84,128        —          —    
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display

    America, Inc.

   Hongkong & Shanghai Banking Corp.    USD   400        448,680        USD 400        448,678  
   Standard Chartered Bank    USD   400        448,680        —          —    
  

Sumitomo Mitsui

    Banking Corporation

   USD   250        280,425        USD 40        44,869  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Japan Co., Ltd.

  

Sumitomo Mitsui

    Banking Corporation

   USD   90        100,953        —          —    
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Guangzhou Trading Co., Ltd.

   Industrial and Commercial Bank of China    USD   64        71,789        —          —    
  

 

  

 

 

    

 

 

    

 

 

    

 

 

 
      USD   2,160        2,422,872        USD 550        616,934  
     

 

 

    

 

 

    

 

 

    

 

 

 
      USD   2,550           USD 597     
      KRW   90,000        2,950,335        —          666,838  
     

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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14.

Contingencies and Commitments, Continued

 

Letters of credit

As of June 30, 2018, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 30 million (W33,651 million) with KEB Hana Bank, USD 80 million (W89,736 million) with Bank of China and USD 50 million (W56,085 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 1,600 million (W1,794,720 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements and USD 8.5 million (W9,534 million) from Shinhan Bank for value added tax payments in Poland.

LG Display (China) Co., Ltd. and other subsidiaries are provided with payment guarantees from the China Construction Bank Corporation and other various banks amounting to CNY 1,030 million (W174,492 million), JPY 900 million (W9,133 million), EUR 2.5 million (W3,243 million), VND 38,167 million (W1,866 million), USD 0.5 million (W561 million), PLN 0.2 million (W59 million) and, respectively, for their local tax payments and utility payments.

License agreements

As of June 30, 2018, in relation to its LCD business, the Group has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of June 30, 2018, in connection with long-term supply agreements with customers, the Controlling Company recognized USD 1,600 million (W1,794,720 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Controlling Company received payment guarantees amounting to USD 1,600 million (W1,794,720 million) from KEB Hana Bank and other various banks relating to advances received.

Pledged assets

Regarding the secured bank borrowing amounting to USD 270 million (W302,648 million) and CNY 655 million (W110,896 million) from China Construction Bank, as of June 30, 2018, the Group provided its property, plant and equipment and others with carrying amount of W215,979 million as pledged assets.

 

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15.

Capital and Reserves

 

  (a)

Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), and as of June 30, 2018 and December 31, 2017, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2017 to June 30, 2018.

 

  (b)

Reserves

Reserves consist mainly of the following:

Translation reserve

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

Other comprehensive income (loss) from associates

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

Reserves as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018     December 31, 2017  

Foreign currency translation differences for foreign operations

     W (141,844)       (259,749

Other comprehensive loss from associates (excluding remeasurements)

     (27,842     (28,531
  

 

 

   

 

 

 
     W (169,686)       (288,280
  

 

 

   

 

 

 

 

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16.

Revenue

Details of revenue for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

               
(In millions of won)    For the three-month periods ended
June 30
     For the six-month periods ended
June 30
 
     2018      2017      2018      2017  

Sales of goods

   W 5,601,749        6,613,513        11,266,199        13,664,421  

Royalties

     4,167        4,671        9,575        11,215  

Others

     5,332        10,702        10,638        15,412  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,611,248        6,628,886        11,286,412        13,691,048  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

17.

Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the three-month and six-month periods ended June 30, 2018 and 2017.

 

  (a)

Revenue by geography

 

        
(In millions of won)    For the three-month periods
ended June 30,
     For the six-month
periods ended June 30,
 

Region

   2018      2017      2018      2017  

Domestic

   W 437,277        461,735        871,390        1,004,946  

Foreign

           

China

     3,431,123        4,282,599        7,027,414        8,932,091  

Asia (excluding China)

     577,441        641,251        979,715        1,218,970  

United States

     579,967        645,817        1,193,880        1,293,694  

Europe (excluding Poland)

     347,324        343,802        693,376        626,115  

Poland

     238,116        253,682        520,637        615,232  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sub total

   W 5,173,971        6,167,151        10,415,022        12,686,102  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 5,611,248        6,628,886        11,286,412        13,691,048  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sales to Company A and Company B amount to W3,290,397 million and W2,692,462 million, respectively, for the six-month period ended June 30, 2018 (the six-month period ended June 30, 2017: W4,041,690 million and W3,251,702 million). The Group’s top ten end-brand customers together accounted for 77% of sales for the six-month period ended June 30, 2018 (the six-month period ended June 30, 2017: 80%).

 

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17.

Geographic and Other Information, Continued

 

  (b)

Non-current assets by geography

 

   
     June 30, 2018      December 31, 2017  

(In millions of won)

Region

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

Domestic

   W 14,589,582        770,962        12,487,111        731,373  

Foreign

           

China

     3,078,244        13,507        2,929,739        17,244  

Others

     1,364,856        161,957        785,110        164,204  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sub total

     4,443,100        175,464        3,714,849        181,448  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 19,032,682        946,426        16,201,960        912,821  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c)

Revenue by product and services

 

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

(In millions of won)

Product

   2018      2017      2018      2017  

Televisions

   W 2,331,519        3,043,029        4,745,269        6,042,653  

Desktop monitors

     982,871        1,137,471        1,918,902        2,210,563  

Tablet products

     411,583        487,030        887,712        1,071,873  

Notebook computers

     629,432        538,723        1,219,131        1,114,345  

Mobile and others

     1,255,843        1,422,633        2,515,398        3,251,614  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  5,611,248        6,628,886        11,286,412        13,691,048  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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18.

The Nature of Expenses and Others

The classification of expenses by nature for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Changes in inventories

   (79,923)        (60,215      (80,224      (55,599

Purchases of raw materials, merchandise and others

     2,982,655        3,067,295        5,810,279        6,401,079  

Depreciation and amortization

     909,036        779,132        1,819,111        1,494,996  

Outsourcing fees

     191,551        171,439        381,773        354,239  

Labor costs

     834,508        758,912        1,692,192        1,529,602  

Supplies and others

     249,089        300,563        493,253        552,278  

Utility

     211,048        199,841        432,317        400,342  

Fees and commissions

     177,621        175,486        369,327        337,219  

Shipping costs

     58,878        66,102        113,303        122,429  

Advertising

     23,584        44,969        38,528        89,458  

Warranty expenses

     56,415        50,402        92,062        126,252  

Taxes and dues

     37,942        29,760        66,629        50,860  

Travel

     26,040        22,792        52,170        41,731  

Others

     197,932        229,333        379,452        432,840  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,876,376        5,835,811        11,660,172        11,877,726  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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19.

Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Salaries and wages

   W 89,529        77,190        180,592        158,440  

Expenses related to defined

benefit plans

     7,578        6,917        15,062        13,801  

Other employee benefits

     23,648        22,300        46,720        45,007  

Shipping costs

     48,795        57,751        94,666        106,340  

Fees and commissions

     51,138        48,290        99,835        95,274  

Depreciation

     41,029        33,930        80,824        68,699  

Taxes and dues

     24,788        19,170        37,895        28,131  

Advertising

     23,584        44,969        38,528        89,458  

Warranty expenses

     56,415        50,402        92,062        126,252  

Rent

     6,541        5,836        13,190        13,859  

Insurance

     2,994        3,339        5,877        6,234  

Travel

     5,545        7,172        11,723        13,657  

Training

     3,986        4,910        6,553        8,456  

Others

     14,366        15,807        31,697        32,528  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  399,936        397,983        755,224        806,136  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20.

Personnel Expenses

Details of personnel expenses for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Salaries and wages

   W 710,725        638,553        1,424,159        1,268,889  

Other employee benefits

     120,974        107,817        259,158        227,561  

Contributions to National Pension plan

     18,673        17,835        37,480        35,752  

Expenses related to defined benefit plan

     51,870        49,698        103,671        99,047  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  902,242        813,903        1,824,468        1,631,249  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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21.

Other Non-operating Income and Other Non-operating Expenses

 

  (a)

Details of other non-operating income for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Foreign currency gain

   W 369,413        152,169        589,883        519,128  

Gain on disposal of property, plant and equipment

     324        1,792        4,330        13,352  

Gain on disposal of intangible assets

     —          308        239        308  

Reversal of impairment loss on intangible assets

     —          —          36        —    

Rental income

     254        1,276        587        2,689  

Others

     522        578        2,986        5,005  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  370,513        156,123        598,061        540,482  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Details of other non-operating expenses for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Foreign currency loss

   W 418,035        76,331        620,469        650,194  

Loss on disposal of property, plant and equipment

     2,257        3,139        10,568        5,370  

Impairment loss on property, plant and equipment

     27,491        —          27,491        —    

Impairment loss on intangible assets

     265        —          301        1,677  

Donations

     1,207        8,078        3,073        10,452  

Other bad debt expenses

     —          —          28        78  

Others

     5,800        10        5,868        250  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  455,055        87,558        667,798        668,021  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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22.

Finance Income and Finance Costs

 

  (a)

Finance income and costs recognized in profit and loss for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
Finance income    2018      2017      2018      2017  

Interest income

   W 20,099        12,185        39,568        24,293  

Foreign currency gain

     12,710        33,005        114,202        100,770  

Gain on transaction of derivatives

     77        3,106        113        3,106  

Gain on valuation of derivatives

     —          50        —          255  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W  32,886        48,346        153,883        128,424  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   W 21,529        21,529        44,288        47,286  

Foreign currency loss

     37,878        46,956        144,182        51,214  

Loss on disposal of investments in equity accounted investees

     —          18,823        —          42,023  

Loss on impairment of investments in equity accounted investees

     —          4,234        —          4,234  

Loss on impairment of

available-for-sale financial assets

     —          1,298        —          1,298  

Loss on sale of trade accounts and notes receivable

     1,391        119        1,736        149  

Loss on transaction of derivatives

     5        110        43        211  

Loss on valuation of derivatives

     259        593        501        —    

Other

     904        364        1,577        592  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 61,966        94,026        192,327        147,007  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Finance income and costs recognized in other comprehensive income or loss for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Foreign currency translation differences for foreign operations

   W 12,042        138,890        139,932        (110,787
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance income (costs) recognized in other comprehensive income or loss after tax

   W 12,042        138,890        139,932        (110,787
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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23.

Income Taxes

 

  (a)

Details of income tax expense (benefit) for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month periods
ended June 30,
     For the six-month
periods ended June 30,
 
(In millions of won)    2018      2017      2018      2017  

Current tax expense

      42,789        190,016        92,173        313,986  

Deferred tax benefit

     (82,266      (94,865      (178,443      (40,212
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense (benefit)

   W  (39,477)        95,151        (86,270      273,774  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Deferred Tax Assets and Liabilities

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

Deferred tax assets and liabilities as of June 30, 2018 and December 31, 2017 are attributable to the following:

 

     Assets      Liabilities     Total  
(In millions of won)    June
30, 2018
     December,
31, 2017
     June
30, 2018
    December,
31, 2017
    June
30, 2018
    December,
31, 2017
 

Other accounts receivable, net

   W —          —          (518     (1,441     (518     (1,441

Inventories, net

     36,757        34,550        —         —         36,757       34,550  

Defined benefit liabilities, net

     33,311        2,375        —         —         33,311       2,375  

Investments in subsidiaries and associates

     21,146        29,061        —         —         21,146       29,061  

Accrued expenses

     139,457        183,903        —         —         139,457       183,903  

Property, plant and equipment

     448,170        409,928        —         —         448,170       409,928  

Intangible assets

     3,336        3,457        (15,854     (24,646     (12,518     (21,189

Provisions

     25,132        27,018        —         —         25,132       27,018  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     23,268        27,562        —         —         23,268       27,562  

Tax loss carryforwards

     173,793        —          —         —         173,793       —    

Tax credit carryforwards

     254,763        268,926        —         —         254,763       268,926  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 1,159,146        986,793        (16,372     (26,087     1,142,774       960,706  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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23.

Income Taxes, Continued

 

Statutory tax rate applicable to the Controlling Company was 24.2% for the year ended December 31, 2017. During the year ended December 31 2017, certain amendments to corporate income tax rules in the Republic of Korea were enacted and effective on January 1, 2018 that resulted in application of 27.5% for taxable income in excess of W300,000 million. Deferred taxes as of June 30, 2018 and December 31, 2017 have been measured using the applicable tax rates from the amendment.

Meanwhile, effective tax rate for the six-month period ended June 30, 2018 differs from statutory tax rate primarily due to change of the probability of utilizing deferred tax assets including tax credit carryforwards.

 

24.

Earnings (Loss) Per Share

 

  (a)

Basic earnings (loss) per share for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
(In won and number of shares)    2018      2017      2018     2017  

Profit (loss) attributable to owners of the Controlling Company

   W (297,385,160,764)        690,300,682,980        (356,839,048,265     1,323,790,377,205  

Weighted-average number of common stocks outstanding

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

 

 

    

 

 

    

 

 

   

 

 

 

Earnings (loss) per share

   W (831)        1,929        (997     3,700  
  

 

 

    

 

 

    

 

 

   

 

 

 

For the three-month and six-month periods ended June 30, 2018 and 2017, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.

 

  (b)

Diluted earnings (loss) per share for the three-month and six-month periods ended June 30, 2018 and 2017 are not calculated since there was no potential common stock.

 

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25.

Financial Risk Management

 

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

 

  (a)

Market risk

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

 

  (i)

Currency risk

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

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

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts as of June 30, 2018 and December 31, 2017 is as follows:

 

     June 30, 2018  
(In millions)    USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     695       238       6,710       72       1       185       3,345,966  

Deposits in banks

     —         —         400       —         —         —         —    

Trade accounts and notes receivable

     2,758       2       331       —         —         —         —    

Non-trade receivable

     69       815       139       4       3       —         11,893  

Other assets denominated in foreign currencies

     33       713       4,589       88       6       31       2,373  

Trade accounts and notes payable

     (1,078     (13,149     (2,931     —         —         —         (126,466

Other accounts payable

     (447     (10,253     (3,592     (4     (6     (3     (1,171,563

Borrowings

     (2,170     —         (1,954     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (140     (21,634     3,692       160       4       213       2,062,203  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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25.

Financial Risk Management, Continued

 

     December 31, 2017  
(In millions)    USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     1,228       152       6,940       16       3       165       342,063  

Deposits in banks

     —         —         750       —         —         —         —    

Trade accounts and notes receivable

     3,316       11       1,453       —         —         —         —    

Non-trade receivable

     62       1,340       136       2       9       —         13,405  

Other assets denominated in foreign currencies

     1       206       596       7       —         —         1,882  

Trade accounts and notes payable

     (1,345     (14,898     (2,843     —         —         —         (102,398

Other accounts payable

     (285     (14,653     (2,403     (11     (8     (4     (2,138,370

Borrowings

     (1,500     —         (3,263     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     1,477       (27,842     1,366       14       4       161       (1,883,418
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average exchange rates applied for the six-month periods ended June 30, 2018 and 2017 and the exchange rates at June 30, 2018 and December 31, 2017 are as follows:

 

     Average rate      Reporting date spot rate  
(In won)    2018      2017      June 30,
2018
     December 31,
2017
 

USD

   W 1,075.44        1,141.76      W 1,121.70        1,071.40  

JPY

     9.89        10.16        10.15        9.49  

CNY

     168.98        166.41        169.41        163.65  

TWD

     36.42        37.21        36.67        35.92  

EUR

     1,301.51        1,235.32        1,297.02        1,279.25  

PLN

     308.55        289.34        297.32        306.07  

VND

     0.0472        0.0503        0.0489        0.0472  

 

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25.

Financial Risk Management, Continued

 

ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in foreign currency as of June 30, 2018 and December 31, 2017, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

     June 30, 2018      December 31, 2017  
(In millions of won)    Equity      Profit
or loss
     Equity      Profit
or loss
 

USD (5 percent weakening)

   W (25,011)        45,226        50,040        91,238  

JPY (5 percent weakening)

     (8,252      (7,185      (10,294      (9,141

CNY (5 percent weakening)

     29,398        4,957        13,212        (6,396

TWD (5 percent weakening)

     293        —          23        1  

EUR (5 percent weakening)

     235        (51      16        594  

PLN (5 percent weakening)

     3,229        (151      2,515        (120

VND (5 percent weakening)

     5,042        —          (4,445      —    

A stronger won against the above currencies as of June 30, 2018 and December 31, 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

(ii) Interest rate risk

Interest rate risk arises principally from the Group’s bonds and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures.

i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of June 30, 2018 and December 31, 2017 is as follows:

 

(In millions of won)    June 30, 2018      December 31,
2017
 

Fixed rate instruments

     

Financial assets

   W 3,197,803        3,360,800  

Financial liabilities

     (4,301,616      (2,962,671
  

 

 

    

 

 

 
   W  (1,103,813)        398,129  
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (3,264,837)        (2,640,447

 

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25.

Financial Risk Management, Continued

 

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

As of June 30, 2018 and December 31, 2017, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

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

June 30, 2018

         

Variable rate instruments(*)

   W (21,133     21,133        (21,133     21,133  

December 31, 2017

         

Variable rate instruments(*)

   W (17,362)       17,362        (17,362     17,362  

 

(*)

Financial instruments subject to interest rate swap not qualified for hedging are excluded.

 

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25.

Financial Risk Management, Continued

 

  (b)

Credit risk

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

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

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

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

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of June 30, 2018 and December 31, 2017 are as follows:

i) As of June 30, 2018

 

(In millions of won)    June 30, 2018  

Financial assets carried at amortized cost

  

Cash and cash equivalents

   W 2,851,481  

Deposits in banks

     346,175  

Trade accounts and notes receivable

     3,491,024  

Non-trade receivable

     142,991  

Accrued income

     11,605  

Deposits

     23,597  

Short-term loans

     13,147  

Long-term loans

     43,967  

Long-term non-trade receivable

     631  
  

 

 

 
   W 6,924,618  
  

 

 

 

Financial assets at fair value through profit or loss

  

Convertible bonds

   W 1,552  

Derivatives

     341  
  

 

 

 
   W 1,893  
  

 

 

 

Financial assets at fair value through other comprehensive income

  

Debt instrument

   W 158  
  

 

 

 
   W  6,926,669  
  

 

 

 

 

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25.

Financial Risk Management, Continued

 

  ii)

As of December 31, 2017

 

        
(In millions of won)    December 31, 2017  

Cash and cash equivalents

   W 2,602,560  

Deposits in banks

     758,089  

Trade accounts and notes receivable

     4,325,120  

Non-trade receivable

     150,554  

Accrued income

     14,273  

Available-for-sale financial assets

     162  

Financial assets at fair value through profit or loss

     1,552  

Deposits

     30,378  

Short-term loans

     16,766  

Long-term loans

     32,408  

Long-term non-trade receivable

     8,738  

Derivatives

     842  
  

 

 

 
   W 7,941,442  
  

 

 

 

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

 

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25.

Financial Risk Management, Continued

 

  (c)

Liquidity risk

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

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

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of June 30, 2018.

 

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

Non-derivative
financial liabilities :

                    

Secured bank borrowings

   W 413,544        406,782        148,403        258,379        —          —          —    

Unsecured bank borrowings

     5,032,877        5,339,567        633,903        863,633        638,043        2,809,430        394,558  

Unsecured bond issues

     2,120,032        2,305,514        142,383        285,239        600,283        1,135,296        142,313  

Trade accounts and notes payable

     2,969,607        2,969,607        2,969,607        —          —          —          —    

Other accounts payable

     3,244,839        3,244,839        3,244,839        —          —          —          —    

Long-term other accounts payable

     1        1        —          —          1        —          —    

Security deposits

     6,684        6,684        1,020        —          5,664        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W  13,787,584        14,272,994        7,140,155        1,407,251        1,243,991        3,944,726        536,871  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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25.

Financial Risk Management, Continued

 

  (d)

Capital management

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

 

(In millions of won)    June 30, 2018     December 31, 2017  

Total liabilities

   W 16,911,363       14,178,177  

Total equity

     14,532,848       14,981,510  

Cash and deposits in banks (*1)

     3,197,645       3,360,638  

Borrowings (including bonds)

     7,566,453       5,603,118  

Total liabilities to equity ratio

     116     95

Net borrowings to equity ratio (*2)

     30     15

 

(*1)

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

(*2)

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

 

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25.

Financial Risk Management, Continued

 

 

  (e)

Determination of fair value

(i) Measurement of fair value

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

i) Current Assets and Liabilities

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

ii) Trade Receivables and Other Receivables

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

iii) Investments in Equity and Debt Instruments

The fair value of marketable financial assets at fair value through profit or loss and at fair value through other comprehensive income is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using valuation methods.

iv) Non-derivative Financial Liabilities

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

 

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25.

Financial Risk Management, Continued

 

 

  (ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed consolidated interim statements of financial position as of June 30, 2018 and December 31, 2017 are as follows:

i) As of June 30, 2018

 

     June 30, 2018  
(In millions of won)    Carrying amounts      Fair Values  

Financial assets carried at amortized cost

     

Cash and cash equivalents

   W 2,851,481        (*)  

Deposits in banks

     346,175        (*)  

Trade accounts and notes receivable

     3,491,024        (*)  

Non-trade receivable

     142,991        (*)  

Accrued income

     11,605        (*)  

Deposits

     23,597        (*)  

Short-term loans

     13,147        (*)  

Long-term loans

     43,967        (*)  

Long-term non-trade receivable

     631        (*)  

Financial assets at fair value through profit or loss

     

Equity instrument

   W 5,480        5,480  

Convertible bonds

     1,552        1,552  

Derivatives

     341        341  

Financial assets at fair value through other comprehensive income

     

Debt instrument

   W 158        158  

Liabilities carried at amortized cost

     

Secured bank borrowings

   W 413,544        413,544  

Unsecured bank borrowings

     5,032,877        5,059,174  

Unsecured bond issues

     2,120,032        2,141,129  

Trade accounts and notes payable

     2,969,607        (*)  

Other accounts payable

     3,244,839        3,244,886  

Long-term other accounts payable

     1        (*)  

Security deposits

     6,684        (*)  

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

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25.

Financial Risk Management, Continued

 

 

  ii)

As of December 31, 2017

 

     December 31, 2017  
(In millions of won)    Carrying amounts      Fair Values  

Assets carried at fair value

     

Available-for-sale financial assets

   W 162        162  

Financial asset at fair value through profit or loss

     1,552        1,552  

Derivatives

     842        842  

Assets carried at amortized cost

     

Cash and cash equivalents

   W 2,602,560        (*)  

Deposits in banks

     758,089        (*)  

Trade accounts and notes receivable

     4,325,120        (*)  

Non-trade receivable

     150,554        (*)  

Accrued income

     14,273        (*)  

Deposits

     30,378        (*)  

Short-term loans

     16,766        (*)  

Long-term loans

     32,408        (*)  

Long-term non-trade receivable

     8,738        (*)  

Liabilities carried at amortized cost

     

Secured bank borrowings

   W 642,172        642,172  

Unsecured bank borrowings

     2,950,184        2,955,399  

Unsecured bond issues

     2,010,762        2,016,086  

Trade accounts and notes payable

     2,875,090        (*)  

Other accounts payable

     3,169,937        3,170,147  

Long-term other accounts payable

     2        (*)  

(*) Excluded from disclosures as the carrying amount approximates fair value.

 

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25.

Financial Risk Management, Continued

 

 

  (iii)

Fair values of financial assets and liabilities

 

  i)

Fair value hierarchy

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

 

   

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

 

   

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

 

   

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

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of June 30, 2018 and December 31, 2017 are as follows:

 

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

June 30, 2018

           

Financial assets at fair value through profit or loss

           

Available-for-sale financial assets

   W     —          —          5,480        5,480  

Financial assets at fair value through profit or loss

     —          —          1,552        1,552  

Derivatives

     —          —          341        341  

Financial asset at fair value through other comprehensive income

           

Debt instrument

     158        —          —          158  

 

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

December 31, 2017

           

Available-for-sale financial assets

   W      162        —          —          162  

Financial assets at fair value through profit or loss

     —          —          1,552        1,552  

Derivatives

     —          —          842        842  

 

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25.

Financial Risk Management, Continued

 

 

  iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Secured bank borrowings

     W    —          —          413,544       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Unsecured bank borrowings

     —          —          5,059,174       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Unsecured bond issues

     —          —          2,141,129       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Other accounts payable

     —          —          3,244,886       
Discounted
cash flow
 
 
    
Discount
rate
 
 

 

(In millions of won)    December 31, 2017      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Secured bank borrowings

     W    —          —          642,172       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Unsecured bank borrowings

     —          —          2,955,399       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Unsecured bond issues

     —          —          2,016,086       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Other accounts payable

     —          —          3,170,147       
Discounted
cash flow
 
 
    
Discount
rate
 
 

 

iv)

The interest rates applied for determination of the above fair value as of June 30, 2018 and December 31, 2017 are as follows:

 

     June 30, 2018     December 31, 2017  

Borrowings, bonds and others

     1.55~3.83     1.57~2.92

 

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26.

Changes in liabilities arising from financing activities

 

Changes in liabilities arising from financing activities for the six-month period ended June 30, 2018 are as follows:

 

                  Non-cash transactions         
(In millions of won)    January 1, 2018      Cash flows from
financing
activities
    Dividends
declared
     Reclassification     Gain or loss on
foreign currency
translation
    Effective
interest
adjustment
     June 30,
2018
 

Current portion of long-term borrowings and bonds

   W 1,452,926        (646,476     —          1,317,052       58,602       264        2,182,368  

Long-term borrowings

     2,644,189        1,982,289       —          (1,057,367     69,649       —          3,638,760  

Bonds

     1,506,003        498,170       —          (259,685     —         837        1,745,325  

Dividends payable

     —          —         53,107        —         (491     —          52,616  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
   W  5,603,118        1,833,983       53,107        —         127,760       1,101        7,619,069  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

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27.

Related Parties and Others

 

  (a)

Related parties

Related parties as of June 30, 2018 are as follows:

 

Classification

  

Description

Associates(*)

   Paju Electric Glass Co., Ltd. and others

Subsidiaries of Associates

   AVATEC Electronics Yantai Co., Ltd. and others

Entity that has significant influence over the Controlling Company

   LG Electronics Inc.

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

   Subsidiaries of LG Electronics Inc.

 

(*)

Details of associates are described in note 8.

 

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27.

Related Parties and Others, Continued

 

  (b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month period ended June 30, 2018  
                   Purchase and others  
(In millions of won)    Sales and
others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

INVENIA Co., Ltd.

   W —          —          499        13,972        —          206  

AVATEC Co., Ltd.

     —          —          —          —          17,306        104  

Paju Electric Glass Co., Ltd.

     —          —          91,301        —          —          923  

WooRee E&L Co., Ltd.

     —          —          38        —          —          39  

YAS Co., Ltd.

     —          —          1,421        5,135        —          722  

LB Gemini New Growth Fund No. 16

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          93,259        19,107        17,306        1,994  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W  336,637        —          12,427        335,653        —          29,554  

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

                 

LG Electronics India Pvt. Ltd.

   W 15,419        —          —          —          —          13  

LG Electronics Vietnam Haiphong Co., Ltd.

     37,248        —          —          201        —          3  

 

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27.

Related Parties and Others, Continued

 

     For the three-month period ended June 30, 2018  
                   Purchase and others  
(In millions of won)    Sales and
others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

LG Electronics Nanjing New Technology Co., Ltd.

   W 50,101        —          —          —          —          1,221  

LG Electronics RUS, LLC

     24,052        —          —          —          —          779  

LG Electronics do Brasil Ltda.

     38,694        —          —          —          —          60  

LG Innotek Co., Ltd.

     10,098        —          33,022        —          —          16,970  

Qingdao LG Inspur Digital Communication Co., Ltd.

     12,430        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     41,059        —          —          —          —          —    

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

     45,185        —          —          —          —          11  

LG Electronics Mlawa Sp. z o.o.

     189,415        —          —          —          —          242  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          86,247        —          5,770  

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

     246,502        —          —          —          —          398  

HiEntech Co., Ltd.

     —          —          —          1,132        —          6,931  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          5,619        —          4,294  

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

     —          —          122        1,803        —          17,348  

LG Electronics Almaty Kazakhstan

     782        —          —          —          —          13  

LG Electronics Egypt S.A.E.

     14,881        —          —          —          —          16  

LG Electronics S.A. (Pty) Ltd.

     2,038        —          —          —          —          4  

LG Electronics Taiwan Taipei Co., Ltd.

     3,062        —          —          —          —          64  

Others

     751        —          9        1        —          3,065  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W  731,717        —          33,153        95,003        —          57,202  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,068,354        —          138,839        449,763        17,306        88,750  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

(In millions of won)    For the six-month period ended June 30, 2018  
                   Purchase and others  
(In millions of won)    Sales and
others
     Dividend
income
     Purchase of raw
material and

others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

INVENIA Co., Ltd.

   W —          30        769        21,874        —          278  

AVATEC Co., Ltd.

     —          530        —          —          35,079        223  

Paju Electric Glass Co., Ltd.

     —          4,172        183,798        —          —          1,843  

WooRee E&L Co., Ltd.

     —          —          38        —          —          86  

YAS Co., Ltd.

     —          —          2,181        17,552        —          1,516  

LB Gemini New Growth Fund No. 16

     —          540        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        186,786        39,426        35,079        3,946  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 700,336        —          23,540        557,024        —          48,668  

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

                 

LG Electronics India Pvt. Ltd.

   W 23,774        —          —          —          —          26  

LG Electronics Vietnam Haiphong Co., Ltd.

     70,236        —          —          1,415        —          5  

LG Electronics Nanjing New Technology Co., Ltd.

     121,584        —          —          18        —          1,346  

LG Electronics RUS, LLC

     39,380        —          —          —          —          1,099  

LG Electronics do Brasil Ltda.

     124,699        —          —          —          —          164  

LG Innotek Co., Ltd.

     17,048        —          72,638        —          —          28,052  

 

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27.

Related Parties and Others, Continued

 

 

     For the six-month period ended June 30, 2018  
                   Purchase and others  
(In millions of won)    Sales and
others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Qingdao LG Inspur Digital Communication Co., Ltd.

   W 20,086        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     75,046        —          —          —          —          —    

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

     100,213        —          —          —          —          65  

LG Electronics Mlawa Sp. z o.o.

     362,037        —          —          —          —          314  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          205,784        —          6,261  

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

     493,430        —          —          —          —          1,296  

HiEntech Co., Ltd.

     —          —          —          6,362        —          14,866  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          13,160        —          14,537  

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

     —          —          128        1,803        —          19,416  

LG Electronics Almaty Kazakhstan

     3,207        —          —          —          —          21  

LG Electronics Egypt S.A.E.

     14,881        —          —          —          —          16  

LG Electronics S.A. (Pty) Ltd.

     4,435        —          —          —          —          6  

LG Electronics Taiwan Taipei Co., Ltd.

     6,738        —          —          —          —          192  

Others

     790        —          9        1        —          3,726  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W  1,477,584        —          72,775        228,543        —          91,408  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,177,920        5,272        283,101        824,993        35,079        144,022  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

 

     For the three-month period ended June 30, 2017  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

New Optics Ltd.(*)

   W —          —          —          —          —          —    

INVENIA Co., Ltd.

     10        —          159        27,298        —          38  

AVATEC Co., Ltd.

     —          —          —          —          21,397        247  

Paju Electric Glass Co., Ltd.

     —          —          96,031        —          —          1,096  

Shinbo Electric Co., Ltd.(*)

     —          —          —          —          —          —    

Narenanotech Corporation(*)

     —          —          53        4,852        —          19  

WooRee E&L Co., Ltd.

     —          —          —          —          —          12  

YAS Co., Ltd.

     —          —          900        25,070        —          1,090  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 10        —          97,143        57,220        21,397        2,502  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 376,993        —          8,910        264,818        —          24,770  

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

                 

LG Electronics India Pvt. Ltd.

   W 15,943        —          —          —          —          24  

LG Electronics Vietnam Haiphong Co., Ltd.

     46,767        —          —          —          —          31  

 

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27.

Related Parties and Others, Continued

 

 

     For the three-month period ended June 30, 2017  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

LG Electronics Nanjing New Technology Co., Ltd.

   W 72,433        —          —          42        —          264  

LG Electronics RUS, LLC

     15,308        —          —          —          —          165  

LG Electronics do Brasil Ltda.

     57,647        —          —          —          —          142  

LG Innotek Co., Ltd.

     2,239        —          47,633        —          —          3,515  

Qingdao LG Inspur Digital Communication Co., Ltd.

     18,722        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     50,372        —          —          —          —          —    

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

     85,286        —          —          —          —          18  

LG Electronics Mlawa Sp. z o.o.

     201,698        —          —          —          —          138  

LG Electronics Taiwan Taipei Co., Ltd.

     3,455        —          —          —          —          16  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          46,094        —          1,632  

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

     289,939        —          —          —          —          515  

LG Electronics Almaty Kazakhstan

     3,236        —          —          —          —          12  

HiEntech Co., Ltd.

     —          —          —          1,800        —          6,315  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          4,395        —          3,859  

LG Electronics S.A. (Pty) Ltd.

     4,351        —          —          —          —          11  

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

     —          —          —          3,167        —          1,338  

Hi M Solutek

     —          —          2        —          —          743  

Others

     12        —          —          —          —          563  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 867,408        —          47,635        55,498        —          19,301  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,244,411        —          153,688        377,536        21,397        46,573  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

 

     For the six-month period ended June 30, 2017  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

New Optics Ltd.(*)

   W 1        —          —          —          4        6  

INVENIA Co., Ltd.

     10        —          613        47,388        —          151  

AVATEC Co., Ltd.

     —          530        —          —          41,214        498  

Paju Electric Glass Co., Ltd.

     —          8,109        194,794        —          —          2,193  

Shinbo Electric Co., Ltd.(*)

     15,812        —          —          —          —          21  

Narenanotech Corporation(*)

     —          —          279        21,727        —          244  

WooRee E&L Co., Ltd.

     —          —          —          —          —          88  

YAS Co., Ltd.

     —          —          1,730        44,278        —          1,482  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 15,823        8,639        197,416        113,393        41,218        4,683  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 853,914        —          15,956        496,697        —          60,262  

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

                 

LG Electronics India Pvt. Ltd.

   W 38,219        —          —          —          —          53  

LG Electronics Vietnam Haiphong Co., Ltd.

     99,723        —          —          4,813        —          124  

LG Electronics Nanjing New Technology Co., Ltd.

     149,327        —          —          42        —          371  

 

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27.

Related Parties and Others, Continued

 

     For the six-month period ended June 30, 2017  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

LG Electronics RUS, LLC

   W 44,283        —          —          —          —          451  

LG Electronics do Brasil Ltda.

     120,263        —          —          —          —          233  

LG Innotek Co., Ltd.

     6,513        —          88,956        —          —          10,967  

Qingdao LG Inspur Digital Communication Co., Ltd.

     34,685        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     122,336        —          —          —          —          —    

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

     163,620        —          —          —          —          69  

LG Electronics Mlawa Sp. z o.o.

     492,435        —          —          —          —          440  

LG Electronics Taiwan Taipei Co., Ltd.

     7,053        —          —          —          —          39  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          75,824        —          3,016  

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

     594,449        —          —          —          —          840  

LG Electronics Almaty Kazakhstan

     7,279        —          —          —          —          12  

HiEntech Co., Ltd.

     —          —          —          1,800        —          18,826  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          9,077        —          10,459  

LG Electronics S.A. (Pty) Ltd.

     9,533        —          —          —          —          14  

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

     —          —          —          3,676        —          1,338  

Hi M Solutek

     —          —          2        —          —          1,530  

Others

     26        —          —          —          —          1,442  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,889,744        —          88,958        95,232        —          50,224  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,759,481        8,639        302,330        705,322        41,218        115,169  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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27.

Related Parties and Others, Continued

 

  (c)

Trade accounts and notes receivable and payable as of June 30, 2018 and December 31, 2017 are as follows:

 

        
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
(In millions of won)    June 30, 2018      December 31, 2017      June 30, 2018      December 31, 2017  

Associates

           

INVENIA Co., Ltd.

   W 2,125        2,375        7,536        18,662  

AVATEC Co., Ltd.

     —          —          4,706        2,949  

Paju Electric Glass Co., Ltd.

     —          —          65,051        60,141  

WooRee E&L Co., Ltd.

     —          —          74        61  

YAS Co., Ltd.

     125        375        5,934        6,474  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,250        2,750        83,301        88,287  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

           

LG Electronics Inc.

   W 311,356        550,335        359,580        257,071  

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

           

LG Electronics India Pvt. Ltd.

   W 12,499        3,030        2        —    

LG Electronics Vietnam Haiphong Co., Ltd.

     27,744        36,017        314        3,917  

LG Electronics Nanjing New Technology Co., Ltd.

     33,020        46,373        37        699  

LG Electronics RUS, LLC

     13,891        25,102        8        80  

LG Electronics do Brasil Ltda.

     10,863        19,091        —          10  

 

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27.

Related Parties and Others, Continued

 

 

        
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
(In millions of won)    June 30, 2018      December 31, 2017      June 30, 2018      December 31, 2017  

LG Innotek Co., Ltd.

   W 6,652        407        49,179        62,675  

Qingdao LG Inspur Digital Communication Co., Ltd.

     8,901        13,061        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     44,549        55,278        —          —    

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

     28,926        29,440        —          —    

LG Electronics Mlawa Sp. z o.o.

     127,508        136,874        5        25  

LG Hitachi Water Solutions Co., Ltd.

     —          —          154,137        154,864  

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

     108,493        137,413        —          82  

HiEntech Co., Ltd.

     —          —          5,194        6,679  

HiEntech (Tianjin) Co., Ltd.

     —          —          9,325        5,600  

LG Electronics Egypt S.A.E.

     15,103        —          —          1  

Others

     5,197        7,618        4,678        1,714  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 443,346        509,704        222,879        236,346  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 756,952        1,062,789        665,760        581,704  
  

 

 

    

 

 

    

 

 

    

 

 

 

.

 

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27.

Related Parties and Others, Continued

 

  (d)

Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the six-month periods ended June 30, 2018 and 2017 are as follows:

 

        
     2018      2017  

(In millions of won)

Associates

   Loans      Collection
of loans
     Loans      Collection
of loans
 

INVENIA Co., Ltd.

   W —          250        —          208  

YAS Co., Ltd.

     —          250        —          208  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          500        —          416  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

 

  (e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and six-month periods ended June 30, 2018 and 2017 and as of June 30, 2018 and December 31, 2017 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.

 

   
     For the three-month period
ended June 30, 2018
     For the six-month period
ended June 30, 2018
     June 30, 2018  
(In millions of won)    Sales and
others
     Purchase
and others
     Sales and
others
     Purchase and
others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG Chem Ltd. and its subsidiaries

   W —          279,505        1,564        576,206        152        200,538  

LG Household & Health Care and its subsidiaries

     —          13        —          25        —          1  

LG Hausys Ltd

     —          —          1,110        1        —          —    

Serveone and its subsidiaries

     104        521,406        208        997,374        21,307        614,627  

Silicon Works Co., Ltd

     —          160,546        —          303,841        —          110,868  

LG CNS Co., Ltd. and its subsidiaries

     —          48,152        —          85,965        1        41,743  

LG Holdings Japan Co., Ltd.

     —          456        —          912        2,040        —    

LG International Corp. and its subsidiaries(*)

     203,365        147,486        387,758        320,473        158,173        258,957  

LG Management Development Institute

     —          2,305        —          5,118        3,480        367  

G2R Inc. and its subsidiaries

     —          36,171        —          40,212        —          35,145  

LG Corp.

     —          12,578        —          25,369        9,810        5,583  

LG Uplus Corp.

     21        396        21        620        —          34  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 203,490        1,208,714        390,661        2,356,116        194,963        1,267,863  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27.

Related Parties and Others, Continued

 

(*)

For transactions which LG International and its subsidiaries act as an agent of the Group and receive commission revenue from the Group, above transaction amount only include commission revenue recognized by LG International and its subsidiaries. For prior year comparative purpose, gross sales and others for the three-month and six-month periods ended June 30, 2018 amount to W213,854 million and W414,482 million, respectively, and gross purchase and others for the three-month and six-month periods ended June 30, 2018 amount to W261,929 million and W675,765 million, respectively.

 

   
     For the three-month period
ended June 30, 2017
     For the six-month period
ended June 30, 2017
     December 31, 2017  
(In millions of won)    Sales
and others
     Purchase
and others
     Sales
and others
     Purchase
and others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG Chem Ltd. and its subsidiaries

   W 7        319,718        12        649,940        8,684        246,491  

LG Household & Health Care and its subsidiaries

     —          33        —          95        —          3  

LG Hausys Ltd

     418        —          836        44        —          374  

Serveone and its subsidiaries

     134        419,479        249        790,879        21,567        645,847  

Silicon Works Co., Ltd

     —          138,450        —          285,467        —          120,031  

SK Siltron Co., Ltd. (formerly, Siltron Co., Ltd.)(*)

     —          —          10        —          —          —    

LG CNS Co., Ltd.and its subsidiaries

     102        55,155        139        85,785        4        115,899  

LG Holdings Japan Co., Ltd.

     —          468        —          936        1,908        —    

LG International Corp. and its subsidiaries

     185,311        486,001        361,377        882,023        112,200        230,179  

LG Management Development Institute

     —          2,372        —          4,382        3,480        699  

G2R Inc. and its subsidiaries

     —          6,747        —          7,576        —          14,785  

LG Corp.

     —          15,259        —          30,958        4,700        1,523  

Lusem Co., Ltd.(*)

     3        132        8        631        1        53  

LG Uplus Corp.

     47        134        98        320        —          1,505  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 186,022        1,443,948        362,729        2,739,036        152,544        1,377,389  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

 

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27.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

Compensation costs of key management for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30,
     For the six-month
periods ended June 30,
 
     2018      2017      2018      2017  

Short-term benefits

   W 928        691        1,816        2,008  

Expenses related to the defined benefit plan

     314        204        587        297  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,242        895        2,403        2,305  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

28.

Subsequent Event

In July 2018, the Group established LG Display(China) High-tech,Co., Ltd. in Guangzhou, China to manufacture display products and the Group has a 70% equity interest of this subsidiary.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2018 and 2017

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  

Independent Auditors’ Review Report

     109  

Condensed Separate Interim Statements of Financial Position

     111  

Condensed Separate Interim Statements of Comprehensive Income (Loss)

     112  

Condensed Separate Interim Statements of Changes in Equity

     113  

Condensed Separate Interim Statements of Cash Flows

     114  

Notes to the Condensed Separate Interim Financial Statements

     116  

 

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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.:

Reviewed Financial Statements

We have reviewed the accompanying condensed separate interim financial statements of LG Display Co., Ltd. (the “Company”) which comprise the condensed separate interim statement of financial position as of June 30, 2018, the condensed separate interim statements of comprehensive income (loss) for each of the three-month and six-month periods ended June 30, 2018 and 2017, and statements of changes in equity and cash flows for the six-month periods ended June 30, 2018 and 2017, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Separate Interim Financial Statements

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

Auditors’ Responsibility

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

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

Conclusion

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

Other Matters    

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

We audited the separate statement of financial position as of December 31, 2017, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 22, 2018, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2017, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

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KPMG Samjong Accounting Corp.

Seoul, Korea

August 10, 2018

 

This report is effective as of August 10, 2018, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Financial Position

(Unaudited)

As of June 30, 2018 and December 31, 2017

 

(In millions of won)    Note      Jun 30, 2018      December 31, 2017  

Assets

        

Cash and cash equivalents

     4,24      W 547,561        566,408

Deposits in banks

     4,24        277,200      580,770

Trade accounts and notes receivable, net

     5,14,24,26        3,563,489      4,673,570

Other accounts receivable, net

     5,24        704,417      687,109

Other current financial assets

     6,24        9,759      13,499

Inventories

     7        1,740,091      1,682,245

Prepaid income tax

        1,261      —    

Other current assets

     5        236,416      177,473
     

 

 

    

 

 

 

Total current assets

        7,080,194      8,381,074

Deposits in banks

     4,24        11      11

Investments

     8        3,234,203      2,683,941

Other non-current financial assets

     6,24        80,421      64,772

Property, plant and equipment, net

     9        14,589,494      12,487,001

Intangible assets, net

     10        770,962      731,373

Deferred tax assets

     22        860,531      727,248

Other non-current assets

     5        326,356      333,995
     

 

 

    

 

 

 

Total non-current assets

        19,861,978      17,028,341
     

 

 

    

 

 

 

Total assets

      W 26,942,172        25,409,415
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

     24,26      W 3,099,418        2,391,493

Current financial liabilities

     11,24        1,747,281      1,060,735

Other accounts payable

     24        2,281,510      2,701,823

Accrued expenses

        584,884      755,062

Income tax payable

        —          235,593

Provisions

     13        77,168      73,685

Advances received

     14        376,000      142,700

Other current liabilities

     13        24,888      33,514
     

 

 

    

 

 

 

Total current liabilities

        8,191,149      7,394,605

Non-current financial liabilities

     11,24        3,866,748      3,165,413

Non-current provisions

     13        22,188      28,312

Defined benefit liabilities, net

     12        204,385      94,535

Long-term advances received

     14        1,430,168      830,335

Other non-current liabilities

     13        82,552      66,956
     

 

 

    

 

 

 

Total non-current liabilities

        5,606,041      4,185,551
     

 

 

    

 

 

 

Total liabilities

        13,797,190      11,580,156
     

 

 

    

 

 

 

Equity

        

Share capital

     15        1,789,079      1,789,079

Share premium

        2,251,113      2,251,113

Retained earnings

        9,104,790      9,789,067
     

 

 

    

 

 

 

Total equity

        13,144,982      13,829,259
     

 

 

    

 

 

 

Total liabilities and equity

      W 26,942,172        25,409,415
     

 

 

    

 

 

 

See accompanying notes to the condensed separate interim financial statements.    

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Comprehensive Income (Loss)

(Unaudited)

For the three-month and six-month periods ended June 30, 2018 and 2017

 

(In millions of won, except earnings per share)   Note      For the three-month period
ended June 30
    For the six-month period
ended June 30
 
           2018     2017     2018     2017  

Revenue

    16,26      W 5,034,966       6,022,851   W 10,189,227       12,565,798

Cost of sales

    7,17,26        (4,896,707     (4,927,871     (9,799,231     (10,146,804
    

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

       138,259     1,094,980     389,996     2,418,994

Selling expenses

    18        (130,361     (136,546     (229,574     (303,451

Administrative expenses

    18        (126,262     (115,198     (250,917     (233,000

Research and development expenses

       (290,704     (307,006     (572,194     (587,302
    

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

       (409,068     536,230     (662,689     1,295,241
    

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

    21        5,784     23,806     111,479     95,638

Finance costs

    21        (43,201     (69,048     (60,111     (65,955

Other non-operating income

    20        245,892     82,575     362,802     386,724

Other non-operating expenses

    20        (274,612     (25,291     (386,933     (514,830
    

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before income tax

       (475,205     548,272     (635,452     1,196,818

Income tax expense (benefit)

    22        (57,966     70,417     (137,849     204,851
    

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

       (417,239     477,855     (497,603     991,967
    

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

          

Items that will never be reclassified to profit or loss

          

Remeasurements of net defined benefit liabilities

    12        (4,973     (3,599     (11,392     (8,324

Related income tax

    12        1,330     871     3,626     2,014
    

 

 

   

 

 

   

 

 

   

 

 

 
       (3,643     (2,728     (7,766     (6,310

Other comprehensive loss for the period, net of income tax

       (3,643     (2,728     (7,766     (6,310
    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

     W (420,882     475,127   W (505,369     985,657
    

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share (In Won)

          

Basic earnings (loss) per share

    23      W (1,166     1,335   W (1,391     2,772
    

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

    23      W (1,166     1,335   W (1,391     2,772
    

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.    

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

For the six-month periods ended June 30, 2018 and 2017

 

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

Balances at January 1, 2017

   W 1,789,079        2,251,113      8,195,255     12,235,447
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive income for the period

          

Profit for the period

     —          —          991,967     991,967

Other comprehensive loss

          

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (6,310     (6,310
  

 

 

    

 

 

    

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (6,310     (6,310
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive income for the period

   W —        —          985,657     985,657
  

 

 

    

 

 

    

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

          

Dividends to equity holders

     —          —          (178,908     (178,908
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at June 30, 2017

   W 1,789,079        2,251,113      9,002,004     13,042,196
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at January 1, 2018

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

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

          

Loss for the period

     —          —          (497,603     (497,603

Other comprehensive loss

          

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (7,766     (7,766
  

 

 

    

 

 

    

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (7,766     (7,766
  

 

 

    

 

 

    

 

 

   

 

 

 

Total comprehensive loss for the period

   W —        —          (505,369     (505,369
  

 

 

    

 

 

    

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

          

Dividends to equity holders

     —          —          (178,908     (178,908
  

 

 

    

 

 

    

 

 

   

 

 

 

Balances at June 30, 2018

   W 1,789,079        2,251,113      9,104,790     13,144,982
  

 

 

    

 

 

    

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.    

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows

(Unaudited)

For the six-month periods ended Jun 30, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from operating activities:

       

Profit (loss) for the period

      W (497,603     991,967

Adjustments for:

       

Income tax expense (benefit)

     22        (137,849     204,851

Depreciation

     17        974,417     810,712

Amortization of intangible assets

     17        196,301     201,071

Gain on foreign currency translation

        (163,645     (54,055

Loss on foreign currency translation

        182,923     36,777

Expenses related to defined benefit plans

     12        102,702     98,427

Gain on disposal of property, plant and equipment

        (27,019     (45,817

Loss on disposal of property, plant and equipment

        4,597     3,208

Impairment loss on disposal of property, plant and equipment

        27,491     —    

Gain on disposal of intangible assets

        (239     (308

Impairment loss on intangible assets

        301     1,677

Reversal of impairment loss on intangible assets

        (36     —    

Warranty expenses

        80,411     113,174

Finance income

        (106,070     (75,808

Finance costs

        57,271     57,782

Other income

        (2,173     (16,444

Other expenses

        683     249
     

 

 

   

 

 

 
        1,190,066     1,335,496

Changes in

       

Trade accounts and notes receivable

        1,252,507     367,949

Other accounts receivable

        33,743     (6,546

Inventories

        (144,794     20,121

Other current assets

        (22,256     (59,155

Other non-current assets

        (30,775     (93,161

Trade accounts and notes payable

        602,544     (573,009

Other accounts payable

        (202,574     (79,699

Accrued expenses

        (174,139     (86,658

Provisions

        (92,841     (76,219

Other current liabilities

        (2,559     (7,714

Defined benefit liabilities, net

        (4,244     (4,080

Long-term advances received

        767,830     565,950

Other non-current liabilities

        13,289     3,308
     

 

 

   

 

 

 
        1,995,731     (28,913

Cash generated from operating activities

        2,688,194     2,298,550

Income taxes paid

        (225,644     (168,071

Interests received

        12,443     12,816

Interests paid

        (64,486     (44,920
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 2,410,507     2,098,375
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.    

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows, Continued

(Unaudited)

For the six-month periods ended Jun 30, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from investing activities:

       

Dividends received

      W 24,136     316,469

Increase in deposits in banks

        (241,180     (941,180

Proceeds from withdrawal of deposits in banks

        544,395     1,040,501

Acquisition of available-for-sale financial assets

        —         (4

Acquisition of financial asset at fair value through profit or loss

        (285     —    

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

        6     —    

Acquisition of investments

        (550,262     (51,500

Proceeds from disposal of investments

        2,382     6,697

Acquisition of property, plant and equipment

        (3,260,303     (2,229,875

Proceeds from disposal of property, plant and equipment

        144,530     109,212

Acquisition of intangible assets

        (251,736     (203,509

Proceeds from disposal of intangible assets

        960     750

Government grants received

        1,210     1,505

Receipt from settlement of derivatives

        71     2,895

Proceeds from collection of short-term loans

        6,271     430

Increase in long-term loans

        (19,420     (300

Increase in deposits

        (349     (1,357

Decrease in deposits

        300     626

Proceeds from disposal of emission rights

        10,200     —    
     

 

 

   

 

 

 

Net cash used in investing activities

        (3,589,074     (1,948,640
     

 

 

   

 

 

 

Cash flows from financing activities:

     25       

Repayments of short-term borrowings

        —         (113,209

Proceeds from issuance of debentures

        498,170     298,780

Proceeds from long-term borrowings

        1,230,000     200,000

Repayments of current portion of long-term borrowings and bonds

        (390,339     (364,431

Payment guarantee fee received

        797     —    

Dividends paid

        (178,908     (178,908
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        1,159,720     (157,768
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (18,847     (8,033

Cash and cash equivalents at January 1

        566,408     259,467
     

 

 

   

 

 

 

Cash and cash equivalents at Jun 30

      W 547,561     251,434
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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1.

Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of June 30, 2018, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of June 30, 2018, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of June 30, 2018, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of June 30, 2018, there are 20,572,122 ADSs outstanding.

 

2.

Basis of Presenting Financial Statements

 

  (a)

Statement of Compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the separate financial statements of the Company as of and for the year ended December 31, 2017.

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

This is the first set of the Company’s financial statements where K-IFRS No. 1109, K-IFRS No. 1115, and K-IFRS No. 2122 have been applied. Changes to significant accounting policies are described in Note 3.

 

  (b)

Basis of Measurement

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

 

   

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

   

net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

 

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2.

Basis of Presenting Financial Statements, Continued

 

  (c)

Functional and Presentation Currency

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

 

  (d)

Use of Estimates and Judgments

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

During the six-month period ended June 30, 2018, based on the review of the past accumulated usage information that became available, the Company management reassessed the economic useful life of the Mask and Mold which had previously been classified as inventory. The balances of such Mask and Mold inventories amounted to W90,955 million as of December 31, 2017. Based on the results of the reassessment, the Company changed useful lives of Mask and Mold to two years and accounted for the change as a change in accounting estimate. The Company also changed the classification of Mask and Mold to property, plant and equipment.

In preparing these condensed separate 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 the last annual financial statements, except for new significant judgments and key sources of estimation uncertainty related to the application of K-IFRS No. 1109, K-IFRS No. 1115 in Note 3 and the change in useful life of Mask and Mold.

 

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3.

Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its condensed separate interim financial statements are the same as those followed by the Company in its preparation of the separate financial statements as of and for the year ended December 31, 2017, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the amended accounting standards explained below. The changes in accounting policies are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2018.

 

  (a)

Changes in Accounting Policies

The Company has initially adopted K-IFRS No. 1115, Revenue from Contracts with Customers, K-IFRS No. 1109, Financial Instruments, and K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration, from January 1, 2018.

 

  (i)

K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109 set out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standards replaces K-IFRS No. 1039 Financial Instruments: Recognition and Measurement. The Company adopted K-IFRS No. 1109, Financial Instruments, from January 1, 2018, and the Company has taken an exemption not to restate the financial statements for prior years with respects to transition requirements.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below. There is no impact on the opening balance of retained earnings at January 1, 2018.

i) Classification and measurement of financial assets and financial liabilities

K-IFRS No. 1109 largely retains the existing requirements in K-IFRS No. 1039 for the classification and measurement of financial liabilities. However, it eliminates the previous K-IFRS No. 1039 categories for financial assets of held to maturity, loans and receivables and available for sale.

The adoption K-IFRS No. 1109 has not had a significant effect on the Company’s accounting policies related to financial liabilities and derivative financial instruments. The impact of K-IFRS No. 1109 on the classification and measurement of financial assets is set out below.

Under K-IFRS No. 1109, on initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI-debt investment; FVOCI-equity investment; or FVTPL. The classification of financial assets under K-IFRS 1109 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

   

It is held within a business model whose objective is to hold assets to collect contractual cash flow; and

 

   

its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

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3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

   

It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

   

its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

The following accounting policies apply to the subsequent measurement of financial assets.

 

Financial assets at FVTPL

   These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

Financial assets at amortized cost

   These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

Debt investments at FVOCI

   These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

 

 

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3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

The following table below explain the original measurement categories under K-IFRS No. 1039 and the changes in measurement categories under K-IFRS No. 1109 for each class of the Company’s financial assets as at January 1, 2018 are as below.

 

(In millions of won)    Classification
under
K-IFRS No. 1039
     Classification under
K-IFRS No. 1109
     Carrying amount
under

K-IFRS No. 1039
     Carrying amount
under

K-IFRS No. 1109
     Difference  

Financial assets

              

Cash and cash equivalents

    

Loans and

receivables

 

 

     Amortized cost      W  566,408        566,408        —    

Deposits

    

Loans and

receivables

 

 

     Amortized cost        580,781        580,781        —    

Trade

receivables

    

Loans and

receivables

 

 

     Amortized cost        4,673,570        4,673,570        —    

Other receivables

    

Loans and

receivables

 

 

     Amortized cost        687,109        687,109        —    

Debt

instrument

     Available-for-sale       
FVOCI-debt
instrument
 
 
     162        162        —    

Equity instrument

     Available-for-sale       

Mandatorily at

FVTPL

 

 

     2,697        2,697        —    

Convertible bonds

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     1,552        1,552        —    

Derivatives

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     842        842        —    

Others

    

Loans and

receivables

 

 

     Amortized cost        73,018        73,018        —    
        

 

 

    

 

 

    

 

 

 

Total financial assets

         W  6,586,139        6,586,139        —    
        

 

 

    

 

 

    

 

 

 

As of January 1, 2018, there was no financial liabilities measured at FVTPL.

 

  ii)

Impairment of financial assets

K-IFRS No. 1109 replaces the ‘incurred loss’ model in K-IFRS No. 1039 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under K-IFRS No. 1109, credit losses are recognized earlier than under K-IFRS No. 1039.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt instruments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

 

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3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt instruments at FVOCI, the loss allowance is recognized in OCI, instead of reducing the carrying amount of the asset.

As a result of applying the loss allowances model under K-IFRS No. 1109, as of January 1, 2018, there are no additional loss allowances as compared with the loss allowances under K-IFRS No. 1039.

iii) Hedge Accounting

When initially applying K-IFRS No. 1109, the Company elected as its accounting policy to continue to apply hedge accounting requirements under K-IFRS No. 1039 instead of the requirements in K-IFRS No. 1109. As of January 1, 2018, there is no impact on the condensed separate interim financial statement of the Company resulting from the application of the requirements in K-IFRS No. 1109.

 

  (ii)

K-IFRS No. 1115, Revenue from Contracts with Customers

K-IFRS No. 1115, Revenue from contracts with customers, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. K-IFRS No. 1115 replaces existing revenue recognition guidance, including K-IFRS No. 1018 Revenue, K-IFRS No. 1011, Construction Contracts, K-IFRS No. 2031, Revenue: Barter Transactions Involving Advertising Services, K-IFRS No. 2113, Customer Loyalty Programmes, K-IFRS No. 2115, Agreements for the Construction of Real Estate and K-IFRS No. 2118, Transfers of Assets from Customers.

The Company has initially applied K-IFRS No. 1115, Revenue from contracts with customers, from January 1, 2018. Regarding transition to K-IFRS No.1115, the Company has decided to apply the cumulative effect method, i.e. recognizing the cumulative effect of applying K-IFRS No. 1115 at the date of initial application, which is January 1, 2018, without restatement of the comparative periods presented. The impact on its condensed separate interim financial statements resulting from the application of the new standard is as follows.

Variable Consideration

The consideration received from customers may be variable as the Company allows its customers to return their products according to the contracts. For the year-ended December 31, 2017, the Company recognizes a provision measured at the gross profit for products sold which are expected to be returned. Under K-IFRS No. 1115, the Company shall estimate an amount of variable consideration by using the expected value or the most likely amount, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled and include in the transaction price some or all of an amount of variable consideration estimated only to the extent that is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when return period expires. The Company shall recognize refund liability measured at the amount of consideration received (or receivable) to which the Company does not expect to be entitled and a new asset for the right to recover returned goods. As a result of this change, the refund liability and a new asset for the right to recover returned goods increased by W9,789 million, respectively, as of January 1, 2018. There is no impact on the opening balance of retained earnings at January 1, 2018. (Note 5(d), 13(a))

 

 

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3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

The effect of the application of K-IFRS No. 1115 on the Company’s separate interim statement of financial position as of June 30, 2018 is as follows. There is no impact on the condensed separate interim statement of comprehensive income and the cash flows for the six-month period ended June 30, 2018.

 

                      

(In millions of won)

Categories

   Adoption of
K-IFRS No. 1115
     Adjustments      Adoption of
K-IFRS No. 1018
 

Current Assets

        

Other current assets

   W  236,416        (5,360      231,056  

Current Liabilities

        

Provisions

   W  77,168        (5,360      71,808  

(iii) K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration

According to the new interpretation, K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. There is no significant impact on the condensed separate interim financial statements of the Company.

 

  (b)

New Standards and Amendments Not Yet Adopted

The following new standard is effective for annual periods beginning after January 1, 2018 and earlier application is permitted; however, the Company has not early adopted the following new standard in preparing these condensed separate interim financial statements.

 

  (i)

K-IFRS No. 1116, Leases

The Company plans to adopt K-IFRS No. 1116, Leases, in its separate financial statements for annual period beginning on January 1, 2019, assess the financial impact of the adoption of K-IFRS No. 1116 and disclose the results in its separate financial statements for the year ending December 31, 2018. As of June 30, 2018, other than the potential impacts described in the separate financial statements as of and for the year ended December 31, 2017, there are no significant changes in relation to preparation for the adoption of this new standard.

 

 

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4.

Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of June 30, 2018 and December 31, 2017 are as follows:

 

               
(In millions of won)    June 30, 2018      December 31, 2017  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W  547,561        566,408  

Deposits in banks

     

Time deposits

   W  203,118        507,930  

Restricted cash (*)

     74,082        72,840  
  

 

 

    

 

 

 
   W  277,200        580,770  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted cash (*)

   W  11        11  
  

 

 

    

 

 

 
   W  824,772        1,147,189  
  

 

 

    

 

 

 

 

(*)

Restricted cash includes mutual growth fund to aid LG Group’s second and third-tier suppliers, pledge to enforce investment plans according to the receipt of subsidies from Gumi city and Gyeongsangbuk-do and others.

 

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5.

Receivables and Other Assets

 

  (a)

Trade accounts and notes receivable as of June 30, 2018 and December 31, 2017 are as follows:

 

               
(In millions of won)    June 30, 2018      December 31, 2017  

Trade, net

   W  310,701        355,332  

Due from related parties

     3,252,788        4,318,238  
  

 

 

    

 

 

 
   W  3,563,489        4,673,570  
  

 

 

    

 

 

 

 

  (b)

Other accounts receivable as of June 30, 2018 and December 31, 2017 are as follows:

 

               
(In millions of won)    June 30, 2018      December 31, 2017  

Non-trade receivable, net

   W  699,824        678,454  

Accrued income

     4,593        8,655  
  

 

 

    

 

 

 
   W  704,417        687,109  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of June 30, 2018 and December 31, 2017 are W608,263 million and W567,996 million, respectively.

 

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5.

Receivables and Other Assets, Continued

 

  (c)

The aging of trade accounts and note receivable, other accounts receivable and long-term non-trade receivable as of June 30, 2018 and December 31, 2017 are as follows:

 

     June 30, 2018  
     Book value      Impairment loss  
(In millions of won)    Trade accounts
and notes
receivable
     Other
accounts
receivable(*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable(*)
    Long-term
non-trade
receivable
 

Not past due

   W  3,533,495        686,537        17,740        (4     (239     (6

Past due 1-15 days

     2,495        1,915        —          —         (3     —    

Past due 16-30 days

     27,491        1,338        —          —         —         —    

Past due 31-60 days

     12        284        —          —         (2     —    

Past due more than 60 days

     —          15,132        —          —         (545     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W  3,563,493        705,206        17,740        (4     (789     (6
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*)

Other accounts receivable includes non-trade receivable and accrued income.

 

 

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5.

Receivables and Other Assets, Continued

 

     December 31, 2017  
     Book value      Impairment loss  
(In millions of won)    Trade accounts
and notes
receivable
     Other
accounts
receivable(*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable(*)
    Long-term
non-trade
receivable
 

Not past due

   W  4,673,660        686,837        15,115        (570     (686     —    

Past due 1-15 days

     341        482        —          —         (3     —    

Past due 16-30 days

     135        53        —          —         (1     —    

Past due 31-60 days

     —          207        —          —         (2     —    

Past due more than 60 days

     4        622        —          —         (400     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W  4,674,140        688,201        15,115        (570     (1,092     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable, other accounts receivable and long-term non-trade receivable for the six-month periods ended June 30, 2018 and the year ended December 31, 2017 are as follows:

 

     2018      2017  
(In millions of won)    Trade accounts
and notes
receivable
    Other
accounts
receivable
    Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
     Other
accounts
receivable
     Long-term
non-trade
receivable
 

Balance at the beginning of the period

   W  570       1,092       —          520        804        23  

(Reversal of) bad debt expense

     (566     (303     6        50        288        (23
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W  4       789       6        570        1,092        —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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5.

Receivables and Other Assets, Continued

 

  (d)

Other assets as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     June 30, 2018      December 31, 2017  

Current assets

     

Advance payments

   W  3,632        3,597  

Prepaid expenses

     148,194        76,129  

Value added tax refundable

     79,230        95,769  

Emission rights

     —          1,978  

Right to recover returned goods(*)

     5,360        —    
  

 

 

    

 

 

 
   W  236,416        177,473  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W  326,356        333,995  
  

 

 

    

 

 

 
   W  326,356        333,995  
  

 

 

    

 

 

 

 

(*)

As a result from the initial application of K-IFRS No. 1115, the Company recognized an asset for right to recover returned goods returned by the customer.

 

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6.

Other Financial Assets

 

  (a)

Other financial assets as of June 30, 2018 are as follows:

 

(In millions of won)    June 30, 2018  

Current assets

  

Financial asset carried at amortized cost

  

Short-term loans

   W  9,759  
  

 

 

 
   W   9,759  
  

 

 

 

Non-current assets

  

Financial asset at fair value through profit or loss

  

Equity instrument

  

Intellectual Discovery, Ltd.

   W  729  

Kyulux, Inc

     1,968  

Fineeva Co., Ltd.

     285  
  

 

 

 
   W   2,982  
  

 

 

 

Convertible bonds

   W  1,552  

Derivatives(*)

     341  

Financial asset at fair value through other comprehensive income

  

Debt instrument

  

Government bonds

   W  158  

Financial asset carried at amortized cost

  

Deposits

   W  13,687  

Long-term loans

     43,967  

Long-term non-trade receivable

     17,734  
  

 

 

 
   W   80,421  
  

 

 

 

 

(*)

Represents interest rate swap contracts related to borrowings with variable interest rate.

 

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6.

Other Financial Assets, Continued

 

(b) Other financial assets as of December 31, 2017 are as follows:

 

(In millions of won)    December 31, 2017  

Current assets

  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W  6  

Short-term loans

     13,493  
  

 

 

 
   W   13,499  
  

 

 

 

Non-current assets

  

Financial asset at fair value through profit or loss

   W  1,552  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W  156  

Equity instrument

  

Intellectual Discovery, Ltd.

   W  729  

Kyulux, Inc

     1,968  
  

 

 

 
   W   2,697  
  

 

 

 

Deposits

   W  13,638  

Long-term loans

     30,772  

Long-term non-trade receivable

     15,115  

Derivatives(*)

     842  
  

 

 

 
   W   64,772  
  

 

 

 

 

(*)

Represents interest rate swap contracts related to borrowings with variable interest rate.

Other financial assets of related parties as of June 30, 2018 and December 31, 2017 are W2,250 million and W2,750 million, respectively.

 

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7.

Inventories

Inventories as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Finished goods

   567,646        491,330  

Work-in-process

     713,546        675,324  

Raw materials

     334,064        286,934  

Supplies

     124,835        228,657  
  

 

 

    

 

 

 
   W  1,740,091        1,682,245  
  

 

 

    

 

 

 

For the six-month periods ended June 30, 2018 and 2017, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:

 

(In millions of won)    2018      2017  

Inventories recognized as cost of sales

   W  9,799,231        10,146,804  

Including: inventory write-downs

     237,232        215,927  

Including: reversal and usage of inventory write-downs

     (184,139      (185,454

 

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8.

Investments

(a) Investments in subsidiaries consist of the following:

 

                   June 30, 2018      December 31, 2017  

(In millions of won)

Overseas Subsidiaries

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

LG Display America, Inc.

    

San Jose,

U.S.A.

 

 

    

Sell Display

products

 

 

     100     W36,815        100     W36,815  

LG Display Germany GmbH

    
Eschborn,
Germany
 
 
    

Sell Display

products

 

 

     100     19,373        100     19,373  

LG Display Japan Co., Ltd.

     Tokyo, Japan       

Sell Display

products

 

 

     100     15,686        100     15,686  

LG Display Taiwan Co., Ltd.

     Taipei, Taiwan       

Sell Display

products

 

 

     100     35,230        100     35,230  

LG Display Nanjing Co., Ltd.

     Nanjing, China       

Manufacture

Display products

 

 

     100     593,726        100     593,726  

LG Display Shanghai Co., Ltd.

     Shanghai, China       

Sell Display

products

 

 

     100     9,093        100     9,093  

LG Display Poland Sp. z o.o.

     Wroclaw, Poland       

Manufacture

Display products

 

 

     100     194,992        100     194,992  

LG Display Guangzhou Co., Ltd.

    
Guangzhou,
China
 
 
    

Manufacture

Display products

 

 

     100     293,557        100     293,557  

LG Display Shenzhen Co., Ltd.

     Shenzhen, China       

Sell Display

products

 

 

     100     3,467        100     3,467  

LG Display Singapore Pte. Ltd.

     Singapore       

Sell Display

products

 

 

     100     1,250        100     1,250  

L&T Display Technology

(Fujian) Limited

    

Fujian,

China

 

 

    

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

LG Display Yantai Co., Ltd.

    

Yantai,

China

 

 

    

Manufacture

Display products

 

 

     100     169,195        100     169,195  

Nanumnuri Co., Ltd.

    
Gumi, South
Korea
 
 
     Janitorial services        100     800        100     800  

LG Display (China) Co., Ltd.

     Guangzhou,China       
Manufacture and Sell
Display products
 
 
     51     723,086        51     723,086  

Unified Innovative Technology, LLC

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

LG Display Guangzhou Trading Co., Ltd.

    
Guangzhou,
China
 
 
     Sell Display products        100     218        100     218  

Global OLED Technology LLC

    

Herndon,

U.S.A

 

 

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

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

    
Haiphong,
Vietnam

 
    
Manufacture
Display Products

 
     100     329,978        100     117,378  

Suzhou Lehui Display Co., Ltd.

    

Suzhou,

China

 

 

    

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

LG DISPLAY FUND I LLC(*2)

    
Wilmington,
U.S.A.
 
 
    

Invest in venture
business and obtain
technologies
 
 
 
     100     —          —         —    

Money Market Trust(*3)

    

Seoul,

South Korea

 

 

     Money market trust        100     384,401        100     61,471  
          

 

 

      

 

 

 
           W   3,116,441        W   2,580,911  
          

 

 

      

 

 

 

 

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8.

Investments, Continued

 

(*1) For the six-month period ended June 30, 2018, the Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Company’s ownership percentage in LGDVN as a result of this additional investment.

(*2) For the six-month period ended June 30, 2018, the Company established LG DISPLAY FUND I LLC in Wilmington, U.S.A. to invest in venture business and the Company has a 100% equity interest of this subsidiary.

(*3) For the six-month period ended June 30, 2018, the Company acquired and disposed interests in Money Market Trust (“MMT”) and the MMT amount as of June 30, 2018 is W384,401 million.

(b) Investments in associates consist of the following:

 

                                       
               June 30, 2018      December 31, 2017  

(In millions of won)

Associates

  

Location

  

Business

   Percentage
of ownership
     Book Value      Percentage
of
ownership
     Book Value  

Paju Electric Glass

Co., Ltd.

  

Paju,

South Korea

   Manufacture electric glass for FPDs      40      W45,089        40    W   45,089  

INVENIA Co., Ltd.

  

Seongnam,

South Korea

   Develop and manufacture the equipment for FPDs      13      6,330        13      6,330  

WooRee E&L Co., Ltd.

  

Ansan,

South Korea

   Manufacture LED back light unit packages      14      10,268        14      10,268  

LB Gemini New Growth Fund No.16 (*1)

  

Seoul,

South Korea

   Invest in small and middle sized companies and benefit from M&A opportunities      31      434        31      434  

YAS Co., Ltd.

  

Paju,

South Korea

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

AVATEC Co., Ltd.

  

Daegu,

South Korea

   Process and sell electric glass for FPDs      17      10,600        17      10,600  

Arctic Sentinel, Inc.

  

Los Angeles

,U.S.A.

   Develop and manufacture tablet for kids      10      —          10      —    

CYNORA Gmbh

  

Bruchsal,

Germany

  

Develop organic emitting materials for displays

and lighting devices

     14      20,309        14      20,309  

Material Science Co., Ltd. (*2)

  

Seoul,

South Korea

   Develop, manufacture and sell material for display      10      4,000        —          —    
                 

Nanosys Inc. (*3)

  

Milpitas,

U.S.A.

   Develop, manufacture and sell material for display      4      10,732        —          —    
           

 

 

       

 

 

 
            W   117,762         W   103,030  
           

 

 

       

 

 

 

 

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8.

Investments, Continued

(*1) The Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). On the other hand, a resolution to dissolve the fund was approved at the general meeting and the fund is in process of liquidation as of June 30, 2018.

(*2) In March 2018, the Company invested W4,000 million and acquired 10,767 shares of common stock with voting rights in Material Science Co., Ltd. As of June 30, 2018, the Company‘s ownership percentage in Material Science Co., Ltd. is 10% and the Company has the right to appoint a director to the board of directors of the investee.

(*3) In May 2018, the Company invested W10,732 million and acquired 5,699,954 shares of preferred stock with voting rights in Nanosys Inc. As of June 30, 2018, the Company‘s ownership percentage in Nanosys Inc. is 4% and the Company has the right to appoint a director to the board of directors of the investee.

For the six-month periods ended June 30, 2018 and 2017, the aggregate amount of received dividends from subsidiaries and associates are W95,553 million and W8,639 million, respectively.

 

9.

Property, Plant and Equipment

For the six-month periods ended June 30, 2018 and 2017, the Company purchased property, plant and equipment of W3,106,611 million and W2,400,858 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W47,291 million and 2.64%, and W15,525 million and 1.83% for the six-month periods ended June 30, 2018 and 2017, respectively. Also, for the six-month periods ended June 30, 2018 and 2017, the Company disposed of property, plant and equipment with carrying amounts of W87,948 million and W28,525 million, respectively, and recognized W27,019 million and W4,597 million, respectively, as gain and loss on disposal of property, plant and equipment for the six-month period ended June 30, 2018 (gain and loss for the six-month period ended June 30, 2017: W45,817 million and W3,208 million, respectively).

 

10.

Intangible Assets

 

(a)

The Company capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of June 30, 2018 and December 31, 2017, are W352,694 million and W296,760 million, respectively.

 

(b)

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

 

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11.

Financial Liabilities

(a) Financial liabilities as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Current

     

Current portion of long-term borrowings and bonds

   W 1,742,770        1,058,985  

Current portion of payment guarantee liabilities

     4,511        1,750  
  

 

 

    

 

 

 
   W   1,747,281        1,060,735  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W   1,980,933        1,251,258  

Foreign currency denominated borrowings

     123,387        401,775  

Bonds

     1,745,325        1,506,003  

Payment guarantee liabilities

     17,103        6,377  
  

 

 

    

 

 

 
   W   3,866,748        3,165,413  
  

 

 

    

 

 

 

(b) Won denominated long-term borrowings as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)

Lender

   Annual interest rate as of
June 30, 2018 (%)
    June 30,
2018
     December 31,
2017
 

Woori Bank

     2.75     W   1,584        1,922  

Shinhan Bank

     CD rate  (91days) + 0.30      200,000        200,000  

Korea Development Bank and others

    

CD rate 

2.28~3.25

(91days) + 0.64~0.74, 

 

    2,480,000        1,250,000  

Less current portion of long-term borrowings

       (700,651      (200,664
    

 

 

    

 

 

 
     W   1,980,933        1,251,258  
    

 

 

    

 

 

 

 

(c)

Foreign currency denominated long-term borrowings as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won and USD)

Lender

   Annual interest rate as of
June 30, 2018 (%)(*)
     June 30, 2018      December 31,
2017
 
        

The Export-Import Bank of Korea and Others

     3ML+0.55 ~1.04      W   790,799        755,337  
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 705        USD 705  

Less current portion of long-term borrowings

        (667,412      (353,562
     

 

 

    

 

 

 
      W   123,387        401,775  
     

 

 

    

 

 

 

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

 

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11.

Financial Liabilities, Continued

(d) Details of bonds issued and outstanding as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)   

Maturity

  

Annual interest

rate as of

June 30, 2018 (%)

   June 30, 2018      December 31, 2017  

Won denominated

bonds(*)

           

Publicly issued bonds

  

November 2018 ~

February 2023

   1.80~3.73    W   2,015,000        2,015,000  

Privately placed bonds

  

May 2025 ~

May 2033

   3.25~4.25      110,000        —    

Less discount on bonds

           (4,968      (4,238

Less current portion

           (374,707      (504,759
        

 

 

    

 

 

 
         W   1,745,325        1,506,003  
        

 

 

    

 

 

 

 

(*)

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

 

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12.

Employee Benefits

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

 

  (a)

Net defined benefit liabilities recognized as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Present value of partially funded defined benefit obligations

   W   1,630,721        1,560,525  

Fair value of plan assets

     (1,426,336      (1,465,990
  

 

 

    

 

 

 
   W   204,385        94,535  
  

 

 

    

 

 

 

(b) Expenses recognized in profit or loss for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

(In millions of won)    For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
     2018      2017      2018      2017  

Current service cost

   W   51,109        48,616        102,218        97,231  

Net interest cost

     242        598        484        1,196  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   51,351        49,214        102,702        98,427  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c)

Plan assets as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Guaranteed deposits in banks

   W   1,426,336        1,465,990  

As of June 30, 2018, the Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., Shinhan Bank and others.

 

  (d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended
June 30
 
(In millions of won)    2018      2017      2018      2017  

Remeasurements of net defined benefit liabilities

   W   (4,973)        (3,599      (11,392      (8,324

Tax effect

     1,330        871        3,626        2,014  
  

 

 

    

 

 

    

 

 

    

 

 

 

Remeasurements of net defined benefit liabilities, net of income tax

   W (3,643)        (2,728      (7,766      (6,310
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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13.

Provisions and Other Liabilities

(a) Changes in provisions for the six-month period ended June 30, 2018 are as follows:

 

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

Balance at January 1, 2018

   W   43        100,119       1,835       101,997  

Adjustment from adoption of

K-IFRS 1115

     —          —         9,789       9,789  

Additions (reversals)

     —          80,411       (5,744     74,667  

Usage

     —          (87,097     —         (87,097
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at June 30, 2018

   W   43        93,433       5,880       99,356  
  

 

 

    

 

 

   

 

 

   

 

 

 

Current

   W   43        71,245       5,880       77,168  

Non-current

   W   —          22,188       —         22,188  

 

(*)

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

(b) Other liabilities as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Current liabilities

     

Withholdings

   W   17,771        23,948  

Unearned revenues

     6,097        9,566  

Security deposits

     1,020        —    
  

 

 

    

 

 

 
   W   24,888        33,514  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W   76,888        66,956  

Security deposits

     5,664        —    
  

 

 

    

 

 

 
   W    82,552        66,956  
  

 

 

    

 

 

 

 

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14.

Contingencies and Commitments

(a) Legal Proceedings

Anti-trust litigations

Argos Limited and affiliated companies (“Argos”) filed a Notice of Claim against the Company and LG Display Taiwan Co., Ltd. in the High Court of Justice in London alleging infringement of Treaty on the Functioning of the European Union and Agreement on the European Economic Area. Prior to Argos’ filing of Particulars of Claim and service, the Company and LG Display Taiwan Co., Ltd. reached a settlement in principle with Argos in December 2017. The parties expect to execute a settlement agreement in 2018.

Others

The Company is defending against various claims in addition to pending proceedings described above. The Company does not have a present obligation for these matters and has not recognized any provision at June 30, 2018.

(b) Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,743 million (W1,955,662 million) in connection with the Company’s export sales transactions with its subsidiaries. As of June 30, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.

The Company has a credit facility agreement with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts receivables up to an aggregate of W527,463 million in connection with its domestic and export sales transactions and, as of June 30, 2018, W49,904 million were outstanding in connection with the agreement. In connection with the contract above, the Company has sold its accounts receivable without recourse.

Letters of credit

As of June 30, 2018, the Company has agreements in relation to the opening of letters of credit up to USD 30 million (W33,651 million) with KEB Hana Bank, USD 80 million (W89,736 million) with Bank of China and USD 50 million (W56,085 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Company provides a payment guarantee in connection with the term loan credit facilities of LG Display Vietnam Haiphong, Co., Ltd. amounting to USD 1,195 million (W1,340,432 million) for principals.

In addition, the Company obtained payment guarantees amounting to USD 1,600 million (W1,794,720 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements and USD 8.5 million (W9,534 million) from Shinhan Bank for value added tax payments in Poland.

 

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14.

Contingencies and Commitments, Continued

License agreements

As of June 30, 2018, in relation to its LCD business, the Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of June 30, 2018, in connection with long-term supply agreements with customers, the Company recognized USD 1,600 million (W1,794,720 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Company received payment guarantees amounting to USD 1,600 million (W1,794,720 million) from KEB Hana Bank and other various banks relating to advances received.

 

15.

Share capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value W 5,000), and as of June 30, 2018 and December 31, 2017, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2017 to June 30, 2018.

 

16.

Revenue

Details of revenue for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Sales of goods

   W   5,023,610        6,007,000        10,168,036        12,535,896  

Royalties

     4,139        4,256        7,865        8,856  

Others

     7,217        11,595        13,326        21,046  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,034,966        6,022,851        10,189,227        12,565,798  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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17.

The Nature of Expenses and Others

The classification of expenses by nature for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Changes in inventories

   W (90,035      (79,955      (57,846      20,121  

Purchases of raw materials, merchandise and others

     1,900,976        2,340,533        3,887,562        4,703,099  

Depreciation and amortization

     597,268        521,164        1,170,718        1,011,783  

Outsourcing fees

     1,570,819        1,202,085        2,909,586        2,565,267  

Labor costs

     677,964        633,077        1,374,209        1,266,212  

Supplies and others

     198,336        246,740        389,504        454,946  

Utility

     168,339        164,941        348,151        334,336  

Fees and commissions

     137,998        113,094        278,525        230,455  

Shipping costs

     23,212        29,068        50,520        56,242  

Advertising

     23,486        44,965        38,415        89,454  

Warranty expenses

     51,071        44,997        80,411        113,174  

Travel

     23,843        20,352        47,867        36,839  

Taxes and dues

     13,242        11,235        29,014        23,631  

Others

     183,215        203,771        346,650        380,726  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   5,479,734        5,496,067        10,893,286        11,286,285  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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18.

Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Salaries and wages

   W 62,776        52,943        125,571        106,039  

Expenses related to defined benefit plans

     7,058        6,557        14,092        13,112  

Other employee benefits

     10,568        10,913        22,649        25,561  

Shipping costs

     15,598        22,873        36,152        44,499  

Fees and commissions

     36,968        23,374        64,333        54,347  

Depreciation

     27,552        21,888        53,976        44,613  

Taxes and dues

     699        690        1,492        1,004  

Advertising

     23,486        44,965        38,415        89,454  

Warranty expenses

     51,071        44,997        80,411        113,174  

Rent

     2,678        2,500        5,316        5,007  

Insurance

     1,585        1,853        3,120        3,214  

Travel

     3,934        5,174        8,484        9,733  

Training

     3,356        4,191        5,557        7,358  

Others

     9,294        8,826        20,923        19,336  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 256,623        251,744        480,491        536,451  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

19.

Personnel Expenses

Details of personnel expenses for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Salaries and wages

   W 600,257        550,153        1,198,813        1,085,521  

Other employee benefits

     75,419        70,867        167,491        148,160  

Contributions to National Pension plan

     18,673        17,835        37,480        35,752  

Expenses related to defined benefit plan

     51,351        49,214        102,702        98,427  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 745,700        688,069        1,506,486        1,367,860  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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20.

Other Non-operating Income and Other Non-operating Expenses

(a) Details of other non-operating income for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Foreign currency gain

   W 231,717        65,563        332,436        334,649  

Gain on disposal of property, plant and equipment

     13,304        15,503        27,019        45,817  

Gain on disposal of intangible assets

     —          308        239        308  

Reversal of impairment loss on intangible assets

     —          —          36        —    

Rental income

     429        895        877        1,764  

Others

     442        306        2,195        4,186  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 245,892        82,575        362,802        386,724  
  

 

 

    

 

 

    

 

 

    

 

 

 

(b) Details of other non-operating expenses for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Foreign currency loss

   W 238,912        15,845        345,563        499,102  

Loss on disposal of property, plant and equipment

     865        1,251        4,597        3,208  

Impairment loss on property, plant and equipment

     27,491        —          27,491        —    

Impairment loss on intangible assets

     264        —          301        1,677  

Donations

     1,169        7,979        3,019        10,343  

Other bad debt expenses

     90        204        94        250  

Others

     5,821        12        5,868        250  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 274,612        25,291        386,933        514,830  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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21.

Finance Income and Finance Costs

Finance income and costs recognized in profit and loss for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-
monthperiods ended
June 30
     For the six-month
periods ended
June 30
 
(In millions of won)    2018      2017      2018      2017  

Finance income

           

Interest income

   W 4,139        4,992        8,922        11,030  

Dividend income

     —          —          95,553        8,639  

Foreign currency gain

     603        15,658        5,410        68,405  

Gain on disposal of investments

     —          —          —          4,203  

Gain on transaction of derivatives

     77        3,106        113        3,106  

Gain on valuation of derivatives

     —          50        —          255  

Other

     965        —          1,481        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,784        23,806        111,479        95,638  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expense

   W 9,924        12,445        20,911        28,367  

Foreign currency loss

     32,008        25,255        36,974        7,262  

Loss on disposal of investments

     —          23,281        —          22,401  

Loss on impairment of investments

     —          5,504        —          5,504  

Loss on sale of trade accounts and notes receivable

     68        25        68        25  

Loss on impairment of available-for-sale financial assets

     —          1,298        —          1,298  

Loss on transaction of derivatives

     5        110        43        211  

Loss on valuation of derivatives

     259        593        501        —    

Other

     937        537        1,614        887  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 43,201        69,048        60,111        65,955  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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22. Income Taxes

 

  (a)

Details of income tax expense (benefit) for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Current tax expense (benefit)

   W 1,112        133,672        (8,192      229,777  

Deferred tax benefit

     (59,078      (63,255      (129,657      (24,926
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense (benefit)

   W (57,966)        70,417        (137,849      204,851  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (b)

Deferred Tax Assets and Liabilities

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

Deferred tax assets and liabilities as of June 30, 2018 and December 31, 2017 are attributable to the following:

 

     Assets      Liabilities     Total  
(In millions of won)    June 30,
2018
     December 31,
2017
     June
30, 2018
    December
31, 2017
    June
30, 2018
    December
31, 2017
 

Other accounts receivable, net

   W —          —          (508     (1,378     (508     (1,378

Inventories, net

     32,710        30,688        —         —         32,710       30,688  

Defined benefit liabilities, net

     33,311        2,375        —         —         33,311       2,375  

Accrued expenses

     135,830        179,112        —         —         135,830       179,112  

Property, plant and equipment

     200,209        206,900        —         —         200,209       206,900  

Intangible assets

     821        1,249        —         —         821       1,249  

Provisions

     25,132        27,018        —         —         25,132       27,018  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     10,893        12,345        —         —         10,893       12,345  

Tax loss carryforwards

     167,357        —          —         —         167,357       —    

Tax credit carryforwards

     254,763        268,926        —         —         254,763       268,926  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 861,039        728,626        (508     (1,378     860,531       727,248  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Company was 24.2% for the year ended December 31, 2017. During the year-ended December 31, 2017, certain amendments to corporate income tax rules in the Republic of Korea were enacted and effective on January 1, 2018 that resulted in application of 27.5% for taxable income in excess of W300,000 million. Deferred taxes as of June 30, 2018 and December 31, 2017 have been measured using the applicable tax rates from the amendment.

Meanwhile, effective tax rate for the six-month period ended June 30, 2018 differs from statutory tax rate primarily due to change of the probability of utilizing deferred tax assets including tax credit carryforwards.

 

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23.

Earnings (Loss) Per Share

 

  (a)

Basic earnings (loss) per share for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

(In won and number of shares)    For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
     2018      2017      2018      2017  

Profit (loss) for the period

   W (417,238,094,408)        477,855,702,905        (497,602,540,739)        991,967,435,457  

Weighted-average number of common stocks outstanding

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

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (loss) per share

   W (1,166)        1,335        (1,391)        2,772  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three-month and six-month periods ended June 30, 2018 and 2017, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.

 

  (b)

Diluted earnings (loss) per share for the three-month and six-month periods ended June 30, 2018 and 2017 are not calculated since there was no potential common stock.

 

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24.

Financial Risk Management

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

(a) Market risk

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

 

  (i)

Currency risk

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

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

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of June 30, 2018 and December 31, 2017 is as follows:

 

     June 30, 2018  
(In millions)    USD     JPY     CNY     PLN     EUR  

Cash and cash equivalents

     217       193       —         2       —    

Trade accounts and notes receivable

     2,844       2,400       —         —         —    

Non-trade receivable

     81       812       3,358       —         —    

Trade accounts and notes payable

     (1,647     (12,067     —         —         —    

Other accounts payable

     (124     (9,721     (443     (10     (2

Borrowings

     (705     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     666       (18,383     2,915       (8     (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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24.

Financial Risk Management, Continued

 

     December 31, 2017  
(In millions)    USD     JPY     CNY     PLN     EUR  

Cash and cash equivalents

     482       77       —         2       —    

Trade accounts and notes receivable

     3,840       1,960       —         —         —    

Non-trade receivable

     73       1,674       1,085       —         9  

Trade accounts and notes payable

     (1,337     (13,659     —         —         —    

Other accounts payable

     (170     (12,582     (1,059     (10     (2

Borrowings

     (705     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     2,183       (22,530     26       (8     7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average exchange rates applied for the six-month periods ended June 30, 2018 and 2017 and the exchange rates at June 30, 2018 and December 31, 2017 are as follows:

 

     Average rate      Reporting date spot rate  
(In won)    2018      2017      June 30,
2018
     December 31,
2017
 

USD

   W 1,075.44        1,141.76        1,121.70        1,071.40  

JPY

     9.89        10.16        10.15        9.49  

CNY

     168.98        166.41        169.41        163.65  

PLN

     308.55        289.34        297.32        306.07  

EUR

     1,301.51        1,235.32        1,297.02        1,279.25  

 

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24.

Financial Risk Management, Continued

ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in foreign currency as of June 30, 2018 and December 31, 2017, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible as of the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

     June 30, 2018      December 31, 2017  
(In millions of won)    Equity      Profit or loss      Equity      Profit or loss  

USD (5 percent weakening)

   W   27,081        27,081        88,643        88,643  

JPY (5 percent weakening)

     (6,762      (6,762      (8,104      (8,104

CNY (5 percent weakening)

     17,901        17,901        161        161  

PLN (5 percent weakening)

     (86      (86      (93      (93

EUR (5 percent weakening)

     (94      (94      339        339  

A stronger won against the above currencies as of June 30, 2018 and December 31, 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

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24.

Financial Risk Management, Continued

(ii) Interest rate risk

Interest rate risk arises principally from the Company’s bonds and borrowings. The Company establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures.

i) Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of June 30, 2018 and December 31, 2017 is as follows:

 

(In millions of won)    June 30, 2018      December 31, 2017  

Fixed rate instruments

     

Financial assets

   W 824,919        1,147,340  

Financial liabilities

     (4,301,616      (2,962,671
  

 

 

    

 

 

 
   W (3,476,697      (1,815,331
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (1,290,799      (1,255,350

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

As of June 30, 2018 and December 31, 2017, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

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

June 30, 2018

          

Variable rate instruments(*)

   W (6,821)      6,821        (6,821      6,821  

December 31, 2017

          

Variable rate instruments(*)

   W (6,863)      6,863        (6,863      6,863  

(*) Financial instruments subject to interest rate swap not qualified for hedging are excluded.

 

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24.

Financial Risk Management, Continued

 

(b) Credit risk

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

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

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

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

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of June 30, 2018 and December 31, 2017 are as follows:

i) As of June 30, 2018

 

(In millions of won)    June 30, 2018  

Financial assets carried at amortized cost

  

Cash and cash equivalents

   W 547,561  

Deposits in banks

     277,211  

Trade accounts and notes receivable

     3,563,489  

Non-trade receivable

     699,824  

Accrued income

     4,593  

Deposits

     13,687  

Short-term loans

     9,759  

Long-term loans

     43,967  

Long-term non-trade receivable

     17,734  
  

 

 

 
   W   5,177,825  
  

 

 

 

Financial assets at fair value through profit or loss

  

Convertible bonds

   W 1,552  

Derivatives

     341  
  

 

 

 
   W   1,893  
  

 

 

 

Financial assets at fair value through other comprehensive income

  

Debt instrument

   W 158  
  

 

 

 
   W 5,179,876  
  

 

 

 

 

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24.

Financial Risk Management, Continued

 

  ii)

As of December 31, 2017

 

(In millions of won)    December 31, 2017  

Cash and cash equivalents

   W 566,408  

Deposits in banks

     580,781  

Trade accounts and notes receivable

     4,673,570  

Non-trade receivable

     678,454  

Accrued income

     8,655  

Available-for-sale financial assets

     162  

Financial assets at fair value through profit or loss

     1,552  

Deposits

     13,638  

Short-term loans

     13,493  

Long-term loans

     30,772  

Long-term non-trade receivable

     15,115  

Derivatives

     842  
  

 

 

 
   W 6,583,442  
  

 

 

 

In addition to the financial assets above, as of June 30, 2018, the Company provides a payment guarantee of USD 1,195 million (W1,340,432 million), for its subsidiary.    

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

 

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24.

Financial Risk Management, Continued

 

  (c)

Liquidity risk

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

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

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of June 30, 2018.

 

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

Non-derivative financial liabilities

                    

Unsecured bank borrowings

   W 3,472,383        3,641,197        598,077        820,430        342,202        1,861,550        18,938  

Unsecured bond issues

     2,120,032        2,305,514        142,383        285,239        600,283        1,135,296        142,313  

Trade accounts and notes payable

     3,099,418        3,099,418        3,099,418        —          —          —          —    

Other accounts payable

     2,281,510        2,281,510        2,281,510        —          —          —          —    

Payment guarantee(*)

     21,614        1,530,272        30,798        38,893        77,489        989,552        393,540  

Security deposits

     6,684        6,684        1,020        —          5,664        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 11,001,641        12,864,595        6,153,206        1,144,562        1,025,638        3,986,398        554,791  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

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

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

 

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24.

Financial Risk Management, Continued

 

  (d)

Capital management

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

 

(In millions of won)    June 30, 2018     December 31, 2017  

Total liabilities

   W 13,797,190       11,580,156  

Total equity

     13,144,982       13,829,259  

Cash and deposits in banks (*1)

     824,761       1,147,178  

Borrowings (including bonds)

     5,592,415       4,218,021  

Total liabilities to equity ratio

     105     84

Net borrowings to equity ratio (*2)

     36     22

 

(*1)

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

(*2)

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

 

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24.

Financial Risk Management, Continued

 

(e) Determination of fair value

(i) Measurement of fair value

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

i) Current Assets and Liabilities

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

ii) Trade Receivables and Other Receivables

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

iii) Investments in Equity and Debt Instruments

The fair value of marketable financial assets at fair value through profit or loss and at fair value through other comprehensive income is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using valuation methods.

iv) Non-derivative Financial Liabilities

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

 

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24.

Financial Risk Management, Continued

 

(ii) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed separate interim statements of financial position as of June 30, 2018 and December 31, 2017 are as follows:

i) As of June 30, 2018

 

     June 30, 2018  
(In millions of won)    Carrying amounts      Fair Values  

Financial assets carried at amortized cost

     

Cash and cash equivalents

   W 547,561        (*

Deposits in banks

     277,211        (*

Trade accounts and notes receivable

     3,563,489        (*

Non-trade receivable

     699,824        (*

Accrued income

     4,593        (*

Deposits

     13,687        (*

Short-term loans

     9,759        (*

Long-term loans

     43,967        (*

Long-term non-trade receivable

     17,734        (*

Financial assets at fair value through profit or loss

     

Equity instrument

   W 2,982        2,982  

Convertible bonds

     1,552        1,552  

Derivatives

     341        341  

Financial assets at fair value through other comprehensive income

     

Debt instrument

   W 158        158  

Liabilities carried at amortized cost

     

Unsecured bank borrowings

     3,472,383        3,498,679  

Unsecured bond issues

     2,120,032        2,141,129  

Trade accounts and notes payable

     3,099,418        (*

Other accounts payable

     2,281,510        2,281,558  

Long-term other accounts payable

     21,614        (*

Security deposits

     6,684        (*

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

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24.

Financial Risk Management, Continued

 

ii) As of December 31, 2017

 

     December 31, 2017  
(In millions of won)    Carrying amounts      Fair Values  

Assets carried at fair value

     

Available-for-sale financial assets

   W 162        162  

Financial asset at fair value through profit or loss

     1,552        1,552  

Derivatives

     842        842  

Assets carried at amortized cost

     

Cash and cash equivalents

   W 566,408        (*

Deposits in banks

     580,781        (*

Trade accounts and notes receivable

     4,673,570        (*

Non-trade receivable

     678,454        (*

Accrued income

     8,655        (*

Deposits

     13,638        (*

Short-term loans

     13,493        (*

Long-term loans

     30,772        (*

Long-term non-trade receivable

     15,115        (*

Liabilities carried at amortized cost

     

Unsecured bank borrowings

   W 2,207,259        2,212,474  

Unsecured bond issues

     2,010,762        2,016,086  

Trade accounts and notes payable

     2,391,493        (*

Other accounts payable

     2,701,823        2,702,033  

Payment guarantee liabilities

     8,127        (*

 

(*)

Excluded from disclosures as the carrying amount approximates fair value.

 

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24.

Financial Risk Management, Continued

 

(iii) Fair values of financial assets and liabilities

i) Fair value hierarchy

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

 

   

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

 

   

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

 

   

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

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as ofJune 30, 2018 and December 31, 2017 are as follows:

 

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

June 30, 2018

           

Financial assets at fair value through profit or loss

           

Equity instrument

   W —          —          2,982        2,982  

Convertible bonds

     —          —          1,552        1,552  

Derivatives

     —          —          341        341  

Financial asset at fair value through other comprehensive income

           

Debt instrument

     158        —          —          158  
(In millions of won)    Level 1      Level 2      Level 3      Total  

December 31, 2017

           

Available-for-sale financial assets

   W 162        —          —          162  

Financial assets at fair value through profit or loss

     —          —          1,552        1,552  

Derivatives

     —          —          842        842  

 

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24.

Financial Risk Management, Continued

 

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of June 30, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    June 30, 2018     

Valuation technique

   Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Unsecured bank borrowings

   W —          —          3,498,679      Discounted cash flow      Discount rate  

Unsecured bond issues

     —          —          2,141,129      Discounted cash flow      Discount rate  

Other accounts payable

     —          —          2,281,558      Discounted cash flow      Discount rate  
(In millions of won)    December 31, 2017     

Valuation technique

   Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Unsecured bank borrowings

   W —          —          2,212,474      Discounted cash flow      Discount rate  

Unsecured bond issues

     —          —          2,016,086      Discounted cash flow      Discount rate  

Other accounts payable

     —          —          2,702,033      Discounted cash flow      Discount rate  

 

iv)

The interest rates applied for determination of the above fair value as of June 30, 2018 and December 31, 2017 are as follows:

 

     June 30, 2018     December 31, 2017  

Borrowings, bonds and others

     1.55~3.83     1.57~2.92

 

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25.

Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the six-month period ended June 30, 2018 are as follows:

 

                  Non-cash transactions         
(In millions of won)    January 1,
2018
     Cash flows from
financing
activities
    Reclassification     Gain or loss on
foreign currency
translation
     Effective
interest
adjustment
     Others      June 30,
2018
 

Current portion of long-term borrowings and bonds

   W 1,058,985        (390,339     1,043,931       29,929        264        —          1,742,770  

Payment Guarantee

     8,127        797       —         —          —          12,690        21,614  

Long-term borrowings

     1,653,033        1,230,000       (784,246     5,533        —          —          2,104,320  

Bonds

     1,506,003        498,170       (259,685     —          837        —          1,745,325  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,226,148        1,338,628       —         35,462        1,101        12,690        5,614,029  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others

(a) Related parties

 Related parties as of June 30, 2018 are as follows:

 

Classification

  

Description

Subsidiaries(*)    LG Display America, Inc. and others
Associates(*)    Paju Electric Glass Co., Ltd. and others
Subsidiaries of Associates    AVATEC Electronics Yantai Co., Ltd. and others
Entity that has significant influence over the Company    LG Electronics Inc.

Subsidiaries of the entity that has significant influence over the Company

   Subsidiaries of LG Electronics Inc.

 

(*)

Details of subsidiaries and associates are described in note 8.

 

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26.

Related Parties and Others, Continued

 

(b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month period ended June 30, 2018  
                   Purchase and others  
(In millions of won)    Sales and
others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other
costs
 

Subsidiaries

                 

LG Display America, Inc.

   W 1,810,086        —          —          —          —          1  

LG Display Japan Co., Ltd.

     556,822        —          —          —          —          1  

LG Display Germany GmbH

     400,805        —          —          —          —          489  

LG Display Taiwan Co., Ltd.

     322,871        —          —          —          —          179  

LG Display Nanjing Co., Ltd.

     5,295        —          1,484        —          381,049        6,838  

LG Display Shanghai Co., Ltd.

     218,961        —          —          —          —          33  

LG Display Poland Sp. z o.o.

     63        —          —          —          8,930        4  

LG Display Guangzhou Co., Ltd.

     17,499        —          3,298        —          513,406        3,680  

LG Display Shenzhen Co., Ltd.

     367,312        —          —          —          —          4  

LG Display Yantai Co., Ltd.

     6,671        —          3,122        —          375,578        3,029  

LG Display (China) Co., Ltd.

     328        —          316,418        —          —          318  

LG Display Singapore Pte. Ltd.

     240,695        —          —          —          —          6  

L&T Display Technology (Fujian) Limited

     104,586        —          —          —          —          31  

Nanumnuri Co., Ltd.

     44        —          —          —          —          5,048  

Global OLED Technology LLC

     —          —          —          —          —          1,508  

LG Display Guangzhou Trading Co., Ltd.

     143,880        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     770        —          6,690        —          173,813        548  

Suzhou Lehui Display Co., Ltd.

     42,240        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,238,928        —          331,012        —          1,452,776        21,717  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

     For the three-month period ended June 30, 2018  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales
and others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

   W —          —          34        —          —          39  

INVENIA Co., Ltd.

     —          —          499        13,838        —          184  

AVATEC Co., Ltd.

     —          —          —          —          17,306        104  

Paju Electric Glass Co., Ltd.

     —          —          91,301        —          —          923  

LB Gemini New Growth Fund No.16

     —          —          —          —          —          —    

YAS Co., Ltd.

     —          —          1,421        5,135        —          722  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          —          93,255        18,973        17,306        1,972  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 335,012        —          11,394        153,463        —          30,341  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 15,419        —          —          —          —          13  

LG Electronics Vietnam Haiphong Co., Ltd.

     37,248        —          —          —          —          3  

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

     12,657        —          —          —          —          398  

LG Electronics Almaty Kazakhstan

     782        —          —          —          —          13  

LG Electronics S.A. (Pty) Ltd

     2,038        —          —          —          —          4  

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

     220        —          —          —          —          11  

LG Electronics RUS, LLC

     1,559        —          —          —          —          779  

 

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26.    Related Parties and Others, Continued

 

 

     For the three-month period ended June 30, 2018  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales and
others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics Egypt S.A.E.

   W 14,881        —          —          —          —          16  

LG Innotek Co., Ltd.

     10,098        —          30,506        —          —          16,970  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          79,142        —          5,770  

Inspur LG Digital Mobile Communications Co., Ltd.

     24,440        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     12,430        —          —          —          —          —    

HiEntech Co., Ltd.

     —          —          —          —          —          6,931  

Others

     1,005        —          9        —          —          2,116  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 132,777        —          30,515        79,142        —          33,024  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,706,717        —          466,176        251,578        1,470,082        87,054  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

     For the six-month period ended June 30, 2018  
    

 

    

 

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

Subsidiaries

                 

LG Display America, Inc.

   W 3,958,533        —          —          —          —          1  

LG Display Japan Co., Ltd.

     993,506        —          —          —          —          2,152  

LG Display Germany GmbH

     825,961        —          —          —          —          818  

LG Display Taiwan Co., Ltd.

     664,083        —          —          —          —          350  

LG Display Nanjing Co., Ltd.

     10,160        —          1,752        —          643,337        8,223  

LG Display Shanghai Co., Ltd.

     442,481        —          —          —          —          43  

LG Display Poland Sp. z o.o.

     204        —          —          —          18,519        6  

LG Display Guangzhou Co., Ltd.

     22,948        —          5,877        —          955,037        7,148  

LG Display Shenzhen Co., Ltd.

     755,588        —          —          —          —          4  

LG Display Yantai Co., Ltd.

     14,330        —          8,602        —          771,523        8,572  

LG Display (China) Co., Ltd.

     328        90,281        675,639        —          —          742  

LG Display Singapore Pte. Ltd.

     434,959        —          —          —          —          19  

L&T Display Technology (Fujian) Limited

     186,603        —          —          —          8        36  

Nanumnuri Co., Ltd.

     89        —          —          —          —          11,171  

Global OLED Technology LLC

     —          —          —          —          —          3,002  

LG Display Guangzhou Trading Co., Ltd.

     233,400        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     36,510        —          10,855        —          285,482        617  

Suzhou Lehui Display Co., Ltd.

     77,963        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,657,646        90,281        702,725        —          2,673,906        42,904  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

     For the six-month period ended June 30, 2018  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales
and others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

   W —          —          34        —          —          86  

INVENIA Co., Ltd.

     —          30        769        21,587        —          256  

AVATEC Co., Ltd.

     —          530        —          —          35,079        223  

Paju Electric Glass Co., Ltd.

     —          4,172        183,798        —          —          1,843  

LB Gemini New Growth Fund No.16

     —          540        —          —          —          —    

YAS Co., Ltd.

     —          —          2,181        17,552        —          1,516  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        186,782        39,139        35,079        3,924  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 696,056        —          21,580        305,953        —          47,807  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 23,774        —          —          —          —          26  

LG Electronics Vietnam Haiphong Co., Ltd.

     70,236        —          —          —          —          5  

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

     17,500        —          —          —          —          1,296  

LG Electronics Almaty Kazakhstan

     3,207        —          —          —          —          21  

LG Electronics S.A. (Pty) Ltd

     4,435        —          —          —          —          6  

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

     1,501        —          —          —          —          65  

LG Electronics RUS, LLC

     2,162        —          —          —          —          1,099  

 

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26.    Related Parties and Others, Continued

 

 

     For the six-month period ended June 30, 2018  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales
and others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics Egypt S.A.E.

   W 14,881        —          —          —          —          16  

LG Innotek Co., Ltd.

     17,048        —          65,132        —          —          28,052  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          196,956        —          6,261  

Inspur LG Digital Mobile Communications Co., Ltd.

     36,617        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     20,086        —          —          —          —          —    

HiEntech Co., Ltd.

     —          —          —          —          —          14,866  

Others

     1,735        —          9        —          —          4,029  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 213,182        —          65,141        196,956        —          55,742  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 9,566,884        95,553        976,228        542,048        2,708,985        150,377  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.    Related Parties and Others, Continued

 

 

     For the three-month period ended June 30, 2017  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 2,265,818        —          —          —          —          7  

LG Display Japan Co., Ltd.

     712,104        —          —          —          —          28  

LG Display Germany GmbH

     404,193        —          —          —          —          —    

LG Display Taiwan Co., Ltd.

     446,068        —          —          —          —          99  

LG Display Nanjing Co., Ltd.

     7,413        —          —          —          132,190        —    

LG Display Shanghai Co., Ltd.

     352,300        —          —          —          —          133  

LG Display Poland Sp. z o.o.

     77        —          —          —          8,978        2  

LG Display Guangzhou Co., Ltd.

     6,315        —          1,893        —          559,293        2,285  

LG Display Shenzhen Co., Ltd.

     444,723        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     10,771        —          4,687        —          392,785        4,563  

LG Display (China) Co., Ltd.

     204        —          408,576        —          —          —    

LG Display Singapore Pte LTD.

     249,235        —          —          —          —          643  

L&T Display Technology (Fujian) Limited

     131,869        —          3        —          —          470  

Nanumnuri Co., Ltd.

     24        —          —          —          —          4,282  

Global OLED Technology LLC

     —          —          —          —          —          1,500  

LG Display Guangzhou Trading Co., Ltd.

     192,044        —          —          —          —          180  

LG Display Vietnam Haiphong Co., Ltd.

     2,206        —          —          —          —          —    

Suzhou Lehui Display Co., Ltd.

     59,068        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,284,432        —          415,159        —          1,093,246        14,192  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

 

     For the three-month period ended June 30, 2017  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales
and others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

New Optics Ltd.(*)

   W —          —          —          —          —          —    

WooRee E&L Co., Ltd.

     —          —          —          —          —          12  

INVENIA Co., Ltd.

     10        —          159        16,148        —          37  

AVATEC Co., Ltd.

     —          —          —          —          21,398        247  

Paju Electric Glass Co., Ltd.

     —          —          96,031        —          —          1,096  

Narenanotech Corporation(*)

     —          —          53        1,798        —          8  

YAS Co., Ltd.

     —          —          900        25,070        —          1,090  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 10        —          97,143        43,016        21,398        2,490  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 374,859        —          8,910        182,690        —          23,799  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 15,943        —          —          —          —          24  

LG Electronics Vietnam Haiphong Co., Ltd.

     46,767        —          —          —          —          87  

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

     5,197        —          —          —          —          515  

LG Electronics Almaty Kazakhstan

     3,236        —          —          —          —          12  

LG Electronics S.A. (Pty) Ltd.

     4,351        —          —          —          —          11  

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

     2,853        —          —          —          —          18  

LG Electronics RUS, LLC

     1,746        —          —          —          —          165  

 

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26.

Related Parties and Others, Continued

 

     For the three-month period ended June 30, 2017  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales
and others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Innotek Co., Ltd.

   W 2,239        —          46,953        —          —          675  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          46,094        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     28,421        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     18,622        —          —          —          —          —    

Hi Entech Co., Ltd.

     —          —          —          —          —          6,398  

Others

     500        —          —          —          —          1,515  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 129,875        —          46,953        46,094        —          9,420  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,789,176        —          568,165        271,800        1,114,644        49,901  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.    Related Parties and Others, Continued

 

 

     For the six-month period ended June 30, 2017  
                   Purchase and others  
(In millions of won)    Sales
and others
     Dividend
income
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 5,037,675        —          —          —          —          7  

LG Display Japan Co., Ltd.

     1,276,165        —          —          —          —          40  

LG Display Germany GmbH

     925,482        —          —          —          —          6,313  

LG Display Taiwan Co., Ltd.

     856,116        —          —          —          —          450  

LG Display Nanjing Co., Ltd.

     10,922        —          —          —          248,853        —    

LG Display Shanghai Co., Ltd.

     687,535        —          —          —          —          158  

LG Display Poland Sp. z o.o.

     1,823        —          —          —          17,386        33  

LG Display Guangzhou Co., Ltd.

     24,751        —          3,724        —          1,158,746        5,088  

LG Display Shenzhen Co., Ltd.

     872,707        —          —          —          —          1  

LG Display Yantai Co., Ltd.

     17,063        —          9,281        —          921,441        13,662  

LG Display (China) Co., Ltd.

     12,027        —          624,682        —          —          —    

LG Display Singapore Pte LTD.

     542,647        —          —          —          —          646  

L&T Display Technology (Fujian) Limited

     235,068        —          15        —          —          765  

Nanumnuri Co., Ltd.

     48        —          —          —          —          8,902  

Global OLED Technology LLC

     —          —          —          —          —          2,977  

LG Display Guangzhou Trading Co., Ltd.

     332,199        —          —          —          —          180  

LG Display Vietnam Haiphong Co., Ltd.

     2,318        —          —          —          —          —    

Suzhou Lehui Display Co., Ltd.

     110,282        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 10,944,828        —          637,702        —          2,346,426        39,222  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

     For the six-month period ended June 30, 2017  
            Dividend
income
     Purchase and others  
(In millions of won)    Sales
and others
     Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

New Optics Ltd.(*)

   W 1        —          —          —          4        6  

WooRee E&L Co., Ltd.

     —          —          —          —          —          88  

INVENIA Co., Ltd.

     10        —          613        18,906        —          148  

AVATEC Co., Ltd.

     —          530        —          —          41,214        498  

Paju Electric Glass Co., Ltd.

     —          8,109        194,794        —          —          2,193  

Narenanotech Corporation(*)

     —          —          279        12,251        —          177  

YAS Co., Ltd.

     —          —          1,729        44,278        —          1,482  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 11        8,639        197,415        75,435        41,218        4,592  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W   847,564        —          15,956        369,036        —          58,852  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 38,219        —          —          —          —          53  

LG Electronics Vietnam Haiphong Co., Ltd.

     99,723        —          —          —          —          124  

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

     41,998        —          —          —          —          840  

LG Electronics Almaty Kazakhstan

     7,279        —          —          —          —          12  

LG Electronics S.A. (Pty) Ltd.

     9,533        —          —          —          —          14  

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

     17,927        —          —          —          —          69  

LG Electronics RUS, LLC

     3,029        —          —          —          —          451  

 

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26.

Related Parties and Others, Continued

 

     For the six-month period ended June 30, 2017  
     Sales
and others
     Dividend
income
     Purchase and others  
(In millions of won)    Purchase of
raw material
and others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Innotek Co., Ltd.

   W 6,513        —          88,071        —          —          3,818  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          72,992        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     67,965        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     34,256        —          —          —          —          —    

Hi Entech Co., Ltd.

     —          —          —          —          —          13,380  

Others

     1,205        —          3        —          —          3,228  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 327,647        —          88,074        72,992        —          21,989  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W    12,120,050        8,639        939,147        517,463        2,387,644        124,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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26.

Related Parties and Others, Continued

 

  (c)

Trade accounts and notes receivable and payable as of June 30, 2018 and December 31, 2017 are as follows:

 

     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
(In millions of won)    June 30, 2018      December 31, 2017      June 30,
2018
     December 31, 2017  

Subsidiaries

           

LG Display America, Inc.

   W 881,984        1,795,757        —          —    

LG Display Japan Co., Ltd.

     337,097        230,804        —          2  

LG Display Germany GmbH

     395,005        497,677        2,931        —    

LG Display Taiwan Co., Ltd.

     528,806        436,943        28        106  

LG Display Nanjing Co., Ltd.

     23,703        176        3,422        85,646  

LG Display Shanghai Co., Ltd.

     176,481        176,816        —          74  

LG Display Poland Sp. z o.o.

     41        73        5,870        5,480  

LG Display Guangzhou Co., Ltd.

     363,346        345,212        207,773        189,996  

LG Display Guangzhou Trading Co., Ltd.

     132,701        88,876        —          —    

LG Display Shenzhen Co., Ltd.

     132,805        217,542        —          —    

LG Display Yantai Co., Ltd.

     127,260        123,059        166,855        30,397  

LG Display (China) Co., Ltd.

     85,468        55,309        353,800        150,933  

LG Display Singapore Pte. Ltd.

     129,074        187,420        6        1  

L&T Display Technology (Fujian) Limited

     71,356        57,545        192,555        177,487  

Nanumnuri Co., Ltd.

     —          —          1,843        2,453  

LG Display Vietnam Haiphong Co., Ltd.

     26,257        9,119        612,991        58,666  

Suzhou Lehui Display Co., Ltd.

     32,175        21,110        6,963        36,919  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W    3,443,559        4,243,438        1,555,037        738,160  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

        
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
(In millions of won)    June 30, 2018      December 31, 2017      June 30, 2018      December 31, 2017  

Associates and their subsidiaries

           

WooRee E&L Co., Ltd.

     —          —          72        61  

INVENIA Co., Ltd.

     2,125        2,375        7,374        18,523  

AVATEC Co., Ltd.

     —          —          4,706        2,949  

Paju Electric Glass Co., Ltd.

     —          —          65,051        60,141  

YAS Co., Ltd.

     125        375        5,934        6,474  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,250        2,750        83,137        88,148  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

           

LG Electronics Inc.

   W   310,362        550,101        201,333        206,616  

 

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26.

Related Parties and Others, Continued

 

        
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
(In millions of won)    June 30, 2018      December 31, 2017      June 30, 2018      December 31, 2017  

Subsidiaries of the entity that has significant influence over the Company

           

LG Innotek Co., Ltd.

   W 6,652        407        45,711        58,741  

LG Hitachi Water Solutions Co., Ltd.

     —          —          146,019        154,079  

HiEntech Co., Ltd.

     —          —          4,189        4,854  

Inspur LG Digital Mobile Communications Co., Ltd.

     25,247        20,953        —          —    

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

     6,672        11,494        —          82  

LG Electronics India Pvt. Ltd.

     12,499        3,030        2        —    

LG Electronics Vietnam Haiphong Co., Ltd.

     27,744        36,017        3        1  

LG Electronics S.A. (Pty) Ltd

     1,475        2,400        5        4  

LG Electronics Egypt S.A.E.

     15,103        —          —          1  

Qingdao LG Inspur Digital Communication Co., Ltd.

     8,901        9        —          80  

Others

     2,837        18,385        1,004        1,308  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 107,130        92,695        196,933        219,150  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W    3,863,301        4,888,984        2,036,440        1,252,074  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

  (d)

Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the six-month periods ended June 30, 2018 and 2017 are as follows:

 

   
     2018      2017  

(In millions of won)

Associates

   Loans      Collection
of loans
     Loans      Collection
of loans
 

INVENIA Co., Ltd.

   W —          250        —          208  

YAS Co., Ltd.

     —          250        —          208  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W    —          500        —          416  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26.

Related Parties and Others, Continued

 

  (e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and six-month periods ended June 30, 2018 and 2017 and as of June 30, 2018 and December 31, 2017 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.

 

     For the three-month period
ended June 30, 2018
     For the six-month period
ended June 30, 2018
     June 30, 2018  
(In millions of won)    Sales
and others
     Purchase
and
others
     Sales
and others
     Purchase
and others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG International Corp. and its subsidiaries(*)

   W   203,335        41,987        387,592        96,539        158,142        127,225  

LG Uplus Corp.

     21        395        21        618        —          34  

LG Chem Ltd. and its subsidiaries

     —          175,568        1,564        369,120        —          89,539  

Serveone and its subsidiaries

     98        350,253        195        686,552        21,307        416,570  

Silicon Works Co., Ltd

     —          160,546        —          303,841        —          110,868  

LG Corp.

     —          12,578        —          25,369        9,810        5,583  

LG Management Development Institute

     —          2,305        —          5,118        3,480        367  

LG CNS Co., Ltd. and its subsidiaries

     —          40,483        —          71,254        —          34,602  

LG Hausys Ltd

     —          —          1,110        1        —          —    

G2R Inc. and its subsidiaries

     —          33,029        —          37,070        —          35,114  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 203,454        817,144        390,482        1,595,482        192,739        819,902  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

For transactions which LG International and its subsidiaries act as an agent of the Company and receive commission revenue from the Company, above transaction amount only include commission revenue recognized by LG International and its subsidiaries. For prior year comparative purpose, gross sales and others for the three-month and six-month periods ended June 30, 2018 amount to W203,335 million and W387,592 million, respectively, and gross purchase and others for the three-month and six-month periods ended June 30, 2018 amount to W101,800 million and W366,577 million, respectively.

 

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26.

Related Parties and Others, Continued

 

     For the three-month period
ended June 30, 2017
     For the six-month period
ended June 30, 2017
     December 31, 2017  
(In millions of won)    Sales and
others
     Purchase and
others
     Sales
and others
     Purchase
and others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG International Corp. and its subsidiaries

   W 146,741        360,281        277,655        638,189        110,786        186,799  

LG Household & Health Care and its subsidiaries

     —          92        —          92        —          —    

LG Uplus Corp.

     47        132        98        317        —          1,505  

LG Chem Ltd. and its subsidiaries

     7        206,687        12        412,199        8,659        127,416  

SK Siltron Co., Ltd. ( formerly, Siltron Co., Ltd.)(*)

     —          —          10        —          —          —    

Lusem Co., Ltd.(*)

     3        132        8        631        1        53  

Serveone and its subsidiaries

     134        310,589        249        591,957        21,565        491,719  

Silicon Works Co., Ltd

     —          138,450        —          285,467        —          120,031  

LG Corp.

     —          15,259        —          30,958        4,700        1,523  

LG Management Development Institute

     —          2,361        —          4,370        3,480        699  

LG CNS Co., Ltd. and its subsidiaries

     102        46,836        139        69,019        —          90,374  

LG Hausys Ltd

     418        —          836        44        —          374  

G2R Inc. and its subsidiaries

     —          6,747        —          7,576        —          14,275  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     147,452        1,087,566        279,007        2,040,819        149,191        1,034,768  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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26.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

Compensation costs of key management for the three-month and six-month periods ended June 30, 2018 and 2017 are as follows:

 

     For the three-month
periods ended June 30
     For the six-month
periods ended June 30
 
(In millions of won)    2018      2017      2018      2017  

Short-term benefits

   W 928        691        1,816        2,008  

Expenses related to the defined benefit plan

     314        204        587        297  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,242        895        2,403        2,305  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

27.

Subsequent Event

In July 2018, the Company established LG Display(China) High-tech,Co., Ltd. in Guangzhou China to manufacture display products and the company has a 69% equity interest of this subsidiary.

 

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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: August 14, 2018     By:  

/s/ Heeyeon Kim

      (Signature)
    Name:  

Heeyeon Kim

    Title:   Head of IR / Vice President

 

181