LG 1999 Annual Report Download - page 40

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13. Accrued Severance Benefits :
Accrued severance benefits as of December 31, 1999 are as follows :
Millions of Won
Beginning balance
￦
456,071
Severance payments (135,293)
Transfer-in from affiliated companies 8,854
Provisions 99,300
Additional provisions (Note 2) 11,907
Conversion to severance insurance deposit (5,997)
434,842
Severance insurance deposits (265,835)
Contribution to National Pension Fund (40,277)
￦
128,730
The severance benefits are funded approximately 65% at December 31, 1999 through group severance insurance plans and employees severance
insurance plans with Kyobo Life Insurance Co, Ltd. and other life insurance companies. The amounts funded under group severance insurance
plans are recorded as long-term financial instruments and the amounts funded under employees severance insurance plans (severance insurance
deposits) are presented as deduction from accrued severance benefits (Note 3).
14. Commitments and Contingencies :
At December 31, 1999, the Company provided 34 notes and 13 checks to financial institutions as collateral in relation to various borrowings and
guarantees of indebtedness. In addition, the Company has received guarantees approximating
￦
874,078 million from various banks for the
repayment of certain debentures of the Company.
At December 31, 1999, the Company has entered into bank overdraft facility agreements with various banks amounting to
￦
336,200
million. At December 31, 1999, the outstanding balance of domestic trade notes receivable and export trade accounts receivable sold at discount
to various financial institutions with recourse is
￦
2,279,388 million. At December 31, 1999, the Company was a party to various technical
assistance agreements with various foreign companies for the manufacture of certain product lines. At December 31, 1999, the Company was
contingently liable for guarantees approximating
￦
1,492,126 million (including equivalent US$ 757 million) on indebtedness of its subsidiaries
and affiliates as follows :
Millions of Won
Domestic companies
LG Telecom, Ltd.
￦
114,540
LG Precision Co., Ltd. 5,727
Other 26,011
146,278
Overseas companies
LG Electronics Wales Ltd. 264,759
PT LG Electronics Display Device Indonesia 127,630
LG Electronics Alabama Inc. 166,083
LG Electronics U.S.A., Inc. 116,831
LG Electronics North of England Ltd. 80,873
Shuguang LG Electronics Inc. 74,577
Other 515,095
1,345,848
Total
￦
1,492,126
In order to reduce the impact of changes in exchange rates on future cash flows, the Company enters into foreign currency forward contracts. As
of December 31, 1999, the Company has outstanding forward contracts for selling US Dollars amounting to US$ 130 million (contract rates :
￦
1,134.1 : US$ 1~
￦
1,187.6 : US$ 1, contract due dates : January through November 2000) and an unrealized gain of
￦
1,490 million was
credited to operations for the year ended December 31, 1999.
In order to reduce the impact of changes in interest rates, the Company enters into interest rate swap contracts and an unrealized gain
of
￦
171 million was recorded as a capital adjustment. A summary of the terms of outstanding interest rate swap contracts at December 31,
1999 is as follows (see Note 18) :
Amount (In millions) Buying rate (% ) (* ) Selling rate (%) Contract due date
Korea Exchange Bank US$ 50 5.45% 6M LIBOR 2001.6.5
Korea Exchange Bank US$ 40 5.9% 6M LIBOR 2000.8.24
Bankers Trust Company US$ 40 5.9% 6M LIBOR 2000.8.24
Citi Bank US$ 20 5.91% 6M LIBOR 2000.8.24
(* ) If 6 month LIBOR is over 6.25%, the rate deducting 0.34 or 0.35% point from 6 month LIBOR would be applied.