LG 2000 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ...Appliance Company 22 / Digital Media Company 24 / Digital Handset Company 26 / Digital System Company 28 / Digital Network Company 29 / Management's Discussion & Analysis 30 / LGE Network 76 / Management & Board of Directors 78 / LGE Chronology 79 / Corporate Information 80 / Shareholder Information...

  • Page 3
    ... home appliances, PC-related multimedia products and electronic products. Telecommunication products such as handsets, mobile telecommunication systems and network systems are also examples of internationally acclaimed LGE products. 2000 was especially meaningful for LGE in light of a merger with LG...

  • Page 4
    ... Company's CRT sales and growth of the Digital Media Company's optical storage. Balance Sheet 2000 Total assets Trade accounts & notes receivable Inventories Property, plant & equipment Investments Other Total liabilities Short-term borrowings Current maturities of long-term debt Trade accounts...

  • Page 5
    ... of current and long-term liabilities in 2000 was W7,872 billion, a 33.3% increase from 1999. Shareholders' Equity Shareholders' equity increased to W4,008 billion in 2000 through capital increases generated by the LGIC share exchange program, the issuance of redeemable preferred stocks, and a net...

  • Page 6
    ... secure our dominance in the emerging digital TV and third generation telecommunication markets, we have set the following strategies: First, we will cultivate our core businesses to lead the global electronics market, team up with top-tier electronics manufacturers, and make a determined drive into...

  • Page 7
    ... corporate culture. Thus, LGE employees will be encouraged to develop with flexibility and proficiency in accordance with digitization tides. To enhance the competitiveness of our staff, we will renew the Company's human resource structure through a stringent evaluation system and transparent reward...

  • Page 8
    ... the creation of a sound financial base and the implementation of a "digital" corporate culture. With the aim of becoming a global digital leader, LGE has been an industry pioneer in the development and marketing of its digital TVs, Internet accessible home appliances, and other digital products. 8

  • Page 9
    ...its global competitiveness, LGE continues to forge strategic partnerships with major players including Intel, Microsoft, Sony, Philips and Hitachi. Building an "Infotainment" platform that integrates consumer electronics and information products, LGE strives to deliver maximum value to its customers...

  • Page 10
    ... of an employee buy-out. In addition, production was relocated overseas for several of its lower-tech electronic products. As well, LGE's CRT business will be separated in 2001. Global Partnership To enhance its global competitiveness, LGE continues to forge strategic partnerships with major players...

  • Page 11
    ... out in five separate areas: e-R&D, e-procurement, e-SCM (supply chain management), e-CRM (customer relations management), and e-management. Focusing on business-to-business relationships in 2000, LGE enhanced its e-business systems for procurement, supplier management, and customer relations. 11

  • Page 12
    ...designed to offer diverse information regarding LGE's new products, delivery schedules, and after-sales services to its major customers. In 2001, LGE will operate its e-business with focus upon business-to-customer relationships. E-CRM shall be promoted, a new e-HR (human resources) systems shall be...

  • Page 13
    ... This strategy aims to secure global technological leadership in selected businesses. Through TL2005, LGE expects to acquire an advantage in next-generation electronic products, advancing to the forefront of the global digital market. Design LGE's innovative designs are also one of the Company's key...

  • Page 14
    ... personnel information system for officials 4. E-learning portal formation . Offering specialized on-line education to create effective individuals and a formidable company In 2000, the labor market was faced with major difficulties for several reasons: restructuring of the corporate and financial...

  • Page 15
    ... changed from Goldstar in 1995, LG has been earnestly working to enhance its brand image and increase its public awareness. There has been no deviation from the "Digital LG" mission of 1999 and focus is continuously placed on the advertising and marketing of its corporate headquarters and businesses...

  • Page 16
    ... products, flat TV/monitors and air conditioners. It has also secured leading positions in the areas of optical storage and mobile internet phones. Aiming to be a world leading digital company, LGE has continued to form strategic alliances with other global electronic companies. A major achievement...

  • Page 17
    Display The Most Internationally Acclaimed Among LGE Companies Appliance A Provider of a Wide Range of Home Appliances For The Internet Age M edia Committed to R&D And A Sharpened Leadership Position Handset A Proven Leader In The Fast Growing Global Handset Market System The Biggest Beneficiary...

  • Page 18
    ... factors: a worsening American economy, instability of the euro, an uncertain global financial market, and mounting concerns regarding political unrest, rising oil prices, and currency instability in Asia. The Korean Economy The Korean economy continued to recover in 2000, with a GDP growth...

  • Page 19
    ...in comparison with 2000. Appliances will grow 11 percent while computers and telecommunication devices will increase 13 percent. The economy and industry reviews herein are, in large part, based on working papers compiled by the LG Economic Research Center. 1998 1999 2000 P -6.7% 10.9% 8.8% 1998...

  • Page 20
    ... its existing four production sites which currently manufacture CRTs, TVs, monitors and CRT parts. The investment, which is also a part of LGE's strategy to invest in areas with great growth potential, will strengthen the Division's international competitiveness in the display business. 22" TFT-LCD...

  • Page 21
    ...the first Korean electronics company to break into the American market with its radios in 1962. The wide-screen TV was unbeatably priced. By pursuing this strategy, the Company expects to claim 25 percent of the North American market in digital PDP TVs by 2005. Sales Growth 1999 2000 10.2% 8.9% 1998...

  • Page 22
    ..., microwave ovens, gas ovens and compressors for refrigerators and air conditioners. Backed by strong sales bases both at home and abroad, Digital Appliance Company continued to grow in 2000. Holding on to its number one position in the global air conditioner market, the Company's high quality...

  • Page 23
    .... These products operate automatically by tapping the abundant information of the Internet. Aware of the growing opportunities for Internet appliances and home networks, the Company has set up a strategic alliance with Intel Corporation. Digital Appliance Company's leading-edge technology in the...

  • Page 24
    ... technology industry worldwide, Digital Media Company made the most impressive progress among LGE companies in year 2000. The Company's products include video cassette recorders (VCRs), personal computers (PCs), CD-ROM drives, CDRW (Rewritable) drives, DVD-ROM drives, and printed circuit boards...

  • Page 25
    ... of the world's first audio compact disc recording (ACDR) player for MP3 files. Not content with its current successes, Digital Media Division is sharpening its leadership position. In 2000, the Company became the first in the world to develop a video disc recorder featuring high definition and user...

  • Page 26
    ... domestic handset market. In 2000, Digital Handset Company received considerable recognition for its achievements in technology and business performance. Positioned well ahead of its competitors, the Division's mobile telephone was selected among "The Best Product of 2000" by Business Week magazine...

  • Page 27
    ... working on developing Korean and European-style multi-media phone for IMT 2000, aiming to release the new products by 2002. In line with a strategy to enhance its presence in China, the Company has agreed to establish Langchao 2000 1999 1998 Digital Mobile Communication Technology R&D Center...

  • Page 28
    ... market, the Company has shared its core technology on W-CDMA with Marconi Mobile S.P.A. in Italy. Under the strategic alliance with Marconi Mobile, an W-CDMA testbed will be set up in Italy and the two companies will pursue joint marketing activities in Europe. 87 92 2000 1999 1998 115 Sales...

  • Page 29
    ... notch global player in selected products, the Company is developing voice/data integrated products and web-based interactive solutions. Utilizing the global sales network of LGE and its partners, the Company is expanding its reach in the global market. 802.11B 11MBPS WIRELESS ROUTER LW1100 ADVANCED...

  • Page 30
    ...'s Discussion & Analysis Report of Independent Accountants 43 / Non-Consolidated Balance Sheets 44 / Non-Consolidated Income Statements 46 / Non-Consolidated Statements of Appropriations of Retained Earnings 47 / Non-Consolidated Statements of Cash Flows 48 /Notes to Financial Statements 50 30

  • Page 31
    31

  • Page 32
    ... of this financial review is derived from internal management reporting sources, prepared without consideration for GAAP, Korean or otherwise. Merger Results As of September 1, 2000, LG Information & Communication Co., Ltd. was merged with LGE for support of mobile phone and telecommunication system...

  • Page 33
    ... account LGE's merger with LG Information & Communications (LGIC), whose operations have been included in LGE since September 2000, total sales in 2000 were W13,760 billion, 30.5% higher than sales in 1999. This increase is attributable largely to the Digital Appliance Company and the Digital Media...

  • Page 34
    ..., consumer products such as personal computers, air conditioners, and high-value-added home appliances were sold beyond expectations. Domestic Sales & Exports 2000 Domestic Sales Digital Display Digital Appliance Digital Media Information & Communications 74.4% 73.9% 67.1% In billions of Korean won...

  • Page 35
    ..., LGE will increase its North American sales with the Zenith brand, high-value-added consumer products such as flat-wide screen TVs, DVDs, and mobile internet phones. Exports to Central and South America grew substantially through LGE's strong marketing activities in Brazil, Peru, and Chile. 20...

  • Page 36
    ... to Hyundai Electronics. As a result of the sale, LGE had gain on sale of investment securities equivalent to W1,102 billion in 1999. Non-operating Income 4.8% 2.9% In billions of Korean won 2000 Interest & dividends Foreign exchange gains Gain on disposal of noncurrent assets Equity in earnings...

  • Page 37
    .... Non-operating Expenses 2000 Interest expenses Foreign exchange losses Loss from transfer of trade accounts & notes receivable Loss from disposal of noncurrent assets Equity in losses of affiliates Other 217 1,234 146 201 1,320 109 97 437 275 196 1999 509 261 106 In billions of Korean won 1998...

  • Page 38
    ...092 Trade accounts & notes receivable 800 1,192 3,337 4,211 2,340 11,880 In billions of Korean won Inventories As a percent of sales 1998 634 441 2,826 2,564 2,245 8,710 28.7 25.8 22.5 Inventories Property, plant & equipment Investment Other 1998 1999 2000 Reflecting LGE's extensive operations...

  • Page 39
    ...LGIC merger and a W173 billion rise in foreign currency payables. Foreign currency payables increased due to a boost in sales of products that are highly dependent upon overseas materials such as PCs, CD-ROM drives, monitors, CRTs, and air conditioners. 1998 1999 2000 Debt In billions of Korean won...

  • Page 40
    ... in late 2000. LGE predicts even greater soundness in 2001, primarily through profit growth, sales of its treasury stock, and gain on property investment. As a result of the excessive value of LGE's property investment through its CRT manufacturing joint venture with Philips Electronics, LGE expects...

  • Page 41
    ... the new CRT Joint Venture, treasury stock disposition, and expansion of LGE operations. Cash Flow 2000 Capital expenditure Cash flow 1,585 171 In billions of Korean won Risk Management Material challenges that LGE may face in 2001 include, but are not limited to, an increase in the price of oil...

  • Page 42
    ...oriented management and financial soundness. Cash inflow is expected to be generated from net income, continuous shedding of treasury stock, and ongoing disposition of non-strategic operations. Cash outflow will primarily be utilized for investment in digital TVs, plasma display panels, and IMT 2000...

  • Page 43
    ...the accompanying financial statements, LG Information & Communications, Ltd. ("LGIC"), an affiliate, was merged into the Company effective September 1, 2000. In connection with the merger, the Company issued 47,790,404 shares of common stock (issue value : W1,347,645 million) to the shareholders of...

  • Page 44
    ... As of December 31, 2000 and 1999 In millions of Korean won 2000 1999 Assets Current Assets : Cash and cash equivalents (Note 5) Short-term financial instruments (Note 3) Marketable securities (Note 7) Trade accounts and notes receivable (Notes 4, 5 and 22) Other accounts receivable (Notes 4 and...

  • Page 45
    ...Note 11) Long-term other accounts payable (Note 11) Accrued severance benefits, net (Note 13) Other long-term liabilities Total liabilities Commitments and contingencies (Note 14) Shareholders' Equity Capital stock (Note 15) Capital surplus : Additional paid-in capital (Note 15) Gain on merger (Note...

  • Page 46
    ...505,984 684,012 Sales (Note 22) Cost of sales (Note 22) Gross profit Selling and administrative expenses Operating income Non-operating income : Interest income Dividends income Foreign exchange gains Gain on disposal of property, plant and equipment Gain on disposal of investments (Note 7) Gain on...

  • Page 47
    ...Reserve for technological development Reserve for redemption of redeemable preferred stock Loss from disposal of treasury stock Cash dividends (Note 21) Unappropriated retained earnings to be carried forward to subsequent year The accompanying notes are an integral part of these financial statements...

  • Page 48
    ... in advances from customers Increase (decrease) in income taxes payable Decrease in withholdings Payment of severance benefits Decrease in contribution to national pension fund Other Net cash provided by operating activities The accompanying notes are an integral part of these financial statements...

  • Page 49
    ...in long-term financial instruments Increase in severance insurance deposits Acquisition of marketable securities Acquisition of investments Acquisition of property, plant and equipment Acquisition of intangible assets Decrease (increase) in short and long-term loans Increase in cash by merger Others...

  • Page 50
    ...are listed on the London and Luxembourg stock exchanges. The Company entered into a merger agreement with LG Information & Communications, Ltd. ("LGIC"), an affiliate, which was in the business of selling and manufacturing mobile telecommunication systems, mobile phones, electronic switching systems...

  • Page 51
    ... accounted for as operating leases, of which the total minimum lease payments are charged to expense over the lease period on a straight-line basis. Research costs are expensed as incurred. Development costs directly relating to new technology or new products of which the estimated future benefits...

  • Page 52
    ... are refunded from the National Pension Plan and the insurance companies to employees on their retirement. Income Taxes - The Company recognizes deferred income taxes for anticipated future tax consequences resulting from temporary differences between amounts reported for financial accounting and...

  • Page 53
    ... (11.0%) is used to calculate discounted present value. As of December 31, 2000, the outstanding balance of notes receivable, sold at discount to financial institution with recourse, from Hyundai Electronics Industries Co., Ltd. in relation to the Company's share transfer of LG Semicon Co., Ltd. in...

  • Page 54
    ...2000 Foreign currencies (In millions) 1999 Won equivalent (Millions of won) Foreign currencies (In millions) Won equivalent (Millions of won) Cash and cash...1,891 198 10 71 40 29 3 436 7 Refundable deposits 26 2 Long-term loan Trade accounts payable USD JPY DEM ITL Others USD DEM FFR ESP ...

  • Page 55
    ... Co., Ltd. LG International Corp. LG Sports Ltd. LG Innotek Co., Ltd. (formerly, LG Precision Co., Ltd.) LG Cable Ltd. LG Capital Co., Ltd. LG Investments Security Inc. LG Hitachi Ltd. LG-Caltex Oil Corp. LG-EDS Systems Inc. LG. Philips LCD Co., Ltd. LG Internet Inc. LG Information & Communications...

  • Page 56
    ...(%) at December 31, Acquisition 2000 cost 2000 Net asset value Carrying value Acquisition cost 1999 Net asset value Carrying value LG Electronics Argentina S.A. (LGEAR) (*2) Arcelik-LG Klima Sanayi ve Ticaret A.S. (LGEAT) (*3) LG Electronics da Amazonia Ltda...

  • Page 57
    ... value Carrying value LG Electronics Magyar Kft (LGEMK) (*3) LG Electronics (M) SDN. BHD (LGEML) (*2) LG Electronics Monterrey Mexico S.A de C.V. (LGEMM) (*2) LG Electronics Mexico S.A.de C.V. (LGEMS) LG MITR Electronics Co., Ltd. (LGEMT) (*3) LG Electronics North...

  • Page 58
    ... Electronics Industries Co., Ltd. Korea stock market stabilization fund P.D.I Hanaro Telecom Inc. Vodavi Technology Inc. Domestic Companies Media Valley Inc. Nara Mold & Die Co., Ltd. Lotis Co., Ltd. LG OTIS Elevator Co., Ltd. Dreamwiz Korea Information Certificate...

  • Page 59
    ... at December 31, Acquisition 2000 cost 2000 Net asset value Carrying value Acquisition cost 1999 Net asset value Carrying value Overseas Companies Nakhodka FEZ Telecommunication Co., Ltd. NICE Telecom Erlang Technology Mainstreet Networks (*5) iTV Corporation...

  • Page 60
    ... the sales of the patents by the Company to LG. Philips LCD Co., Ltd., an equity-method investee, is fully eliminated and charged to investment in LG. Philips LCD Co., Ltd. Senior secured note issued by Zenith outstanding at December 31, 2000 and 1999, was converted from the Company's receivables...

  • Page 61
    ... of won 2000 W 76,836 295,776 W372,612 1999 W 74,271 179,697 W253,968 Capitalized Expensed As a result of the merger with LG Information & Communications, Ltd., the Company recognized goodwill of W393,820 million and acquired industrial property rights of W578,788 million. Related amortization...

  • Page 62
    ...15,061 1,280 467 W 341,732 1999 4,439 91,266 853 920 30,000 6,104 - - W 133,582 Won currency loans Kookmin Bank Korea Development Bank Housing and Commercial Bank Hana Bank Hanvit Bank Korea Technology Banking Corporation Korea Development Capital Corporation Korea Network Research Association 62

  • Page 63
    ... into common stock of Hyundai Electronics Industries Co., Ltd. ("Hyundai Electronics," formerly "LG Semicon Co., Ltd.") through November 2007, unless previously redeemed. Each bond can be exchanged for 250 shares of Hyundai Electronics common stock with a par value of W5,000. The exchange price was...

  • Page 64
    ... the exchange price, but is subject to change as a result of any adjustment to the exchange price or an offer made for the common shares. In July 1996, relating to construction of the Bundang research center, the Company entered into a land purchase agreement with Korea Land Corporation under which...

  • Page 65
    ... of domestic trade notes receivable and export trade accounts receivable sold at discount to various financial institutions with recourse is W3,825,833 million. At December 31, 2000, the Company has entered into factoring agreements with LG Capital Co., Ltd. and Shinhan Bank. In relation to the...

  • Page 66
    ... Boston International ("CSFB"). The terms and conditions of the contract are as follows : (1) Treasury stock sales * Trade date: December 21, 2000 * Number of shares: 11,000,000 shares of common stock * Total sales amount: W136,400 million (US$ 112 million) * Sales price: the closing trade price on...

  • Page 67
    ... deposits whose book value is W133,854 million to the SPC for W120,400 million. The Company has also provided the SPC with a long-term loan of W3,300 million as of December 31, 2000. The Company provides management services related to the leasehold deposits owned by the SPC and receives a service...

  • Page 68
    ... to the relevant market price as of every 23rd of March, June, September, and December in case the market price is lower than conversion price. The number of shares 47,790,404 32,000,000 Par value W238,952 160,000 Capital in excess of par value(*) W1,108,693 382,952 Cash received(*) W1,347,645...

  • Page 69
    ... net gain from the disposal of property, plant and equipment after deducting related taxes, until equity equals 30% of total assets. This reserve is not available for dividends, but may be transferred to capital stock through an appropriate resolution by the Company's board of directors or used to...

  • Page 70
    ... exchange loss, net Losses from sales of receivables The equity method of accounting Bad debt expenses Other Deferred tax assets Deferred tax liabilities Amortization of intangible assets Gain on valuation of investments Custom duty drawback Reserve for technological development Other Deferred tax...

  • Page 71
    ... for EPS data) 2000 W 502,183 (19,472) 482,711 108,942,560 W 4,431 W W 1999 2,005,021 (20,050) 1,984,971 107,327,666 18,494 Basic earnings per share Net income as reported on the statements of income Less : Preferred stock dividends Net income allocated to common stock Weighted average number of...

  • Page 72
    ... Inc. LG Electronics Alabama, Inc. LG Goldstar France S.A.R.L. PT LG Electronics Display Devices Indonesia Zenith Electronics Corporation Other 2000 Total 1999 Total 23. Segment Information: The Company has organized four reportable business divisions: display division, home appliances division...

  • Page 73
    ...: Home appliances division : Multimedia division : TV, CPT/CDT, monitor, DY, FBT, electron gun, magnetron and PDP refrigerator, washing machine, air conditioner, microwave oven and vacuum cleaner VCR, PC, computer, CD-ROM and audio transmission equipment, network equipment Financial Data by Business...

  • Page 74
    ... Changes in retained earnings and capital adjustments by equity method of accounting on investments Transfer to investments from receivables from Zenith Increase in assets by merger of LGIC Increase in liabilities by merger of LGIC 25. Merger : Effective September 1, 2000, the Company merged LG...

  • Page 75
    ... eight-month period ended August 31, 2000 Sales Cost of sales Gross profit Selling and administrative expenses Opreating income Non-operating income (expenses) Income before income taxes Income taxes Net income 26. Subsequent Events: Through a resolution by the board of directors on January 19, 2001...

  • Page 76
    ... Devices Indonesia Video Display Glass Indonesia Product P.T.LG Electronics Indonesia LG Collins Electronics Manila Inc. LG SEL Electronics Vietnam Inc. Vietnam Korea Exchange, Ltd. SLD Telecom Pte, Ltd. LG Electronics Thailand Co., Ltd. LG Srithai Electronics, Inc. LG Mitr Electronics Co., Ltd. LG...

  • Page 77
    ... Aires JAPAN LGEJP LG Electronics Japan, Inc. NORTH LGEAI LGEMX LGEUS LGICUS LGECI LGEMS LGERS LGEMM ZENITH TRIVENI AM ERICA LG Electronics Alabama, Inc. LG Electronics Mexicalli S.A.DE C.V. LG Electronics U.S.A., Inc. LG Electronics LG InforComm, U.S.A. LG Electronics Canada, Inc. LG Electronics...

  • Page 78
    ... CEO Vice Chairman | Head of LG China President & CFO President | Head of Display Device Company President President | Head of Digital Appliance Company ... President Executive Vice President Standing Bon Moo Koo John Koo Byung Chul Jung Non-Standing Chang Soo Huh Outside Directors Yong Chin Kim ...

  • Page 79
    ... Korea's first television › Developed South Korea's first washing machine, air conditioner, and elevator › Established South Korea's first private R&D facility (GoldStar Central Research Laboratory) › Established first overseas sales subsidiary in the USA (GoldStar Electronics International...

  • Page 80
    ...: Number of Employees: Shareholders' Meeting: 72 subsidiaries 64,000 ( including overseas) The annual shareholders' meeting is held within 3 months following the end of the fiscal year at the company's corporate office located at 20, Yoido-dong, Youngdungpo-gu, Seoul, Korea. Investor Relations: LG...

  • Page 81
    Shareholder Information As of December 31, 2000 Listing Korea Stock Exchange (stocks) London Stock Exchange (CBs) Luxembourg Stock Exchange (CBs) Major Common Shareholders LG Chemical & LG related entities Credit Swiss First Boston 37.3% 7.0% Capital Stock 2000 Number of issuance (Shares) Common ...

  • Page 82
    .... CRT Cathode Ray Tube An upgraded digital telephone switching system to handle demand for telephone services and digital exchange technology. Moves an electron beam back and forth across the back of the screen, lighting up phosphor dots and illuminating active portions of the screen. DVD Digital...

  • Page 83