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ANNUAL REPORT
2004

Table of contents

  • Page 1
    ANNUAL REPORT 2004

  • Page 2
    ... Financial Highlights At a Glance in 2004 CEO's Message Global Leading Products Business Review Mobile Communications Digital Appliance Digital Display Digital Media CTO's Message CFO's Message Eco-friendly Management Social Contributions Ethical Management Corporate Governance Board of Directors...

  • Page 3
    ... have emerged as a major global player. We are securing product competitiveness, as well as market leadership, both at home and abroad. Through heavy investment in research and development, aggressive global marketing strategies, and constant improvement of management practices, we are breaking new...

  • Page 4
    Financial Highlights Sales (in billions of Korean won) Operating Profit 24,659 (in billions of Korean won) Net Profit (in billions of Korean won) 1,546 20,177 17,...

  • Page 5
    ... should be noted that our company underwent a demerger in April 2002, and our official financial statements are based on a nine-month period from April to December 2002. LG ELECTRONICS 004 005 ANNUAL REPORT 2004 Income Statement 2004 1. Sales Domestic Exports 2. Cost of Sales 3. Gross Profit 4. SG...

  • Page 6
    ... out a broad spectrum of changes and innovations in every area of our management. business performance ever reached in the Company's history. Our aggressive marketing in overseas markets of premium home appliances, digital TV, and mobile handsets, was the main factor driving the improvement in...

  • Page 7
    ... TV. Buy Award in the Netherlands and Belgium. Moreover, our air conditioner, vacuum cleaner, microwave oven, and optical storage were all selected as a national brand in Russia. These accomplishments have set a foundation for future growth that will help us become one of the Top 3 Global companies...

  • Page 8
    Entering the Global Top 3

  • Page 9
    ... Digital Appliance Division sales increased 10% to KRW 6.2 trillion. A surge in premium products such as air-conditioners and drum washing machines fueled the overall growth. For five consecutive years, LG Electronics' air-conditioners have been the number one sellers in the world's appliance market...

  • Page 10
    ... our core competence as a global company in 2004 LG Electronics emphasizes quantitative growth, but the pursuit of qualitative growth is also important for maintaining our competitiveness both at home and abroad. To this end, we continue to enhance our employees' core competencies in order...

  • Page 11
    ...to passionately face new challenges. We will also focus on recruiting high-quality people from outside the Company. Second, we will continue to promote 'Technology Management'. This will help us increase our research and development investments with the aim of creating cutting-edge technologies that...

  • Page 12
    ..., and the best streaming video and sound quality, we are breaking new ground in mobile communications. *Source : Strategy Analytics 22% LG Electronics, as one of the world's top three PDP module makers, boasted a 22% share of the international market in 2004, and ranked as the number two PDP module...

  • Page 13
    .... LG Electronics will continue to maintain its leading position by developing a broad spectrum of cutting-edge products including our portable DVD Player and DVD recorder- next generation digital AV products *Source : TSR (Combi is included.) 012 013 ANNUAL REPORT 2004 Residential Air-Conditioner...

  • Page 14

  • Page 15
    ...notch products, LG Electronics makes a deep impression on customers throughout Asia, Europe, North America, South America and even Africa. Our goal is to enrich and improve the lives of our customers. Our premium home appliances, advanced displays, digital media, and next generation mobile phones do...

  • Page 16
    ..., and drum washing machines. Main Products Air-Conditioners, Air Cleaners, Microwave Ovens, Vacuum Cleaner, Refrigerator, Washing Machines, Dish Washers, Compressors, Motors, and Magnetrons. Business Results in 2004 Due to a strengthening export volume we achieved KRW 6.2 trillion in total sales, an...

  • Page 17
    ..., and enhancing strategic alliances with local telecom operators. Main Products Home Theater, DVD Recorder, MP3 Player, Optical Storage, Notebook PC, Desktop PC, and PDA Business Results in 2004 In the Digital Media Division, sales revenues came to KRW 3.8 trillion. This is a 7% decrease from...

  • Page 18
    ... results in the Company's history, and bolstered our leading position in the world's telecommunications market. We are already one of the top players in the global CDMA handset business, and have also successfully broken into the US and European GSM markets. Additionally, LG Electronics has emerged...

  • Page 19
    ... Handset for Overseas Markets 3G WCDMA handset that supports camcorder & video telephony / Supports VOD & MOD / Supports MP3 player 018 019 ANNUAL REPORT 2004 LG ELECTRONICS Sales (in trillions of Korean won) â- Domestic â- Export 7.9 4.7 6.1 9.5 Our business results in 2004 were outstanding...

  • Page 20
    ... LG-LP5200, Multifunctional Camera Phone Enjoy the music of MP3 installed in mobile phone through the audio equipped with FM radio / Antibiotic silver nano coating case / Text to Speech (TTS) function / Supports electronic dictionary / 1.3 million pixel camera / MP3 player / 17 âˆ... dual stereo...

  • Page 21
    ... camera / MP3 player 020 021 ANNUAL REPORT 2004 â- LG-F9100, QWERTY Messenger for the U.S. Market Using e-mail, text-messages, and internet messenger by â- Apr. 2004 Acquired "Environmental Declaration of Products" for the first time in the Korean mobile phone industry - LG-SD230 â- Dec. 2004...

  • Page 22
    ... fifth consecutive year, our residential air-conditioners maintained a leading share of the global market, and this year our washing machine became a major product in the world market. With these, and other products, we have bolstered our leadership position in the worldwide home appliance market.

  • Page 23
    .... Hard work 2.0 1.9 product leadership, LG Electronics diversified its business structure by advancing into the commercial air-conditioner market. This will boost our mid- and long-term growth momentum, and future success. While domestic sales were somewhat slow, exports of washing machines grew...

  • Page 24
    ... the entire business' 25 Air Conditioner Refrigerator Washing Machine Cooking Appliances Vacuum Cleaner Others profit growth. To counteract this decrease in profitability due to unfavorable external factors, LG Electronics will focus on stimulating premium products sales in the global market, as...

  • Page 25
    ... TROMM Washing Machine â- Mar. 2004 Selected "National Brand" of Russia - Air-conditioner, Vacuum Cleaner â- Mar. 2004 Selected "Top Product of The Year" in Byelorussia - Vacuum Cleaner, Air-conditioner, Microwave ovens â- Nov. 2004 Received "Energy Winner Award of The Year" - Linear Refrigerator...

  • Page 26
    ... at home and abroad in 2004, our Digital Display Division enhanced the Company's growth by strengthening the competitiveness of our display products, and securing a leadership position in the market. Our PDP TVs and LCD monitors occupied the No.2 positions in the global electronics market, while...

  • Page 27
    ... system is plated in 24K Gold combined with set-top box LG ELECTRONICS 026 027 ANNUAL REPORT 2004 Sales (in trillions of Korean won) â- Domestic 4.1 5.0 â- Export 4.2 2004 was a difficult year for domestic businesses due to stagnation in domestic consumption, an increase in oil prices...

  • Page 28
    ... North American market. Also, we improved business structure by increasing our sales portion of 17 inch and larger LCD monitors to 75% in 2004, up from the 66% for 2003. TVs, and LCD monitors. In particular, the Company will increase the sales of premium products, such as digital TVs, in the North...

  • Page 29
    ... of Electronics Component Technology" - Single Scan PDP for High Definition programming / Adopting LG Electronics' own XD Engine to provide vivid and crystal clear images / Support nine compatible memory cards for direct playback of MP3 and photo files. â- MX40 Series LCD Monitor with TV tuner...

  • Page 30
    ... product development, enhanced price competitiveness, and managerial efficiency. Our optical storage sales have ranked at the top of the global market for seven consecutive years, and our home theater sales in the digital AV business are now number one as well. The structure of our PC business...

  • Page 31
    ... technology called XTS pro / Recording DVD up to six hours with 4.7GB disc / Adopting IEEE 1394 DV input, 7 in 2 multi memory slot LG ELECTRONICS 030 031 ANNUAL REPORT 2004 Sales (in trillions of Korean won) â- Domestic â- Export 4.1 3.8 Digital Media Division sales in 2004 recorded...

  • Page 32
    ... players in the global market. By putting forth our best we will ensure that 2005 will be a stepping stone when we bolster our position as a number one supplier of PDAs and tablet PCs. Digital Media ROM drives for game console. We also plan to improve our profitability by increasing the production...

  • Page 33
    ...Inch Mobile DVD Player (DP 8800) information service / All-in-one product with AV function combined with mobile phone function / Connects with service center with a single button â- High-Speed External Type Super Multi DVD Rewriter Simple interface (supporting USB 2.0 and IEEE1394) / Storing high...

  • Page 34
    ... the biggest screen sizes in the world. In addition, the United States adopted our digital TV technology as their standard. Our top notch global R&D capabilities will continue to augment our efforts to gain tangible results in finding next-generation growth engines, and to develop premium products...

  • Page 35
    ...will help us grow to become a 'Global Top 3' electronics company. We have done this by actively promoting such untapped growth drivers as next-generation displays, Home Networks and Telematics. DIGITAL TV � LG Electronics has accomplished remarkable achievements based on such core technologies...

  • Page 36
    ...to hold the largest share of the global optical storage market by developing high-speed DVD-RW drives, and slim type Super Multi Drives that support all DVD recording standards. Based on the world's best R&D capabilities, the Company is OLED � LG Electronics successfully committed to acquiring...

  • Page 37
    ... global leadership. By promoting these premium products, such as side-by-side refrigerators, TROMM washing machines, CYKING vacuum cleaners, PLAN FOR 2005 � In 2005, LG the Company will strive to enhance brand awareness and profitability, as well. In the arenas of optical storage and digital...

  • Page 38
    ...our 47 year history, the employees of LG Electronics, exhibiting a spirit of creativity and persistence, have devoted themselves to constantly implementing innovations throughout the entire organization including work processes. We have pursued to implement globally oriented management, state-of-the...

  • Page 39

  • Page 40
    ... volumes, and sales of premium products such as digital TVs, PDPs, and mobile handsets. In particular, our overall profits have improved due to increased profitability in the mobile handset business, and gains on our equity share in LG.Philips LCD. In 2005, we will continue investing in research and...

  • Page 41
    ...: Mobile Communications Division, Digital Appliance Division, Digital Display Division, and Digital Media Division. ANNUAL REPORT 2004 LG ELECTRONICS 040 041 BUSINESS RESULTS IN 2004 � 2004 was a challenging year for us, MOBILE COMMUNICATIONS � Sales in the Mobile Communications both...

  • Page 42
    ... the market position of LG Electronics' high brand value premium products. Commercial airconditioners sales, which have great potential to enhance profitability, grew remarkably. In 2003 with products such as air-conditioners, refrigerators, washing machines, and vacuum cleaners. Despite...

  • Page 43
    ... an aggressive brand marketing program for notebook PCs. As a result, the operating profit margin of the Digital Media Division was 4.6%, slightly improved than the previous year's margin. Our optical storage product lines gained the top market share in 2004 due to our DVD Writers topping the...

  • Page 44
    ... brand enhancement activities for major products such as digital appliances and TVs. As a result, our operating profit margin was 5.1%, a slight decline from the previous year. Considering the profits of each division, the Mobile Communications Division contributed more to the growth of the Company...

  • Page 45
    ...edge in our market. Mindful of this, we plan to confront present difficulties by efficiently managing company resources, and accelerating innovations throughout our management processes. LG Electronics will place utmost emphasis on existing core business areas like mobile handsets, PDPs, and digital...

  • Page 46
    ... community. Our efforts are focused on being a crystal clear business entity that faithfully assumes our roles and responsibilities toward our shareholders, customers, employees, investors and business partners, as well as society. LG Electronics remains committed to becoming a world's best company...

  • Page 47

  • Page 48
    Eco-friendly Management LG Electronics has a firm and long-held commitment to fulfill its responsibilities to customers, as well as society, by complying with the principles of eco-friendly management. We will put forth our best effort to make a large-scale contribution to the improvement of the ...

  • Page 49
    ... of Products (EDP) for mobile handsets, in April of 2004. This was a first in Korea. Previously LG Electronics gained an authentication of EDP for TVs, air-conditioners, washing machines and refrigerators. In March 2004, we showcased a broad range of our eco-friendly technologies and products in...

  • Page 50
    ... 2004 Hosted musical concert to raise funds for needy Czech Republic teenagers Fund Raising â- LG Electronics, acting as a faithful our less fortunate neighbors. The "LG Electronics Social Service Group" conducts relief work to help the recovery of disaster-stricken areas, and it also offers free...

  • Page 51
    ... has also sponsored a broad range of social programs such as musical concerts, technological training, scholarships, and an archery team in Mexico. Since 2002, LG Electronics has been offering free surgical operations for babies with harelips in the Middle East and Africa, and is also carrying out...

  • Page 52
    ... Management â- LG Electronics has an Ethics variety of education programs, as well as placing ethical management-related cases on the ethical management homepage. We also operate an online consultation room to help solve any problems with business partners, and cyber hot line system to report...

  • Page 53
    ...052 053 ANNUAL REPORT 2004 LG ELECTRONICS This helps us deploy more transparent and value creation management activities that increase Company value, as well as shareholder value. Domestic Individual & Institutional Investors LG.Philips LCD. LG Micron 24% 36% Shareholding LG Corp. LG Corp. LG...

  • Page 54
    Board of Directors (As of March, 2005) Director S.S. Kim CEO of LG Electronics Vice Chairman Director Young-Soo Kwon CFO of LG Electronics Executive Vice President Director Yu-Sig Kang COO of LG Corp. Vice Chairman Outside Director Suk-Jean Kang Chairman of CEO Consulting Group Outside ...

  • Page 55
    ...Ik Kang Executive Vice President Mobile Communications Division Organizations (As of March, 2005) CTO LG Electronics China North American Headquarters European Headquarters Korea Sales & Marketing Operation Digital Appliance Division Digital Display Division Customer Service CFO Digital Media...

  • Page 56
    ... to commercialize home network system Ranked sixth in the global mobile handset industry Established Pyeongtaek factory Broke 1 trillion won in sales 1983 â- Established research center for design 2001 â- 1981 â- Established world's second PDP mass production line (Gumi) Established Korea...

  • Page 57
    2004 Financial Report 058 Report of Independent Auditors Non-Consolidated Financial Statements 060 062 064 065 067 113 Balance Sheets Statements of Income Statements of Appropriations of Retained Earnings Statements of Cash Flows Notes to Non-Consolidated Financial Statements Other Information

  • Page 58
    ... non-consolidated financial statements, upon a resolution of the Board of Directors in July, 2004, the Company invested 289,125 million (equivalent to US$ 250 million) in LG Electronics Wales Ltd. ("LGEWA") which, in turn, invested to its subsidiary, LG.Philips Displays Holding B.V. ("LPD...

  • Page 59
    058 059 ANNUAL REPORT 2004 LG ELECTRONICS As discussed in Notes 5 and 9 to the accompanying non-consolidated financial statements, as per the resolution of the Board of Directors dated February 6, 2004, the Company purchased LG Card Co., Ltd. (LG Card)'s commercial papers with a face value of 150,...

  • Page 60
    LG Electronics Inc. Non-Consolidated Balance Sheets December 31, 2004 and 2003 (in millions of Korean won) 2004 Assets Current assets Cash and cash equivalents (Notes 3 and 7) Short-term financial instruments (Note 4) Short-term investments (Note 5) Trade accounts and notes receivable, net (Notes ...

  • Page 61
    LG Electronics Inc. Non-Consolidated Balance Sheets December 31, 2004 and 2003 (in millions of Korean won) 060 061 ANNUAL REPORT 2004 LG ELECTRONICS 2004 Liabilities and Shareholders' Equity Current liabilities Short-term borrowings (Note 14) Current maturities of long-term debt (Note 14) Trade ...

  • Page 62
    LG Electronics Inc. Non-Consolidated Statements of Income December 31, 2004 and 2003 (in millions of Korean won, except per share amounts) 2004 Sales (Notes 25 and 26) Cost of sales (Note 25) Gross profit Selling and administrative expenses Operating income (Note 26) Non-operating income Gain on ...

  • Page 63
    LG Electronics Inc. Non-Consolidated Statements of Income December 31, 2004 and 2003 (in millions of Korean won, except per share amounts) 062 063 ANNUAL REPORT 2004 LG ELECTRONICS 2004 Non-operating expenses Foreign exchange losses Interest expense Loss from transfer of trade accounts and notes...

  • Page 64
    LG Electronics Inc. Non-Consolidated Statements of Appropriations of Retained Earnings Years Ended December 31, 2004 and 2003 (Dates of Appropriations: March 11, 2005 and March 12, 2004 for the years ended December 31, 2004 and 2003, respectively) (in millions of Korean won) 2004 Retained earnings...

  • Page 65
    LG Electronics Inc. Non-Consolidated Statements of Cash Flows Years ended December 31, 2004 and 2003 (in millions of Korean won) 064 065 ANNUAL REPORT 2004 LG ELECTRONICS 2004 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating ...

  • Page 66
    LG Electronics Inc. Non-Consolidated Statements of Cash Flows Years ended December 31, 2004 and 2003 (in millions of Korean won) 2004 Cash flows from investing activities Disposal of short-term financial instruments Acquisition of short-term financial instruments Increase in short-term and long-...

  • Page 67
    ..., and information and communication products. Former LG Electronics Inc. was incorporated in February 1959 under the Commercial Code of the Republic of Korea to manufacture and sell electronics, and information and communication products, and had its shares listed on the Korea Stock Exchange in...

  • Page 68
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 Application of the Statements of Korean Financial Accounting Standards The Korean Accounting Standards Board has published a series of Statements of Korean Financial Accounting Standards ("SKFAS"), which ...

  • Page 69
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 068 069 Equity Method Investment Securities Investments in equity securities of companies, over which the Company exercises a significant control or influence (controlled investees), are recorded using the...

  • Page 70
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 Routine maintenance and repairs are charged to current operations as incurred. Betterments and renewals which enhance the value of the assets over their most recently appraised value are capitalized. The ...

  • Page 71
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 070 071 Discounts (Premiums) on Debentures Discounts (premiums) on debentures are amortized using the effective interest rate method over the repayment period of ...

  • Page 72
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 Foreign Currency Translation Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the basic rates in effect at the balance sheet date( December 31, 2004, 1,...

  • Page 73
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 072 073 LG ELECTRONICS 3. Cash and Cash Equivalents Cash and cash equivalents as of December 31, 2004 and 2003, consist of the following: (in millions of Korean won) ANNUAL REPORT 2004 Annual interest ...

  • Page 74
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 5. Short-term investments Short-term investments as of December 31, 2004, are as follows: (in millions of Korean won) Acquisition cost Commercial papers issued by LG Card Co., Ltd. 111,876 Market value ...

  • Page 75
    ... Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 074 075 LG ELECTRONICS 7. Assets and Liabilities Denominated in Foreign Currencies As of December 31, 2004 and 2003, monetary assets and liabilities denominated in foreign currencies, other than those disclosed...

  • Page 76
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 8. Inventories Inventories as of December 31, 2004 and 2003, consist of the following: (in millions of Korean won) 2004 Acquisition cost Merchandise Finished products Work-in-process Raw materials Parts ...

  • Page 77
    ... Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 076 077 Available-for-sale securities as of December 31, 2004 and 2003, are as follows: Percentage of ownership (%) Acquisition at December cost 31, 2004 ANNUAL REPORT 2004 LG ELECTRONICS (in millions of Korean...

  • Page 78
    ... the 10,180,531 shares of the common stock of LG Investment & Securities Co., Ltd. to Woori Bank, the representative of the creditor banks, as a part of the business normalization plan of LG Card. In April 2004, in accordance with the business normalization plan, Korea Development Bank exercised its...

  • Page 79
    ... Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 078 079 As of December 31, 2004 and 2003, held-to-maturity securities consist of the follows: (in millions of Korean won) ANNUAL REPORT 2004 LG ELECTRONICS 2004 Subordinated bonds of ABN-AMRO ABCP Other 807 44...

  • Page 80
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 The details of changes in accumulated gains (losses) on valuation of available-for-sale securities as recorded in capital adjustments for the years ended December 31, 2004 and 2003, are as follows (Note 21...

  • Page 81
    ...Consolidated Financial Statements December 31, 2004 and 2003 080 081 LG ELECTRONICS 10. Equity Method Investment Securities Equity method investment securities as of December 31, 2004 and 2003, are as follows: (in millions of Korean won) ANNUAL REPORT 2004 Percentage of ownership (%) Acquisition...

  • Page 82
    ...-Consolidated Financial Statements December 31, 2004 and 2003 (in millions of Korean won) Percentage of ownership (%) Acquisition at December cost 31, 2004 2004 Net asset value Carrying value Acquisition cost 2003 Net asset value Carrying value LG Electronics Czech S.R.O.(LGECZ) LG Electronics...

  • Page 83
    ... Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 (in millions of Korean won) 082 083 ANNUAL REPORT 2004 LG ELECTRONICS Percentage of ownership (%) Acquisition at December cost 31, 2004 2004 Net asset value Carrying value Acquisition cost 2003 Net asset value...

  • Page 84
    ...LGICTH) Vietnam Korea Exchange, Ltd.(V.K.X.) LG TOPS 3 Langchao LG (Yantai) Digital Mobile Technology Research & Development Co., Ltd. 2 LGE (China) R&D Center Electromagnetica Goldstar S.R.L. SLD Telecom Pte. Ltd. 4 Triveni Digital Inc. 2 LG (Yantai) Information & Communication Technology Co., Ltd...

  • Page 85
    ... 084 085 ANNUAL REPORT 2004 LG ELECTRONICS Percentage of ownership (%) Acquisition at December cost 31, 2004 2004 Net asset value Carrying value Acquisition cost 2003 Net asset value Carrying value LG Holdings (HK) Ltd. 4 Qingdao LG Langchao Digital Communication Co., Ltd. 4 LG Goldstar France...

  • Page 86
    ... 31, 2004 Domestic companies LG Micron Ltd. LG Innotek Co., Ltd. Hi Plaza Inc. Hankuk Electric Glass Co., Ltd. Overseas companies LG Electronics Mlawa SP. Zo. O.(LGEMA) LG Electronics Service Europe Netherlands B.V.(LGESE) LG Electronics Shenyang Inc.(LGESY) Taizhou LG-Chunlan Home Appliances Co...

  • Page 87
    ... LG Micron Ltd. LG Sports Ltd. LG Innotek Co., Ltd. LG Investment & Securities Co., Ltd. LG Philips LCD Co., Ltd. HI Plaza Inc. Overseas companies LG Electronics Mlawa SP. Zo. O.(LGEMA) LG Electronics Service Europe Netherlands B.V. (LGESE) LG Electronics Shenyang Inc.(LGESY) TaiZhou LG-Chunlan Home...

  • Page 88
    ...) Inventories Property,plant and equipment Intangible assets Equity securities Total Domestic companies LG Micron Ltd. LG Innotek Co., Ltd. LG.Philips LCD Co., Ltd. LG IBM PC Co., Ltd. Hankuk Electric Glass Co., Ltd. Hi Plaza Inc. Hi Business Logistics Overseas companies LG Electronics China...

  • Page 89
    ...of Korean won) ANNUAL REPORT 2004 LG ELECTRONICS Inventories Property, plant and equipment Intangible assets Equity securities Total Domestic Companies LG Micron Ltd. LG Innotek Co., Ltd. LG.Philips LCD Co., Ltd. LG IBM PC Co., Ltd. Hi Plaza Inc. Overseas Companies LG Electronics Alabama, Inc...

  • Page 90
    ... LG Micron Ltd. LG Sports Ltd. LG Innotek Co., Ltd. Hankuk Electric Glass Co., Ltd. LG.Philips LCD Co., Ltd. LG IBM PC Co., Ltd. Hi Plaza Inc. STIC Ventures Co., Ltd. Hi Business Logistics Overseas companies LG Electronics Alabama, Inc.(LGEAI) LG Electronics Huizhou Inc.(LGEHZ) LG Electronics India...

  • Page 91
    ... of Korean won) ANNUAL REPORT 2004 LG ELECTRONICS January 1, 2003 Equity in earnings (losses) of affiliates, net Others December 31, 2003 Domestic companies LG Micron Ltd. LG Sports Ltd. LG Innotek Co., Ltd. LG Investment & Securities Co., Ltd. LG Philips LCD Co., Ltd. LG IBM PC Co., Ltd. Hi...

  • Page 92
    ... July 2004, the Company invested 289,125 million (equivalent to US$ 250 million) 51,757 million, in LG Electronics Wales Ltd. ("LGEWA") which, in turn, invested to its subsidiary, LG.Philips Displays Holding B.V.("LPD") according to an agreement with the LPD's creditor financial institutions. The...

  • Page 93
    ... Statements December 31, 2004 and 2003 092 093 LG ELECTRONICS 11. Property, Plant and Equipment Changes in property, plant and equipment for the year ended December 31, 2004, are as follows: (in millions of Korean won) ANNUAL REPORT 2004 Balance at January 1, 2004 Acquisitions and capital...

  • Page 94
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 12. Insured Assets As of December 31, 2004, property, plant and equipment, other than land and certain construction-in-progress, and inventories are insured against fire and other casualty losses up to ...

  • Page 95
    ... LG Electronics Inc., now merged into LG Corp.)'s merger with LG Information & Communications, Ltd. in September 2000, former LG Electronics Inc. recognized goodwill amounting to industrial property rights amounting to 393,820 million and acquired 39,382 million and 578,788 million. At the time...

  • Page 96
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 14. Short-Term Borrowings and Current Maturities of Long-Term Debt Short-term borrowings as of December 31, 2004 and 2003, consist of the following: (in millions of Korean won) Annual interest rate (%) at...

  • Page 97
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 096 097 LG ELECTRONICS 15. Debentures, Convertible Bonds and Long-Term Debt Debentures and convertible bonds as of December 31, 2004 and 2003, consist of the following: (in millions) ANNUAL REPORT 2004 ...

  • Page 98
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 Terms and conditions for conversion - Type of stock to be issued : registered common stock - Number of shares convertible : 4,920,464 shares - Conversion price : 68,900 per share - Conversion period : ...

  • Page 99
    ... Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 098 099 Long-term debt as of December 31, 2004 and 2003, consists of the following: (in millions) ANNUAL REPORT 2004 LG ELECTRONICS Annual interest rate (%) at December 31, 2004 2004 19,832 31,314 204,195 31...

  • Page 100
    ... electronic settlement services contracts for payment of trade accounts payable with various banks amounting to 880,000 million. As of December 31, 2004, the Company has sales contracts with several companies, the undelivered portions of which amounted to approximately 6,438 million for KT Corp...

  • Page 101
    ...-Consolidated Financial Statements December 31, 2004 and 2003 100 101 As of December 31, 2004, Hana Bank has provided guarantees of for guarantees approximating follows: (in millions of Korean won) LG ELECTRONICS 26,264 million to the Company. The Company is contingently liable ANNUAL REPORT 2004...

  • Page 102
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 In order to reduce the impact of changes in exchange rates, the Company has also entered into foreign currency option contracts. An unrealized valuation gain and loss amounting to operations for the year ...

  • Page 103
    ... Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 102 103 LG ELECTRONICS 18. Capital Stock Capital stock as of December 31, 2004 and 2003, are as follows: Number of shares issued Common stock Preferred stock 1 ANNUAL REPORT 2004 (in millions of Korean won) Par...

  • Page 104
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 21. Capital Adjustments Capital adjustments as of December 31, 2004 and 2003, consist of the following: (in millions of Korean won) 2004 Treasury stock Gain on valuation of equity method investment ...

  • Page 105
    ...,104) (156,360) 108,978 55,581 16,866 87,899 104,765 ANNUAL REPORT 2004 LG ELECTRONICS (in millions of Korean won) 2003 1,499 37,829 23,095 (21,470) 169,227 41,006 (1,458) 249,728 249,728 The Company periodically assesses its ability to recover deferred income tax assets. In the event of...

  • Page 106
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 23. Earnings Per Share Basic earnings per share is computed by dividing net income allocated to common stock by the weighted-average number of common shares outstanding during the year. Basic ordinary ...

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    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 106 107 The diluted securities outstanding as of December 31, 2004, are as follows: (in millions of Korean won, except per share amounts) ANNUAL REPORT 2004 LG ELECTRONICS Diluted security Foreign ...

  • Page 108
    ... 31, 2004 and 2003, are summarized as follows: (in millions of Korean won) Sales LG Infocomm U.S.A. Inc. (LGICUS) LG Electronics U.S.A. Inc. (LGEUS) Hitachi-LG Data Storage Inc. (HLDS) LG Electronics Service Europe Netherlands B.V. (LGESE) LG Electronics Huizhou Inc. (LGEHZ) LG Electronics Italy...

  • Page 109
    ... sales and research and development services to each business division. The main products that each business division manufactures and sells are as follows: Digital Display & Media division : VCR, CD-ROM, audio, TV, monitor, PDP and PC Digital Appliance division : Refrigerator, washing machine, air...

  • Page 110
    LG Electronics Inc. Notes to Non-Consolidated Financial Statements December 31, 2004 and 2003 Financial data by business division as of and for the year ended December 31, 2003, were as follows: (in millions of Korean won) Business Division Total Digital Display & Media Digital Appliance ...

  • Page 111
    ... Non-Consolidated Financial Statements December 31, 2004 and 2003 110 111 LG ELECTRONICS 27. Value Added Information Details of accounts included in the computation of value added for the years ended December 31, 2004 and 2003, are as follows: (in millions of Korean won) ANNUAL REPORT 2004 2004...

  • Page 112
    ...-consolidated financial statements of the Company will be approved by the Board of Directors on February 19, 2005. 33. Subsequent Event On January 1, 2005, the Company merged a part of PC division of LG IBM PC Co., Ltd., a joint venture with IBM Korea Inc. This merger is aimed to optimize business...

  • Page 113
    LG Electronics Inc. Domestic Production Facilities 112 113 Korea ANNUAL REPORT 2004 LG ELECTRONICS Company Digital Appliance Institute Changwon Location Changwon-si, Gyeongsangnam-do Major Products Refrigerator Microwave Oven RE Compressor Air-Conditioner Washing Machine Vacuum Cleaner RO ...

  • Page 114
    ... Paulo Europe U.K New Castle U.K Wales Poland Mlawa Middle East & Africa Egypt Ismalia LGEEG Production DY FBT Tuner TV Turkey Istanbul Asia India New Delhi / Pune LGEIL LGEAT Production / Sales Production / Sales TV Monitor Refrigerator Air-Conditioner Washing Machine Microwave Oven Compressor PC...

  • Page 115
    ... Air-Conditioner Washing Machine Refrigerator Microwave Oven Vacuum Cleaner Vietnam Hanoi LGEVN Production / Sales TV Monitor DVD Optical Storage GSM Handset Vietnam Hanoi Indonesia Jakarta LGEDI VKX Production / Sales Production Switch Board CDMA System Monitor VCR, COMBI, Home Theater, DVD...

  • Page 116
    ... PC PDA PDP Module TV DVD-Recordable Video Cassette Tape 300 1,700 240 90 54,000 108,000 CNY 57,939 LGE 49% Hangzhou Nature 51% China Qingdao CIS & others Kazakhstan Almaty Russia Moscow LGERA LGEAK LGEQD Production / Sales Production / Sales Production TV Washing Machine Refrigerator / Washing...

  • Page 117
    ... 134,601 LGE 100% Aug 1993 LGEMU Sales USD 11,000 LGE 100% Apr 1995 LGEUS Sales USD 32,884 LGE 100% Aug 1978 LGECI Sales CAD 18,600 LGE 100% Oct 1986 Name LGEAI Service Type Capital Stock (1000) USD 27 Invest Type LGE 100% (As of December 31, 2004) ANNUAL REPORT 2004 LG ELECTRONICS Established Apr...

  • Page 118
    LG Electronics Inc. Overseas Subsidiaries Overseas Sales / Others Location Greece Athens Austria Vienna Romania Bucharest Czech Prague(Praha) Portugal Lisbon Middle East & Africa S. Africa Johanesburg Moroco Casablanca U.A.E. Dubai U.A.E. Dubai Egypt Cairo Nigeria Lagos Asia China Beijing China ...

  • Page 119
    ... Design Management Center Display Division Research Laboratory Digital Appliance Changwon Research Laboratory Mobile Handset R&D Center Mobile Communications Technology Research Laboratory Network Laboratory (As of December 31, 2004) ANNUAL REPORT 2004 LG ELECTRONICS Location Umyeon-dong, Seoul...

  • Page 120
    ... Executive Vice President Current Position Chief Technology Officer Head of European Headquarters Head of Digital Display and Media Division Chief of LG Electronics Institute of Technology Head of Telecommunication Equipment & Handset Division Head of LG Electronics China Head of Korea Sales...

  • Page 121
    ... Digital Display & Media Division (As of December 31, 2004) ANNUAL REPORT 2004 Telecommunication Equipment & Handset Division CEO Korea Sales & Marketing Customer Service LG Electronics China North American Headquarters CTO CFO Human Resources European Headquarters Capital Stock 1) Capital...

  • Page 122
    ... 85,929,960 Capital Resources Korea (In billions of KRW, %) 2004 Capital Resources Bank Insurance Firm Investment Bank / Securities Firm Lease Firm Other Financial Institution Total Corporate bond(private placement) Corporate bond(public offering) Capital increase Capital market Total Grand Total...

  • Page 123
    LG Electronics Inc. Capital Resources 122 123 Borrowings 2004 Capital Resources Short-term borrowings Short-term borrowings denominated in Korean won Short-term borrowings denominated in foreign currency Sub-Total Long-term borrowings 1) Long-term borrowings denominated in Korean won Corporate bond...

  • Page 124
    LG Electronics Inc. Capital Resources Maturity of Debts Capital Resources Short-term borrowings Short-term borrowings denominated in Korean won Short-term borrowings denominated in foreign currency Sub-Total Long-term borrowings 1) Long-term borrowings denominated in Korean won Corporate bond ...

  • Page 125
    ... 124 125 LG ELECTRONICS Current Status of Major Shareholder ANNUAL REPORT 2004 Major Shareholder Structure Name of Shareholder Largest shareholder [LG Corp.] (As of December 31, 2004) Type Common share Preferred share Total Common share Preferred share Total Common share Preferred share Total...

  • Page 126
    ...Computer Co., Ltd. LG Electronics (Nanjing) Plasma Co., Ltd. Qingdao LG Langchao Digital Communication Co., Ltd. LG Electronics (Taizhou) Refrigeration Co., Ltd. LG Electronics Nature (Hangzhou) Recording Media Co., Ltd. Guangzhou LG-TOPS Comm.Tech. Co., Ltd. LG (Yantai) Information & Comm. Tech. Co...

  • Page 127
    126 127 ANNUAL REPORT 2004 LG ELECTRONICS LGECI Toronto Chicago LGEUS ZENITH New Jersey LGEMU San Diego LGEMX Mexicali LGEMM Monterrey LGEAI Huntsville / Service LGERS Reynosa LGEMS Mexico City LGEPS Panama PRODUCTION / SALES SERVICE BRANCH SALES R&D & DESIGN / OTHERS LOGISTICS LGEAZ Manaus ...

  • Page 128
    www.lge.com LG Twin Towers 20 Yeouido-dong, Yeongdeungpo-gu, Seoul, 150-721, Korea e-mail : [email protected]

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