MagnaChip Reports First Quarter 2012 Financial Results - Power Solutions Revenue Grew 14.6% Sequentially and 23.7% Year-over-Year

- Achieved GAAP EPS of $0.40 and Adjusted EPS of $0.17

- Expects Q2 Revenue to Increase 11% to 15% on a Sequential Basis

SEOUL, South Korea and CUPERTINO, Calif., April 25, 2012 /PRNewswire/ -- MagnaChip Semiconductor Corporation ("MagnaChip") (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the first quarter ended March 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120305/NY61184LOGO )

Revenue for the first quarter of 2012 was $177.0 million, a 2.1% decrease compared to $180.8 million for the fourth quarter of 2011, and a 5.8% decrease compared to $187.9 million for the first quarter of 2011.

Gross profit was $49.9 million or 28.2%, as a percent of revenue, for the first quarter of 2012. This compares to gross profit of $51.5 million or 28.5 % for the fourth quarter of 2011 and $56.5 million or 30.1% for the first quarter of 2011.

"I am very pleased that since going public in March 2011, we have met our revenue and gross margin guidance each quarter for 5 consecutive quarters in what has been a very challenging period for the industry," said Sang Park, MagnaChip's Chairman and Chief Executive Officer. "As our Q2 guidance suggests, the first quarter of 2012 was indeed our bottom during this current semiconductor downturn. We have been seeing renewed customer order strength and wafer loading since early March as a result of increased demand from smartphone and tablet PC customers and expect this trend to continue into the second half of this year.  In anticipation of this growing demand, we have allocated additional fab capacity to support expansion."

Net income, on a GAAP basis, for the first quarter of 2012 totaled $15.3 million or $0.40 per diluted share. This compares to net income of $23.7 million or $0.61 per diluted share for the fourth quarter of 2011 and a net income of $22.5 million or $0.57 per diluted share for the first quarter of 2011. Net income was impacted primarily by a foreign currency gain of $11.1 million during the quarter which was primarily related to non-cash translation gains for intercompany balances that were denominated in U.S. dollars.

Adjusted net income, a non-GAAP measurement, for the first quarter of 2012 totaled $6.5 million or $0.17 per diluted share compared to $10.0 million or $0.26 per diluted share for the fourth quarter of 2011 and $15.7 million or $0.40 per diluted share for the first quarter of 2011.

Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a more meaningful understanding of the factors and trends affecting MagnaChip's business and operations. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income or as a better indicator of our operating performance than measures that are presented in accordance with GAAP.

Combined cash balances (cash and cash equivalents plus restricted cash) totaled $160.6 million at the end of the first quarter of 2012, a decrease of $8.4 million from the end of the prior quarter. Cash provided from operations totaled approximately $39.9 million for the first quarter of 2012.



Revenue by Segment


In thousands of US dollars

Three Months Ended


March 31, 2012

December 31, 2011

March 31, 2011

Semiconductor

Manufacturing Services

$      67,863

$        67,973

$      92,266

Display Solutions

83,225

90,045

74,464

Power Solutions

25,253

22,039

20,412

Other

661

769

779





Total Revenue

$     177,002

$      180,826

$     187,921





First Quarter and Recent Company Highlights

  • Power Solutions Revenue Grew 14.6% Sequentially and 23.7% Year-over-Year.
  • Fab loading rate exceeded 90% in March 2012.
  • Achieved GAAP EPS of $0.40 and Adjusted EPS of $0.17.
  • Repurchased 1.04 Million Shares under MagnaChip's Stock Repurchase Program Announced October 11, 2011.

Business Outlook
For the second quarter of 2012, MagnaChip expects:

  • Revenue will increase 11% to 15% ($197 million to $203 million) on a sequential basis.
  • Gross Profit, as a percent of revenue, will be in the range of 29.5% to 30.5%.

Non-GAAP Metrics
Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense, stock-based compensation expense, foreign currency gain, net, derivative valuation loss (gain), net, and special expense for an IPO employee incentive payment. Adjusted net income (loss) excludes charges related to, stock-based compensation expense, amortization of intangible assets associated with continuing operations, foreign currency gain, net, derivative valuation loss (gain), net, and special expense for an IPO employee incentive payment. A reconciliation of GAAP results to non-GAAP results is included following the financial statements.

About MagnaChip Semiconductor Corporation
Headquartered in South Korea, MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. MagnaChip believes it has one of the broadest and deepest ranges of analog and mixed-signal semiconductor platforms in the industry, supported by its 30-year operating history, a large portfolio of registered and pending patents, and extensive engineering and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through, MagnaChip's website is not a part of, and is not incorporated into, this release.

Safe Harbor for Forward-Looking Statements
Information in this release regarding MagnaChip's forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about our ability to capitalize on improving market dynamics and future operating and financial performance including second quarter 2012 revenue and gross profit. All forward-looking statements included in this release are based upon information available to MagnaChip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new products and technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for semiconductor products, industry and/or company overcapacity, effective and cost efficient utilization of manufacturing capacity, financial stability in foreign markets and the impact of foreign exchange rates, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, compliance with U.S. and international trade and export laws and regulations by us and our distributors, and other risks detailed from time to time in MagnaChip's filings with the SEC, including our Form 10-K filed on March 8, 2012 and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website.  MagnaChip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

CONTACTS:


 

In the United States:

Robert Pursel

Director of Investor Relations

Tel. 408-625-1262

robert.pursel@magnachip.com

In Korea:

Chankeun Park

Senior Manager, Public Relations

Tel. +82-2-6903-3195

chankeun.park@magnachip.com










MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars, except share data)

(Unaudited)








Three Months Ended


March 31,

2012


December 31,

2011


March 31,

2011

Net sales

$

177,002


$

180,826


$

187,921

Cost of sales


127,087



129,287



131,447










Gross profit


49,915



51,539



56,474

Gross profit %


28.2%



28.5%



30.1%










Selling, general and administrative expenses


18,209



17,627



15,401

Research and development expenses


19,831



18,652



18,498

Special expense for IPO incentive






12,146










Operating income


11,875



15,260



10,429










Other income (expense)









Interest expense, net


(5,580)



(5,644)



(7,111)

Foreign currency gain, net


11,109



16,832



21,359

Other


89



(862)



166












5,618



10,326



14,414










Income before income taxes


17,493



25,586



24,843










Income tax expense


2,230



1,881



2,375










Net income

$

15,263


$

23,705


$

22,468










Earnings per common share :









        - Basic

$

0.41


$

0.61


$

0.59

        - Diluted

$

0.40


$

0.61


$

0.57

Weighted average number of shares—Basic


37,524,127



38,632,975



38,332,750

Weighted average number of shares—Diluted


38,298,336



39,110,759



39,570,522



















MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME

(In thousands of US dollars, except share data)

(Unaudited)





Three Months Ended



March 31,


December 31,


March 31,



2012


2011


2011


Net income

$

15,263


$

23,705


$

22,468


Adjustments:










Depreciation and amortization


7,474



8,856



13,903


Interest expense, net    


5,580



5,644



7,111


Income tax expense


2,230



1,881



2,375


Stock-based compensation expense


458



287



641


Foreign currency gain, net


(11,109)



(16,832)



(21,359)


Derivative valuation loss (gain), net


(85)



862



(158)


Special expense for IPO incentive





12,146


Adjusted EBITDA

$

19,811


$

24,403


$

37,127


Adjusted EBITDA per common share:










- Diluted

$

0.52


$

0.62


$

0.94


Weighted average number of shares - Diluted


38,298,336



39,110,759



39,570,522












Net income

$

15,263


$

23,705


$

22,468


Adjustments:










Stock-based compensation expense


458



287



641


Amortization of intangibles


1,993



1,985



1,990


Foreign currency gain, net


(11,109)



(16,832)



(21,359)


Derivative valuation loss (gain), net


(85)



862



(158)


Special expense for IPO incentive






12,146


Adjusted net income

$

6,520


$

10,007


$

15,728


Adjusted net income per common share:










- Diluted

$

0.17


$

0.26


$

0.40


Weighted average number of shares - Diluted


38,298,336



39,110,759



39,570,522













We define Adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense, (iv) stock-based compensation expense, (v) foreign currency gain, net, (vi) derivative valuation loss (gain), net, and (vii) special expense for IPO incentive.

We present Adjusted Net Income as a further supplemental measure of our performance. We prepare Adjusted Net Income by adjusting net income to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income as net income adjusted to exclude (i) stock-based compensation expense, (ii) amortization of intangibles, (iii) foreign currency gain, net, (iv) derivative valuation loss (gain), net, and (v) special expense for IPO incentive.


MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)




 

March 31,

2012


 

December 31,

2011

Assets







Current assets







Cash and cash equivalents


$

156,623


$

162,111

Restricted cash



3,934


6,830

Accounts receivable, net



127,332



125,922

Inventories, net



68,105



62,836

Other receivables



4,343



256

Prepaid expenses



8,112



6,032

Other current assets



5,578



15,909








Total current assets



374,027



379,896








Property, plant and equipment, net



206,206



182,663

Intangible assets, net



20,348



16,787

Long-term prepaid expenses



4,107



4,790

Other non-current assets



17,972



18,539








Total assets


$

622,660


$

602,675








Liabilities and Stockholders' Equity







Current liabilities







Accounts payable


$

90,902


$

77,848

Other accounts payable



13,772



13,452

Accrued expenses



39,649



31,723

Current portion of capital lease obligations



1,458



2,852

Derivative liabilities



8,308



9,757

Other current liabilities



3,266



2,007








Total current liabilities



157,355



137,639








Long-term borrowings, net



201,452



201,389

Accrued severance benefits, net



94,352



90,755

Other non-current liabilities



5,596



6,222








Total liabilities



458,755



436,005








Commitments and contingencies














Stockholder' equity







Common stock, $0.01 par value, 150,000,000 shares authorized, 39,457,063

   shares issued and 36,880,879 outstanding at March 31, 2012 and 39,439,115

   shares issued and 37,907,575 outstanding at December 31, 2011



394



394

Additional paid-in capital



99,495



98,929

Retained earnings



109,213



93,950

Treasury stock, 2,576,184 shares at March 31, 2012



(23,728)



(11,793)

Accumulated other comprehensive loss



(21,469)



(14,810)








Total stockholders' equity



163,905



166,670








Total liabilities and stockholders' equity


$

622,660


$

602,675



MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)




Three Months Ended



March 31,

2012


March 31,

2011

Cash flows from operating activities







Net income


$

15,263


$

22,468

Adjustments to reconcile net income to net cash provided by operating activities







Depreciation and amortization



7,474



13,903

Provision for severance benefits



4,703



2,854

Amortization of debt issuance costs and original issue discount



242



246

Gain on foreign currency translation, net



(12,824)



(23,684)

Gain on disposal of property, plant and equipment, net



(269)



Loss on disposal of intangible assets, net



11



4

Stock-based compensation



458



641

Other



123



549

Changes in operating assets and liabilities







Accounts receivable



1,339



(9,250)

Inventories



(2,860)



(3,467)

Other receivables



(4,024)



(1,041)

Other current assets



8,536



(1,449)

Deferred tax assets



871



548

Accounts payable



12,581



14,289

Other accounts payable



(298)



(1,348)

Accrued expenses



9,886



7,153

Other current liabilities



2,225



(1,518)

Payment of severance benefits



(2,323)



(1,610)

Other



(1,261)



(72)








Net cash provided by operating activities



39,853



19,216








Cash flows from investing activities







Decrease in restricted cash



2,995



Proceeds from disposal of plant, property and equipment



273



Purchase of plant, property and equipment



(24,758)



(6,779)

Payment for intellectual property registration



(190)



(165)

Payment for acquisition



(8,642)



Decrease in short-term financial instruments



173



Collection of guarantee deposits



31



979

Payment of guarantee deposits



(178)



(1,004)

Other



(48)



(44)








Net cash used in investing activities



(30,344)



(7,013)








Cash flows from financing activities







Proceeds from issuance of common stock



108



11,425

Repayment of obligation under capital lease



(1,510)



(1,562)

Acquisition of treasury stock



(11,935)










Net cash provided by (used in) financing activities



(13,337)



9,863

Effect of exchange rates on cash and cash equivalents



(1,660)



(59)









Net increase (decrease) in cash and cash equivalents



(5,488)



22,007








Cash and cash equivalents







Beginning of the period



162,111



172,172








End of the period


$

156,623


$

194,179





















 

SOURCE MagnaChip Semiconductor Corporation



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