MagnaChip Reports Fourth Quarter and Full Year 2012 Financial Results

- Revenue Increased 6.1% For the Full Year

- Gross Margin Increased 190 Basis Points For the Full Year

- Achieved 2012 GAAP EPS of $5.16 Per Diluted Share, Adjusted EPS of $2.23 Per Diluted Share

30 Jan, 2013, 16:00 ET from MagnaChip Semiconductor Corporation

SEOUL, South Korea and CUPERTINO, Calif., Jan. 30, 2013 /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 quarter and year ended December 31, 2012.

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

Revenue for the fourth quarter of 2012 was $218.1 million, a 1.7% decrease compared to $221.9 million for the third quarter of 2012, and a 20.6% increase compared to $180.8 million for the fourth quarter of 2011. For the full year 2012, revenue was $819.6 million compared to $772.8 million for 2011, a 6.1% increase.

Gross margin was $74.3 million or 34.1%, as a percent of revenue, for the fourth quarter of 2012. This compares to gross profit of $76.4 million or 34.5 % for the third quarter of 2012 and $51.5 million or 28.5% for the fourth quarter of 2011. For the full year 2012, gross profit was $263.5 million or 32.2% compared to $234.3 million or 30.3% for 2011.

Net income, on a GAAP basis, for the fourth quarter of 2012 totaled $125.3 million or $3.38 per diluted share. This compares to net income of $48.4 million or $1.30 per diluted share for the third quarter of 2012 and a net income of $23.7 million or $0.61 per diluted share for the fourth quarter of 2011. For the full year 2012, net income was $193.3 million or $5.16 per diluted share compared to $21.8 million or $0.55 per diluted share for 2011. Net income for 2012 was impacted primarily by a gross margin of $263.5 million compared to $234.3 million for 2011, recognition of deferred tax assets of $64.7 million in 2012, and a foreign currency gain of $56.0 million compared to a foreign currency loss of $11.6 million for 2011, which was primarily related to non-cash foreign currency translation for intercompany balances that were denominated in U.S. dollars.

"I am very pleased that we ended 2012 with revenue of $819.6 million dollars, up 6.1% from 2011 and outpacing the semiconductor industry, which declined 3.0% this year. While the macro environment remained weak, we have successfully aligned with the growing smartphone and tablet PC market, leveraged our strong relationships with blue chip customers, and delivered 30% more new products in 2012 from the previous year," said Sang Park, MagnaChip Chairman and CEO.  "I believe that this will help differentiate us from our competitors and allow us to perform better than the market in 2013.  Compared to the same quarter last year, Q4 revenue and gross margin maintained better momentum due to a successful mix shift of products and customers and improved utilization from our mixed business model. Our revenue and margin performance this quarter represents our eighth consecutive quarter of meeting or exceeding guidance."

Adjusted net income, a non-GAAP measurement, for the fourth quarter of 2012 totaled $28.7 million or $0.77 per diluted share compared to $30.4 million or $0.81 per diluted share for the third quarter of 2012 and $10.0 million or $0.26 per diluted share for the fourth quarter of 2011. For the full year 2012, adjusted net income was $83.5 million or $2.23 per diluted share compared to $66.4 million or $1.67 per diluted share for 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 $182.4 million at the end of the fourth quarter of 2012, an increase of $16.6 million from the end of the prior quarter. Cash provided from operations totaled approximately $31.5 million for the fourth quarter of 2012.

Revenue by Segment

In thousands of US dollars

Three Months Ended

Year Ended

December 31, 2012

September 30, 2012

December 31,

2011

December 31, 2012

December 31,

2011

Semiconductor Manufacturing Services

$    112,654

$      117,978

$    67,973

$    389,812

$    338,268

Display Solutions

72,806

69,415

90,045

302,230

338,995

Power Solutions

31,949

33,849

22,039

124,750

92,547

Other

675

630

769

2,800

3,021

Total Revenue

$     218,084

$     221,872

$     180,826

$     819,592

$     772,831

Fourth Quarter and Recent Company Highlights

  • Power Solutions 2012 Revenue Grew 34.8% for the Full Year.
  • AMOLED 2012 Revenue from Smartphones Grew 47.0% for the Full Year.
  • Eighth Consecutive Quarter of Achieving Financial Guidance.
  • Repurchased 406 Thousand Shares in Q4 under MagnaChip's 2011 Stock Repurchase Program.

Business Outlook

For the first quarter of 2013, MagnaChip expects:

  • Revenue will be in the range of $201 million to $209 million.
  • Gross margin will be 31.0% to 33.0% as a percent of revenue.

Non-GAAP Metrics

Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense (benefit), restructuring and impairment charges, stock-based compensation expense, foreign currency loss (gain), net, derivative valuation loss (gain), net, secondary offering and others, special expense for an IPO employee incentive payment, and loss on early extinguishment of senior notes. Adjusted net income excludes charges related to restructuring and impairment, stock-based compensation expense, amortization of intangible assets associated with continuing operations, foreign currency loss (gain), net, derivative valuation loss (gain), net, secondary offering and others, GAAP and cash tax expense difference, special expense for an IPO employee incentive payment, and loss on early extinguishment of senior notes. A reconciliation of GAAP results to non-GAAP results is included following the financial statements.

Conference Call

MagnaChip will hold a conference call at 2 p.m. PST today to discuss the fourth quarter 2012 financial results.  The conference call will be webcast live and is also available by dialing 1-866-776-2061 in the U.S. or 1-706-679-0298 for all other locations. The conference ID number is 86473379 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 2 p.m. PST start time to ensure a timely connection. The webcast and earnings release will be accessible at www.magnachip.com.

A replay of the conference call will be available the same day and will run for 72 hours. The replay access numbers are 1-855-859-2056 or 1-404-537-3406. The access code is 86473379.

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 first quarter 2013 revenue and gross margin. All forward-looking statements included in this release are based upon information available to MagnaChip Semiconductor 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. +1-408-625-1262

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

Year Ended

December 31,

2012

September 30,

2012

December 31,

2011

December 31,

2012

December 31,

2011

Net sales

$

218,084

$

221,872

$

180,826

$

819,592

$

772,831

Cost of sales

143,796

145,432

129,287

556,091

538,515

Gross profit

74,288

76,440

51,539

263,501

234,316

Gross profit %

34.1%

34.5%

28.5%

32.2%

30.3%

Selling, general and administrative expenses

19,281

21,388

17,627

78,971

68,367

Research and development expenses

19,660

19,470

18,652

78,723

76,767

Restructuring and impairment charges

4,096

Special expense for IPO incentive

12,146

Operating income

35,347

35,582

15,260

105,807

72,940

Other income (expenses)

Interest expense, net

(5,655)

(5,746)

(5,644)

(22,600)

(24,984)

Foreign currency gain (loss), net

33,656

21,782

16,832

55,961

(11,633)

Loss on early extinguishment of senior notes

(5,459)

Other

634

695

(862)

2,119

(1,052)

28,635

16,731

10,326

35,480

(43,128)

Income before income taxes

63,982

52,313

25,586

141,287

29,812

Income tax expense (benefit)

(61,304)

3,901

1,881

(52,014)

8,019

Net income

$

125,286

$

48,412

$

23,705

$

193,301

$

21,793

Earnings per common share :

        - Basic

$

3.50

$

1.34

$

0.61

$

5.29

$

0.56

        - Diluted

$

3.38

$

1.30

$

0.61

$

5.16

$

0.55

Weighted average number of shares—Basic

35,845,367

36,199,655

38,632,975

36,567,684

38,775,642

Weighted average number of shares—Diluted

37,074,657

37,324,787

39,110,759

37,496,965

39,774,898

 

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

Year Ended

December 31,

2012

September 30,

2012

December 31,

2011

December 31,

2012

December 31,

2011

Net income

$

125,286

$

48,412

$

23,705

$

193,301

$

21,793

Adjustments:

Depreciation and amortization

8,550

8,443

8,856

32,390

51,224

Interest expense, net

5,655

5,746

5,644

22,600

24,984

Income tax expense (benefit)

(61,304)

3,901

1,881

(52,014)

8,019

Restructuring and impairment charges

4,096

Stock-based compensation expense

546

535

287

1,996

2,085

Foreign currency loss (gain), net

(33,656)

(21,782)

(16,832)

(55,961)

11,633

Derivative valuation loss (gain), net

(634)

(695)

862

(2,115)

1,059

Secondary offering and others

2,119

3,335

Special expense for IPO incentive

12,146

Loss on early extinguishment of senior notes

5,459

Adjusted EBITDA

$

44,443

$

46,679

$

24,403

$

143,532

$

142,498

Adjusted EBITDA per common share:

- Diluted

$

1.20

$

1.25

$

0.62

$

3.83

$

3.58

Weighted average number of shares - Diluted

37,074,657

37,324,787

39,110,759

37,496,965

39,774,898

Net income

$

125,286

$

48,412

$

23,705

$

193,301

$

21,793

Adjustments:

Restructuring and impairment charges

4,096

Stock-based compensation expense

546

535

287

1,996

2,085

Amortization of intangibles

1,893

1,829

1,985

7,695

8,147

Foreign currency loss (gain), net

(33,656)

(21,782)

(16,832)

(55,961)

11,633

Derivative valuation loss (gain), net

(634)

(695)

862

(2,115)

1,059

Secondary offering and others

2,119

3,335

GAAP and cash tax expense difference

(64,749)

(64,749)

Special expense for IPO incentive

12,146

Loss on early extinguishment of senior notes

5,459

Adjusted net income

$

28,686

$

30,418

$

10,007

$

83,502

$

66,418

Adjusted net income per common share:

- Diluted

$

0.77

$

0.81

$

0.26

$

2.23

$

1.67

Weighted average number of shares - Diluted

37,074,657

37,324,787

39,110,759

37,496,965

39,774,898

We define Adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) restructuring and impairment charges, (v) stock-based compensation expense, (vi) foreign currency loss (gain), net, (vii) derivative valuation loss (gain), net, (viii) secondary offering and others, (ix) Special expense for IPO incentive, and (x) loss on early extinguishment of senior notes.

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) restructuring and impairment charges, (ii) stock-based compensation expense, (iii) amortization of intangibles, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, (vi) secondary offering and others, (vii) GAAP and cash tax expense difference, (viii) Special expense for IPO incentive, and (ix) loss on early extinguishment of senior notes.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)

December 31,

2012

December 31, 2011

Assets

Current assets

Cash and cash equivalents

$

182,238

$

162,111

Restricted cash

133

6,830

Accounts receivable, net

143,331

125,922

Inventories, net

89,363

62,836

Other receivables

1,429

256

Prepaid expenses

7,884

6,032

Current deferred income tax assets

22,768

3,406

Other current assets

9,680

12,503

Total current assets

456,826

379,896

Property, plant and equipment, net

238,256

182,663

Intangible assets, net

15,260

16,787

Long-term prepaid expenses

18,048

4,790

Deferred income tax assets

46,710

3,537

Other non-current assets

14,866

15,002

Total assets

$

789,966

$

602,675

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

79,236

$

77,848

Other accounts payable

15,600

13,452

Accrued expenses

43,486

31,723

Current portion of capital lease obligations

2,852

Derivative liabilities

9,757

Other current liabilities

9,973

2,007

Total current liabilities

148,295

137,639

Long-term borrowings, net

201,653

201,389

Accrued severance benefits, net

112,446

90,755

Other non-current liabilities

17,263

6,222

Total liabilities

479,657

436,005

Stockholders' equity

Common stock, $0.01 par value, 150,000,000 shares authorized, 39,599,374 shares issued and 35,635,357 shares outstanding at December 31, 2012 and 39,439,115 shares issued and 37,907,575 shares outstanding at December 31, 2011

396

394

Additional paid-in capital

101,885

98,929

Retained earnings

287,251

93,950

Treasury stock, 3,964,017 shares at December 31, 2012 and 1,531,540 shares at December 31, 2011

(39,918)

(11,793)

Accumulated other comprehensive loss

(39,305)

(14,810)

Total stockholders' equity

310,309

166,670

Total liabilities and stockholders' equity

$

789,966

$

602,675

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of US dollars) (Unaudited)

Three Months Ended

Year Ended

December 31,

2012

December 31,

2012

December 31,

2011

Cash flow from operating activities

Net income

$

125,286

$

193,301

$

21,793

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

Depreciation and amortization

8,550

32,390

51,224

Provision for severance benefits

4,158

20,937

14,698

Amortization of debt issuance costs and original issue discount

256

1,009

970

Loss (gain) on foreign currency translation, net

(38,263)

(63,567)

15,140

Loss (gain) on disposal of property, plant and equipment, net

2

(172)

(122)

Loss on disposal of intangible assets, net

1

27

25

Restructuring and impairment charges

2,499

Stock-based compensation

546

1,996

2,085

Loss on early extinguishment of senior notes

5,459

Other

(138)

(470)

1,682

Changes in operating assets and liabilities

Accounts receivable

10,634

(7,534)

(6,234)

Inventories

(10,540)

(19,066)

4,274

Other receivables

1,329

(458)

2,657

Other current assets

11,606

10,944

(5,081)

Deferred tax assets

(64,257)

(62,743)

1,412

Accounts payable

(19,310)

(1,838)

18,084

Other accounts payable

(8,485)

(9,185)

(6,891)

Accrued expenses

10,651

24,412

(5,577)

Other current liabilities

2,407

11,857

(3,050)

Payment of severance benefits

(1,428)

(6,997)

(10,478)

Other

(1,501)

(3,740)

(38)

Net cash provided by operating activities

31,504

121,103

104,531

Cash flow from investing activities

Decrease (increase) in restricted cash

9

6,783

(7,199)

Proceeds from disposal of plant, property and equipment

937

219

Purchase of plant, property and equipment

(4,777)

(61,522)

(48,173)

Payment for intellectual property registration

(130)

(882)

(696)

Payment for acquisition

(8,642)

Decrease in short-term financial instruments

173

Collection of guarantee deposits

9

81

1,544

Payment of guarantee deposits

(9)

(320)

(2,482)

Other

(86)

(136)

(371)

Net cash used in investing activities

(4,984)

(63,528)

(57,158)

Cash flow from financing activities

Proceeds from issuance of common stock

526

962

9,336

Repurchase of senior notes

(50,307)

Repayment of obligations under capital lease

(2,968)

(6,312)

Acquisition of treasury stock

(5,188)

(28,125)

(11,793)

Net cash used in financing activities

(4,662)

(30,131)

(59,076)

Effect of exchange rates on cash and cash equivalents

(5,278)

(7,317)

1,642

Net increase (decrease) in cash and cash equivalents

16,580

20,127

(10,061)

Cash and cash equivalents

Beginning of the period

165,658

162,111

172,172

End of the period

$

182,238

$

182,238

$

162,111

 

SOURCE MagnaChip Semiconductor Corporation



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