MagnaChip Reports Second Quarter 2013 Financial Results - Revenue Grew 4.9% Sequentially, 6.2% Year-Over-Year

- Power Solutions Revenue Increased 19.1% Sequentially, 6.7% Year-Over-Year

- Gross Margin Improved 100 BPS Sequentially, 200 BPS Year-Over-Year

- Achieved GAAP EPS of $0.12 and Adjusted EPS of $0.71 Per Diluted Share

- Board Approves New $100 Million Stock Repurchase Program

SEOUL, South Korea and CUPERTINO, Calif., July 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 second quarter ended June 30, 2013.

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

Revenue for the second quarter of 2013 was $215.3 million, a 4.9% increase compared to $205.3 million for the first quarter of 2013 and a 6.2% increase compared to $202.6 million for the second quarter of 2012.

Gross margin was $71.0 million or 33.0%, as a percent of revenue, for the second quarter of 2013. This compares to gross margin of $65.7 million or 32.0% for the first quarter of 2013 and $62.9 million or 31.0% for the second quarter of 2012.

Net income, on a GAAP basis, for the second quarter of 2013 totaled $4.4 million or $0.12 per diluted share. This compares to a net loss of $7.4 million or $0.21 per diluted share for the first quarter of 2013 and a net income of $4.3 million or $0.12 per diluted share for the second quarter of 2012.

"We delivered solid results in the second quarter. Revenue of $215.3 million dollars was up 4.9% sequentially and up 6.2% year-over-year. Gross margin of 33.0% was up 100 basis points compared to last quarter and up 200 basis points compared to Q2 of last year," said Sang Park, MagnaChip Chairman and CEO. "We're excited that our effort to focus on fast growing markets with our expanding list of innovative partners has enabled us to deliver ten consecutive quarters of meeting or exceeding our financial guidance, in spite of the recent soft demand from high-end smartphone makers."

Adjusted net income, a non-GAAP measurement, for the second quarter of 2013 totaled $26.2 million or $0.71 per diluted share compared to $19.7 million or $0.53 per diluted share for the first quarter of 2013 and $17.9 million or $0.48 per diluted share for the second quarter of 2012.

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. A reconciliation of GAAP results to non-GAAP results is included following the financial statements.

Combined cash balances (cash and cash equivalents plus restricted cash) totaled $192.6 million at the end of the second quarter of 2013, an increase of $9.6 million from the end of the prior quarter. Cash provided from operations totaled approximately $11.0 million for the second quarter of 2013.

 

Revenue by Segment




In thousands of US dollars

Three Months Ended


June 30, 2013

March 31, 2013

June 30, 2012

Semiconductor Manufacturing Services (Foundry)

$    109,751

$    104,138

$    91,318

Display Solutions

68,867

70,323

76,784

Power Solutions

35,959

30,184

33,699

Other

712

653

833

Total Revenue

$     215,289

$     205,298

$     202,634

Second Quarter and Recent Company Highlights

  • Completed Private Offering of $225 Million of Senior Notes.
  • Lowered Cash Interest Expense by 30.3% or $6.5 Million Annually.
  • Corporate Credit and Debt Rating Upgraded by Moody's Investors Service.
  • Tenth Consecutive Quarter of Meeting or Exceeding Financial Guidance.

Business Outlook

For the third quarter of 2013, MagnaChip expects:

  • Revenue will be in the range of $215 million to $225 million.
  • Gross margin will be 33.0% to 34.0% as a percent of revenue.

Conference Call

MagnaChip will hold a conference call at 5 p.m. EDT today to discuss the second quarter 2013 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 18170301 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EDT 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 18170301.

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 third 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 February 22, 2013 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



June 30,

2013



March 31,

2013



June 30,

2012

Net sales

$

215,289


$

205,298


$

202,634

Cost of sales


144,241



139,555



139,776










Gross profit


71,048



65,743



62,858

Gross profit %


33.0%



32.0%



31.0%










Selling, general and administrative expenses


19,709



19,791



20,093

Research and development expenses


21,131



20,582



19,762

Restructuring and impairment charges




2,446












Operating income


30,208



22,924



23,003










Other income (expenses)









Interest expense, net


(5,879)



(5,849)



(5,619)

Foreign currency loss, net


(20,978)



(22,558)



(10,586)

Other


(230)



(260)



701












(27,087)



(28,667)



(15,504)










Income (loss) before income taxes


3,121



(5,743)



7,499










Income tax expense (benefit)


(1,315)



1,662



3,159










Net income (loss)

$

4,436


$

(7,405)


$

4,340










Earnings (loss) per common share :









        - Basic

$

0.13


$

(0.21)


$

0.12

        - Diluted

$

0.12


$

(0.21)


$

0.12

Weighted average number of shares—Basic


35,474,001



35,539,413



36,713,569

Weighted average number of shares—Diluted


37,125,005



35,539,413



37,566,699



















 

 

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



June 30,

2013



March 31,

2013



June 30,

2012

Net income (loss)

$

4,436


$

(7,405)


$

4,340

Adjustments:









Depreciation and amortization


8,359



8,522



7,923

Interest expense, net      


5,879



5,849



5,619

Income tax expense (benefit)


(1,315)



1,662



3,159

Restructuring and impairment charges




2,446



Stock-based compensation expense


493



420



457

Foreign currency loss, net


20,978



22,558



10,586

Derivative valuation loss (gain), net


230



267



(701)

Secondary offering expense




669



1,216

Adjusted EBITDA

$

39,060


$

34,988


$

32,599

Adjusted EBITDA per common share:









- Diluted

$

1.05


$

0.94


$

0.87

Weighted average number of shares

- Diluted


37,125,005



37,138,414



37,566,699










Net income (loss)

$

4,436


$

(7,405)


$

4,340

Adjustments:









Restructuring and impairment charges




2,446



Stock-based compensation expense


493



420



457

Amortization of intangibles


1,492



1,749



1,980

Foreign currency loss, net


20,978



22,558



10,586

Derivative valuation loss (gain), net


230



267



(701)

Secondary offering expense




669



1,216

GAAP and cash tax expense difference


(1,452)



(998)



Adjusted net income

$

26,177


$

19,706


$

17,878

Adjusted net income per common share:









- Diluted

$

0.71


$

0.53


$

0.48

Weighted average number of shares - Diluted


37,125,005



37,138,414



37,566,699










We define Adjusted EBITDA as net income (loss) 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, net, (vii) derivative valuation loss (gain), net, and (viii) secondary offering expense.

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 (loss) adjusted to exclude (i) restructuring and impairment charges, (ii) stock-based compensation expense, (iii) amortization of intangibles, (iv) foreign currency loss, net, (v) derivative valuation loss (gain), net, (vi) secondary offering expense, and (vii) GAAP and cash tax expense difference.

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)

 



 

June 30,

2013


 

December 31,
2012

Assets






Current assets






Cash and cash equivalents

$

192,641


$

182,238

Restricted cash


6


133

Accounts receivable, net


165,181



143,331

Inventories, net


76,342



89,363

Other receivables


2,459



1,429

Prepaid expenses


9,366



7,884

Current deferred income tax assets


25,347



22,768

Other current assets


3,695



9,680







     Total current assets


475,037



456,826







Property, plant and equipment, net


247,242



238,256

Intangible assets, net


10,068



15,260

Long-term prepaid expenses


17,962



18,048

Deferred income tax assets


42,631



46,710

Other non-current assets


15,422



14,866







     Total assets

$

808,362


$

789,966







Liabilities and Stockholders' Equity






Current liabilities






Accounts payable

$

76,175


$

79,236

Other accounts payable


16,804



15,600

Accrued expenses


49,918



43,486

Derivative liabilities


10,247



Other current liabilities


6,912



9,973







     Total current liabilities


160,056



148,295







Long-term borrowings, net


201,801



201,653

Accrued severance benefits, net


112,198



112,446

Other non-current liabilities


17,880



17,263







     Total liabilities


491,935



479,657







Stockholders' equity






Common stock, $0.01 par value, 150,000,000 shares authorized,

40,021,283 shares issued and 35,681,382 shares outstanding at June

30, 2013 and 39,599,374 shares issued and 35,635,357 shares

outstanding at December 31, 2012


400



396

Additional paid-in capital


107,375



101,885

Retained earnings


284,282



287,251

Treasury stock, 4,339,901 shares at June 30, 2013 and 3,964,017

 shares at December 31, 2012


(45,918)



(39,918)

Accumulated other comprehensive loss


(29,712)



(39,305)







     Total stockholders' equity


316,427



310,309







     Total liabilities and stockholders' equity

$

808,362


$

789,966







 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)

 



Three Months Ended


Six Months

 Ended


June 30,

2013


June 30,

2013


June 30,

2012

Cash flows from operating activities









Net income (loss)

$

4,436


$

(2,969)


$

19,603

Adjustments to reconcile net income (loss) to net cash provided by operating activities









Depreciation and amortization


8,359



16,881



15,397

Provision for severance benefits


6,457



10,686



10,975

Amortization of debt issuance costs and original issue discount


285



568



497

Loss on foreign currency translation, net


26,728



55,008



55

Gain on disposal of property, plant and equipment, net


(26)



(26)



(190)

Loss on disposal of intangible assets, net




1



15

Restructuring and impairment charges




618



Stock-based compensation


493



913



915

Other


776



1,411



(348)

Changes in operating assets and liabilities









Accounts receivable


(23,077)



(29,486)



(8,296)

Inventories


4,738



6,760



(11,498)

Other receivables


1,878



600



(2,580)

Other current assets


5,411



7,425



8,851

Deferred tax assets


(3,177)



(995)



1,146

Accounts payable


(1,437)



853



14,654

Other accounts payable


(17,256)



(7,522)



9,677

Accrued expenses


(5,878)



(7,003)



7,890

Other current liabilities


4,741



(1,097)



6,611

Payment of severance benefits


(2,312)



(2,939)



(4,816)

Other


(103)



(1,107)



(1,996)







Net cash provided by operating activities


11,036



48,580



66,562







Cash flows from investing activities









Decrease in restricted cash


30



122



1,634

Proceeds from disposal of plant, property and equipment


27



27



891

Purchase of plant, property and equipment


(6,963)



(39,890)



(46,728)

Payment for intellectual property registration


(101)



(243)



(565)

Payment for acquisition






(8,642)

Decrease in short-term financial instruments






173

Collection of guarantee deposits


117



117



70

Payment of guarantee deposits


(198)



(939)



(176)

Other


3



11



(53)







Net cash used in investing activities


(7,085)



(40,795)



(53,396)







Cash flows from financing activities









Proceeds from issuance of common stock


3,575



4,581



183

Repayment of obligations under capital lease






(2,968)

Acquisition of treasury stock




(6,000)



(16,935)







Net cash provided by (used in) financing activities


3,575



(1,419)



(19,720)

Effect of exchange rates on cash and cash equivalents


2,128



4,037



207







Net increase (decrease) in cash and cash equivalents


9,654



10,403



(6,347)







Cash and cash equivalents









Beginning of the period


182,987



182,238



162,111







End of the period

$

192,641


$

192,641


$

155,764










 

SOURCE MagnaChip Semiconductor Corporation



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