MagnaChip Reports Third Quarter 2012 Financial Results - Revenue Increased 9.5% Sequentially and 10.7% Year-Over-Year Driven By Solid Foundry Revenue Growth

- Gross Margin of 34.5% Expanded 350 Basis Points Sequentially and 450 Basis Points Year-Over-Year

- Achieved GAAP EPS of $1.30 Per Diluted Share and Adjusted EPS of $0.81 Per Diluted Share

SEOUL, South Korea and CUPERTINO, Calif., Nov. 1, 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 third quarter ended September 30, 2012.

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

Revenue for the third quarter of 2012 was $221.9 million, a 9.5% increase compared to $202.6 million for the second quarter of 2012, and a 10.7% increase compared to $200.4 million for the third quarter of 2011.

Gross margin was $76.4 million or 34.5%, as a percent of revenue, for the third quarter of 2012. This compares to gross margin of $62.9 million or 31.0% for the second quarter of 2012 and $60.1 million or 30.0% for the third quarter of 2011.

Net income, on a GAAP basis, for the third quarter of 2012 totaled $48.4 million or $1.30 per diluted share. This compares to net income of $4.3 million or $0.12 per diluted share for the second quarter of 2012 and net loss of $56.0 million or $1.43 per diluted share for the third quarter of 2011. Net income was impacted primarily by a foreign currency gain of $21.8 million during the quarter which was primarily related to non-cash foreign currency translation for intercompany balances that were denominated in U.S. dollars.

"Our sequential revenue growth of nearly 10% put us at the high end of the semiconductor group in terms of top line performance with smartphone and tablet PC demand remaining strong going into the fourth quarter. This smartphone and tablet PC demand is well diversified with MagnaChip supplying about 50 unique products to 26 different customers," said Sang Park, MagnaChip Chairman and CEO. "In addition to strong revenue growth, our Q3 gross margin was up 350 basis points sequentially and up 630 basis points since Q1 due to higher fab utilization and improved product mix shift."

Adjusted net income, a non-GAAP measurement, for the third quarter of 2012 totaled $30.4 million or $0.81 per diluted share compared to $17.9 million or $0.48 per diluted share for the second quarter of 2012 and $18.2 million or $0.46 per diluted share for the third 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 $165.8 million at the end of the third quarter of 2012, an increase of $4.8 million from the end of the prior quarter. Cash provided from operations totaled approximately $23.0 million for the third quarter of 2012.

Revenue by Segment


In thousands of US dollars

Three Months Ended


September 30, 2012

June 30, 2012

September 30, 2011

Semiconductor

Manufacturing Services

$      117,978

$      91,318

$      81,571

Display Solutions

69,415

76,784

91,767

Power Solutions

33,849

33,699

26,358

Other

630

833

709





Total Revenue

$     221,872

$     202,634

$     200,405

Third Quarter and Recent Company Highlights

  • Seventh Consecutive Quarter of Achieving Financial Guidance.
  • Expanded Gross Margins to $76.4 million or 34.5%.
  • Achieved GAAP EPS of $1.30 Per Diluted Share and Adjusted EPS of $0.81 Per Diluted Share.
  • Repurchased 444 Thousand Shares under MagnaChip's 2011 Stock Repurchase Program.

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

  • Revenue will be in the range of $213 million to $222 million.
  • Gross margin will be 33.5% to 34.5%.

Non-GAAP Metrics
Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense, restructuring and impairment charges, stock-based compensation expense, foreign currency loss (gain), net, derivative valuation loss (gain), net, secondary offering and others, and loss on early extinguishment of senior notes. Adjusted net income (loss) excludes charges related to restructuring and impairment charges, 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, and loss on early extinguishment of senior notes. 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 fourth quarter 2012 revenue and gross margin. 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. +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



September 30,

2012


June 30,

2012


September 30,

2011


Net sales

$

221,872


$

202,634


$

200,405


Cost of sales


145,432



139,776



140,284












Gross profit


76,440



62,858



60,121


Gross profit %


34.5%



31.0%



30.0%












Selling, general and administrative expenses


21,388



20,093



17,881


Research and development expenses


19,470



19,762



19,003


Restructuring and impairment charges






1,621












Operating income


35,582



23,003



21,616












Other income (expense)










Interest expense, net


(5,746)



(5,619)



(5,860)


Foreign currency gain (loss), net


21,782



(10,586)



(68,058)


Loss on early extinguishment of senior notes






(1,357)


Other


695



701



(558)














16,731



(15,504)



(75,833)












Income (loss) before income taxes


52,313



7,499



(54,217)












Income tax expense


3,901



3,159



1,793












Net income (loss)

$

48,412


$

4,340


$

(56,010)












Earnings (loss) per common share :










        - Basic

$

1.34


$

0.12


$

(1.43)


        - Diluted

$

1.30


$

0.12


$

(1.43)


Weighted average number of shares—Basic


36,199,655



36,713,569



39,064,071


Weighted average number of shares—Diluted


37,324,787



37,566,699



39,064,071


 

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



September 30,

2012


June 30,

2012


September 30,

2011


Net income (loss)

$

48,412


$

4,340


$

(56,010)


Adjustments:










Depreciation and amortization


8,443



7,923



13,053


Interest expense, net    


5,746



5,619



5,861


Income tax expense


3,901



3,159



1,793


Restructuring and impairment charges






1,621


Stock-based compensation expense


535



457



552


Foreign currency loss (gain), net


(21,782)



10,586



68,058


Derivative valuation loss (gain), net


(695)



(701)



558


Secondary offering and others


2,119



1,216




Loss on early extinguishment of senior notes






1,357


Adjusted EBITDA

$

46,679


$

32,599


$

36,843


Adjusted EBITDA per common share:










- Diluted

$

1.25


$

0.87


$

0.92


Weighted average number of shares - Diluted


37,324,787



37,566,699



39,973,691












Net income (loss)

$

48,412


$

4,340


$

(56,010)


Adjustments:










Restructuring and impairment charges






1,621


Stock-based compensation expense


535



457



552


Amortization of intangibles


1,829



1,980



2,092


Foreign currency loss (gain), net


(21,782)



10,586



68,058


Derivative valuation loss (gain), net


(695)



(701)



558


Secondary offering and others


2,119



1,216




Loss on early extinguishment of senior notes






1,357


Adjusted net income

$

30,418


$

17,878


$

18,228


Adjusted net income per common share:










- Diluted

$

0.81


$

0.48


$

0.46


Weighted average number of shares - Diluted


37,324,787



37,566,699



39,973,691


We define Adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense, (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, and (ix) 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, and (vii) loss on early extinguishment of senior notes.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)










September 30,

2012


December 31,
2011


Assets








Current assets








Cash and cash equivalents


$

165,658


$

162,111


Restricted cash



136


6,830

Accounts receivable, net



148,537



125,922


Inventories, net



75,020



62,836


Other receivables



2,097



256


Prepaid expenses



9,120



6,032


Other current assets



19,270



15,909










Total current assets



419,838



379,896










Property, plant and equipment, net



229,632



182,663


Intangible assets, net



16,684



16,787


Long-term prepaid expenses



9,575



4,790


Other non-current assets



17,044



18,539










Total assets


$

692,773


$

602,675










Liabilities and Stockholders' Equity








Current liabilities








Accounts payable


$

97,386


$

77,848


Other accounts payable



19,049



13,452


Accrued expenses



40,483



31,723


Current portion of capital lease obligations





2,852


Derivative liabilities



1,818



9,757


Other current liabilities



8,460



2,007










Total current liabilities



167,196



137,639










Long-term borrowings, net



201,586



201,389


Accrued severance benefits, net



105,051



90,755


Other non-current liabilities



11,556



6,222










Total liabilities



485,389



436,005










Stockholders' equity








Common stock, $0.01 par value, 150,000,000 shares authorized, 39,513,351

   shares issued and 35,954,925 outstanding at September 30, 2012 and

   39,439,115 shares issued and 37,907,575 outstanding at December 31,

   2011



395



394


Additional paid-in capital



100,834



98,929


Retained earnings



161,965



93,950


Treasury stock, 3,558,426 shares at September 30, 2012



(34,730)



(11,793)


Accumulated other comprehensive loss



(21,080)



(14,810)










Total stockholders' equity



207,384



166,670










Total liabilities and stockholders' equity


$

692,773


$

602,675


 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)



Three Months

Ended


Nine Months

 Ended


September 30,

2012


September 30,

2012


September 30,

2011

Cash flows from operating activities









Net income (loss)

$

48,412


$

68,015


$

(1,912)

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

   activities









Depreciation and amortization


8,443



23,840



42,368

Provision for severance benefits


5,804



16,779



13,137

Amortization of debt issuance costs and original issue discount


256



753



728

Loss (gain) on foreign currency translation, net


(25,359)



(25,304)



33,220

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


16



(174)



(15)

Loss on disposal of intangible assets, net


11



26



17

Restructuring and impairment charges






4,096

Stock-based compensation


535



1,450



1,798

Loss on early extinguishment of senior notes






5,460

Other


16



(332)



651

Changes in operating assets and liabilities









Accounts receivable


(9,872)



(18,168)



(4,400)

Inventories


2,972



(8,526)



(4,400)

Other receivables


793



(1,787)



836

Other current assets


(9,513)



(662)



(3,196)

Deferred tax assets


368



1,514



1,483

Accounts payable


2,818



17,472



15,072

Other accounts payable


(10,377)



(700)



7,157

Accrued expenses


5,871



13,761



(18,278)

Other current liabilities


2,839



9,450



(1,209)

Payment of severance benefits


(753)



(5,569)



(6,549)

Other


(243)



(2,239)



141







Net cash provided by operating activities


23,037



89,599



86,205







Cash flows from investing activities









Decrease (increase) in restricted cash


5,140



6,774



(9,711)

Proceeds from disposal of plant, property and equipment


46



937



29

Purchase of plant, property and equipment


(10,017)



(56,745)



(42,945)

Payment for intellectual property registration


(187)



(752)



(521)

Payment for acquisition




(8,642)



Decrease in short-term financial instruments




173



Collection of guarantee deposits


2



72



984

Payment of guarantee deposits


(135)



(311)



(2,489)

Other


3



(50)



(625)







Net cash used in investing activities


(5,148)



(58,544)



(55,278)







Cash flows from financing activities









Proceeds from issuance of common stock


253



436



8,835

Repurchase of senior notes






(50,307)

Repayment of obligations under capital lease




(2,968)



(4,831)

Acquisition of treasury stock


(6,002)



(22,937)









Net cash used in financing activities


(5,749)



(25,469)



(46,303)

Effect of exchange rates on cash and cash equivalents


(2,246)



(2,039)



2,672







Net increase (decrease) in cash and cash equivalents


9,894



3,547



(12,704)







Cash and cash equivalents









Beginning of the period


155,764



162,111



172,172







End of the period

$

165,658


$

165,658


$

159,468


 

SOURCE MagnaChip Semiconductor Corporation



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