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

Nov 01, 2012, 16:00 ET from MagnaChip Semiconductor Corporation

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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