MagnaChip Reports Third Quarter 2013 Financial Results

-- Power Solutions Revenue Increased 14% Sequentially, 21% Year-Over-Year

-- Display Solutions Revenue Increased 6% Sequentially, 5% Year-Over-Year

-- Achieved GAAP EPS of $1.24 and Adjusted EPS of $0.76 Per Diluted Share

29 Oct, 2013, 16:00 ET from MagnaChip Semiconductor Corporation

SEOUL, South Korea and CUPERTINO, Calif., Oct. 29, 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 third quarter ended September 30, 2013.

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

Revenue for the third quarter of 2013 was $217.8 million, a 1.2% increase compared to $215.3 million for the second quarter of 2013 and a 1.8% decrease compared to $221.9 million for the third quarter of 2012.

Gross margin was $71.9 million or 33.0%, as a percent of revenue, for the third quarter of 2013. This compares to gross margin of $71.0 million or 33.0% for the second quarter of 2013 and $76.4 million or 34.5% for the third quarter of 2012.

Net income, on a GAAP basis, for the third quarter of 2013 totaled $46.7 million or $1.24 per diluted share. This compares to a net income of $4.4 million or $0.12 per diluted share for the second quarter of 2013 and a net income of $48.4 million or $1.30 per diluted share for the third quarter of 2012. Net income was impacted primarily by a foreign currency gain of $43.3 million during the quarter which was primarily related to the non-cash foreign currency translation of intercompany balances that were denominated in U.S. dollars.

"We are pleased to have delivered results that met our financial guidance for the eleventh consecutive quarter. We met our revenue and gross margin guidance through a combination of product and customer diversification and the successful launch of a new product line for our Power Solutions Division," said Sang Park, MagnaChip Chairman and CEO. "Our smartphone related revenue grew quarter-to-quarter due to the expansion of AMOLED display drivers in high-end smartphones and from an increase of sales to mid- to low-end smartphone customers."

Adjusted net income, a non-GAAP measurement, for the third quarter of 2013 totaled $28.6 million or $0.76 per diluted share compared to $26.2 million or $0.71 per diluted share for the second quarter of 2013 and $30.4 million or $0.81 per diluted share for the third 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 $158.3 million at the end of the third quarter of 2013, a decrease of $34.4 million from the end of the prior quarter. Cash provided from operations totaled approximately $6.0 million for the third quarter of 2013.

Revenue by Segment

In thousands of US dollars

Three Months Ended

September 30, 2013      

June 30, 2013

September 30, 2012

Semiconductor Manufacturing Services (Foundry)

$    103,076

$    109,751

$    117,978

Display Solutions

73,162

68,867

69,415

Power Solutions

40,959

35,959

33,849

Other

627

712

630

Total Revenue

$     217,824

$     215,289

$     221,872

Third Quarter and Recent Company Highlights

  • Repurchased $25 Million or 1,213,517 Shares under MagnaChip's 2013 Stock Repurchase Program.
  • Eleventh Consecutive Quarter of Meeting or Exceeding Financial Guidance.
  • Completed Secondary Offering of 1.7 Million Shares of Common Stock.

Business Outlook   For the fourth quarter of 2013, MagnaChip expects:

  • Revenue will be in the range of $193 million to $203 million.
  • Gross margin will be 29.0% to 31.0% as a percent of revenue.

Conference Call    MagnaChip will hold a conference call at 5 p.m. EDT today to discuss the third 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 78794356 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 78794356.

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 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

September 30,

2013

June 30,

2013

September 30,

2012

Net sales

$

217,824

$

215,289

$

221,872

Cost of sales

145,936

144,241

145,432

Gross profit

71,888

71,048

76,440

Gross profit %

33.0%

33.0%

34.5%

Selling, general and administrative expenses

20,071

19,709

21,388

Research and development expenses

21,192

21,131

19,470

Operating income

30,625

30,208

35,582

Other income (expenses)

Interest expense, net

(4,548)

(5,879)

(5,746)

Foreign currency gain (loss), net

43,350

(20,978)

21,782

Loss on early extinguishment of senior notes

(32,812)

Other

763

(230)

695

6,753

(27,087)

16,731

Income before income taxes

37,378

3,121

52,313

Income tax expense (benefit)

(9,293)

(1,315)

3,901

Net income

$

46,671

$

4,436

$

48,412

Earnings per common share:

        - Basic

$

1.32

$

0.13

$

1.34

        - Diluted

$

1.24

$

0.12

$

1.30

Weighted average number of shares—Basic

35,443,820

35,474,001

36,199,655

Weighted average number of shares—Diluted

37,493,550

37,125,005

37,324,787

 

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,

2013

June 30,

2013

September 30,

2012

Net income

$

46,671

$

4,436

$

48,412

Adjustments:

Depreciation and amortization

8,748

8,359

8,443

Interest expense, net      

4,548

5,879

5,746

Income tax expense (benefit)

(9,293)

(1,315)

3,901

Stock-based compensation expense

485

493

535

Foreign currency loss (gain), net

(43,350)

20,978

(21,782)

Derivative valuation loss (gain), net

(763)

230

(695)

Secondary offering and others

460

2,119

Loss on early extinguishment of senior notes

32,812

Adjusted EBITDA

$

40,318

$

39,060

$

46,679

Adjusted EBITDA per common share:

- Diluted

$

1.08

$

1.05

$

1.25

Weighted average number of shares - Diluted

37,493,550

37,125,005

37,324,787

Net income

$

46,671

$

4,436

$

48,412

Adjustments:

Stock-based compensation expense

485

493

535

Amortization of intangibles

1,508

1,492

1,829

Foreign currency loss (gain), net

(43,350)

20,978

(21,782)

Derivative valuation loss (gain), net

(763)

230

(695)

Secondary offering and others

460

2,119

GAAP and cash tax expense difference

(9,173)

(1,452)

Loss on early extinguishment of senior notes

32,812

Adjusted net income

$

28,650

$

26,177

$

30,418

Adjusted net income per common share:

- Diluted

$

0.76

$

0.71

$

0.81

Weighted average number of shares - Diluted

37,493,550

37,125,005

37,324,787

 

We define Adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) stock-based compensation expense, (v) foreign currency loss (gain), net, (vi) derivative valuation loss (gain), net, (vii) secondary offering and others, and (viii) 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) stock-based compensation expense, (ii) amortization of intangibles, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss (gain), net, (v) secondary offering and others, (vi) GAAP and cash tax expense difference, 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)

 

September 30,

2013

 

December 31, 2012

Assets

Current assets

Cash and cash equivalents

$

158,268

$

182,238

Restricted cash

6

133

Accounts receivable, net

199,018

143,331

Inventories, net

80,881

89,363

Other receivables

2,114

1,429

Prepaid expenses

11,777

7,884

Current deferred income tax assets

32,686

22,768

Other current assets

6,828

9,680

Total current assets

491,578

456,826

Property, plant and equipment, net

263,150

238,256

Intangible assets, net

8,992

15,260

Long-term prepaid expenses

17,791

18,048

Deferred income tax assets

45,253

46,710

Other non-current assets

16,731

14,866

Total assets

$

843,495

$

789,966

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

74,655

$

79,236

Other accounts payable

17,381

15,600

Accrued expenses

44,765

43,486

Other current liabilities

7,420

9,973

Total current liabilities

144,221

148,295

Long-term borrowings, net

223,897

201,653

Accrued severance benefits, net

123,619

112,446

Other non-current liabilities

15,018

17,263

Total liabilities

506,755

479,657

Stockholders' equity

Common stock, $0.01 par value, 150,000,000 shares authorized, 40,498,795            shares issued and 34,945,377 shares outstanding at September 30, 2013 and           39,599,374 shares issued and 35,635,357 shares outstanding at December            31, 2012

405

396

Additional paid-in capital

112,950

101,885

Retained earnings

330,953

287,251

Treasury stock, 5,553,418 shares at September 30, 2013 and 3,964,017 shares         at December 31, 2012

(70,918)

(39,918)

Accumulated other comprehensive loss

(36,650)

(39,305)

Total stockholders' equity

336,740

310,309

Total liabilities and stockholders' equity

$

843,495

$

789,966

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)

Three Months Ended

Nine Months

Ended

September 30,

2013

September 30,

2013

September 30,

2012

Cash flows from operating activities

Net income

$

46,671

$

43,702

$

68,015

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

Depreciation and amortization

8,748

25,629

23,840

Provision for severance benefits

4,975

15,661

16,779

Amortization of debt issuance costs and original issue discount

176

744

753

Loss (gain) on foreign currency translation, net

(53,364)

1,644

(25,304)

Gain on disposal of property, plant and equipment, net

(49)

(75)

(174)

Loss on disposal of intangible assets, net

1

2

26

Restructuring and impairment charges

618

Stock-based compensation

485

1,398

1,450

Loss on early extinguishment of senior notes

32,812

32,812

Other

156

1,567

(332)

Changes in operating assets and liabilities

Accounts receivable

(29,825)

(59,311)

(18,168)

Inventories

1,638

8,398

(8,526)

Other receivables

(884)

(284)

(1,787)

Other current assets

743

8,168

(662)

Deferred tax assets

(9,043)

(10,038)

1,514

Accounts payable

(3,167)

(2,314)

17,472

Other accounts payable

(379)

(7,901)

(700)

Accrued expenses

8,007

1,004

13,761

Other current liabilities

434

(663)

9,450

Payment of severance benefits

(1,392)

(4,331)

(5,569)

Other

(707)

(1,814)

(2,239)

Net cash provided by operating activities

6,036

54,616

89,599

Cash flows from investing activities

Decrease in restricted cash

1

123

6,774

Proceeds from disposal of plant, property and equipment

66

93

937

Purchase of plant, property and equipment

(5,813)

(45,703)

(56,745)

Payment for intellectual property registration

(158)

(401)

(752)

Payment for acquisition

(8,642)

Decrease in short-term financial instruments

173

Collection of guarantee deposits

117

72

Payment of guarantee deposits

(2)

(941)

(311)

Other

1

12

(50)

Net cash used in investing activities

(5,905)

(46,700)

(58,544)

Cash flows from financing activities

Proceeds from issuance of senior notes

218,836

218,836

Proceeds from issuance of common stock

5,095

9,676

436

Repayment of long term borrowings

(229,333)

(229,333)

Repayment of obligations under capital lease

(2,968)

Acquisition of treasury stock

(25,000)

(31,000)

(22,937)

Net cash used in financing activities

(30,402)

(31,821)

(25,469)

Effect of exchange rates on cash and cash equivalents

(4,102)

(65)

(2,039)

Net increase (decrease) in cash and cash equivalents

(34,373)

(23,970)

3,547

Cash and cash equivalents

Beginning of the period

192,641

182,238

162,111

End of the period

$

158,268

$

158,268

$

165,658

SOURCE MagnaChip Semiconductor Corporation



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