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2014

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

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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



RELATED LINKS
http://www.magnachip.com

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