MagnaChip Reports Second Quarter 2012 Financial Results

- Q2 Revenue Increased 14.5% Sequentially Driven By Strong Growth From Power Solutions (33.4%) and Foundry (34.6%) Revenue

- Gross Margin Expanded 280 Basis Points to 31.0% in Q2

- Expects Q3 Revenue to Increase 7% to 11% and Gross Margin to Increase 100 to 200 Basis Points on a Sequential Basis

News provided by

MagnaChip Semiconductor Corporation

Aug 02, 2012, 04:00 ET

SEOUL, South Korea and CUPERTINO, Calif., Aug. 2, 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 second quarter ended June 30, 2012.

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

Revenue for the second quarter of 2012 was $202.6 million, a 14.5% increase compared to $177.0 million for the first quarter of 2012, and a 0.5% decrease compared to $203.7 million for the second quarter of 2011.

Gross margin was $62.9 million or 31.0%, as a percent of revenue, for the second quarter of 2012. This compares to gross margin of $49.9 million or 28.2% for the first quarter of 2012 and $66.2 million or 32.5% for the second quarter of 2011.

"I am very pleased that the second quarter represented our sixth consecutive quarter of meeting revenue and gross margin guidance in what is being described as a challenging macro environment. Our foundry services and power solutions segments saw greater than anticipated order strength and revenue growth during the quarter," said Sang Park, MagnaChip Chairman and CEO. "This is possible because of our alignment with strategic customers in high growth markets - including the leading smart phone and tablet PC makers.  During the last three years, we have made solid progress shifting our customer base and refocusing our product portfolio. Our direct and indirect revenue from the top two smart phone/tablet PC makers has almost tripled in the first half of this year compared to the first half of 2010."

Net income, on a GAAP basis, for the second quarter of 2012 totaled $4.3 million or $0.12 per diluted share. This compares to net income of $15.3 million or $0.40 per diluted share for the first quarter of 2012 and net income of $31.6 million or $0.78 per diluted share for the second quarter of 2011. Net income was impacted primarily by a foreign currency loss of $10.6 million during the quarter which was primarily related to non-cash translation losses for intercompany balances that were denominated in U.S. dollars.

Adjusted net income, a non-GAAP measurement, for the second quarter of 2012 totaled $17.9 million or $0.48 per diluted share compared to $6.5 million or $0.17 per diluted share for the first quarter of 2012 and $22.5 million or $0.56 per diluted share for the second 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 $161.0 million at the end of the second quarter of 2012, an increase of $0.4 million from the end of the prior quarter. Cash provided from operations totaled approximately $26.7 million for the second quarter of 2012.

Revenue by Segment

In thousands of US dollars

Three Months Ended

June 30, 2012

March 31, 2012

June 30, 2011

Semiconductor
Manufacturing Services

$      91,318

$      67,863

$      96,458

Display Solutions

76,784

83,225

82,719

Power Solutions

33,699

25,253

23,739

Other

833

661

763

Total Revenue

$     202,634

$     177,002

$     203,679

Second Quarter and Recent Company Highlights

  • Sixth Consecutive Quarter of Achieving Financial Guidance.
  • Factory Utilization Increased to More than 90% in the Second Quarter.
  • Achieved GAAP EPS of $0.12 Per Diluted Share and Adjusted EPS of $0.48.
  • Completed Successful Secondary Offering of 7 Million Shares of Common Stock in May.
  • Repurchased 539 Thousand Shares under MagnaChip's Stock Repurchase Program Announced October 11, 2011.

Business Outlook

For the third quarter of 2012, MagnaChip expects:

  • Revenue to increase 7% to 11% to $217 million to $225 million on a sequential basis.
  • Gross margin to increase 100 to 200 basis points to 32.0% to 33.0% sequentially.

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 gain, net, secondary offering expense, 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 gain, net, secondary offering expense, 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 third quarter 2012 revenue and gross profit. 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:

In Korea:

Robert Pursel 

Chankeun Park

Director of Investor Relations 

Senior Manager, Public Relations

Tel. 408-625-1262 

Tel. +82-2-6903-3195

[email protected] 

[email protected]

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US dollars, except share data)
(Unaudited)


Three Months Ended

June 30,
2012

March 31,

2012

June 30,

2011

Net sales

$

202,634

$

177,002

$

203,679

Cost of sales

139,776

127,087

137,497







Gross profit

62,858

49,915

66,182

Gross profit %

31.0%

28.2%

32.5%







Selling, general and administrative expenses

20,093

18,209

17,458

Research and development expenses

19,762

19,831

20,614

Restructuring and impairment charges

—

—

2,475







Operating income

23,003

11,875

25,635







Other income (expense)







Interest expense, net

(5,619)

(5,580)

(6,369)

Foreign currency gain (loss), net

(10,586)

11,109

18,234

Loss on early extinguishment of senior notes

—

—

(4,103)

Other

701

89

203









(15,504)

5,618

7,965







Income before income taxes

7,499

17,493

33,600







Income tax expense

3,159

2,230

1,970







Net income

$

4,340

$

15,263

$

31,630







Earnings per common share :







        - Basic

$

0.12

$

0.41

$

0.81

        - Diluted

$

0.12

$

0.40

$

0.78

Weighted average number of shares—Basic

36,713,569

37,524,127

39,066,303

Weighted average number of shares—Diluted

37,566,699

38,298,336

40,294,902

















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,

March 31,

June 30,

2012

2012

2011

Net income

$

4,340

$

15,263

$

31,630

Adjustments:







Depreciation and amortization


7,923

7,474

15,412

Interest expense, net    


5,619

5,580

6,368

Income tax expense

3,159

2,230

1,970

Restructuring and impairment charges

—

—

2,475

Stock-based compensation expense

457

458

605

Foreign currency loss (gain), net

10,586

(11,109)

(18,234)

Derivative valuation gain, net

(701)

(85)

(203)

Secondary offering expense

1,216

—

—

Loss on early extinguishment of senior notes

—

—

4,103

Adjusted EBITDA

$

32,599

$

19,811

$

44,126

Adjusted EBITDA per common share:







- Diluted

$

0.87

$

0.52

$

1.10

Weighted average number of shares - Diluted

37,566,699

38,298,336

40,294,902







Net income

$

4,340

$

15,263

$

31,630

Adjustments:







Restructuring and impairment charges

—

—

2,475

Stock-based compensation expense

457

458

605

Amortization of intangibles

1,980

1,993

2,080

Foreign currency loss (gain), net

10,586

(11,109)

(18,234)

Derivative valuation gain, net

(701)

(85)

(203)

Secondary offering expense

1,216

—

—

Loss on early extinguishment of senior notes

—

—

4,103

Adjusted net income

$

17,878

$

6,520

$

22,456

Adjusted net income per common share:







- Diluted

$

0.48

$

0.17

$

0.56

Weighted average number of shares - Diluted


37,566,699

38,298,336

40,294,902








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 gain, net, (viii) secondary offering expense, 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 gain, net, (vi) secondary offering expense, 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)


June 30,

2012

December 31,
2011

Assets




Current assets




Cash and cash equivalents

$

155,764

$

162,111

Restricted cash

5,218

6,830

Accounts receivable, net

135,090

125,922

Inventories, net

75,417

62,836

Other receivables

2,497

256

Prepaid expenses

4,940

6,032

Other current assets

8,102

15,909




Total current assets

387,028

379,896




Property, plant and equipment, net

219,021

182,663

Intangible assets, net

18,139

16,787

Long-term prepaid expenses

4,137

4,790

Other non-current assets

17,379

18,539




Total assets

$

645,704

$

602,675




Liabilities and Stockholders' Equity




Current liabilities




Accounts payable

$

92,906

$

77,848

Other accounts payable

23,344

13,452

Accrued expenses

39,550

31,723

Current portion of capital lease obligations

—

2,852

Derivative liabilities

8,449

9,757

Other current liabilities

6,566

2,007




Total current liabilities

170,815

137,639




Long-term borrowings, net

201,519

201,389

Accrued severance benefits, net

96,883

90,755

Other non-current liabilities

5,939

6,222




Total liabilities

475,156

436,005




Stockholders' equity




Common stock, $0.01 par value, 150,000,000 shares authorized, 39,468,338
           shares issued and 36,353,545 outstanding at June 30, 2012 and 39,439,115
           shares issued and 37,907,575 outstanding at December 31, 2011

395

394

Additional paid-in capital

100,027

98,929

Retained earnings

113,553

93,950

Treasury stock, 3,114,793 shares at June 30, 2012

(28,728)

(11,793)

Accumulated other comprehensive loss

(14,699)

(14,810)




Total stockholders' equity

170,548

166,670




Total liabilities and stockholders' equity

$

645,704

$

602,675




MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)



Three Months
Ended

Six Months

 Ended

June 30,

2012

June 30,

2012

June 30,

2011

Cash flows from operating activities







Net income

$

4,340

$

19,603

$

54,098

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







Depreciation and amortization

7,923

15,397

29,315

Provision for severance benefits

6,272

10,975

8,396

Amortization of debt issuance costs and original issue discount

255

497

491

Loss (gain) on foreign currency translation, net

12,879

55

(44,109)

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

79

(190)

(11)

Loss on disposal of intangible assets, net

4

15

8

Restructuring and impairment charges

—

—

2,475

Stock-based compensation

457

915

1,246

Loss on early extinguishment of senior notes

—

—

4,103

Other

(471)

(348)

1,104

Changes in operating assets and liabilities







Accounts receivable

(9,635)

(8,296)

2,103

Inventories

(8,638)

(11,498)

(14,300)

Other receivables

1,444

(2,580)

(1,309)

Other current assets

315

8,851

(884)

Deferred tax assets

275

1,146

824

Accounts payable

2,073

14,654

12,139

Other accounts payable

9,975

9,677

13,800

Accrued expenses

(1,996)

7,890

3,141

Other current liabilities

4,386

6,611

(1,155)

Payment of severance benefits

(2,493)

(4,816)

(3,745)

Other


(735)

(1,996)

(232)




Net cash provided by operating activities

26,709

66,562

67,498




Cash flows from investing activities







Decrease (increase) in restricted cash


(1,361)

1,634

—

Proceeds from disposal of plant, property and equipment


618

891

23

Purchase of plant, property and equipment


(21,970)

(46,728)

(26,926)

Payment for intellectual property registration


(375)

(565)

(324)

Payment for acquisition

—

(8,642)

—

Decrease in short-term financial instruments


—

173

—

Collection of guarantee deposits

39

70

979

Payment of guarantee deposits

2

(176)

(1,483)

Other

(5)

(53)

(402)




Net cash used in investing activities

(23,052)

(53,396)

(28,133)




Cash flows from financing activities







Proceeds from issuance of common stock

75

183

8,818

Repurchase of senior notes

—

—

(38,150)

Repayment of obligations under capital lease

(1,458)

(2,968)

(3,182)

Acquisition of treasury stock

(5,000)

(16,935)

—




Net cash used in financing activities

(6,383)

(19,720)

(32,514)

Effect of exchange rates on cash and cash equivalents

1,867

207

(1,259)




Net increase (decrease) in cash and cash equivalents

(859)

(6,347)

5,592




Cash and cash equivalents







Beginning of the period

156,623

162,111

172,172




End of the period

$

155,764

$

155,764

$

177,764







SOURCE MagnaChip Semiconductor Corporation