MagnaChip Reports Third Quarter 2011 Financial Results

- Power Solutions Revenue Grew 11% Sequentially and 48% Year-over-Year

- Display Solutions Revenue Grew 11% Sequentially and 18% Year-over -Year

Oct 26, 2011, 16:00 ET from MagnaChip Semiconductor Corporation

SEOUL, South Korea and CUPERTINO, Calif., Oct. 26, 2011 /PRNewswire/ -- MagnaChip Semiconductor Corporation (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, 2011.

Revenue for the third quarter of 2011 was $200.4 million, a 1.6% decrease compared to $203.7 million for the second quarter of 2011, and a 4.3% decrease compared to $209.4 million for the third quarter of 2010.

Gross profit was $60.1 million or 30.0%, as a percent of revenue, for the third quarter of 2011. This compares to gross profit of 66.2 million or 32.5 % for the second quarter of 2011 and $69.3 million or 33.1% for the third quarter of 2010.

"Despite continued weakness in the global semiconductor market, we managed to deliver results consistent with our original guidance while growing Power Solutions 11% sequentially and 48% year-over-year," said Sang Park, MagnaChip's Chairman and Chief Executive Officer. "While many of our peers reduced their outlook as the quarter progressed, we delivered on our initial expectations based on the strength of our blue-chip customer relationships, diverse product portfolio and growing Power and Display Solutions businesses. Having a strategy that capitalizes on the strength of our Foundry, Display and Power products better positions us for growth as the macro environment begins its recovery."

Net loss, on a GAAP basis, for the third quarter of 2011 totaled $56.0 million or $1.43 per diluted share. This compares to net income of $31.6 million or $0.78 per diluted share for the second quarter of 2011 and a net income of $61.5 million or $1.57 per diluted share for the third quarter of 2010. Net loss was primarily impacted by a non-cash foreign currency translation loss of $68.1 million due to the appreciation of the US dollar against the Korean won associated with intercompany balances.

Adjusted net income, a non-GAAP measurement, for the third quarter of 2011 totaled $18.2 million or $0.46 per diluted share compared to $22.5 million or $0.56 per diluted share for the second quarter of 2011 and $26.2 million or $0.67 per diluted share for the third quarter of 2010.

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 Semiconductor Corporation'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 $168.7 million at the end of the third quarter of 2011, a decrease of $9.1 million from the end of the prior quarter primarily due to a cash payment of $12.1 million related to the $11.3 million repurchase of senior notes during the quarter. Cash provided from operations totaled approximately $18.7 million for the third quarter of 2011.

Revenue by Segment

In thousands of US dollars

Three Months Ended

September 30, 2011

June 30, 2011

September 30, 2010

Semiconductor Manufacturing Services

$      81,571

$        96,458

$      113,171

Display Solutions

91,767

82,719

77,989

Power Solutions

26,358

23,739

17,801

Other

709

763

487

Total Revenue

$     200,405

$      203,679

$     209,448

Third Quarter and Recent Company Highlights

  • Reduced the Aggregate Principal Amount of the Company's Outstanding 10.500% Senior Notes from $215.0M to $203.7M by Repurchasing and Retiring $11.3M of Principal.
  • Announced $35 Million Common Stock Repurchase Program.
  • Began Supplying AMOLED Display Drivers for Samsung's Galaxy S2 LTE Smartphone.
  • Shipped Pre-Production Samples of AC LED Lighting Drivers to a Leading Korean LED Manufacturer.
  • Delivered IGBT Engineering Samples to Several Key Asian and Western Power Customers.

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, and loss on early extinguishment of senior notes. Adjusted net income (loss) excludes charges related to restructuring and impairment, stock-based compensation expense, amortization of intangible assets associated with continuing operations, foreign currency loss (gain), net, derivative valuation loss (gain), net, and loss on early extinguishment of senior notes. A reconciliation of GAAP results to non-GAAP results is included following the financial statements below.

About MagnaChip Semiconductor Corporation

Headquartered in South Korea, MagnaChip Semiconductor Corporation is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. MagnaChip Semiconductor 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 Semiconductor'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 Semiconductor Corporation'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 2011 revenue. 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 Semiconductor Corporation's filings with the SEC, including our Form 10-K filed on March 18, 2011 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 Semiconductor Corporation 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. 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,

2011

June 30,

2011

September 30,

2010

Net sales

$

200,405

$

203,679

$

209,448

Cost of sales

140,284

137,497

140,133

Gross profit

60,121

66,182

69,315

Gross profit %

30.0%

32.5%

33.1%

Selling, general and administrative expenses

17,881

17,458

16,202

Research and development expenses

19,003

20,614

23,119

Restructuring and impairment charges

1,621

2,475

442

Operating income

21,616

25,635

29,552

Other income (expenses)

       Interest expense, net

(5,860)

(6,369)

(7,312)

       Foreign currency gain (loss), net

(68,058)

18,234

41,400

       Loss on early extinguishment of senior notes

(1,357)

(4,103)

       Other

(558)

203

312

(75,833)

7,965

34,400

Income (loss) before income taxes

(54,217)

33,600

63,952

Income tax expense

1,793

1,970

2,457

Net income (loss)

$

(56,010)

$

31,630

$

61,495

Earnings (loss) per common share :

       - Basic

$

(1.43)

$

0.81

$

1.63

       - Diluted

$

(1.43)

$

0.78

$

1.57

Weighted average number of shares—Basic

39,064,071

39,066,303

37,819,820

Weighted average number of shares—Diluted

39,064,071

40,294,902

39,200,585

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,

June 30,

September 30,

2011

2011

2010

Net income (loss)

$

(56,010)

$

31,630

$

61,495

Adjustments:

  Depreciation and amortization

13,053

15,412

14,347

  Interest expense, net

5,861

6,368

7,312

  Income tax expenses

1,793

1,970

2,457

  Restructuring and impairment charges

1,621

2,475

442

  Stock-based compensation expense

552

605

1,320

  Foreign currency loss (gain), net

68,058

(18,234)

(41,400)

  Derivative valuation loss (gain), net

558

(203)

(312)

  Loss on early extinguishment of senior notes

1,357

4,103

Adjusted EBITDA

$

36,843

$

44,126

$

45,661

Adjusted EBITDA per common share:

  - Diluted

$

0.92

$

1.10

$

1.16

  Weighted average number of shares - Diluted

39,973,691

40,294,902

39,200,585

Net income (loss)

$

(56,010)

$

31,630

$

61,495

Adjustments:

  Restructuring and impairment charges

1,621

2,475

442

  Stock-based compensation expense

552

605

1,320

  Amortization of intangibles

2,092

2,080

4,681

  Foreign currency loss (gain), net

68,058

(18,234)

(41,400)

  Derivative valuation loss (gain), net

558

(203)

(312)

  Loss on early extinguishment of senior notes

1,357

4,103

Adjusted net income

$

18,228

$

22,456

$

26,226

Adjusted net income per common share:

  - Diluted

$

0.46

$

0.56

$

0.67

  Weighted average number of shares - Diluted

39,973,691

40,294,902

39,200,585

We define Adjusted EBITDA as net income (loss) 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, 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(loss) 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 (loss) adjusted to exclude (i) restructuring and impairment charges, (ii) stock-based compensation expense, (iii) amortization of intangible assets associated with continuing operations, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, and (vi) 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,

2011

December 31, 2010

Assets

Current assets

       Cash and cash equivalents

$

159,468

$

172,172

       Restricted cash

9,210

       Accounts receivable, net

124,150

119,054

       Inventories, net

69,817

68,435

       Other receivables

1,950

2,919

       Prepaid expenses

8,770

8,207

       Other current assets

8,159

18,920

               Total current assets

381,524

389,707

Property, plant and equipment, net

180,032

179,012

Intangible assets, net

18,565

27,538

Long-term prepaid expenses

4,759

8,235

Other non-current assets

20,986

21,252

               Total assets

$

605,866

$

625,744

Liabilities and Stockholders' Equity

Current liabilities

       Accounts payable

$

75,947

$

58,264

       Other accounts payable

12,425

14,645

       Accrued expenses

37,012

32,635

       Current portion of capital lease obligations

4,415

5,557

       Other current liabilities

13,762

5,048

               Total current liabilities

143,561

116,149

Long-term borrowings, net

201,325

246,882

Long-term obligations under capital lease

3,105

Accrued severance benefits, net

91,106

87,778

Other non-current liabilities

9,927

8,979

               Total liabilities

445,919

462,893

Commitments and contingencies

Stockholders' equity

       Common stock, $0.01 par value, 150,000,000 shares authorized, 39,354,006

          and 38,401,985 shares issued and outstanding at September 30, 2011 and

          December 31, 2010, respectively

394

384

Additional paid-in capital

98,310

95,585

Retained earnings

70,245

72,157

Accumulated other comprehensive loss

(9,002)

(5,275)

               Total stockholders' equity

159,947

162,851

               Total liabilities and stockholders' equity

$

605,866

$

625,744

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)

Three Months Ended

Nine Months

Ended

September 30,

2011

September 30,

2011

September 30,

2010

Cash flows from operating activities

Net income (loss)

$

(56,010)

$

(1,912)

$

61,849

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

       Depreciation and amortization

13,053

42,368

44,332

       Provision for severance benefits

4,741

13,137

15,123

       Amortization of debt issuance costs and original issue discount

237

728

687

       Loss (gain) on foreign currency translation, net

77,329

33,220

(16,704)

       Gain on disposal of property, plant and equipment, net

(4)

(15)

(7)

       Loss on disposal of intangible assets, net

9

17

9

       Restructuring and impairment charges

1,621

4,096

1,045

       Stock-based compensation

552

1,798

4,072

       Cash used for reorganization items

1,573

       Loss on early extinguishment of senior notes

1,357

5,460

       Other

(453)

651

951

Changes in operating assets and liabilities

       Accounts receivable

(6,503)

(4,400)

(61,771)

       Inventories

9,900

(4,400)

193

       Other receivables

2,145

836

(1,229)

       Other current assets

(2,312)

(3,196)

(221)

       Deferred tax assets

659

1,483

1,133

       Accounts payable

2,933

15,072

10,400

       Other accounts payable

(6,643)

7,157

6,332

       Accrued expenses

(21,419)

(18,278)

22,094

       Other current liabilities

(54)

(1,209)

516

       Payment of severance benefits

(2,804)

(6,549)

(4,707)

       Other non-current liabilities

373

141

(2,470)

Net cash provided by operating activities before reorganization items

18,707

86,205

83,200

       Cash used for reorganization items

(1,573)

Net cash provided by operating activities

18,707

86,205

81,627

Cash flows from investing activities

       Increase in restricted cash

(9,711)

(9,711)

       Proceeds from disposal of plant, property and equipment

6

29

10

       Purchase of plant, property and equipment

(16,019)

(42,945)

(29,739)

       Payment for intellectual property registration

(197)

(521)

(437)

       Decrease in short-term financial instruments

329)

       Collection of guarantee deposits

5

984

1,011

       Payment of guarantee deposits

(1,006)

(2,489)

(794)

       Other

(223)

(625)

(13)

Net cash used in investing activities

(27,145)

(55,278)

(29,633)

Cash flows from financing activities

       Proceeds from issuance of common stock

17

8,835

       Proceeds from issuance of senior notes

246,685

       Debt issuance costs paid

(8,313)

       Distribution to stockholders

(130,697)

       Repayment of long-term borrowings

(61,750)

       Repurchase of senior notes

(12,157)

(50,307)

       Repayment of obligations under capital lease

(1,649)

(4,831)

(1,812)

Net cash provided by (used in) financing activities

(13,789)

(46,303)

44,113

Effect of exchange rates on cash and cash equivalents

3,931

2,672

397

Net increase (decrease) in cash and cash equivalents

(18,296)

(12,704)

96,504

Cash and cash equivalents

Beginning of the period

177,764

172,172

64,925

End of the period

$

159,468

$

159,468

$

161,429

SOURCE MagnaChip Semiconductor Corporation



RELATED LINKS

http://www.magnachip.com