MagnaChip Reports Second Quarter 2011 Financial Results

Jul 27, 2011

- Revenue of $204 Million up 8% Sequentially and 5% Year-over-Year
- Power Solutions Revenue Grew 16% Sequentially and 97% Year-over-Year
- Gross Profit Expands 240 Basis Points Sequentially
- GAAP Net Income $32 Million or $0.78 Per Diluted Share

SEOUL, South Korea and CUPERTINO, Calif., July 27, 2011 /PRNewswire via COMTEX/ -- MagnaChip Semiconductor Corporation (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, 2011.

Revenue for the second quarter of 2011 was $203.7 million, an 8.4% increase compared to $187.9 million for the first quarter of 2011, and a 4.6% increase compared to $194.7 million for the second quarter of 2010.

Gross profit was $66.2 million or 32.5%, as a percent of revenue, for the second quarter of 2011. This compares to gross profit of $56.5 million or 30.1% for the first quarter of 2011 and $64.5 million or 33.1% for the second quarter of 2010.

"I am very pleased that revenue for our three business segments grew during the quarter and that gross profit expanded as a result of strong execution by our sales and manufacturing organizations," said Sang Park, MagnaChip's Chairman and Chief Executive Officer. "Not only did our Power Solutions segment grow 16 percent sequentially, but our Display Solutions segment posted double-digit revenue growth this quarter as well. Additionally, our Foundry business was up 5% over the March quarter despite overall market softness as reported by several foundry providers. I am very encouraged by the traction of our new products, which has increased the design-win activity for both our Power Segment and Foundry Services. This better positions us strategically for growth in the coming years."

Net income, on a GAAP basis, for the second quarter of 2011 totaled $31.6 million or $0.78 per diluted share. This compares to net income of $22.5 million or $0.57 per diluted share for the first quarter of 2011 and a net loss of $30.7 million or $0.81 per diluted share for the second quarter of 2010.

Adjusted net income, a non-GAAP measurement, for the second quarter of 2011 totaled $22.5 million or $0.56 per diluted share compared to $15.7 million or $0.40 per diluted share for the first quarter of 2011 and $25.7 million or $0.68 per diluted share for the second 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 short-term investments) totaled $177.8 million at the end of the second quarter of 2011, a decrease of $16.4 million from the end of the prior quarter due to a cash payment of $38.2 million related to the $35 million repurchase of senior notes during the quarter. Cash provided from operations totaled approximately $48.3 million for the second quarter of 2011.

Revenue by Segment

In thousands of US dollars

Three Months Ended


June 30, 2011

March 31, 2011

June 30, 2010

Semiconductor Manufacturing Services

$ 96,458

$ 92,266

$ 101,564

Display Solutions

82,719

74,464

80,584

Power Solutions

23,739

20,412

12,040

Other

763

779

512

Total Revenue

$ 203,679

$ 187,921

$ 194,700


Second Quarter and Recent Company Highlights

  • Reduced the Company's Outstanding Senior Notes from $250M to $215M by Repurchasing and Retiring $35M of Principal.
  • Began Wafer Production for ELMOS' 0.35um Automotive Semiconductor Products.
  • Delivered Working Samples of an LED Lighting Product targeted for the Fast Growing LED Market.
  • Developed a High Voltage IGBT Power Module for Industrial and Consumer Appliance Applications.

Non-GAAP Metrics

Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense, restructuring and impairment activities, stock-based compensation expense, foreign currency loss (gain), net, derivative valuation loss (gain), net, special expense for the IPO employee incentive payment, 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, special expense for the IPO employee incentive payment, 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 http://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 third 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.+82-3-6903-3195

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




June30,

2011



March 31,

2011


June 30,

2010


Net sales

$

203,679


$

187,921


$

194,700


Cost of sales


137,497



131,447



130,166












Gross profit


66,182



56,474



64,534


Gross profit %


32.5%



30.1%



33.1%












Selling, general and administrative expenses


17,458



15,401



15,964


Research and development expenses


20,614



18,498



20,543


Restructuring and impairment charges


2,475



--



267


Special expense for IPO incentive


--



12,146



--












Operating income


25,635



10,429



27,760












Other income (expense)










Interest expense, net


(6,369)



(7,111)



(6,557)


Foreign currency gain (loss), net


18,234



21,359



(48,273)


Loss on early extinguishment of senior notes


(4,103)



--



--


Other


203



166



(950)














7,965



14,414



(55,780)












Income (loss) before income taxes


33,600



24,843



(28,020)












Income tax expense


1,970



2,375



2,727












Net income (loss)

$

31,630


$

22,468


$

(30,747)












Earnings (loss) per common share :










- Basic

$

0.81


$

0.59


$

(0.81)


- Diluted

$

0.78


$

0.57


$

(0.81)


Weighted average number of shares - Basic


39,066,303



38,332,750



37,819,820


Weighted average number of shares - Diluted


40,294,902



39,570,522



37,819,820
















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,


June30,



2011


2011


2010


Net income (loss)

$

31,630


$

22,468


$

(30,747)


Adjustments:










Depreciation and amortization


15,412



13,903



14,508


Interest expense, net


6,368



7,111



6,557


Income tax expense


1,970



2,375



2,727


Restructuring and impairment charges


2,475



--



267


Stock-based compensation expense


605



641



1,279


Foreign currency loss (gain), net


(18,234)



(21,359)



48,273


Derivative valuation loss (gain), net


(203)



(158)



950


Special expense for IPO incentive


--



12,146



--


Loss on early extinguishment of senior notes

4,103



--



--

Adjusted EBITDA

$

44,126


$

37,127


$

43,814


Adjusted EBITDA per common share:










- Basic

$

1.13



0.97



1.16


- Diluted

$

1.10



0.94



1.16












Net income(loss)

$

31,630


$

22,468


$

(30,747)


Adjustments:










Restructuring and impairment charges


2,475



--



267


Stock-based compensation expense


605



641



1,279


Amortization of intangibles


2,080



1,990



5,718


Foreign currency loss (gain), net


(18,234)



(21,359)



48,273


Derivative valuation loss (gain), net


(203)



(158)



950


Special expense for IPO incentive


--



12,146



--


Loss on early extinguishment of senior notes

4,103



--



--

Adjusted net income

$

22,456


$

15,728


$

25,740


Adjusted net income per common share:










- Basic

$

0.58


$

0.41


$

0.68


- Diluted

$

0.56


$

0.40


$

0.68



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) special expense for IPO incentive, 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) special expense for IPO incentive, 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)




June30,
2011


December 31,
2010


Assets








Current assets








Cash and cash equivalents


$

177,764


$

172,172


Accounts receivable, net



123,792



119,054


Inventories, net



86,826



68,435


Other receivables



4,217



2,919


Prepaid expenses



9,257



8,207


Other current assets



10,724



18,920










Total current assets



412,580



389,707










Property, plant and equipment, net



191,133



179,012


Intangible assets, net



24,177



27,538


Long-term prepaid expenses



6,103



8,235


Other non-current assets



21,260



21,252










Total assets


$

655,253


$

625,744










Liabilities and Stockholders' Equity








Current liabilities








Accounts payable


$

73,906


$

58,264


Other accounts payable



23,098



14,645


Accrued expenses



41,780



32,635


Current portion of capital lease obligation



6,149



5,557


Other current liabilities



4,747



5,048










Total current liabilities



149,680



116,149










Long-term borrowings



212,441



246,882


Obligation under capital lease



123



3,105


Accrued severance benefits, net



97,417



87,778


Other non-current liabilities



5,778



8,979










Total liabilities



465,439



462,893










Commitments and contingencies
















Stockholder' equity








Common stock, $0.01 par value, 150,000,000 shares authorized, 39,357,471 and 38,401,985shares issued and outstanding at June30, 2011 and December 31, 2010, respectively



394



384


Additional paid-in capital



97,987



95,585


Retained earnings



126,255



72,157


Accumulated other comprehensive loss



(34,822)



(5,275)










Total stockholders' equity



189,814



162,851










Total liabilities and stockholders' equity


$

655,253


$

625,744























MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)



Six MonthsEnded



June 30,

2011


June 30,

2010


Cash flows from operating activities







Net income

$

54,098


$

354


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







Depreciation and amortization


29,315



29,985


Provision for severance benefits


8,396



9,380


Amortization of debt issuance costs and original issue discount


491



449


Loss (gain) on foreign currency translation, net


(44,109)



29,975


Gain on disposal of property, plant and equipment, net


(11)



(9)


Losson disposal of intangible assets, net


8



7


Restructuring and impairment charges


2,475



603


Stock-based compensation


1,246



2,752


Cash used for reorganization items


--



1,475


Loss on early extinguishment of senior notes


4,103

--

Other


1,104



740


Changes in operating assets and liabilities







Accounts receivable


2,103



(45,243)


Inventories


(14,300)



1,342


Other receivables


(1,309)



119


Other current assets


(884)



(92)


Deferred tax assets


824



618


Accounts payable


12,139



7,542


Other accounts payable


13,800



11,330


Accrued expenses


3,141



7,841


Other current liabilities


(1,155)



(1,172)


Payment of severance benefits


(3,745)



(2,760)


Other non-current liabilities


(232)



(2,855)









Net cash provided by operating activities before reorganization items


67,498



52,381









Cash used for reorganization items


--



(1,475)









Net cash provided by operating activities


67,498



50,906









Cash flows from investing activities







Proceeds from disposal of plant, property and equipment


23



13


Purchase of plant, property and equipment


(26,926)



(20,509)


Payment for intellectual property registration


(324)



(245)


Decreasein short-term financial instruments


--



329


Collection ofguarantee deposits


979



999


Payment of guarantee deposits


(1,483)



(769)


Other


(402)



(9)









Net cash used in investing activities


(28,133)



(20,191)









Cash flows from financing activities







Proceeds from issuance of common stock


8,818



--


Proceeds from issuance of senior notes


--



246,685


Debt issuance costs paid


--



(8,313)


Repayment of Long-term borrowings


--



(61,750)


Repurchase of senior notes


(38,150)



--


Distribution to stockholders


--



(130,697)


Repayment of obligation under capital lease


(3,182)



--









Net cash provided by (used in) financing activities


(32,514)



45,925


Effect of exchange rates on cash and cash equivalents


(1,259)



(255)










Net increase in cash and cash equivalents


5,592



76,385









Cash and cash equivalents







Beginning of the period


172,172



64,925









End of the period

$

177,764


$

141,310



SOURCE MagnaChip Semiconductor Corporation

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