UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 6, 2018
MagnaChip Semiconductor Corporation
(Exact name of Registrant as specified in its charter)
| Delaware | 001-34791 | 83-0406195 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| c/o MagnaChip Semiconductor S.A. 1, Allée Scheffer, L-2520 Luxembourg, Grand Duchy of Luxembourg |
Not Applicable | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (352) 45-62-62
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
Attached hereto as Exhibit 99.1 and incorporated by reference herein is financial information for MagnaChip Semiconductor Corporation and its consolidated subsidiaries for the fourth quarter and full year ended December 31, 2017, as presented in a press release dated February 6, 2018.
The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
The following exhibit is furnished as part of this report:
| Exhibit No. |
Description | |
| 99.1 | Press release for MagnaChip Semiconductor Corporation dated February 6, 2018, announcing the results for the fourth quarter and full year ended December 31, 2017. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MAGNACHIP SEMICONDUCTOR CORPORATION | ||||
| Dated: February 6, 2018 | By: | /s/ Theodore Kim | ||
| Theodore Kim | ||||
| Chief Compliance Officer, Executive Vice President, General Counsel and Secretary | ||||
Exhibit 99.1
Press Release
MagnaChip Reports Fourth Quarter and Full Year 2017 Financial Results
SEOUL, South Korea and SAN JOSE, Calif., Feb. 6, 2018 — MagnaChip Semiconductor Corporation (NYSE: MX), today, announced financial results for the fourth quarter and full year of 2017.
Q4 Summary
| • | Revenue of $174.6 million, slightly higher than the mid-point of the guidance range |
| • | Gross profit margin of 28.3%, slightly higher than mid-point of guidance range |
| • | Operating income of $7.6 million, up 46.1% from $5.2 million in Q4 2016, and Adjusted EBITDA of $20.5 million, up 45.8% from $14.1 million in Q4 2016, reflecting improvement in core operating performance |
| • | Foundry gross profit margin of 31.7%, the highest level in 4 years |
| • | Power revenue highest since Q4 2013 with gross margin improvement of about 15 percentage points |
| • | Achieved 6 new OLED design wins |
2017 Full-Year Highlights
| • | $679.7 million in revenue achieved despite a prolonged slowdown in China smartphone market |
| • | Gross profit margin of 27.6% rose nearly 5 percentage points over 2016, due to improved product mix, higher utilization rate, product portfolio optimization and implementation of a headcount reduction plan |
| • | Operating income of $39.2 million increased from $2.7 million in 2016 and Adjusted EBITDA of $78.7 million increased 93.3% from $40.7 million in 2016 |
| • | Foundry revenue grew 16.8% over 2016; Power standard product revenue increases 14.0% |
| • | Introduced 4 new advanced OLED display drivers and achieved a total of 18 new smartphone design wins |
CEO Comments: “Revenue and gross profit margin in the fourth quarter topped the mid-point of our guidance range despite a typically soft seasonal period, a slowdown in the China smartphone market that affected our Display business, and an industry-wide increase in wafer prices that began in the second half of 2017, which kept a lid on gross profit,” said YJ Kim, Chief Executive Officer.
“Revenue in our Foundry and Power businesses edged higher sequentially in the fourth quarter, while revenue in the Display business, including OLED drivers, declined due to general market factors.” Mr. Kim said, “Based upon our current business visibility, we anticipate a sharp rebound and steep growth in our OLED business in the first quarter of 2018 and remain confident that our OLED revenue this year is on track to exceed 50% growth as compared to 2017 or clearly exceed $100 million.” CEO Kim added, “Overall, we made significant operational progress across the board in 2017 and have set a solid foundation for MagnaChip’s growth in 2018.”
CFO Comments:
“Gross profit margin of 27.6% for the 2017 calendar year increased approximately 5 percentage points over 2016, operating income of $39.2 million increased substantially from $2.7 million in 2016, and Adjusted EBITDA of $78.7 million increased 93.3% from $40.7 million in 2016,” said Jonathan Kim, Chief Financial Officer. “The sharp improvement in our financial results stemmed primarily from the success of our business strategy to improve product mix, achieve a higher utilization rate, increase manufacturing efficiencies and reduce expenses by implementing a substantial headcount reduction plan.” CFO Kim added, “We remain fully committed in 2018 to focus on the overall profitability of MagnaChip, continue to optimize our product portfolio, and to manage the business in order to maximize opportunities for revenue growth.”
1
Fourth Quarter and Full-Year 2017 Financial Review
Total Revenue
Total revenue for the fourth quarter of 2017 was $174.6 million, down 3.3% as compared to $180.5 million from the fourth quarter a year ago, and down 1.2% as compared to $176.7 million from the third quarter of 2017. Total revenue for the full year 2017 was $679.7 million, down 1.2% from $688.0 million in 2016.
Segment Revenue
Foundry Services Group revenue in the fourth quarter was $80.6 million, up 3.6% year-over year, and up 0.3% from $80.4 million in the prior quarter. Standard Products Group revenue in the fourth quarter was $93.9 million, down 8.4% year-over- year, and down 2.4% sequentially, which primarily reflected changes in the mobile OLED business in both periods.
Total Gross Profit and Gross Profit Margin
Total gross profit in the fourth quarter of 2017 was $49.4 million or 28.3% as a percentage of sales as compared with gross profit of $46.1 million or 25.5% gross profit margin in the fourth quarter of 2016, and $50.3 million or 28.5% gross profit margin for the third quarter of 2017.
Segment Gross Profit Margin
Foundry Services Group gross profit margin was 31.7% in the fourth quarter of 2017 as compared with 30.3% in the fourth quarter of 2016 and 30.3% in the third quarter of 2017. The Standard Products Group gross profit margin was 25.3% in the fourth quarter of 2017 as compared with 21.8% in the fourth quarter of 2016 and 26.9% in the third quarter of 2017.
Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income, on a GAAP basis, for the fourth quarter was $7.6 million, as compared with $5.2 million in the fourth quarter of 2016 and $15.5 million in the third quarter of 2017.
Net income, on a GAAP basis, for the fourth quarter was $43.7 million or $1.28 per basic share and $0.99 per diluted share, as compared with a net loss on a GAAP basis of $49.8 million or $1.42 per basic share in the fourth quarter of 2016, and compared with net income of $5.6 million or $0.16 per basic share and $0.15 per diluted share in the third quarter of 2017.
Adjusted Net Income, a non-GAAP financial measure, for the fourth quarter of 2017, totaled $9.1 million or $0.27 per basic share and $0.23 per diluted share, as compared with Adjusted Net Income of $1.6 million or $0.05 per basic share and $0.04 per diluted share in the fourth quarter of 2016, and compared with Adjusted Net Income of $11.4 million or $0.33 per basic share and $0.28 per diluted share in the third quarter of 2017.
Adjusted EBITDA, a non-GAAP financial measure, in the fourth quarter was $20.5 million or 11.8% of revenue, as compared with Adjusted EBITDA of $14.1 million or 7.8% of revenue in the fourth quarter of 2016, and compared with Adjusted EBITDA of $24.7 million or 14.0% of revenue in the third quarter of 2017.
Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting MagnaChip’s business and operations and assist in evaluating our core operating performance. 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 in this press release.
Cash and cash equivalents totaled $128.6 million at the end of the fourth quarter, about flat with $128.4 million at the end of the third quarter of 2017.
2
The following table sets forth information relating to our operating segments:
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, 2017 |
December 31, 2016 |
December 31, 2017 |
December 31, 2016 |
|||||||||||||
| Net Sales |
||||||||||||||||
| Foundry Services Group |
$ | 80,629 | $ | 77,809 | $ | 320,089 | $ | 273,961 | ||||||||
| Standard Products Group |
||||||||||||||||
| Display Solutions |
53,671 | 64,796 | 209,539 | 281,967 | ||||||||||||
| Power Solutions |
40,241 | 37,718 | 149,836 | 131,468 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Standard Products Group |
93,912 | 102,514 | 359,375 | 413,435 | ||||||||||||
| All other |
39 | 139 | 208 | 573 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net sales |
$ | 174,580 | $ | 180,462 | $ | 679,672 | $ | 687,969 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Three Months Ended December 31, 2017 |
Three Months Ended December 31, 2016 |
|||||||||||||||
| Amount | % of Net Sales |
Amount | % of Net Sales |
|||||||||||||
| Gross Profit |
||||||||||||||||
| Foundry Services Group |
$ | 25,564 | 31.7 | % | $ | 23,592 | 30.3 | % | ||||||||
| Standard Products Group |
23,748 | 25.3 | 22,358 | 21.8 | ||||||||||||
| All other |
39 | 100.0 | 139 | 100.0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total gross profit |
$ | 49,351 | 28.3 | % | $ | 46,089 | 25.5 | % | ||||||||
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|
|
|
|
|
|
|||||||||
| Year Ended December 31, 2017 |
Year Ended December 31, 2016 |
|||||||||||||||
| Amount | % of Net Sales |
Amount | % of Net Sales |
|||||||||||||
| Gross Profit |
||||||||||||||||
| Foundry Services Group |
$ | 95,458 | 29.8 | % | $ | 69,412 | 25.3 | % | ||||||||
| Standard Products Group |
92,227 | 25.7 | 87,194 | 21.1 | ||||||||||||
| All other |
208 | 100.0 | (380 | ) | (66.3 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total gross profit |
$ | 187,893 | 27.6 | % | $ | 156,226 | 22.7 | % | ||||||||
|
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|
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|
|||||||||
Fourth Quarter 2017 and Recent Company Highlights
MagnaChip:
| • | Developed a multi-level thick IMD (Inter-Metal Dielectric) process for a capacitor with ultra-high breakdown voltage, which is useful for electric vehicles and for applications in the industrial, communications and healthcare markets. |
| • | Announced it now offers a 0.35-micron 700V Ultra-High Voltage process technology (UHV) that reduces mask counts, manufacturing time and cost for power-related AC-DC products. This UHV process technology offers 700V nLDMOS, 700V JFET, and 5.5V CMOS devices suitable for manufacturing AC-DC converter ICs and LED driver ICs. |
| • | Hosted its annual Foundry Technology Symposium in Hsinchu, Taiwan in October 2017 to showcase the Company’s latest technology offerings and provide a wide-ranging overview of its manufacturing capabilities, specialty technologies, target applications and end-markets. The event drew record attendance. |
3
First Quarter 2018 Business Outlook
For the first quarter of 2018, MagnaChip anticipates:
| • | Revenue to be in the range of $158 million to $164 million, down sequentially 7.8% at the mid-point of the projected range, due to typical seasonal factors and ongoing portfolio optimization activities. The guidance for the first quarter compares with revenue of $174.6 million in the fourth quarter of 2017 and $161.7 million in the first quarter of 2017. |
| • | An increase in silicon wafer prices, a lower fab utilization rate due to seasonal factors and product portfolio optimization activity will result in gross profit margin to be in the range of 26% to 28%. This compares to 28.3% in the fourth quarter of 2017, and 25.7% in the first quarter of 2017. |
Fourth Quarter 2017 Conference Call
MagnaChip will hold a conference call on February 6 at 5 p.m. EST to discuss the fourth quarter and 2017 financial results. The conference call will be webcast live and also is available by dialing toll-free at 1-844 536-5472. International call-in participants can dial toll-free at 1-614-999-9318.
The conference ID number is 5392748. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EST 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 dial-in numbers are 1-404-537-3406 or toll-free at 1-855-859-2056. The access code is 5392748.
About MagnaChip Semiconductor Corporation
MagnaChip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications. The Company’s Standard Products Group and Foundry Services Group provide a broad range of standard products and manufacturing services to customers worldwide. MagnaChip, with over 30 years of operating history, owns a portfolio of approximately 3,200 registered patents and pending applications, and has extensive engineering, design 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 future operating and financial performance, including first quarter 2018 revenue and gross profit expectations. 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 February 21, 2017 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.
4
| CONTACTS: In the United States: Bruce Entin Investor Relations Tel. +1-408-625-1262 Investor.relations@magnachip.com |
In Korea: Chankeun Park Director, Public Relations Tel. +82-2-6903-5223 chankeun.park@magnachip.com |
5
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US dollars, except share data)
(Unaudited)
| Three Months Ended | Year Ended | |||||||||||||||||||
| December 31, 2017 |
September 30, 2017 |
December 31, 2016 |
December 31, 2017 |
December 31, 2016 |
||||||||||||||||
| Net sales |
$ | 174,580 | $ | 176,697 | $ | 180,462 | $ | 679,672 | $ | 687,969 | ||||||||||
| Cost of sales |
125,229 | 126,387 | 134,373 | 491,779 | 531,743 | |||||||||||||||
| Gross profit |
49,351 | 50,310 | 46,089 | 187,893 | 156,226 | |||||||||||||||
| Gross profit % |
28.3 | % | 28.5 | % | 25.5 | % | 27.6 | % | 22.7 | % | ||||||||||
| Operating expenses |
||||||||||||||||||||
| Selling, general and administrative expenses |
23,631 | 17,266 | 23,112 | 81,775 | 83,549 | |||||||||||||||
| Research and development expenses |
18,083 | 17,554 | 17,748 | 70,523 | 72,180 | |||||||||||||||
| Restructuring and other charges (gain), net |
— | — | — | (17,010 | ) | (6,480 | ) | |||||||||||||
| Early termination charges |
— | — | — | 13,369 | 4,240 | |||||||||||||||
| Total operating expenses |
41,714 | 34,820 | 40,860 | 148,657 | 153,489 | |||||||||||||||
| Operating income |
7,637 | 15,490 | 5,229 | 39,236 | 2,737 | |||||||||||||||
| Interest expense |
(5,460 | ) | (5,485 | ) | (4,053 | ) | (21,559 | ) | (16,238 | ) | ||||||||||
| Foreign currency gain (loss), net |
39,297 | (3,662 | ) | (49,628 | ) | 65,516 | (15,360 | ) | ||||||||||||
| Other income, net |
1,006 | 198 | 561 | 2,898 | 2,990 | |||||||||||||||
| Income (loss) before income tax expenses |
42,480 | 6,541 | (47,891 | ) | 86,091 | (25,871 | ) | |||||||||||||
| Income tax expenses (benefits) |
(1,173 | ) | 937 | 1,899 | 1,155 | 3,744 | ||||||||||||||
| Net income (loss) |
$ | 43,653 | $ | 5,604 | $ | (49,790 | ) | $ | 84,936 | $ | (29,615 | ) | ||||||||
| Earnings (loss) per common share: |
||||||||||||||||||||
| - Basic |
$ | 1.28 | $ | 0.16 | $ | (1.42 | ) | $ | 2.50 | $ | (0.85 | ) | ||||||||
| - Diluted |
$ | 0.99 | $ | 0.15 | $ | (1.42 | ) | $ | 2.02 | $ | (0.85 | ) | ||||||||
| Weighted average number of shares—Basic |
34,176,812 | 34,103,029 | 35,068,330 | 33,943,264 | 34,833,967 | |||||||||||||||
| Weighted average number of shares—Diluted |
45,573,889 | 45,542,418 | 35,068,330 | 44,755,137 | 34,833,967 | |||||||||||||||
6
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME (LOSS)
(In thousands of US dollars, except share data)
(Unaudited)
| Three Months Ended | Year Ended | |||||||||||||||||||
| December 31, 2017 |
September 30, 2017 |
December 31, 2016 |
December 31, 2017 |
December 31, 2016 |
||||||||||||||||
| Net income (loss) |
$ | 43,653 | $ | 5,604 | $ | (49,790 | ) | $ | 84,936 | $ | (29,615 | ) | ||||||||
| Adjustments: |
||||||||||||||||||||
| Interest expense, net |
5,149 | 5,193 | 3,987 | 20,505 | 15,983 | |||||||||||||||
| Income tax expenses (benefits) |
(1,173 | ) | 937 | 1,899 | 1,155 | 3,744 | ||||||||||||||
| Depreciation and amortization |
7,457 | 7,158 | 6,625 | 28,146 | 25,416 | |||||||||||||||
| EBITDA |
55,086 | 18,892 | (37,279 | ) | 134,742 | 15,528 | ||||||||||||||
| Restructuring and other charges (gain), net |
— | — | — | (17,010 | ) | (5,526 | ) | |||||||||||||
| Early termination charges |
— | — | — | 13,369 | 4,240 | |||||||||||||||
| Equity-based compensation expense |
722 | 435 | 877 | 2,336 | 3,843 | |||||||||||||||
| Foreign currency loss (gain), net |
(39,297 | ) | 3,662 | 49,627 | (65,516 | ) | 15,360 | |||||||||||||
| Derivative valuation loss (gain), net |
(436 | ) | 370 | 273 | (236 | ) | 272 | |||||||||||||
| Restatement related expenses |
4,319 | 828 | 597 | 10,306 | 6,970 | |||||||||||||||
| Secondary offering expenses |
154 | 515 | — | 669 | — | |||||||||||||||
| Adjusted EBITDA |
$ | 20,548 | $ | 24,702 | $ | 14,095 | $ | 78,660 | $ | 40,687 | ||||||||||
| Net income (loss) |
$ | 43,653 | $ | 5,604 | $ | (49,790 | ) | $ | 84,936 | $ | (29,615 | ) | ||||||||
| Adjustments: |
||||||||||||||||||||
| Restructuring and other charges (gain), net |
— | — | — | (17,010 | ) | (5,526 | ) | |||||||||||||
| Early termination charges |
— | — | — | 13,369 | 4,240 | |||||||||||||||
| Equity-based compensation expense |
722 | 435 | 877 | 2,336 | 3,843 | |||||||||||||||
| Foreign currency loss (gain), net |
(39,297 | ) | 3,662 | 49,627 | (65,516 | ) | 15,360 | |||||||||||||
| Derivative valuation loss (gain), net |
(436 | ) | 370 | 273 | (236 | ) | 272 | |||||||||||||
| Restatement related expenses |
4,319 | 828 | 597 | 10,306 | 6,970 | |||||||||||||||
| Secondary offering expenses |
154 | 515 | — | 669 | — | |||||||||||||||
| Adjusted Net Income (Loss) |
$ | 9,115 | $ | 11,414 | $ | 1,584 | $ | 28,854 | $ | (4,456 | ) | |||||||||
| Adjusted Net Income (Loss) per common share: |
||||||||||||||||||||
| - Basic |
$ | 0.27 | $ | 0.33 | $ | 0.05 | $ | 0.85 | $ | (0.13 | ) | |||||||||
| - Diluted |
$ | 0.23 | $ | 0.28 | $ | 0.04 | $ | 0.76 | $ | (0.13 | ) | |||||||||
| Weighted average number of shares – Basic |
34,176,812 | 34,103,029 | 35,068,330 | 33,943,264 | 34,833,967 | |||||||||||||||
| Weighted average number of shares – Diluted |
45,573,889 | 45,542,418 | 35,503,993 | 44,755,137 | 34,833,967 | |||||||||||||||
We present Adjusted EBITDA and Adjusted Net Income (Loss) as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) restructuring and other charges (gain), net, (ii) early termination charges, (iii) equity-based compensation expense, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, (vi) restatement related expenses and (vii) secondary offering expenses. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expenses (benefits) and depreciation and amortization. We prepare Adjusted Net Income (Loss) 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 (Loss) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income (Loss) for the periods as net income (loss), adjusted to exclude (i) restructuring and other charges (gain), net, (ii) early termination charges, (iii) equity-based compensation expense, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, (vi) restatement related expenses and (vii) secondary offering expenses.
7
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share data)
(Unaudited)
| December 31, 2017 |
December 31, 2016 |
|||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 128,575 | $ | 83,355 | ||||
| Restricted cash |
— | 18,251 | ||||||
| Accounts receivable, net |
92,026 | 61,775 | ||||||
| Inventories, net |
73,073 | 57,048 | ||||||
| Other receivables |
4,292 | 5,864 | ||||||
| Prepaid expenses |
9,250 | 8,137 | ||||||
| Hedge collateral |
7,600 | 3,150 | ||||||
| Other current assets |
15,444 | 5,113 | ||||||
|
|
|
|
|
|||||
| Total current assets |
330,260 | 242,693 | ||||||
|
|
|
|
|
|||||
| Property, plant and equipment, net |
205,903 | 179,793 | ||||||
| Intangible assets, net |
4,061 | 3,085 | ||||||
| Long-term prepaid expenses |
12,791 | 9,556 | ||||||
| Deferred income tax assets |
264 | 193 | ||||||
| Other non-current assets |
5,510 | 6,632 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 558,789 | $ | 441,952 | ||||
|
|
|
|
|
|||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 65,940 | $ | 51,509 | ||||
| Other accounts payable |
10,261 | 12,272 | ||||||
| Accrued expenses |
51,746 | 60,365 | ||||||
| Deferred revenue |
8,335 | 11,092 | ||||||
| Deposits received |
— | 16,549 | ||||||
| Other current liabilities |
1,860 | 1,654 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
138,142 | 153,441 | ||||||
|
|
|
|
|
|||||
| Long-term borrowings, net |
303,416 | 221,082 | ||||||
| Accrued severance benefits, net |
148,905 | 129,225 | ||||||
| Other non-current liabilities |
7,963 | 10,318 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
598,426 | 514,066 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity |
||||||||
| Common stock, $0.01 par value, 150,000,000 shares authorized, 42,563,808 shares issued and 34,189,599 outstanding at December 31, 2017 and 41,627,103 shares issued and 35,048,338 outstanding at December 31, 2016 |
426 | 416 | ||||||
| Additional paid-in capital |
136,259 | 130,189 | ||||||
| Accumulated deficit |
(40,889 | ) | (125,825 | ) | ||||
| Treasury stock, 8,374,209 shares at December 31, 2017 and 6,578,765 shares at December 31, 2016, respectively |
(102,319 | ) | (90,918 | ) | ||||
| Accumulated other comprehensive income (loss) |
(33,114 | ) | 14,024 | |||||
|
|
|
|
|
|||||
| Total stockholders’ deficit |
(39,637 | ) | (72,114 | ) | ||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 558,789 | $ | 441,952 | ||||
8
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)
| Three Months Ended |
Year Ended | |||||||||||
| December 31, 2017 |
December 31, 2017 |
December 31, 2016 |
||||||||||
| Cash flows from operating activities |
||||||||||||
| Net income |
$ | 43,653 | $ | 84,936 | $ | (29,615 | ) | |||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities |
||||||||||||
| Depreciation and amortization |
7,457 | 28,146 | 25,416 | |||||||||
| Provision for severance benefits |
9,019 | 24,373 | 14,432 | |||||||||
| Amortization of debt issuance costs and original issue discount |
523 | 1,987 | 707 | |||||||||
| Loss (gain) on foreign currency, net |
(46,985 | ) | (77,600 | ) | 18,884 | |||||||
| Restructuring gain and other |
— | (17,010 | ) | (7,785 | ) | |||||||
| Stock-based compensation |
722 | 2,336 | 3,843 | |||||||||
| Other |
(410 | ) | 49 | 103 | ||||||||
| Changes in operating assets and liabilities |
||||||||||||
| Accounts receivable, net |
(1,969 | ) | (22,210 | ) | 285 | |||||||
| Inventories, net |
(11,358 | ) | (8,077 | ) | (557 | ) | ||||||
| Other receivables |
(1,323 | ) | 3,981 | 19,125 | ||||||||
| Other current assets |
(579 | ) | 2,318 | 5,000 | ||||||||
| Accounts payable |
10,142 | 10,320 | (4,163 | ) | ||||||||
| Other accounts payable |
(3,763 | ) | (12,141 | ) | (6,603 | ) | ||||||
| Accrued expenses |
4,439 | (12,020 | ) | (16,305 | ) | |||||||
| Deferred revenue |
(1,706 | ) | (3,949 | ) | 1,674 | |||||||
| Other current liabilities |
(459 | ) | (1,281 | ) | (5,331 | ) | ||||||
| Other non-current liabilities |
(1,043 | ) | (760 | ) | (1,574 | ) | ||||||
| Payment of severance benefits |
(1,928 | ) | (21,506 | ) | (15,352 | ) | ||||||
| Other |
(371 | ) | (336 | ) | 5,447 | |||||||
| Net cash provided by (used in) operating activities |
4,061 | (18,444 | ) | 7,631 | ||||||||
| Cash flows from investing activities |
||||||||||||
| Proceeds from settlement of hedge collateral |
2,059 | 10,615 | 6,317 | |||||||||
| Payment of hedge collateral |
— | (14,839 | ) | (3,552 | ) | |||||||
| Proceeds from disposal of plant, property and equipment |
81 | 18,834 | 688 | |||||||||
| Purchase of plant, property and equipment |
(13,392 | ) | (32,661 | ) | (18,727 | ) | ||||||
| Payment for intellectual property registration |
(230 | ) | (1,207 | ) | (1,049 | ) | ||||||
| Collection of guarantee deposits |
36 | 1,462 | 619 | |||||||||
| Payment of guarantee deposits |
— | (41 | ) | (193 | ) | |||||||
| Other |
70 | 94 | 23 | |||||||||
| Net cash used in investing activities |
(11,376 | ) | (17,743 | ) | (15,874 | ) | ||||||
| Cash flows from financing activities |
||||||||||||
| Proceeds from issuance of senior notes |
— | 86,250 | — | |||||||||
| Payment of debt issuance costs |
— | (5,902 | ) | — | ||||||||
| Proceeds from exercise of stock options |
353 | 3,744 | 1,732 | |||||||||
| Acquisition of treasury stock |
— | (11,401 | ) | — | ||||||||
| Net cash provided by financing activities |
353 | 72,691 | 1,732 | |||||||||
| Effect of exchange rates on cash and cash equivalents |
7,112 | 8,716 | (1,016 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents |
150 | 45,220 | (7,527 | ) | ||||||||
| Cash and cash equivalents |
||||||||||||
| Beginning of the period |
128,425 | 83,355 | 90,882 | |||||||||
| End of the period |
$ | 128,575 | $ | 128,575 | $ | 83,355 | ||||||
9