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): July 27, 2011
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., 74, rue de Merl, B.P. 709, L-2017 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)) |
| 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 second quarter ended June 30, 2011, as presented in a press release dated July 27, 2011.
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 exhibits are furnished as part of this report:
| Exhibit No. |
Description | |
| 99.1 |
Press release for MagnaChip Semiconductor Corporation dated July 27, 2011, announcing the results for the second quarter ended June 30, 2011. | |
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: July 27, 2011 | By: | /s/ Margaret Sakai | ||||
| Margaret Sakai Executive Vice President and Chief Financial Officer | ||||||
Exhibit Index
| Exhibit No. |
Description | |
| 99.1 |
Press release for MagnaChip Semiconductor Corporation dated July 27, 2011, announcing the results for the second quarter ended June 30, 2011. | |
Exhibit 99.1
MagnaChip Reports Second Quarter 2011 Financial Results
| • | 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 — 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 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 | ||||||||||||
| June 30, 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, | June 30, | ||||||||||
| 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)
| June 30, 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 38,401,985 shares issued and outstanding at June 30, 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 Months Ended | ||||||||
| 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 | ) | ||||
| Loss on 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 | ) | ||||
| Decrease in short-term financial instruments |
— | 329 | ||||||
| Collection of guarantee 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 | ||||