UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 001-34791
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1, Allée Scheffer, L-2520
Luxembourg, Grand Duchy of Luxembourg
(352 ) 45-62-62
(Address, zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. ☒
☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act. | Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule Yes ☒ No
12b-2
of the Exchange Act). ☐
As of October 29, 2021,
the registrant had 46,464,889 shares of common stock outstanding.
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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| Item 1. |
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2
PART I—FINANCIAL INFORMATION
Item 1. |
Interim Consolidated Financial Statements (Unaudited) |
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, 2021 |
December 31, 2020 |
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(In thousands of U.S. dollars, except share data) |
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| Assets |
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| Current assets |
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| Cash and cash equivalents |
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| Accounts receivable, net |
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| Inventories, net |
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| Other receivables |
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| Prepaid expenses |
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| Hedge collateral (Note 9) |
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| Other current assets (Notes 10 and 19) |
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| Total current assets |
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| Property, plant and equipment, net |
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| Operating lease right-of-use |
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| Intangible assets, net |
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| Long-term prepaid expenses |
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| Deferred income taxes |
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| Other non-current assets |
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| Total assets |
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| Liabilities and Stockholders’ Equity |
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| Current liabilities |
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| Accounts payable |
$ | $ | ||||||
| Other accounts payable |
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| Accrued expenses (Note 8) |
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| Accrued income taxes |
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| Operating lease liabilities |
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| Current portion of long-term borrowings, net |
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| Other current liabilities (Note 10) |
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| Total current liabilities |
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| Accrued severance benefits, net |
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| Non-current operating lease liabilities |
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| Other non-current liabilities (Note 10) |
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| Total liabilities |
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| Commitments and contingencies (Note 19) |
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| Stockholders’ equity |
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| Common stock, $ |
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| Additional paid-in capital |
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| Retained earnings |
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| Treasury stock, |
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| Accumulated other comprehensive income (loss) |
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| Total stockholders’ equity |
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| Total liabilities and stockholders’ equity |
$ | $ | ||||||
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The accompanying notes are an integral part of these consolidated financial statements.
3
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended |
Nine Months Ended |
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September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
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(In thousands of U.S. dollars, except share data) |
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| Revenues: |
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| Net sales – standard products business |
$ | $ | $ | $ | ||||||||||||
| Net sales – transitional Fab 3 foundry services |
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| Total revenues |
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| Cost of sales: |
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| Cost of sales – standard products business |
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| Cost of sales – transitional Fab 3 foundry services |
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| Total cost of sales |
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| Gross profit |
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| Operating expenses: |
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| Selling, general and administrative expenses |
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| Research and development expenses |
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| Other charges |
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| Total operating expenses |
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| Operating income |
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| Interest expense |
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| Foreign currency gain (loss), net |
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| Other income, net |
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| Income (loss) from continuing operations before income tax expense |
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| Income tax expense (benefit) |
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| Income (loss) from continuing operations |
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| Income from discontinued operations, net of tax |
— | — |
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| Net income |
$ | $ | $ | $ | ||||||||||||
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| Basic earnings (loss) per common share— |
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| Continuing operations |
$ | $ | $ | $ | ( |
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| Discontinued operations |
— | |||||||||||||||
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| Total |
$ | $ | $ | $ | ||||||||||||
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| Diluted earnings (loss) per common share— |
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| Continuing operations |
$ | $ | $ | $ | ( |
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| Discontinued operations |
— | |||||||||||||||
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| Total |
$ | $ | $ | $ | ||||||||||||
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| Weighted average number of shares— |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
4
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months Ended |
Nine Months Ended |
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September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
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(In thousands of U.S. dollars) |
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| Net income |
$ | $ | $ | $ | ||||||||||||
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| Other comprehensive income (loss) |
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| Foreign currency translation adjustments |
( |
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| Derivative adjustments |
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| Fair valuation of derivatives |
( |
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| Reclassification adjustment for loss (gain) on derivatives included in net income |
( |
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| Total other comprehensive income (loss) |
( |
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| Total comprehensive income (loss) |
$ | $ | $ | ( |
) | $ | ||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
5
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
| (In thousands of U.S. dollars, except share data) |
Common Stock |
Additional Paid-In Capital |
Retained Earnings (Deficit) |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total |
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Shares |
Amount |
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| Three Months Ended September 30, 2021: |
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| Balance at June 30, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
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| Other comprehensive loss, net |
— | — | — | — | — | ( |
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| Net income |
— | — | — | — | — | |||||||||||||||||||||||
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| Balance at September 30, 2021 |
$ | $ | $ | $ | ( |
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| Three Months Ended September 30, 2020: |
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| Balance at June 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
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| Other comprehensive loss, net |
— | — | — | — | — | ( |
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| Net income |
— | — | — | — | — | |||||||||||||||||||||||
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| Balance at September 30, 2020 |
$ | $ | $ | $ | ( |
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| (In thousands of U.S. dollars, except share data) |
Common Stock |
Additional Paid-In Capital |
Retained Earnings (Deficit) |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total |
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Shares |
Amount |
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| Nine Months Ended September 30, 2021: |
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| Balance at December 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exchange of exchangeable senior note |
— | — | — | |||||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
) | — | — | — | — | ||||||||||||||||||||||
| Acquisition of treasury stock |
( |
) | — | — | — | ( |
) | — | ( |
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| Other comprehensive loss, net |
— | — | — | — | — | ( |
) | ( |
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| Net income |
— | — | — | — | — | |||||||||||||||||||||||
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| Balance at September 30, 2021 |
$ | $ | $ | $ | ( |
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| Nine Months Ended September 30, 2020: |
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| Balance at December 31, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
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| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
) | — | — | — | — | ||||||||||||||||||||||
| Acquisition of treasury stock |
( |
) | — | — | — | ( |
) | — | ( |
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| Other comprehensive income, net |
— | — | — | — | — | |||||||||||||||||||||||
| Net income |
— | — | — | — | — | |||||||||||||||||||||||
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| Balance at September 30, 2020 |
$ | $ | $ | $ | ( |
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The accompanying notes are an integral part of these consolidated financial statements.
6
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended |
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September 30, 2021 |
September 30, 2020 |
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(In thousands of U.S. dollars) |
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| Cash flows from operating activities |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities |
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| Depreciation and amortization |
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| Provision for severance benefits |
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| Amortization of debt issuance costs and original issue discount |
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| Loss on foreign currency, net |
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| Restructuring and other charges |
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| Provision for inventory reserves |
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| Stock-based compensation |
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| Gain on sale of discontinued operations |
— | ( |
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| Other, net |
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| Changes in operating assets and liabilities |
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| Accounts receivable, net |
( |
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| Unbilled accounts receivable, net |
— | |||||||
| Inventories |
( |
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| Other receivables |
( |
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| Other current assets |
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| Accounts payable |
( |
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| Other accounts payable |
( |
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| Accrued expenses |
( |
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| Accrued income taxes |
( |
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| Other current liabilities |
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| Other non-current liabilities |
( |
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| Payment of severance benefits |
( |
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| Other, net |
( |
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| Net cash provided by operating activities |
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| Cash flows from investing activities |
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| Proceeds from settlement of hedge collateral |
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| Payment of hedge collateral |
( |
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| Purchase of property, plant and equipment |
( |
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| Payment for intellectual property registration |
( |
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| Collection of guarantee deposits |
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| Payment of guarantee deposits |
( |
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| Proceeds from sale of discontinued operations |
— | |||||||
| Other, net |
( |
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| Net cash provided by (used in) investing activities |
( |
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| Cash flows from financing activities |
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| Proceeds from exercise of stock options |
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| Acquisition of treasury stock |
( |
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| Repayment of financing related to water treatment facility arrangement |
( |
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| Repayment of principal portion of finance lease liabilities |
( |
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| Net cash provided by financing activities |
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| Effect of exchange rates on cash and cash equivalents |
( |
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| Net increase (decrease) in cash and cash equivalents |
( |
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| Cash and cash equivalents |
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| Beginning of the period |
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| End of the period |
$ | $ | ||||||
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| Supplemental cash flow information |
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| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
$ | $ | ||||||
| Non-cash investing activities |
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| Property, plant and equipment additions in other accounts payable |
$ | $ | ||||||
| Non-cash financing activities |
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| Exchange of exchangeable senior notes into common stock |
$ | $ | — | |||||
The accompanying notes are an integral part of these consolidated financial statements.
7
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. Business, Basis of Presentation and Significant Accounting Policies
Business
Magnachip Semiconductor Corporation (together with its subsidiaries, the “Company”) is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, Internet of Things (“IoT”) applications, consumer and industrial applications.
On September 1, 2020 (the “Closing Date”), the Company completed the sale of the Company’s Foundry Services Group business and its fabrication facility located in Cheongju, Korea, known as “Fab 4” to Key Foundry Co., Ltd. (the “Buyer”), a Korean corporation, in exchange for a purchase price equal to approximately $350.6 million in cash, pursuant to the terms of a business transfer agreement (the “Business Transfer Agreement”) dated March 31, 2020 by and among the Company and Magnus Semiconductor, LLC, a Korean limited liability company (“Magnus”). The purchase price was paid in a combination of U.S. Dollars in the amount of $46.5 million and Korean Won in the amount of approximately KRW 360.6 billion. In addition to the purchase price, the Buyer assumed all severance liabilities relating to the transferred employees, which had a value of approximately $100 million. The Buyer is a wholly owned subsidiary of Magnus, which was established by Alchemist Capital Partners Korea Co., Ltd. and Credian Partners, Inc. On April 20, 2020, Magnus assigned, and the Buyer assumed, all rights and obligations of Magnus under the Business Transfer Agreement. This divestiture of the Foundry Services Group business and Fab 4 was made in connection with the Company’s strategic shift of its operational focus to its standard products business. The Foundry Services Group was historically a reportable segment. The Foundry Services Group business was classified as discontinued operations in the Company’s consolidated statements of operations and excluded from both continuing operations and segment results for the three and nine months ended September 30, 2020. Accordingly, the Company has one reportable segment, its standard products business, together with transitional foundry services associated with its fabrication facility located in Gumi, Korea, known as “Fab 3,” that it expects to perform for the Buyer for a period of up to three years from the Closing Date (the “Transitional Fab 3 Foundry Services”).
The Company’s standard products business includes its Display Solutions and Power Solutions business lines. The Company’s Display Solutions products provide panel display solutions to major suppliers of large and small rigid and flexible panel displays, and mobile, automotive applications and home appliances. The Company’s Power Solutions products include discrete and integrated circuit solutions for power management in communications, consumer and industrial applications.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). These interim consolidated financial statements include normal recurring adjustments and the elimination of all intercompany accounts and transactions which are, in the opinion of management, necessary to provide a fair statement of the Company’s financial condition and results of operations for the periods presented. These interim consolidated financial statements are presented in accordance with Accounting Standards Codification (“ASC”) 270, “Interim Reporting” and, accordingly, do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements, except for the changes below. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for a full year or for any other periods. The consolidated statement of cash flow for the nine months ended September 30, 2020 has not been adjusted to separately disclose the cash flow related to discontinued operations, but the material items in the operating and investing activities of the cash flow relating to discontinued operations for the same period is disclosed in Note 3. Unless otherwise stated, information in these notes to consolidated financial statements relates to the Company’s continuing operations and excludes the discontinued operations.
The December 31, 2020 balance sheet data was derived from the Company’s audited financial statements, but does not include all disclosures required by U.S. GAAP. The interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K
for the fiscal year ended December 31, 2020. 8
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).
ASU 2019-12
removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted ASU 2019-12
as of January 1, 2021, and the adoption of ASU 2019-12
did not have a material impact on the Company’s consolidated financial statements. 2. Merger Agreement
On March 25, 2021, the Company, South Dearborn Limited, an exempted company incorporated in the Cayman Islands with limited liability (“Parent”), formed by an affiliate of Wise Road Capital LTD, and Michigan Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (as it may be amended, supplemented or modified from time to time, the “Merger Agreement”). The Merger Agreement provides that, among other things, and subject to the terms and conditions thereof, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing its corporate existence under the General Corporation Law of the State of Delaware (the “DGCL”) as the surviving corporation in the Merger and becoming a wholly owned subsidiary of Parent.
Pursuant to the Merger Agreement, each share of the Company’s common stock, par value $0.01 per share (the “Common Stock”), issued and outstanding immediately before the effective time of the Merger (the “Effective Time”) (other than (a) shares of Common Stock owned by the Company or any of its wholly owned subsidiaries or by Parent or any of its subsidiaries immediately before the Effective Time (collectively, the “Excluded Shares”) and (b) any shares of Common Stock for which the holder thereof (i) has not voted in favor of the Merger or consented to it in writing and (ii) has properly and validly exercised their statutory rights of appraisal in respect of such shares of Common Stock in accordance with Section 262 of the DGCL (collectively, “Dissenting Shares”)) will be cancelled and will cease to exist and will be automatically converted into the right to receive $29.00 in cash, without interest (the “Merger Consideration”), subject to applicable withholding taxes.
Consummation of the Merger is subject to certain customary closing conditions, including (i) approval of the Merger Agreement by our stockholders, (ii) the receipt of certain required or requested governmental approvals or authorizations (including from the Committee on Foreign Investment in the United States (“CFIUS”) and the Korean Ministry of Trade, Industry and Energy (“MOTIE”)), (iii) the absence of any order or law issued, enacted or deemed applicable by certain governmental authorities specified in the Merger Agreement that makes consummation of the Merger illegal and that remains in effect (a “Prohibitive Order”), (iv) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) and (v) other customary closing conditions, including the accuracy of each party’s representations and warranties, and each party’s compliance with its obligations under the Merger Agreement (subject in the case of this clause (v) to certain materiality qualifiers).
The Merger Agreement contains termination rights for each of the Company and Parent, including if (i) the consummation of the Merger does not occur by 11:59 p.m. (New York time) on December 25, 2021 (subject to extension to March 25, 2022 at the option of either party if certain regulatory approvals or authorizations have not been obtained by such date or certain governmental authorities specified in the Merger Agreement have issued, enacted or deemed applicable a Prohibitive Order), (ii) the Requisite Company Vote is not obtained, (iii) any of certain governmental authorities specified in the Merger Agreement issues, enacts or deems applicable after the date of the Merger Agreement a Prohibitive Order that has become final and
non-appealable,
or (iv) the other party has breached the Merger Agreement, which breach would give rise to a failure, or has materially contributed to the failure, of certain conditions to the non-breaching
party’s obligations to close (subject to a cure period). Additionally, each of the Company and Parent may terminate the Merger Agreement in certain other circumstances. For the three and nine months ended September 30, 2021, the Company incurred $1,552 thousand and $13,842 thousand, respectively, of professional fees and certain transaction related-expenses incurred in connection with the Merger, which were recognized in other charges in the consolidated statements of operations.
The foregoing description of the Merger Agreement is not complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to the Company’s Current Report on Form
8-K
filed on March 29, 2021 and as amended by the Letter Agreement attached as Exhibit 2.1 to the Company’s Form 8-K
filed on August 23, 2021. 9
3. Discontinued Operations
On September 1, 2020, the Company completed the sale of the Company’s Foundry Services Group business and Fab 4. As a result of the sale of the Foundry Services Group business and Fab 4, the Company recorded a gain of $287,117 thousand and all operations from the Foundry Services Group business and Fab 4 were classified as discontinued operations for the three and nine months ended September 30, 2020. Following the consummation of the sale, and for up to three years, the Company is expected to provide the Transitional Fab 3 Foundry Services at an agreed upon cost plus 11,428 thousand and $36,218 thousand for the three and nine months ended September 30, 2021, respectively.
mark-up.
For the periods prior to the Closing Date, revenue from providing the Transitional Fab 3 Foundry Services to the Foundry Services Group is recorded at cost on both of the continuing and discontinued businesses for comparative purposes. Cash inflows to the Company from the Buyer related to providing the Transitional Fab 3 Foundry Services were $The following table summarizes the results from discontinued operations, net of tax, for the three and nine months ended September 30, 2020.
Three Months Ended |
Nine Months Ended |
|||||||
September 30, 2020 |
||||||||
(In thousands of U.S. dollars) |
||||||||
| Revenues: |
||||||||
| Net sales – Foundry Services Group |
$ | $ | ||||||
| Net sales – transitional Fab 3 foundry services |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total revenues |
||||||||
| Cost of sales: |
||||||||
| Cost of sales – Foundry Services Group |
||||||||
| Cost of sales – transitional Fab 3 foundry services |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total cost of sales |
||||||||
| |
|
|
|
|||||
| Gross profit |
||||||||
| Operating expenses: |
||||||||
| Selling, general and administrative expenses |
||||||||
| Research and development expenses |
||||||||
| Restructuring and other charges |
||||||||
| |
|
|
|
|||||
| Total operating expenses |
||||||||
| |
|
|
|
|||||
| Operating income from discontinued operations |
||||||||
| Foreign currency gain (loss), net |
( |
) | ||||||
| Others, net |
||||||||
| |
|
|
|
|||||
| Income from discontinued operations before income tax expense |
||||||||
| Income tax expense |
||||||||
| Gain on sale of discontinued operations |
||||||||
| Transaction costs |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Income from discontinued operations, net of tax |
||||||||
| |
|
|
|
|||||
For the three and nine months ended September 30, 2020, the Company recorded $7,870 thousand and $10,574 thousand, respectively, in professional fees incurred in connection with the sale of the Foundry Services Group business and Fab 4, and recorded such costs as restructuring and other charges in the above.
The following table provides supplemental cash flows information related to discontinued operations:
Nine Months Ended |
||||
September 30, 2020 |
||||
(In thousands of U.S. dollars) |
||||
| Significant non-cash operating activities: |
||||
| Depreciation and amortization |
$ | |||
| Provision for severance benefits |
||||
| Stock-based compensation |
||||
| Investing activities: |
||||
| Capital expenditures |
$ | ( |
) | |
10
4. Inventories
Inventories as of September 30, 2021 and December 31, 2020 consist of the following (in thousands):
September 30, 2021 |
December 31, 2020 |
|||||||
| Finished goods |
$ | $ | ||||||
| Semi-finished goods and work-in-process |
||||||||
| Raw materials |
||||||||
| Materials in-transit |
||||||||
| Less: inventory reserve |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Inventories, net |
$ | $ | ||||||
| |
|
|
|
|||||
Changes in inventory reserve for the three and nine months ended September 30, 2021 and 2020 are as follows (in thousands):
Three Months Ended |
Nine Months Ended |
Three Months Ended |
Nine Months Ended |
|||||||||||||
September 30, 2021 |
September 30, 2020 |
|||||||||||||||
| Beginning balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Change in reserve |
||||||||||||||||
| Inventory reserve charged to costs of sales |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Sale of previously reserved inventory |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| ( |
) | ( |
) | ( |
) | |||||||||||
| Write off |
||||||||||||||||
| Translation adjustments |
( |
) | ||||||||||||||
| Reclassified to assets held for sale |
— | — | — | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Ending balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
Inventory reserve represents the Company’s best estimate in value lost due to excessive inventory level, physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and circumstances. Inventory reserve relates to inventory items including finished goods, semi-finished goods, and raw materials. Write off of this reserve is recognized only when the related inventory has been disposed or scrapped.
work-in-process
11
5. Property, Plant and Equipment
Property, plant and equipment as of September 30, 2021 and December 31, 2020 are comprised of the following (in thousands):
September 30, 2021 |
December 31, 2020 |
|||||||
| Buildings and related structures |
$ | $ | ||||||
| Machinery and equipment |
||||||||
| Finance lease right-of-use |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Less: accumulated depreciation |
( |
) | ( |
) | ||||
| Land |
||||||||
| Construction in progress |
||||||||
| |
|
|
|
|||||
| Property, plant and equipment, net |
$ | $ | ||||||
| |
|
|
|
|||||
Aggregate depreciation expenses totaled $10,018 thousand and $7,473 thousand for the nine months ended September 30, 2021 and 2020, respectively.
6. Intangible Assets
Intangible assets as of September 30, 2021 and December 31, 2020 are comprised of the following (in thousands):
September 30, 2021 |
||||||||||||
Gross amount |
Accumulated amortization |
Net amount |
||||||||||
| Intellectual property assets |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
| Intangible assets |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
December 31, 2020 |
||||||||||||
Gross amount |
Accumulated amortization |
Net amount |
||||||||||
| Intellectual property assets |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
| Intangible assets |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
Aggregate amortization expenses for intangible assets totaled $558 thousand and $495 thousand for the nine months ended September 30, 2021 and 2020, respectively.
12
7. Leases
The Company has operating and finance leases for buildings and other assets such as vehicles and office equipment. The Company’s leases have remaining lease terms ranging from 1 year to 4 years.
The tables below present financial information related to the Company’s leases.
Supplemental balance sheets information related to leases as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
| Leases |
Classification |
September 30, 2021 |
December 31, 2020 |
|||||||||
| Assets |
||||||||||||
| Operating lease |
Operating lease right-of-use |
$ |
$ |
|||||||||
| Finance lease |
Property, plant and equipment, net |
|||||||||||
| |
|
|
|
|||||||||
| Total lease assets |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
| Liabilities |
||||||||||||
| Current |
||||||||||||
| Operating |
Operating lease liabilities |
$ |
$ |
|||||||||
| Finance |
Other current liabilities |
|||||||||||
| Non-current |
||||||||||||
| Operating |
Non-current operating lease liabilities |
|||||||||||
| Finance |
Other non-current liabilities |
|||||||||||
| |
|
|
|
|||||||||
| Total lease liabilities |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
September 30, 2021 |
December 31, 2020 |
|||||||
| Weighted average remaining lease term |
||||||||
| Operating leases |
||||||||
| Finance leases |
||||||||
| Weighted average discount rate |
||||||||
| Operating leases |
% | % | ||||||
| Finance leases |
% | % | ||||||
The components of lease cost included in the Company’s consolidated statements of operations, are as follows (in thousands):
Three Months Ended |
Nine Months Ended |
|||||||||||||||
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
|||||||||||||
| Operating lease cost |
$ | $ | $ | $ | ||||||||||||
| Finance lease cost |
||||||||||||||||
| Amortization of right-of-use |
||||||||||||||||
| Interest on lease liabilities |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total lease cost |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
The above table does not include an immaterial cost of short-term leases for the three and nine months ended September 30, 2021 and 2020.
13
Three Months Ended |
Nine Months Ended |
|||||||||||||||
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
|||||||||||||
| Cash lease liabilities |
||||||||||||||||
| Operating cash flows from operating leases |
$ | $ | $ | $ | ||||||||||||
| Operating cash flows from finance leases |
||||||||||||||||
| Financing cash flows from finance leases |
||||||||||||||||
The aggregate future lease payments for operating and finance leases as of September
30,
2021 are as follows (in thousands):
Operating Leases |
Finance Leases |
|||||||
| Remainder of 2021 |
$ | $ | ||||||
| 2022 |
||||||||
| 2023 |
||||||||
| 2024 |
||||||||
| 2025 |
||||||||
| |
|
|
|
|||||
| Total future lease payments |
||||||||
| Less: Imputed interest |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Present value of future payments |
$ | $ | ||||||
| |
|
|
|
|||||
8. Accrued Expenses
Accrued expenses as of September 30, 2021 and December 31, 2020 are comprised of the following (in thousands):
September 30, 2021 |
December 31, 2020 |
|||||||
| Payroll, benefits and related taxes, excluding severance benefits |
$ | $ | ||||||
| Withholding tax attributable to intercompany interest income |
||||||||