UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2012
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
MagnaChip Semiconductor Corporation
(Exact name of registrant as specified in its charter)
Delaware | 83-0406195 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o MagnaChip Semiconductor S.A.
74, rue de Merl, B.P. 709 L-2146
Luxembourg R.C.S.
Luxembourg B97483
(352) 45-62-62
(Address, zip code, and telephone number, including area code, of registrants principal executive offices)
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. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. x Yes ¨ No
As of July 31, 2012, the registrant had 36,358,236 shares of common stock outstanding.
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page No. | ||||||||
4 | ||||||||
Item 1. | 4 | |||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
7 | ||||||||
9 | ||||||||
MagnaChip Semiconductor Corporation and Subsidiaries Notes to Consolidated Financial Statements |
10 | |||||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
31 | ||||||
Item 3. | 50 | |||||||
Item 4. | 50 | |||||||
51 | ||||||||
Item 1A. | 51 | |||||||
Item 2. | 63 | |||||||
Item 6. | 64 | |||||||
65 |
2
FORWARD LOOKING STATEMENTS
The following Managements Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that involve risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as anticipate, estimate, expect, project, intend, plan, believe and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.
These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, managements assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in this section and in Part II: Item 1A. Risk Factors in this report.
All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information or future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Statements made in this Quarterly Report on Form 10-Q, unless the context otherwise requires, include the use of the terms we, us, our and MagnaChip refer to MagnaChip Semiconductor Corporation and its consolidated subsidiaries. The term Korea refers to the Republic of Korea or South Korea.
3
Item 1. | Interim Consolidated Financial Statements (Unaudited) |
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands of US dollars, except share data)
June 30, 2012 |
December 31, 2011 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 155,764 | $ | 162,111 | ||||
Restricted cash |
5,218 | 6,830 | ||||||
Accounts receivable, net |
135,090 | 125,922 | ||||||
Inventories, net |
75,417 | 62,836 | ||||||
Other receivables |
2,497 | 256 | ||||||
Prepaid expenses |
4,940 | 6,032 | ||||||
Other current assets |
8,102 | 15,909 | ||||||
|
|
|
|
|||||
Total current assets |
387,028 | 379,896 | ||||||
|
|
|
|
|||||
Property, plant and equipment, net |
219,021 | 182,663 | ||||||
Intangible assets, net |
18,139 | 16,787 | ||||||
Long-term prepaid expenses |
4,137 | 4,790 | ||||||
Other non-current assets |
17,379 | 18,539 | ||||||
|
|
|
|
|||||
Total assets |
$ | 645,704 | $ | 602,675 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 92,906 | $ | 77,848 | ||||
Other accounts payable |
23,344 | 13,452 | ||||||
Accrued expenses |
39,550 | 31,723 | ||||||
Current portion of capital lease obligations |
| 2,852 | ||||||
Derivative liabilities |
8,449 | 9,757 | ||||||
Other current liabilities |
6,566 | 2,007 | ||||||
|
|
|
|
|||||
Total current liabilities |
170,815 | 137,639 | ||||||
|
|
|
|
|||||
Long-term borrowings, net |
201,519 | 201,389 | ||||||
Accrued severance benefits, net |
96,883 | 90,755 | ||||||
Other non-current liabilities |
5,939 | 6,222 | ||||||
|
|
|
|
|||||
Total liabilities |
475,156 | 436,005 | ||||||
|
|
|
|
|||||
Stockholders equity |
||||||||
Common stock, $0.01 par value, 150,000,000 shares authorized, 39,468,338 shares issued and 36,353,545 outstanding at June 30, 2012 and 39,439,115 shares issued and 37,907,575 outstanding at December 31, 2011 |
395 | 394 | ||||||
Additional paid-in capital |
100,027 | 98,929 | ||||||
Retained earnings |
113,553 | 93,950 | ||||||
Treasury stock, 3,114,793 and 1,531,540 shares at June 30, 2012 and December 31, 2011, respectively |
(28,728 | ) | (11,793 | ) | ||||
Accumulated other comprehensive loss |
(14,699 | ) | (14,810 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
170,548 | 166,670 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 645,704 | $ | 602,675 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
4
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands of US dollars, except share data)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2012 |
June 30, 2011 |
June 30, 2012 |
June 30, 2011 |
|||||||||||||
Net sales |
$ | 202,634 | $ | 203,679 | $ | 379,636 | $ | 391,600 | ||||||||
Cost of sales |
139,776 | 137,497 | 266,863 | 268,944 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
62,858 | 66,182 | 112,773 | 122,656 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Selling, general and administrative expenses |
20,093 | 17,458 | 38,302 | 32,859 | ||||||||||||
Research and development expenses |
19,762 | 20,614 | 39,593 | 39,112 | ||||||||||||
Restructuring and impairment charges |
| 2,475 | | 2,475 | ||||||||||||
Special expense for IPO incentive |
| | | 12,146 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
23,003 | 25,635 | 34,878 | 36,064 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other income (expenses) |
||||||||||||||||
Interest expense, net |
(5,619 | ) | (6,369 | ) | (11,199 | ) | (13,480 | ) | ||||||||
Foreign currency gain (loss), net |
(10,586 | ) | 18,234 | 523 | 39,593 | |||||||||||
Loss on early extinguishment of senior notes |
| (4,103 | ) | | (4,103 | ) | ||||||||||
Other |
701 | 203 | 790 | 369 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(15,504 | ) | 7,965 | (9,886 | ) | 22,379 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
7,499 | 33,600 | 24,992 | 58,443 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income tax expense |
3,159 | 1,970 | 5,389 | 4,345 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 4,340 | $ | 31,630 | $ | 19,603 | $ | 54,098 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per common share |
||||||||||||||||
Basic |
$ | 0.12 | $ | 0.81 | $ | 0.53 | $ | 1.40 | ||||||||
Diluted |
$ | 0.12 | $ | 0.78 | $ | 0.52 | $ | 1.35 | ||||||||
Weighted average number of shares |
||||||||||||||||
Basic |
36,713,569 | 39,066,303 | 37,118,848 | 38,701,553 | ||||||||||||
Diluted |
37,566,699 | 40,294,902 | 37,916,149 | 39,925,275 |
The accompanying notes are an integral part of these consolidated financial statements
5
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands of US dollars)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2012 |
June 30, 2011 |
June 30, 2012 |
June 30, 2011 |
|||||||||||||
Net income |
$ | 4,340 | $ | 31,630 | $ | 19,603 | $ | 54,098 | ||||||||
Other comprehensive income (loss) |
||||||||||||||||
Unrealized gain (loss) on investments |
(106 | ) | (518 | ) | (27 | ) | 37 | |||||||||
Derivative adjustments |
(690 | ) | (1,909 | ) | 884 | (3,866 | ) | |||||||||
Foreign currency translation adjustments |
7,566 | (11,451 | ) | (746 | ) | (25,718 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive income |
$ | 11,110 | $ | 17,752 | $ | 19,714 | $ | 24,551 | ||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
6
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited; in thousands of US dollars, except share data)
Additional Paid-In Capital |
Retained Earnings (Accumulated deficit) |
Common Stock Held in Treasury |
Accumulated Other Comprehensive Income (loss) |
Total | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
Three Months Ended June 30, 2012 |
||||||||||||||||||||||||||||
Balance at April 1, 2012 |
36,880,879 | $ | 394 | $ | 99,495 | $ | 109,213 | $ | (23,728 | ) | $ | (21,469 | ) | $ | 163,905 | |||||||||||||
Stock-based compensation |
| | 457 | | | | 457 | |||||||||||||||||||||
Issuance of new stock |
1,650 | | 18 | | | | 18 | |||||||||||||||||||||
Exercise of stock options |
9,625 | 1 | 57 | | | | 58 | |||||||||||||||||||||
Acquisitions of treasury stock |
(538,609 | ) | | | | (5,000 | ) | | (5,000 | ) | ||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
| | | 4,340 | | | 4,340 | |||||||||||||||||||||
Fair valuation of derivatives |
| | | | | (2,187 | ) | (2,187 | ) | |||||||||||||||||||
Reclassification to net income from accumulated other comprehensive loss related to hedge derivatives |
| | | | | 1,497 | 1,497 | |||||||||||||||||||||
Foreign currency translation adjustments |
| | | | | 7,566 | 7,566 | |||||||||||||||||||||
Unrealized losses on investments |
| | | | | (106 | ) | (106 | ) | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total comprehensive income |
11,110 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at June 30, 2012 |
36,353,545 | $ | 395 | $ | 100,027 | $ | 113,553 | $ | (28,728 | ) | $ | (14,699 | ) | $ | 170,548 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Six Months Ended June 30, 2012 |
||||||||||||||||||||||||||||
Balance at January 1, 2012 |
37,907,575 | $ | 394 | $ | 98,929 | $ | 93,950 | $ | (11,793 | ) | $ | (14,810 | ) | $ | 166,670 | |||||||||||||
Stock-based compensation |
| | 915 | | | | 915 | |||||||||||||||||||||
Issuance of new stock |
2,468 | | 26 | | | | 26 | |||||||||||||||||||||
Exercise of stock options |
26,755 | 1 | 157 | | | | 158 | |||||||||||||||||||||
Acquisition of treasury stock |
(1,583,253 | ) | (16,935 | ) | (16,935 | ) | ||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
| | | 19,603 | | | 19,603 | |||||||||||||||||||||
Fair valuation of derivatives |
| | | | | (645 | ) | (645 | ) | |||||||||||||||||||
Reclassification to net income from accumulated other comprehensive loss related to hedge derivatives |
| | | | | 1,529 | 1,529 | |||||||||||||||||||||
Foreign currency translation adjustments |
| | | | | (746 | ) | (746 | ) | |||||||||||||||||||
Unrealized losses on investments |
| | | | | (27 | ) | (27 | ) | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total comprehensive income |
19,714 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at June 30, 2012 |
36,353,545 | $ | 395 | $ | 100,027 | $ | 113,553 | $ | (28,728 | ) | $ | (14,699 | ) | $ | 170,548 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
7
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited; in thousands of US dollars, except share data)
Additional Paid-In Capital |
Retained Earnings (Accumulated deficit) |
Accumulated Other Comprehensive Income (loss) |
Total | |||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Three Months Ended June 30, 2011 |
||||||||||||||||||||||||
Balance at April 1, 2011 |
39,356,749 | $ | 394 | $ | 97,812 | $ | 94,625 | $ | (20,944 | ) | $ | 171,887 | ||||||||||||
Stock-based compensation |
| | 386 | | | 386 | ||||||||||||||||||
Issuance of new stock |
| | (215 | ) | | | (215 | ) | ||||||||||||||||
Exercise of stock options |
722 | | 4 | | | 4 | ||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net Income |
| | | 31,630 | | 31,630 | ||||||||||||||||||
Fair valuation of derivatives |
| | | | 3,740 | 3,740 | ||||||||||||||||||
Reclassification to net income from accumulated other comprehensive loss related to hedge derivatives |
| | | | (5,649 | ) | (5,649 | ) | ||||||||||||||||
Foreign currency translation adjustments |
| | | | (11,451 | ) | (11,451 | ) | ||||||||||||||||
Unrealized losses on investments |
| | | | (518 | ) | (518 | ) | ||||||||||||||||
|
|
|||||||||||||||||||||||
Total comprehensive income |
17,752 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at June 30, 2011 |
39,357,471 | $ | 394 | $ | 97,987 | $ | 126,255 | $ | (34,822 | ) | $ | 189,814 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Six Months Ended June 30, 2011 |
||||||||||||||||||||||||
Balance at January 1, 2011 |
38,401,985 | $ | 384 | $ | 95,585 | $ | 72,157 | $ | (5,275 | ) | $ | 162,851 | ||||||||||||
Stock-based compensation |
| | 817 | | | 817 | ||||||||||||||||||
Issuance of new stock |
950,000 | 10 | 1,553 | | | 1,563 | ||||||||||||||||||
Exercise of stock options |
5,486 | | 32 | | | 32 | ||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income |
| | | 54,098 | | 54,098 | ||||||||||||||||||
Fair valuation of derivatives |
| | | | 6,076 | 6,076 | ||||||||||||||||||
Reclassification to net income from accumulated other comprehensive loss related to hedge derivatives |
| | | | (9,942 | ) | (9,942 | ) | ||||||||||||||||
Foreign currency translation adjustments |
| | | | (25,718 | ) | (25,718 | ) | ||||||||||||||||
Unrealized gains on investments |
| | | | 37 | 37 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total comprehensive income |
24,551 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at June 30, 2011 |
39,357,471 | $ | 394 | $ | 97,987 | $ | 126,255 | $ | (34,822 | ) | $ | 189,814 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
8
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands of US dollars)
Six Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 19,603 | $ | 54,098 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Depreciation and amortization |
15,397 | 29,315 | ||||||
Provision for severance benefits |
10,975 | 8,396 | ||||||
Amortization of debt issuance costs and original issue discount |
497 | 491 | ||||||
Loss (gain) on foreign currency translation, net |
55 | (44,109 | ) | |||||
Gain on disposal of property, plant and equipment, net |
(190 | ) | (11 | ) | ||||
Loss on disposal of intangible assets, net |
15 | 8 | ||||||
Restructuring and impairment charges |
| 2,475 | ||||||
Stock-based compensation |
915 | 1,246 | ||||||
Loss on early extinguishment of senior notes |
| 4,103 | ||||||
Other |
(348 | ) | 1,104 | |||||
Changes in operating assets and liabilities |
||||||||
Accounts receivable |
(8,296 | ) | 2,103 | |||||
Inventories |
(11,498 | ) | (14,300 | ) | ||||
Other receivables |
(2,580 | ) | (1,309 | ) | ||||
Other current assets |
8,851 | (884 | ) | |||||
Deferred tax assets |
1,146 | 824 | ||||||
Accounts payable |
14,654 | 12,139 | ||||||
Other accounts payable |
9,677 | 13,800 | ||||||
Accrued expenses |
7,890 | 3,141 | ||||||
Other current liabilities |
6,611 | (1,155 | ) | |||||
Payment of severance benefits |
(4,816 | ) | (3,745 | ) | ||||
Other |
(1,996 | ) | (232 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
66,562 | 67,498 | ||||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Decrease in restricted cash |
1,634 | | ||||||
Proceeds from disposal of plant, property and equipment |
891 | 23 | ||||||
Purchase of plant, property and equipment |
(46,728 | ) | (26,926 | ) | ||||
Payment for intellectual property registration |
(565 | ) | (324 | ) | ||||
Payment for purchase of Dawin, net of cash acquired |
(8,642 | ) | | |||||
Decrease in short-term financial instruments |
173 | | ||||||
Collection of guarantee deposits |
70 | 979 | ||||||
Payment of guarantee deposits |
(176 | ) | (1,483 | ) | ||||
Other |
(53 | ) | (402 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(53,396 | ) | (28,133 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Proceeds from issuance of common stock |
183 | 8,818 | ||||||
Repurchase of senior notes |
| (38,150 | ) | |||||
Repayment of obligations under capital lease |
(2,968 | ) | (3,182 | ) | ||||
Acquisition of treasury stock |
(16,935 | ) | | |||||
|
|
|
|
|||||
Net cash used in financing activities |
(19,720 | ) | (32,514 | ) | ||||
Effect of exchange rates on cash and cash equivalents |
207 | (1,259 | ) | |||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
(6,347 | ) | 5,592 | |||||
|
|
|
|
|||||
Cash and cash equivalents |
||||||||
Beginning of the period |
162,111 | 172,172 | ||||||
|
|
|
|
|||||
End of the period |
$ | 155,764 | $ | 177,764 | ||||
|
|
|
|
|||||
Supplemental cash flow information |
||||||||
Cash paid for interest |
$ | 10,737 | $ | 13,468 | ||||
|
|
|
|
|||||
Cash paid (refunded) for income taxes |
$ | (684 | ) | $ | 1,207 | |||
|
|
|
|
|||||
Noncash transactions |
||||||||
Deferred offering costs reclassified as reduction of additional paid-in capital |
$ | | $ | 7,269 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
9
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited; tabular dollars in thousands, except share data)
1. General
The Company
MagnaChip Semiconductor Corporation (together with its subsidiaries, the Company) is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. The Companys business is comprised of three key segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. The Companys Display Solutions products include display drivers for use in a wide range of flat panel displays and mobile multimedia devices. The Companys Power Solutions products include discrete and integrated circuit solutions for power management in high-volume consumer applications. The Companys Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services for fabless semiconductor companies that serve the consumer, computing and wireless end markets.
2. Significant Accounting Policies
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 (US GAAP). These interim consolidated financial statements include all adjustments consisting only of normal recurring adjustments and the elimination of all intercompany accounts and transactions which are, in the opinion of management, necessary to provide a fair presentation of financial condition and results of operations for the periods presented. These interim consolidated financial statements are presented in accordance with ASC 270, Interim Reporting, (ASC 270) and, accordingly, do not include all of the information and note disclosures required by US GAAP for complete financial statements. The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for a full year or for any other periods.
The December 31, 2011 balance sheet data was derived from audited financial statements, but does not include all disclosures required by US GAAP.
Recent Accounting Pronouncements
In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities (ASU 2011-11) which requires an entity to disclose information about offsetting and related arrangements to ensure that the users of the Companys financial statements can understand the effect that offsetting has on the Companys financial position. ASU 2001-11 is effective for annual periods beginning on or after January 1, 2013. Retrospective application is required for all comparative periods presented. The adoption of ASU 2011-11 is not expected to have a material impact on the Companys consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350)-Testing Goodwill for Impairment (ASU 2011-08). ASU 2011-08 gives the option to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit. Under the amendments in ASU 2011-08, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments in ASU 2011-08 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011. Early adoption is permitted. The company plans to adopt the applicable requirements of ASU 2011-08 in the fourth quarter of fiscal 2012. The company does not expect the provisions of ASU 2011-08 to have a material effect on its financial position, results of operations or cash flows.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income: Presentation of Comprehensive Income (ASU 2011-05) which amends current comprehensive income guidance. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of shareholders equity. Instead, it requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income (OCI). ASU 2011-05 does not change the items that must be reported in OCI.
10
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
However, in December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12), which deferred the guidance on whether to require entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements. ASU 2011-12 reinstated the requirements for the presentation of reclassifications that were in place prior to the issuance of ASU 2011-05 and did not change the effective date for ASU 2011-05. For public entities, the amendments in ASU 2011-05 and ASU 2011-12 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and should be applied retrospectively. The adoption of ASU 2011-12 is not expected to have a material impact on the Companys consolidated financial statements.
3. Completion of acquisition
On March 2, 2012, the Companys Korean subsidiary, MagnaChip Semiconductor, Ltd., completed the acquisition of Dawin Electronics (the acquired company), a privately-held semiconductor company that designs and manufactures IGBT, Fast Recovery Diode and MOSFET modules.
The acquisition was accounted for as a business purchase pursuant to Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805). As required by ASC 805-20, the Company allocated the purchase price to assets and liabilities based on their estimated fair value at the effective date of acquisition, March 2, 2012. The total consideration paid for the acquisition, amounted to $9,291 thousand. As a result of the acquisition, the Company expects to build up IGBT and FRD business position and improve IGBT module cost structure using Dawins developed technology and engineering know-how. The acquisition will be synergistic to the Companys Power Solution business and be accretive to its revenue which was reflected as goodwill in the amount of $3,163 thousand at the completion of the acquisition.
4. Sales of Accounts Receivable
The Company has entered into an agreement to sell selected trade accounts receivable to a financial institution. After the sale, the Company does not retain any interests in the receivables and the applicable financial institution collects these accounts receivable directly from the customer. The proceeds from the sales of these accounts receivable totaled $8,412 thousand for the six months period ended June 30, 2012 and these sales resulted in a pre-tax loss of $4 thousand for the six months period ended June 30, 2012, which is included in selling, general and administrative expenses in the consolidated Statements of Income. Net proceeds of these accounts receivable sale program are recognized in the Consolidated Statements of Cash Flows as part of operating cash flows.
5. Inventories
Inventories as of June 30, 2012 and December 31, 2011 consist of the following:
June 30, 2012 |
December 31, 2011 |
|||||||
Merchandise |
$ | 10 | $ | | ||||
Finished goods |
8,821 | 7,140 | ||||||
Semi-finished goods and work-in-process |
59,110 | 46,562 | ||||||
Raw materials |
14,393 | 9,933 | ||||||
Materials in-transit |
814 | 1,471 | ||||||
Less: inventory reserve |
(7,731 | ) | (2,270 | ) | ||||
|
|
|
|
|||||
Inventories, net |
$ | 75,417 | $ | 62,836 | ||||
|
|
|
|
11
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
6. Property, Plant and Equipment
Property, plant and equipment as of June 30, 2012 and December 31, 2011 comprise the following:
June 30, 2012 |
December 31, 2011 |
|||||||
Buildings and related structures |
$ | 73,946 | $ | 73,021 | ||||
Machinery and equipment |
192,991 | 151,100 | ||||||
Vehicles and others |
13,801 | 11,998 | ||||||
Equipment under capital lease |
11,308 | 11,160 | ||||||
|
|
|
|
|||||
292,046 | 242,279 | |||||||
Less: accumulated depreciation |
(87,089 | ) | (78,130 | ) | ||||
accumulated depreciation on equipment under capital lease |
(2,991 | ) | (2,414 | ) | ||||
Land |
15,921 | 15,928 | ||||||
Construction in progress |
1,134 | | ||||||
|
|
|
|
|||||
Property, plant and equipment, net |
$ | 219,021 | $ | 182,663 | ||||
|
|
|
|
7. Intangible Assets
Intangible assets as of June 30, 2012 and December 31, 2011 are as follows:
June 30, 2012 |
December 31, 2011 |
|||||||
Technology |
$ | 23,218 | $ | 21,126 | ||||
Customer relationships |
26,931 | 26,777 | ||||||
Intellectual property assets |
6,395 | 5,868 | ||||||
Less: accumulated amortization |
(41,525 | ) | (36,984 | ) | ||||
Goodwill |
3,120 | | ||||||
|
|
|
|
|||||
Intangible assets, net |
$ | 18,139 | $ | 16,787 | ||||
|
|
|
|
12
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
8. Derivative Financial Instruments
The Companys Korean subsidiary, MagnaChip Semiconductor, Ltd., entered into option, forward and zero cost collar contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues.
Details of derivative contracts as of June 30, 2012 are as follows:
Date of transaction |
Type of derivative |
Total notional amount | Month of settlement | |||||
August 8, 2011 |
Forward | 54,000 | July to September 2012 | |||||
August 19, 2011 |
Forward | 54,000 | October to December 2012 | |||||
March 23, 2012 |
Zero cost collar | 54,000 | January to March 2013 | |||||
May 18, 2012 |
Zero cost collar | 54,000 | April to June 2013 |
The option, forward and zero cost collar contracts qualify as cash flow hedges under ASC 815, Derivatives and Hedging, (ASC 815), since at both the inception of the contracts and on an ongoing basis, the hedging relationship was and is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the contracts. The Company is utilizing the hypothetical derivative method to measure the effectiveness by comparing the changes in value of the actual derivative versus the change in fair value of the hypothetical derivative.
The fair values of the Companys outstanding forward and zero cost collar contracts recorded as assets and liabilities as of June 30, 2012 and December 31, 2011 are as follows:
Derivatives designated as hedging instruments: |
June 30, 2012 |
December 31, 2011 |
||||||||
Liability Derivatives: |
||||||||||
Forward |
Derivative liabilities | $ | 6,800 | $ | 6,801 | |||||
Zero cost collars |
Derivative liabilities | $ | 1,649 | $ | 2,956 |
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (AOCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative, representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in current earnings.
13
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
The following table summarizes the impact of derivative instruments on the consolidated statement of operations for the three months ended June 30, 2012 and 2011:
Derivatives in ASC 815 Cash Flow Hedging Relationships |
Amount of Gain
(Loss) Recognized in AOCI on Derivatives (Effective Portion) |
Location of Gain
(Loss) Reclassified from AOCI into Statement of Income (Effective Portion) |
Amount of Gain (Loss) Reclassified from AOCI into Statement of Income (Effective Portion) |
Location of Gain (Loss) Recognized in Statement of Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
Amount of
Gain (Loss) Recognized in Statement of Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
|||||||||||||||||||||||||
2Q, 2012 | 2Q, 2011 | 2Q, 2012 | 2Q, 2011 | 2Q, 2012 | 2Q, 2011 | |||||||||||||||||||||||||
Options |
$ | | $ | (14 | ) | Net sales | $ | | $ | (496 | ) | Other income (expenses) Others | $ | | $ | (7 | ) | |||||||||||||
Forward |
(1,552 | ) | 897 | Net sales | | 6,145 | Other income (expenses) Others | 529 | 85 | |||||||||||||||||||||
Zero cost collars |
(635 | ) | 2,857 | Net sales | (1,497 | ) | | Other income (expenses) Others | 172 | 125 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | (2,187 | ) | $ | 3,740 | $ | (1,497 | ) | $ | 5,649 | $ | 701 | $ | 203 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the impact of derivative instruments on the consolidated statement of operations for the six months ended June 30, 2012 and 2011:
Derivatives in ASC 815 Cash Flow Hedging Relationships |
Amount of Gain
(Loss) Recognized in AOCI on Derivatives (Effective Portion) |
Location of Gain (Loss) Reclassified from AOCI into Statement of Income (Effective Portion) |
Amount of Gain (Loss) Reclassified from AOCI into Statement of Income (Effective Portion) |
Location of Gain (Loss) Recognized in Statement of Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
Amount of Gain (Loss) Recognized in Statement of Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
|||||||||||||||||||||||||
1H, 2012 | 1H, 2011 | 1H, 2012 | 1H, 2011 | 1H, 2012 | 1H, 2011 | |||||||||||||||||||||||||
Options |
$ | | $ | (85 | ) | Net sales | $ | | $ | (829 | ) | Other income (expenses) Others | $ | | $ | (18 | ) | |||||||||||||
Forward |
(385 | ) | 2,707 | Net sales | | 10,771 | Other income (expenses) Others | 513 | 263 | |||||||||||||||||||||
Zero cost collars |
(260 | ) | 3,454 | Net sales | (1,529 | ) | | Other income (expenses) Others | 273 | 116 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | (645 | ) | $ | 6,076 | $ | (1,529 | ) | $ | 9,942 | $ | 786 | $ | 361 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
14
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
The estimated net loss as of June 30, 2012 that is expected to be reclassified from accumulated other comprehensive income (loss) into earnings within the next twelve months is $8,324 thousand.
The Companys option, forward and zero cost collar contracts are subject to termination upon the occurrence of the following events:
(i) On the last day of a fiscal quarter, the sum of qualified and unrestricted cash and cash equivalents held by the Company is less than $30 million.
(ii) The rating of the Companys debt is B- or lower by Standard & Poors Ratings Group or any successor rating agency thereof (S&P) or B3 or lower by Moodys Investor Services, Inc. or any successor rating agency thereof (Moodys) or the Companys debt ceases to be assigned a rating by either S&P or Moodys.
In addition, the Company is required to deposit cash collateral with Goldman Sachs International Bank (GS), the counterparty to the option, forward and zero cost collar contracts, for any exposure in excess of $5 million. As of June 30, 2012, the Company has transferred $5,218 thousand of cash collateral to GS for the purpose of credit support to the counterparty. This cash collateral is changed depending on derivative market exposures. GS is required to return the cash collateral to the Company when the derivative market exposures decreases. Under this circumstance, the Company recorded the balance of $5,218 thousand as restricted cash in the balance sheet as of June 30, 2012.
9. Fair Value Measurements
The Companys assets and liabilities measured at fair value on a recurring basis as of June 30, 2012, and the basis for that measurement is as follows:
Carrying Value | Fair
Value Measurement |
Quoted Prices in Active Markets for Identical Asset (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||||||
Assets: |
||||||||||||||||||||
Available-for-sale securities |
$ | 544 | $ | 544 | $ | 544 | $ | | $ | | ||||||||||
Liabilities: |
||||||||||||||||||||
Derivative liabilities |
8,449 | 8,449 | | 8,449 | |
As of June 30, 2012, the total carrying value and estimated fair value of the senior notes which are not measured at fair value on a recurring basis were $201,519 thousand and $225,588 thousand, respectively. The estimated fair value is based on Level 2 inputs.
15
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
10. Accrued Severance Benefits
The majority of accrued severance benefits is for employees in the Companys Korean subsidiary, MagnaChip Semiconductor Ltd. Pursuant to the Employee Retirement Benefit Security Act of Korea, most employees and executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of June 30, 2012, 98.5 % of employees of the Company were eligible for severance benefits.
Changes in accrued severance benefits for each period are as follows:
Three Months Ended |
Six Months Ended |
Three Months Ended |
Six Months Ended |
|||||||||||||
June 30, 2012 | June 30, 2011 | |||||||||||||||
Beginning balance |
$ | 95,472 | $ | 91,882 | $ | 92,715 | $ | 88,973 | ||||||||
Provisions |
6,272 | 10,975 | 5,542 | 8,396 | ||||||||||||
Severance payments |
(2,493 | ) | (4,816 | ) | (2,135 | ) | (3,745 | ) | ||||||||
Translation adjustments |
(1,284 | ) | (74 | ) | 2,525 | 5,023 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
97,967 | 97,967 | 98,647 | 98,647 | |||||||||||||
Less: Cumulative contributions to the National Pension Fund |
(372 | ) | (372 | ) | (466 | ) | (466 | ) | ||||||||
Group Severance insurance plan |
(712 | ) | (712 | ) | (764 | ) | (764 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Accrued severance benefits, net |
$ | 96,883 | $ | 96,883 | $ | 97,417 | $ | 97,417 | ||||||||
|
|
|
|
|
|
|
|
The severance benefits are funded approximately 1.11% and 1.25 % as of June 30, 2012 and 2011, respectively, through the Companys National Pension Fund and group severance insurance plan which will be used exclusively for payment of severance benefits to eligible employees. These amounts have been deducted from the accrued severance benefit balance.
The Company is liable to pay the following future benefits to its non-executive employees upon their normal retirement age:
Severance benefit | ||||
Remainder of 2012 |
$ | 56 | ||
2013 |
| |||
2014 |
323 | |||
2015 |
326 | |||
2016 |
1,202 | |||
2017 |
1,612 | |||
2018 2022 |
16,582 |
The above amounts were determined based on the non-executive employees current salary rates and the number of service years that will be accumulated upon their retirement dates. These amounts do not include amounts that might be paid to non-executive employees that will cease working with the Company before their normal retirement ages.
16
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
11. Foreign Currency Gain (Loss), Net
Net foreign currency gain or loss includes non-cash translation gain or loss associated with intercompany balances.
12. Income Taxes
The Company files income tax returns in the U.S., Korea, Japan, Taiwan and various other jurisdictions.
MagnaChip Semiconductor Ltd. (Korea) is the principal operating entity within the consolidated Company. For the three and six months ended June 30, 2012 and 2011, no income tax expense for MagnaChip Semiconductor, Ltd. (Korea) was recorded due to net operating loss carry-forwards available to offset taxable income and full allowance for deferred tax assets.
Income tax expense recorded for the three month period ended June 30, 2012 and 2011 was $3,159 and $1,970, respectively, and for the six month period ended June 30, 2012 and 2011 was $5,389 and $4,345, respectively.
13. Geographic and Segment Information
The following sets forth information relating to the reportable segments:
Three Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Net Sales |
||||||||
Display Solutions |
$ | 76,784 | $ | 82,719 | ||||
Semiconductor Manufacturing Services |
91,318 | 96,458 | ||||||
Power Solutions |
33,699 | 23,739 | ||||||
All other |
833 | 763 | ||||||
|
|
|
|
|||||
Total segment net sales |
$ | 202,634 | $ | 203,679 | ||||
|
|
|
|
Six Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Net Sales |
||||||||
Display Solutions |
$ | 160,009 | $ | 157,183 | ||||
Semiconductor Manufacturing Services |
159,180 | 188,724 | ||||||
Power Solutions |
58,952 | 44,151 | ||||||
All other |
1,495 | 1,542 | ||||||
|
|
|
|
|||||
Total segment net sales |
$ | 379,636 | $ | 391,600 | ||||
|
|
|
|
17
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
The following is a summary of net sales by region, based on the location of the customer:
Three Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Korea |
$ | 94,385 | $ | 99,298 | ||||
Asia Pacific |
66,113 | 59,585 | ||||||
Japan |
7,102 | 18,451 | ||||||
North America |
26,218 | 20,715 | ||||||
Europe |
8,385 | 5,029 | ||||||
Africa |
431 | 601 | ||||||
|
|
|
|
|||||
Total |
$ | 202,634 | $ | 203,679 | ||||
|
|
|
|
Six Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Korea |
$ | 192,336 | $ | 186,811 | ||||
Asia Pacific |
118,716 | 116,880 | ||||||
Japan |
13,734 | 31,790 | ||||||
North America |
39,588 | 46,637 | ||||||
Europe |
13,950 | 7,996 | ||||||
Africa |
1,312 | 1,486 | ||||||
|
|
|
|
|||||
Total |
$ | 379,636 | $ | 391,600 | ||||
|
|
|
|
Net sales from the Companys top ten largest customers accounted for 64.0 % and 61.2% for the three months ended June 30, 2012 and 2011, respectively, and 62.6% and 61.2% for the six months ended June 30, 2012 and 2011, respectively.
For the three months ended June 30, 2012, we had one customer which represented 12.3% of the Companys net sales, and for the six months ended June 30, 2012, we had two customers which represented 13.0% and 11.3%, respectively.
For the three months and six months ended June 30, 2011, we had one customer which represented 15.4% and 14.8% of the Companys net sales, respectively.
Over 99% of the Companys property, plant and equipment are located in Korea as of June 30, 2012.
18
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
14. Earnings per Share
The following table illustrates the computation of basic and diluted earnings per common share:
Three Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Net income |
$ | 4,340 | $ | 31,630 | ||||
Weighted average common stock outstanding |
||||||||
Basic |
36,713,569 | 39,066,303 | ||||||
Diluted |
37,566,699 | 40,294,902 | ||||||
Earnings per share |
||||||||
Basic |
$ | 0.12 | $ | 0.81 | ||||
Diluted |
$ | 0.12 | $ | 0.78 |
Six Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Net income |
$ | 19,603 | $ | 54,098 | ||||
Weighted average common stock outstanding |
||||||||
Basic |
37,118,848 | 38,701,553 | ||||||
Diluted |
37,916,149 | 39,925,275 | ||||||
Earnings per share |
||||||||
Basic |
$ | 0.53 | $ | 1.40 | ||||
Diluted |
$ | 0.52 | $ | 1.35 |
The following outstanding instruments were excluded from the computation of diluted earnings per share, as they have an anti-dilutive effect on the calculation:
Six Months Ended | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
Options |
230,625 | 106,500 | ||||||
Warrants |
1,875,028 | 1,875,017 |
19
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
15. Condensed Consolidating Financial Information
The Companys $203.7 million senior notes are guaranteed by the Company and all of its subsidiaries, except for MagnaChip Semiconductor, Ltd. (Korea) and MagnaChip Semiconductor (Shanghai) Company Limited. These guarantees are full and unconditional, subject to certain customary release provisions, as well as joint and several.
The senior notes are structurally subordinated to the creditors of the Companys principal manufacturing and selling subsidiary, MagnaChip Semiconductor, Ltd. (Korea), which accounts for substantially all of the Companys net sales and assets.
Below are condensed consolidating balance sheets as of June 30, 2012 and December 31, 2011, condensed consolidating statements of operations for the three months and six months ended June 30, 2012 and 2011 and condensed consolidating statements of cash flows for the six months ended June 30, 2012 and 2011 of those entities that guarantee the senior notes, those that do not, MagnaChip Semiconductor Corporation, and the co-issuers.
For the purpose of the guarantor financial information, the investments in subsidiaries are accounted for under the equity method.
20
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Balance Sheets
June 30, 2012
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non- Guarantors |
Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 131 | $ | 15,487 | $ | 136,520 | $ | 3,626 | $ | | $ | 155,764 | ||||||||||||
Restricted cash |
| | 5,218 | | | 5,218 | ||||||||||||||||||
Accounts receivable, net |
| | 135,396 | 22,023 | (22,329 | ) | 135,090 | |||||||||||||||||
Inventories, net |
| | 75,417 | | | 75,417 | ||||||||||||||||||
Other receivables |
74 | 28,728 | 5,746 | 338 | (32,389 | ) | 2,497 | |||||||||||||||||
Prepaid expenses |
168 | | 7,202 | 467 | (2,897 | ) | 4,940 | |||||||||||||||||
Other current assets |
70,250 | 210,836 | 4,265 | 183,466 | (460,715 | ) | 8,102 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
70,623 | 255,051 | 369,764 | 209,920 | (518,330 | ) | 387,028 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property, plant and equipment, net |
| | 218,935 | 86 | | 219,021 | ||||||||||||||||||
Intangible assets, net |
| | 17,941 | 198 | | 18,139 | ||||||||||||||||||
Long-term prepaid expenses |
| | 8,931 | | (4,794 | ) | 4,137 | |||||||||||||||||
Investment in subsidiaries |
(563,490 | ) | (636,951 | ) | | (465,088 | ) | 1,665,529 | | |||||||||||||||
Long-term intercompany loan |
697,125 | 785,620 | | 642,750 | (2,125,495 | ) | | |||||||||||||||||
Other non-current assets |
641 | 6,137 | 8,308 | 2,980 | (687 | ) | 17,379 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 204,899 | $ | 409,857 | $ | 623,879 | $ | 390,846 | $ | (983,777 | ) | $ | 645,704 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | | $ | 114,439 | $ | 474 | $ | (22,007 | ) | $ | 92,906 | |||||||||||
Other accounts payable |
31,228 | | 22,795 | 2,032 | (32,711 | ) | 23,344 | |||||||||||||||||
Accrued expenses |
470 | 74,248 | 213,633 | 211,914 | (460,715 | ) | 39,550 | |||||||||||||||||
Derivative liabilities |
| | 8,449 | | | 8,449 | ||||||||||||||||||
Other current liabilities |
2,608 | | 2,988 | 3,867 | (2,897 | ) | 6,566 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
34,306 | 74,248 | 362,304 | 218,287 | (518,330 | ) | 170,815 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term borrowings, net |
| 898,644 | 625,447 | 802,922 | (2,125,494 | ) | 201,519 | |||||||||||||||||
Accrued severance benefits, net |
| | 96,715 | 168 | | 96,883 | ||||||||||||||||||
Other non-current liabilities |
45 | | 4,444 | 6,931 | (5,481 | ) | 5,939 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
34,351 | 972,892 | 1,088,910 | 1,028,308 | (2,649,305 | ) | 475,156 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Stockholders equity |
||||||||||||||||||||||||
Common stock |
395 | 136,229 | 39,005 | 51,976 | (227,210 | ) | 395 | |||||||||||||||||
Additional paid-in capital |
100,027 | (732,212 | ) | (535,872 | ) | (730,191 | ) | 1,998,275 | 100,027 | |||||||||||||||
Retained earnings |
113,553 | 47,647 | 49,114 | 55,629 | (152,390 | ) | 113,553 | |||||||||||||||||
Treasury stock |
(28,728 | ) | | | | | (28,728 | ) | ||||||||||||||||
Accumulated other comprehensive loss |
(14,699 | ) | (14,699 | ) | (17,278 | ) | (14,876 | ) | 46,853 | (14,699 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total stockholders equity |
170,548 | (563,035 | ) | (465,031 | ) | (637,462 | ) | 1,665,528 | 170,548 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and stockholders equity |
$ | 204,899 | $ | 409,857 | $ | 623,879 | $ | 390,846 | $ | (983,777 | ) | $ | 645,704 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
21
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Balance Sheets
December 31, 2011
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non- Guarantors |
Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 1,677 | $ | 25,119 | $ | 127,118 | $ | 8,197 | $ | | $ | 162,111 | ||||||||||||
Restricted cash |
| | 6,830 | | | 6,830 | ||||||||||||||||||
Accounts receivable, net |
| | 126,391 | 22,179 | (22,648 | ) | 125,922 | |||||||||||||||||
Inventories, net |
| | 62,836 | 158 | (158 | ) | 62,836 | |||||||||||||||||
Other receivables |
1 | 11,793 | 7,581 | 399 | (19,518 | ) | 256 | |||||||||||||||||
Prepaid expenses |
34 | 2 | 8,509 | 384 | (2,897 | ) | 6,032 | |||||||||||||||||
Other current assets |
58,636 | 188,018 | 11,738 | 183,685 | (426,168 | ) | 15,909 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
60,348 | 224,932 | 351,003 | 215,002 | (471,389 | ) | 379,896 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property, plant and equipment, net |
| | 182,583 | 80 | | 182,663 | ||||||||||||||||||
Intangible assets, net |
| | 16,514 | 273 | | 16,787 | ||||||||||||||||||
Long-term prepaid expenses |
| | 10,963 | 66 | (6,239 | ) | 4,790 | |||||||||||||||||
Investment in subsidiaries |
(576,642 | ) | (655,845 | ) | | (481,478 | ) | 1,713,965 | | |||||||||||||||
Long-term intercompany loan |
697,125 | 809,913 | | 660,066 | (2,167,104 | ) | | |||||||||||||||||
Other non-current assets |
| 6,505 | 8,170 | 3,864 | | 18,539 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 180,831 | $ | 385,505 | $ | 569,233 | $ | 397,873 | $ | (930,767 | ) | $ | 602,675 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | | $ | 99,560 | $ | 842 | $ | (22,554 | ) | $ | 77,848 | |||||||||||
Other accounts payable |
13,659 | 1 | 13,115 | 6,195 | (19,518 | ) | 13,452 | |||||||||||||||||
Accrued expenses |
502 | 63,033 | 186,678 | 207,770 | (426,260 | ) | 31,723 | |||||||||||||||||
Current portion of capital lease obligations |
| | 2,852 | | | 2,852 | ||||||||||||||||||
Other current liabilities |
| 1 | 11,544 | 3,117 | (2,898 | ) | 11,764 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
14,161 | 63,035 | 313,749 | 217,924 | (471,230 | ) | 137,639 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term borrowings, net |
| 898,514 | 642,383 | 827,596 | (2,167,104 | ) | 201,389 | |||||||||||||||||
Accrued severance benefits, net |
| | 90,611 | 144 | | 90,755 | ||||||||||||||||||
Other non-current liabilities |
| | 3,894 | 8,567 | (6,239 | ) | 6,222 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
14,161 | 961,549 | 1,050,637 | 1,054,231 | (2,644,573 | ) | 436,005 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Stockholders equity |
||||||||||||||||||||||||
Common stock |
394 | 136,229 | 39,005 | 51,976 | (227,210 | ) | 394 | |||||||||||||||||
Additional paid-in capital |
98,929 | (733,223 | ) | (536,894 | ) | (731,209 | ) | 2,001,326 | 98,929 | |||||||||||||||
Retained earnings |
93,950 | 35,760 | 35,141 | 37,722 | (108,623 | ) | 93,950 | |||||||||||||||||
Treasury stock |
(11,793 | ) | | | | | (11,793 | ) | ||||||||||||||||
Accumulated other comprehensive loss |
(14,810 | ) | (14,810 | ) | (18,656 | ) | (14,847 | ) | 48,313 | (14,810 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total stockholders equity |
166,670 | (576,044 | ) | (481,404 | ) | (656,358 | ) | 1,713,806 | 166,670 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and stockholders equity |
$ | 180,831 | $ | 385,505 | $ | 569,233 | $ | 397,873 | $ | (930,767 | ) | $ | 602,675 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
22
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2012
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 202,760 | $ | 4,791 | $ | (4,917 | ) | $ | 202,634 | |||||||||||
Cost of sales |
| | 139,775 | 349 | (348 | ) | 139,776 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
| | 62,985 | 4,442 | (4,569 | ) | 62,858 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Selling, general and administrative expenses |
1,477 | 9 | 19,102 | 3,054 | (3,549 | ) | 20,093 | |||||||||||||||||
Research and development expenses |
| | 20,540 | 242 | (1,020 | ) | 19,762 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(1,477 | ) | (9 | ) | 23,343 | 1,146 | | 23,003 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other income (expense) |
5,419 | (10,181 | ) | (19,900 | ) | 9,158 | | (15,504 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes, equity in earnings of related equity investment |
3,942 | (10,190 | ) | 3,443 | 10,304 | | 7,499 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income tax expenses (benefits) |
1,498 | (295 | ) | (170 | ) | 2,126 | | 3,159 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before equity in earnings of related investment |
2,444 | (9,895 | ) | 3,613 | 8,178 | | 4,340 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of related investment |
1,896 | 11,739 | | 3,614 | (17,249 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 4,340 | $ | 1,844 | $ | 3,613 | $ | 11,792 | $ | (17,249 | ) | $ | 4,340 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income |
$ | 11,110 | $ | 8,614 | $ | 9,566 | $ | 18,423 | $ | (36,603 | ) | $ | 11,110 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
23
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Statements of Comprehensive Income
For the six months ended June 30, 2012
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 379,771 | $ | 9,615 | $ | (9,750 | ) | $ | 379,636 | |||||||||||
Cost of sales |
| | 266,861 | 601 | (599 | ) | 266,863 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
| | 112,910 | 9,014 | (9,151 | ) | 112,773 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Selling, general and administrative expenses |
2,097 | 53 | 37,112 | 6,140 | (7,100 | ) | 38,302 | |||||||||||||||||
Research and development expenses |
| | 41,112 | 532 | (2,051 | ) | 39,593 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(2,097 | ) | (53 | ) | 34,686 | 2,342 | | 34,878 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other income (expense) |
11,215 | (6,001 | ) | (20,362 | ) | 5,262 | | (9,886 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes, equity in earnings of related equity investment |
9,118 | (6,054 | ) | 14,324 | 7,604 | | 24,992 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income tax expenses (benefits) |
1,613 | (170 | ) | 277 | 3,669 | | 5,389 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before equity in earnings of related investment |
7,505 | (5,884 | ) | 14,047 | 3,935 | | 19,603 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of related investment |
12,098 | 17,844 | | 14,046 | (43,988 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 19,603 | $ | 11,960 | $ | 14,047 | $ | 17,981 | $ | (43,988 | ) | $ | 19,603 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income |
$ | 19,714 | $ | 12,071 | $ | 15,425 | $ | 17,952 | $ | (45,448 | ) | $ | 19,714 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
24
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2011
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 203,812 | $ | 6,131 | $ | (6,264 | ) | $ | 203,679 | |||||||||||
Cost of sales |
| | 137,514 | 538 | (555 | ) | 137,497 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
| | 66,298 | 5,593 | (5,709 | ) | 66,182 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Selling, general and administrative expenses |
659 | 351 | 16,180 | 3,484 | (3,216 | ) | 17,458 | |||||||||||||||||
Research and development expenses |
| | 21,391 | 1,709 | (2,486 | ) | 20,614 | |||||||||||||||||
Restructuring and impairment charges |
| | 799 | 1,676 | | 2,475 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(659 | ) | (351 | ) | 27,928 | (1,276 | ) | (7 | ) | 25,635 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other income (expense) |
1 | 11,284 | 4,400 | (7,720 | ) | | 7,965 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes, equity in earnings of related equity investment |
(658 | ) | 10,933 | 32,328 | (8,996 | ) | (7 | ) | 33,600 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income tax expenses (benefits) |
(18 | ) | | 1,039 | 949 | | 1,970 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before equity in earnings of related investment |
(640 | ) | 10,933 | 31,289 | (9,945 | ) | (7 | ) | 31,630 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity in earnings of related investment |
32,270 | 21,334 | | 31,282 | (84,886 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 31,630 | $ | 32,267 | $ | 31,289 | $ | 21,337 | $ | (84,893 | ) | $ | 31,630 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income |
$ | 17,752 | $ | 18,388 | $ | 16,525 | $ | 7,445 | $ | (42,358 | ) | $ | 17,752 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
25
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Statements of Comprehensive Income
For the six months ended June 30, 2011
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 391,562 | $ | 12,747 | $ | (12,709 | ) | $ | 391,600 | |||||||||||
Cost of sales |
| | 268,959 | 612 | (627 | ) | 268,944 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
| | 122,603 | 12,135 | (12,082 | ) | 122,656 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Selling, general and administrative expenses |
1,296 | 586 | 31,794 | 6,587 | (7,404 | ) | 32,859 | |||||||||||||||||
Research and development expenses |
| | 40,692 | 3,091 | (4,671 | ) | 39,112 | |||||||||||||||||
Restructuring and impairment charges |
| | 799 | 1,676 | | 2,475 | ||||||||||||||||||
IPO incentive |
| | 11,355 | 791 | | 12,146 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(1,296 | ) | (586 | ) | 37,963 | (10 | ) | (7 | ) | 36,064 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other income (expense) |
1 | 32,036 | 10,590 | (20,248 | ) | | 22,379 | |||||||||||||||||
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|
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Income (loss) before income taxes, equity in earnings of related equity investment |
(1,295 | ) | 31,450 | 48,553 | (20,258 | ) | (7 | ) | 58,443 | |||||||||||||||
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|
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Income tax expenses (benefits) |
(18 | ) | | 1,193 | 3,170 | | 4,345 | |||||||||||||||||
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Income (loss) before equity in earnings of related investment |
(1,277 | ) | 31,450 | 47,360 | (23,428 | ) | (7 | ) | 54,098 | |||||||||||||||
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Equity in earnings of related investment |
55,375 | 23,878 | | 47,353 | (126,606 | ) | | |||||||||||||||||
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Net income |
$ | 54,098 | $ | 55,328 | $ | 47,360 | $ | 23,925 | $ | (126,613 | ) | $ | 54,098 | |||||||||||
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Comprehensive income |
$ | 24,551 | $ | 25,779 | $ | 17,964 | $ | (5,640 | ) | $ | (38,103 | ) | $ | 24,551 | ||||||||||
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26
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2012
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Cash flow from operating activities |
||||||||||||||||||||||||
Net income |
$ | 19,603 | $ | 11,960 | $ | 14,047 | $ | 17,981 | $ | (43,988 | ) | $ | 19,603 | |||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
||||||||||||||||||||||||
Depreciation and amortization |
| | 15,308 | 89 | | 15,397 | ||||||||||||||||||
Provision for severance benefits |
| | 10,948 | 27 | | 10,975 | ||||||||||||||||||
Amortization of debt issuance costs and original issue discount |
| 497 | | | | 497 | ||||||||||||||||||
Loss (gain) on foreign currency translation, net |
95 | 6,563 | 449 | (7,052 | ) | | 55 | |||||||||||||||||
Gain on disposal of property, plant and equipment, net |
| | (190 | ) | | | (190 | ) | ||||||||||||||||
Loss on disposal of intangible assets, net |
| | 15 | | | 15 | ||||||||||||||||||
Stock-based compensation |
(103 | ) | | 1,021 | (3 | ) | | 915 | ||||||||||||||||
Equity in earnings of related investment |
(12,098 | ) | (17,844 | ) | | (14,046 | ) | 43,988 | | |||||||||||||||
Other |
| 1 | (348 | ) | 20 | (21 | ) | (348 | ) | |||||||||||||||
Changes in operating assets and liabilities |
||||||||||||||||||||||||
Accounts receivable, net |
| | (8,119 | ) | 142 | (319 | ) | (8,296 | ) | |||||||||||||||
Inventories, net |
| | (11,498 | ) | | | (11,498 | ) | ||||||||||||||||
Other receivables |
1 | (16,935 | ) | 1,425 | 58 | 12,871 | (2,580 | ) | ||||||||||||||||
Other current assets |
(11,894 | ) | (22,816 | ) | 9,255 | (19,310 | ) | 53,616 | 8,851 | |||||||||||||||
Deferred tax assets |
| | | 1,146 | | 1,146 | ||||||||||||||||||
Accounts payable |
| | 14,475 | (368 | ) | 547 | 14,654 | |||||||||||||||||
Other accounts payable |
17,569 | (1 | ) | 9,470 | (4,169 | ) | (13,192 | ) | 9,677 | |||||||||||||||
Accrued expenses |
(30 | ) | 11,308 | 26,898 | 23,237 | (53,523 | ) | 7,890 | ||||||||||||||||
Other current liabilities |
2,607 | | 1,233 | 2,771 | | 6,611 | ||||||||||||||||||
Payment of severance benefits |
| | (4,816 | ) | | | (4,816 | ) | ||||||||||||||||
Other |
(544 | ) | | 2,578 | (4,255 | ) | 225 | (1,996 | ) | |||||||||||||||
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Net cash provided by (used in) operating activities |
15,206 | (27,267 | ) | 82,151 | (3,732 | ) | 204 | 66,562 | ||||||||||||||||
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Cash flows from investing activities |
||||||||||||||||||||||||
Decrease in restricted cash |
| | 1,634 | | | 1,634 | ||||||||||||||||||
Proceeds from disposal of plant, property and equipment |
| | 891 | | | 891 | ||||||||||||||||||
Purchases of plant, property and equipment |
| | (46,707 | ) | (21 | ) | | (46,728 | ) | |||||||||||||||
Payment for intellectual property registration |
| | (565 | ) | | | (565 | ) |
27
MagnaChip Semiconductor Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Unaudited; tabular dollars in thousands, except share data)
MagnaChip Semiconductor Corporation (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Payment for purchase of Dawin, net of cash acquired |
| | (8,642 | ) | | | (8,642 | ) | ||||||||||||||||
Decrease in short-term financial instruments |
| | 173 | | | 173 | ||||||||||||||||||
Collection of guarantee deposits |
| | 42 | 28 | | 70 | ||||||||||||||||||
Payment of guarantee deposits |
| | (175 | ) | (1 | ) | | (176 | ) | |||||||||||||||
Other |
| 17,635 | (40 | ) | 16,922 | (34,570 | ) | (53 | ) | |||||||||||||||
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Net cash used in investing activities |
| 17,635 | (53,389 | ) | 16,928 | (34,570 | ) | (53,396 | ) | |||||||||||||||
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Cash flow from financing activities |
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Proceeds from issuance of common stock |
183 | | | | | 183 | ||||||||||||||||||
Repayment of long-term intercompany borrowings |
| | (17,215 | ) | (17,635 | ) | 34,850 | | ||||||||||||||||
Repayment of obligations under capital lease |
| | (2,968 | ) | | | (2,968 | ) | ||||||||||||||||
Acquisition of treasury stock |
(16,935 | ) | | | |