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MagnaChip Reports Third Quarter 2012 Financial Results

November 1, 2012

SEOUL, South Korea and CUPERTINO, Calif., Nov. 1, 2012 /PRNewswire/ — MagnaChip Semiconductor Corporation (“MagnaChip”) (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the third quarter ended September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120305/NY61184LOGO )

Revenue for the third quarter of 2012 was $221.9 million, a 9.5% increase compared to $202.6 million for the second quarter of 2012, and a 10.7% increase compared to $200.4 million for the third quarter of 2011.

Gross margin was $76.4 million or 34.5%, as a percent of revenue, for the third quarter of 2012. This compares to gross margin of $62.9 million or 31.0% for the second quarter of 2012 and $60.1 million or 30.0% for the third quarter of 2011.

Net income, on a GAAP basis, for the third quarter of 2012 totaled $48.4 million or $1.30 per diluted share. This compares to net income of $4.3 million or $0.12 per diluted share for the second quarter of 2012 and net loss of $56.0 million or $1.43 per diluted share for the third quarter of 2011. Net income was impacted primarily by a foreign currency gain of $21.8 million during the quarter which was primarily related to non-cash foreign currency translation for intercompany balances that were denominated in U.S. dollars.

“Our sequential revenue growth of nearly 10% put us at the high end of the semiconductor group in terms of top line performance with smartphone and tablet PC demand remaining strong going into the fourth quarter. This smartphone and tablet PC demand is well diversified with MagnaChip supplying about 50 unique products to 26 different customers,” said Sang Park, MagnaChip Chairman and CEO. “In addition to strong revenue growth, our Q3 gross margin was up 350 basis points sequentially and up 630 basis points since Q1 due to higher fab utilization and improved product mix shift.”

Adjusted net income, a non-GAAP measurement, for the third quarter of 2012 totaled $30.4 million or $0.81 per diluted share compared to $17.9 million or $0.48 per diluted share for the second quarter of 2012 and $18.2 million or $0.46 per diluted share for the third quarter of 2011.

Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a more meaningful understanding of the factors and trends affecting MagnaChip’s business and operations. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income or as a better indicator of our operating performance than measures that are presented in accordance with GAAP.

Combined cash balances (cash and cash equivalents plus restricted cash) totaled $165.8 million at the end of the third quarter of 2012, an increase of $4.8 million from the end of the prior quarter. Cash provided from operations totaled approximately $23.0 million for the third quarter of 2012.

    Revenue by
     Segment
    In thousands
     of US
     dollars       Three Months Ended
                   September 30, 2012      June 30, 2012       September 30, 2011
    Semiconductor                 $117,978             $91,318                $81,571
     Manufacturing
     Services
    Display
     Solutions                      69,415              76,784                 91,767
    Power
     Solutions                      33,849              33,699                 26,358
    Other                              630                 833                    709

    Total
     Revenue                      $221,872            $202,634               $200,405

Third Quarter and Recent Company Highlights

  • Seventh Consecutive Quarter of Achieving Financial Guidance.
  • Expanded Gross Margins to $76.4 million or 34.5%.
  • Achieved GAAP EPS of $1.30 Per Diluted Share and Adjusted EPS of $0.81 Per Diluted Share.
  • Repurchased 444 Thousand Shares under MagnaChip’s 2011 Stock Repurchase Program.

Business Outlook
For the fourth quarter of 2012, MagnaChip expects:

  • Revenue will be in the range of $213 million to $222 million.
  • Gross margin will be 33.5% to 34.5%.

Non-GAAP Metrics
Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense, restructuring and impairment charges, stock-based compensation expense, foreign currency loss (gain), net, derivative valuation loss (gain), net, secondary offering and others, and loss on early extinguishment of senior notes. Adjusted net income (loss) excludes charges related to restructuring and impairment charges, stock-based compensation expense, amortization of intangible assets associated with continuing operations, foreign currency loss (gain), net, derivative valuation loss (gain), net, secondary offering and others, and loss on early extinguishment of senior notes. A reconciliation of GAAP results to non-GAAP results is included following the financial statements.

About MagnaChip Semiconductor Corporation
Headquartered in South Korea, MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. MagnaChip believes it has one of the broadest and deepest ranges of analog and mixed-signal semiconductor platforms in the industry, supported by its 30-year operating history, a large portfolio of registered and pending patents, and extensive engineering and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through, MagnaChip’s website is not a part of, and is not incorporated into, this release.

Safe Harbor for Forward-Looking Statements
Information in this release regarding MagnaChip’s forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about our ability to capitalize on improving market dynamics and future operating and financial performance including fourth quarter 2012 revenue and gross margin. All forward-looking statements included in this release are based upon information available to MagnaChip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new products and technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for semiconductor products, industry and/or company overcapacity, effective and cost efficient utilization of manufacturing capacity, financial stability in foreign markets and the impact of foreign exchange rates, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, compliance with U.S. and international trade and export laws and regulations by us and our distributors, and other risks detailed from time to time in MagnaChip’s filings with the SEC, including our Form 10-K filed on March 8, 2012 and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. MagnaChip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

    CONTACTS:

    In the United States:          In Korea:
    Robert Pursel                  Chankeun Park
    Director of Investor Relations Senior Manager, Public Relations
    Tel. +1-408-625-1262           Tel. +82-2-6903-3195
    robert.pursel@magnachip.com    chankeun.park@magnachip.com

                                                 MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                                   (In thousands of US dollars, except share data)
                                                                     (Unaudited)

                                                                                            Three Months Ended
                                                                                            ------------------
                                                                       September 30,                  June 30,  September 30,
                                                                                2012                       2012          2011
                                                                                ----                       ----          ----
    Net sales                                                                              $221,872                  $202,634    $200,405
    Cost of sales                                                                           145,432                   139,776     140,284
                                                                                            -------                   -------     -------

    Gross profit                                                                             76,440                    62,858      60,121
                                                                                             ------                    ------      ------
    Gross profit %                                                                            34.5%                     31.0%       30.0%

    Selling, general and administrative expenses                                             21,388                    20,093      17,881
    Research and development expenses                                                        19,470                    19,762      19,003
    Restructuring and impairment charges                                                          -                         -       1,621

    Operating income                                                                         35,582                    23,003      21,616

    Other income (expense)
    Interest expense, net                                                                    (5,746)                   (5,619)     (5,860)
    Foreign currency gain (loss), net                                                        21,782                   (10,586)    (68,058)
    Loss on early extinguishment of senior notes                                                  -                         -      (1,357)
    Other                                                                                       695                       701        (558)
                                                                                                ---                       ---        ----

                                                                                             16,731                   (15,504)    (75,833)
                                                                                             ------                   -------     -------

    Income (loss) before income taxes                                                        52,313                     7,499     (54,217)
                                                                                             ------                     -----     -------

    Income tax expense                                                                        3,901                     3,159       1,793
                                                                                              -----                     -----       -----

    Net income (loss)                                                                       $48,412                    $4,340    $(56,010)
                                                                                            =======                    ======    ========

    Earnings (loss) per common share :
            - Basic                                                                           $1.34                     $0.12      $(1.43)
            - Diluted                                                                         $1.30                     $0.12      $(1.43)
                                                                                              =====                     =====      ======
    Weighted average number of shares-Basic                                              36,199,655                36,713,569  39,064,071
    Weighted average number of shares-Diluted                                            37,324,787                37,566,699  39,064,071

                                                          MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                 RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NETINCOME
                                                            (In thousands of US dollars, except share data)
                                                                              (Unaudited)

                                                                                                     Three Months Ended
                                                                                                     ------------------
                                                                                   September 30,                June 30, September 30,
                                                                                            2012                    2012          2011
    Net income (loss)                                                                                  $48,412                  $4,340    $(56,010)
    Adjustments:
    Depreciation and amortization                                                                        8,443                   7,923      13,053
    Interest expense, net                                                                                5,746                   5,619       5,861
    Income tax expense                                                                                   3,901                   3,159       1,793
    Restructuring and impairment charges                                                                     -                       -       1,621
    Stock-based compensation expense                                                                       535                     457         552
    Foreign currency loss (gain), net                                                                  (21,782)                 10,586      68,058
    Derivative valuation loss (gain), net                                                                 (695)                   (701)        558
    Secondary offering and others                                                                        2,119                   1,216           -
    Loss on early extinguishment of senior notes                                                             -                       -       1,357
    Adjusted EBITDA                                                                                    $46,679                 $32,599     $36,843
                                                                                                       =======                 =======     =======
    Adjusted EBITDA per common share:
    - Diluted                                                                                            $1.25                   $0.87       $0.92
    Weighted average number of shares - Diluted                                                     37,324,787              37,566,699  39,973,691

    Net income (loss)                                                                                  $48,412                  $4,340    $(56,010)
    Adjustments:
    Restructuring and impairment charges                                                                     -                       -       1,621
    Stock-based compensation expense                                                                       535                     457         552
    Amortization of intangibles                                                                          1,829                   1,980       2,092
    Foreign currency loss (gain), net                                                                  (21,782)                 10,586      68,058
    Derivative valuation loss (gain), net                                                                 (695)                   (701)        558
    Secondary offering and others                                                                        2,119                   1,216           -
    Loss on early extinguishment of senior notes                                                             -                       -       1,357
                                                                                                           ---                     ---       -----
    Adjusted net income                                                                                $30,418                 $17,878     $18,228
                                                                                                       =======                 =======     =======
    Adjusted net income per common share:
    - Diluted                                                                                            $0.81                   $0.48       $0.46
    Weighted average number of shares - Diluted                                                     37,324,787              37,566,699  39,973,691

We define Adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense, (iv) restructuring and impairment charges, (v) stock-based compensation expense, (vi) foreign currency loss (gain), net, (vii) derivative valuation loss (gain), net, (viii) secondary offering and others, and (ix) loss on early extinguishment of senior notes.

We present Adjusted Net Income as a further supplemental measure of our performance. We prepare Adjusted Net Income by adjusting net income to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income as net income adjusted to exclude (i) restructuring and impairment charges (ii) stock-based compensation expense, (iii) amortization of intangibles, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, (vi) secondary offering and others, and (vii) loss on early extinguishment of senior notes.

                                                                             MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                          CONSOLIDATED BALANCE SHEETS
                                                                                (In thousands of US dollars, except share data)
                                                                                                  (Unaudited)

                                                                                                                                  September 30,           December 31,
                                                                                                                                           2012                   2011
                                                                                                                                           ----                   ----
    Assets
    Current assets
    Cash and cash equivalents                                                                                                                   $165,658                     $162,111
    Restricted cash                                                                                                                                  136               6,830
    Accounts receivable, net                                                                                                                     148,537                      125,922
    Inventories, net                                                                                                                              75,020                       62,836
    Other receivables                                                                                                                              2,097                          256
    Prepaid expenses                                                                                                                               9,120                        6,032
    Other current assets                                                                                                                          19,270                       15,909
                                                                                                                                                  ------                       ------

    Total current assets                                                                                                                         419,838                      379,896
                                                                                                                                                 -------                      -------

    Property, plant and equipment, net                                                                                                           229,632                      182,663
    Intangible assets, net                                                                                                                        16,684                       16,787
    Long-term prepaid expenses                                                                                                                     9,575                        4,790
    Other non-current assets                                                                                                                      17,044                       18,539
                                                                                                                                                  ------                       ------

    Total assets                                                                                                                                $692,773                     $602,675
                                                                                                                                                ========                     ========

    Liabilities and Stockholders' Equity
    Current liabilities
    Accounts payable                                                                                                                             $97,386                      $77,848
    Other accounts payable                                                                                                                        19,049                       13,452
    Accrued expenses                                                                                                                              40,483                       31,723
    Current portion of capital lease obligations                                                                                                       -                        2,852
    Derivative liabilities                                                                                                                         1,818                        9,757
    Other current liabilities                                                                                                                      8,460                        2,007
                                                                                                                                                   -----                        -----

    Total current liabilities                                                                                                                    167,196                      137,639

    Long-term borrowings, net                                                                                                                    201,586                      201,389
    Accrued severance benefits, net                                                                                                              105,051                       90,755
    Other non-current liabilities                                                                                                                 11,556                        6,222
                                                                                                                                                  ------                        -----

    Total liabilities                                                                                                                            485,389                      436,005
                                                                                                                                                 -------                      -------

    Stockholders' equity
    Common stock, $0.01 par value, 150,000,000 shares authorized, 39,513,351                                                                         395                          394
       shares issued and 35,954,925 outstanding at September 30, 2012 and
       39,439,115 shares issued and 37,907,575 outstanding at December 31,
       2011
    Additional paid-in capital                                                                                                                   100,834                       98,929
    Retained earnings                                                                                                                            161,965                       93,950
    Treasury stock, 3,558,426 shares at September 30, 2012                                                                                       (34,730)                     (11,793)
    Accumulated other comprehensive loss                                                                                                         (21,080)                     (14,810)
                                                                                                                                                 -------                      -------

    Total stockholders' equity                                                                                                                   207,384                      166,670
                                                                                                                                                 =======                      =======

    Total liabilities and stockholders' equity                                                                                                  $692,773                     $602,675
                                                                                                                                                ========                     ========

                                                                                 MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                             (In thousands of US dollars)
                                                                                                      (Unaudited)

                                                                                                                                      Three Months                       Nine Months
                                                                                                                                          Ended                              Ended
                                                                                                                                          -----                             -----
                                                                                                                                      September 30,           September 30,              September 30,
                                                                                                                                               2012                     2012                    2011
                                                                                                                                               ----                     ----                    ----
    Cash flows from operating activities
    Net income (loss)                                                                                                                                $48,412                    $68,015                          $(1,912)
    Adjustments to reconcile net income (loss) to net cash provided by operating
       activities
    Depreciation and amortization                                                                                                                      8,443                     23,840                           42,368
    Provision for severance benefits                                                                                                                   5,804                     16,779                           13,137
    Amortization of debt issuance costs and original issue discount                                                                                      256                        753                              728
    Loss (gain) on foreign currency translation, net                                                                                                 (25,359)                   (25,304)                          33,220
    Loss (gain) on disposal of property, plant and equipment, net                                                                                         16                       (174)                             (15)
    Loss on disposal of intangible assets, net                                                                                                            11                         26                               17
    Restructuring and impairment charges                                                                                                          -                        -                             4,096
    Stock-based compensation                                                                                                                             535                      1,450                            1,798
    Loss on early extinguishment of senior notes                                                                                                  -                        -                             5,460
    Other                                                                                                                                                 16                       (332)                             651
    Changes in operating assets and liabilities
    Accounts receivable                                                                                                                               (9,872)                   (18,168)                          (4,400)
    Inventories                                                                                                                                        2,972                     (8,526)                          (4,400)
    Other receivables                                                                                                                                    793                     (1,787)                             836
    Other current assets                                                                                                                              (9,513)                      (662)                          (3,196)
    Deferred tax assets                                                                                                                                  368                      1,514                            1,483
    Accounts payable                                                                                                                                   2,818                     17,472                           15,072
    Other accounts payable                                                                                                                           (10,377)                      (700)                           7,157
    Accrued expenses                                                                                                                                   5,871                     13,761                          (18,278)
    Other current liabilities                                                                                                                          2,839                      9,450                           (1,209)
    Payment of severance benefits                                                                                                                       (753)                    (5,569)                          (6,549)
    Other                                                                                                                                               (243)                    (2,239)                             141
                                                                                                                                                        ----                     ------                              ---

    Net cash provided by operating activities                                                                                                         23,037                     89,599                           86,205
                                                                                                                                                      ------                     ------                           ------

    Cash flows from investing activities
    Decrease (increase) in restricted cash                                                                                                             5,140                      6,774                           (9,711)
    Proceeds from disposal of plant, property and equipment                                                                                               46                        937                               29
    Purchase of plant, property and equipment                                                                                                        (10,017)                   (56,745)                         (42,945)
    Payment for intellectual property registration                                                                                                      (187)                      (752)                            (521)
    Payment for acquisition                                                                                                                       -                   (8,642)                                -
    Decrease in short-term financial instruments                                                                                                  -                      173                                 -
    Collection of guarantee deposits                                                                                                                       2                         72                              984
    Payment of guarantee deposits                                                                                                                       (135)                      (311)                          (2,489)
    Other                                                                                                                                                  3                        (50)                            (625)
                                                                                                                                                         ---                        ---                             ----

    Net cash used in investing activities                                                                                                             (5,148)                   (58,544)                         (55,278)
                                                                                                                                                      ------                    -------                          -------

    Cash flows from financing activities
    Proceeds from issuance of common stock                                                                                                               253                        436                            8,835
    Repurchase of senior notes                                                                                                                    -                        -                           (50,307)
    Repayment of obligations under capital lease                                                                                                  -                   (2,968)                           (4,831)
    Acquisition of treasury stock                                                                                                                     (6,002)                   (22,937)                               -
                                                                                                                                                      ------

    Net cash used in financing activities                                                                                                             (5,749)                   (25,469)                         (46,303)
    Effect of exchange rates on cash and cash equivalents                                                                                             (2,246)                    (2,039)                           2,672
                                                                                                                                                      ------                     ------                            -----

    Net increase (decrease) in cash and cash equivalents                                                                                               9,894                      3,547                          (12,704)
                                                                                                                                                       -----                      -----                          -------

    Cash and cash equivalents
    Beginning of the period                                                                                                                          155,764                    162,111                          172,172
                                                                                                                                                     -------                    -------                          -------

    End of the period                                                                                                                               $165,658                   $165,658                         $159,468
                                                                                                                                                    ========                   ========                         ========

SOURCE MagnaChip Semiconductor Corporation


Source: PR Newswire