Attached files
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| 8-K - FORM 8-K - MAGNACHIP SEMICONDUCTOR Corp | d8k.htm |
Exhibit 99.1
MagnaChip Reports Solid Third Quarter 2010
Financial Results
SEOUL, South Korea and CUPERTINO, Calif., October 28, 2010 — MagnaChip Semiconductor LLC (“MagnaChip Semiconductor”) today announced financial results for the quarter ended September 30, 2010.
Revenue for the third quarter of 2010 was $209.4 million, a 7.6% increase compared to $194.7 million for the second quarter of 2010, and a 33.7% increase compared to $156.6 million for the third quarter ended September 27, 2009.
Gross profit was $69.3 million or 33.1%, as a percent of revenue, for the third quarter of 2010. This compares to gross profit of $64.5 million or 33.1% for the second quarter of 2010 and $52.2 million or 33.3% for the year-ago quarter.
“We again delivered solid financial results with sequential revenue growth of nearly 8% this quarter driven by our Manufacturing Services and Power Solutions segments,” said Sang Park, MagnaChip Semiconductor’s Chairman and Chief Executive Officer. “While recent industry announcements indicate some uncertainty regarding the state of the global semiconductor market recovery, MagnaChip continues to be well-positioned for profitable growth with a strong product portfolio and pipeline of new products during this short-term inventory correction.”
Operating expense was $39.8 million or 19.0% of revenue for the third quarter of 2010. This compares to $36.8 million or 18.9% of revenue for the second quarter of 2010 and $34.9 million or 22.3% of revenue for the third quarter of 2009.
Operating income was $29.6 million for the third quarter of 2010 or 14.1% of revenue. This compares to operating income of $27.8 million or 14.3% of revenue for the second quarter of 2010 and $17.3 million or 11.0% of revenue for the third quarter of 2009.
Net income, on a GAAP basis, for the third quarter of 2010 totaled $61.5 million or $0.20 per diluted common unit. This compares to net loss of $30.7 million or $0.10 per diluted common unit for the second quarter of 2010 and net income of $62.4 million or $1.18 per diluted common unit for the third quarter of 2009. Net income, for the third
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quarter of 2010, was impacted primarily by a foreign currency gain of $41.4 million compared to a foreign currency loss of $48.3 million for the second quarter of 2010 and a foreign currency gain of $45.4 million for third quarter of 2009, respectively. The net foreign currency exposure is primarily related to non-cash translation gains or losses for intercompany borrowings at our Korean subsidiary that are denominated in U.S. dollars.
Adjusted net income, a non-GAAP measurement, for the third quarter of 2010 totaled $26.2 million compared to $25.7 million for the second quarter of 2010, and $20.4 million for the third quarter of 2009.
Adjusted EBITDA, a non-GAAP measurement, for the third quarter of 2010 totaled $45.7 million compared to $43.8 million for the second quarter of 2010, and $34.5 million for the third quarter of 2009.
Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a more meaningful understanding of the factors and trends affecting MagnaChip Semiconductor’s business and operations. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income or as a better indicator of our operating performance than measures that are presented in accordance with GAAP.
Combined cash balances (cash and cash equivalents plus short-term investments) totaled $161.4 million at the end of the third quarter of 2010, an increase of $20.1 million from the end of the prior quarter. Cash provided from operations totaled approximately $30.7 million for the third quarter of 2010. This compares to $36.0 million for the second quarter of 2010 and $4.6 million for the third quarter of 2009.
Revenue by Segment
In thousands of US dollars
| Three Months Ended
|
||||||||||||
| Successor
|
Predecessor
|
|||||||||||
| 3Q 10
|
2Q 10
|
3Q 09
|
||||||||||
| Semiconductor Manufacturing Services |
$ | 113,171 | $ | 101,564 | $ | 76,354 | ||||||
| Display Solutions |
77,989 | 80,584 | 75,588 | |||||||||
| Power Solutions |
17,801 | 12,040 | 3,812 | |||||||||
| Other |
487 | 512 | 873 | |||||||||
| Total Revenue |
$ | 209,448 | $ | 194,700 | $ | 156,627 | ||||||
Non-GAAP Metrics
Adjusted EBITDA excludes charges related to depreciation and amortization associated with continuing operations, interest expense, income tax expense (benefit), restructuring and impairment activities, other restructuring charges, reorganization items, inventory step-up, equity-based compensation, foreign currency loss (gain) and derivative valuation loss (gain). Adjusted net income (loss) excludes charges related to restructuring and impairment, other restructuring charges, reorganization items, inventory step-up equity-based compensation, amortization of intangible assets associated with continuing operations, foreign currency loss (gain) and derivative valuation loss (gain). A reconciliation of GAAP results to non-GAAP results is included following the financial statements below.
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Conference Call
MagnaChip Semiconductor will host a teleconference at 11 a.m. PDT today to discuss the third quarter 2010 financial results. The conference call will be webcast live and can also be monitored by dialing 1-866-776-2061 in the U.S. or 1-706-679-0298 for all other locations. The conference ID number is 17066059 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 11 a.m. PDT start time to ensure a timely connection. The webcast can be accessed at www.magnachip.com and will be archived for one year.
A replay of the conference call will be available the same day and will run for 72 hours. The replay access numbers are 1-800-642-1687 and 1-706-645-9291. The access code is 17066059.
About MagnaChip Semiconductor
Headquartered in South Korea, MagnaChip Semiconductor is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high volume consumer applications. MagnaChip Semiconductor believes it has one of the broadest and deepest range of analog and mixed-signal semiconductor platforms in the industry, supported by its 30-year operating history, a large portfolio of registered and pending patents and extensive engineering and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through, MagnaChip Semiconductor’s website is not a part of, and is not incorporated into, this release.
Safe Harbor for Forward-Looking Statements
Information in this release regarding MagnaChip Semiconductor’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 2010 revenues. All forward-looking statements included in this release are based upon information available to MagnaChip Semiconductor as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new products and technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for semiconductor products, industry and/or company overcapacity, effective and cost efficient utilization of manufacturing capacity, financial stability in foreign markets and the impact of foreign exchange rates, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, compliance with U.S. and international trade and export laws and regulations by us and our distributors, and other risks detailed from time to time in MagnaChip Semiconductor’s filings with the SEC, including our Form 10-Q filed on September 3, 2010, and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. MagnaChip Semiconductor 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.
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| CONTACTS: | ||
| In the United States: Robert Pursel Director of Investor Relations Tel. 408-625-1262 robert.pursel@magnachip.com |
In Korea: Chankeun Park Senior Manager, Public Relations Tel. +82-3-6903-3195 chankeun.park@magnachip.com | |
# # #
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MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US dollars, except unit data)
(Unaudited)
| Three Months Ended | ||||||||||||
| Successor | Predecessor | |||||||||||
| September 30, 2010 |
June
30, 2010 |
September 27, 2009 |
||||||||||
| Net sales |
$ | 209,448 | $ | 194,700 | $ | 156,627 | ||||||
| Cost of sales |
140,133 | 130,166 | 104,465 | |||||||||
| Gross profit |
69,315 | 64,534 | 52,162 | |||||||||
| Gross profit % |
33.1 | % | 33.1 | % | 33.3 | % | ||||||
| Selling, general and administrative expenses |
16,202 | 15,964 | 17,175 | |||||||||
| Research and development expenses |
23,119 | 20,543 | 17,704 | |||||||||
| Restructuring and impairment charges |
442 | 267 | — | |||||||||
| Operating income from continuing operations |
29,552 | 27,760 | 17,283 | |||||||||
| Other income (expenses) |
||||||||||||
| Interest expense, net |
(7,312 | ) | (6,557 | ) | (2,642 | ) | ||||||
| Foreign currency gain (loss), net |
41,400 | (48,273 | ) | 45,449 | ||||||||
| Reorganization items, net |
— | — | (4,135 | ) | ||||||||
| Others |
312 | (950 | ) | — | ||||||||
| 34,400 | (55,780 | ) | 38,672 | |||||||||
| Income (loss) from continuing operations before income taxes |
63,952 | (28,020 | ) | 55,955 | ||||||||
| Income tax expenses |
2,457 | 2,727 | 2,434 | |||||||||
| Income (loss) from continuing operations |
61,495 | (30,747 | ) | 53,521 | ||||||||
| Income from discontinued operations, net of taxes |
— | — | 8,916 | |||||||||
| Net income (loss) |
$ | 61,495 | $ | (30,747 | ) | $ | 62,437 | |||||
| Income (loss) from continuing operations attributable to common units |
$ | 61,495 | $ | (30,747 | ) | $ | 53,521 | |||||
| Net income (loss) attributable to common units |
$ | 61,495 | $ | (30,747 | ) | $ | 62,437 | |||||
| Earnings (loss) per common unit from continuing operations—Basic and diluted |
$ | 0.20 | $ | (0.10 | ) | $ | 1.01 | |||||
| Earnings (loss) per common unit from discontinued operations—Basic and diluted |
$ | — | $ | — | $ | 0.17 | ||||||
| Earnings (loss) per common unit—Basic and diluted |
$ | 0.20 | $ | (0.10 | ) | $ | 1.18 | |||||
| Weighted average number of units—Basic |
302,558,556 | 302,558,556 | 52,923,483 | |||||||||
| Weighted average number of units—Diluted |
313,604,679 | 302,558,556 | 52,923,483 | |||||||||
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MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA AND ADJUSTED NET INCOME (LOSS)
(In thousands of US dollars, except unit data)
(Unaudited)
| Three Months Ended | ||||||||||||||||
| Successor | Predecessor | |||||||||||||||
| September 30, 2010 |
June 30, 2010 |
September 27, 2009 |
||||||||||||||
| Net income (loss) |
$ | 61,495 | $ | (30,747 | ) | $ | 62,437 | |||||||||
| Less: Income from discontinued operations, net of taxes |
— | — | 8,916 | |||||||||||||
| Income (loss) from continuing operations |
61,495 | (30,747 | ) | 53,521 | ||||||||||||
| Adjustments: |
||||||||||||||||
| Depreciation and amortization associated with continuing operations |
14,347 | 14,508 | 11,887 | |||||||||||||
| Interest expense, net |
7,312 | 6,557 | 2,642 | |||||||||||||
| Income tax expenses |
2,457 | 2,727 | 2,434 | |||||||||||||
| Restructuring and impairment charges |
442 | 267 | — | |||||||||||||
| Other restructuring charges |
— | — | 5,306 | |||||||||||||
| Reorganization items, net |
— | — | 4,135 | |||||||||||||
| Equity-based compensation expense |
1,320 | 1,279 | 51 | |||||||||||||
| Foreign currency (gain) loss, net |
(41,400 | ) | 48,273 | (45,449 | ) | |||||||||||
| Derivative valuation (gain) loss, net |
(312 | ) | 950 | — | ||||||||||||
| Adjusted EBITDA |
$ | 45,661 | $ | 43,814 | $ | 34,527 | ||||||||||
| Adjusted EBITDA per Common Unit: |
||||||||||||||||
| - Basic and diluted |
0.15 | 0.14 | 0.65 | |||||||||||||
| Net income (loss) |
$ | 61,495 | $ | (30,747 | ) | $ | 62,437 | |||||||||
| Less: Income from discontinued operations, net of taxes |
— | — | 8,916 | |||||||||||||
| Income (loss) from continuing operations |
61,495 | $ | (30,747 | ) | 53,521 | |||||||||||
| Adjustments: |
||||||||||||||||
| Restructuring and impairment charges |
442 | 267 | — | |||||||||||||
| Other restructuring charges |
— | — | 5,306 | |||||||||||||
| Reorganization items, net |
— | — | 4,135 | |||||||||||||
| Equity based compensation expense |
1,320 | 1,279 | 51 | |||||||||||||
| Amortization of intangibles associated with continuing operations |
4,681 | 5,718 | 2,817 | |||||||||||||
| Foreign currency (gain) loss, net |
(41,400 | ) | 48,273 | (45,449 | ) | |||||||||||
| Derivative valuation (gain) loss, net |
(312 | ) | 950 | — | ||||||||||||
| Adjusted Net Income |
$ | 26,226 | $ | 25,740 | $ | 20,381 | ||||||||||
| Adjusted Net Income per Common Unit: |
||||||||||||||||
| - Basic |
$ | 0.09 | $ | 0.09 | $ | 0.39 | ||||||||||
| - Diluted |
0.08 | 0.08 | 0.39 | |||||||||||||
We define Adjusted EBITDA as net income (loss) less income (loss) from discontinued operations, net of taxes, adjusted to exclude (i) depreciation and amortization associated with continuing operations, (ii) interest expense, net, (iii) income tax expense, (iv) restructuring and impairment charges, (v) other restructuring charges, (vi) abandoned IPO expenses, (vii) subcontractor claim settlement, (viii) reorganization items, net, (ix) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (x) equity-based compensation expense, (xi) foreign currency gain (loss), net, and (xii) derivative valuation loss(gain), net.
We present Adjusted Net Income as a further supplemental measure of our performance. We prepare Adjusted Net Income by adjusting net income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance.
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MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except unit data)
(Unaudited)
| Successor | ||||||||
| September 30, 2010 |
December 31, 2009 |
|||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 161,429 | $ | 64,925 | ||||
| Accounts receivable, net |
136,945 | 74,233 | ||||||
| Inventories, net |
65,029 | 63,407 | ||||||
| Other receivables |
4,476 | 3,433 | ||||||
| Prepaid expenses |
10,375 | 12,625 | ||||||
| Other current assets |
17,327 | 3,433 | ||||||
| Total current assets |
395,581 | 222,056 | ||||||
| Property, plant and equipment, net |
175,393 | 156,337 | ||||||
| Intangible assets, net |
31,500 | 50,158 | ||||||
| Long-term prepaid expenses |
9,685 | 10,542 | ||||||
| Other non-current assets |
22,135 | 14,238 | ||||||
| Total assets |
$ | 634,294 | $ | 453,331 | ||||
| Liabilities and Unitholders’ Equity |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 71,958 | $ | 59,705 | ||||
| Other accounts payable |
12,987 | 7,190 | ||||||
| Accrued expenses |
48,012 | 22,114 | ||||||
| Current portion of long-term debt |
— | 618 | ||||||
| Obligation under capital lease |
5,222 | — | ||||||
| Other current liabilities |
5,235 | 3,937 | ||||||
| Total current liabilities |
143,414 | 93,564 | ||||||
| Long-term borrowings |
246,814 | 61,132 | ||||||
| Obligation under capital lease |
4,270 | — | ||||||
| Accrued severance benefits, net |
84,943 | 72,409 | ||||||
| Other non-current liabilities |
7,748 | 10,536 | ||||||
| Total liabilities |
487,189 | 237,641 | ||||||
| Commitments and contingencies |
||||||||
| Unitholders’ equity |
||||||||
| Common units, no par value, 375,000,000 units authorized, 307,215,516 and |
55,453 | 55,135 | ||||||
| Additional paid-in capital |
39,887 | 168,700 | ||||||
| Retained earnings (accumulated deficit) |
59,886 | (1,963 | ) | |||||
| Accumulated other comprehensive loss |
(8,121 | ) | (6,182 | ) | ||||
| Total unitholders’ equity |
147,105 | 215,690 | ||||||
| Total liabilities and unitholders’ equity |
$ | 634,294 | $ | 453,331 | ||||
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MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)
| Nine Months Ended | ||||||||||||
| Successor | Predecessor | |||||||||||
| September 30, 2010 |
September 27, 2009 |
|||||||||||
| Cash flows from operating activities |
||||||||||||
| Net income |
$ | 61,849 | $ | 20,357 | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities |
||||||||||||
| Depreciation and amortization |
44,332 | 34,608 | ||||||||||
| Provision for severance benefits |
15,123 | 7,831 | ||||||||||
| Amortization of debt issuance costs |
687 | 756 | ||||||||||
| Gain on foreign currency translation, net |
(16,704 | ) | (36,182 | ) | ||||||||
| Loss (gain) on disposal of property, plant and equipment, net |
(7 | ) | 84 | |||||||||
| Loss (gain) on disposal of intangible assets, net |
9 | (9,139 | ) | |||||||||
| Restructuring and impairment charges |
1,045 | — | ||||||||||
| Unit-based compensation |
4,072 | 219 | ||||||||||
| Cash used for reorganization items |
1,573 | 2 | ||||||||||
| Noncash reorganization items |
— | 4,473 | ||||||||||
| Other |
951 | 1,997 | ||||||||||
| Changes in operating assets and liabilities |
||||||||||||
| Accounts receivable |
(61,771 | ) | (17,961 | ) | ||||||||
| Inventories |
193 | (1,878 | ) | |||||||||
| Other receivables |
(1,229 | ) | (455 | ) | ||||||||
| Deferred tax assets |
1,133 | 1,874 | ||||||||||
| Accounts payable |
10,400 | 6,686 | ||||||||||
| Other accounts payable |
6,332 | (11,534 | ) | |||||||||
| Accrued expenses |
22,094 | 27,550 | ||||||||||
| Long term other payable |
(1,606 | ) | 454 | |||||||||
| Other current assets |
(221 | ) | 4,873 | |||||||||
| Other current liabilities |
516 | 60 | ||||||||||
| Payment of severance benefits |
(4,707 | ) | (4,085 | ) | ||||||||
| Other |
(864 | ) | (476 | ) | ||||||||
| Net cash provided by operating activities before reorganization items |
83,200 | 30,114 | ||||||||||
| Cash used for reorganization items |
(1,573 | ) | (2 | ) | ||||||||
| Net cash provided by operating activities |
81,627 | 30,112 | ||||||||||
| Cash flows from investing activities |
||||||||||||
| Proceeds from disposal of plant, property and equipment |
10 | 299 | ||||||||||
| Proceeds from disposal of intangible assets |
— | 9,283 | ||||||||||
| Purchase of plant, property and equipment |
(29,739 | ) | (7,270 | ) | ||||||||
| Payment for intellectual property registration |
(437 | ) | (317 | ) | ||||||||
| Increase in restricted cash |
— | (34,067 | ) | |||||||||
| Decrease (increase) in short-term financial instruments |
329 | (326 | ) | |||||||||
| Decrease in guarantee deposits |
1,011 | 632 | ||||||||||
| Other |
(807 | ) | (25 | ) | ||||||||
| Net cash used in investing activities |
(29,633 | ) | (31,791 | ) | ||||||||
| Cash flows from financing activities |
||||||||||||
| Proceeds from issuance of senior notes |
246,685 | — | ||||||||||
| Debt issuance costs paid |
(8,313 | ) | ||||||||||
| Repayment of long-term debt |
(61,750 | ) | — | |||||||||
| Repayment of obligation under capital lease |
(1,812 | ) | ||||||||||
| Distribution to unitholders |
(130,697 | ) | — | |||||||||
| Net cash provided by financing activities |
44,113 | — | ||||||||||
| Effect of exchange rates on cash and cash equivalents |
397 | 3,047 | ||||||||||
| Net increase in cash and cash equivalents |
96,504 | 1,368 | ||||||||||
| Cash and cash equivalents |
||||||||||||
| Beginning of the period |
64,925 | 4,037 | ||||||||||
| End of the period |
$ | 161,429 | $ | 5,405 | ||||||||
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