MAGNACHIP SEMICONDUCTOR Corp - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - MAGNACHIP SEMICONDUCTOR Corp	d247197d8k.htm

Exhibit 99.1

LOGO

Press Release

MagnaChip Reports Third Quarter 2011 Financial Results

•

Power Solutions Revenue Grew 11% Sequentially and 48% Year-over-Year

•

Display Solutions Revenue Grew 11% Sequentially and 18% Year-over -Year

SEOUL, South Korea and CUPERTINO, Calif., October 26, 2011 — MagnaChip Semiconductor Corporation (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the third quarter ended September 30, 2011.

Revenue for the third quarter of 2011 was $200.4 million, a 1.6% decrease compared to $203.7 million for the second quarter of 2011, and a 4.3% decrease compared to $209.4 million for the third quarter of 2010.

Gross profit was $60.1 million or 30.0%, as a percent of revenue, for the third quarter of 2011. This compares to gross profit of 66.2 million or 32.5 % for the second quarter of 2011 and $69.3 million or 33.1% for the third quarter of 2010.

“Despite continued weakness in the global semiconductor market, we managed to deliver results consistent with our original guidance while growing Power Solutions 11% sequentially and 48% year-over-year,” said Sang Park, MagnaChip’s Chairman and Chief Executive Officer. “While many of our peers reduced their outlook as the quarter progressed, we delivered on our initial expectations based on the strength of our blue-chip customer relationships, diverse product portfolio and growing Power and Display Solutions businesses. Having a strategy that capitalizes on the strength of our Foundry, Display and Power products better positions us for growth as the macro environment begins its recovery.”

Net loss, on a GAAP basis, for the third quarter of 2011 totaled $56.0 million or $1.43 per diluted share. This compares to net income of $31.6 million or $0.78 per diluted share for the second quarter of 2011 and a net income of $61.5 million or $1.57 per diluted share for the third quarter of 2010. Net loss was primarily impacted by a non-cash foreign currency translation loss of $68.1 million due to the appreciation of the US dollar against the Korean won associated with intercompany balances.

Adjusted net income, a non-GAAP measurement, for the third quarter of 2011 totaled $18.2 million or $0.46 per diluted share compared to $22.5 million or $0.56 per diluted share for the second quarter of 2011 and $26.2 million or $0.67 per diluted share for the third quarter of 2010.

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

Combined cash balances (cash and cash equivalents plus restricted cash) totaled $168.7 million at the end of the third quarter of 2011, a decrease of $9.1 million from the end of the prior quarter primarily due to a cash payment of $12.1 million related to the $11.3 million repurchase of senior notes during the quarter. Cash provided from operations totaled approximately $18.7 million for the third quarter of 2011.

Revenue by Segment


In thousands of US dollars	Three Months Ended
	September 30, 2011		June 30, 2011		September 30, 2010
Semiconductor Manufacturing Services	$	81,571	$	96,458	$	113,171
Display Solutions		91,767		82,719		77,989
Power Solutions		26,358		23,739		17,801
Other		709		763		487
Total Revenue	$	200,405	$	203,679	$	209,448

Third Quarter and Recent Company Highlights

•

Reduced the Aggregate Principal Amount of the Company’s Outstanding 10.500% Senior Notes from $215.0M to $203.7M by Repurchasing and Retiring $11.3M of Principal.

•

Announced $35 Million Common Stock Repurchase Program.

•

Began Supplying AMOLED Display Drivers for Samsung’s Galaxy S2 LTE Smartphone.

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Shipped Pre-Production Samples of AC LED Lighting Drivers to a Leading Korean LED Manufacturer.

•

Delivered IGBT Engineering Samples to Several Key Asian and Western Power Customers.

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

About MagnaChip Semiconductor Corporation

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

Safe Harbor for Forward-Looking Statements

Information in this release regarding MagnaChip Semiconductor Corporation’s forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about our ability to capitalize on improving market dynamics and future operating and financial performance including fourth quarter 2011 revenue. All forward-looking statements included in this release are based upon information available to MagnaChip Semiconductor as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new products and technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for semiconductor products, industry and/or company overcapacity, effective and cost efficient utilization of manufacturing capacity, financial stability in foreign markets and the impact of foreign exchange rates, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, compliance with U.S. and international trade and export laws and regulations by us and our distributors, and other risks detailed from time to time in MagnaChip Semiconductor Corporation’s filings with the SEC, including our Form 10-K filed on March 18, 2011 and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. MagnaChip Semiconductor Corporation assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.


CONTACTS:

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

# # #

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars, except share data)

(Unaudited)


	Three Months Ended
	September 30, 2011			June 30, 2011			September 30, 2010
Net sales	$	200,405		$	203,679		$	209,448
Cost of sales		140,284			137,497			140,133

Gross profit		60,121			66,182			69,315

Gross profit %		30.0	%		32.5	%		33.1	%
Selling, general and administrative expenses		17,881			17,458			16,202
Research and development expenses		19,003			20,614			23,119
Restructuring and impairment charges		1,621			2,475			442

Operating income		21,616			25,635			29,552
Other income (expenses)
Interest expense, net		(5,860	)		(6,369	)		(7,312	)
Foreign currency gain (loss), net		(68,058	)		18,234			41,400
Loss on early extinguishment of senior notes		(1,357	)		(4,103	)		—
Other		(558	)		203			312

		(75,833	)		7,965			34,400

Income (loss) before income taxes		(54,217	)		33,600			63,952

Income tax expense		1,793			1,970			2,457

Net income (loss)	$	(56,010	)	$	31,630		$	61,495

Earnings (loss) per common share :
- Basic	$	(1.43	)	$	0.81		$	1.63
- Diluted	$	(1.43	)	$	0.78		$	1.57

Weighted average number of shares—Basic		39,064,071			39,066,303			37,819,820
Weighted average number of shares—Diluted		39,064,071			40,294,902			39,200,585

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME

(In thousands of US dollars, except share data)

(Unaudited)


	Three Months Ended
	September 30, 2011			June 30, 2011			September 30, 2010
Net income (loss)	$	(56,010	)	$	31,630		$	61,495
Adjustments:
Depreciation and amortization		13,053			15,412			14,347
Interest expense, net		5,861			6,368			7,312
Income tax expenses		1,793			1,970			2,457
Restructuring and impairment charges		1,621			2,475			442
Stock-based compensation expense		552			605			1,320
Foreign currency loss (gain), net		68,058			(18,234	)		(41,400	)
Derivative valuation loss (gain), net		558			(203	)		(312	)
Loss on early extinguishment of senior notes		1,357			4,103			—

Adjusted EBITDA	$	36,843		$	44,126		$	45,661

Adjusted EBITDA per common share:
- Diluted	$	0.92		$	1.10		$	1.16
Weighted average number of shares—Diluted		39,973,691			40,294,902			39,200,585
Net income (loss)	$	(56,010	)	$	31,630		$	61,495
Adjustments:
Restructuring and impairment charges		1,621			2,475			442
Stock-based compensation expense		552			605			1,320
Amortization of intangibles		2,092			2,080			4,681
Foreign currency loss (gain), net		68,058			(18,234	)		(41,400	)
Derivative valuation loss (gain), net		558			(203	)		(312	)
Loss on early extinguishment of senior notes		1,357			4,103			—

Adjusted net income	$	18,228		$	22,456		$	26,226

Adjusted net income per common share:
- Diluted	$	0.46		$	0.56		$	0.67
Weighted average number of shares—Diluted		39,973,691			40,294,902			39,200,585

We define Adjusted EBITDA as net income (loss) 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, and (viii) 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(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. We define Adjusted Net Income as net income (loss) adjusted to exclude (i) restructuring and impairment charges, (ii) stock-based compensation expense, (iii) amortization of intangible assets associated with continuing operations, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, and (vi) 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, 2011			December 31, 2010
Assets
Current assets
Cash and cash equivalents	$	159,468		$	172,172
Restricted cash		9,210			—
Accounts receivable, net		124,150			119,054
Inventories, net		69,817			68,435
Other receivables		1,950			2,919
Prepaid expenses		8,770			8,207
Other current assets		8,159			18,920

Total current assets		381,524			389,707

Property, plant and equipment, net		180,032			179,012
Intangible assets, net		18,565			27,538
Long-term prepaid expenses		4,759			8,235
Other non-current assets		20,986			21,252

Total assets	$	605,866		$	625,744

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	75,947		$	58,264
Other accounts payable		12,425			14,645
Accrued expenses		37,012			32,635
Current portion of capital lease obligations		4,415			5,557
Other current liabilities		13,762			5,048

Total current liabilities		143,561			116,149
Long-term borrowings, net		201,325			246,882
Long-term obligations under capital lease		—			3,105
Accrued severance benefits, net		91,106			87,778
Other non-current liabilities		9,927			8,979

Total liabilities		445,919			462,893

Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 39,354,006 and 38,401,985 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		394			384
Additional paid-in capital		98,310			95,585
Retained earnings		70,245			72,157
Accumulated other comprehensive loss		(9,002	)		(5,275	)

Total stockholders’ equity		159,947			162,851

Total liabilities and stockholders’ equity	$	605,866		$	625,744

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)


	Three Months Ended			Nine Months Ended
	September 30, 2011			September 30, 2011			September 30, 2010
Cash flows from operating activities
Net income (loss)	$	(56,010	)	$	(1,912	)	$	61,849
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		13,053			42,368			44,332
Provision for severance benefits		4,741			13,137			15,123
Amortization of debt issuance costs and original issue discount		237			728			687
Loss (gain) on foreign currency translation, net		77,329			33,220			(16,704	)
Gain on disposal of property, plant and equipment, net		(4	)		(15	)		(7	)
Loss on disposal of intangible assets, net		9			17			9
Restructuring and impairment charges		1,621			4,096			1,045
Stock-based compensation		552			1,798			4,072
Cash used for reorganization items		—			—			1,573
Loss on early extinguishment of senior notes		1,357			5,460			—
Other		(453	)		651			951
Changes in operating assets and liabilities
Accounts receivable		(6,503	)		(4,400	)		(61,771	)
Inventories		9,900			(4,400	)		193
Other receivables		2,145			836			(1,229	)
Other current assets		(2,312	)		(3,196	)		(221	)
Deferred tax assets		659			1,483			1,133
Accounts payable		2,933			15,072			10,400
Other accounts payable		(6,643	)		7,157			6,332
Accrued expenses		(21,419	)		(18,278	)		22,094
Other current liabilities		(54	)		(1,209	)		516
Payment of severance benefits		(2,804	)		(6,549	)		(4,707	)
Other non-current liabilities		373			141			(2,470	)

Net cash provided by operating activities before reorganization items		18,707			86,205			83,200

Cash used for reorganization items		—			—			(1,573	)

Net cash provided by operating activities		18,707			86,205			81,627

Cash flows from investing activities
Increase in restricted cash		(9,711	)		(9,711	)		—
Proceeds from disposal of plant, property and equipment		6			29			10
Purchase of plant, property and equipment		(16,019	)		(42,945	)		(29,739	)
Payment for intellectual property registration		(197	)		(521	)		(437	)
Decrease in short-term financial instruments		—			—			329
Collection of guarantee deposits		5			984			1,011
Payment of guarantee deposits		(1,006	)		(2,489	)		(794	)
Other		(223	)		(625	)		(13	)

Net cash used in investing activities		(27,145	)		(55,278	)		(29,633	)

Cash flows from financing activities
Proceeds from issuance of common stock		17			8,835			—
Proceeds from issuance of senior notes		—			—			246,685
Debt issuance costs paid		—			—			(8,313	)
Distribution to stockholders		—			—			(130,697	)
Repayment of long-term borrowings		—			—			(61,750	)
Repurchase of senior notes		(12,157	)		(50,307	)		—
Repayment of obligations under capital lease		(1,649	)		(4,831	)		(1,812	)

Net cash provided by (used in) financing activities		(13,789	)		(46,303	)		44,113
Effect of exchange rates on cash and cash equivalents		3,931			2,672			397

Net increase (decrease) in cash and cash equivalents		(18,296	)		(12,704	)		96,504

Cash and cash equivalents
Beginning of the period		177,764			172,172			64,925

End of the period	$	159,468		$	159,468		$	161,429

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