SEOUL, South Korea and CUPERTINO, Calif., July 28, 2010 /PRNewswire via COMTEX/ —
MagnaChip Semiconductor LLC (“MagnaChip Semiconductor”) today announced solid financial results for the second quarter ended June 30, 2010.
Revenue for the second quarter of 2010 was $194.7 million, an 8.5% increase compared to $179.5 million for the first quarter of 2010, and a 39.4% increase compared to $139.7 million for the second quarter ended June 30, 2009. Revenue exceeded the top end of the Company’s expectations due to continued strong demand for its diverse mixed-signal analog products from its Semiconductor Manufacturing Services division and accelerated sales growth in the company’s Power Solutions division.
Gross profit was $64.5 million or 33.1%, as a percent of revenue, for the second quarter of 2010. This compares to gross profit of $49.4 million or 27.5% for the first quarter of 2010 and $48.3 million or 34.6% for the year-ago quarter. During the second quarter, gross profit was positively impacted by improved factory utilization at the Company’s wafer fabrication facilities as well as a favorable mix shift to higher margin products in our Display and Power Solution business segments.
“We are very encouraged by the strength of the order patterns across all our product lines,” said Sang Park, MagnaChip’s Chairman and Chief Executive Officer. “We delivered solid financial results this quarter, exceeded the upper end of our revenue expectations and are well positioned to continue to capitalize on the improving global semiconductor market.”
The Company continues to prudently manage operating expenses. Combined SG&A and R&D expenses were $36.5 million or 18.8% of revenue for the second quarter of 2010 compared to $38.4 million or 21.4% for the first quarter of 2010 and $34.6 million or 24.8% for the year-ago quarter.
Operating income was $27.8 million for the second quarter of 2010 or 14.3% of revenue. This compares to operating income of $10.6 million or 5.9% of revenue for the first quarter of 2010 and $13.4 million or 9.6% of revenue for the second quarter of 2009.
Net loss, on a GAAP basis, for the second quarter of 2010 totaled $30.7 million or $0.10 per diluted common unit. This compares to net income of $31.1 million or $0.10 per diluted common unit for the first quarter of 2010 and net income of $27.6 million or $0.46 per diluted common unit for the year-ago quarter. Net loss, for the second quarter of 2010, was negatively impacted by a foreign currency loss of $48.3 million compared to a foreign currency gain of $21.6 million and $30.8 million for the first quarter of 2010 and second quarter of 2009, respectively. A substantial portion of the net foreign currency exposure is related to non-cash translations gains or losses recorded for intercompany borrowings at our Korea subsidiary that are denominated in U.S. dollars.
Adjusted net income, a non-GAAP measurement, for the second quarter of 2010 totaled $25.7 million compared to $19.9 million for the first quarter of 2010, and an Adjusted net income of $5.0 million for the year-ago quarter.
Adjusted EBITDA, a non-GAAP measurement, for the second quarter of 2010 totaled $43.8 million compared to $28.7 million for the first quarter of 2010, and $29.2 million for the second 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’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 $141.3 million at the end of the second quarter of 2010, an increase of $58.6 million from the end of the prior quarter. Cash provided from operations totaled approximately $36.0 million for the second quarter of 2010. This compares to $14.9 million for the first quarter of 2010 and $25.2 million for the second quarter of 2009.
Revenue by Segment
In thousands of US dollars Three Months Ended
Successor Predecessor
2Q 10 1Q 10 2Q 09
Semiconductor Manufacturing
Services $101,564 $93,201 $62,963
Display Solutions 80,584 76,730 74,187
Power Solutions 12,040 9,034 1,685
Other 512 520 858
Total Revenue $194,700 $179,485 $139,693
Recent Operational Highlights
- Announced an Enhanced Process Design Kit (PDK) for 0.18um and 0.35um BCD Technology
- Introduced a Cost Competitive 0.18um Embedded EEPROM Technology for Specialized Applications
Business Outlook
The Company anticipates third quarter 2010 revenue will increase 7% to 9% on a sequential basis.
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). A reconciliation of GAAP results to non-GAAP results is included following the financial statements below. 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).
Conference Call
MagnaChip will hold a teleconference at 6 p.m. EDT today to discuss the second 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 87834798 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 6 p.m. EDT 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 July 28, 2010 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 87834798.
About MagnaChip Semiconductor
Headquartered in South Korea, MagnaChip Semiconductor is an Asia-based designer and manufacturer of analog and mixed-signal semiconductor products for high volume consumer applications. The Company has a broad range of analog and mixed-signal semiconductor technology and intellectual property, supported by its 30-year operating history, 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
MagnaChip Semiconductor has filed a registration statement (including a preliminary prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents MagnaChip Semiconductor has filed with the SEC for more complete information about the company and the offering. You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov or by visiting MagnaChip Semiconductor’s investor relations SEC web site link at www.magnachip.com. Alternatively, MagnaChip Semiconductor will arrange to send you the preliminary prospectus if you request it by calling 1-408-625-1262.
Information in this release regarding MagnaChip Semiconductor’s forecasts, business outlook, expectations and beliefs are forward-looking statements 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 third 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 S-1/A registration statement filed on June 16, 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.
CONTACTS:
In the United States: In Korea:
Robert Pursel Chankeun Park
Director of Investor Relations Senior Manager, Public Relations
Tel. 408-625-1262 Tel. +82-3-6903-3195
robert.pursel@magnachip.com chankeun.park@magnachip.com
MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US dollars, except unit data)
(Unaudited)
Three Months Ended
------------------
Successor Predecessor
--------- -----------
June 30, March 31, June 28,
2010 2010 2009
Net sales $194,700 $179,485 $139,693
Cost of sales 130,166 130,127 91,362
------- ------- ------
Gross profit 64,534 49,358 48,331
------ ------ ------
Gross profit % 33.1% 27.5% 34.6%
Selling, general and
administrative expenses 15,964 17,908 18,353
Research and development
expenses 20,543 20,531 16,242
Restructuring and
impairment charges 267 336 385
--- --- ---
Operating income from
continuing operations 27,760 10,583 13,351
Other income (expenses)
Interest expense, net (6,557) (2,049) (12,837)
Foreign currency gain
(loss), net (48,273) 21,616 30,791
Reorganization items, net 0 0 (340)
Others (950) (52) 0
---- --- ---
(55,780) 19,515 17,614
------- ------ ------
Income (loss) from
continuing operations
before income taxes (28,020) 30,098 30,965
------- ------ ------
Income tax expenses
(benefits) 2,727 (1,003) 2,387
----- ------ -----
Income (loss) from
continuing operations (30,747) 31,101 28,578
------- ------ ------
Loss from discontinued
operations, net of taxes 0 0 966
--- --- ---
Net income (loss) $(30,747) $31,101 $27,612
======== ======= =======
Dividends accrued on
preferred units 0 0 2,948
--- --- -----
Income (loss) from
continuing operations
attributable to $(30,747) $31,101 $25,630
common units ======== ======= =======
Net income (loss)
attributable to common
units $(30,747) $31,101 $24,664
======== ======= =======
Earnings (loss) per common
unit from continuing
operations $(0.10) $0.10 $0.48
- Basic and diluted ====== ===== =====
Earnings (loss) per common
unit form discontinued
operations $0.00 $0.00 $(0.02)
- Basic and diluted ===== ===== ======
Earnings (loss) per common
unit -Basic and diluted $(0.10) $0.10 $0.46
====== ===== =====
Weighted average number of
units -Basic 302,558,556 302,443,556 529,234,833
Weighted average number of
units -Diluted 302,558,556 307,535,928 529,234,833
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
--------- -----------
June 30, March 31, June 28,
2010 2010 2009
Net Income (loss) $(30,747) $31,101 $27,612
Less: income(loss) from
discontinued operations,
net of taxes 0 0 (966)
--- --- ----
Income(loss) from continuing
operations (30,747) 31,101 28,578
Adjustments:
Depreciation and
amortization associated
with continuing operations 14,508 15,477 11,741
Interest expense, net 6,557 2,049 12,837
Income tax expenses
(benefits) 2,727 (1,003) 2,387
Restructuring and impairment
charges 267 336 385
Other restructuring charges 0 0 3,719
Reorganization items, net 0 0 340
Inventory step-up 0 867 0
Equity-based compensation
expense 1,279 1,473 56
Foreign currency loss(gain),
net 48,273 (21,616) (30,791)
Derivative valuation
loss(gain), net 950 57 0
Adjusted EBITDA $43,814 $28,741 $29,252
======= ======= =======
Adjusted EBITDA per Common
Unit: Basic and diluted 0.14 0.09 0.55
Net income (loss) $(30,747) $31,101 $27,612
Less: income(loss) from
discontinued operations,
net of taxes 0 0 (966)
--- --- ----
Income (loss) from
continuing operations (30,747) 31,101 28,578
Adjustments:
Restructuring and impairment
charges 267 336 385
Other restructuring charges 0 0 3,719
Reorganization items, net 0 0 340
Inventory step-up 0 867 0
Equity based compensation
expense 1,279 1,473 56
Amortization of intangibles
associated with continuing
operations 5,718 7,697 2,725
Foreign currency loss
(gain), net 48,273 (21,616) (30,791)
Derivative valuation
loss(gain), net 950 57 0
Adjusted Net Income (Loss) $25,740 $19,915 $5,012
======= ======= ======
Adjusted Net Income (Loss)
per Common Unit:
Basic $0.09 $0.07 $0.09
Diluted $0.08 $0.06 $0.09
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) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (ix) equity-based compensation expense, (x) reorganization items, net, (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.
MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except unit data)
(Unaudited)
Successor
---------
June 30, December 31,
2010 2009
Assets
Current assets
Cash and cash equivalents $141,310 64,925
Accounts receivable, net 117,711 74,233
Inventories, net 59,972 63,407
Other receivables 3,702 3,433
Prepaid expenses 9,908 12,625
Other current assets 11,097 3,433
------ -----
Total current assets 343,700 222,056
------- -------
Property, plant and equipment, net 155,040 156,337
Intangible assets, net 34,837 50,158
Long-term prepaid expenses 10,883 10,542
Other non-current assets 21,491 14,238
------ ------
Total assets $565,951 $453,331
-------- --------
Liabilities and Unitholders' Equity
Current liabilities
Accounts payable $69,379 $59,705
Other accounts payable 22,546 7,190
Accrued expenses 31,906 22,114
Current portion of long-term debt - 618
Other current liabilities 7,826 3,937
----- -----
Total current liabilities 131,657 93,564
Long-term borrowings 246,746 61,132
Accrued severance benefits, net 76,394 72,409
Other non-current liabilities 9,234 10,536
----- ------
Total liabilities 464,031 237,641
------- -------
Unitholders' equity
Common units, no par value, 375,000,000
units authorized, 307,233,996 55,453 55,135
and 307,083,996 units issued and
outstanding at June 30, 2010 and
December 31,2009, respectively
Additional paid-in capital 39,224 168,700
Accumulated deficit (1,609) (1,963)
Accumulated other comprehensive income
(loss) 8,852 (6,182)
----- ------
Total unitholders' equity 101,920 215,690
------- -------
Total liabilities and unitholders'
equity $565,951 $453,331
-------- --------
MAGNACHIP SEMICONDUCTOR LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)
Six Months Ended
----------------
Successor Predecessor
--------- -----------
June 30, June 28,
2010 2009
Cash flows from operating activities
Net income (loss) $354 $(42,080)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 29,985 22,167
Provision for severance benefits 9,380 3,738
Amortization of debt issuance costs 449 499
Gain on foreign currency translation,
net 29,966 9,758
Loss (gain) on disposal of property,
plant, and equipment, net (9) 82
Loss on disposal of intangible assets,
net 7 74
Restructuring and impairment charges 603 0
Unit-based compensation 2,752 167
Cash used for reorganization items 1,475 0
Noncash reorganization items 0 340
Other 749 1,077
Changes in operating assets and
liabilities
Accounts receivable (45,243) (13,972)
Inventories 1,342 7,899
Other receivables 119 343
Deferred tax assets 618 1,623
Accounts payable 7,542 8,520
Other accounts payable 11,330 (2,884)
Accrued expenses 7,841 25,542
Long term other payable (1,531) 405
Other current assets (92) 517
Other current liabilities (1,172) 5,081
Payment of severance benefits (2,760) (3,207)
Other (1,324) (184)
------ ----
Net Cash provided by operating
activities before reorganization items 52,381 25,505
------ ------
Cash used for reorganization items (1,475) 0
------ ---
Net cash provided by operating
activities 50,906 25,505
------ ------
Cash flows from investing activities
Proceeds from disposal of plant,
property and equipment 13 282
Proceeds from disposal of intangible
assets 0 1
Purchase of plant, property and
equipment (20,509) (2,082)
Payment for intellectual property
registration (245) (155)
Increase in restricted cash 0 (17,524)
Decrease (increase) in short-term
financial instruments 329 (324)
Decrease in guarantee deposits 999 608
Other (778) 3
---- ---
Net cash used in investing activities (20,191) (19,191)
------- -------
Cash flows from financing activities
Proceeds from issuance of senior notes 238,372 0
Repayment of current portion of long-
term debt (772) 0
Repayment of long-term debt (60,978) 0
Distribution to unitholders (130,697) 0
-------- ---
Net cash provided by financing
activities 45,925 0
Effect of exchange rates on cash and
cash equivalents (255) (914)
---- ----
Net increase in cash and cash
equivalents 76,385 5,400
------ -----
Cash and cash equivalents
Beginning of the period 64,925 4,037
------ -----
End of the period $141,310 $9,437
-------- ------
SOURCE Magnachip Semiconductor
