MagnaChip Reports Second Quarter 2011 Financial Results

- Revenue of $204 Million up 8% Sequentially and 5% Year-over-Year

- Power Solutions Revenue Grew 16% Sequentially and 97% Year-over-Year

- Gross Profit Expands 240 Basis Points Sequentially

- GAAP Net Income $32 Million or $0.78 Per Diluted Share

News provided by

Jul 27, 2011, 04:00 ET

SEOUL, South Korea and CUPERTINO, Calif., July 27, 2011 /PRNewswire/ -- MagnaChip Semiconductor Corporation (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the second quarter ended June 30, 2011.

Revenue for the second quarter of 2011 was $203.7 million, an 8.4% increase compared to $187.9 million for the first quarter of 2011, and a 4.6% increase compared to $194.7 million for the second quarter of 2010.

Gross profit was $66.2 million or 32.5%, as a percent of revenue, for the second quarter of 2011. This compares to gross profit of $56.5 million or 30.1% for the first quarter of 2011 and $64.5 million or 33.1% for the second quarter of 2010.

"I am very pleased that revenue for our three business segments grew during the quarter and that gross profit expanded as a result of strong execution by our sales and manufacturing organizations," said Sang Park, MagnaChip's Chairman and Chief Executive Officer. "Not only did our Power Solutions segment grow 16 percent sequentially, but our Display Solutions segment posted double-digit revenue growth this quarter as well. Additionally, our Foundry business was up 5% over the March quarter despite overall market softness as reported by several foundry providers. I am very encouraged by the traction of our new products, which has increased the design-win activity for both our Power Segment and Foundry Services. This better positions us strategically for growth in the coming years."

Net income, on a GAAP basis, for the second quarter of 2011 totaled $31.6 million or $0.78 per diluted share. This compares to net income of $22.5 million or $0.57 per diluted share for the first quarter of 2011 and a net loss of $30.7 million or $0.81 per diluted share for the second quarter of 2010.

Adjusted net income, a non-GAAP measurement, for the second quarter of 2011 totaled $22.5 million or $0.56 per diluted share compared to $15.7 million or $0.40 per diluted share for the first quarter of 2011 and $25.7 million or $0.68 per diluted share for the second 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 short-term investments) totaled $177.8 million at the end of the second quarter of 2011, a decrease of $16.4 million from the end of the prior quarter due to a cash payment of $38.2 million related to the $35 million repurchase of senior notes during the quarter. Cash provided from operations totaled approximately $48.3 million for the second quarter of 2011.

Revenue by Segment
In thousands of US dollars	Three Months Ended
	June 30, 2011	March 31, 2011	June 30, 2010
Semiconductor Manufacturing Services	$ 96,458	$ 92,266	$ 101,564
Display Solutions	82,719	74,464	80,584
Power Solutions	23,739	20,412	12,040
Other	763	779	512
Total Revenue	$ 203,679	$ 187,921	$ 194,700

Second Quarter and Recent Company Highlights

Reduced the Company's Outstanding Senior Notes from $250M to $215M by Repurchasing and Retiring $35M of Principal.
Began Wafer Production for ELMOS' 0.35um Automotive Semiconductor Products.
Delivered Working Samples of an LED Lighting Product targeted for the Fast Growing LED Market.
Developed a High Voltage IGBT Power Module for Industrial and Consumer Appliance Applications.

Non-GAAP Metrics

Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense, restructuring and impairment activities, stock-based compensation expense, foreign currency loss (gain), net, derivative valuation loss (gain), net, special expense for the IPO employee incentive payment, 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, special expense for the IPO employee incentive payment, 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 third 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 [email protected]	In Korea: Chankeun Park Senior Manager, Public Relations Tel. +82-3-6903-3195 [email protected]



MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands of US dollars, except share data) (Unaudited)
		Three Months Ended
		June 30, 2011		March 31, 2011	June 30, 2010
Net sales	$	203,679	$	187,921	$	194,700
Cost of sales		137,497		131,447		130,166

Gross profit		66,182		56,474		64,534
Gross profit %		32.5%		30.1%		33.1%

Selling, general and administrative expenses		17,458		15,401		15,964
Research and development expenses		20,614		18,498		20,543
Restructuring and impairment charges		2,475		--		267
Special expense for IPO incentive		--		12,146		--

Operating income		25,635		10,429		27,760

Other income (expense)
Interest expense, net		(6,369)		(7,111)		(6,557)
Foreign currency gain (loss), net		18,234		21,359		(48,273)
Loss on early extinguishment of senior notes		(4,103)		--		--
Other		203		166		(950)

		7,965		14,414		(55,780)

Income (loss) before income taxes		33,600		24,843		(28,020)

Income tax expense		1,970		2,375		2,727

Net income (loss)	$	31,630	$	22,468	$	(30,747)

Earnings (loss) per common share :
- Basic	$	0.81	$	0.59	$	(0.81)
- Diluted	$	0.78	$	0.57	$	(0.81)
Weighted average number of shares - Basic		39,066,303		38,332,750		37,819,820
Weighted average number of shares - Diluted		40,294,902		39,570,522		37,819,820



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
	June 30,		March 31,		June 30,
	2011		2011		2010
Net income (loss)	$	31,630	$	22,468	$	(30,747)
Adjustments:
Depreciation and amortization		15,412		13,903		14,508
Interest expense, net		6,368		7,111		6,557
Income tax expense		1,970		2,375		2,727
Restructuring and impairment charges		2,475		--		267
Stock-based compensation expense		605		641		1,279
Foreign currency loss (gain), net		(18,234)		(21,359)		48,273
Derivative valuation loss (gain), net		(203)		(158)		950
Special expense for IPO incentive		--		12,146		--
Loss on early extinguishment of senior notes		4,103		--		--
Adjusted EBITDA	$	44,126	$	37,127	$	43,814
Adjusted EBITDA per common share:
- Basic	$	1.13		0.97		1.16
- Diluted	$	1.10		0.94		1.16

Net income(loss)	$	31,630	$	22,468	$	(30,747)
Adjustments:
Restructuring and impairment charges		2,475		--		267
Stock-based compensation expense		605		641		1,279
Amortization of intangibles		2,080		1,990		5,718
Foreign currency loss (gain), net		(18,234)		(21,359)		48,273
Derivative valuation loss (gain), net		(203)		(158)		950
Special expense for IPO incentive		--		12,146		--
Loss on early extinguishment of senior notes		4,103		--		--
Adjusted net income	$	22,456	$	15,728	$	25,740
Adjusted net income per common share:
- Basic	$	0.58	$	0.41	$	0.68
- Diluted	$	0.56	$	0.40	$	0.68

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) special expense for IPO incentive, 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) special expense for IPO incentive, 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)
	June 30, 2011		December 31, 2010
Assets
Current assets
Cash and cash equivalents	$	177,764	$	172,172
Accounts receivable, net		123,792		119,054
Inventories, net		86,826		68,435
Other receivables		4,217		2,919
Prepaid expenses		9,257		8,207
Other current assets		10,724		18,920

Total current assets		412,580		389,707

Property, plant and equipment, net		191,133		179,012
Intangible assets, net		24,177		27,538
Long-term prepaid expenses		6,103		8,235
Other non-current assets		21,260		21,252

Total assets	$	655,253	$	625,744

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	73,906	$	58,264
Other accounts payable		23,098		14,645
Accrued expenses		41,780		32,635
Current portion of capital lease obligation		6,149		5,557
Other current liabilities		4,747		5,048

Total current liabilities		149,680		116,149

Long-term borrowings		212,441		246,882
Obligation under capital lease		123		3,105
Accrued severance benefits, net		97,417		87,778
Other non-current liabilities		5,778		8,979

Total liabilities		465,439		462,893

Commitments and contingencies

Stockholder' equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 39,357,471 and 38,401,985 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		394		384
Additional paid-in capital		97,987		95,585
Retained earnings		126,255		72,157
Accumulated other comprehensive loss		(34,822)		(5,275)

Total stockholders' equity		189,814		162,851

Total liabilities and stockholders' equity	$	655,253	$	625,744



MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of US dollars) (Unaudited)
	Six Months Ended
	June 30, 2011		June 30, 2010
Cash flows from operating activities
Net income	$	54,098	$	354
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		29,315		29,985
Provision for severance benefits		8,396		9,380
Amortization of debt issuance costs and original issue discount		491		449
Loss (gain) on foreign currency translation, net		(44,109)		29,975
Gain on disposal of property, plant and equipment, net		(11)		(9)
Loss on disposal of intangible assets, net		8		7
Restructuring and impairment charges		2,475		603
Stock-based compensation		1,246		2,752
Cash used for reorganization items		--		1,475
Loss on early extinguishment of senior notes		4,103		--
Other		1,104		740
Changes in operating assets and liabilities
Accounts receivable		2,103		(45,243)
Inventories		(14,300)		1,342
Other receivables		(1,309)		119
Other current assets		(884)		(92)
Deferred tax assets		824		618
Accounts payable		12,139		7,542
Other accounts payable		13,800		11,330
Accrued expenses		3,141		7,841
Other current liabilities		(1,155)		(1,172)
Payment of severance benefits		(3,745)		(2,760)
Other non-current liabilities		(232)		(2,855)

Net cash provided by operating activities before reorganization items		67,498		52,381

Cash used for reorganization items		--		(1,475)

Net cash provided by operating activities		67,498		50,906

Cash flows from investing activities
Proceeds from disposal of plant, property and equipment		23		13
Purchase of plant, property and equipment		(26,926)		(20,509)
Payment for intellectual property registration		(324)		(245)
Decrease in short-term financial instruments		--		329
Collection of guarantee deposits		979		999
Payment of guarantee deposits		(1,483)		(769)
Other		(402)		(9)

Net cash used in investing activities		(28,133)		(20,191)

Cash flows from financing activities
Proceeds from issuance of common stock		8,818		--
Proceeds from issuance of senior notes		--		246,685
Debt issuance costs paid		--		(8,313)
Repayment of Long-term borrowings		--		(61,750)
Repurchase of senior notes		(38,150)		--
Distribution to stockholders		--		(130,697)
Repayment of obligation under capital lease		(3,182)		--

Net cash provided by (used in) financing activities		(32,514)		45,925
Effect of exchange rates on cash and cash equivalents		(1,259)		(255)

Net increase in cash and cash equivalents		5,592		76,385

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

End of the period	$	177,764	$	141,310