MagnaChip Reports Solid Third Quarter 2010 Financial Results

SEOUL, South Korea and CUPERTINO, Calif., Oct. 28 /PRNewswire-FirstCall/ -- 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 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 $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.

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.

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.

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.

SOURCE MagnaChip Semiconductor