MagnaChip Reports First Quarter 2011 Financial Results
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MagnaChip Reports First Quarter 2011 Financial Results

- Revenue of $188 Million up Sequentially and Year-over-Year

(PRNewswire) — MagnaChip Semiconductor Corporation (NYSE: MX) today announced financial results for the first quarter ended March 31, 2011.

Revenue for the first quarter of 2011 was $187.9 million, a 4.7% increase compared to $179.5 million for the first quarter of 2010, and a 0.6% increase compared to $186.8 million for the fourth quarter of 2010.

Gross profit was $56.5 million or 30.1%, as a percent of revenue, for the first quarter of 2011. This compares to gross profit of $49.4 million or 27.5% for the first quarter of 2010 and $60.4 million or 32.3% for the fourth quarter of 2010.

"I am very pleased with our performance in what is typically a seasonally down quarter for MagnaChip and the industry," said Sang Park, MagnaChip's Chairman and Chief Executive Officer. "Our Power Solutions business segment grew 11 percent sequentially and more than doubled over the same period last year. Our foundry business was down less than expected for this seasonally weaker quarter and our Display Solutions segment was up for the quarter. All indications point to 2011 being another solid year for growth in revenue and margin expansion for MagnaChip."

Net income, on a GAAP basis, for the first quarter of 2011 totaled $22.5 million or $0.57 per diluted share. This compares to net income of $31.1 million or $0.81 per diluted share for the first quarter of 2010 and net income of $12.3 million or $0.31 per diluted share for the fourth quarter of 2010.

Adjusted net income, a non-GAAP measurement, for the first quarter of 2011 totaled $15.7 million or $0.40 per diluted share compared to $19.9 million or $0.52 per diluted share for the first quarter of 2010 and $17.4 million or $0.44 per diluted share for the fourth 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 $194.2 million at the end of the first quarter of 2011, an increase of $22.0 million from the end of the prior quarter. Cash provided from operations totaled approximately $19.2 million for the first quarter of 2011.

Revenue by Segment


In thousands of US dollars

Three Months Ended


March 31, 2011

December 31, 2010

March 31, 2010

Semiconductor
Manufacturing Services

$      92,266

$      97,261

$      93,201

Display Solutions

74,464

70,581

76,730

Power Solutions

20,412

18,398

9,034

Other

779

532

520

Total Revenue

$     187,921

$    186,772

$     179,485




First Quarter and Recent Company Highlights


Business Outlook  

For the second quarter of 2011, the company expects:


Non-GAAP Metrics

Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, income tax expense (benefit), restructuring and impairment activities, inventory step-up, equity-based compensation, foreign currency (gain) loss, derivative valuation (gain) loss and special expense for the IPO employee incentive payment. Adjusted net income (loss) excludes charges related to restructuring and impairment, inventory step-up, equity-based compensation, amortization of intangible assets associated with continuing operations, foreign currency (gain) loss, derivative valuation (gain) loss and special expense for the IPO employee incentive payment. 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 second quarter 2011 revenue and gross profit. 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 Contact

In Korea:

Chankeun Park

Senior Manager, Public Relations

Tel. +82-3-6903-3195

Email Contact






MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars, except share data)

(Unaudited)




Three Months Ended




March 31,

2011



December 31,

2010


March 31,

2010


Net sales

$

187,921


$

186,772


$

179,485


Cost of sales


131,447



126,421



130,127












Gross profit


56,474



60,351



49,358


Gross profit %


30.1%



32.3%



27.5%












Selling, general and administrative expenses


15,401



16,566



17,908


Research and development expenses


18,498



19,331



20,531


Restructuring and impairment charges


-



958



336


Special expense for IPO incentive


12,146



-



-












Operating income


10,429



23,496



10,583












Other income (expense)










Interest expense, net


(7,111)



(6,981)



(2,049)


Foreign currency gain (loss), net


21,359



(19)



21,616


Other


166



(16)



(52)














14,414



(7,016)



19,515












Income before income taxes



24,843



16,480



30,098












Income tax expense (benefits)


2,375



4,209



(1,003)












Net income

$

22,468


$

12,271


$

31,101












Earnings per common share :










       - Basic

$

0.59


$

0.32


$

0.82


       - Diluted

$

0.57


$

0.31


$

0.81


Weighted average number of shares - Basic


38,332,750



37,898,912



37,805,445


Weighted average number of shares - Diluted


39,570,522



39,269,465



38,441,991


















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



March 31,


December 31,


March 31,



2011


2010


2010


Net income

$

22,468


$

12,271


$

31,101


Adjustments:




















Depreciation and amortization


13,903



14,063



15,477


Interest expense, net


7,111



6,981



2,049


Income tax expense


2,375



4,209



(1,003)


Restructuring and impairment charges


-



958



336


Inventory step-up


-



-



867


Equity-based compensation expense


641



1,167



1,473


Foreign currency (gain) loss, net


(21,359)



19



(21,616)


Derivative valuation (gain) loss, net


(158)



16



57


Special expense for IPO incentive


12,146



-



-


Adjusted EBITDA

$

37,127


$

39,684


$

28,741


Adjusted EBITDA per common share:










- Basic

$

0.97



1.05



0.76


- Diluted

$

0.94



1.01



0.75












Net income

$

22,468


$

12,271


$

31,101


Adjustments:










Restructuring and impairment charges


-



958



336


Inventory step-up


-



-



867


Equity based compensation expense


641



1,167



1,473












Amortization of intangibles


1,990



2,937



7,697


Foreign currency (gain) loss, net


(21,359)



19



(21,616)


Derivative valuation (gain) loss, net


(158)



16



57


Special expense for IPO incentive


12,146



-



-


Adjusted net income

$

15,728


$

17,368


$

19,915


Adjusted net income per common share:










- Basic

$

0.41


$

0.46


$

0.53


- Diluted

$

0.40


$

0.44


$

0.52





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) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (vi) equity-based compensation expense, (vii) foreign currency (gain) loss, net, (viii) derivative valuation (gain) loss, net and (ix) special expense for IPO incentive.

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) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (iii) equity-based compensation expense, (iv) amortization of intangibles, (v) foreign currency gain (loss), net, (vi) derivative valuation gain (loss), net and (vii) special expense for IPO incentive.












MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)






March 31,

2011



December 31,
2010


Assets








Current assets








Cash and cash equivalents


$

194,179


$

172,172


Accounts receivable, net



131,020



119,054


Inventories, net



73,879



68,435


Other receivables



4,006



2,919


Prepaid expenses



11,082



8,207


Other current assets



9,937



18,920










Total current assets



424,103



389,707










Property, plant and equipment, net



179,240



179,012


Intangible assets, net



26,154



27,538


Long-term prepaid expenses



7,456



8,235


Other non-current assets



21,357



21,252










Total assets


$

658,310


$

625,744










Liabilities and Stockholders' Equity








Current liabilities








Accounts payable


$

74,040


$

58,264


Other accounts payable



10,869



14,645


Accrued expenses



43,710



32,635


Current portion of capital lease obligation



5,850



5,557


Other current liabilities



3,932



5,048










Total current liabilities



138,401



116,149










Long-term borrowings



246,952



246,882


Obligation under capital lease



1,665



3,105


Accrued severance benefits, net



91,503



87,778


Other non-current liabilities



7,902



8,979










Total liabilities



486,423



462,893










Commitments and contingencies
















Stockholders' equity








  Common stock, $0.01 par value, 150,000,000 shares authorized, 39,356,749
    and 38,401,985 shares issued and outstanding at March 31, 2011 and
     December 31, 2010, respectively



394



384


Additional paid-in capital



97,812



95,585


Retained earnings



94,625



72,157


Accumulated other comprehensive loss



(20,944)



(5,275)










Total stockholders' equity



171,887



162,851










Total liabilities and stockholders' equity


$

658,310


$

625,744

























MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)



Three Months Ended



March 31,

2011


March 31,

2010


Cash flows from operating activities







Net income

$

22,468


$

31,101


Adjustments to reconcile net income to net cash provided by operating activities







Depreciation and amortization


13,903



15,477


Provision for severance benefits


2,854



3,166


Amortization of debt issuance costs


246



25


Gain on foreign currency translation, net


(23,684)



(23,478)


Gain on disposal of property, plant and equipment, net


-



(9)


Loss on disposal of intangible assets, net


4



2


Restructuring and impairment charges


-



336


Stock-based compensation


641



1,473


Cash used for reorganization items


-



1,579


Other


549



393


Changes in operating assets and liabilities







Accounts receivable


(9,250)



(29,684)


Inventories


(3,467)



7,206


Other receivables


(1,041)



(1,238)


Other current assets


(1,449)



(3,659)


Deferred tax assets


548



264


Accounts payable


14,289



18,088


Other accounts payable


(1,348)



(1,612)


Accrued expenses


7,153



3,196


Other current liabilities


(1,518)



(2,107)


Long term other payable


184



(2,136)


Payment of severance benefits


(1,610)



(1,092)


Other


(256)



(788)









Net cash provided by operating activities before reorganization items


19,216



16,503









Cash used for reorganization items


-



(1,579)









Net cash provided by operating activities


19,216



14,924









Cash flows from investing activities







Proceeds from disposal of plant, property and equipment


-



4


Purchase of plant, property and equipment


(6,779)



(891)


Payment for intellectual property registration


(165)



(152)


Decrease in short-term financial instruments


-



329


Collection of guarantee deposits


979



972


Payment of guarantee deposits


(1,004)



(56)


Other


(44)



33









Net cash provided by (used in) investing activities


(7,013)



239









Cash flows from financing activities







Proceeds from issuance of common stock


11,425



-


Repayment of current portion of long-term debt


-



(154)


Repayment of obligation under capital lease


(1,562)












Net cash provided by (used in) financing activities


9,863



(154)


Effect of exchange rates on cash and cash equivalents


(59)



2,754










Net increase in cash and cash equivalents


22,007



17,763









Cash and cash equivalents







Beginning of the period


172,172



64,925









End of the period

$

194,179


$

82,688





SOURCE MagnaChip Semiconductor Corporation

Contact:
MagnaChip Semiconductor Corporation
Web: hhtp:// www.magnachip.com