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MagnaChip Reports First Quarter 2012 Financial Results

SEOUL, South Korea and CUPERTINO, Calif., April 25, 2012 /PRNewswire/ -- MagnaChip Semiconductor Corporation ("MagnaChip") (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the first quarter ended March 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120305/NY61184LOGO )

Revenue for the first quarter of 2012 was $177.0 million, a 2.1% decrease compared to $180.8 million for the fourth quarter of 2011, and a 5.8% decrease compared to $187.9 million for the first quarter of 2011.

Gross profit was $49.9 million or 28.2%, as a percent of revenue, for the first quarter of 2012. This compares to gross profit of $51.5 million or 28.5 % for the fourth quarter of 2011 and $56.5 million or 30.1% for the first quarter of 2011.

"I am very pleased that since going public in March 2011, we have met our revenue and gross margin guidance each quarter for 5 consecutive quarters in what has been a very challenging period for the industry," said Sang Park, MagnaChip's Chairman and Chief Executive Officer. "As our Q2 guidance suggests, the first quarter of 2012 was indeed our bottom during this current semiconductor downturn. We have been seeing renewed customer order strength and wafer loading since early March as a result of increased demand from smartphone and tablet PC customers and expect this trend to continue into the second half of this year. In anticipation of this growing demand, we have allocated additional fab capacity to support expansion."

Net income, on a GAAP basis, for the first quarter of 2012 totaled $15.3 million or $0.40 per diluted share. This compares to net income of $23.7 million or $0.61 per diluted share for the fourth quarter of 2011 and a net income of $22.5 million or $0.57 per diluted share for the first quarter of 2011. Net income was impacted primarily by a foreign currency gain of $11.1 million during the quarter which was primarily related to non-cash translation gains for intercompany balances that were denominated in U.S. dollars.

Adjusted net income, a non-GAAP measurement, for the first quarter of 2012 totaled $6.5 million or $0.17 per diluted share compared to $10.0 million or $0.26 per diluted share for the fourth quarter of 2011 and $15.7 million or $0.40 per diluted share for the first quarter of 2011.

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 restricted cash) totaled $160.6 million at the end of the first quarter of 2012, a decrease of $8.4 million from the end of the prior quarter. Cash provided from operations totaled approximately $39.9 million for the first quarter of 2012.


    Revenue by Segment
    In thousands of US
     dollars                Three Months Ended
                       March 31, 2012              December 31, 2011          March 31, 2011
    Semiconductor                          $67,863                    $67,973                 $92,266
    Manufacturing
     Services
    Display Solutions                       83,225                     90,045                  74,464
    Power Solutions                         25,253                     22,039                  20,412
    Other                                      661                        769                     779

    Total Revenue                         $177,002                   $180,826                $187,921

First Quarter and Recent Company Highlights

    --  Power Solutions Revenue Grew 14.6% Sequentially and 23.7%
        Year-over-Year.
    --  Fab loading rate exceeded 90% in March 2012.
    --  Achieved GAAP EPS of $0.40 and Adjusted EPS of $0.17.
    --  Repurchased 1.04 Million Shares under MagnaChip's Stock Repurchase
        Program Announced October 11, 2011.

Business Outlook
For the second quarter of 2012, MagnaChip expects:

    --  Revenue will increase 11% to 15% ($197 million to $203 million) on a
        sequential basis.
    --  Gross Profit, as a percent of revenue, will be in the range of 29.5% to
        30.5%.

Non-GAAP Metrics
Adjusted EBITDA excludes charges related to depreciation and amortization, interest expense, net, income tax expense, stock-based compensation expense, foreign currency gain, net, derivative valuation loss (gain), net, and special expense for an IPO employee incentive payment. Adjusted net income (loss) excludes charges related to, stock-based compensation expense, amortization of intangible assets associated with continuing operations, foreign currency gain, net, derivative valuation loss (gain), net, and special expense for an IPO employee incentive payment. A reconciliation of GAAP results to non-GAAP results is included following the financial statements.

About MagnaChip Semiconductor Corporation
Headquartered in South Korea, MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. MagnaChip 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'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'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 2012 revenue and gross profit. All forward-looking statements included in this release are based upon information available to MagnaChip 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's filings with the SEC, including our Form 10-K filed on March 8, 2012 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 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 Korea:
    In the United States:          Chankeun Park
    Robert Pursel                  Senior Manager, Public Relations
    Director of Investor Relations Tel. +82-2-6903-3195
    Tel. 408-625-1262              chankeun.park@magnachip.com
    robert.pursel@magnachip.com

                                                                                                                                                                                             
                                                                                        MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                          (In thousands of US dollars, except share data)
                                                                                                            (Unaudited)
                                                                                                                                                                                             
                                                                                                                                                                    Three Months Ended
                                                                                                                                                                    ------------------
                                                                                                                           March 31,                       December 31,                                     March 31,
                                                                                                                                 2012                              2011                                                               2011
                                                                                                                                 ----                              ----                                                               ----
    Net sales                                                                                                                                    $177,002                                    $180,826                 $187,921
    Cost of sales                                                                                                             127,087                                               129,287                  131,447
                                                                                                                              -------                                               -------                  -------
                                                                                                                                                                                                                      
    Gross profit                                                                                                               49,915                                                51,539                   56,474
                                                                                                                               ------                                                ------                   ------
    Gross profit %                                                                                                              28.2%                                                 28.5%                    30.1%
                                                                                                                                                                                                                      
    Selling, general and administrative expenses                                                                               18,209                                                17,627                   15,401
    Research and development expenses                                                                                          19,831                                                18,652                   18,498
    Special expense for IPO incentive                                                                                               -                                                     -                   12,146
                                                                                                                                                                                                                      
    Operating income                                                                                                           11,875                                                15,260                   10,429
                                                                                                                                                                                                                      
    Other income (expense)
    Interest expense, net                                                                                                      (5,580)                                               (5,644)                  (7,111)
    Foreign currency gain, net                                                                                                 11,109                                                16,832                   21,359
    Other                                                                                                                          89                                                  (862)                     166
                                                                                                                                  ---                                                  ----                      ---
                                                                                                                                                                                                                      
                                                                                                                                5,618                                                10,326                   14,414
                                                                                                                                -----                                                ------                   ------
                                                                                                                                                                                                                      
    Income before income taxes                                                                                                 17,493                                                25,586                   24,843
                                                                                                                               ------                                                ------                   ------
                                                                                                                                                                                                                      
    Income tax expense                                                                                                          2,230                                                 1,881                    2,375
                                                                                                                                -----                                                 -----                    -----
                                                                                                                                                                                                                      
    Net income                                                                                                                                    $15,263                                     $23,705                  $22,468
                                                                                                                                                  =======                                     =======                  =======
                                                                                                                                                                                                                      
    Earnings per common share :
            - Basic                                                                                                                                 $0.41                                       $0.61                    $0.59
            - Diluted                                                                                                                               $0.40                                       $0.61                    $0.57
                                                                                                                                                    =====                                       =====                    =====
    Weighted average number of shares-Basic                                                                                37,524,127                                            38,632,975               38,332,750
    Weighted average number of shares-Diluted                                                                              38,298,336                                            39,110,759               39,570,522


                                            MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                   RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NETINCOME
                                              (In thousands of US dollars, except share data)
                                                                (Unaudited)

                                                              Three Months Ended
                                                              ------------------
                                       March 31,                 December 31,                  March 31,
                                             2012                        2011                        2011
    Net income                                          $15,263                                   $23,705            $22,468
    Adjustments:
    Depreciation and amortization                         7,474                                     8,856             13,903
    Interest expense, net                                 5,580                                     5,644              7,111
    Income tax expense                                    2,230                                     1,881              2,375
    Stock-based compensation
     expense                                                458                                       287                641
    Foreign currency gain, net                          (11,109)                                  (16,832)           (21,359)
    Derivative valuation loss
     (gain), net                                            (85)                                      862               (158)
    Special expense for IPO
     incentive                                                             -                           -             12,146
    Adjusted EBITDA                                     $19,811                                   $24,403            $37,127
                                                        =======                                   =======            =======
    Adjusted EBITDA per common
     share:
    - Diluted                                             $0.52                                     $0.62              $0.94
    Weighted average number of
     shares -Diluted                                 38,298,336                                39,110,759         39,570,522

    Net income                                          $15,263                                   $23,705            $22,468
    Adjustments:
    Stock-based compensation
     expense                                                458                                       287                641
    Amortization of intangibles                           1,993                                     1,985              1,990
    Foreign currency gain, net                          (11,109)                                  (16,832)           (21,359)
    Derivative valuation loss
     (gain), net                                            (85)                                      862               (158)
    Special expense for IPO
     incentive                                  -                                         -                12,146
                                              ---                                       ---                ------
    Adjusted net income                                  $6,520                                   $10,007            $15,728
                                                         ======                                   =======            =======
    Adjusted net income per common
     share:
    - Diluted                                             $0.17                                     $0.26              $0.40
    Weighted average number of
     shares -Diluted                                 38,298,336                                39,110,759         39,570,522

We define Adjusted EBITDA as net income adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense, (iv) stock-based compensation expense, (v) foreign currency gain, net, (vi) derivative valuation loss (gain), net, and (vii) 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) stock-based compensation expense, (ii) amortization of intangibles, (iii) foreign currency gain, net, (iv) derivative valuation loss (gain), net, and (v) special expense for IPO incentive.


                                         MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                     CONSOLIDATED BALANCE SHEETS
                                           (In thousands of US dollars, except share data)
                                                             (Unaudited)


                                                                     March 31,                          December 31,
                                                                           2012                                 2011
                                                                           ----                                 ----
    Assets
    Current assets
    Cash and cash equivalents                                                                 $156,623                     $162,111
    Restricted cash                                                                              3,934               6,830
    Accounts receivable, net                                                                   127,332                      125,922
    Inventories, net                                                                            68,105                       62,836
    Other receivables                                                                            4,343                          256
    Prepaid expenses                                                                             8,112                        6,032
    Other current assets                                                                         5,578                       15,909
                                                                                                 -----                       ------

    Total current assets                                                                       374,027                      379,896
                                                                                               -------                      -------

    Property, plant and equipment, net                                                         206,206                      182,663
    Intangible assets, net                                                                      20,348                       16,787
    Long-term prepaid expenses                                                                   4,107                        4,790
    Other non-current assets                                                                    17,972                       18,539
                                                                                                ------                       ------

    Total assets                                                                              $622,660                     $602,675
                                                                                              ========                     ========

    Liabilities and Stockholders' Equity
    Current liabilities
    Accounts payable                                                                           $90,902                      $77,848
    Other accounts payable                                                                      13,772                       13,452
    Accrued expenses                                                                            39,649                       31,723
    Current portion of capital lease obligations                                                 1,458                        2,852
    Derivative liabilities                                                                       8,308                        9,757
    Other current liabilities                                                                    3,266                        2,007
                                                                                                 -----                        -----

    Total current liabilities                                                                  157,355                      137,639

    Long-term borrowings, net                                                                  201,452                      201,389
    Accrued severance benefits, net                                                             94,352                       90,755
    Other non-current liabilities                                                                5,596                        6,222
                                                                                                 -----                        -----

    Total liabilities                                                                          458,755                      436,005
                                                                                               -------                      -------

    Commitments and contingencies

    Stockholder' equity
    Common stock, $0.01 par value, 150,000,000
     shares authorized, 39,457,063                                                                 394                          394
       shares issued and 36,880,879 outstanding at
        March 31, 2012 and 39,439,115
       shares issued and 37,907,575 outstanding at
        December 31, 2011
    Additional paid-in capital                                                                  99,495                       98,929
    Retained earnings                                                                          109,213                       93,950
    Treasury stock, 2,576,184 shares at March 31,
     2012                                                                                      (23,728)                     (11,793)
    Accumulated other comprehensive loss                                                       (21,469)                     (14,810)
                                                                                               -------                      -------

    Total stockholders' equity                                                                 163,905                      166,670
                                                                                               =======                      =======

    Total liabilities and stockholders' equity                                                $622,660                     $602,675
                                                                                              ========                     ========

                                                                                                                                                                                 
                                                                MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                            (In thousands of US dollars)
                                                                                    (Unaudited)
                                                                                                                                                                                 
                                                                                                                                                                                                         Three MonthsEnded
                                                                                                                                                                                                         -----------------
                                                                                                                                                                                 March 31,            March 31,
                                                                                                                                                                                      2012                 2011
                                                                                                                                                                                      ----                 ----
    Cash flows from operating activities
    Net income                                                                                                                                                                               $15,263                 $22,468
    Adjustments to reconcile net income to net cash provided by operating activities
    Depreciation and amortization                                                                                                                                                              7,474                  13,903
    Provision for severance benefits                                                                                                                                                           4,703                   2,854
    Amortization of debt issuance costs and original issue discount                                                                                                                              242                     246
    Gain on foreign currency translation, net                                                                                                                                               (12,824)                (23,684)
    Gain on disposal of property, plant and equipment, net                                                                                                                                      (269)                      -
    Loss on disposal of intangible assets, net                                                                                                                                                    11                       4
    Stock-based compensation                                                                                                                                                                     458                     641
    Other                                                                                                                                                                                        123                     549
    Changes in operating assets and liabilities
    Accounts receivable                                                                                                                                                                        1,339                  (9,250)
    Inventories                                                                                                                                                                               (2,860)                 (3,467)
    Other receivables                                                                                                                                                                         (4,024)                 (1,041)
    Other current assets                                                                                                                                                                       8,536                  (1,449)
    Deferred tax assets                                                                                                                                                                          871                     548
    Accounts payable                                                                                                                                                                          12,581                  14,289
    Other accounts payable                                                                                                                                                                      (298)                 (1,348)
    Accrued expenses                                                                                                                                                                           9,886                   7,153
    Other current liabilities                                                                                                                                                                  2,225                  (1,518)
    Payment of severance benefits                                                                                                                                                             (2,323)                 (1,610)
    Other                                                                                                                                                                                     (1,261)                    (72)
                                                                                                                                                                                              ------                     ---
                                                                                                                                                                                                                              
    Net cash provided by operating activities                                                                                                                                                 39,853                  19,216
                                                                                                                                                                                              ------                  ------
                                                                                                                                                                                                                              
    Cash flows from investing activities
    Decrease in restricted cash                                                                                                                                                                2,995                       -
    Proceeds from disposal of plant, property and equipment                                                                                                                                      273                       -
    Purchase of plant, property and equipment                                                                                                                                               (24,758)                  (6,779)
    Payment for intellectual property registration                                                                                                                                              (190)                   (165)
    Payment for acquisition                                                                                                                                                                   (8,642)                      -
    Decrease in short-term financial instruments                                                                                                                                                 173                       -
    Collection of guarantee deposits                                                                                                                                                              31                     979
    Payment of guarantee deposits                                                                                                                                                               (178)                 (1,004)
    Other                                                                                                                                                                                        (48)                    (44)
                                                                                                                                                                                                 ---                     ---
                                                                                                                                                                                                                              
    Net cash used in investing activities                                                                                                                                                   (30,344)                  (7,013)
                                                                                                                                                                                             -------                  ------
                                                                                                                                                                                                                              
    Cash flows from financing activities
    Proceeds from issuance of common stock                                                                                                                                                       108                  11,425
    Repayment of obligation under capital lease                                                                                                                                               (1,510)                 (1,562)
    Acquisition of treasury stock                                                                                                                                                           (11,935)                       -
                                                                                                                                                                                                                              
    Net cash provided by (used in) financing activities                                                                                                                                     (13,337)                   9,863
    Effect of exchange rates on cash and cash equivalents                                                                                                                                     (1,660)                    (59)
                                                                                                                                                                                              ------                     ---
                                                                                                                                                                                                                                 
    Net increase (decrease) in cash and cash equivalents                                                                                                                                      (5,488)                 22,007
                                                                                                                                                                                              ------                  ------
                                                                                                                                                                                                                              
    Cash and cash equivalents
    Beginning of the period                                                                                                                                                                  162,111                 172,172
                                                                                                                                                                                             -------                 -------
                                                                                                                                                                                                                              
    End of the period                                                                                                                                                                       $156,623                $194,179
                                                                                                                                                                                            ========                ========

SOURCE MagnaChip Semiconductor Corporation

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