UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 28, 2008
or
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number 333-126019-09
MAGNACHIP SEMICONDUCTOR LLC
(Exact name of Registrant as specified in its charter)
Delaware | 83-0406195 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
c/o MagnaChip Semiconductor S.A. 74, rue de Merl, B.P. 709, L-2017 Luxembourg, Grand Duchy of Luxembourg |
Not Applicable | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (352) 45-62-62
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of September 28, 2008, the registrant had 52,923,482.797 of the registrants common units outstanding.
MagnaChip Semiconductor LLC and Subsidiaries
TABLE OF CONTENTS
2
Item 1. | Financial Statements |
MagnaChip Semiconductor LLC and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited; in thousands of US dollars, except unit data)
Three months ended | Nine months ended | |||||||||||||||
September 28, 2008 |
September 30, 2007 |
September 28, 2008 |
September 30, 2007 |
|||||||||||||
Net sales |
$ | 176,012 | $ | 200,045 | $ | 573,740 | $ | 545,881 | ||||||||
Cost of sales |
135,505 | 168,702 | 436,213 | 471,861 | ||||||||||||
Gross profit |
40,507 | 31,343 | 137,527 | 74,020 | ||||||||||||
Selling, general and administrative expenses |
21,226 | 23,644 | 63,460 | 71,904 | ||||||||||||
Research and development expenses |
32,199 | 33,437 | 104,040 | 101,089 | ||||||||||||
Restructuring and impairment charges |
26,285 | | 25,410 | 12,084 | ||||||||||||
Operating loss |
(39,203 | ) | (25,738 | ) | (55,383 | ) | (111,057 | ) | ||||||||
Other income (expenses) |
||||||||||||||||
Interest expense, net |
(15,631 | ) | (15,336 | ) | (47,142 | ) | (44,704 | ) | ||||||||
Foreign currency gain (loss), net |
(81,640 | ) | 4,855 | (155,653 | ) | 11,332 | ||||||||||
Loss before income taxes |
(136,474 | ) | (36,219 | ) | (258,178 | ) | (144,429 | ) | ||||||||
Income tax expenses |
3,317 | 2,547 | 9,103 | 6,643 | ||||||||||||
Net loss |
$ | (139,791 | ) | $ | (38,766 | ) | $ | (267,281 | ) | $ | (151,072 | ) | ||||
Dividends accrued on preferred units |
3,306 | 3,010 | 9,705 | 8,863 | ||||||||||||
Net loss attributable to common units |
$ | (143,097 | ) | $ | (41,776 | ) | $ | (276,986 | ) | $ | (159,935 | ) | ||||
Net loss per common units |
||||||||||||||||
- Basic and diluted |
$ | (2.71 | ) | $ | (0.79 | ) | $ | (5.25 | ) | $ | (3.03 | ) | ||||
Weighted average number of units |
||||||||||||||||
- Basic and diluted |
52,831,904 | 52,814,383 | 52,716,486 | 52,769,273 |
The accompanying notes are an integral part of these financial statements
3
MagnaChip Semiconductor LLC and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited; in thousands of US dollars, except unit data)
September 28, 2008 |
December 31, 2007 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 23,870 | $ | 64,345 | ||||
Accounts receivable, net |
140,441 | 123,789 | ||||||
Inventories, net |
59,768 | 75,867 | ||||||
Other receivables |
5,631 | 5,771 | ||||||
Other current assets |
18,388 | 10,951 | ||||||
Total current assets |
248,098 | 280,723 | ||||||
Property, plant and equipment, net |
204,196 | 279,669 | ||||||
Intangible assets, net |
55,077 | 104,725 | ||||||
Other non-current assets |
39,784 | 42,766 | ||||||
Total assets |
$ | 547,155 | $ | 707,883 | ||||
Liabilities and Unitholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 105,894 | $ | 89,977 | ||||
Other accounts payable |
19,525 | 30,661 | ||||||
Accrued expenses |
24,674 | 18,100 | ||||||
Short-term borrowings |
90,000 | 80,000 | ||||||
Other current liabilities |
4,216 | 6,377 | ||||||
Total current liabilities |
244,309 | 225,115 | ||||||
Long-term borrowings |
750,000 | 750,000 | ||||||
Accrued severance benefits, net |
68,566 | 74,176 | ||||||
Other non-current liabilities |
10,212 | 6,666 | ||||||
Total liabilities |
1,073,087 | 1,055,957 | ||||||
Commitments and contingencies |
||||||||
Series A redeemable convertible preferred units; $1,000 par value; 60,000 units authorized, 50,091 units issued and 0 unit outstanding at September 28, 2008 and December 31, 2007 |
| | ||||||
Series B redeemable convertible preferred units; $1,000 par value; 550,000 units authorized, 450,692 units issued and 93,997 units outstanding at September 28, 2008 and December 31, 2007 |
139,110 | 129,405 | ||||||
Total redeemable convertible preferred units |
139,110 | 129,405 | ||||||
Unitholders equity |
||||||||
Common units; $1 par value; 65,000,000 units authorized, 52,923,483 and 52,844,222 units issued and outstanding at September 28, 2008 and December 31, 2007 |
52,923 | 52,844 | ||||||
Additional paid-in capital |
3,031 | 3,077 | ||||||
Accumulated deficit |
(841,435 | ) | (564,449 | ) | ||||
Accumulated other comprehensive income |
120,439 | 31,049 | ||||||
Total unitholders equity |
(665,042 | ) | (477,479 | ) | ||||
Total liabilities, redeemable convertible preferred units and unitholders equity |
$ | 547,155 | $ | 707,883 | ||||
The accompanying notes are an integral part of these financial statements
4
MagnaChip Semiconductor LLC and Subsidiaries
Condensed Consolidated Statements of Changes in Unitholders Equity
(Unaudited; in thousands of US dollars, except unit data)
Common Units |
Additional Paid-In Capital |
Accumulated deficit |
Accumulated Other Comprehensive Income |
Total | |||||||||||||||||||
Units | Amount | ||||||||||||||||||||||
Three months ended September 28, 2008 |
|||||||||||||||||||||||
Balance at June 30, 2008 |
52,919,108 | $ | 52,919 | $ | 2,900 | $ | (698,338 | ) | $ | 67,068 | $ | (575,451 | ) | ||||||||||
Exercise of unit options |
4,375 | 4 | 7 | | | 11 | |||||||||||||||||
Unit-based compensation |
| | 124 | | | 124 | |||||||||||||||||
Dividends accrued on preferred units |
| | | (3,306 | ) | | (3,306 | ) | |||||||||||||||
Comprehensive income (loss) |
|||||||||||||||||||||||
Net loss |
| | | (139,791 | ) | | (139,791 | ) | |||||||||||||||
Foreign currency translation adjustments |
| | | | 53,371 | 53,371 | |||||||||||||||||
Total comprehensive loss |
(86,420 | ) | |||||||||||||||||||||
Balance at September 28, 2008 |
52,923,483 | $ | 52,923 | $ | 3,031 | $ | (841,435 | ) | $ | 120,439 | $ | (665,042 | ) | ||||||||||
Nine months ended September 28, 2008 |
|||||||||||||||||||||||
Balance at January 1, 2008 |
52,844,222 | $ | 52,844 | $ | 3,077 | $ | (564,449 | ) | $ | 31,049 | $ | (477,479 | ) | ||||||||||
Exercise of unit options |
161,460 | 161 | 22 | | | 183 | |||||||||||||||||
Repurchase of common units |
(82,199 | ) | (82 | ) | (414 | ) | | | (496 | ) | |||||||||||||
Unit-based compensation |
| | 346 | | | 346 | |||||||||||||||||
Dividends accrued on preferred units |
| | | (9,705 | ) | | (9,705 | ) | |||||||||||||||
Comprehensive income (loss) |
|||||||||||||||||||||||
Net loss |
| | | (267,281 | ) | | (267,281 | ) | |||||||||||||||
Fair valuation of derivatives |
| | | | (864 | ) | (864 | ) | |||||||||||||||
Foreign currency translation adjustments |
| | | | 90,254 | 90,254 | |||||||||||||||||
Total comprehensive loss |
(177,891 | ) | |||||||||||||||||||||
Balance at September 28, 2008 |
52,923,483 | $ | 52,923 | $ | 3,031 | $ | (841,435 | ) | $ | 120,439 | $ | (665,042 | ) | ||||||||||
The accompanying notes are an integral part of these financial statements
5
MagnaChip Semiconductor LLC and Subsidiaries
Condensed Consolidated Statements of Changes in Unitholders Equity
(Unaudited; in thousands of US dollars, except unit data)
Common Units |
Additional Paid-In Capital |
Accumulated deficit |
Accumulated Other Comprehensive Income |
Total | ||||||||||||||||
Units | Amount | |||||||||||||||||||
Three months ended September 30, 2007 |
||||||||||||||||||||
Balance at July 2, 2007 |
52,800,784 | $ | 52,801 | $ | 2,521 | $ | (490,027 | ) | $ | 26,143 | $ | (408,562 | ) | |||||||
Exercise of unit options |
30,938 | 31 | | | | 31 | ||||||||||||||
Unit-based compensation |
| | 177 | | | 177 | ||||||||||||||
Dividends accrued on preferred units |
| | | (3,010 | ) | | (3,010 | ) | ||||||||||||
Comprehensive income (loss) |
||||||||||||||||||||
Net loss |
| | | (38,766 | ) | | (38,766 | ) | ||||||||||||
Fair valuation of derivatives |
| | | | (1,326 | ) | (1,326 | ) | ||||||||||||
Foreign currency translation adjustments |
| | | | (745 | ) | (745 | ) | ||||||||||||
Total comprehensive loss |
(40,837 | ) | ||||||||||||||||||
Balance at September 30, 2007 |
52,831,722 | $ | 52,832 | $ | 2,698 | $ | (531,803 | ) | $ | 24,072 | $ | (452,201 | ) | |||||||
Nine months ended September 30, 2007 |
||||||||||||||||||||
Balance at January 1, 2007 |
52,720,784 | $ | 52,721 | $ | 2,451 | $ | (370,314 | ) | $ | 30,601 | $ | (284,541 | ) | |||||||
Exercise of unit options |
110,938 | 111 | | | | 111 | ||||||||||||||
Unit-based compensation |
| | 247 | | | 247 | ||||||||||||||
Dividends accrued on preferred units |
| | | (8,863 | ) | | (8,863 | ) | ||||||||||||
Impact on beginning accumulated deficit upon adoption of FIN 48 |
| | | (1,554 | ) | | (1,554 | ) | ||||||||||||
Comprehensive income (loss) |
||||||||||||||||||||
Net loss |
| | | (151,072 | ) | | (151,072 | ) | ||||||||||||
Fair valuation of derivatives |
| | | | (2,260 | ) | (2,260 | ) | ||||||||||||
Foreign currency translation adjustments |
| | | | (4,269 | ) | (4,269 | ) | ||||||||||||
Total comprehensive loss |
(157,601 | ) | ||||||||||||||||||
Balance at September 30, 2007 |
52,831,722 | $ | 52,832 | $ | 2,698 | $ | (531,803 | ) | $ | 24,072 | $ | (452,201 | ) | |||||||
The accompanying notes are an integral part of these financial statements
6
MagnaChip Semiconductor LLC and Subsidiaries
Condensed Consolidated Statements of Cash Flows
( Unaudited; in thousands of US dollars )
Nine months ended | ||||||||
September 28, 2008 |
September 30, 2007 |
|||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (267,281 | ) | $ | (151,072 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
Depreciation and amortization |
62,752 | 138,787 | ||||||
Provision for severance benefits |
13,444 | 13,985 | ||||||
Amortization of debt issuance costs |
2,988 | 2,913 | ||||||
Loss (gain) on foreign currency translation, net |
155,929 | (9,623 | ) | |||||
Gain on disposal of property, plant and equipment, net |
(3,386 | ) | | |||||
Impairment charges |
26,285 | 10,106 | ||||||
Other |
801 | 361 | ||||||
Changes in operating assets and liabilities |
||||||||
Accounts receivable |
(40,484 | ) | (46,487 | ) | ||||
Inventories |
1,919 | (34,528 | ) | |||||
Other receivables |
(697 | ) | (212 | ) | ||||
Deferred tax assets |
1,067 | 655 | ||||||
Accounts payable |
27,669 | 56,699 | ||||||
Other accounts payable |
(11,796 | ) | (5,012 | ) | ||||
Accrued expenses |
10,701 | 6,118 | ||||||
Other current assets |
(588 | ) | 8,242 | |||||
Other current liabilities |
753 | 2,939 | ||||||
Payment of severance benefits |
(3,618 | ) | (5,913 | ) | ||||
Other |
(3,186 | ) | (1,183 | ) | ||||
Net cash used in operating activities |
(26,728 | ) | (13,225 | ) | ||||
Cash flows from investing activities |
||||||||
Purchase of property, plant and equipment |
(24,894 | ) | (63,967 | ) | ||||
Payment for intellectual property registration |
(970 | ) | (955 | ) | ||||
Proceeds from disposal of property, plant and equipment |
3,390 | 278 | ||||||
Other |
(367 | ) | 208 | |||||
Net cash used in investing activities |
(22,841 | ) | (64,436 | ) | ||||
Cash flows from financing activities |
||||||||
Exercise of unit options |
183 | 111 | ||||||
Repurchase of common units |
(496 | ) | | |||||
Proceeds from short-term borrowings |
175,000 | 70,397 | ||||||
Repayment of short-term borrowings |
(165,000 | ) | (20,000 | ) | ||||
Net cash provided by financing activities |
9,687 | 50,508 | ||||||
Effect of exchange rates on cash and cash equivalents |
(593 | ) | (86 | ) | ||||
Net decrease in cash and cash equivalents |
(40,475 | ) | (27,239 | ) | ||||
Cash and cash equivalents |
||||||||
Beginning of the period |
64,345 | 89,173 | ||||||
End of the period |
$ | 23,870 | $ | 61,934 | ||||
The accompanying notes are an integral part of these financial statements
7
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited; tabular dollars in thousands, except unit data)
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of MagnaChip Semiconductor LLC and its subsidiaries (the Company) have been prepared in accordance with Accounting Principle Board (APB) Opinion No. 28, Interim Financial Reporting regarding interim financial information and, accordingly, do not include all of the information and note disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. In the opinion of the Companys management, the unaudited interim condensed consolidated financial statements include all normal recurring adjustments necessary to fairly present the information required to be set forth therein. All inter-company accounts and transactions have been eliminated. The results of operations for the nine-month period ended September 28, 2008 are not necessarily indicative of the results to be expected for a full year or for any other periods.
The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 141 (revised 2007), Business Combinations (SFAS 141R), which replaces FASB Statement No. 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. This statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141R is effective as of the beginning of an entitys fiscal year that begins after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 141R on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementamendments of ARB No. 51 (SFAS 160). SFAS 160 states that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement is effective as of the beginning of an entitys first fiscal year beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities including an amendment of FASB Statement No. 115 (SFAS 159), which permits all entities to choose to measure many financial instruments and certain other items at fair value and consequently report unrealized gains and losses on these items in earnings. SFAS 159 was effective for the Companys fiscal year beginning January 1, 2008. The Company has not elected the fair value option to measure certain financial instruments. The adoption of SFAS 159 does not have a material impact on the Companys consolidated financial position, results of operations or cash flows.
The Company adopted the provisions of SFAS No. 157, Fair Value Measurements (SFAS 157) on January 1, 2008. SFAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. SFAS 157 does not expand or require any new fair value measures, however the application of this statement may change current practice. In February 2008, the FASB decided that an entity need not apply this standard to nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until 2009. Accordingly, the Companys adoption of this standard in 2008 was limited to financial assets and liabilities, which primarily affects the valuation of its derivative contract. The adoption of SFAS 157 does not have a material effect on the Companys financial condition or results of operations. The Company is still in the process of evaluating this standard with respect to its effect on nonfinancial assets and liabilities and therefore has not yet determined the impact that it will have on its consolidated financial statements upon full adoption in 2009. Nonfinancial assets and liabilities for which the Company has not applied the provisions of SFAS 157 include those measured at fair value in impairment testing and those initially measured at fair value in a business combination.
8
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
2. Inventories
Inventories as of September 28, 2008 and December 31, 2007 consist of the following:
September 28, 2008 |
December 31, 2007 |
|||||||
Finished goods |
$ | 12,503 | $ | 19,557 | ||||
Semi-finished goods and work-in-process |
52,984 | 56,877 | ||||||
Raw materials |
7,123 | 7,498 | ||||||
Materials in-transit |
360 | 555 | ||||||
Less: valuation allowances |
(13,202 | ) | (8,620 | ) | ||||
Inventories, net |
$ | 59,768 | $ | 75,867 | ||||
3. Property, Plant and Equipment
Property, plant and equipment as of September 28, 2008 and December 31, 2007 comprise the following:
September 28, 2008 |
December 31, 2007 |
|||||||
Buildings and related structures |
$ | 121,765 | $ | 150,951 | ||||
Machinery and equipment |
350,463 | 429,259 | ||||||
Vehicles and others |
45,024 | 54,556 | ||||||
517,252 | 634,766 | |||||||
Less: accumulated depreciation |
(323,062 | ) | (367,501 | ) | ||||
Land |
10,006 | 12,404 | ||||||
Property, plant and equipment, net |
$ | 204,196 | $ | 279,669 | ||||
During the third quarter ended September 28, 2008, the Company recognized impairment charges on tangible assets of $10,169 thousand under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). The impairment charges were recorded related to the closure of the Companys Imaging Solutions Division, which generated losses and is expected to be closed by the second fiscal quarter of 2009.
4. Intangible Assets
Intangible assets as of September 28, 2008 and December 31, 2007 are as follows:
September 28, 2008 |
December 31, 2007 |
|||||||
Technology |
$ | 15,399 | $ | 21,157 | ||||
Customer relationships |
120,364 | 169,300 | ||||||
Goodwill |
14,245 | 14,245 | ||||||
Intellectual property assets |
6,439 | 9,320 | ||||||
Less: accumulated amortization |
(101,370 | ) | (109,297 | ) | ||||
Intangible assets, net |
$ | 55,077 | $ | 104,725 | ||||
During the third quarter ended September 28, 2008, the Company recognized impairment charges on intangible assets of $16,116 thousand under SFAS 144. The impairment charges were recorded related to the closure of the Companys Imaging Solutions Division, which generated losses and is expected to be closed by the second fiscal quarter of 2009.
9
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Goodwill has resulted from the acquisition of ISRON Corporation on March 6, 2005. On an ongoing basis, the Company evaluates goodwill at the reporting unit level for indications of potential impairment. Goodwill is tested for impairment based on the present value of discounted cash flows, and, if impaired, written down to fair value based on discounted cash flows. The Company performs its annual goodwill impairment test during the first quarter of each fiscal year, as well as any additional impairment test required on an event-driven basis. In the first quarter of each of fiscal 2008 and 2007, the Company performed its annual goodwill impairment test and determined that goodwill was not impaired.
5. Short-term borrowings
On December 23, 2004, the Company and its subsidiaries, including MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, as borrowers, entered into a senior credit agreement with a syndicate of banks, financial institutions and other entities providing for a $100 million senior secured revolving credit facility. Interest is charged at current rates when drawn upon.
Presently, borrowings under the credit agreement bear interest equal to the 3-month London Inter-bank Offering Rate (LIBOR) plus 4.75% or Alternate Base Rate (ABR) plus 3.75%. Additionally, the Company is required to pay the administrative agent for the account of each lender a commitment fee equal to 0.5% on the average daily unused amount of the commitment of each lender during the period from December 23, 2004 to but excluding the date on which such commitments terminate. As of September 28, 2008 and December 31, 2007, the Company had borrowed $90 million and $80 million, respectively, under this credit agreement.
Borrowings under the senior secured credit facility are subject to significant conditions, including compliance with financial ratios and other covenants and obligations.
Short-term borrowings as of September 28, 2008 and December 31, 2007 are presented as below:
As of September 28, 2008 | Amount of principal | |||||||||
Maturity | Annual interest rate (%) | September 28, 2008 |
December 31, 2007 | |||||||
Euro dollar Revolving Loan |
2008-08-29 ~ 2008-10-24 | 3 month LIBOR + 4.75 | $ | 88,000 | $ | 30,000 | ||||
ABR Revolving Loan |
2008-09-25 ~ 2008-12-31 | ABR + 3.75 | 2,000 | 50,000 | ||||||
$ | 90,000 | $ | 80,000 | |||||||
6. Long-term Borrowings
On December 23, 2004, two of the Companys subsidiaries, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company issued $500 million aggregate principal amount of Second Priority Senior Secured Notes consisting of $300 million aggregate principal amount of Floating Rate Second Priority Senior Secured Notes and $200 million aggregate principal amount of 6 7/8% Second Priority Senior Secured Notes. At the same time, such subsidiaries issued $250 million aggregate principal amount of 8% Senior Subordinated Notes.
Details of long-term borrowings as of September 28, 2008 and December 31, 2007 are presented as below:
Maturity | Annual interest rate (%) | Amount of principal | |||||
Floating Rate Second Priority Senior Secured Notes |
2011 | 3 month LIBOR + 3.250 | $ | 300,000 | |||
6 7/8% Second Priority Senior Secured Notes |
2011 | 6.875 | 200,000 | ||||
8% Senior Subordinated Notes |
2014 | 8.000 | 250,000 | ||||
$ | 750,000 | ||||||
The senior secured revolving credit facility and Second Priority Senior Secured Notes are collateralized by substantially all of the assets of the Company. The notes are due in full upon maturity.
Each indenture governing the notes contains covenants that limit the ability of the Company and its subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or make other distributions on its capital stock or repurchase, repay or redeem its capital stock, (iii) make certain investments, (iv) incur liens, (v) enter into certain types of transactions with affiliates, (vi) create restrictions on the payment of dividends or other amounts to the Company by its subsidiaries, and (vii) sell all or substantially all of its assets or merge with or into other companies.
10
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
As of September 28, 2008, the Company and all of its subsidiaries except for MagnaChip Semiconductor (Shanghai) Company Limited have jointly and severally guaranteed each series of the Second Priority Senior Secured Notes on a second priority senior secured basis. As of September 28, 2008, the Company and all of its subsidiaries except for MagnaChip Semiconductor Ltd. (Korea) and MagnaChip Semiconductor (Shanghai) Company Limited have jointly and severally guaranteed the Senior Subordinated Notes on an unsecured, senior subordinated basis. In addition, the Company and each of its current and future direct and indirect subsidiaries (subject to certain exceptions) will be guarantors of the Second Priority Senior Secured Notes and Senior Subordinated Notes.
Interest Rate Swap
Effective June 27, 2005, the Company entered into an interest rate swap agreement (the Swap) to hedge the effect of the volatility of the 3-month London Inter-Bank Offering Rate (LIBOR) resulting from the Companys $300 million of Floating Rate Second Priority Senior Secured Notes. Under the terms of the Swap, the Company received a variable interest rate equal to the three-month LIBOR rate plus 3.25%. In exchange, the Company paid interest at a fixed rate of 7.34%. The Swap effectively replaced the variable interest rate on the notes with a fixed interest rate through the expiration date of the Swap on June 15, 2008.
The Swap qualified as a cash flow hedge under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, since at both the inception of the hedge and on an ongoing basis, the hedging relationship was expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the hedge. The Company utilized the hypothetical derivative method to measure the effectiveness by comparing the changes in value of the actual derivative versus the change in fair value of the hypothetical derivative.
The Swap agreement expired on June 15, 2008.
11
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
7. Accrued Severance Benefits
The majority of accrued severance benefits is for employees in the Companys Korean subsidiary. Pursuant to the Labor Standards Act of Korea, most employees and executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of September 28, 2008, 98% of all employees of the Company were eligible for severance benefits.
Changes in the carrying value of accrued severance benefits are as follows:
Three months ended | Nine months ended | |||||||||||||||||
September 28, 2008 |
September 30, 2007 |
September 28, 2008 |
September 30, 2007 |
|||||||||||||||
Beginning balance |
$ | 72,109 | $ | 70,182 | $ | 75,869 | $ | 64,642 | ||||||||||
Provisions |
6,553 | 4,605 | 13,444 | 13,985 | ||||||||||||||
Severance payments |
(823 | ) | (1,511 | ) | (3,618 | ) | (5,913 | ) | ||||||||||
Effect of foreign currency translation and other |
(7,932 | ) | 763 | (15,788 | ) | 1,325 | ||||||||||||
Ending balance |
69,907 | 74,039 | 69,907 | 74,039 | ||||||||||||||
Less: |
Cumulative contributions to the National Pension Fund |
(607 | ) | (813 | ) | (607 | ) | (813 | ) | |||||||||
Group Severance insurance plan |
(734 | ) | (919 | ) | (734 | ) | (919 | ) | ||||||||||
$ | 68,566 | $ | 72,307 | $ | 68,566 | $ | 72,307 | |||||||||||
The severance benefits are funded approximately 1.92% and 2.34% as of September 28, 2008 and September 30, 2007, respectively, through the Companys National Pension Fund and group severance insurance plan which will be used exclusively for payment of severance benefits to eligible employees. These amounts have been deducted from the accrued severance benefit balance.
The Company has liability to pay the following future benefits to its employees upon their normal retirement age:
Severance benefit | |||
2009 |
$ | 51 | |
2010 |
34 | ||
2011 |
68 | ||
2012 |
140 | ||
2013 |
173 | ||
2014 2018 |
6,654 |
The above amounts were determined based on the employees current salary rates and the number of service years that will be accumulated upon their retirement dates. These amounts do not include amounts that might be paid to employees that will cease working with the Company before their normal retirement ages.
12
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
8. Redeemable Convertible Preferred Units
The Company issued 49,727 units as Series A redeemable convertible preferred units (the Series A) and 447,420 units as Series B redeemable convertible preferred units (the Series B) on September 23, 2004 and additionally issued 364 units of Series A and 3,272 units of Series B on November 30, 2004, respectively. All of Series A were redeemed by cash on December 27, 2004 and some of the Series B were redeemed by cash on December 15, 2004 and December 27, 2004.
Changes in Series B for the three and nine months ended September 28, 2008 and September 30, 2007 are as follows:
Three months ended | ||||||||||
September 28, 2008 |
September 30, 2007 | |||||||||
Units | Amount | Units | Amount | |||||||
Beginning of period |
93,997 | $ | 135,804 | 93,997 | $ | 123,227 | ||||
Accrual of preferred dividends |
| 3,306 | | 3,010 | ||||||
End of period |
93,997 | $ | 139,110 | 93,997 | $ | 126,237 | ||||
Nine months ended | ||||||||||
September 28, 2008 |
September 30, 2007 | |||||||||
Units | Amount | Units | Amount | |||||||
Beginning of period |
93,997 | $ | 129,405 | 93,997 | $ | 117,374 | ||||
Accrual of preferred dividends |
| 9,705 | | 8,863 | ||||||
End of period |
93,997 | $ | 139,110 | 93,997 | $ | 126,237 | ||||
The Series B were issued to the original purchasers of the Company in 2004. Holders of Series B receive dividends which are cumulative, whether or not earned or declared by the board of directors. The cumulative cash dividends accrue at the rate of 10% per unit per annum on the Series B original issue price, compounded semi-annually.
9. Earnings per Unit
The following table illustrates the computation of basic and diluted loss per common unit for the three-month and nine-month periods ended September 28, 2008 and September 30, 2007:
Three months ended | Nine months ended | |||||||||||||||
September 28, 2008 |
September 30, 2007 |
September 28, 2008 |
September 30, 2007 |
|||||||||||||
Net loss |
$ | (139,791 | ) | $ | (38,766 | ) | $ | (267,281 | ) | $ | (151,072 | ) | ||||
Dividends to preferred unitholders |
3,306 | 3,010 | 9,705 | 8,863 | ||||||||||||
Net loss attributable to common units |
$ | (143,097 | ) | $ | (41,776 | ) | $ | (276,986 | ) | $ | (159,935 | ) | ||||
Weighted-average common units outstanding |
52,831,904 | 52,814,383 | 52,716,486 | 52,769,273 | ||||||||||||
Basic and diluted loss per unit |
$ | (2.71 | ) | $ | (0.79 | ) | $ | (5.25 | ) | $ | (3.03 | ) | ||||
The following outstanding redeemable convertible preferred units issued, options granted and restricted units issued were excluded from the computation of diluted loss per unit as they would have an anti-dilutive effect on the calculation:
Nine months ended | ||||
September 28, 2008 |
September 30, 2007 | |||
Redeemable convertible preferred units |
93,997 | 93,997 | ||
Options |
4,867,288 | 4,956,434 | ||
Restricted units |
91,531 | 356,749 |
13
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
10. Restructuring and Impairment Charges
Assets impairment
A. Imaging Solutions Division
During the third quarter ended September 28, 2008, the Company recognized impairment charges of $26,285 thousand under SFAS 144. The impairment charges were recorded related to the closure of the Companys Imaging Solutions Division that has generated losses and that we expect to be closed by the second fiscal quarter of 2009.
B. Five-Inch Wafer Fabrication Facilities
In the second quarter of 2007, the Company recognized impairment charges of $10,106 thousand under SFAS 144. The impairment charges were recorded related to the closure of one of the Companys five-inch wafer fabrication facilities that has generated losses and no longer supported the Companys strategic technology roadmap.
SFAS 144 requires the Company to evaluate the recoverability of certain long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. All of the net book value of the Imaging Solutions Division asset group was entirely written off during the third quarter ended September 28, 2008. The net book value of the five-inch wafer fabrication asset group before the impairment charges as of July 1, 2007 was approximately $10,228 thousand.
The impairment charge was measured as an excess of the carrying value of the asset group over its fair value. The fair value of the asset group was estimated using a present value technique, where expected future cash flows from the use and eventual disposal of the asset group were discounted by an interest rate commensurate with the risk of the cash flows.
Restructuring
During the three months ended July 1, 2007, the Company recognized $1,978 thousand of restructuring accruals under SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146). The restructuring charges were related to the closure of the Companys five-inch wafer fabrication facilities and those charges consisted of one-time termination benefits, transfer of machinery and other associated costs. Up to the first quarter of 2008, actual payments were charged against the restructuring accruals and the Company believes the restructuring activities were substantially completed as of March 30, 2008. Accordingly, the Company reversed $875 thousand of unused restructuring accruals.
11. Uncertainty in Income Taxes
The Companys subsidiaries file income tax returns in Korea, Japan, Taiwan, U.S. and other various jurisdictions. The Company is subject to income tax examinations by tax authorities of these jurisdictions for all years since the beginning of its operation in October 2004.
The Company adopted the provisions of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxesan interpretation of SFAS No. 109 (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $1,554 thousand of liabilities for unrecognized tax benefit, which are related to the temporary difference arising from the timing of expensing certain inventories. Such liabilities were accounted for as an increase to the January 1, 2007 balance of accumulated deficits. As of September 28, 2008 and September 30, 2007, the Company recorded $1,488 thousand and $1,724 thousand of liabilities for unrecognized tax benefits, respectively.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expenses. The Company recognized $36 thousand and $112 thousand of interest and penalties as income tax expenses for the three and nine months ended September 28, 2008, respectively. And it also recognized $41 thousand and $121 thousand of interest and penalties as income tax expenses for the three and nine months ended September 30, 2007, respectively. Total interest and penalties accrued as of September 28, 2008, September 30, 2007 and as of the FIN 48 adoption date were $658 thousand, $670 thousand and $530 thousand, respectively.
14
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
12. Segment Information
The Company has determined, based on the nature of its operations and products offered to customers, that its reportable segments are Display Solutions, Imaging Solutions, Semiconductor Manufacturing Services and Power Solutions. On October 6, 2008, the Company announced the closure of the Companys Imaging Solutions business segment, subject to support for existing customers. The Company expects the Imaging Solutions business segment to be closed by the second fiscal quarter of 2009. The Display Solutions segments primary products are flat panel display drivers and the Imaging Solutions segments primary products are CMOS image sensors. The Semiconductor Manufacturing Service segment provides for wafer foundry services to clients. The Power Solutions segments primary products are MOSFETs, analog switches, DC-DC converters and linear regulators. Net sales and gross profit for the All other category primarily relates to certain business activities that do not constitute operating or reportable segments.
The Companys chief operating decision maker (CODM) as defined by SFAS No. 131, Disclosure about Segments of an Enterprise and Relate Information, allocates resources to and assesses the performance of each segment using information about its revenue and gross profit. The Company does not identify or allocate assets by segments, nor does the CODM evaluate operating segments using discrete asset information. In addition, the Company does not allocate operating expense, interest income or expense, other income or expense, or income tax to the segments. Management does not evaluate segments based on these criteria. The following sets forth information relating to the reportable segments:
Three months ended | |||||||
September 28, 2008 |
September 30, 2007 | ||||||
Net Sales |
|||||||
Display Solutions |
$ | 76,344 | $ | 79,344 | |||
Imaging Solutions |
18,375 | 22,425 | |||||
Semiconductor Manufacturing Services |
77,308 | 84,770 | |||||
Power Solutions |
2,934 | | |||||
All other |
1,051 | 13,506 | |||||
Total segment net sales |
$ | 176,012 | $ | 200,045 | |||
Gross Profit (Loss) |
|||||||
Display Solutions |
$ | 14,569 | $ | 4,660 | |||
Imaging Solutions |
(766 | ) | 2,666 | ||||
Semiconductor Manufacturing Services |
25,934 | 17,184 | |||||
Power Solutions |
(285 | ) | | ||||
All other |
1,055 | 6,833 | |||||
Total segment gross profit |
$ | 40,507 | $ | 31,343 | |||
15
Nine months ended | |||||||
September 28, 2008 |
September 30, 2007 | ||||||
Net Sales |
|||||||
Display Solutions |
$ | 253,967 | $ | 223,327 | |||
Imaging Solutions |
63,585 | 51,568 | |||||
Semiconductor Manufacturing Services |
246,846 | 217,611 | |||||
Power Solutions |
5,025 | | |||||
All other |
4,317 | 53,375 | |||||
Total segment net sales |
$ | 573,740 | $ | 545,881 | |||
Gross Profit (Loss) |
|||||||
Display Solutions |
$ | 53,085 | $ | 19,885 | |||
Imaging Solutions |
(1,737 | ) | 2,517 | ||||
Semiconductor Manufacturing Services |
83,032 | 31,747 | |||||
Power Solutions |
77 | | |||||
All other |
3,070 | 19,871 | |||||
Total segment gross profit |
$ | 137,527 | $ | 74,020 | |||
16
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
As of September 28, 2008, approximately 99% of the Companys property, plant and equipment were located in Korea.
Net sales from the Companys ten largest customers accounted for 59.4% and 56.7% for the three months ended September 28, 2008 and September 30, 2007, respectively, and 58.8% and 61.6% for the nine months ended September 28, 2008 and September 30, 2007, respectively.
The Company recorded $38.4 million and $35.7 million of sales to one customer within the Display Solutions segment, which represents greater than 10% of net sales, for the three months ended September 28, 2008 and September 30, 2007, respectively, and $129.6 million and $131.1 million for the nine months ended September 28, 2008 and September 30, 2007, respectively.
13. Commitments and Contingencies
Advisory agreements were entered into as of October 6, 2004 by and between the Company and each of the advisors including Court Square Advisor, LLC (successor in interest to CVC Management LLC) (Court Square), CVC Capital Partners Asia Limited (CVC Capital) and Francisco Partners Management LLC (Francisco Partners). The Company was to pay each of Court Square and Francisco Partners an annual advisory fee the amount of which shall be the greater of $1,379,163 per annum or 0.14777% per annum of annual consolidated revenue, and is also to pay CVC Capital an annual advisory fee the amount of which shall be the greater of $741,673 per annum or 0.07946% per annum of annual consolidated revenue plus reasonable out-of-pocket expenses for an initial term of 10 years (subsequently extended for an additional year), subject to termination by either party upon written notice 90 days prior to the expiration of the initial term or any extension thereof. During the year ended December 31, 2005 and the three-month period ended December 31, 2004, the Company accrued $3,545 thousand and $890 thousand of accrued expenses under these agreements, respectively. During the year ended December 31, 2006, due to lower financial performances, the advisors agreed to waive the advisory fee and, therefore, the Company did not accrue any expenses. Effective June 30, 2007, the parties to the advisory agreements entered into that certain First Amendment to Advisory Agreement (the Amendment) under which all rights and obligations of the parties terminate except for indemnity and liability provisions. The Amendment provides that upon a sale of the Company to an unaffiliated third party or a firmly underwritten public offering of common equity of the Company with net proceeds of $50 million or more, the Company must pay a termination fee to the advisors in the amount of all advisory fees not paid under the advisory agreements plus the net present value of all advisory fees that would have been payable through October 6, 2014 had the advisory agreements not been amended. The amount of the termination fee will be determined through discussions between the parties to the advisory agreements, and the Company currently expects the termination fee will be approximately $9.8 million.
The Company has made a contingent commitment to its employees that it will pay an incentive of approximately $30 million in total in the event of an initial public offering of the Companys equity. This incentive payment is subject to managements discretion and would be distributed to all employees other than senior management.
14. Liquidity and Capital Resources
The Company has funded its operations largely through the issuance of debt. The Company has incurred substantial losses and negative cash flows from its operations and has an accumulated deficit of $841.4 million as of September 28, 2008. For the nine months ended September 28, 2008, the Company incurred a loss from operations of $55.4 million and negative cash flows from operations of $26.7 million. The business climate in 2008 continues to be extremely difficult. The Company expects operating losses and negative cash flows from operations to continue in the short-term, and as a result, the Company could default under its senior secured credit facility, Second Priority Senior Secured Notes, and Senior Subordinated Notes. The Companys management currently forecasts that the Company will fail to meet certain of its financial covenants under its senior secured credit facility as of October 31, 2008. Failure to negotiate a waiver or forbearance of any resulting default under the senior secured credit facility would permit the agent and the lenders under the senior secured credit facility to accelerate the maturity of all outstanding amounts under such facility and demand immediate payment. If all of the obligations under the senior secured credit facility are accelerated, the trustee under the indentures governing the Companys Second Priority Senior Secured Notes and Senior Subordinated Notes, or the requisite number of noteholders, may also demand immediate payment of all outstanding amounts under such notes. The Company is currently unable to make such a payment.
In addition, failure to generate sufficient revenue, potentially raise additional capital, restructure debt or lease agreements, or reduce operating expenses could have a material adverse effect on the Companys financial condition. Accordingly, the Company has retained financial and legal advisors to assist the Company in evaluating options to improve the Companys financial condition, and the Company is currently in negotiations with its lenders.
The Board of Directors of the Company has engaged Miller Buckfire & Co., LLC to assist in reviewing the Companys strategic and financial alternatives. From an operational perspective, the Company continues to address cost management, cash and working capital management, and the timely release of new products. However, there can be no assurance that any of the strategic alternatives being considered by the Company will be successful or that the Companys results of operations, cash flows and financial position will improve absent successful execution of some or all of the alternatives under consideration.
As of September 28, 2008, the Company was compliant with all of its financial covenants under the terms of its senior secured credit facility, Second Priority Senior Secured Notes, and Senior Subordinated Notes. Accordingly, amounts outstanding under the Second Priority Senior Secured Notes and Senior Subordinated Notes have been classified as non-current obligations in the Companys September 28, 2008, balance sheet.
15. Condensed Consolidating Financial Statements
The senior secured credit facility and Second Priority Senior Secured Notes are each fully and unconditionally guaranteed by the Company and all of its subsidiaries, except for MagnaChip Semiconductor (Shanghai) Company Limited. The Senior Subordinated
17
Notes are fully and unconditionally guaranteed by the Company and all of its subsidiaries, except for MagnaChip Semiconductor, Ltd. (Korea) and MagnaChip Semiconductor (Shanghai) Company Limited. The Senior Subordinated Notes are structurally subordinated to the creditors of our principal manufacturing subsidiary, MagnaChip Semiconductor, Ltd. (Korea), which accounts for a majority of our net sales and substantially all of our assets.
Below are condensed consolidating balance sheets as of September 28, 2008 and December 31, 2007, condensed consolidating statements of operations for the three months and nine months ended September 28, 2008 and September 30, 2007 and condensed consolidating statement of cash flows for the nine months ended September 28, 2008 and September 30, 2007 of those entities that guarantee the Senior Subordinated Notes, those that do not, MagnaChip Semiconductor LLC, and the co-issuers.
18
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Statement of Operations
For the three months ended September 28, 2008
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 170,869 | $ | 100,621 | $ | (95,478 | ) | $ | 176,012 | |||||||||||
Cost of sales |
| | 134,491 | 88,006 | (86,992 | ) | 135,505 | |||||||||||||||||
Gross profit |
| | 36,378 | 12,615 | (8,486 | ) | 40,507 | |||||||||||||||||
Selling, general and administrative expenses |
79 | 193 | 16,930 | 4,188 | (164 | ) | 21,226 | |||||||||||||||||
Research and development expenses |
| | 33,024 | 7,666 | (8,491 | ) | 32,199 | |||||||||||||||||
Restructuring and impairment charges |
| | 23,973 | 2,312 | | 26,285 | ||||||||||||||||||
Operating income (loss) |
(79 | ) | (193 | ) | (37,549 | ) | (1,551 | ) | 169 | (39,203 | ) | |||||||||||||
Other income (expenses) |
| (16,197 | ) | (96,897 | ) | 15,823 | | (97,271 | ) | |||||||||||||||
Income (loss) before income taxes, equity in earnings (loss) of related equity investment |
(79 | ) | (16,390 | ) | (134,446 | ) | 14,272 | 169 | (136,474 | ) | ||||||||||||||
Income tax expenses (benefit) |
| (320 | ) | 35 | 3,602 | | 3,317 | |||||||||||||||||
Loss before equity in loss of related investment |
(79 | ) | (16,070 | ) | (134,481 | ) | 10,670 | 169 | (139,791 | ) | ||||||||||||||
Loss of related investment |
(139,712 | ) | (120,731 | ) | | (134,342 | ) | 394,785 | | |||||||||||||||
Net loss |
$ | (139,791 | ) | $ | (136,801 | ) | $ | (134,481 | ) | $ | (123,672 | ) | $ | 394,954 | $ | (139,791 | ) | |||||||
Dividends accrued on preferred units |
3,306 | | | | | 3,306 | ||||||||||||||||||
Net loss attributable to common units |
$ | (143,097 | ) | $ | (136,801 | ) | $ | (134,481 | ) | $ | (123,672 | ) | $ | 394,954 | $ | (143,097 | ) | |||||||
19
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Statement of Operations
For the nine months ended September 28, 2008
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 553,846 | $ | 308,106 | $ | (288,212 | ) | $ | 573,740 | |||||||||||
Cost of sales |
| | 430,348 | 268,451 | (262,586 | ) | 436,213 | |||||||||||||||||
Gross profit |
| | 123,498 | 39,655 | (25,626 | ) | 137,527 | |||||||||||||||||
Selling, general and administrative expenses |
292 | 887 | 51,355 | 11,451 | (525 | ) | 63,460 | |||||||||||||||||
Research and development expenses |
| | 106,215 | 23,591 | (25,766 | ) | 104,040 | |||||||||||||||||
Restructuring and impairment charges |
| | 23,098 | 2,312 | | 25,410 | ||||||||||||||||||
Operating income (loss) |
(292 | ) | (887 | ) | (57,170 | ) | 2,301 | 665 | (55,383 | ) | ||||||||||||||
Other income (expenses) |
| (6,644 | ) | (198,655 | ) | 2,504 | | (202,795 | ) | |||||||||||||||
Income (loss) before income taxes, equity in earnings (loss) of related equity investment |
(292 | ) | (7,531 | ) | (255,825 | ) | 4,805 | 665 | (258,178 | ) | ||||||||||||||
Income tax expenses |
| 284 | 116 | 8,703 | | 9,103 | ||||||||||||||||||
Income (loss) before equity in loss of related investment |
(292 | ) | (7,815 | ) | (255,941 | ) | (3,898 | ) | 665 | (267,281 | ) | |||||||||||||
Loss of related investment |
(266,989 | ) | (256,803 | ) | | (254,503 | ) | 778,295 | | |||||||||||||||
Net loss |
$ | (267,281 | ) | $ | (264,618 | ) | $ | (255,941 | ) | $ | (258,401 | ) | $ | 778,960 | $ | (267,281 | ) | |||||||
Dividends accrued on preferred units |
9,705 | | | | | 9,705 | ||||||||||||||||||
Net loss attributable to common units |
$ | (276,986 | ) | $ | (264,618 | ) | $ | (255,941 | ) | $ | (258,401 | ) | $ | 778,960 | $ | (276,986 | ) | |||||||
20
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Statement of Operations
For the three months ended September 30, 2007
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 197,287 | $ | 98,087 | $ | (95,329 | ) | $ | 200,045 | |||||||||||
Cost of sales |
| | 170,083 | 86,651 | (88,032 | ) | 168,702 | |||||||||||||||||
Gross profit |
| | 27,204 | 11,436 | (7,297 | ) | 31,343 | |||||||||||||||||
Selling, general and administrative expenses |
76 | 365 | 19,741 | 3,589 | (127 | ) | 23,644 | |||||||||||||||||
Research and development expenses |
| | 33,737 | 6,456 | (6,756 | ) | 33,437 | |||||||||||||||||
Restructuring and Impairment charges |
| | | | | | ||||||||||||||||||
Operating income (loss) |
(76 | ) | (365 | ) | (26,274 | ) | 1,391 | (414 | ) | (25,738 | ) | |||||||||||||
Other income (expenses) |
1 | 7,142 | (8,030 | ) | (9,594 | ) | | (10,481 | ) | |||||||||||||||
Income (loss) before income taxes, equity in earning (loss) of related equity investment |
(75 | ) | 6,777 | (34,304 | ) | (8,203 | ) | (414 | ) | (36,219 | ) | |||||||||||||
Income tax expenses |
| 43 | 81 | 2,423 | | 2,547 | ||||||||||||||||||
Loss before equity in loss of related investment |
(75 | ) | 6,734 | (34,385 | ) | (10,626 | ) | (414 | ) | (38,766 | ) | |||||||||||||
Earning (loss) of related investment |
(38,691 | ) | (45,603 | ) | | (34,782 | ) | 119,076 | | |||||||||||||||
Net loss |
$ | (38,766 | ) | $ | (38,869 | ) | $ | (34,385 | ) | $ | (45,408 | ) | $ | 118,662 | $ | (38,766 | ) | |||||||
Dividends accrued on preferred units |
3,010 | | | | | 3,010 | ||||||||||||||||||
Net loss attributable to common units |
$ | (41,776 | ) | $ | (38,869 | ) | $ | (34,385 | ) | $ | (45,408 | ) | $ | 118,662 | $ | (41,776 | ) | |||||||
21
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Statement of Operations
For the nine months ended September 30, 2007
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | | $ | 532,544 | $ | 235,186 | $ | (221,849 | ) | $ | 545,881 | |||||||||||
Cost of sales |
| | 471,123 | 204,483 | (203,745 | ) | 471,861 | |||||||||||||||||
Gross profit |
| | 61,421 | 30,703 | (18,104 | ) | 74,020 | |||||||||||||||||
Selling, general and administrative expenses |
321 | 926 | 60,448 | 10,272 | (63 | ) | 71,904 | |||||||||||||||||
Research and development expenses |
| | 101,813 | 16,681 | (17,405 | ) | 101,089 | |||||||||||||||||
Restructuring and Impairment charges |
| | 12,084 | | | 12,084 | ||||||||||||||||||
Operating income (loss) |
(321 | ) | (926 | ) | (112,924 | ) | 3,750 | (636 | ) | (111,057 | ) | |||||||||||||
Other income (expenses) |
1 | 4,512 | (28,045 | ) | (9,840 | ) | | (33,372 | ) | |||||||||||||||
Income (loss) before income taxes, equity in earnings (loss) of related equity investment |
(320 | ) | 3,586 | (140,969 | ) | (6,090 | ) | (636 | ) | (144,429 | ) | |||||||||||||
Income tax expenses |
| 128 | 115 | 6,400 | | 6,643 | ||||||||||||||||||
Loss before equity in loss of related investment |
(320 | ) | 3,458 | (141,084 | ) | (12,490 | ) | (636 | ) | (151,072 | ) | |||||||||||||
Loss of related investment |
(150,752 | ) | (154,605 | ) | | (141,451 | ) | 446,808 | | |||||||||||||||
Net loss |
$ | (151,072 | ) | $ | (151,147 | ) | $ | (141,084 | ) | $ | (153,941 | ) | $ | 446,172 | $ | (151,072 | ) | |||||||
Dividends accrued on preferred units |
8,863 | | | | | 8,863 | ||||||||||||||||||
Net loss attributable to common units |
$ | (159,935 | ) | $ | (151,147 | ) | $ | (141,084 | ) | $ | (153,941 | ) | $ | 446,172 | $ | (159,935 | ) | |||||||
22
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Balance Sheet
September 28, 2008
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 250 | $ | 57 | $ | 20,697 | $ | 2,866 | $ | | $ | 23,870 | ||||||||||||
Accounts receivable, net |
| | 146,993 | 94,140 | (100,692 | ) | 140,441 | |||||||||||||||||
Inventories, net |
| | 59,506 | 262 | | 59,768 | ||||||||||||||||||
Other receivables |
| 718 | 8,492 | 5,990 | (9,569 | ) | 5,631 | |||||||||||||||||
Short-term inter-company loans |
| 90,000 | | 90,000 | (180,000 | ) | | |||||||||||||||||
Other current assets |
3,185 | 11,230 | 15,574 | 14,458 | (26,059 | ) | 18,388 | |||||||||||||||||
Total current assets |
3,435 | 102,005 | 251,262 | 207,716 | (316,320 | ) | 248,098 | |||||||||||||||||
Property, plant and equipment, net |
| | 201,508 | 2,688 | | 204,196 | ||||||||||||||||||
Intangible assets, net |
| | 38,394 | 16,812 | (129 | ) | 55,077 | |||||||||||||||||
Investments in subsidiaries |
(525,615 | ) | (597,905 | ) | | (408,743 | ) | 1,532,263 | | |||||||||||||||
Long-term inter-company loans |
| 809,664 | | 635,574 | (1,445,238 | ) | | |||||||||||||||||
Other non-current assets |
| 11,618 | 36,380 | 9,204 | (17,418 | ) | 39,784 | |||||||||||||||||
Total assets |
$ | (522,180 | ) | $ | 325,382 | $ | 527,544 | $ | 463,251 | $ | (246,842 | ) | $ | 547,155 | ||||||||||
Liabilities and Unitholders equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | | $ | 128,419 | $ | 78,167 | $ | (100,692 | ) | $ | 105,894 | |||||||||||
Other accounts payable |
3,692 | 5 | 23,133 | 2,264 | (9,569 | ) | 19,525 | |||||||||||||||||
Accrued expenses |
61 | 11,108 | 22,542 | 13,800 | (22,837 | ) | 24,674 | |||||||||||||||||
Short-term Borrowings |
| 90,000 | 90,000 | 90,000 | (180,000 | ) | 90,000 | |||||||||||||||||
Other current liabilities |
(1 | ) | 96 | 1,763 | 5,580 | (3,222 | ) | 4,216 | ||||||||||||||||
Total current liabilities |
3,752 | 101,209 | 265,857 | 189,811 | (316,320 | ) | 244,309 | |||||||||||||||||
Long-term borrowings |
| 750,000 | 621,000 | 824,238 | (1,445,238 | ) | 750,000 | |||||||||||||||||
Accrued severance benefits, net |
| | 67,864 | 702 | | 68,566 | ||||||||||||||||||
Other non-current liabilities |
| | 8,768 | 18,862 | (17,418 | ) | 10,212 | |||||||||||||||||
Total liabilities |
3,752 | 851,209 | 963,489 | 1,033,613 | (1,778,976 | ) | 1,073,087 | |||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Series A redeemable convertible preferred units |
| | | | | | ||||||||||||||||||
Series B redeemable convertible preferred units |
139,110 | | | | | 139,110 | ||||||||||||||||||
Total redeemable convertible preferred units |
139,110 | | | | | 139,110 | ||||||||||||||||||
Unitholders equity |
||||||||||||||||||||||||
Common units |
52,923 | 136,229 | 39,005 | 55,778 | (231,012 | ) | 52,923 | |||||||||||||||||
Additional paid-in capital |
3,031 | 2,153 | 156,129 | 108,285 | (266,567 | ) | 3,031 | |||||||||||||||||
Accumulated deficit |
(841,435 | ) | (785,399 | ) | (747,886 | ) | (859,800 | ) | 2,393,085 | (841,435 | ) | |||||||||||||
Accumulated other comprehensive income |
120,439 | 121,190 | 116,807 | 125,375 | (363,372 | ) | 120,439 | |||||||||||||||||
Total unitholders equity |
(665,042 | ) | (525,827 | ) | (435,945 | ) | (570,362 | ) | 1,532,134 | (665,042 | ) | |||||||||||||
Total liabilities, redeemable convertible preferred units and unitholders equity |
$ | (522,180 | ) | $ | 325,382 | $ | 527,544 | $ | 463,251 | $ | (246,842 | ) | $ | 547,155 | ||||||||||
23
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Balance Sheet
December 31, 2007
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 163 | $ | 31,248 | $ | 24,301 | $ | 8,633 | $ | | $ | 64,345 | ||||||||||||
Accounts receivable, net |
| | 131,101 | 68,156 | (75,468 | ) | 123,789 | |||||||||||||||||
Inventories, net |
| | 71,930 | 4,598 | (661 | ) | 75,867 | |||||||||||||||||
Other receivables |
| 717 | 5,846 | 12,702 | (13,494 | ) | 5,771 | |||||||||||||||||
Short-term inter-company loan |
| 50,000 | | 50,000 | (100,000 | ) | | |||||||||||||||||
Other current assets |
1,129 | 9,037 | 9,309 | 6,047 | (14,571 | ) | 10,951 | |||||||||||||||||
Total current assets |
1,292 | 91,002 | 242,487 | 150,136 | (204,194 | ) | 280,723 | |||||||||||||||||
Property, plant and equipment, net |
| | 275,997 | 3,672 | | 279,669 | ||||||||||||||||||
Intangible assets, net |
| | 86,571 | 18,328 | (174 | ) | 104,725 | |||||||||||||||||
Investments in subsidiaries |
(348,345 | ) | (431,611 | ) | | (243,130 | ) | 1,023,086 | | |||||||||||||||
Long-term inter-company loans |
| 809,754 | | 634,837 | (1,444,591 | ) | | |||||||||||||||||
Other non-current assets |
| 13,897 | 38,866 | 9,823 | (19,820 | ) | 42,766 | |||||||||||||||||
Total assets |
$ | (347,053 | ) | $ | 483,042 | $ | 643,921 | $ | 573,666 | $ | (645,693 | ) | $ | 707,883 | ||||||||||
Liabilities and Unitholders equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | | $ | 101,056 | $ | 64,389 | $ | (75,468 | ) | $ | 89,977 | |||||||||||
Other accounts payable |
1,021 | 5 | 40,381 | 2,748 | (13,494 | ) | 30,661 | |||||||||||||||||
Accrued expenses |
| 3,389 | 16,412 | 9,647 | (11,348 | ) | 18,100 | |||||||||||||||||
Short-term borrowings |
| 80,000 | 50,000 | 50,000 | (100,000 | ) | 80,000 | |||||||||||||||||
Other current liabilities |
| 503 | 3,714 | 5,383 | (3,223 | ) | 6,377 | |||||||||||||||||
Total current liabilities |
1,021 | 83,897 | 211,563 | 132,167 | (203,533 | ) | 225,115 | |||||||||||||||||
Long-term borrowings |
| 750,000 | 621,000 | 823,591 | (1,444,591 | ) | 750,000 | |||||||||||||||||
Accrued severance benefits, net |
| | 73,700 | 476 | | 74,176 | ||||||||||||||||||
Other non-current liabilities |
| | 4,867 | 21,619 | (19,820 | ) | 6,666 | |||||||||||||||||
Total liabilities |
1,021 | 833,897 | 911,130 | 977,853 | (1,667,944 | ) | 1,055,957 | |||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Series A redeemable convertible preferred units |
| | | | | | ||||||||||||||||||
Series B redeemable convertible preferred units |
129,405 | | | | | 129,405 | ||||||||||||||||||
Total redeemable convertible preferred units |
129,405 | | | | | 129,405 | ||||||||||||||||||
Unitholders equity |
||||||||||||||||||||||||
Common units |
52,844 | 136,229 | 39,005 | 55,778 | (231,012 | ) | 52,844 | |||||||||||||||||
Additional paid-in capital |
3,077 | 1,899 | 155,888 | 107,946 | (265,733 | ) | 3,077 | |||||||||||||||||
Accumulated deficit |
(564,449 | ) | (520,781 | ) | (491,945 | ) | (601,399 | ) | 1,614,125 | (564,449 | ) | |||||||||||||
Accumulated other comprehensive income |
31,049 | 31,798 | 29,843 | 33,488 | (95,129 | ) | 31,049 | |||||||||||||||||
Total unitholders equity |
(477,479 | ) | (350,855 | ) | (267,209 | ) | (404,187 | ) | 1,022,251 | (477,479 | ) | |||||||||||||
Total liabilities, redeemable convertible preferred units and unitholders equity |
$ | (347,053 | ) | $ | 483,042 | $ | 643,921 | $ | 573,666 | $ | (645,693 | ) | $ | 707,883 | ||||||||||
24
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Statement of Cash Flows
For the nine months ended September 28, 2008
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Cash flow from operating activities: |
||||||||||||||||||||||||
Net loss |
$ | (267,281 | ) | $ | (264,618 | ) | $ | (255,941 | ) | $ | (258,401 | ) | $ | 778,960 | $ | (267,281 | ) | |||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
||||||||||||||||||||||||
Depreciation and amortization |
| | 60,134 | 2,618 | | 62,752 | ||||||||||||||||||
Provision for severance benefits |
| | 13,189 | 255 | | 13,444 | ||||||||||||||||||
Amortization of debt issuance costs |
| 2,278 | 710 | | | 2,988 | ||||||||||||||||||
Loss on foreign currency translation, net |
| 90 | 155,359 | 480 | | 155,929 | ||||||||||||||||||
Loss (gain) on disposal of property, plant and equipment, net |
| | (3,387 | ) | 1 | | (3,386 | ) | ||||||||||||||||
Impairment charge |
| | 23,973 | 2,312 | | 26,285 | ||||||||||||||||||
Loss of related investment |
266,989 | 256,803 | | 254,503 | (778,295 | ) | | |||||||||||||||||
Other |
17 | (1 | ) | 829 | (44 | ) | | 801 | ||||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||||||
Accounts receivable |
| | (41,096 | ) | (24,612 | ) | 25,224 | (40,484 | ) | |||||||||||||||
Inventories |
| | (1,849 | ) | 4,431 | (663 | ) | 1,919 | ||||||||||||||||
Other receivables |
| | (3,492 | ) | 6,720 | (3,925 | ) | (697 | ) | |||||||||||||||
Deferred tax assets |
| | | 1,067 | | 1,067 | ||||||||||||||||||
Accounts payable |
| | 40,310 | 12,583 | (25,224 | ) | 27,669 | |||||||||||||||||
Other accounts payable |
2,671 | | (17,880 | ) | (512 | ) | 3,925 | (11,796 | ) | |||||||||||||||
Accrued expenses |
61 | 7,720 | 10,287 | 4,122 | (11,489 | ) | 10,701 | |||||||||||||||||
Other current assets |
(2,057 | ) | (3,183 | ) | 3,685 | (8,137 | ) | 9,104 | (588 | ) | ||||||||||||||
Other current liabilities |
| (408 | ) | (1,554 | ) | 226 | 2,489 | 753 | ||||||||||||||||
Payment of severance benefits |
| | (3,564 | ) | (54 | ) | | (3,618 | ) | |||||||||||||||
Other |
| 128 | (4,400 | ) | (3,848 | ) | 4,934 | (3,186 | ) | |||||||||||||||
Net cash provided by (used in) operating activities |
400 | (1,191 | ) | (24,687 | ) | (6,290 | ) | 5,040 | (26,728 | ) | ||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Purchase of plant, property and equipment |
| | (23,105 | ) | (1,789 | ) | | (24,894 | ) | |||||||||||||||
Payment for intellectual property registration |
| | (714 | ) | (256 | ) | | (970 | ) | |||||||||||||||
Proceeds from disposal of property, plant and equipment |
| | 3,391 | (1 | ) | | 3,390 | |||||||||||||||||
Other |
| (40,000 | ) | (276 | ) | (40,091 | ) | 80,000 | (367 | ) | ||||||||||||||
Net cash used in investing activities |
| (40,000 | ) | (20,704 | ) | (42,137 | ) | 80,000 | (22,841 | ) | ||||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Exercise of unit options |
183 | | | | | 183 | ||||||||||||||||||
Repurchase of common stock |
(496 | ) | | | | | (496 | ) | ||||||||||||||||
Proceeds from short-term borrowings |
| 170,000 | 150,000 | 145,000 | (290,000 | ) | 175,000 | |||||||||||||||||
Repayment of short-term borrowings |
| (160,000 | ) | (110,000 | ) | (105,000 | ) | 210,000 | (165,000 | ) | ||||||||||||||
Net cash provided by (used in) financing activities |
(313 | ) | 10,000 | 40,000 | 40,000 | (80,000 | ) | 9,687 | ||||||||||||||||
Effect of exchange rates on cash and cash equivalents |
| | 1,787 | 2,660 | (5,040 | ) | (593 | ) | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents |
87 | (31,191 | ) | (3,604 | ) | (5,767 | ) | | (40,475 | ) | ||||||||||||||
Cash and cash equivalents: |
||||||||||||||||||||||||
Beginning of the period |
163 | 31,248 | 24,301 | 8,633 | | 64,345 | ||||||||||||||||||
End of the period |
$ | 250 | $ | 57 | $ | 20,697 | $ | 2,866 | $ | | $ | 23,870 | ||||||||||||
25
MagnaChip Semiconductor LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited; tabular dollars in thousands, except unit data)
Condensed Consolidating Statement of Cash Flows
For the nine months ended September 30, 2007
MagnaChip Semiconductor LLC (Parent) |
Co-Issuers | Non-Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Cash flow from operating activities: |
||||||||||||||||||||||||
Net loss |
$ | (151,072 | ) | $ | (151,147 | ) | $ | (141,084 | ) | $ | (153,941 | ) | $ | 446,172 | $ | (151,072 | ) | |||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
||||||||||||||||||||||||
Depreciation and amortization |
| | 135,507 | 3,280 | | 138,787 | ||||||||||||||||||
Provision for severance benefits |
| | 13,857 | 128 | | 13,985 | ||||||||||||||||||
Amortization of debt issuance costs |
| 2,180 | 733 | | | 2,913 | ||||||||||||||||||
(Gain) loss on foreign currency translation, net |
| (13,161 | ) | (10,042 | ) | 13,580 | | (9,623 | ) | |||||||||||||||
Impairment charges |
| | 10,130 | | (24 | ) | 10,106 | |||||||||||||||||
Loss of related investment |
150,752 | 154,605 | | 141,451 | (446,808 | ) | | |||||||||||||||||
Other |
| | 238 | 123 | | 361 | ||||||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||||||
Accounts receivable |
| | (40,196 | ) | (21,089 | ) | 14,798 | (46,487 | ) | |||||||||||||||
Inventories |
| | (32,252 | ) | (2,742 | ) | 466 | (34,528 | ) | |||||||||||||||
Other receivables |
| | (1,017 | ) | 8,397 | (7,592 | ) | (212 | ) | |||||||||||||||
Deferred tax assets |
| | | 655 | | 655 | ||||||||||||||||||
Accounts payable |
| | 59,565 | 11,932 | (14,798 | ) | 56,699 | |||||||||||||||||
Other accounts payable |
| | (7,710 | ) | (4,894 | ) | 7,592 | (5,012 | ) | |||||||||||||||
Accrued expenses |
110 | 8,539 | 1,838 | 548 | (4,917 | ) | 6,118 | |||||||||||||||||
Other current assets |
58 | 89 | 9,364 | (3,792 | ) | 2,523 | 8,242 | |||||||||||||||||
Other current liabilities |
| 128 | 1,028 | (602 | ) | 2,385 | 2,939 | |||||||||||||||||
Payment of severance benefits |
| | (5,913 | ) | | | (5,913 | ) | ||||||||||||||||
Other |
| (34 | ) | (55 | ) | (1,696 | ) | 602 | (1,183 | ) | ||||||||||||||
Net cash provided by (used in) operating activities |
(152 | ) | 1,199 | (6,009 | ) | (8,662 | ) | 399 | (13,225 | ) | ||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Purchase of plant, property and equipment |
| | (62,285 | ) | (1,682 | ) | | (63,967 | ) | |||||||||||||||
Payment for intellectual property registration |
| | (1,115 | ) | (34 | ) | 194 | (955 | ) | |||||||||||||||
Proceeds from disposal of plant, property and equipment |
| | 699 | (421 | ) | | 278 | |||||||||||||||||
Increase in short-term loans |
| (20,000 | ) | | (20,000 | ) | 40,000 | | ||||||||||||||||
Other |
| | 787 | (579 | ) | | 208 | |||||||||||||||||
Net cash provided by (used in) investing activities |
| (20,000 | ) | (61,914 | ) | (22,716 | ) | 40,194 | (64,436 | ) | ||||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Exercise of unit options |
111 | | | | | 111 | ||||||||||||||||||
Proceeds from short-term borrowings |
| 40,000 | 30,397 | 20,000 | (20,000 | ) | 70,397 | |||||||||||||||||
Repayment of short-term borrowings |
| | | | (20,000 | ) | (20,000 | ) | ||||||||||||||||
Net cash provided by (used in) financing activities |
111 | 40,000 | 30,397 | 20,000 | (40,000 | ) | 50,508 | |||||||||||||||||
Effect of exchange rates on cash and cash equivalents |
(2 | ) | | (194 | ) | 703 | (593 | ) | (86 | ) | ||||||||||||||
Net increase (decrease) in cash and cash equivalents |
(43 | ) | 21,199 | (37,720 | ) | (10,675 | ) | | (27,239 | ) | ||||||||||||||
Cash and cash equivalents: |
||||||||||||||||||||||||
Beginning of the period |
321 | 892 | 72,608 | 15,352 | | 89,173 | ||||||||||||||||||
End of the period |
$ | 278 | $ | 22,091 | $ | 34,888 | $ | 4,677 | $ | | $ | 61,934 | ||||||||||||
26
16. Subsequent Event
On October 6, 2008, the Company announced the closure of its Imaging Solution business segment, subject to support for existing customers. In connection with this action, the Company recorded impairment charges of $26.3 million at the end of the third quarter ended September 28, 2008, in accordance with SFAS 144. The Company expects to record restructuring charges in the fourth quarter, in accordance with SFAS 146, related to one-time employee termination benefits, costs associated with the closing of the facilities and contract terminations, which are expected to be paid over the next 18 months.
27
PART I. Financial Information - (continued)
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following Managements Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as anticipate, estimate, expect, project, intend, plan, believe and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.
These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, managements assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in this section and the Risk Factors and elsewhere in this report.
All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information or future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Overview
We are a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high volume consumer applications, such as mobile phones, digital televisions, flat panel displays, notebook computers, mobile multimedia devices and digital cameras. Our analog and mixed-signal semiconductor products and services enable the high resolution display of images and video, conversion of analog signals, such as light and sound, into digital data as well as manage power consumption. Our display driver solutions cover a wide range of display sizes used in high definition liquid crystal display, or LCD, televisions, flat panel displays, notebook computers and mobile communications and entertainment devices. Our image sensor solutions are highly integrated and designed to provide brighter, sharper and more colorful image quality in a variety of light conditions for use primarily in mobile handset, PC and notebook computer camera applications and security systems. We have also utilized our technology platform and manufacturing process expertise to design power management solutions in order to expand our market opportunity and address more of our customers needs. We offer semiconductor manufacturing services to providers of analog and mixed-signal semiconductors that require differentiated, specialty process technologies such as high voltage CMOS, embedded memory and power management.
The variety of analog and mixed-signal semiconductor products and services we offer is based on a technology platform and strategy that allows us to address multiple end markets and to develop and introduce new products quickly. We believe that our manufacturing integration and broad intellectual property enable us to respond quickly to our consumer electronics and semiconductor customers needs. To maintain and increase our profitability, we must forecast trends in consumer product demand and invest in relevant research and development activities and in appropriate capital equipment. We expect to maintain or increase our expenditures on research and development in future periods to establish our position as a leading provider of semiconductor products and services in the segments in which we compete.
The semiconductor markets in which we compete are characterized by the use of advanced production technology and rapid technological advances. The prices of our products tend to decrease regularly over their useful lives, and such price decreases can be significant as new generations of products are introduced. We manage our pricing, production and product development activities so as to benefit from, or at least mitigate any adverse impact of, declining market prices for our products. For example, in some periods we are able to offset the impact of declining selling prices for existing products through the introduction of new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to preclude losses from inevitable product and productive capacity obsolescence.
Demand for our products and services is driven primarily by overall demand for the consumer end products in which our products are used and, consequently, can be adversely affected by periods of weak consumer spending in developed countries. Nonetheless, the consumer electronics market is large and rapidly growing, driven by consumers seeking to enjoy rich media content, such as digital and high definition audio and video, mobile television, games and digital photography. As a company, we seek to
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address market segments with higher growth rates than the overall consumer electronics industry. In recent years, we have experienced increasing demand from OEMs and consumers in developing countries such as China and India, and we expect to derive a substantial portion of our growth in the next decade from growing demand in such markets. We also expect that new competitors will emerge in these markets that may place increased pressure on the pricing for our products and services, but we believe that the competitive offerings will be, at least initially, of lower quality than the products and services that we offer, and that the impact from the increased competition will be more than offset by demand arising from such markets. Further, we believe we are well-positioned geographically to capture this demand, with our Korea-based operations.
Within particular operating segments and products, net sales are driven by design wins in which we or another company is selected by an electronics OEM or other potential customer to supply its demand of a particular product. These competitions typically determine the semiconductor supplier for the life of a particular end product and specify in many cases the production volume and pricing of a particular semiconductor product throughout the life of the end product. In any given period, our net sales depend heavily upon the end-market demand for the goods in which our products are used and the inventory levels maintained by our customers.
Our products and services require investments in capital equipment. We focus on specialty technologies, however, that do not require investments in leading edge manufacturing equipment, and as a result, our business tends not to be as subject to the pronounced boom and bust cycles characteristic of other semiconductor markets, in which the introduction of substantial, high-fixed cost capacity can cause product prices to plunge dramatically. In general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time. We believe this capital investment strategy enables us to optimize our capital investments and facilitates deeper and more diversified product and service offerings.
Our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors. Additionally, we must innovate to remain ahead of, or at least rapidly adapt to, technological breakthroughs that may lead to a step function change in the technology necessary to deliver our products and services. We believe that our established relationships and close collaboration with leading customers, such as LG Display (formerly LG.Philips LCD), Sharp, and Samsung, enhance our visibility into new product opportunities, market and technology trends and improve our ability to meet these challenges successfully.
We have funded our operations largely through the issuance of debt and we have incurred substantial losses and negative cash flows from operations. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. There is substantial doubt as to whether we can raise new capital or debt in the current environment given that the capital and credit markets have been experiencing extreme unprecedented volatility and disruption.
Business Segments
We report in four separate business segments because we derive our revenues from four principal business lines: Display Solutions, Imaging Solutions, Semiconductor Manufacturing Services, and Power Solutions. We have identified these segments based on how we allocate resources and assess our performance.
| Display Solutions: Our Display Solutions segment offers flat panel display drivers for a wide range of small to large panel displays used in digital televisions, mobile phones, LCD monitors, notebook computers and mobile multimedia devices, such as handheld games. Our products cover a broad range of interfaces, packages and technologies, including AMOLED, LTPS and TFT technologies. |
| Imaging Solutions: Our Imaging Solutions segment covers a broad spectrum of videographics array, or VGA; 1.3, 2.1 and 3.2 megapixel, or MP; CMOS image sensors for large and rapidly growing camera-equipped applications, such as mobile handsets, PCs, digital cameras, notebook computers and security cameras. Our image sensors are designed to provide brighter, sharper and more colorful image quality for use primarily in applications that require a small form factor, low power consumption and high sensitivity in a variety of light conditions. On October 6, 2008, we announced the closure of our Imaging Solution business segment, subject to support for existing customers. We expect the Imaging Solutions business segment to be closed by the second fiscal quarter of 2009. |
| Semiconductor Manufacturing Services: Our Semiconductor Manufacturing Services segment manufactures wafers for analog and mixed-signal semiconductor companies based on their designs. The activities conducted within this segment are, in substance, identical to those conducted in our Display Solution and Imaging Solution businesses. The only difference is that, in the Semiconductor Manufacturing Services segment, the product designs originate from our customers. The customers provide us with their designs, and we manufacture and sell the products to the customers based upon such designs. We offer over 180 process flows to our manufacturing services customers. We also often partner with key customers to jointly develop or customize specialized processes that enable our customers to improve their products and allow us to develop unique manufacturing expertise. Our manufacturing services offering is targeted at customers who require differentiated, specialty analog and mixed-signal process technologies such as high voltage CMOS, embedded memory and power. These customers typically serve high growth and high volume applications in the consumer, computing, wireless and industrial end markets. |
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| Power Solutions: Our Power Solutions segment produces MOSFETs, analog switches, DC-DC converters and linear regulators, such as LDOs. Our power solutions products are designed for applications such as mobile phones, LCD televisions, and desktop computers, and allow electronics manufacturers to achieve specific design goals of high efficiency and low standby power consumption. Going forward, we expect to expand our power management product portfolio through the addition, for example, of more advanced DC-DC products. |
Results of Operations
The following table sets forth consolidated results of operations for the three months ended September 28, 2008 and September 30, 2007:
Three months ended September 28, 2008 |
Three months ended September 30, 2007 |
|||||||||||||||||
Amount | % of net sales |
Amount | % of net sales |
Change Amount |
||||||||||||||
(in millions; %) | ||||||||||||||||||
Net sales |
$ | 176.0 | 100.0 | % | $ | 200.0 | 100.0 | % | $ | (24.0 | ) | |||||||
Cost of sales |
135.5 | 77.0 | 168.7 | 84.4 | (33.2 | ) | ||||||||||||
Gross profit |
40.5 | 23.0 | 31.3 | 15.6 | 9.2 | |||||||||||||
Selling, general and administrative expenses |
21.2 | 12.1 | 23.6 | 11.8 | (2.4 | ) | ||||||||||||
Research and development expenses |
32.2 | 18.3 | 33.4 | 16.7 | (1.2 | ) | ||||||||||||
Restructuring and impairment charges |
26.3 | 14.9 | | | 26.3 | |||||||||||||
Operating loss |
(39.2 | ) | (22.3 | ) | (25.7 | ) | (12.9 | ) | (13.5 | ) | ||||||||
Interest expense, net |
15.6 | 8.9 | 15.3 | 7.7 | 0.3 | |||||||||||||
Foreign currency gain (loss), net |
(81.6 | ) | (46.4 | ) | 4.9 | 2.5 | (86.5 | ) | ||||||||||
Loss before income taxes |
(136.5 | ) | (77.5 | ) | (36.2 | ) | (18.2 | ) | (100.3 | ) | ||||||||
Income tax expenses |
3.3 | 1.9 | 2.5 | 1.3 | 0.8 | |||||||||||||
Net loss |
$ | (139.8 | ) | (79.4 | )% | $ | (38.8 | ) | (19.5 | )% | $ | (101.0 | ) | |||||
Net Sales
Three months ended September 28, 2008 |
Three months ended September 30, 2007 |
|||||||||||||||
Amount | % of Total |
Amount | % of Total |
Change Amount |
||||||||||||
(in millions; %) | ||||||||||||||||
Display Solutions |
$ | 76.3 | 43.4 | % | $ | 79.3 | 39.7 | % | $ | (3.0 | ) | |||||
Imaging Solutions |
18.4 | 10.4 | 22.4 | 11.2 | (4.1 | ) | ||||||||||
Semiconductor Manufacturing Services |
77.3 | 43.9 | 84.8 | 42.4 | (7.5 | ) | ||||||||||
Power Solutions |
2.9 | 1.7 | | | 2.9 | |||||||||||
All other |
1.1 | 0.6 | 13.5 | 6.7 | (12.5 | ) | ||||||||||
$ | 176.0 | 100.0 | % | $ | 200.0 | 100.0 | % | $ | (24.0 | ) | ||||||
We derive a majority of our net sales from four operating segments: Display Solutions, Imaging Solutions, Semiconductor Manufacturing Services and Power Solutions. The All other category represents certain business activities other than these business segments, principally composed of rental and unit processing.
Total net sales for the three months ended September 28, 2008 decreased $24.0 million, or 12.0% compared to the three months ended September 30, 2007. Net sales generated in the four operating segments during the current quarter were $175.0 million, a decrease of $11.6 million or 6.2% from the net sales of the three operating segments from which we earned revenues for the prior-year quarter. The decline in revenue was principally due to a reduction of inventory levels in the supply chain as our customers responded to the uncertainty associated with the current economic crisis. We continue to add new accounts and to offer new products and services, which we expect to contribute to market share improvement long term.
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Display Solutions. Net sales from Display Solutions for the three months ended September 28, 2008 were $76.3 million, a $3.0 million or 3.8% decrease from $79.3 million for the three months ended September 30, 2007. The decrease resulted from a 15.5% decrease in average selling prices, primarily from display driver products for LCD televisions and PC monitors, coupled with a 6.5% sales volume decrease. We continue to add product features, such as development of touch panel solutions, to meet customer needs and also have developed, what we believe to be, leading low power consumption capabilities and important AMOLED technologies that enable next generation panels.
Imaging Solutions. Net sales from Imaging Solutions decreased $4.1 million in the current quarter, or 18.1% compared to net sales generated in the prior year quarter. This decrease resulted from a 23.1% sales volume decrease mainly caused by small form factor VGA products, and was partially offset by a 6.3% increase in average selling prices. On October 6, 2008, we announced the closure of our Imaging Solution business segment, subject to support for existing customers. We expect the Imaging Solutions business segment to be closed by the second fiscal quarter of 2009.
Semiconductor Manufacturing Services. Net sales from Semiconductor Manufacturing Services for the third quarter of 2008 were $77.3 million, a $7.5 million or 8.8% decrease compared to net sales of $84.8 million for the prior year quarter. This decrease was due to a 3.2% decrease in average selling prices, coupled with a 3.0% sales volume decrease. We expect that the current economic downturn and the resulting impacts to the overall analog semiconductor market in particular, will negatively impact our semiconductor manufacturing service business.
Power Solutions. Net sales from Power Solutions for the third quarter of 2008 were $2.9 million. We have built our new product pipeline with the launch of our 30V and 40V MOSFET series and development of LDO and USB solutions. We finished development of our high voltage MOSFET technology and expect our first products using this technology to be released in the forth quarter.
All other. Net sales from All other for the three months ended September 28, 2008 were $1.1 million compared to $13.5 million for the three months ended September 30, 2007. This decrease of $12.5 million was primarily due to a $12.0 million decrease in unit processing services rendered to Hynix as Hynix increased its internal capacity. We rendered no unit processing services to Hynix during the three months ended September 30, 2008.
Net Sales by Geographic Region
The following table sets forth our net sales by geographic region and the percentage of total net sales represented by each geographic region for the three months ended September 28, 2008 and September 30, 2007, respectively:
Three months ended September 28, 2008 |
Three months ended September 30, 2007 |
|||||||||||
Amount | % of Total | Amount | % of Total | |||||||||
(in millions; %) | ||||||||||||
Korea |
$ | 83.6 | 47.5 | % | $ | 102.2 | 51.1 | % | ||||
Asia Pacific |
51.6 | 29.3 | 53.5 | 26.8 | ||||||||
Japan |
18.0 | 10.2 | 21.9 | 11.0 | ||||||||
North America |
19.1 | 10.9 | 16.1 | 8.0 | ||||||||
Europe |
3.6 | 2.1 | 6.3 | 3.1 | ||||||||
Total net revenues |
$ | 176.0 | 100.0 | % | $ | 200.0 | 100.0 | % | ||||
Gross Profit
Three months ended September 28, 2008 |
Three months ended September 30, 2007 |
Change Amount |
|||||||||||||||
Amount | % of net sales |
Amount | % of net sales |
||||||||||||||
(in millions; %) | |||||||||||||||||
Display Solutions |
$ | 14.6 | 19.1 | % | $ | 4.7 | 5.8 | % | $ | 9.9 | |||||||
Imaging Solutions |
(0.8 | ) | (4.2 | ) | 2.7 | 12.1 | (3.4 | ) | |||||||||
Semiconductor Manufacturing Services |
25.9 | 33.5 | 17.2 | 20.3 | 8.8 | ||||||||||||
Power Solutions |
(0.3 | ) | (9.7 | ) | | | (0.3 | ) | |||||||||
All other |
1.1 | 100.4 | 6.8 | 50.4 | (5.8 | ) | |||||||||||
$ | 40.5 | 23.0 | % | $ | 31.3 | 15.6 | % | $ | 9.2 | ||||||||
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Total gross profit increased $9.2 million in the third quarter of 2008, or 29.2%, compared to the gross profit generated in the prior-year quarter. Gross profit percentage for the current quarter was 23.0% of net sales, an increase of 7.4% from 15.6% for the prior-year quarter. This increase in gross profit percentage was primarily attributable to an overall decrease in unit costs due to a decrease in overall production costs, especially from decrease in depreciation expense. We expect our gross profit to benefit in the next several quarters from the sale of inventory reflecting our reduced cost structure as well as due to increased capacity utilization.
Display Solutions. Gross profit percentage for Display Solutions for the three months ended September 28, 2008 improved to 19.1% compared to 5.8% for the three months ended September 30, 2007 due to a decrease in unit costs that resulted from a decrease in overall production costs, especially from depreciation expenses.
Imaging Solutions. Gross profit percentage for Imaging Solutions was minus 4.2% in the third quarter ended September 28, 2008 compared to 12.1% of positive gross profit percentage for the three months ended September 30, 2007. This change was due to a 23.1% decrease in sales volume and higher unit costs resulting from new design products. On October 6, 2008, we announced the closure of our Imaging Solution business segment, subject to support for existing customers. We expect the Imaging Solutions business segment to be closed by the second fiscal quarter of 2009.
Semiconductor Manufacturing Services. Gross profit percentage for Semiconductor Manufacturing Services improved to 33.5% in the third quarter of 2008 from 20.3% in the prior-year quarter. This increase was due to decrease in unit costs, resulting from decrease in overall production costs, especially from depreciation expenses.
Power Solutions. Gross profit percentage for Power Solutions was minus 9.7% for the three months ended September 30, 2008.
All other. Gross profit percentage for All other for the current period increased to 100.4% from 50.4% in the third quarter of 2007. This improvement in gross profit percentage was mainly attributable to lower fixed cost per unit.
Operating Expenses
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $21.2 million or 12.1% of net sales for the three months ended September 28, 2008, compared to $23.6 million or 11.8% for the three months ended September 30, 2007. The decrease of $2.4 million or 10.2% from the prior-year quarter resulted from reductions of various expenses including depreciation and amortization, contingency losses, outside service fees and sales commissions.
Research and Development Expenses. Research and development expenses for the current quarter were $32.2 million, a decrease of $1.2 million or 3.7% from $33.4 million for the prior year quarter mainly due to $1.2 million decrease in depreciation and amortization expense. As a percentage of net sales, research and development expenses for the current quarter increased to 18.3% compared to 16.7% for the prior-year quarter. We expect research and development expenses in 2008 to be generally consistent with the levels in 2007 on a percentage of net sales basis.
Restructuring and Impairment Charges. During the third quarter ended September 28, 2008, we recognized impairment charges of $26.3 million under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). The impairment charges were recorded related to the closure of our Imaging Solutions Division, which generated losses and is expected to be closed by the second fiscal quarter of 2009.
Other Income (Expense)
Interest Expense, Net. Net interest expense was $15.6 million during the three months ended September 28, 2008 compared to $15.3 million for the three months ended September 30, 2007. Interest expense was incurred to service to our notes in the amount of $750.0 million and drawings under our senior secured facility. At September 28, 2008, the notes bore interest at a weighted average interest rate of 6.87%. Drawings under our senior secured credit facility bore interest at September 28, 2008 at either three-month LIBOR plus 4.75% or ABR plus 3.75%. The increase in net interest expense was mainly due to an increase in interest expense driven by drawdowns from our senior secured credit facility and a decrease in interest income from financial assets including cash and cash equivalents.
Foreign Currency Gain (Loss), Net. Net foreign currency loss for the three months ended September 28, 2008 was $81.6 million, compared to net foreign exchange gain of $4.9 million for the three months ended September 30, 2007.
A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss recorded for intercompany borrowings at our Korean subsidiary and is affected by changes in the exchange rate between the Korea won and the U.S. dollar. Foreign currency translation loss from the intercompany borrowings was included in determining our consolidated net income since the intercompany borrowings were not considered long-term investments in nature because management intended to repay these intercompany borrowings at their maturity dates. The Korean won to U.S. dollar exchange rates were 1,160.1:1 and 913.6:1 using the noon buying rate in effect as of September 28, 2008 and September 30, 2007, respectively, as quoted by the Federal Reserve Bank of New York.
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Income Tax Expenses
Income Tax Expenses. Income tax expenses for the three months ended September 28, 2008 were $3.3 million, compared to $2.5 million for the three months ended September 30, 2007. Income tax expenses for this period were comprised of $1.5 million of current income taxes incurred in various jurisdictions in which we operate, $1.6 million of withholding taxes mostly paid on intercompany interest payments and $0.2 million of income tax increase effect from the change of deferred tax assets. Due to the uncertainty of the utilization of foreign tax credits, we did not recognize these withholding taxes as deferred assets.
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Results of Operations Comparison of Nine-Month Periods Ended September 28, 2008 and September 30, 2007.
The following table sets forth consolidated result of operations for the nine months ended September 28, 2008 and September 30, 2007:
Nine months ended September 28, 2008 |
Nine months ended September 30, 2007 |
Change Amount |
||||||||||||||||
Amount | % of net sales |
Amount | % of net sales |
|||||||||||||||
(in millions; %) | ||||||||||||||||||
Net sales |
$ | 573.7 | 100.0 | % | $ | 545.9 | 100.0 | % | $ | 27.9 | ||||||||
Cost of sales |
436.2 | 76.0 | 471.9 | 86.4 | (35.6 | ) | ||||||||||||
Gross profit |
137.5 | 24.0 | 74.0 | 13.6 | 63.5 | |||||||||||||
Selling, general and administrative expenses |
63.5 | 11.1 | 71.9 | 13.2 | (8.4 | ) | ||||||||||||
Research and development expenses |
104.0 | 18.1 | 101.1 | 18.5 | 3.0 | |||||||||||||
Restructuring and impairment charges |
25.4 | 4.4 | 12.1 | 2.2 | 13.3 | |||||||||||||
Operating loss |
(55.4 | ) | (9.7 | ) | (111.1 | ) | (20.3 | ) | 55.7 | |||||||||
Interest expense, net |
47.1 | 8.2 | 44.7 | 8.2 | 2.4 | |||||||||||||
Foreign currency gain (loss), net |
(155.7 | ) | (27.1 | ) | 11.3 | 2.1 | (167.0 | ) | ||||||||||
Loss before income taxes |
(258.2 | ) | (45.0 | ) | (144.4 | ) | (26.4 | ) | (113.7 | ) | ||||||||
Income tax expenses |
9.1 | 1.6 | 6.6 | 1.2 | 2.5 | |||||||||||||
Net loss |
$ | (267.3 | ) | (46.6 | )% | $ | (151.1 | ) | (27.7 | )% | $ | (116.2 | ) | |||||
Net Sales
Nine months ended September 28, 2008 |
Nine months ended September 30, 2007 |
Change Amount |
||||||||||||||
Amount | % of Total |
Amount | % of total |
|||||||||||||
(in millions; %) | ||||||||||||||||
Display Solutions |
$ | 254.0 | 44.3 | % | $ | 223.3 | 40.9 | % | $ | 30.6 | ||||||
Imaging Solutions |
63.6 | 11.1 | 51.6 | 9.5 | 12.0 | |||||||||||