| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
Page No. |
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3 |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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8 |
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Item 2. |
29 |
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Item 3. |
52 |
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Item 4. |
53 |
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54 |
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Item 1. |
54 |
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Item 1A. |
54 |
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Item 6. |
55 |
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56 |
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Item 1. |
Interim Consolidated Financial Statements (Unaudited) |
June 30, 2020 |
December 31, 2019 |
|||||||
(In thousands of US dollars, except share data) |
||||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Accounts receivable, net |
||||||||
| Inventories, net |
||||||||
| Other receivables |
||||||||
| Prepaid expenses |
||||||||
| Hedge collateral (Note 9) |
||||||||
| Other current assets (Notes 10 and 18) |
||||||||
| Current assets held for sale (Note 2) |
||||||||
| |
|
|
|
|||||
| Total current assets |
||||||||
| |
|
|
|
|||||
| Property, plant and equipment, net |
||||||||
| Operating lease right-of-use |
||||||||
| Intangible assets, net |
||||||||
| Long-term prepaid expenses |
||||||||
| Other non-current assets |
||||||||
| Non-current assets held for sale (Note 2) |
— | |||||||
| |
|
|
|
|||||
| Total assets |
$ | $ | ||||||
| |
|
|
|
|||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | $ | ||||||
| Other accounts payable |
||||||||
| Accrued expenses (Note 8) |
||||||||
| Operating lease liabilities |
||||||||
| Current portion of long-term borrowings, net |
— | |||||||
| Other current liabilities (Note 10) |
||||||||
| Current liabilities held for sale (Note 2) |
||||||||
| |
|
|
|
|||||
| Total current liabilities |
||||||||
| |
|
|
|
|||||
| Long-term borrowings, net |
||||||||
| Accrued severance benefits, net |
||||||||
| Other non-current liabilities |
||||||||
| Non-current liabilities held for sale (Note 2) |
— | |||||||
| |
|
|
|
|||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and contingencies (Note 18) |
||||||||
| Stockholders’ equity |
||||||||
| Common stock, $ |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| Treasury stock, |
( |
) | ( |
) | ||||
| Accumulated other comprehensive income (loss) |
( |
) | ||||||
| |
|
|
|
|||||
| Total stockholders’ equity (deficit) |
( |
) | ||||||
| |
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
(In thousands of US dollars, except share data) |
||||||||||||||||
| Revenues: |
||||||||||||||||
| Net sales – standard products business |
$ | $ | $ | $ | ||||||||||||
| Net sales – transitional Fab 3 foundry services |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total revenues |
||||||||||||||||
| Cost of sales: |
||||||||||||||||
| Cost of sales – standard products business |
||||||||||||||||
| Cost of sales – transitional Fab 3 foundry services |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total cost of sales |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross profit |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative expenses |
||||||||||||||||
| Research and development expenses |
||||||||||||||||
| Other charges |
— | — | — | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating income: |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Foreign currency gain (loss), net |
( |
) | ( |
) | ( |
) | ||||||||||
| Loss on early extinguishment of long-term borrowings, net |
— | — | — | ( |
) | |||||||||||
| Other income, net |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) from continuing operations before income tax expense |
( |
) | ( |
) | ( |
) | ||||||||||
| Income tax expense |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) from continuing operations |
( |
) | ( |
) | ( |
) | ||||||||||
| Income (loss) from discontinued operations, net of tax |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Basic earnings (loss) per common share— |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Discontinued operations |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted earnings (loss) per common share— |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Discontinued operations |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Weighted average number of shares— |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
(In thousands of US dollars) |
||||||||||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Other comprehensive income (loss) |
||||||||||||||||
| Foreign currency translation adjustments |
( |
) | ||||||||||||||
| Derivative adjustments |
||||||||||||||||
| Fair valuation of derivatives |
( |
) | ( |
) | ( |
) | ||||||||||
| Reclassification adjustment for loss on derivatives included in net income (loss) |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive income (loss) |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
Common Stock |
Additional Paid-In |
Accumulated |
Treasury |
Accumulated Other Comprehensive |
||||||||||||||||||||||||
| (In thousands of US dollars, except share data) |
Shares |
Amount |
Capital |
Deficit |
Stock |
Income (Loss) |
Total |
|||||||||||||||||||||
| Three Months Ended June 30, 2020: |
||||||||||||||||||||||||||||
| Balance at March 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Other comprehensive loss, net |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Net income |
— | — | — | — | — | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at June 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Three Months Ended June 30, 2019: |
||||||||||||||||||||||||||||
| Balance at March 31, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
) | — | — | — | — | ||||||||||||||||||||||
| Acquisition of treasury stock |
( |
) | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||
| Other comprehensive income, net |
— | — | — | — | — | |||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at June 30, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Common Stock |
Additional Paid-In |
Accumulated |
Treasury |
Accumulated Other Comprehensive |
||||||||||||||||||||||||
| (In thousands of US dollars, except share data) |
Shares |
Amount |
Capital |
Deficit |
Stock |
Income (Loss) |
Total |
|||||||||||||||||||||
| Six Months Ended June 30, 2020: |
||||||||||||||||||||||||||||
| Balance at December 31, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
) | — | — | — | — | ||||||||||||||||||||||
| Acquisition of treasury stock |
( |
) | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||
| Other comprehensive income, net |
— | — | — | — | — | |||||||||||||||||||||||
| Net income |
— | — | — | — | — | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at June 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Six Months Ended June 30, 2019: |
||||||||||||||||||||||||||||
| Balance at December 31, 2018 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
| Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
| Settlement of restricted stock units |
( |
) | — | — | — | — | ||||||||||||||||||||||
| Acquisition of treasury stock |
( |
) | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||
| Other comprehensive income, net |
— | — | — | — | — | |||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at June 30, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Six Months Ended |
||||||||
June 30, 2020 |
June 30, 2019 |
|||||||
(In thousands of US dollars) |
||||||||
| Cash flows from operating activities |
||||||||
| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities |
||||||||
| Depreciation and amortization |
||||||||
| Provision for severance benefits |
||||||||
| Amortization of debt issuance costs and original issue discount |
||||||||
| Loss on foreign currency, net |
||||||||
| Restructuring and other charges |
||||||||
| Provision for inventory reserves |
||||||||
| Stock-based compensation |
||||||||
| Loss on early extinguishment of long-term borrowings, net |
— | |||||||
| Other |
( |
) | ( |
) | ||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable, net |
( |
) | ( |
) | ||||
| Unbilled accounts receivable, net |
||||||||
| Inventories |
( |
) | ( |
) | ||||
| Other receivables |
( |
) | ||||||
| Other current assets |
||||||||
| Accounts payable |
||||||||
| Other accounts payable |
( |
) | ( |
) | ||||
| Accrued expenses |
||||||||
| Other current liabilities |
( |
) | ||||||
| Other non-current liabilities |
||||||||
| Payment of severance benefits |
( |
) | ( |
) | ||||
| Other |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash provided by operating activities |
||||||||
| |
|
|
|
|||||
| Cash flows from investing activities |
||||||||
| Proceeds from settlement of hedge collateral |
||||||||
| Payment of hedge collateral |
( |
) | ( |
) | ||||
| Purchase of property, plant and equipment |
( |
) | ( |
) | ||||
| Payment for intellectual property registration |
( |
) | ( |
) | ||||
| Collection of guarantee deposits |
||||||||
| Payment of guarantee deposits |
( |
) | ( |
) | ||||
| Other |
||||||||
| |
|
|
|
|||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash flows from financing activities |
||||||||
| Repurchase of long-term borrowings |
— | ( |
) | |||||
| Proceeds from exercise of stock options |
||||||||
| Acquisition of treasury stock |
( |
) | ( |
) | ||||
| Repayment of financing related to water treatment facility arrangement |
( |
) | ( |
) | ||||
| Repayment of principal portion of finance lease liabilities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Effect of exchange rates on cash and cash equivalents |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| |
|
|
|
|||||
| Cash and cash equivalents |
||||||||
| Beginning of the period |
||||||||
| |
|
|
|
|||||
| End of the period |
$ | $ | ||||||
| |
|
|
|
|||||
| Supplemental cash flow information |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| |
|
|
|
|||||
| Cash paid for income taxes |
$ | $ | ||||||
| |
|
|
|
|||||
| Non-cash investing activities |
||||||||
| Property, plant and equipment additions in other accounts payable |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
(In thousands of US dollars, except share data) |
||||||||||||||||
| Revenues: |
||||||||||||||||
| Net sales – Foundry Services Group |
$ | $ | $ | $ | ||||||||||||
| Net sales – transitional Fab 3 foundry services |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total revenues |
||||||||||||||||
| Cost of sales: |
||||||||||||||||
| Cost of sales – Foundry Services Group |
||||||||||||||||
| Cost of sales – transitional Fab 3 foundry services |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total cost of sales |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross profit |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative expenses |
||||||||||||||||
| Research and development expenses |
||||||||||||||||
| Restructuring and other charges |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) from discontinued operations |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Foreign currency gain (loss), net |
( |
) | ||||||||||||||
| Others, net |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) from discontinued operations before income tax expense |
( |
) | ( |
) | ||||||||||||
| Income tax expense |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) from discontinued operations, net of tax |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
June 30, 2020 |
December 31, 2019 |
|||||||
(In thousands of US dollars) |
||||||||
| Assets |
||||||||
| Current assets |
||||||||
| Accounts receivable, net |
$ | $ | ||||||
| Unbilled accounts receivable |
||||||||
| Inventories, net |
||||||||
| Other current assets |
||||||||
| Other assets of the disposal group classified as held for sale |
— | |||||||
| |
|
|
|
|||||
| Total current assets held for sale |
$ | $ | ||||||
| |
|
|
|
|||||
| Property, plant and equipment, net |
||||||||
| Intangible assets, net |
||||||||
| Other non-current assets |
||||||||
| |
|
|
|
|||||
| Total assets held for sale |
$ | $ | ||||||
| |
|
|
|
|||||
| Liabilities |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | $ | ||||||
| Other current liabilities |
||||||||
| |
|
|
|
|||||
| Total current liabilities held for sale |
$ | $ | ||||||
| |
|
|
|
|||||
| Accrued severance benefits, net |
||||||||
| Other non-current liabilities |
||||||||
| |
|
|
|
|||||
| Total liabilities held for sale |
$ | $ | ||||||
| |
|
|
|
|||||
Six Months Ended |
||||||||
June 30, 2020 |
June 30, 2019 |
|||||||
(In thousands of US dollars) |
||||||||
| Significant non-cash operating activities: |
||||||||
| Depreciation and amortization |
$ | $ | ||||||
| Provision for severance benefits |
||||||||
| Stock-based compensation |
||||||||
| Investing activities: |
||||||||
| Capital expenditures |
$ | ( |
) | $ | ( |
) | ||
June 30, 2020 |
December 31, 2019 |
|||||||
| Finished goods |
$ | $ | ||||||
| Semi-finished goods and work-in-process |
||||||||
| Raw materials |
||||||||
| Materials in-transit |
— | |||||||
| Less: inventory reserve |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Inventories, net |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
Six Months Ended |
Three Months Ended |
Six Months Ended |
|||||||||||||
June 30, 2020 |
June 30, 2019 |
|||||||||||||||
| Beginning balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Change in reserve |
||||||||||||||||
| Inventory reserve charged to costs of sales |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Sale of previously reserved inventory |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| ( |
) | ( |
) | ( |
) | ( |
) | |||||||||
| Write off |
||||||||||||||||
| Translation adjustments |
( |
) | ||||||||||||||
| Reclassified to assets held for sale |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Ending balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
June 30, 2020 |
December 31, 2019 |
|||||||
| Buildings and related structures |
$ | $ | ||||||
| Machinery and equipment |
||||||||
| Finance lease right-of-use |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Less: accumulated depreciation |
( |
) | ( |
) | ||||
| Land |
||||||||
| |
|
|
|
|||||
| Property, plant and equipment, net |
$ | $ | ||||||
| |
|
|
|
|||||
June 30, 2020 |
||||||||||||
Gross amount |
Accumulated amortization |
Net amount |
||||||||||
| Technology |
$ | $ | ( |
) | $ | — | ||||||
| Customer relationships |
( |
) | — | |||||||||
| Intellectual property assets |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Intangible assets, net |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
December 31, 2019 |
||||||||||||
Gross amount |
Accumulated amortization |
Net amount |
||||||||||
| Technology |
$ | $ | ( |
) | $ | — | ||||||
| Customer relationships |
( |
) | — | |||||||||
| Intellectual property assets |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Intangible assets, net |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
| Leases |
Classification |
June 30, 2020 |
December 31, 2019 |
|||||||
| Assets |
||||||||||
| Operating lease |
Operating lease right-of-use assets |
$ | $ | |||||||
| Finance lease |
Property, plant and equipment, net | |||||||||
| |
|
|
|
|||||||
| Total lease assets |
$ | $ | ||||||||
| |
|
|
|
|||||||
| Liabilities |
||||||||||
| Current |
||||||||||
| Operating |
Operating lease liabilities | $ | $ | |||||||
| Finance |
Other current liabilities | |||||||||
| Non-current |
||||||||||
| Operating |
Other non-current liabilities |
|||||||||
| Finance |
Other non-current liabilities |
|||||||||
| |
|
|
|
|||||||
| Total lease liabilities |
$ | $ | ||||||||
| |
|
|
|
|||||||
June 30, 2020 |
December 31, 2019 |
|||||||
| Weighted average remaining lease term |
||||||||
| Operating leases |
||||||||
| Finance leases |
||||||||
| Weighted average discount rate |
||||||||
| Operating leases |
% | % | ||||||
| Finance leases |
% | % | ||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
| Operating lease cost |
$ | $ | $ | $ | ||||||||||||
| Finance lease cost |
||||||||||||||||
| Amortization of right-of-use |
||||||||||||||||
| Interest on lease liabilities |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total lease cost |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities |
||||||||||||||||
| Operating cash flows from operating leases |
$ | $ | $ | $ | ||||||||||||
| Operating cash flows from finance leases |
||||||||||||||||
| Financing cash flows from finance leases |
||||||||||||||||
Operating Leases |
Finance Leases |
|||||||
| 2020 |
$ |
$ | ||||||
| 2021 |
||||||||
| 2022 |
||||||||
| 2023 |
||||||||
| Thereafter |
||||||||
| |
|
|
|
|||||
| Total future lease payments |
||||||||
| Less: Imputed interest |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Present value of future payments |
$ | $ | ||||||
| |
|
|
|
|||||
June 30, 2020 |
December 31, 2019 |
|||||||
| Payroll, benefits and related taxes, excluding severance benefits |
$ |
$ | ||||||
| Withholding tax attributable to intercompany interest income |
||||||||
| Interest on senior notes |
||||||||
| Outside service fees |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Accrued expenses |
$ | $ | ||||||
| |
|
|
|
|||||
| Date of transaction |
Type of derivative |
Total notional amount |
Month of settlement |
|||||||||
| |
$ | |||||||||||
| |
$ | |||||||||||
| |
$ | |||||||||||
| |
$ | |||||||||||
| Date of transaction |
Type of derivative |
Total notional amount |
Month of settlement |
|||||||||
| |
$ | |||||||||||
| |
$ | |||||||||||
| |
$ | |||||||||||
| Derivatives designated as hedging instruments: |
June 30, 2020 |
December 31, 2019 |
||||||||||
| Asset Derivatives: |
||||||||||||
| Zero cost collars |
Other current assets | $ | — | $ | ||||||||
| Liability Derivatives: |
||||||||||||
| Zero cost collars |
Other current liabilities | $ | $ | — | ||||||||
| As of June 30, 2020 |
Gross amounts of recognized liabilities |
Gross amounts offset in the balance sheets |
Net amounts of liabilities presented in the balance sheets |
Gross amounts not offset in the balance sheets |
Net amount |
|||||||||||||||||||
Financial instruments |
Cash collateral pledged |
|||||||||||||||||||||||
| Liability Derivatives: |
||||||||||||||||||||||||
| Zero cost collars |
$ | $ | — | $ | $ | — | $ | ( |
) | $ | ( |
) | ||||||||||||
| As of December 31, 2019 |
Gross amounts of recognized assets |
Gross amounts offset in the balance sheets |
Net amounts of assets presented in the balance sheets |
Gross amounts not offset in the balance sheets |
Net amount |
|||||||||||||||||||
Financial instruments |
Cash collateral pledged |
|||||||||||||||||||||||
| Asset Derivatives: |
||||||||||||||||||||||||
| Zero cost collars |
$ | $ | — | $ | $ | — | $ | $ | ||||||||||||||||
| Derivatives in ASC 815 Cash Flow Hedging Relationships |
Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) |
Location/Amount of Loss Reclassified from AOCI Into Statement of Operations (Effective Portion) |
Location/Amount of Gain (Loss) Recognized in Statement of Operations on Derivatives (Ineffective Portion) |
|||||||||||||||||||||||||||||
Three Months Ended June 30, |
Three Months Ended June 30, |
Three Months Ended June 30, |
||||||||||||||||||||||||||||||
2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||||||||||||
| Zero cost collars |
$ |
$ | ( |
) | Net sales | $ | ( |
) | $ | ( |
) | Other income, net | $ |
$ | ( |
) | ||||||||||||||||
| Forwards |
$ | — | $ | ( |
) | Net sales | $ | — | $ | ( |
) | Other income, net | $ | — | $ | ( |
) | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| $ | $ |
( |
) | $ |
( |
) | $ |
( |
) | $ |
$ |
( |
) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Derivatives in ASC 815 Cash Flow Hedging Relationships |
Amount of Loss Recognized in AOCI on Derivatives (Effective Portion) |
Location/Amount of Loss Reclassified from AOCI Into Statement of Operations (Effective Portion) |
Location/Amount of Gain (Loss) Recognized in Statement of Operations on Derivatives (Ineffective Portion) |
|||||||||||||||||||||||||||||
Six Months Ended June 30, |
Six Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||||||||||
2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||||||||||||
| Zero cost collars |
$ |
( |
) | $ | ( |
) | Net sales | $ | ( |
) | $ | ( |
) | Other income, net | $ |
$ | ( |
) | ||||||||||||||
| Forwards |
$ | — | $ | ( |
) | Net sales | $ | — | $ | ( |
) | Other income, net | $ | — | $ | ( |
) | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| $ | ( |
) | $ |
( |
) | $ |
( |
) | $ |
( |
) | $ |
$ |
( |
) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Carrying Value June 30, 2020 |
Fair Value Measurement June 30, 2020 |
Quoted Prices in Active Markets for Identical liability (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Derivative liabilities (other current liabilities) |
$ | $ | — | $ | — | |||||||||||||||
Carrying Value December 31, 2019 |
Fair Value Measurement December 31, 2019 |
Quoted Prices in Active Markets for Identical Asset (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||||||
| Assets: |
||||||||||||||||||||
| Derivative assets (other current assets) |
$ | $ | — | $ | — | |||||||||||||||
June 30, 2020 |
December 31, 2019 |
|||||||||||||||
Carrying Value |
Fair Value |
Carrying Value |
Fair Value |
|||||||||||||
(In thousands of US dollars) |
||||||||||||||||
| Borrowings: |
||||||||||||||||
| 5.0% Exchangeable Senior Notes due March 2021 (Level 2) |
$ | $ | $ | $ | ||||||||||||
| 6.625% Senior Notes due July 2021 (Level 2) |
$ | $ | $ | $ | ||||||||||||
June 30, 2020 |
December 31, 2019 |
|||||||
| |
$ | $ | ||||||
| |
||||||||
| Less: unamortized discount and debt issuance costs |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total borrowings, net |
||||||||
| Less: current portion of long-term borrowings, net |
( |
) | — | |||||
| |
|
|
|
|||||
| Long-term borrowings, net |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
Six Months Ended |
Three Months Ended |
Six Months Ended |
|||||||||||||
June 30, 2020 |
June 30, 2019 |
|||||||||||||||
| Beginning balance |
$ | $ | $ | $ | ||||||||||||
| Provisions |
||||||||||||||||
| Severance payments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Translation adjustments |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Less: Cumulative contributions to severance insurance deposit accounts |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| The National Pension Fund |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Group severance insurance plan |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Accrued severance benefits, net |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Severance benefit |
||||
| Remainder of 2020 |
$ | |||
| 2021 |
||||
| 2022 |
||||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| 2026 – 2030 |
||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
| Revenues |
||||||||||||||||
| Standard products business |
||||||||||||||||
| Display Solutions |
$ | $ | $ | $ | ||||||||||||
| Power Solutions |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total standard products business |
||||||||||||||||
| Transitional Fab 3 foundry services |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total revenues |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
| Gross Profit |
||||||||||||||||
| Standard products business |
$ | $ | $ | $ | ||||||||||||
| Transitional Fab 3 foundry services |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total gross profit |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
| Korea |
$ | $ | $ | $ | ||||||||||||
| Asia Pacific (other than Korea) |
||||||||||||||||
| U.S.A. |
||||||||||||||||
| Europe |
||||||||||||||||
| Others |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
June 30, 2020 |
December 31, 2019 |
|||||||
| Foreign currency translation adjustments |
$ | $ | ( |
) | ||||
| Derivative adjustments |
( |
) | ||||||
| |
|
|
|
|||||
| Total |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Three Months Ended June 30, 2020 |
Foreign currency translation adjustments |
Derivative adjustments |
Total |
|||||||||
| Beginning balance |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
| Other comprehensive income (loss) before reclassifications |
( |
) | ( |
) | ||||||||
| Amounts reclassified from accumulated other comprehensive loss |
— | |||||||||||
| |
|
|
|
|
|
|||||||
| Net current-period other comprehensive income (loss) |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Ending balance |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
| Three Months Ended June 30, 2019 |
Foreign currency translation adjustments |
Derivative adjustments |
Total |
|||||||||
| Beginning balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|
|
|||||||
| Other comprehensive income (loss) before reclassifications |
( |
) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss |
— | |||||||||||
| |
|
|
|
|
|
|||||||
| Net current-period other comprehensive income (loss) |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Three Months Ended June 30, 2020 |
Foreign currency translation adjustments |
Derivative adjustments |
Total |
|||||||||
| Ending balance |
$ |
(5,077 |
) |
$ |
(996 |
) |
$ |
(6,073 |
) | |||
| |
|
|
|
|
|
|||||||
| Six Months Ended June 30, 2020 |
Foreign currency translation adjustments |
Derivative adjustments |
Total |
|||||||||
| Beginning balance |
$ | ( |
) | $ | $ | ( |
) | |||||
| |
|
|
|
|
|
|||||||
| Other comprehensive income (loss) before reclassifications |
( |
) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss |
— | |||||||||||
| |
|
|
|
|
|
|||||||
| Net current-period other comprehensive income (loss) |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance |
$ | $ | ( |
) | $ | |||||||
| |
|
|
|
|
|
|||||||
| Six Months Ended June 30, 2019 |
Foreign currency translation adjustments |
Derivative adjustments |
Total |
|||||||||
| Beginning balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|
|
|||||||
| Other comprehensive income (loss) before reclassifications |
( |
) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss |
— | |||||||||||
| |
|
|
|
|
|
|||||||
| Net current-period other comprehensive income (loss) |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|
|
|||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||
(In thousands of US dollars, except share data) |
||||||||||||||||
| Basic earnings (loss) per share |
||||||||||||||||
| Income (loss) from continuing operations |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Income (loss) from discontinued operations, net of tax |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Basic weighted average common stock outstanding |
||||||||||||||||
| Basic earnings (loss) per common share |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Discontinued operations |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted earnings (loss) per share |
||||||||||||||||
| Income (loss) from continuing operations |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Add back: Interest expense on Exchangeable Notes |
— | — | — | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) from continuing operations allocated to common stockholders |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Income (loss) from discontinued operations, net of tax |
( |
) | ( |
) | ||||||||||||
| Net income (loss) allocated to common stockholders |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Basic weighted average common stock outstanding |
||||||||||||||||
| Net effect of dilutive equity awards |
— | — | — | |||||||||||||
| Net effect of assumed conversion of |
— | — | — | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted weighted average common stock outstanding |
||||||||||||||||
| Continuing operations |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Discontinued operations |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Options |
||||||||||||||||
| Restricted Stock Units |
— | |||||||||||||||
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| • | we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not consider to be indicative of our core ongoing operating performance, provides a more comparable measure of our operating performance from period-to-period |
| • | we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and other interested parties in the evaluation of the Company as an enterprise level performance measure that eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well as other one time or recurring items described above; and |
| • | we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess the Company’s period-to-period |
| • | for planning purposes, including the preparation of our annual operating budget; |
| • | to evaluate the effectiveness of our enterprise level business strategies; |
| • | in communications with our Board of Directors concerning our consolidated financial performance; and |
| • | in certain of our compensation plans as a performance measure for determining incentive compensation payments. |
Three Months Ended June 30, 2020 |
Six Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
Six Months Ended June 30, 2019 |
|||||||||||||
(In millions) |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 11.8 | $ | (19.3 | ) | $ | (8.5 | ) | $ | (30.0 | ) | |||||
| Interest expense, net |
4.7 | 9.7 | 4.9 | 9.9 | ||||||||||||
| Income tax expenses |
0.7 | 2.0 | 0.8 | 1.6 | ||||||||||||
| Depreciation and amortization |
2.5 | 5.1 | 2.6 | 5.1 | ||||||||||||
| EBITDA |
$ | 19.7 | $ | (2.5 | ) | $ | (0.3 | ) | $ | (13.4 | ) | |||||
| Adjustments: |
||||||||||||||||
| Equity-based compensation expense(a) |
1.5 | 2.3 | 0.7 | 1.2 | ||||||||||||
| Foreign currency loss (gain), net(b) |
(8.5 | ) | 22.5 | 11.6 | 22.2 | |||||||||||
| Derivative valuation loss (gain), net(c) |
(0.1 | ) | (0.2 | ) | 0.1 | 0.1 | ||||||||||
| Loss on early extinguishment of long-term borrowings, net(d) |
— | — | — | 0.0 | ||||||||||||
| Others(e) |
— | 0.6 | — | 0.6 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | 12.7 | $ | 22.6 | $ | 12.0 | $ | 10.7 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| (a) | This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information. |
| (b) | This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations with respect to the continuing operations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results. |
| (c) | This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in US dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance. |
| (d) | This adjustment eliminates $0.04 million in expenses related to the repurchase of a portion of the 2021 Notes and the Exchangeable Notes in the first quarter of 2019. |
| (e) | For the six months ended June 30, 2020, this adjustment eliminates non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives. For the six months ended June 30, 2019, this adjustment eliminates a $0.5 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which is borne by us under a negotiated separation agreement. We do not believe that these charges are indicative of our core operating performance and have been excluded for comparative purposes. |
| • | Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; |
| • | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| • | Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; |
| • | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; |
| • | Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees; |
| • | Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and |
| • | other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Three Months Ended June 30, 2020 |
Six Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
Six Months Ended June 30, 2019 |
|||||||||||||
(In millions) |
||||||||||||||||
| Operating income |
$ | 8.6 | $ | 14.6 | $ | 8.8 | $ | 3.7 | ||||||||
| Adjustments: |
||||||||||||||||
| Equity-based compensation expense(a) |
1.5 | 2.3 | 0.7 | 1.2 | ||||||||||||
| Others(b) |
— | 0.6 | — | 0.6 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Adjusted Operating Income |
$ | 10.1 | $ | 17.4 | $ | 9.4 | $ | 5.5 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| (a) | This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information. |
| (b) | For the six months ended June 30, 2020, this adjustment eliminates non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives. For the six months ended June 30, 2019, this adjustment eliminates a $0.5 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which is borne by us under a negotiated separation agreement. We do not believe that these charges are indicative of our core operating performance and have been excluded for comparative purposes. |
| • | we use Adjusted Net Income (Loss) (including on a per share basis) in communications with our Board of Directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period; and |
| • | we believe that reporting Adjusted Net Income (Loss) (including on a per share basis) is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below, such as foreign currency gains and losses, which are out of our control and can vary significantly from period to period. |
Three Months Ended June 30, 2020 |
Six Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
Six Months Ended June 30, 2019 |
|||||||||||||
(In millions) |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 11.8 | $ | (19.3 | ) | $ | (8.5 | ) | $ | (30.0 | ) | |||||
| Adjustments: |
||||||||||||||||
| Equity-based compensation expense(a) |
1.5 | 2.3 | 0.7 | 1.2 | ||||||||||||
| Foreign currency loss (gain), net(b) |
(8.5 | ) | 22.5 | 11.6 | 22.2 | |||||||||||
| Derivative valuation loss (gain), net(c) |
(0.1 | ) | (0.2 | ) | 0.1 | 0.1 | ||||||||||
| Loss on early extinguishment of long-term borrowings, net(d) |
— | — | — | 0.0 | ||||||||||||
| Others(e) |
— | 0.6 | — | 0.6 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Adjusted Net Income (Loss) |
$ | 4.8 | $ | 5.8 | $ | 3.8 | $ | (5.9 | ) | |||||||
| |
|
|
|
|
|
|
|
|||||||||
| Reported earnings (loss) per share – basic |
$ | 0.34 | $ | (0.55 | ) | $ | (0.25 | ) | $ | (0.88 | ) | |||||
| Reported earnings (loss) per share – diluted |
$ | 0.28 | $ | (0.55 | ) | $ | (0.25 | ) | $ | (0.88 | ) | |||||
| Weighted average number of shares – basic |
35,092,312 | 34,992,734 | 34,245,127 | 34,220,141 | ||||||||||||
| Weighted average number of shares – diluted |
46,474,237 | 34,992,734 | 34,245,127 | 34,220,141 | ||||||||||||
| Adjusted earnings (loss) per share – basic |
$ | 0.14 | $ | 0.17 | $ | 0.11 | $ | (0.17 | ) | |||||||
| Adjusted earnings (loss) per share – diluted |
$ | 0.13 | $ | 0.16 | $ | 0.11 | $ | (0.17 | ) | |||||||
| Weighted average number of shares – basic |
35,092,312 | 34,992,734 | 34,245,127 | 34,220,141 | ||||||||||||
| Weighted average number of shares – diluted |
36,330,083 | 36,248,039 | 34,965,562 | 34,220,141 | ||||||||||||
| (a) | This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information. |
| (b) | This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations with respect to the continuing operations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results. |
| (c) | This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in US dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance. |
| (d) | This adjustment eliminates $0.04 million in expenses related to the repurchase of a portion of the 2021 Notes and the Exchangeable Notes in the first quarter of 2019. |
| (e) | For the six months ended June 30, 2020, this adjustment eliminates non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives. For the six months ended June 30, 2019, this adjustment eliminates a $0.5 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which is borne by us under a negotiated separation agreement. We do not believe that these charges are indicative of our core operating performance and have been excluded for comparative purposes. |
| • | Adjusted Net Income (Loss) does not reflect changes in, or cash requirements for, our working capital needs; |
| • | Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees; |
| • | Adjusted Net Income (Loss) does not reflect the costs of holding certain assets and liabilities in foreign currencies; and |
| • | other companies in our industry may calculate Adjusted Net Income (Loss) differently than we do, limiting its usefulness as a comparative measure. |
Three Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Total revenues |
Amount |
% of Total revenues |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Revenues |
||||||||||||||||||||
| Net sales – standard products business |
$ | 109.0 | 91.7 | % | $ | 132.0 | 93.7 | % | $ | (23.1 | ) | |||||||||
| Net sales – transitional Fab 3 foundry services |
9.9 | 8.3 | 8.9 | 6.3 | 1.0 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Total revenues |
118.8 | 100.0 | 140.9 | 100.0 | (22.1 | ) | ||||||||||||||
| Cost of sales |
||||||||||||||||||||
| Cost of sales – standard products business |
76.8 | 64.6 | 100.4 | 71.3 | (23.6 | ) | ||||||||||||||
| Cost of sales – transitional Fab 3 foundry services |
9.9 | 8.3 | 8.9 | 6.3 | 1.0 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Total cost of sales |
86.7 | 73.0 | 109.3 | 77.6 | (22.6 | ) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Gross profit |
32.1 | 27.0 | 31.6 | 22.4 | 0.5 | |||||||||||||||
| Selling, general and administrative expenses |
12.4 | 10.4 | 11.1 | 7.9 | 1.3 | |||||||||||||||
| Research and development expenses |
11.1 | 9.3 | 11.8 | 8.4 | (0.7 | ) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Operating income |
8.6 | 7.3 | 8.8 | 6.2 | (0.1 | ) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Interest expense |
(5.4 | ) | (4.6 | ) | (5.4 | ) | (3.9 | ) | 0.0 | |||||||||||
| Foreign currency gain (loss), net |
8.5 | 7.1 | (11.6 | ) | (8.2 | ) | 20.0 | |||||||||||||
| Others, net |
0.8 | 0.7 | 0.6 | 0.4 | 0.2 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| 3.8 | 3.2 | (16.5 | ) | (11.7 | ) | 20.3 | ||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Income (loss) from continuing operations before income tax expense |
12.5 | 10.5 | (7.7 | ) | (5.5 | ) | 20.2 | |||||||||||||
| Income tax expense |
0.7 | 0.6 | 0.8 | 0.6 | (0.1 | ) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Income (loss) from continuing operations |
11.8 | 9.9 | (8.5 | ) | (6.0 | ) | 20.3 | |||||||||||||
| Income (loss) from discontinued operations, net of tax |
17.4 | 14.6 | (1.0 | ) | (0.7 | ) | 18.4 | |||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Net income (loss) |
$ | 29.2 | 24.5 | $ | (9.5 | ) | (6.8 | ) | $ | 38.7 | ||||||||||
| |
|
|
|
|
|
|||||||||||||||
Three Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
|
||||||||||||||||||
Amount |
% of Total Revenues |
Amount |
% of Total Revenues |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Revenues |
||||||||||||||||||||
| Net sales – standard products business |
||||||||||||||||||||
| Display Solutions |
$ | 69.2 | 58.2 | % | $ | 84.3 | 59.8 | % | $ | (15.1 | ) | |||||||||
| Power Solutions |
39.8 | 33.5 | 47.7 | 33.9 | (8.0 | ) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total standard products business |
109.0 | 91.7 | 132.0 | 93.7 | (23.1 | ) | ||||||||||||||
| Net sales – transitional Fab 3 foundry services |
9.9 | 8.3 | 8.9 | 6.3 | 1.0 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
$ | 118.8 | 100.0 | % | $ | 140.9 | 100.0 | % | $ | (22.1 | ) | |||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Three Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Net sales |
Amount |
% of Net sales |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Gross Profit |
||||||||||||||||||||
| Gross profit – standard products business |
$ | 32.1 | 29.5 | % | $ | 31.6 | 24.0 | % | $ | 0.5 | ||||||||||
| Gross profit – transitional Fab 3 foundry services |
— | — | — | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total gross profit |
$ | 32.1 | 27.0 | % | $ | 31.6 | 22.4 | % | $ | 0.5 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Three Months Ended June 30, 2020 |
Three Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Net Sales – standard products business |
Amount |
% of Net Sales – standard products business |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Korea |
$ | 22.0 | 20.2 | % | $ | 36.6 | 27.7 | % | $ | (14.6 | ) | |||||||||
| Asia Pacific (other than Korea) |
84.2 | 77.3 | 93.7 | 70.9 | (9.4 | ) | ||||||||||||||
| United States |
1.5 | 1.3 | 0.7 | 0.5 | 0.8 | |||||||||||||||
| Europe |
0.9 | 0.8 | 0.9 | 0.7 | (0.0 | ) | ||||||||||||||
| Others |
0.5 | 0.4 | 0.3 | 0.2 | 0.2 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 109.0 | 100.0 | % | $ | 132.0 | 100.0 | % | $ | (23.1 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2020 |
Six Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Total revenues |
Amount |
% of Total revenues |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Revenues |
||||||||||||||||||||
| Net sales – standard products business |
$ | 219.7 | 91.8 | % | $ | 232.3 | 93.6 | % | $ | (12.6 | ) | |||||||||
| Net sales – transitional Fab 3 foundry services |
19.6 | 8.2 | 15.9 | 6.4 | 3.7 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Total revenues |
239.3 | 100.0 | 248.2 | 100.0 | (8.9 | ) | ||||||||||||||
| Cost of sales |
||||||||||||||||||||
| Cost of sales – standard products business |
158.4 | 66.2 | 181.6 | 73.2 | (23.2 | ) | ||||||||||||||
| Cost of sales – transitional Fab 3 foundry services |
19.6 | 8.2 | 15.9 | 6.4 | 3.7 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Total cost of sales |
178.0 | 74.4 | 197.5 | 79.6 | (19.5 | ) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Gross profit |
61.3 | 25.6 | 50.6 | 20.4 | 10.6 | |||||||||||||||
| Selling, general and administrative expenses |
24.5 | 10.2 | 23.1 | 9.3 | 1.4 | |||||||||||||||
| Research and development expenses |
21.6 | 9.0 | 23.8 | 9.6 | (2.2 | ) | ||||||||||||||
| Other charges |
0.6 | 0.2 | — | — | 0.6 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Operating income |
14.6 | 6.1 | 3.7 | 1.5 | 10.9 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Interest expense |
(11.0 | ) | (4.6 | ) | (11.1 | ) | (4.5 | ) | 0.0 | |||||||||||
| Foreign currency loss, net |
(22.5 | ) | (9.4 | ) | (22.2 | ) | (8.9 | ) | (0.3 | ) | ||||||||||
| Loss on early extinguishment of long-term borrowings, net |
— | — | (0.0 | ) | (0.0 | ) | 0.0 | |||||||||||||
| Others, net |
1.6 | 0.7 | 1.1 | 0.5 | 0.5 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| (31.9 | ) | (13.3 | ) | (32.2 | ) | (13.0 | ) | 0.3 | ||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Loss from continuing operations before income tax expense |
(17.3 | ) | (7.2 | ) | (28.5 | ) | (11.5 | ) | 11.1 | |||||||||||
| Income tax expense |
2.0 | 0.8 | 1.6 | 0.6 | 0.4 | |||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Loss from continuing operations |
(19.3 | ) | (8.1 | ) | (30.0 | ) | (12.1 | ) | 10.7 | |||||||||||
| Income (loss) from discontinued operations, net of tax |
24.7 | 10.3 | (13.6 | ) | (5.5 | ) | 38.3 | |||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Net income (loss) |
$ | 5.4 | 2.3 | $ | (43.6 | ) | (17.6 | ) | $ | 49.1 | ||||||||||
| |
|
|
|
|
|
|||||||||||||||
Six Months Ended June 30, 2020 |
Six Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Total Revenues |
Amount |
% of Total Revenues |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Revenues |
||||||||||||||||||||
| Net sales – standard products business |
||||||||||||||||||||
| Display Solutions |
$ | 146.8 | 61.3 | % | $ | 142.5 | 57.4 | % | $ | 4.3 | ||||||||||
| Power Solutions |
72.9 | 30.5 | 89.8 | 36.2 | (16.9 | ) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total standard products business |
219.7 | 91.8 | 232.3 | 93.6 | (12.6 | ) | ||||||||||||||
| Net sales – transitional Fab 3 foundry services |
19.6 | 8.2 | 15.9 | 6.4 | 3.7 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
$ | 239.3 | 100.0 | % | $ | 248.2 | 100.0 | % | $ | (8.9 | ) | |||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2020 |
Six Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Net sales |
Amount |
% of Net sales |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Gross Profit |
||||||||||||||||||||
| Gross profit – standard products business |
$ | 61.3 | 27.9 | % | $ | 50.6 | 21.8 | % | $ | 10.6 | ||||||||||
| Gross profit – transitional Fab 3 foundry services |
— | — | — | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total gross profit |
$ | 61.3 | 25.6 | % | $ | 50.6 | 20.4 | % | $ | 10.6 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2020 |
Six Months Ended June 30, 2019 |
|||||||||||||||||||
Amount |
% of Net Sales – standard products business |
Amount |
% of Net Sales – standard products business |
Change Amount |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Korea |
$ | 52.8 | 24.0 | % | $ | 71.2 | 30.7 | % | $ | (18.4 | ) | |||||||||
| Asia Pacific (other than Korea) |
161.8 | 73.6 | 157.4 | 67.8 | 4.3 | |||||||||||||||
| United States |
2.2 | 1.0 | 1.1 | 0.5 | 1.1 | |||||||||||||||
| Europe |
1.8 | 0.8 | 2.0 | 0.9 | (0.2 | ) | ||||||||||||||
| Others |
1.2 | 0.5 | 0.5 | 0.2 | 0.6 | |||||||||||||||
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| $ | 219.7 | 100.0 | % | $ | 232.3 | 100.0 | % | $ | (12.6 | ) | ||||||||||
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Payments Due by Period |
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Total |
Remainder of 2020 |
2021 |
2022 |
2023 |
2024 |
Thereafter |
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(In millions) |
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| Exchangeable Notes(1) |
$ | 87.9 | $ | 2.1 | $ | 85.8 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
| Senior notes(2) |
246.5 | 7.4 | 239.1 | — | — | — | — | |||||||||||||||||||||
| Operating leases(3) |
1.2 | 0.8 | 0.3 | 0.1 | 0.0 | — | — | |||||||||||||||||||||
| Finance leases(3) |
0.3 | 0.0 | 0.1 | 0.1 | 0.1 | — | — | |||||||||||||||||||||
| Water Treatment Services(3)(4) |
29.6 | 2.0 | 3.9 | 3.8 | 3.8 | 3.7 | 12.4 | |||||||||||||||||||||
| Others(5) |
9.5 | 6.1 | 3.4 | 0.0 | 0.0 | — | — | |||||||||||||||||||||
| (1) | Interest payments as well as $83.7 million aggregate principal amount of the Exchangeable Notes outstanding as of June 30, 2020, which bear interest at a rate of 5.0% per annum and are scheduled to mature in 2021 if not earlier exchanged at the price of approximately $8.26 per share of common stock. |
| (2) | Interest payments as well as $224.3 million aggregate principal amount of the 2021 Notes outstanding as of June 30, 2020, which bear interest at a rate of 6.625% per annum and are scheduled to mature in 2021 if not earlier redeemed. |
| (3) | Assumes constant currency exchange rate for Korean won to US dollars of 1,200.7:1, the exchange rate as of June 30, 2020. |
| (4) | Includes future payments for water treatment services for our fabrication facility in Gumi, Korea based on the contractual terms. |
| (5) | Includes license agreements, funding obligations for the accrued severance benefits and other contractual obligations. |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 4. |
Controls and Procedures |
Item 1. |
Legal Proceedings |
Item 1A. |
Risk Factors |
Item 6. |
Exhibits. |
# |
Filed herewith |
| † | Furnished herewith |
| * | Management contract, compensatory plan or arrangement |
| MAGNACHIP SEMICONDUCTOR CORPORATION (Registrant) | ||||||
| Dated: August 7, 2020 | By: | /s/ Young-Joon Kim | ||||
| Young-Joon Kim | ||||||
| Chief Executive Officer (Principal Executive Officer) | ||||||
| Dated: August 7, 2020 | By: | /s/ Young Soo Woo | ||||
| Young Soo Woo | ||||||
| Chief Financial Officer (Principal Financial Officer) | ||||||