MagnaChip Reports Second Quarter 2013 Financial Results

We define Adjusted EBITDA as net income (loss) adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) restructuring and impairment charges, (v) stock-based compensation expense, (vi) foreign currency loss, net, (vii) derivative valuation loss (gain), net, and (viii) secondary offering expense.

We present Adjusted Net Income as a further supplemental measure of our performance. We prepare Adjusted Net Income by adjusting net income to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income as net income (loss) adjusted to exclude (i) restructuring and impairment charges, (ii) stock-based compensation expense, (iii) amortization of intangibles, (iv) foreign currency loss, net, (v) derivative valuation loss (gain), net, (vi) secondary offering expense, and (vii) GAAP and cash tax expense difference.

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

	June 30, 2013		December 31, 2012
Assets
Current assets
Cash and cash equivalents	$	192,641	$	182,238
Restricted cash		6		133
Accounts receivable, net		165,181		143,331
Inventories, net		76,342		89,363
Other receivables		2,459		1,429
Prepaid expenses		9,366		7,884
Current deferred income tax assets		25,347		22,768
Other current assets		3,695		9,680

Total current assets		475,037		456,826

Property, plant and equipment, net		247,242		238,256
Intangible assets, net		10,068		15,260
Long-term prepaid expenses		17,962		18,048
Deferred income tax assets		42,631		46,710
Other non-current assets		15,422		14,866

Total assets	$	808,362	$	789,966

Liabilities and Stockholder s' Equity
Current liabilities
Accounts payable	$	76,175	$	79,236
Other accounts payable		16,804		15,600
Accrued expenses		49,918		43,486
Derivative liabilities		10,247		—
Other current liabilities		6,912		9,973

Total current liabilities		160,056		148,295

Long-term borrowings, net		201,801		201,653
Accrued severance benefits, net		112,198		112,446
Other non-current liabilities		17,880		17,263

Total liabilities		491,935		479,657

Stockholders' equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 40,021,283 shares issued and 35,681,382 shares outstanding at June 30, 2013 and 39,599,374 shares issued and 35,635,357 shares outstanding at December 31, 2012		400		396
Additional paid-in capital		107,375		101,885
Retained earnings		284,282		287,251
Treasury stock, 4,339,901 shares at June 30, 2013 and 3,964,017 shares at December 31, 2012		(45,918)		(39,918)
Accumulated other comprehensive loss		(29,712)		(39,305)

Total stockholders' equity		316,427		310,309

Total liabilities and stockholders' equity	$	808,362	$	789,966

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (I n thousands of US dollars) (Unaudited)

	Three Months Ended		Six M onth s E nded
	June 30 , 20 13		June 30 , 20 13		June 30 , 20 12
Cash flows from operating activities
Net income (loss)	$	4,436	$	(2,969)	$	19,603
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization		8,359		16,881		15,397
Provision for severance benefits		6,457		10,686		10,975
Amortization of debt issuance costs and original issue discount		285		568		497
Loss on foreign currency translation, net		26,728		55,008		55
Gain on disposal of property, plant and equipment, net		(26)		(26)		(190)
Loss on disposal of intangible assets, net		—		1		15
Restructuring and impairment charges		—		618		—
Stock-based compensation		493		913		915
Other		776		1,411		(348)
Changes in operating assets and liabilities
Accounts receivable		(23,077)		(29,486)		(8,296)
Inventories		4,738		6,760		(11,498)
Other receivables		1,878		600		(2,580)
Other current assets		5,411		7,425		8,851
Deferred tax assets		(3,177)		(995)		1,146
Accounts payable		(1,437)		853		14,654
Other accounts payable		(17,256)		(7,522)		9,677
Accrued expenses		(5,878)		(7,003)		7,890
Other current liabilities		4,741		(1,097)		6,611
Payment of severance benefits		(2,312)		(2,939)		(4,816)
Other		(103)		(1,107)		(1,996)

Net cash provided by operating activities		11,036		48,580		66,562

Cash flows from investing activities
Decrease in restricted cash		30		122		1,634
Proceeds from disposal of plant, property and equipment		27		27		891
Purchase of plant, property and equipment		(6,963)		(39,890)		(46,728)
Payment for intellectual property registration		(101)		(243)		(565)
Payment for acquisition		—		—		(8,642)
Decrease in short-term financial instruments		—		—		173
Collection of guarantee deposits		117		117		70
Payment of guarantee deposits		(198)		(939)		(176)
Other		3		11		(53)

Net cash used in investing activities		(7,085)		(40,795)		(53,396)

Cash flows from financing activities
Proceeds from issuance of common stock		3,575		4,581		183
Repayment of obligations under capital lease		—		—		(2,968)
Acquisition of treasury stock		—		(6,000)		(16,935)

Net cash provided by (used in) financing activities		3,575		(1,419)		(19,720)
Effect of exchange rates on cash and cash equivalents		2,128		4,037		207

Net increase (decrease) in cash and cash equivalents		9,654		10,403		(6,347)

Cash and cash equivalents
Beginning of the period		182,987		182,238		162,111

End of the period	$	192,641	$	192,641	$	155,764

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