Himax Reports First Quarter 2010 Financial Results

Tainan City, TAIWAN, PROVINCE OF CHINA


Highlights:

  • Net revenue increased 39.7% year over year to $175.5 million and net income attributable to Himax stockholders increased 109.2% year over year to $9.1 million
  • Small-and-medium panel drivers accounted for more than a quarter of total revenues primarily due to strong shipment and share gain in the global handset display driver market
  • Second quarter 2010 revenues expected to grow by 10% to 15%, gross margin to remain flat
  • Second quarter 2010 GAAP earnings per ADS expected to be in the range of $0.06 to $0.08

TAINAN, Taiwan, May 5, 2010 (GLOBE NEWSWIRE) -- Himax Technologies, Inc. ("Himax" or "Company") (Nasdaq:HIMX) today reported financial results for the first quarter ended March 31, 2010.

For the first quarter of 2010, Himax reported net revenues of $175.5 million, representing a 39.7% increase from $125.7 million in the first quarter of 2009, and a 1.8% decrease from $178.7 million in the fourth quarter of 2009. Gross margin was 19.8% in the first quarter of 2010, down 110 basis points year-over-year, and down 20 basis points, sequentially. Operating income in the first quarter was $10.1 million, compared to $4.8 million for the same period last year and $13.1 million in the previous quarter.

Net income attributable to Himax stockholders for the first quarter of 2010 was $9.1 million or $0.05 per diluted ADS, up from $4.4 million or $0.02 per diluted ADS in the first quarter of 2009, and down from $11.0 million or $0.06 per diluted ADS in the fourth quarter of 2009.

Excluding share-based compensation and acquisition-related charges, non-GAAP operating income for the first quarter of 2010 was $12.5 million, up from $7.7 million in the same period last year, and down from $15.4 million in the previous quarter.

Non-GAAP net income attributable to Himax stockholders for the first quarter of 2010 was $11.2 million or $0.06 per diluted ADS, up from $7.0 million or $0.04 per diluted ADS in the first quarter of 2009, and down from $12.6 million or $0.07 per diluted ADS in the fourth quarter of 2009.

Reconciliation of gross margin, operating margin, net margin and diluted EPS excluding share-based compensation and acquisition-related charges, a non-GAAP financial measure, to GAAP gross margin, GAAP operating margin, GAAP net margin and diluted GAAP EPS, most comparable GAAP figure, is set out in the attached reconciliation schedule.

Numbers for shares outstanding and relevant information in the financial statements of the Company's common stocks are retroactively adjusted for all periods presented to reflect the effect of the recapitalization plan approved by the Company's stockholders in the general meeting on August 6, 2009. The recapitalization plan led to change in par value of the stock and doubled the total share count, with ADS ratio changing to one ADS representing two common stocks.

Jordan Wu, President and Chief Executive Officer of Himax, commented, "For the first time in company history, our small-and-medium panel drivers accounted for more than a quarter of total revenues. Small- and medium-sized applications accounted for 26.4% of total revenues for the first quarter, as compared to 23.0% for the same period last year, and 21.1% in the previous quarter. The strong sequential growth was driven by our share gain in the global handset display driver market. With an increasing number of compatible panels, our product portfolio is among the most complete and popular in the industry. We expect the strong demand of our handset display drivers to continue into the second quarter."

Mr. Wu continued, "We are pleased to start 2010 with solid results in our non-driver products. For our LCOS pico-project line, our 0.28" embedded solution for handset applications has been well-received by a number of optical engine makers and end customers, especially in the Chinese market. We believe the emerging pico-projector applications are just in the early stage of a long-term product life cycle. Being the leader in this fast-growing segment, we plan aggressive capacity expansion to capture the ample business opportunity."

Mr. Wu continued, "Revenues from our analog IC lines grew more than 50% sequentially, primarily due to the ramp of our WLED drivers. In addition to small-and-medium panels and notebooks, we also started to ship WLED drivers for TV applications, where multiple LED drivers are required per panel. With a more integrated and complete product line-up, we are confident that we will benefit from the trend of fast-growing LED-backlight displays, due to our solid technology and close partnerships with both panel makers and system makers."

Mr. Wu continued, "We are excited that our 2D to 3D conversion solution is receiving overwhelming interest from the 3D ecosystem, software and hardware makers alike. Our solution is widely praised for offering the best 3D effect and viewing experience in the market place. In addition to the software/firmware version which we announced in February, we recently launched our chip solution, which is now ready for mass production. This puts us firmly ahead of the market. Our IC solutions can accompany all types of 3D displays empowered by a variety of technologies. They are also suitable for a range of applications including TV, monitor, notebook, portable DVD player and digital photo frame."

Mr. Wu added, "We are seeing capacity tightness throughout the entire driver IC supply chain. This has led to severe shortage in driver IC across the board. The unfulfilled demands are at levels far above what we have experienced. The shortage has resulted in an increase in our cost of revenues and we are raising our selling prices to offset such impacts.

"The capacity tightness may have become a mid- to long-term trend. This is because, while the TFT LCD industry is aggressively expanding capacity again after several quarters of slowing down, the driver IC industry's overall capacity growth now appears limited. On the foundry side, display drivers' constant demand for large volume and favorable price has left it in a relative disadvantage when the foundry capacity becomes tight. The backend vendors, including tape, gold bump, packaging and testing, are still hesitant to expand aggressively, following several quarters of heavy losses during and after the global financial crisis.

"We believe the shortage situation is to the advantage of leading players such as ourselves who have already enjoyed solid access to a relatively large pool of capacity. Additionally, we have established critical long-term partnerships with many of the key suppliers in the industry. Therefore, we are confident that our relative competitiveness will strengthen in this new industry environment."

For the second quarter 2010 guidance, Himax expects revenues to grow by 10% to 15% and gross margin to remain flat. Second quarter 2010 GAAP earnings per ADS is expected to be in the range of $0.06 - $0.08.

Regarding the Taiwan listing plan, Mr. Wu commented, "The application is still under review by the authorities; however, we recently started to assess a potential alternative, which is to have a secondary listing in Taiwan by way of Taiwan Depository Receipts (TDRs). In early March the authorities proposed certain amendments to the existing rules governing foreign companies' offering and issuance of securities in Taiwan. Under the proposed amendments, our ADSs will be eligible to be listed on the TWSE in the form of TDR. The amendments also contain measures to encourage better secondary market liquidity, a major improvement over the existing rules. As we are a Cayman registered company listed on the NASDAQ, a major benefit of TDR for us, as opposed to our originally planned dual-listing, is that our maintenance costs of listing in Taiwan will be substantially lower because our ongoing compliance will remain essentially the same with the additional compliance requirement in Taiwan becoming much more limited. We are still in discussion with the authorities and no decision has been made as to whether to change the original dual-listing plan to a secondary TDR listing. We stress that all the amendments we mentioned above are merely proposals made by the authorities and have not been made effective. We are not certain when or whether it will be made effective or the final form of the new regulations if they should be made effective."

Investor Conference Call / Webcast Details

The Company's management will review detailed first quarter 2010 results on Wednesday, May 5, 2010 at 6:00 PM EDT (7:00 AM, Thursday, May 6, Taiwan time). The conference dial-in numbers are +1-201-689-8470 (international) and +1-877-407-9039 (U.S. domestic). A live webcast of the conference call will be available on the Company's website at www.himax.com.tw. The playback will be available beginning two hours after the call through 1:00pm Taiwan time on Wednesday, May 12, 2010 (midnight U.S. Eastern Daylight Time) at www.himax.com.tw and by telephone at +1-201-612-7415 (international) or +1-877-660-6853 (U.S. domestic). The account number to access the replay is 3055 and the conference ID number is 349435.  

About Himax Technologies, Inc.

Himax Technologies, Inc. designs, develops, and markets semiconductors that are critical components of flat panel displays. The Company's principal products are display drivers for large-sized TFT-LCD panels, which are used in desktop monitors, notebook computers and televisions, and display drivers for small- and medium-sized TFT-LCD panels, which are used in mobile handsets and consumer electronics products such as netbook computers, digital cameras, mobile gaming devices, portable DVD players, digital photo frame and car navigation displays. In addition, the Company is expanding its product offerings to include timing controllers, LCD TV and monitor chipset solutions, LCOS projector solutions, power management ICs, CMOS Image Sensors, Infinitely Color Technology and 2D to 3D conversion solutions. Based in Tainan, Taiwan, the Company has regional offices in Hsinchu and Taipei, Taiwan; Ninbo, Foshan, Fuqing, Beijing, Shanghai, Suzhou and Shenzhen, China; Yokohama and Matsusaka, Japan; Anyang-si Kyungki-do, and Cheonan-si, Chungcheongnam-do, South Korea; and Irvine California, USA.

Forward-Looking Statements: 

Factors that could cause actual events or results to differ materially include, but not limited to, general business and economic conditions and the state of the semiconductor industry; market acceptance and competitiveness of the driver and non-driver products developed by the Company; demand for end-use applications products; reliance on a small group of principal customers; the uncertainty of continued success in technological innovations; our ability to develop and protect our intellectual property; pricing pressures including declines in average selling prices; changes in customer order patterns; changes in estimated full-year effective tax rate; shortages in supply of key components; changes in environmental laws and regulations; exchange rate fluctuations; regulatory approvals for further investments in our subsidiaries; our ability to collect accounts receivable and manage inventory; the uncertainty of success in our Taiwan listing plan which is still under review by Taiwan regulatory authorities and subject to change due to, among other things, changes in either Taiwan or US authorities'policies and Taiwan regulatory authorities'acceptance of the Company's Taiwan listing application and other risks described from time to time in the Company's SEC filings, including those risks identified in the section entitled "Risk Factors" in its Form 20-F for the year ended December 31, 2008 filed with SEC on dated May 15, 2009, as amended.

 

Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Income
(These interim financials do not fully comply with US GAAP because they omit all interim disclosure required by US GAAP)
(Amounts in Thousands of U.S. Dollars, Except Per Share Data)
 
  Three Months
Ended March 31,
Three
Months
Ended
December
31,
   2010  2009  2009
Revenues      
 Revenues from third parties, net $ 70,940 $ 44,373 $ 59,421
 Revenues from related parties, net  104,558  81,283  119,255
   175,498  125,656  178,676
       
Costs and expenses:      
 Cost of revenues  140,773  99,441  142,889
 Research and development  17,808  15,249  16,767
 General and administrative  4,043  3,594  3,882
 Sales and marketing  2,749  2,549  2,047
Total costs and expenses  165,373  120,833  165,585
       
Operating income  10,125  4,823  13,091
       
Non operating income (loss):      
Interest income  104  282  90
Foreign exchange losses, net  (11)  (1,415)  (108)
Other income (loss), net  29  (138)  31
   122  (1,271)  13
Earnings before income taxes  10,247  3,552  13,104
 Income tax expense  2,049  249  3,016
Net income  8,198  3,303  10,088
Net loss attributable to noncontrolling interests  940  1,066  949
Net income attributable to Himax stockholders $ 9,138 $ 4,369 $ 11,037
       
Basic earnings per ordinary share attributable to Himax stockholders $ 0.03 $ 0.01 $ 0.03
Diluted earnings per ordinary share attributable to Himax stockholders $ 0.03 $ 0.01 $ 0.03
Basic earnings per ADS attributable to Himax stockholders $ 0.05 $ 0.02 $ 0.06
Diluted earnings per ADS attributable to Himax stockholders $ 0.05 $ 0.02 $ 0.06
       
Basic Weighted Average Outstanding Ordinary Shares  357,557 377,765  362,034
Diluted Weighted Average Outstanding Ordinary Shares  359,102 377,765  362,579
       
Himax Technologies, Inc.
Unaudited Supplemental Financial Information
(Amounts in Thousands of U.S. Dollars)
 
The amount of share-based compensation included
in applicable
statements of income categories is
summarized as follows:
Three Months
Ended March 31,
Three
Months
Ended
December 31,
  2010 2009 2009
Share-based compensation      
Cost of revenues $ 22 $ 13 $ 22
Research and development  1,374  1,783  1,306
General and administrative  229  272  228
Sales and marketing  218  274  219
Income tax benefit  (187)  (101)  (233)
Total $ 1,656 $ 2,241 $ 1,542
       
The amount of acquisition-related charges included
in applicable
statements of income categories is
summarized as follows:
     
       
Acquisition-related charges      
Research and development $ 259 $ 258 $ 259
Sales and marketing  289  290  289
Income tax benefit  (139)  (162)  (546)
Total $ 409 $ 386 $ 2
       

 

Himax Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
(Amounts in Thousands of U.S. Dollars, Except Per Share Data)
       
  March 31, December 31, March 31,
  2010 2009 2009
Assets      
Current assets:      
Cash and cash equivalents $ 155,932 $ 110,924 $ 200,678
Investments in marketable securities available-for-sale  5,198  10,730  3,919
Accounts receivable, less allowance for doubtful
accounts, sales returns and discounts
 71,354  64,496  52,689
Accounts receivable from related parties, less
allowance for sales returns and discounts
 129,519  138,172  87,959
Inventories  65,401  67,768  63,908
Deferred income taxes  17,590  17,491  20,747
Prepaid expenses and other current assets  13,753  14,216  9,973
 Total current assets $ 458,747 $ 423,797 $ 439,873
       
Investments in non-marketable equity securities  11,619  11,619  11,619
Equity method investments  1,430  586 --
Property, plant and equipment, net  50,783  51,586  53,542
Deferred income taxes  24,695  24,548  22,278
Goodwill  26,846  26,846  26,846
Intangible assets, net  8,322  8,872  10,417
Other assets  2,541  2,594  4,437
   126,236  126,651  129,139
 Total assets $ 584,983 $ 550,448 $ 569,012
       
Liabilities and Equity    
Current liabilities:      
Accounts payable $ 115,916 $ 88,079 $ 63,131
Income taxes payable  16,495  14,147  15,355
Other accrued expenses and other current liabilities  16,017  18,425 15,761
 Total current liabilities $ 148,428 $ 120,651 $ 94,247
Other liabilities  5,605  5,725  3,725
 Total liabilities 154,033 126,376 97,972
       
Equity      
Himax stockholders' equity:      
Ordinary shares, US$0.3 par value, 1,000,000,000
shares authorized; 355,531,454 shares, 358,012,184 shares,
and 374,606,372 shares issued and outstanding
at March 31, 2010, December 31, 2009, and
March 31, 2009, respectively
$ 106,659 $ 107,404  
 
 
 
 
$ 112,382
Additional paid-in capital  102,123  102,924  123,526
Accumulated other comprehensive income (loss)  35  4  (71)
Unappropriated retained earnings 218,259 209,121  229,336
 Himax stockholders' equity $ 427,076 $ 419,453 $ 465,173
Noncontrolling interests  3,874  4,619  5,867
 Total equity $ 430,950 $ 424,072 $ 471,040
 Total liabilities and equity $ 584,983 $ 550,448 $ 569,012
       

 

Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands of U.S.Dollars)
  Three Months
Ended
March 31,
Three Months
Ended
 December 31,
  2010 2009 2009
       
Cash flows from operating activities:      
Net income $ 8,198 $ 3,303 $ 10,088
Adjustments to reconcile net income to net cash provided
by operating activities:
     
 Depreciation and amortization  3,522  3,196  3,617
 Provision (reversal) for allowance for doubtful accounts --  389  (575)
 Share-based compensation expenses  1,843  2,342  1,775
 Equity in loss of equity method investees  59 --  48
 Loss on disposal of property and equipment --  19  2
 Loss (gain) on disposal of marketable securities, net  (59)  156  (17)
 Deferred income tax expense (benefit)  (375)  1,292  2,022
 Inventories write downs  2,864  3,976  3,774
Changes in operating assets and liabilities:      
 Accounts receivable  (6,858)  (2,049)  12,110
 Accounts receivable from related parties  8,656  16,509  10,700
 Inventories (498)  29,037  33,746
 Prepaid expenses and other current assets  462  498  (1,131)
 Accounts payable  27,837  9,411  (62,060)
 Income taxes payable  2,354  (115)  1,068
 Other accrued expenses and other current liabilities  (2,199)  (3,333)  2,159
 Other liabilities -- --  (697)
Net cash provided by operating activities  45,806  64,631  16,629
       
Cash flows from investing activities:      
Purchase of property and equipment  (2,388)  (3,097)  (2,260)
Proceeds from disposal of property and equipment -- --  15
Purchase of available-for-sale marketable securities  (5,577)  (6,552)  (13,653)
Disposal of available-for-sale marketable securities  11,190  16,170  7,946
Proceeds from disposal of subsidiary shares to
noncontrolling interests by Himax Technologies Limited
 418  106  76
Purchase of equity method investments  (897) -- --
Purchase of subsidiary shares from noncontrolling 
 interests
 (38)  (50)  (99)
Decrease (increase) in other assets  69  (1,114)  (2,049)
Net cash provided by(used in) investing activities  2,777  5,463  (10,024)
       
 
Himax Technologies, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands of U.S.Dollars)
       
  Three Months
Ended
March 31,
Three Months
Ended
 December 31,
  2010 2009 2009
Cash flows from financing activities:      
Proceeds from issuance of new shares by subsidiaries $ 65 $ 47 $ 805
Payments to acquire ordinary shares for retirement  (3,642)  (5,072)  (11,043)
Net cash used in financing activities  (3,577)  (5,025)  (10,238)
Effect of foreign currency exchange rate changes on
cash and cash equivalents
 2  409   (5) 
Net increase (decrease) in cash and cash equivalents  45,008 65,478  (3,638)
Cash and cash equivalents at beginning of period  110,924 135,200  114,562
Cash and cash equivalents at end of period $ 155,932 $ 200,678 $ 110,924
       
Supplemental disclosures of cash flow information:      
 Cash paid during the period for:      
 Income taxes $ 47 $ 26 $ 13

 

Himax Technologies, Inc.
Unaudited Supplemental Data – Reconciliation Schedule
(Amounts in Thousands of U.S. Dollars)
 
Gross Margin, Operating Margin and Net Margin Excluding Share-based Compensation and Acquisition-Related Charges:
  Three Months
Ended March 31,
Three Months
Ended December 31,
   2010  2009  2009
Revenues $ 175,498 $ 125,656 $ 178,676
Gross profit  34,725  26,215  35,787
Add: Share-based compensation – Cost of revenues  22  13  22
Gross profit excluding share-based compensation  34,747  26,228  35,809
Gross margin excluding share-based compensation  19.8%  20.9%  20.0%
Operating income  10,125  4,823  13,091
Add: Share-based compensation  1,843  2,342  1,775
Operating income excluding share-based compensation  11,968  7,165  14,866
Add: Acquisition-related charges –Intangible assets amortization  548  548  548
Operating income excluding share-based compensation and acquisition-related charges  12,516  7,713  15,414
Operating margin excluding share-based compensation and acquisition-related charges  7.1%  6.1%  8.6%
Net income attributable to Himax stockholders  9,138  4,369  11,037
Add: Share-based compensation, net of tax  1,656  2,241  1,542
Add: Acquisition-related charges, net of tax  409  386  2
Net income attributable to Himax stockholders excluding share-based compensation and acquisition-related charges  11,203  6,996  12,581
Net margin attributable to Himax stockholders excluding share-based compensation and acquisition-related charges  6.4%  5.6%  7.0%
       
*Gross margin excluding share-based compensation equals gross profit excluding share-based compensation divided by revenues
*Operating margin excluding share-based compensation and acquisition-related charges equals operating income excluding share-based compensation and acquisition-related charges divided by revenues
*Net margin attributable to Himax stockholders excluding share-based compensation and acquisition-related charges equals net income attributable to Himax stockholders excluding share-based compensation and acquisition-related charges divided by revenues
Diluted Earnings Per Ordinary Share Attributable to Himax stockholders Excluding Share-
based Compensation and Acquisition-Related Charges:

 
 
 
Three Months
Ended March 31,
  2010
Diluted GAAP EPS attributable to Himax stockholders $0.03
Add: Share-based compensation per diluted share $--
Add: Acquisition-related charges per diluted share $--
   
Diluted non GAAP EPS attributable to Himax stockholders
excluding share-based compensation and acquisition-related charges
$0.03
   
Numbers do not add up due to rounding


        

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