Himax Technologies, Inc. Reports Fourth Quarter and Full Year 2011 Financial Results

• Q4 2011 revenue increased 19.8% year-over-year and 4.4% quarter-over-quarter
• Small and medium-sized panel driver sales increased 40.2% year-over-year in Q4 2011, representing 47.6% of total revenues
• Q4 2011 gross margin increased 360 basis points to 22.1% from 18.5% in Q3 2011
• Q4 2011 non-GAAP pre-tax income increased 83.3% to $10.3 million from $5.6 million in Q3 2011
• FY 2011 non-GAAP adjusted pre-tax income of $25.7 million and $0.145 per diluted ADS
• Positive 2012 outlook with strong growth in small/medium and non-driver products

TAINAN, Taiwan, Feb. 13, 2012 (GLOBE NEWSWIRE) -- Himax Technologies, Inc. (Nasdaq:HIMX) ("Himax" or "Company"), a leading supplier and fabless manufacturer of display drivers and other semiconductor products, today announced financial results for the fourth quarter and full year ended December 31, 2011.

SUMMARY FINANCIALS - YEAR OVER YEAR and QUARTER TO QUARTER

"We finished 2011 with very solid results," explained Mr. Jordan Wu, President and Chief Executive Officer of Himax. "We grew revenues by almost 20%, the strongest year-over-year growth in the last six quarters. This signifies solid execution of our growth strategy and supports our focus on the small and medium-sized panel market. Our ongoing investments in developing new products and technologies continue to generate positive results for our non-driver business lines as well. With orders up 18.1% year-over-year in the fourth quarter and gross margins expanding by 60 basis points to 22.1%, we are confident in maintaining revenue and earnings growth in 2012."

Fourth Quarter 2011 Financial Results

Breakdown by Product Line (USD in millions) (unaudited)

Revenues for the fourth quarter of 2011 increased 19.8% to $169.2 million year-over-year and increased 4.4% sequentially. Himax's small and medium-sized drivers increased 40.2% in the fourth quarter on a year-over-year basis and were up 1.1% sequentially, mostly due to strong demand of smartphones which nearly tripled year-over-year and doubled sequentially. Driver IC for small and medium-sized applications accounted for 47.6% of total revenues for the fourth quarter, as compared to 40.7% for the same period last year, and 49.2% in the previous quarter. Sales for cell phone applications, in particular, produced very strong 53.0% growth in the fourth quarter on a year-over-year basis and increased 2.5% sequentially due to strong demand of smartphones which nearly tripled year-over-year and doubled sequentially.

Revenues from large panel display drivers were $67.0 million, down 5.8% from a year ago but grew 8.0% sequentially. The quarter-over-quarter increase was mainly attributed to strong "rush" orders from the TV segment as many Chinese customers pulled their demands into Q4 to make up for the loss of working days during the Chinese New Year holidays in January. Large panel drivers accounted for 39.6% of total revenues for the fourth quarter compared to 50.3% a year ago and 38.3% in the third quarter.

Revenues from Himax's non-driver businesses, which include CMOS image sensors and wafer optics, LCOS micro image projectors, touch panel controllers and timing controllers were $21.7 million, an increase of 71.3% from the same period last year and an increase of 6.4% sequentially. Non-driver products accounted for 12.8% of total revenues in the fourth quarter, as compared to 9.0% a year ago and 12.5% in the previous quarter.

With double-digit sales growth to many Himax customers, revenue from related parties remained below 40% at 35.1% of total sales in Q4 last year, compared to 52.5% a year ago and 39.3% in the previous quarter.  The Company believes it has successfully transformed its product mix and developed new products for new customer segments successfully. A more diversified customer base reduces Himax's dependence on any one single customer and helps minimize our business risk. Management is confident that the strong momentum will continue into 2012 and beyond.

Total cost of sales for the fourth quarter of 2011 was $131.9 million compared to $110.9 million for the same period in 2010 and $132.1 million in the third quarter. Gross profit was $37.4 million for the fourth quarter of 2011, representing gross margin of 22.1%, compared to $30.3 million and a gross margin of 21.5% in the fourth quarter of 2010 and $30.0 million and 18.5% in the third quarter. The primary influence of the year-over-year and quarter-over-quarter increases in gross margin was the shift of the Company's product mix. Smartphone and non-driver segments were the major contributors to the improvement of gross margin in Q4T. The Company believes that as non-driver product sales increase, Himax will be able to maintain and improve gross margin from its current levels.

Fourth quarter 2011 GAAP operating expenses were $26.2 million, up 50.2% from $17.4 million a year ago and down 14.1% from $30.5 million in the previous quarter. The significant increase from last year was largely due to a bad debt collection of $8.6 million from SVA-NEC in Q4 2010 which was an offset against the sales expenses. Whereas, the significant sequential decrease was primarily due to the charges of the 2011 RSU granted in the third quarter. Ignoring the bad debt collection of Q4, 2010 and the higher RSU charges of Q3, 2011, Q4 operating expenses actually remained stable compared to the previous quarter and the same period last year.

Non-GAAP adjusted pre-tax income for the fourth quarter was $10.3 million, or $0.059 per diluted ADS, up 51.5% compared to $6.8 million, or $0.038 per diluted ADS during the same period last year, and up 83.3% from $5.6 million, or $0.032 per diluted ADS. Earnings per diluted ADS are based on 176.2 million, 177.5 million and 176.9 million weighted average outstanding ADS for the period, respectively. The non-GAAP adjusted pre-tax income does not take into account RSU expenses, acquisition-related charges, bad debt collections, income taxes and tax credit provisions which are one-off in nature.

The Q4 2011 income tax expenses were affected by two issues, including the effective tax rate and a non-cash tax credit provisions. First, the effective tax rate on consolidated basis was artificially high.  While the Company's subsidiaries are losing money, their losses could not be used to offset against the profit made by the parent companies. This will start to reverse as the subsidiaries turn profitable. The subsidiaries' early profit will be offset by historical losses that can be carried forward for tax purposes.

Another major issue that led to the higher effective tax rate was related to the New Taiwan ("NT") dollar depreciation against the US dollar for the whole year last year. There are two areas of impact. Firstly, as the Company's reporting currency is the US dollar, the majority of taxes are incurred in NT dollars, which is the required currency from the Taiwan tax authority's point of view. The NT dollar depreciation resulted in a significant foreign exchange gain for the Company's US dollar assets and therefore higher tax payable in Taiwan. The second impact was related to provisions of deferred tax asset, which naturally is NT dollar-based. The total additional income tax for the reason of NT dollar depreciation amounted to $5.5 million in the fourth quarter of 2011.

The second issue impacting fourth quarter 2011 taxes was a non-cash tax credit provisions. As part of Himax's accounting practices, Management reviewed its balance sheet in Q4 and decided to make provisions of approximately $3.3 million of tax credits. The Company applied for and was granted these tax credits in the past years mainly out of R&D expenditure. The Company believes this is a prudent approach given the uncertain global economic outlook. While these tax credits have been written off from the balance sheet, they remain effective from the local tax authorities' point of view, meaning if the Company should make more pre-tax profits than the Company currently anticipated for this year, the Company will still be eligible to enjoy such tax credits.

Excluding the aforementioned tax credit provisions, GAAP net income for fourth quarter would be $6.7 million, or $0.038 per ADS

GAAP net income attributable to Himax shareholders for the fourth quarter was $3.7 million, or $0.021 per diluted ADS.

Revenues for the full year 2011 decreased 1.5% to $633.0 million from 2010 due to the 26.2% year-over-year reduction of large-panel drivers, which represented 42.7% of 2011 revenue, as compared to 57.0% in 2010.    Management does not expect further loss of market share for large-sized drivers with existing customers in 2012.  Himax is confident that they will gain share in China where there is aggressive panel capacity expansion plans underway, providing attractive new driver IC business opportunities for this year, especially in the large panel segment.

Small-and medium-sized drivers grew 26.2% year-over-year, and represented 44.6% of total revenue, as compared to 34.8% a year ago. This strong growth momentum in the small and medium drivers will continue through 2012, due mainly to the fast-growing smartphone demand. The increase in sales from the small-and-medium sized drivers is also expected to improve gross margin this year. Non-driver products grew 53.1% year over year, representing 12.7% of total sales, as compared to 8.2% a year ago. Himax achieved numerous milestones for non-driver products in 2011. 2011 was the first year when they commenced mass production for several new product areas, including touch controller ICs, CMOS image sensors, wafer-level optics, wafer-level camera modules, and 2D to 3D conversion solutions. Moreover, Himax's LCOS micro-display solutions, power management ICs and WLED drivers all delivered strong shipments in 2011. These accomplishments are illustrations of the Company's strong R&D capability and commitment to a more diversified product portfolio. Himax's management team is confident that the strong growth momentum from its non-driver products will continue into 2012 and beyond.

Total cost of sales for 2011 was $507.4 million compared to $507.6 million for the same period in 2010. Gross profit was $125.6 million for the fiscal year 2011, representing gross margin of 19.8%, compared to $135.0 million and a gross margin of 21.0% in fiscal year 2010. Excluding the shared-based compensation and acquisition-related charges, non-GAAP gross margin for the year 2011 was 19.9%, as compared to 21.0% last year. 

GAAP operating expenses for the twelve months ended December 31, 2011 were approximately $109.0 million, up 9.3% from $99.7 million for the period a year ago. The increase is mainly due to the bad debt collection from SVA-NEC of $8.8 million in 2010. Excluding the bad debt collection from SVA-NEC, GAAP operating expenses were $110.5 million and $108.5 million for 2011 and 2010, respectively

GAAP operating income for FY 2011 was $16.6 million, as compared to $35.4 million in 2010. Excluding the bad debt collection from SVA-NEC, GAAP operating income were $15.1 million and $26.6 million for 2011 and 2010, respectively.

With total revenues staying literally unchanged from the previous year, the operating income decline was primarily due to the lower gross margin from 21.0% to 19.8%, or $9.6 million reduction of gross profit, as well as $2.0 million of higher operating expenses excluding the bad debt collection from SVA-NEC.

GAAP net income attributable to shareholders was $10.7 million and $33.2 million in the FY 2011 and 2010, respectively. GAAP net income per diluted ADS was $0.061 in FY 2011 compared to $0.187 in the same period in 2010, based on 176.9 million and 177.8 million weighted average outstanding ADS, respectively.

Balance Sheet, Cash Flow and Share Buyback

The Company had $106.3 million in cash, cash equivalents and marketable securities available-for-sale on December 31, 2011, compared to $105.5 million on December 31, 2010. Inventory at the end of December was $113.0 million compared to $118.0 million at end of 2010.

Accounts receivable were approximately $181.1 million on December 31, 2011 compared to $176.2 million on December 31, 2010. Day sales outstanding ("DSO") was 104 days at end of 2011 versus 100 days in 2010.

Net cash inflow from operating activities for the fourth quarter was $17.3 million, as compared to $29.8 million during the same period last year and $17.4 million in the previous quarter. Cumulative cash flows from operations in 2011 were $43.4 million versus $57.6 million the year before.

Himax currently has a $25.0 million share buyback program in place.   Himax has purchased a total of $9.2 million, or approximately 7.1 million ADS through February 10, 2012.  The Company will continue to execute the remaining share repurchase program in accordance with Rule 10b-18. 

 "Our strong balance sheet and positive cash flows provide us a lot of financial flexibility," stated Mr. Wu. "We will continue to invest in our people, our technologies and customer service. In addition, we remain committed to returning excess capital to shareholders through a combination of share repurchases and cash dividends." 

Business Updates

Himax has successfully implemented a product diversification strategy as by entering new markets and signing new customers. The small-medium driver segment has become the Company's single largest revenue contributor which also produce higher gross margins. Revenues from the small-medium segment alone surpassed those from all large panel applications combined, including TV, monitor and laptops. The non-driver business has also grown quickly to become over 10% of total revenue in 2011.   2011 has been marked as a year of transition for success.  Seeing the potential upside potential, the Company remains optimistic it will generate positive top line and bottom line growth in 2012.

"Entering into 2012, we are seeing strong fundamentals across many of our businesses, including large panel driver business, which we believe has stabilized. We are on track with new customer additions in several regions. Equally important, we expect a more balanced product portfolio to contribute to our overall business improvement including better gross margin and more controlled operating expenses. Our smartphone and non-driver products will continue its strong growth to represent a larger part of our overall sales." Concluded Mr. Wu.

Q1 2012 Guidance

In the first quarter, we expect a mid-single-digit decline in our revenues compared to the last quarter with gross margin being flat or down slightly. Given that the first quarter has fewer working days due to Chinese New Year and that it is a cyclically low season, we believe Q1 will be weakest of the quarters in terms of sales. GAAP earnings attributable to shareholders per ADS are expected to be in the range of 3 to 4 cents per ADS based on 172 million outstanding ADS. The guided EPS improvement against the last quarter was mainly to reflect our expectation that the effective income tax rate would be back to a more normal level versus the unusually high level of the last quarter, as explained earlier.

Conference Call

Himax Technologies, Inc. will hold a conference call with investors and analysts today, Monday, February 13, 2012 at 6:00pm US Eastern Standard Time to discuss the Company's fourth quarter and full year 2011 financial results. Details of the call follow below.

A replay of the call will be available beginning two hours after the call through midnight ET February 20, 2012 (1 p.m. February 21, Taiwan time) on www.himax.com.tw and by telephone at +1-877-870-5176 (US Domestic) or +1-858-384-5517 (International). The conference ID number is 387248. This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this http://viavid.net/dce.aspx?sid=0000929E or at ViaVid's website at http://www.viavid.net, where the webcast can be accessed through February 12, 2013.

About Himax Technologies, Inc.

Himax Technologies, Inc. (Nasdaq:HIMX - News) is a fabless semiconductor solution provider dedicated to display imagine processing technologies. Himax is a worldwide market leader in display driver ICs and timing controllers used in TVs, laptops, monitors, mobile phones, tablets, digital cameras, car navigation, and many other consumer electronics devices. Additionally, Himax designs and provides controllers for touch sensor displays, LCOS micro-displays used in palm-size projectors and head-mount displays, LED driver ICs, power management ICs, and chipsets for TVs and monitors. The company also offers digital camera solutions, including CMOS image sensors and wafer level optics, which are used in a wide variety of applications such as mobile phone, tablet, laptop, TV, PC camera, automobile, security and medical devices. Founded in 2001 and headquartered in Tainan, Taiwan, Himax currently employs 1,500 people from three Taiwan-based offices in Tainan, Hsinchu and Taipei and country offices in China, Korea, Japan and the US. With more than 1,200 patents in three continents on its technologies, Himax has retained its position as the leading display image processing semiconductor solution provider to consumer electronics brands worldwide.

http://www.himax.com.tw

About Non-GAAP Financial Measures

To supplement the unaudited consolidated statement of income and comprehensive income presented in accordance with GAAP, the Company are also providing non-GAAP measures of income before income tax expenses, net income, net income attributable to us and basic and diluted earnings per share for the twelve months ended December 31, 2011 and 2010, which are adjusted from results based on GAAP to exclude the non-cash transactions. The non-GAAP financial measures are provided to enhance the investors' overall understanding of our current performance in on-going core operations as the well as prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The Company use both GAAP and non-GAAP information in evaluating our operating business results internally and therefore deem it important to provide all of this information to investors. The non-GAAP adjustments include share based compensations, acquisition related charges, bad debt collections and its tax charges and tax credit provisions.

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 U.S. 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, 2010 filed with the SEC on May 20, 2011, as may be amended.