Analog and mixed-signal chip vendor MagnaChip Semiconductor Corp. (Seoul, South Korea) has announced that it has incorrectly recognized revenue on some product sales over several years and will have to restate its accounts for 2011, 2012 and for the first three quarters of 2013.
The discrepancy hinges on the recognition of sales to distribution but it remains unclear whether recognition of sales to one particular distributor, to many or to all distributors was at fault. At least six legal firms announced they were looking into the possibility of mounting class action suits on behalf of shareholders.
However, the MagnaChip added that it did not anticipate that restating its accounts would change cash and debt balances at the end of the periods being restated and that it estimates that its balance of cash as of Dec. 31, 2013 was $153.6 million. The company also announced the appointment of Jonathon Kim, as chief accounting officer of the company, effective immediately, and that Margaret Sakia, executive vice president and chief financial officer, would no longer serve the company as its principal accounting officer.
MagnaChip had previously announced that it was postponing its fourth quarter 2013 earnings release and investor conference call, previously scheduled for Tuesday, January 28, 2014, to provide additional time to complete a review of its financial results for 4Q13 and full year 2013.
MagnaChip was formed in 2004 by the sell off of the non-memory and foundry operations of Hynix Semiconductor, now SK Hynix, and subsequently floated on the New York Stock Exchange. In the financial results for the 3Q13 – which are not now to be relied upon – MagnaChip declared a net income of $46.7 million on quarterly revenue of $217.8 million.
The problems came to light during an internal review conducted at the Audit Committee's request. MagnaChip plans to reverse the erroneously recognized transactions and recognize them in the period when products were shipped by the distributor. The company said the internal review is not yet concluded. It did not give a date by which it would file its 4Q13 and full year 2013 financial results.
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