Business Context and Reporting Period
This Form 6-K filing by Himax Technologies, Inc. (Himax) is dated November 12, 2009. The report discloses the Company's filing of a listing application with the Taiwan Stock Exchange (TWSE) for its ordinary shares. The filing includes a preliminary offering circular and underwriter evaluation report. Himax currently trades on the NASDAQ via American Depositary Shares (ADSs), with each ADS representing two ordinary shares.
Key Financial Metrics
Revenue and Profit
- Net Revenues (Nine Months Ended Sept 30, 2009): NT$16,523,317,000 (approx. US$508 million).
- Net Revenues (Year Ended Dec 31, 2008): NT$27,315,803,000 (approx. US$840 million).
- Net Income (Nine Months Ended Sept 30, 2009): US$28.6 million (U.S. GAAP) / NT$927.0 million (ROC GAAP).
- Net Income (Year Ended Dec 31, 2008): US$76.4 million (U.S. GAAP) / NT$2,607.1 million (ROC GAAP).
- Earnings Per Diluted ADS (Nine Months 2009): US$0.15.
- Earnings Per Diluted ADS (Full Year 2008): US$0.40.
Liquidity and Cash Flow
- Projected Cash Balance (End of Dec 2009): NT$3,501,392,000.
- Projected Cash Balance (End of Dec 2010): NT$4,016,300,000.
- Debt: The projected cash flow statement indicates a temporary debt issuance and repayment of NT$5,146,400,000 in October 2010, with no net debt impact at period end.
Material Changes and Operational Data
Customer and Supplier Concentration
The Company exhibits high customer concentration. "CMO and its affiliates" accounted for 63.67% of net revenues for the nine months ended September 30, 2009, compared to 62.50% for the full year 2008. The top 10 customers collectively accounted for 88.09% of revenues in the first nine months of 2009.
Supplier concentration is also significant. The top 10 suppliers accounted for 96.69% of net purchases for the nine months ended September 30, 2009. The largest supplier, "Company Z," accounted for 26.45% of purchases.
Executive Compensation
Income ranges for directors and executive officers for 2008 ranged from below NT$2 million to over NT$100 million. Restricted Share Unit (RSU) grants were made to several directors and officers in 2009, with total grants ranging from 24,615 to 61,684 units per individual.
Proposed Listing Plan
- Offer Size: Tentative plan to issue 20 million new ordinary shares (minimum required by TWSE).
- Indicative Price: NT$48 per ordinary share (based on October 2009 ADS averages and industry outlook).
- Use of Proceeds: General working capital.
- Timeline: Listing approval expected in Q1 2010; trading expected to begin in Q2 2010.
- Fungibility: Ordinary shares and ADSs are expected to remain fungible, subject to a cap where deposited ordinary shares underlying ADSs do not exceed 50% of total outstanding ordinary shares.
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding the proposed Taiwan listing. Management expects to receive listing approval in the first quarter of 2010 and begin trading in the second quarter of 2010. However, the Company explicitly states there can be no assurance that the listing will be approved or that trading will begin as expected.
Key Risks Identified:
- Failure to obtain shareholder support for the dual listing plan.
- Changes in policies by Taiwan or U.S. authorities.
- Rejection of the listing application by the TWSE.
- Adverse changes in capital market conditions in Taiwan or the U.S.
- Capital market acceptance of the share offering.
Accounting Differences: The filing notes differences between ROC GAAP and U.S. GAAP regarding share-based compensation, undistributed earnings surtax, and interim income tax provisions. For the periods reported, revenue figures were identical under both standards, though net income figures varied slightly due to these accounting treatments.
Investor Verification Checklist
- Listing Approval Status: Verify if the TWSE has granted approval for the listing as anticipated for Q1 2010.
- Final Offering Price: Confirm the final offer price, as the NT$48 figure is only indicative.
- Customer Concentration: Monitor the relationship with "CMO and its affiliates," which represents nearly two-thirds of revenue.
- ADS Fungibility: Confirm the implementation of the 50% cap on deposited ordinary shares underlying ADSs post-listing.
- Cash Flow Realization: Compare actual cash balances in Q4 2009 and 2010 against the projected figures provided in the filing.