MagnaChip Reports Fourth Quarter and Full Year 2015 Financial Results

Feb 17, 2016, 16:15 ET from MagnaChip Semiconductor Corporation

SEOUL, South Korea and SAN JOSE, Calif., Feb. 17, 2016 /PRNewswire/ -- MagnaChip Semiconductor Corporation ("MagnaChip") (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the fourth quarter and full year ended December 31, 2015.

Revenue for the fourth quarter of 2015 was $152.4 million, a 1.3% decline compared to $154.4 million for the third quarter of 2015, and down 9.1% compared to $167.7 million for the fourth quarter of 2014.  Foundry Services revenue in the fourth quarter of 2015 was $65.8 million and Standard Products Group revenue was $86.5 million. For the full year 2015, revenue was $633.7 million compared to $698.2 million for 2014, a 9.2% decrease.

Gross profit was $29.9 million, or 19.6% as a percent of revenue for the fourth quarter of 2015. This compared with gross profit of $34.7 million, or 22.5%, for the third quarter of 2015 and $34.5 million, or 20.6%, for the fourth quarter of 2014. Foundry gross profit was 22.7% and Standard Products Group gross profit was 17.2% in the fourth quarter of 2015. For the full year 2015, gross profit was $134.9 million, or 21.3%, compared to $152.9 million, or 21.9%, for 2014.

Net income, on a GAAP basis, for the fourth quarter of 2015 totaled $22.9 million, or $0.66 per basic and diluted share, compared to a net loss of $57.1 million, or $1.65 per basic share, for the third quarter of 2015 and net loss of $63.8 million, or $1.87 per basic share, for the fourth quarter of 2014. Net income included a tax benefit and a foreign currency translation gain on intercompany loans payable as well as spending reductions. For the full year 2015, net loss was $84.9 million, or $2.47 per basic share, compared to $117.2 million or $3.44 per basic share, for 2014.

"Revenue in the fourth quarter was at the high end of our guidance range and gross margin was better than expected, driven primarily by an increase in demand for AMOLED display drivers consumed by smartphone makers in China," said YJ Kim, Chief Executive Officer of MagnaChip. "Despite a weak macro environment, our foundry pipeline is filling, AMOLED demand is improving and our business is showing early signs of stabilizing."

Chief Financial Officer Jonathan Kim commented, "During 2015, we embarked on a comprehensive plan to reduce total normalized spending by more than $40 million for the year. In fact, we far exceeded our goal and reduced total normalized spending by over $50 million, including approximately $13 million in the fourth quarter of 2015 alone. We will continue to explore opportunities to control spending in 2016."

Adjusted Net Income, a non-GAAP measurement, for the fourth quarter of 2015 totaled $5.2 million, or $0.15 per basic and diluted share, compared to an Adjusted Net Loss, a non-GAAP measurement, of $10.4 million, or $0.30 per basic share, in the third quarter of 2015 and an Adjusted Net Loss of $10.8 million, or $0.32 per basic share, for the fourth quarter of 2014. For the full year 2015, Adjusted Net Loss was $26.7 million, or $0.78 per basic share compared to an Adjusted Net Loss of $38.1 million or $1.12 per basic share for 2014.

Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting MagnaChip's business and operations. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income or as a better indicator of our operating performance than measures that are presented in accordance with GAAP. A reconciliation of GAAP results to non-GAAP results is included following the financial statements.

Cash and cash equivalents totaled $90.9 million at the end of the fourth quarter of 2015, an increase of $22.4 million from the end of the prior quarter primarily due to one-time receipts of pre-paid deposits for the planned sale of our 6" fab equipment and prepayment received for end-of-life products produced in our 6" fab.

As disclosed in MagnaChip's 2015 proxy statement, the Board of Directors established a Strategic Review Committee ("SRC") to assist the Board in reviewing, considering and evaluating strategic alternatives that may be available to MagnaChip. The SRC and the Board of Directors are still actively involved in an ongoing process of reviewing various strategic alternatives and will continue to evaluate alternatives consistent with their obligation to act in the best interest of stockholders. No decision has been made to enter into a transaction at this time and MagnaChip can offer no assurance that it will enter into any transaction in the future.

The following table sets forth information relating to our operating segments:

Three Months Ended

Year Ended

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Net Sales

Foundry Services Group

$    65,822

$    78,949

$  290,775

$  360,549

Standard Products Group       

Display Solutions          

53,895

55,455

207,480

199,861

Power Solutions             

32,576

33,108

134,814

137,246

Total Standard Products Group  

86,471

88,563

342,294

337,107

All other     

137

140

643

562

Total net sales

$  152,430

$  167,652

$633,712

$  698,218

Three Months Ended

Year Ended

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Gross Profit

Foundry Services Group

$    14,935

$    15,630

$    66,175

$    75,739

Standard Products Group       

14,878

18,728

68,094

76,561

All other     

89

140

595

562

Total gross profit           

$    29,902

$    34,498

$  134,864

$  152,862

Fourth Quarter and Recent Company Highlights

  • Surpassed 160 Million Mark in AMOLED Display Driver IC Units Shipped
  • Selected for the "2015 Excellence Supplier Award" by LG Display
  • Hosted a Foundry Technology Symposium in Shenzhen, China, on November 10, 2015
  • Announced a 2016 Foundry Technology Symposium in Beijing, China, on March 15, 2016

Business Outlook

For the first quarter of 2016, MagnaChip anticipates:

  • Revenue in the first quarter, typically our seasonally weakest period, will be in the range of $141 million to $147million. This would represent a sequential decline of between 3-7% – despite a sequential loss of more than $10 million in revenue from our 6" fab, which will close at the end of February.
  • Gross profit to be 21% to 24% as a percent of revenue.

Conference Call

MagnaChip will hold a conference call at 5 p.m. EST today (February 17, 2016) to discuss the fourth quarter and full year 2015 financial results. The conference call will be webcast live and is also available by dialing 1-866-776-2061 in the U.S. or 1-706-679-0298 for all other locations. The conference ID number is 24897567 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EST start time to ensure a timely connection. The webcast and earnings release will be accessible at www.magnachip.com.

A replay of the conference call will be available the same day and will run for 72 hours. The replay access numbers are 1-855-859-2056 or 1-404-537-3406. The access code is 24897567.

About MagnaChip Semiconductor Corporation

Headquartered in South Korea, MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. MagnaChip believes it has one of the broadest and deepest ranges of analog and mixed-signal semiconductor platforms in the industry, supported by its 30-year operating history, a large portfolio of registered and pending patents, and extensive engineering and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through, MagnaChip's website is not a part of, and is not incorporated into, this release.

Safe Harbor for Forward-Looking Statements

Information in this release regarding MagnaChip's forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about our future operating and financial performance, including first quarter 2016 revenue and gross profit and expectations related to future spending and cost reduction initiatives. All forward-looking statements included in this release are based upon information available to MagnaChip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new products and technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for semiconductor products, industry and/or company overcapacity, effective and cost efficient utilization of manufacturing capacity, financial stability in foreign markets and the impact of foreign exchange rates, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, compliance with U.S. and international trade and export laws and regulations by us and our distributors, and other risks detailed from time to time in MagnaChip's filings with the SEC, including our Form 10-K filed on May 28, 2015 and our Form 10-Q filed on November 6, 2015 and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. MagnaChip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

CONTACTS:

In the United States:

Robert Pursel

Director of Investor Relations

Tel. +1-408-625-1262

robert.pursel@magnachip.com

In Korea:

Chankeun Park

Senior Manager, Public Relations

Tel. +82-2-6903-3195

chankeun.park@magnachip.com

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars, except share data)

(Unaudited)

Three Months Ended

Year Ended

December 31,

2015

September 30,

2015

December 31,

2014

December 31,

2015

December 31,

2014

Net sales

$

152,430

$

154,382

$

167,652

$

633,712

$

698,218

Cost of sales

122,528

119,683

133,154

498,848

545,356

Gross profit

29,902

34,699

34,498

134,864

152,862

Gross profit %

19.6%

22.5%

20.6%

21.3%

21.9%

Operating expenses

Selling, general and administrative expenses

18,653

22,107

32,491

94,378

126,954

Research and development expenses

18,879

20,450

22,147

83,420

92,765

Restructuring and impairment charges

10,269

10,269

Total operating expenses

37,532

42,557

64,907

177,798

229,988

Operating loss

(7,630)

(7,858)

(30,409)

(42,934)

(77,126)

Interest expense

(4,081)

(4,075)

(4,252)

(16,268)

(16,833)

Foreign currency gain (loss), net

17,080

(44,139)

(30,160)

(42,531)

(24,650)

Other income, net

617

256

744

1,779

2,900

Income (loss) before income tax    expenses

5,986

(55,816)

(64,077)

(99,954)

(115,709)

Income tax expenses (benefits)

(16,868)

1,250

(247)

(15,087)

1,523

Net income (loss)

$

22,854

$

(57,066)

$

(63,830)

$

(84,867)

$

(117,232)

Earnings (loss) per common share :

- Basic

$

0.66

$

(1.65)

$

(1.87)

$

(2.47)

$

(3.44)

- Diluted

$

0.66

$

(1.65)

$

(1.87)

$

(2.47)

$

(3.44)

Weighted average number of shares—Basic

34,698,777

34,664,246

34,056,413

34,380,517

34,055,513

Weighted average number of shares—Diluted

34,713,034

34,664,246

34,056,413

34,380,517

34,055,513

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME (LOSS)

(In thousands of US dollars, except share data)

(Unaudited)

Three Months Ended

Year Ended

December 31,

2015

September 30,

2015

December 31,

2014

December 31,

2015

December 31,

2014

Net income (loss)

$

22,854

$

(57,066)

$

(63,830)

$

(84,867)

$

(117,232)

Adjustments:

Depreciation and amortization

6,424

6,399

7,072

26,490

29,989

Interest expense, net

4,020

4,023

4,134

16,039

16,289

Income tax expenses (benefits)

(16,868)

1,250

(247)

(15,087)

1,523

Restructuring and impairment charges

10,269

10,269

Equity-based compensation expense

398

393

407

2,768

2,072

Foreign currency loss (gain), net

(17,080)

44,139

30,160

42,531

24,650

Derivative valuation loss (gain), net

(61)

270

(49)

516

12

Restatement related expenses

(891)

1,891

12,145

12,372

40,897

Adjusted EBITDA

$

(1,204)

$

1,299

$

61

$

762

$

8,469

Adjusted EBITDA per common share:

- Diluted

$

(0.03)

$

0.04

$

0.00

$

0.02

$

0.24

Weighted average number of shares—Diluted

34,698,777

35,002,896

35,006,862

34,663,593

35,172,755

Net income (loss)

$

22,854

$

(57,066)

$

(63,830)

$

(84,867)

$

(117,232)

Adjustments:

Restructuring and impairment charges

10,269

10,269

Equity-based compensation expense

398

393

407

2,768

2,072

Amortization of intangibles

120

1,221

Foreign currency loss (gain), net

(17,080)

44,139

30,160

42,531

24,650

Derivative valuation loss (gain), net

(61)

270

(49)

516

12

Restatement related expenses

(891)

1,891

12,145

12,372

40,897

Adjusted net income (loss)

$

5,220

$

(10,373)

$

(10,778)

$

(26,680)

$

(38,111)

Adjusted net income (loss) per common    share:

- Diluted

$

0.15

$

(0.30)

$

(0.32)

$

(0.78)

$

(1.12)

Weighted average number of shares—Diluted

34,713,034

34,664,246

34,056,413

34,380,517

34,055,513

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

We present Adjusted Net Income (Loss) as a further supplemental measure of our performance. We prepare Adjusted Net Income (Loss) 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 (Loss) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income (Loss) as net income adjusted to exclude (i) restructuring and impairment charges, (ii) equity-based compensation expense, (iii) amortization of intangibles, (iv) foreign currency loss (gain), net, (v) derivative valuation loss (gain), net, and (vi) restatement related expenses.

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)

Assets

December 31, 2015

December 31, 2014

Current assets

Cash and cash equivalents

$

90,882

$

102,434

Accounts receivable, net

63,498

72,957

Inventories, net

57,619

75,334

Other receivables

31,932

10,616

Prepaid expenses

7,075

7,560

Current deferred income tax assets

34

237

Hedge collateral

6,000

Other current assets

3,194

6,898

Total current assets

260,234

276,036

Property, plant and equipment, net

191,985

223,766

Intangible assets, net

2,629

2,451

Long-term prepaid expenses

12,117

10,916

Deferred income tax assets

238

415

Other non-current assets

10,678

14,147

Total assets

$

477,881

$

527,731

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

55,476

$

70,767

Other accounts payable

10,961

10,986

Accrued expenses

76,721

81,060

Deferred revenue

10,060

1,990

Deposits received

8,165

Other current liabilities

5,128

4,470

Total current liabilities

166,511

169,273

Long-term borrowings, net

224,156

224,035

Accrued severance benefits, net

134,148

139,289

Other non-current liabilities

15,396

13,636

Total liabilities

540,211

546,233

Stockholders' equity

Common stock, $0.01 par value, 150,000,000 shares authorized,    41,147,707 shares issued and 34,568,942 outstanding at    December 31, 2015 and 40,635,233 shares issued and    34,056,468 outstanding at December 31, 2014

411

406

Additional paid-in capital

124,618

118,419

Accumulated deficit

(96,210)

(11,343)

Treasury stock, 6,578,765 shares at December 31, 2015 and 2014,    respectively

(90,918)

(90,918)

Accumulated other comprehensive loss

(231)

(35,066)

Total stockholders' equity (deficit)

(62,330)

(18,502)

Total liabilities and stockholders' equity

$

477,881

$

527,731

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)

Three Months Ended

Year Ended

December 31,

2015

December 31,

2015

December 31,

2014

Cash flow from operating activities

Net income (loss)

$

22,854

$

(84,867)

$

(117,232)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating    activities

Depreciation and amortization

6,424

26,490

29,989

Provision for severance benefits

1,116

15,289

17,703

Bad debt expenses (reversal of allowance)

18

(3)

3,718

Amortization of debt issuance costs and original issue discount

169

660

614

Loss (gain) on foreign currency, net

(18,746)

46,984

32,760

Gain on disposal of investments

(1,524)

Impairment charges

10,269

Stock-based compensation

398

2,768

2,072

Other

2,768

2,437

1,375

Changes in operating assets and liabilities

Accounts receivable, net

(5,373)

3,299

(1,668)

Inventories, net

1,627

12,929

(3,380)

Other receivables

(28,578)

(21,463)

(5,052)

Other current assets

10,670

11,339

9,308

Deferred tax assets

5

372

1,458

Accounts payable

6,289

(12,605)

(1,526)

Other accounts payable

(693)

(10,892)

(13,046)

Accrued expenses

31,052

(1,679)

208

Deferred revenue

9,372

8,136

(825)

Other current liabilities

160

(1,210)

2,004

Other non-current labilities

2,915

3,105

1,963

Payment of severance benefits

(3,489)

(11,394)

(6,650)

Other

187

328

(7)

Net cash provided by (used in) operating activities

39,145

(9,977)

(37,469)

Cash flow from investing activities

Proceeds from settlement of hedge collateral

10,841

Payment of hedge collateral

(17,182)

Proceeds from disposal of plant, property and equipment

7,504

9,886

20

Proceeds from disposal of investments

2,003

Purchase of plant, property and equipment

(2,100)

(6,350)

(17,419)

Payment for intellectual property registration

(192)

(742)

(958)

Collection of guarantee deposits

513

636

Payment of guarantee deposits

(5)

(675)

(323)

Other

16

195

(21)

Net cash provided by (used in) investing activities

5,736

(3,391)

(16,698)

Cash flow from financing activities

Proceeds from issuance of common stock

2

3,436

68

Net cash provided by financing activities

2

3,436

68

Effect of exchange rates on cash and cash equivalents

(22,511)

(1,620)

2,927

Net increase (decrease) in cash and cash equivalents

22,372

(11,552)

(51,172)

Cash and cash equivalents

Beginning of the period

68,510

102,434

153,606

End of the period

$

90,882

$

90,882

$

102,434

 

SOURCE MagnaChip Semiconductor Corporation



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