MagnaChip Reports Third Quarter 2015 Financial Results
SEOUL, South Korea and SAN JOSE, Calif., Oct. 29, 2015 /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 third quarter ended September 30, 2015.
Revenue for the third quarter of 2015 was $154.4 million, a 4.7% decline compared to $162.0 million for the second quarter of 2015, and down 20.6% compared to $194.3 million for the third quarter of 2014. Foundry Services revenue in the third quarter of 2015 was $71.5 million and Standard Products Group revenue was $82.7 million.
Gross profit was $34.7 million, or 22.5% as a percent of revenue for the third quarter of 2015. This compared with gross profit of $35.3 million, or 21.8%, for the second quarter of 2015 and $42.6 million, or 21.9%, for the third quarter of 2014. Foundry gross profit was 26.1% and Standard Products Group gross profit was 19.1% in the third quarter of 2015.
Net loss, on a GAAP basis, for the third quarter of 2015 totaled $57.1 million, or $1.65 per diluted share, compared to net loss of $30.6 million, or $0.90 per diluted share, for the second quarter of 2015 and net loss of $46.8 million, or $1.37 per diluted share, for the third quarter of 2014. Net loss stemmed primarily from lower revenue and gross profit, as well as from non-cash foreign currency translation loss.
"We continue to face many challenges but in the third quarter we executed on our product strategies, achieved our short-term financial goals and continued to streamline the organization and reduce costs," said YJ Kim, Chief Executive Officer. "Despite a weak macro environment, revenue in the third quarter came in at the high end of our expectations, as we benefited from the adoption of our standard products by companies in China."
Chief Financial Officer Jonathan Kim commented, "We are well on our way to achieving our previously announced target to reduce total normalized spending by over $40 million in 2015 compared to 2014. Spending in the first three quarters of 2015 declined by approximately $38 million as compared with the same period last year," said Mr. Kim, "and our 2016 spending targets are now under review as part of a comprehensive cost reduction plan launched earlier this year."
Adjusted Net Loss, a non-GAAP measurement, for the third quarter of 2015 totaled $10.4 million, or $0.30 per diluted share, compared to an adjusted net loss of $11.1 million, or $0.32 per diluted share, in the second quarter of 2015 and compared to an adjusted net loss of $6.8 million, or $0.20 per diluted share, for the third quarter of 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 $68.5 million at the end of the third quarter of 2015, a decrease of $4.2 million from the end of the prior quarter.
The following table sets forth information relating to our operating segments:
| Three Months Ended |
Nine Months Ended |
||||||
| September 30, |
September 30, |
September 30, |
September 30, |
||||
| Net Sales |
|||||||
| Foundry Services Group |
$ 71,471 |
$ 99,333 |
$ 224,953 |
$ 281,600 |
|||
| Standard Products Group |
|||||||
| Display Solutions |
48,314 |
58,700 |
153,585 |
144,406 |
|||
| Power Solutions |
34,406 |
36,088 |
102,238 |
104,138 |
|||
| Total Standard Products Group |
82,720 |
94,788 |
255,823 |
248,544 |
|||
| All other |
191 |
211 |
506 |
422 |
|||
| Total net sales |
$ 154,382 |
$ 194,332 |
$ 481,282 |
$ 530,566 |
|||
| Three Months Ended |
Nine Months Ended |
||||||
| September 30, |
September 30, |
September 30, |
September 30, |
||||
| Gross Profit |
|||||||
| Foundry Services Group |
$ 18,681 |
$ 19,386 |
$ 51,241 |
$ 60,109 |
|||
| Standard Products Group |
15,827 |
23,033 |
53,216 |
57,833 |
|||
| All other |
191 |
211 |
505 |
422 |
|||
| Total gross profit |
$ 34,699 |
$ 42,630 |
$ 104,962 |
$ 118,364 |
|||
Third Quarter and Recent Company Events
- Hosted First Foundry Technology Symposium in Shanghai, China on September 22, 2015
- Announced Second Foundry Technology Symposium in Shenzhen, China to be held on November 10, 2015
Business Outlook
For the fourth quarter of 2015, MagnaChip anticipates:
- Revenue to be in the range of $143 million to $153 million
- Gross profit to be 14% to 16% as a percent of revenue
Conference Call
MagnaChip will hold a conference call at 5 p.m. EDT today (October 29, 2015) to discuss the third quarter 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 56598267 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EDT 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 56598267.
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 fourth quarter 2015 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 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 |
In Korea: Chankeun Park Senior Manager, Public Relations Tel. +82-2-6903-3195 |
| MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||||||||||
| (In thousands of US dollars, except share data) |
||||||||||||||||||||||||
| (Unaudited) |
||||||||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||
| September 30, 2015 |
June 30, 2015 |
September 30, 2014 |
||||||||||||||||||||||
| Net sales |
$ |
154,382 |
$ |
162,015 |
$ |
194,332 |
||||||||||||||||||
| Cost of sales |
119,683 |
126,729 |
151,702 |
|||||||||||||||||||||
| Gross profit |
34,699 |
35,286 |
42,630 |
|||||||||||||||||||||
| Gross profit % |
22.5 |
% |
21.8 |
% |
21.9 |
% |
||||||||||||||||||
| Operating expenses |
||||||||||||||||||||||||
| Selling, general and administrative expenses |
22,107 |
28,588 |
38,690 |
|||||||||||||||||||||
| Research and development expenses |
20,450 |
21,931 |
23,422 |
|||||||||||||||||||||
| Total operating expenses |
42,557 |
50,519 |
62,112 |
|||||||||||||||||||||
| Operating loss |
(7,858) |
(15,233) |
(19,482) |
|||||||||||||||||||||
| Interest expense |
(4,075) |
(3,987) |
(4,197) |
|||||||||||||||||||||
| Foreign currency loss, net |
(44,139) |
(12,296) |
(23,508) |
|||||||||||||||||||||
| Other income, net |
256 |
288 |
691 |
|||||||||||||||||||||
| Loss before income taxes |
(55,816) |
(31,228) |
(46,496) |
|||||||||||||||||||||
| Income tax expenses (benefits) |
1,250 |
(602) |
311 |
|||||||||||||||||||||
| Net loss |
$ |
(57,066) |
$ |
(30,626) |
$ |
(46,807) |
||||||||||||||||||
| Loss per common share : |
||||||||||||||||||||||||
| - Basic |
$ |
(1.65) |
$ |
(0.90) |
$ |
(1.37) |
||||||||||||||||||
| - Diluted |
$ |
(1.65) |
$ |
(0.90) |
$ |
(1.37) |
||||||||||||||||||
| Weighted average number of shares—Basic |
34,664,246 |
34,092,402 |
34,056,359 |
|||||||||||||||||||||
| Weighted average number of shares—Diluted |
34,664,246 |
34,092,402 |
34,056,359 |
|||||||||||||||||||||
| MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||||||
| RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME |
||||||||||||
| (In thousands of US dollars, except share data) |
||||||||||||
| (Unaudited) |
||||||||||||
| Three Months Ended |
||||||||||||
| September 30, 2015 |
June 30, 2015 |
September 30, 2014 |
||||||||||
| Net loss |
$ |
(57,066) |
$ |
(30,626) |
$ |
(46,807) |
||||||
| Adjustments: |
||||||||||||
| Depreciation and amortization |
6,399 |
6,797 |
7,824 |
|||||||||
| Interest expense, net |
4,023 |
3,933 |
4,079 |
|||||||||
| Income tax expenses (benefits) |
1,250 |
(602) |
311 |
|||||||||
| Equity-based compensation expense |
393 |
1,792 |
593 |
|||||||||
| Foreign currency loss, net |
44,139 |
12,296 |
23,508 |
|||||||||
| Derivative valuation loss, net |
270 |
306 |
9 |
|||||||||
| Restatement related expenses |
1,891 |
5,168 |
15,478 |
|||||||||
| Adjusted EBITDA |
$ |
1,299 |
$ |
(936) |
$ |
4,995 |
||||||
| Adjusted EBITDA per common share: |
||||||||||||
| - Diluted |
$ |
0.04 |
$ |
(0.03) |
$ |
0.14 |
||||||
| Weighted average number of shares - Diluted |
35,002,896 |
34,092,402 |
35,144,894 |
|||||||||
| Net loss |
$ |
(57,066) |
$ |
(30,626) |
$ |
(46,807) |
||||||
| Adjustments: |
||||||||||||
| Equity-based compensation expense |
393 |
1,792 |
593 |
|||||||||
| Amortization of intangibles |
— |
— |
372 |
|||||||||
| Foreign currency loss, net |
44,139 |
12,296 |
23,508 |
|||||||||
| Derivative valuation loss, net |
270 |
306 |
9 |
|||||||||
| Restatement related expenses |
1,891 |
5,168 |
15,478 |
|||||||||
| Adjusted Net Loss |
$ |
(10,373) |
$ |
(11,064) |
$ |
(6,847) |
||||||
| Adjusted Net Loss per common share: |
||||||||||||
| - Diluted |
$ |
(0.30) |
$ |
(0.32) |
$ |
(0.20) |
||||||
| Weighted average number of shares — Diluted |
34,664,246 |
34,092,402 |
34,056,359 |
|||||||||
We define Adjusted EBITDA as net loss adjusted to exclude (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expenses (benefits), (iv) equity-based compensation expense, (v) foreign currency loss, net, (vi) derivative valuation loss, net and (vii) restatement related expenses.
We present Adjusted Net Loss as a further supplemental measure of our performance. We prepare Adjusted Net Loss by adjusting net loss 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 Loss is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Loss as net loss adjusted to exclude (i) equity-based compensation expense, (ii) amortization of intangibles, (iii) foreign currency loss, net, (vi) derivative valuation loss, net and (v) restatement related expenses.
| MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||
| CONSOLIDATED BALANCE SHEETS |
||||||||
| (In thousands of US dollars, except share data) |
||||||||
| (Unaudited) |
||||||||
| September 30, 2015 |
December 31, 2014 |
|||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ |
68,510 |
$ |
102,434 |
||||
| Accounts receivable, net |
57,885 |
72,957 |
||||||
| Inventories, net |
58,180 |
75,334 |
||||||
| Other receivables |
3,274 |
10,616 |
||||||
| Prepaid expenses |
10,957 |
7,560 |
||||||
| Current deferred income tax assets |
36 |
237 |
||||||
| Hedge collateral |
6,000 |
— |
||||||
| Other current assets |
8,265 |
6,898 |
||||||
| Total current assets |
213,107 |
276,036 |
||||||
| Property, plant and equipment, net |
189,362 |
223,766 |
||||||
| Intangible assets, net |
2,516 |
2,451 |
||||||
| Long-term prepaid expenses |
13,255 |
10,916 |
||||||
| Deferred income tax assets |
246 |
415 |
||||||
| Other non-current assets |
11,905 |
14,147 |
||||||
| Total assets |
$ |
430,391 |
$ |
527,731 |
||||
| Liabilities and Stockholders' Equity |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ |
48,939 |
$ |
70,767 |
||||
| Other accounts payable |
8,418 |
10,986 |
||||||
| Accrued expenses |
68,598 |
81,060 |
||||||
| Other current liabilities |
6,843 |
6,460 |
||||||
| Total current liabilities |
132,798 |
169,273 |
||||||
| Long-term borrowings, net |
224,125 |
224,035 |
||||||
| Accrued severance benefits, net |
133,955 |
139,289 |
||||||
| Other non-current liabilities |
12,362 |
13,636 |
||||||
| Total liabilities |
503,240 |
546,233 |
||||||
| Stockholders' equity |
||||||||
| Common stock, $0.01 par value, 150,000,000 shares authorized, 41,147,307 |
411 |
406 |
||||||
| Additional paid-in capital |
124,218 |
118,419 |
||||||
| Accumulated deficit |
(119,064) |
(11,343) |
||||||
| Treasury stock, 6,578,765 shares at September 30, 2015 and December 31, 2014 |
(90,918) |
(90,918) |
||||||
| Accumulated other comprehensive income (loss) |
12,504 |
(35,066) |
||||||
| Total stockholders' equity (deficit) |
(72,849) |
(18,502) |
||||||
| Total liabilities and stockholders' equity |
$ |
430,391 |
$ |
527,731 |
||||
| MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||
| (In thousands of US dollars) |
||||||||||||
| (Unaudited) |
||||||||||||
| Three Months Ended |
Nine Months Ended |
|||||||||||
| September 30, 2015 |
September 30, 2015 |
September 30, 2014 |
||||||||||
| Cash flows from operating activities |
||||||||||||
| Net loss |
$ |
(57,066) |
$ |
(107,721) |
$ |
(53,402) |
||||||
| Adjustments to reconcile net loss to net cash used in operating activities |
||||||||||||
| Depreciation and amortization |
6,399 |
20,066 |
22,846 |
|||||||||
| Provision for severance benefits |
2,296 |
14,173 |
14,775 |
|||||||||
| Bad debt expenses (reversal of allowance) |
(18) |
(21) |
3,755 |
|||||||||
| Amortization of debt issuance costs and original issue discount |
167 |
491 |
457 |
|||||||||
| Loss (gain) on foreign currency, net |
48,584 |
65,730 |
(4,077) |
|||||||||
| Gain on disposal of investments |
— |
— |
(1,524) |
|||||||||
| Stock-based compensation |
393 |
2,370 |
1,665 |
|||||||||
| Other |
(1,878) |
(331) |
951 |
|||||||||
| Changes in operating assets and liabilities |
||||||||||||
| Accounts receivable |
5,527 |
8,672 |
(206) |
|||||||||
| Inventories, net |
9,679 |
11,302 |
(1,199) |
|||||||||
| Other receivables |
1,592 |
7,115 |
353 |
|||||||||
| Other current assets |
(1,566) |
669 |
4,835 |
|||||||||
| Deferred tax assets |
28 |
367 |
835 |
|||||||||
| Accounts payable |
(6,463) |
(18,894) |
(964) |
|||||||||
| Other accounts payable |
(4,649) |
(10,199) |
(7,265) |
|||||||||
| Accrued expenses |
(22,021) |
(32,731) |
12,678 |
|||||||||
| Other current liabilities |
136 |
(1,922) |
(201) |
|||||||||
| Other non-current liabilities |
1,274 |
190 |
65 |
|||||||||
| Payment of severance benefits |
(3,674) |
(7,905) |
(4,712) |
|||||||||
| Other |
288 |
141 |
19 |
|||||||||
| Net cash used in operating activities |
(20,972) |
(48,438) |
(10,316) |
|||||||||
| Cash flows from investing activities |
||||||||||||
| Proceeds from settlement of hedge collateral |
10,841 |
10,841 |
— |
|||||||||
| Payment of hedge collateral |
(10,627) |
(17,182) |
— |
|||||||||
| Proceeds from disposal of investments |
— |
— |
2,003 |
|||||||||
| Proceeds from disposal of plant, property and equipment |
1,685 |
1,698 |
— |
|||||||||
| Purchase of plant, property and equipment |
(2,286) |
(4,250) |
(15,613) |
|||||||||
| Payment for intellectual property registration |
(287) |
(550) |
(778) |
|||||||||
| Collection of guarantee deposits |
77 |
123 |
— |
|||||||||
| Payment of guarantee deposits |
(28) |
(670) |
(338) |
|||||||||
| Other |
1 |
179 |
45 |
|||||||||
| Net cash used in investing activities |
(624) |
(9,811) |
(14,681) |
|||||||||
| Cash flows from financing activities |
||||||||||||
| Proceeds from issuance of common stock |
2,226 |
3,434 |
67 |
|||||||||
| Net cash provided by financing activities |
2,226 |
3,434 |
67 |
|||||||||
| Effect of exchange rates on cash and cash equivalents |
15,208 |
20,891 |
(3,466) |
|||||||||
| Net decrease in cash and cash equivalents |
(4,162) |
(33,924) |
(28,396) |
|||||||||
| Cash and cash equivalents |
||||||||||||
| Beginning of the period |
72,672 |
102,434 |
153,606 |
|||||||||
| End of the period |
$ |
68,510 |
$ |
68,510 |
$ |
125,210 |
||||||
SOURCE MagnaChip Semiconductor Corporation
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