MagnaChip Reports Second Quarter 2015 Financial Results
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MagnaChip Reports Second Quarter 2015 Financial Results

- Reports Revenue of $162.0 Million and Total Gross Profit of 21.8%

(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 second quarter ended June 30, 2015.

Revenue for the second quarter of 2015 was $162.0 million, a 1.7% decline compared to $164.9 million for the first quarter of 2015, and down 5.8% compared to $172.1 million for the second quarter of 2014. Semiconductor Manufacturing Services (Foundry) revenue in the second quarter of 2015 was $79.0 million, Display Solutions revenue was $48.9 million and Power Solutions revenue was $34.0 million.

Gross profit was $35.3 million, or 21.8% as a percent of revenue, for the second quarter of 2015. This compares to gross profit of $35.0 million, or 21.2%, for the first quarter of 2015 and $35.5 million, or 20.6%, for the second quarter of 2014. Gross profit improvement stemmed from improved product mix and cost savings activities. Aside from reporting its total gross profit, beginning with this second quarter, MagnaChip is now also reporting the gross profit for its Foundry business segment, and its new Standard Products Group business segment, which includes the Display Solutions and Power Solutions business lines. In the second quarter of 2015, Foundry gross profit was 21.8% and Standard Products Group gross profit was 21.7%.

Net loss, on a GAAP basis, for the second quarter of 2015 totaled $30.6 million, or $0.90 per diluted share, compared to net loss of $20.0 million, or $0.59 per diluted share, for the first quarter of 2015 and net income of $15.0 million, or $0.43 per diluted share, for the second quarter of 2014. Net loss was impacted primarily by lower revenue and gross profit as well as by non-cash foreign currency translation loss.

"Revenue in the second quarter was in line with our guidance and gross profit was higher than expected, but the near-term foundry business remains weak and we continue to face major challenges for the remainder of the year," said YJ Kim, Chief Executive Officer. "We have identified new foundry opportunities to broaden our customer base and position MagnaChip for longer-term growth, but these engagements typically take several quarters to ramp up."

In commenting on MagnaChip's previously announced plan to implement a comprehensive cost reduction program, Chief Financial Officer Jonathan Kim said, "Given the current business outlook, we have already reduced our spending by approximately $20 million in the first half of 2015.  We are moving to reduce total normalized spending by over $40 million in 2015 and have launched a comprehensive review to assess the feasibility of further cost reductions in 2016."

Adjusted net loss, a non-GAAP measurement, for the second quarter of 2015 totaled $11.1 million, or $0.32 per diluted share, compared to an adjusted net loss of $9.6 million, or $0.28 per diluted share, in the first quarter of 2015 and compared to an adjusted net loss of $14.1 million, or $0.41 per diluted share, for the second quarter of 2014.

Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a more 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 $72.7 million at the end of the second quarter of 2015, a decrease of $18.7 million from the end of the prior quarter.

As disclosed in MagnaChip's 2015 proxy statement, the Board of Directors has established a Strategic Review Committee to assist the Board in reviewing, considering and evaluating strategic alternatives that may be available to MagnaChip.  MagnaChip has engaged Barclays to serve as its financial adviser in connection with the strategic review process.  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.  MagnaChip does not intend to disclose further developments unless and until such time as its Board of Directors has approved a specific course of action, or it otherwise deems further disclosure is appropriate or required.

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


Three Months Ended


Six Months Ended


June 30,
2015


June 30,
2014


June 30,
2015


June 30,
2014

Net Sales








Semiconductor Manufacturing Services

$  78,962


$  90,339


$  153,482


$  182,267

Standard Products Group








Display Solutions

48,918


45,327


105,271


85,706

Power Solutions

33,995


36,275


67,832


68,050









Total Standard Products Group

82,913


81,602


173,103


153,756









All other

140


129


315


211









Total net sales

$ 162,015


$ 172,070


$  326,900


$  336,234









 










Three Months Ended


Six Months Ended


June 30,
2015


June 30,
2014


June 30,
2015


June 30,
2014

Gross Profit








Semiconductor Manufacturing Services

$    17,183


$    18,601


$    32,560


$    40,723

Standard Products Group

17,963


16,727


37,388


34,801

All other

140


129


315


210









Total gross profit

$    35,286


$    35,457


$    70,263


$    75,734









 

Second Quarter and Recent Company Events

Business Outlook
For the third quarter of 2015, MagnaChip anticipates:

Conference Call
MagnaChip will hold a conference call at 5 p.m. EDT today (August 6, 2015) to discuss the second 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 92718867 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 92718867.

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 third 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:

In Korea:

Robert Pursel

Chankeun Park

Director of Investor Relations

Senior Manager, Public Relations

Tel. +1-408-625-1262

Tel. +82-2-6903-3195

robert.pursel@magnachip.com

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




June 30,

2015



March 31,

2015



June 30,

2014


Net sales


$

162,015



$

164,885



$

172,070


Cost of sales



126,729




129,908




136,613















Gross profit



35,286




34,977




35,457


Gross profit %



21.8 %




21.2 %




20.6 %















Operating expenses













Selling, general and administrative expenses



28,588




25,030




30,746


Research and development expenses



21,931




22,160




24,059


Total operating expenses



50,519




47,190




54,805















Operating loss



(15,233)




(12,213)




(19,348)















Interest expense, net



(3,933)




(4,063)




(4,007)


Foreign currency gain (loss), net



(12,296)




(3,176)




38,424


Other income, net



234




556




597


Income (loss) before income taxes



(31,228)




(18,896)




15,666















Income tax expenses (benefits)



(602)




1,133




656















Net income (loss)


$

(30,626)



$

(20,029)



$

15,010















Earnings (loss) per common share :













- Basic


$

(0.90)



$

(0.59)



$

0.44


- Diluted


$

(0.90)



$

(0.59)



$

0.43















Weighted average number of shares—Basic



34,092,402




34,056,468




34,056,359


Weighted average number of shares—Diluted



34,092,402




34,056,468




35,177,915


 

 


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




June 30,

2015



March 31,

2015



June 30,

2014


Net income (loss)


$

(30,626)



$

(20,029)



$

15,010


Adjustments:













Depreciation and amortization



6,797




6,870




7,754


Interest expense, net



3,933




4,063




4,007


Income tax expenses (benefits)



(602)




1,133




656


Equity-based compensation expense



1,792




185




455


Foreign currency loss (gain), net



12,296




3,176




(38,424)


Derivative valuation loss, net



306







36


Restatement related expenses



5,168




7,058




8,477















Adjusted EBITDA


$

(936)



$

2,456



$

(2,029)


Adjusted EBITDA per common share:













- Diluted


$

(0.03)



$

0.07



$

(0.06)


Weighted average number of shares– Diluted



34,092,402




34,056,468




34,056,359















Net income (loss)


$

(30,626)



$

(20,029)



$

15,010


Adjustments:













Amortization of intangibles









371


Equity-based compensation expense



1,792




185




455


Foreign currency loss (gain), net



12,296




3,176




(38,424)


Derivative valuation loss, net



306







36


Restatement related expenses



5,168




7,058




8,477















Adjusted net loss


$

(11,064)



$

(9,610)



$

(14,075)















Adjusted net loss per common share:













- Diluted


$

(0.32)



$

(0.28)



$

(0.41)


Weighted average number of shares — Diluted



34,092,402




34,056,468




34,056,359


We define Adjusted EBITDA as net income (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 (gain), net, (vi) derivative valuation loss, net and (vii) restatement related expenses.

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




June 30,

2015


 

December 31,

2014


Assets




Current assets




Cash and cash equivalents


$

72,672


$

102,434

Accounts receivable, net



67,780



72,957

Inventories, net



71,800



75,334

Other receivables



5,450



10,616

Prepaid expenses



7,142



7,560

Current deferred income tax assets



43



237

Hedge collateral



6,380



Other current assets



7,383



6,898








Total current assets



238,650



276,036







Property, plant and equipment, net



208,351



223,766

Intangible assets, net



2,476



2,451

Long-term prepaid expenses



9,875



10,916

Deferred income tax assets



260



415

Other non-current assets



12,876



14,147








Total assets


$

472,488


$

 

527,731








Liabilities and Stockholders' Equity







Current liabilities






Accounts payable


$

57,432


$

70,767

Other accounts payable



9,724



10,986

Accrued expenses



75,556



81,060

Other current liabilities



5,946



6,460








Total current liabilities



148,658



169,273








Long-term borrowings, net



224,095



224,035

Accrued severance benefits, net



143,727



139,289

Other non-current liabilities



10,703



13,636








Total liabilities



527,183



546,233








Stockholders' equity

Common stock, $0.01 par value, 150,000,000 shares authorized, 40,840,685 shares issued and 34,261,920 outstanding at June 30, 2015 and 40,635,233 shares issued and 34,056,468 outstanding at December 31, 2014



408



406

Additional paid-in capital



121,602



118,419

Accumulated deficit



(61,998)



(11,343)

Treasury stock, 6,578,765 shares at June 30, 2015 and December 31, 2014



(90,918)



(90,918)

Accumulated other comprehensive loss



(23,789)



(35,066)








Total stockholders' equity (deficit)



(54,695)



(18,502)








Total liabilities and stockholders' equity


$

472,488


$

527,731















 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)



























Three Months

Ended



Six Months

Ended




June 30,

2015



June 30,

2015


June 30,

2014


Cash flows from operating activities












Net loss


$

(30,626)



$

(50,655)


$

(6,595)


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












Depreciation and amortization



6,797




13,667



15,022


Provision for severance benefits



4,617




11,877



9,426


Bad debt expenses (reversal of allowance)



17




(3)



3,724


Amortization of debt issuance costs and original issue discount



162




324



301


Loss (gain) on foreign currency, net



12,967




17,146



(31,969)


Gain on disposal of investments








(1,524)


Stock-based compensation



1,792




1,977



1,072


Other



1,769




1,547



758


Changes in operating assets and liabilities












Accounts receivable



3,012




3,145



6,712


Inventories, net



3,324




1,623



(11,537)


Other receivables



(617)




5,523



781


Other current assets



3,888




2,235



4,590


Deferred tax assets



15




339



391


Accounts payable



(18,333)




(12,431)



4,556


Other accounts payable



(669)




(5,550)



(8,560)


Accrued expenses



(3,084)




(10,710)



20,260


Other current liabilities



(284)




(2,058)



1,230


Other non-current liabilities



(864)




(1,084)



292


Payment of severance benefits



(2,890)




(4,231)



(3,490)


Other



220




(147)



13


Net cash provided by (used in) operating activities



(18,787)




(27,466)



5,453














Cash flows from investing activities












Payment of hedge collateral



(6,555)




(6,555)




Proceeds from disposal of investments








2,003


Purchase of plant, property and equipment



(1,407)




(1,964)



(12,058)


Payment for intellectual property registration



(186)




(263)



(490)


Payment of guarantee deposits



(231)




(642)



(308)


Other



222




237



39


Net cash used in investing activities



(8,157)




(9,187)



(10,814)














Cash flows from financing activities












Proceeds from issuance of common stock



1,208




1,208



67


Net cash provided by financing activities



1,208




1,208



67


Effect of exchange rates on cash and cash equivalents



7,013




5,683



(7,315)














Net decrease in cash and cash equivalents



(18,723)




(29,762)



(12,609)














Cash and cash equivalents












Beginning of the period



91,395




102,434



153,606














End of the period


$

72,672



$

72,672


$

140,997














 

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SOURCE MagnaChip Semiconductor Corporation

Contact:
MagnaChip Semiconductor Corporation
Web: http://www.magnachip.com