Press Release

  View printer-friendly version

<<  Back

MagnaChip Reports Fourth Quarter 2016 Financial Results

SEOUL, South Korea and SAN JOSE, Calif., Feb. 9, 2017 /PRNewswire/ -- MagnaChip Semiconductor Corporation ("MagnaChip" or the "Company") (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the fourth quarter ended December 31, 2016.

Revenue for the fourth quarter of 2016 was $180.5 million, a decline of 6.2% compared to $192.3 million for the third quarter of 2016, and up 18.4% as compared to $152.4 million for the fourth quarter of 2015. Revenue in the fourth quarter was at the high end of the previous guidance range provided in October 2016, and was consistent with the Company's pre-announcement of fourth quarter financial results on January 10, 2017. 

Revenue for the 2016 full year was $688.0 million, an increase of 8.6% from $633.7 million in 2015. The 2016 figure included $10 million of revenue from a 6" fab closed in February 2016, whereas 2015 included $74 million in revenue from that same 6" fab.   

Foundry Services Group revenue in the fourth quarter of 2016 was $77.8 million, a sequential increase of 5.3% from $73.9 million, marking the third consecutive quarter of growth. Foundry Services revenue in the fourth quarter increased 18.2% from revenue of $65.8 million in the fourth quarter of 2015.

Revenue in the Standard Products Group was $102.5 million in the fourth quarter, a sequential decline of 13.4% from $118.3 million in the prior quarter, due primarily to seasonal factors in display products. Standard Products Group revenue in the fourth quarter increased 18.6% from $86.5 million in the fourth quarter of 2015.  

Total gross profit in the fourth quarter was $46.1 million, or 25.5%, as compared with gross profit of $39.1 million, or 20.4%, for the third quarter of 2016 and $29.9 million or 19.6%, for the fourth quarter of 2015. Gross profit and gross profit margin figures in the fourth quarter were at the highest levels in more than three years. The gross profit margin in the fourth quarter of 2016 exceeded the high-end of the guidance range provided in October 2016 by 150 basis points.  

Foundry gross profit margin was 30.3% in the fourth quarter of 2016, as compared with 23.5% in the third quarter of 2016, and 22.7% in the fourth quarter of 2015. Standard Products Group gross profit margin was 21.8% in the fourth quarter of 2016, as compared with 18.3% in the third quarter of 2016 and 17.2% in the fourth quarter of 2015.

Net loss, on a GAAP basis, for the fourth quarter of 2016 was $49.8 million or $1.42 per basic share as compared with net income in the third quarter of 2016 of $29.9 million or $0.86 per basic share and $0.85 per diluted share, and as compared to net income of $22.9 million or $0.66 per basic and diluted share for the fourth quarter of 2015.  The net loss in the fourth quarter of 2016 was attributable primarily to a non-cash foreign exchange loss on the Company's intercompany loans.

Adjusted Net Income, a non-GAAP financial measure, for the fourth quarter of 2016 totaled $1.6 million or $0.05 per basic share and $0.04  per diluted share, compared to Adjusted Net Loss of $1.3 million or $0.04 per basic share in the third quarter of 2016, and compared to Adjusted Net Income of $5.2 million or $0.15 per basic and diluted share in the fourth quarter of 2015.

Adjusted EBITDA in the fourth quarter of 2016 was $14.1 million as compared with $9.9 million in the third quarter of 2016 and a negative $1.2 million in the fourth quarter of 2015.

"The financial results in the fourth quarter of 2016 and the full year continue to reflect the operational progress we've made in our business turnaround," said YJ Kim, Chief Executive Officer of MagnaChip.  "Our key priorities in 2017 include a plan to achieve higher gross profit margin, improve overall profitability and invest in initiatives to fuel long-term growth."  

The Company this month launched a new headcount reduction plan that is expected to be two to three times larger than a 2016 program, which resulted last year in a reduction in headcount of 169 employees. The expected payback period is estimated at approximately 1.5 years, with estimated annual cost savings from $20 million to $27 million, depending upon the final size of the workforce reduction.  The Company expects to use $30-40 million of the proceeds from the Exchangeable Senior Notes Offering completed earlier this year to pay severance and other benefits to affected employees.

In commenting on the fourth quarter financial results, Chief Financial Officer Jonathan Kim said, "Gross profit margin exceeded our expectation, due primarily to a richer-than-expected product mix and a larger-than expected increase in foundry revenue. Gross margin for the AMOLED product line continued to exceed the corporate average in the fourth quarter despite a seasonal slowdown in revenue." Mr. Kim added, "We  believe  our gross profit margin and Adjusted EBITDA will increase sequentially throughout 2017 beginning in the second quarter, based on our current view of the business as well as our assumptions of the cost reductions we expect to achieve from the current headcount reduction program."

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 and assist in evaluating our core operating performance. 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 in this press release.

Cash and cash equivalents totaled $83.4 million at the end of the fourth quarter of 2016, an increase from $75.4 million at the end of the third quarter of 2016.  In the fourth quarter of 2016, MagnaChip received proceeds of $18.2 million in advance, including $1.7 million valued added tax, related to the sale of a building that housed a 6" wafer fab that was closed in February 2016. The Company is required to perform certain removal construction work that is expected to be completed by the end of March 2017. Accordingly, once the construction obligation is completed, the proceeds will be recorded as cash and cash equivalents on the consolidated balance sheet.   

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



Three Months Ended



Year Ended




December 31,
2016



December 31,
2015



December 31,
2016



December 31,
2015


Net Sales













Foundry Services Group


$

77,809



$

65,822



$

273,961



$

290,775


Standard Products Group













Display Solutions



64,796




53,895




281,967




207,480


Power Solutions



37,718




32,576




131,468




134,814


Total Standard Products Group



102,514




86,471




413,435




342,294


All other



139




137




573




643


Total net sales


$

180,462



$

152,430



$

687,969



$

633,712




















Three Months Ended
December 31, 2016



Three Months Ended
December 31, 2015




Amount



% of
Net Sales



Amount



% of
Net Sales


Gross Profit













Foundry Services Group


$

23,592




30.3

%


$

14,935




22.7

%

Standard Products Group



22,358




21.8




14,878




17.2


All other



139




100.0




89




65.0


Total gross profit


$

46,089




25.5

%


$

29,902




19.6

%























Year Ended
December 31, 2016



Year Ended
December 31, 2015




Amount



% of
Net Sales



Amount



% of
Net Sales


Gross Profit













Foundry Services Group


$

69,412




25.3

%


$

66,175




22.8

%

Standard Products Group



87,194




21.1




68,094




19.9


All other



(380)




(66.3)




595




92.5


Total gross profit


$

156,226




22.7

%


$

134,864




21.3

%

 

Fourth Quarter and Recent Company Highlights

  • MagnaChip Selected as "2016 Best Supplier" by LG Display. The award is the highest possible level of recognition presented to a supplier by LG Display for delivering outstanding product quality.
  • MagnaChip Priced Upsized Offering of 5.00% Exchangeable Senior Notes after the initial purchasers exercised an over-allotment option. The offering totaled $86.25 million aggregate principal amount of notes, taking into account the over-allotment option exercised by the initial purchasers.     
  • MagnaChip Announces Cost Competitive 0.13 micron Slim Flash Process Technology  
  • MagnaChip to Offer 0.13 micron EEPROM-based RF-CMOS technology  
  • MagnaChip Offers 0.35 micron 700V Ultra High Voltage Process Technology  

Business Outlook
For the first quarter of 2017, MagnaChip anticipates:

  • Revenue to be in the range of $157 million to $163 million, a sequential decline of 9.7% to 13%, reflecting both a typical first quarter seasonal decline and the timing of new AMOLED products previously described during our last earnings call in October 2016.  The first quarter revenue outlook represents year-on-year growth as compared to total revenue of $148.1 million in the first quarter of 2016. 
  • Gross profit is anticipated to be in the range of 24% to 26%, about flat with Q4 2016, and above the 23.1% gross profit margin in the first quarter of 2016.  

Conference Call
MagnaChip will hold a conference call on Feb. 10 at 8 a.m. ET to discuss the fourth quarter 2016 financial results. The conference call will be webcast live and is also available by dialing toll-free at 1-844-536-5472. International call-in participants can dial toll-free at 1-614-999-9318. The conference ID number is 58406105. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 8 a.m. ET 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 dial-in numbers are 1-404-537-3406 or toll-free at 1-855-859-2056.  The access code is 58406105.

About MagnaChip Semiconductor Corporation
MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer, communication, industrial and computing applications. The Company's Standard Products Group and Foundry Services Group provide a broad range of standard products and manufacturing services to customers worldwide.  MagnaChip, with a 30-year operating history, owns a portfolio of more than 3,400 registered and pending patents, and has extensive engineering, design 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 2016 revenue and gross profit expectations. 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 February 22, 2016 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:

Bruce Entin

Investor Relations

Tel. +1-408-625-1262

Investor.relations@magnachip.com



In Korea:

Chankeun Park

Director, 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,

2016



September 30,

2016



December 31,

2015



December 31,

2016



December 31,

2015


Net sales


$

180,462



$

192,296



$

152,430



$

687,969



$

633,712


Cost of sales



134,373




153,157




122,528




531,743




498,848


Gross profit



46,089




39,139




29,902




156,226




134,864


Gross profit %



25.5

%



20.4

%



19.6

%



22.7

%



21.3

%

Operating expenses





















Selling, general and administrative expenses



23,112




20,082




18,653




89,094




94,378


Research and development expenses



17,748




18,439




18,879




72,180




83,420


Restructuring gain












(7,785)





Total operating expenses



40,860




38,521




37,532




153,489




177,798


Operating income (loss)



5,229




618




(7,630)




2,737




(42,934)


Interest expense



(4,053)




(4,055)




(4,081)




(16,238)




(16,268)


Foreign currency gain (loss), net



(49,628)




33,174




17,080




(15,360)




(42,531)


Other income, net



561




887




617




2,990




1,779


Income (loss) before income tax expenses



(47,891)




30,624




5,986




(25,871)




(99,954)


Income tax expenses (benefits)



1,899




758




(16,868)




3,744




(15,087)


Net income (loss)


$

(49,790)



$

29,866



$

22,854



$

(29,615)



$

(84,867)


Earnings (loss) per common share :





















- Basic


$

(1.42)



$

0.86



$

0.66



$

(0.85)



$

(2.47)


- Diluted


$

(1.42)



$

0.85



$

0.66



$

(0.85)



$

(2.47)


Weighted average number of shares—Basic



35,068,330




34,849,805




34,698,777




34,833,967




34,380,517


Weighted average number of shares—Diluted



35,068,330




35,302,706




34,713,034




34,833,967




34,380,517






























 

 

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,

2016



September 30,

2016



December 31,

2015



December 31,

2016



December 31,

2015


Net income (loss)


$

(49,790)



$

29,866



$

22,854



$

(29,615)



$

(84,867)


Adjustments:





















Interest expense, net



3,987




3,996




4,020




15,983




16,039


Income tax expenses (benefits)



1,899




758




(16,868)




3,744




(15,087)


Depreciation and amortization



6,625




6,539




6,424




25,416




26,490


EBITDA



(37,279)




41,159




16,430




15,528




(57,425)


Restructuring and other












(1,286)





Equity-based compensation expense



877




1,462




398




3,843




2,768


Foreign currency loss (gain), net



49,627




(33,174)




(17,080)




15,360




42,531


Derivative valuation loss (gain), net



273




32




(61)




272




516


Restatement related expenses



597




476




(891)




6,970



$

12,372


Adjusted EBITDA


$

14,095



$

9,955



$

(1,204)



$

40,687



$

762























Net income (loss)


$

(49,790)



$

29,866



$

22,854



$

(29,615)



$

(84,867)


Adjustments:





















Restructuring and other












(1,286)





Equity-based compensation expense



877




1,462




398




3,843




2,768


Foreign currency loss (gain), net



49,627




(33,174)




(17,080)




15,360




42,531


Derivative valuation loss (gain), net



273




32




(61)




272




516


Restatement related expenses



597




476




(891)




6,970




12,372


Adjusted Net Income (Loss)


$

1,584



$

(1,338)



$

5,220



$

(4,456)



$

(26,680)


Adjusted Net Income (Loss) per common share:





















- Basic


$

0.05



$

(0.04)



$

0.15



$

(0.13)



$

(0.78)


- Diluted


$

0.04



$

(0.04)



$

0.15



$

(0.13)



$

(0.78)


Weighted average number of shares – Basic



35,068,330




34,849,805




34,698,777




34,833,967




34,380,517


Weighted average number of shares – Diluted



35,503,993




34,849,805




34,713,034




34,833,967




34,380,517



We present Adjusted EBITDA and Adjusted Net Income (Loss) as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) restructuring and other, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss (gain), net and (v) restatement related expenses. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expenses (benefits) and depreciation and amortization. We prepare Adjusted Net Income (Loss) by adjusting net income (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 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) for the periods as net income (loss), adjusted to exclude (i) restructuring and other, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss (gain), net, and (v) restatement related expenses.

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)




December 31,

2016


December 31,

2015

Assets




Current assets




Cash and cash equivalents

$           83,355


$           90,882

Restricted cash

18,251


Accounts receivable, net

61,775


63,498

Inventories, net

57,048


57,619

Other receivables

5,864


31,932

Prepaid expenses

8,137


7,075

Current deferred income tax assets

37


34

Hedge collateral

3,150


6,000

Other current assets

5,076


3,194

Total current assets

242,693


260,234





Property, plant and equipment, net

179,793


191,985

Intangible assets, net

3,085


2,629

Long-term prepaid expenses

9,556


12,117

Deferred income tax assets

193


238

Other non-current assets

6,632


6,897

Total assets

$        441,952


$        474,100





Liabilities and Stockholders' Equity




Current liabilities




Accounts payable

$           51,509


$           55,476

Other accounts payable

12,272


10,961

Accrued expenses

60,365


76,721

Deferred revenue

11,092


10,060

Deposits received

16,549


8,165

Other current liabilities

1,654


5,128

Total current liabilities

153,441


166,511





Long-term borrowings, net

221,082


220,375

Accrued severance benefits, net

129,225


134,148

Other non-current liabilities

10,318


15,396

Total liabilities

514,066


536,430





Commitments and contingencies




Stockholders' equity




Common stock, $0.01 par value, 150,000,000 shares authorized, 41,627,103 shares issued and  35,048,338 outstanding at December 31, 2016 and 41,147,707 shares issued and 34,568,942 outstanding at December 31, 2015

416


411

Additional paid-in capital

130,189


124,618

Accumulated deficit

(125,825)


(96,210)

Treasury stock, 6,578,765 shares at December 31, 2016 and 2015, respectively

(90,918)


(90,918)

Accumulated other comprehensive income (loss)

14,024


(231)

Total stockholders' deficit

(72,114)


(62,330)

Total liabilities and stockholders' equity

$        441,952


$        474,100

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)








Three Months
Ended



Year Ended




December 31,

2016



December 31,

2016



December 31,

2015


Cash flows from operating activities













Net loss


$

(49,790)



$

(29,615)



$

(84,867)


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













Depreciation and amortization



6,625




25,416




26,490


Provision for severance benefits



823




14,432




15,289


Amortization of debt issuance costs and original issue discount



180




707




660


Loss on foreign currency, net



57,066




18,884




46,984


Stock-based compensation



877




3,843




2,768


Restructuring gain






(7,785)





Other



(318)




103




2,434


Changes in operating assets and liabilities













Accounts receivable, net



(692)




285




3,299


Inventories, net



8,855




(557)




12,929


Other receivables



(1,089)




19,125




(21,463)


Other current assets



4,490




5,000




11,339


Deferred tax assets



34




65




372


Accounts payable



(11,251)




(4,163)




(12,605)


Other accounts payable



(1,839)




(6,603)




(10,892)


Accrued expenses



5,782




(16,305)




(1,679)


Deferred revenue



(988)




1,674




8,136


Other current liabilities



(1,462)




(5,331)




(1,210)


Other non-current liabilities



(162)




(1,574)




3,105


Payment of severance benefits



(1,174)




(15,352)




(11,394)


Other



5,595




5,382




328


Net cash provided by (used in) operating activities



21,562




7,631




(9,977)


Cash flows from investing activities













Proceeds from settlement of hedge collateral






6,317




10,841


Payment of hedge collateral



(1,058)




(3,552)




(17,182)


Proceeds from disposal of plant, property and equipment



503




688




9,886


Purchase of property, plant and equipment



(7,382)




(18,727)




(6,350)


Payment for intellectual property registration



(295)




(1,049)




(742)


Collection of guarantee deposits



143




619




636


Payment of guarantee deposits



(8)




(193)




(675)


Other



14




23




195


Net cash used in investing activities



(8,083)




(15,874)




(3,391)


Cash flows from financing activities













Proceeds from issuance of common stock



230




1,732




3,436


Net cash provided by financing activities



230




1,732




3,436


Effect of exchange rates on cash and cash equivalents



(5,782)




(1,016)




(1,620)


Net increase (decrease) in cash and cash equivalents



7,927




(7,527)




(11,552)


Cash and cash equivalents













Beginning of the period



75,428




90,882




102,434


End of the period


$

83,355



$

83,355



$

90,882















Supplemental disclosure of non-cash investing activity













Restricted cash received from sale of property, plant and equipment


$

(16,917)



$

(16,917)



$


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/magnachip-reports-fourth-quarter-2016-financial-results-300404900.html

SOURCE MagnaChip Semiconductor Corporation