UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 26, 2007
MAGNACHIP SEMICONDUCTOR LLC
(Exact name of Registrant as specified in its charter)
| Delaware | 333-126019-09 | 83-0406195 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| c/o MagnaChip Semiconductor S.A., 74, rue de Merl, B.P. 709, L-2017 Luxembourg, Grand Duchy of Luxembourg | Not Applicable | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (352) 45-62-62
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
Attached hereto as Exhibit 99.1 and incorporated by reference herein is financial information for the Company and its consolidated subsidiaries for the quarter ended July 1, 2007, as presented in a press release dated July 26, 2007.
| Item 9.01. | Financial Statements and Exhibits. |
| (c) | Exhibits. |
The following exhibits are furnished as part of this report:
| Exhibit No. | Description | |
| 99.1 | Press release for MagnaChip Semiconductor LLC dated July 26, 2007, announcing the results for the second quarter ended July 1, 2007. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MAGNACHIP SEMICONDUCTOR LLC | ||||
| Dated: July 26, 2007 | By: | /s/ Robert Krakauer | ||
| Robert Krakauer President and Chief Financial Officer | ||||
Exhibit Index
| Exhibit No. |
Description | |
| 99.1 |
Press release for MagnaChip Semiconductor LLC dated July 26, 2007, announcing the results for the second quarter ended July 1, 2007. |
Exhibit 99.1
MagnaChip Semiconductor Report
Second Quarter Results
Seoul, South Korea, July 26, 2007 – MagnaChip Semiconductor today announced results for the second quarter ended July 1, 2007.
Sang Park, Chairman and CEO of MagnaChip Semiconductor, commented, “The second quarter came in better than our guidance, with revenues rising 28% from the first quarter. This improvement is the result of design wins, enhanced new product development, and strong operational execution, all of which contributed to achievement of share gains at current and new customer accounts. We remain focused on growth and making 2007 the year of MagnaChip’s recovery, as we focus on bringing high-quality display solutions, imaging solutions, and foundry services to the market faster.”
Revenue for the three months ended July 1, 2007 was $194.1 million, compared to $197.6 million in the second quarter of 2006.
Gross margin was $27.8 million or 14.3% of revenue for the quarter ended July 1, 2007, compared to $ 20.3 million or 10.3% of revenue for the second quarter of 2006.
Operating expenses were $70.1 million in the current quarter. This included $13.4 million in special charges, which were composed of $12.1 million in restructuring and impairment charges for the company’s oldest wafer fabrication facility and a $1.3 million legal settlement. Excluding special charges, operating expenses for the second quarter of 2007 were $56.8 million or 29.3% of revenue, compared to $56.0 million or 28.3% of revenue for the second quarter of 2006.
Operating loss was $42.4 million during the quarter. Excluding the special charges, the operating loss for the second quarter of 2007 was $29.0 million compared to $35.7 million before special charges in the prior year’s second quarter.
Net interest expense for the second quarter of 2007 was $15.0 million, compared to $14.4 million in the second quarter of 2006.
Net loss for the three months ended July 1, 2007 was $45.3 million. Excluding special charges, the loss was $31.9 million, compared to a net loss of $38.4 million excluding special charges in the prior year second quarter
Robert Krakauer, President and CFO of MagnaChip Semiconductor, said, “Our new product development and operational execution continue to improve. All three of our business segments showed significant growth quarter over quarter. As we drive for profitability, we are continuing our efforts to increase our productivity, including both rationalization of older facilities and upgrade of our 8 inch wafer capacity and process technology to support new customer design wins.”
Outlook
The Company expects revenue for the third quarter ending September 30, 2007 to be flat compared to the second quarter of 2007. Revenue is expected to rise again significantly in the fourth quarter of 2007, as design wins hit large scale production volume and seasonal holiday demand increases.
Investor Conference Call / Webcast Details
MagnaChip will report full results for the second quarter 2007 on Thursday, July 26, 2007 at 10:00 a.m. in New York (11:00 p.m., Thursday, July 26, 2007 in Seoul). The conference call will be available at www.magnachip.com and by telephone at +1-(201) 689-8560. A replay of the call will be available in two hours after the call through midnight on Thursday, August 2, 2007 in New York (1 p.m. on Friday, August 3, 2007 in Seoul) at www.magnachip.com and by telephone at +1-(201) 612-7415. The account number to access the replay is 3055 and the conference ID number is 247275, respectively.
About MagnaChip Semiconductor
MagnaChip Semiconductor is a leading designer, developer and manufacturer of mixed-signal and digital multimedia semiconductors addressing the convergence of consumer electronics and communications devices. We focus on CMOS image sensors and flat panel display drivers, which are complex, high performance, mixed signal semiconductors that capture images and enable and enhance the features and capabilities of both small and large flat panel displays. MagnaChip also provides wafer foundry services utilizing CMOS high voltage, embedded memory, analog and power process technologies for the manufacture of IC’s for customer-owned designs. For more information, visit www.magnachip.com.
Forward-Looking Statements:
Certain statements in this press release including statements regarding expected future financial and industry growth are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. In some cases, you can identify forward-looking statements by such terms as “believes,” “expects,” “anticipates,” “intends,” “estimated,” the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include general business and economic conditions and the state of the semiconductor industry; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in customer order patterns; changes in product mix; capacity utilization; level of competition; pricing pressure and declines in average selling price; delays in new product introduction; continued success in technological innovations and delivery of products with the features customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange rate fluctuations; litigation and other risks as described in the Company’s SEC filings, including its annual report on Form 10-K for the year ended December 31, 2006.
Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements.
# # #
CONTACT:
In the U.S.:
David Pasquale, EVP at The Ruth Group
Tel: +646-536-7006
dpasquale@theruthgroup.com
MagnaChip Semiconductor
Condensed Consolidated Statements of Operations
(In thousands of U.S. Dollars, except per unit data)
(Unaudited)
| Three Months Ended | ||||||||
| July 1, 2007 | July 2, 2006 | |||||||
| Net sales |
$ | 194,053 | $ | 197,613 | ||||
| Cost of sales |
166,299 | 177,342 | ||||||
| Gross profit |
27,754 | 20,271 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
25,531 | 22,025 | ||||||
| Research and development |
32,534 | 33,934 | ||||||
| Restructuring and impairment charges |
12,084 | 93,684 | ||||||
| Operating loss |
(42,395 | ) | (129,372 | ) | ||||
| Other income (expenses): |
||||||||
| Interest expenses, net |
(14,952 | ) | (14,352 | ) | ||||
| Foreign currency gain, net |
13,868 | 14,520 | ||||||
| Loss before income taxes |
(43,479 | ) | (129,204 | ) | ||||
| Income tax expenses |
1,845 | 2,859 | ||||||
| Net loss |
$ | (45,324 | ) | $ | (132,063 | ) | ||
| Dividends accrued on preferred units |
2,983 | 2,706 | ||||||
| Net loss attributable to common units |
$ | (48,307 | ) | $ | (134,769 | ) | ||
| Net loss per common unit Basic and Diluted |
(0.92 | ) | (2.54 | ) | ||||
| Common units used in per common unit calculation: Basic and Diluted (in thousands) |
52,773 | 53,099 | ||||||
| Key Ratios & Information: | ||||||||
| Gross Margin |
14.3 | % | 10.3 | % | ||||
| Operating Expenses as a % of Revenue |
36.1 | % | 75.7 | % | ||||
| Operating Margin |
(21.8 | %) | (65.5 | %) | ||||
| Depreciation & Amortization Expense |
46,032 | 52,205 | ||||||
| Capital Expenditures |
16,612 | 6,271 | ||||||
MagnaChip Semiconductor
Reconciliation of US GAAP Gross Profit, Operating Income (Loss) and Net Income (Loss) to
Non-US GAAP Gross Profit, Operating Income (Loss) and Net Income (Loss)
(In thousands of US Dollars)
(Unaudited)
Use of Non-US GAAP Financial Information
To supplement our condensed consolidated financial statements presented on a US GAAP basis, MagnaChip Semiconductor uses non-US GAAP measures of gross profit, operating income (loss) and net income (loss), that are US GAAP gross profit, operating income (loss) and net income (loss) adjusted to exclude certain costs, expenses or gains, referred to as special items. Non-US GAAP adjusted gross profit, operating income (loss) and net income (loss) measure give an indication of our baseline performance before other charges that are considered by management to be outside of our core operating results. In addition, our non-US GAAP adjusted measure of gross profit, operating income (loss) and net income (loss) are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information should not be considered in isolation or as a substitute for gross profit, operating income (loss) and net income (loss) prepared in accordance with generally accepted accounting principles in the United States of America.
| Three Months Ended July 1, 2007 |
Three Months Ended July 2, 2006 |
|||||||||||||||||||||
| Gross Profit |
Operating Income (Loss) |
Net Income (Loss) |
Gross Profit |
Operating Income (Loss) |
Net Income |
|||||||||||||||||
| US GAAP Amounts |
$ | 27,754 | $ | (42,395 | ) | $ | (45,324 | ) | $ | 20,271 | $ | (129,372 | ) | $ | (132,063 | ) | ||||||
| Special items |
||||||||||||||||||||||
| (1) Restructuring and impairment charges |
12,084 | 12,084 | 93,684 | 93,684 | ||||||||||||||||||
| (2) Subcontractor mutual agreement |
1,281 | 1,281 | ||||||||||||||||||||
| Total special items |
13,365 | 13,365 | 93,684 | 93,684 | ||||||||||||||||||
| Non-US GAAP Profit |
$ | 27,754 | $ | (29,030 | ) | $ | (31,959 | ) | $ | 20,271 | $ | (35,688 | ) | $ | (38,379 | ) | ||||||
| Adjusted Gross Margin |
14.3 | % | 10.3 | % | ||||||||||||||||||
| Adjusted Operating Expense—% of Revenue |
29.3 | % | 28.3 | % | ||||||||||||||||||
| Adjusted Operating Margin |
(15.0 | )% | (18.1 | )% | ||||||||||||||||||
Non-US GAAP adjusted condensed consolidated statements of operations are intended to present the Company’s operating results, excluding special items. The special items excluded for the three months ended July 1, 2007 and July 2, 2006 are as follows:
(1) Restructuring and impairment charges during the three months ended July 1, 2007 represent asset impairment charges and related cost on closing the oldest Company’s fabrication facility that generates loss and no longer supports our strategic technology roadmap.
Restructuring and impairment charges during the three months ended July 2, 2006 represent asset impairment charges on one of the Company’s fabrication facilities and restructuring charges associated with changes in certain management.
(2) Subcontractor mutual agreement was to resolve issues with subcontractors.
MagnaChip Semiconductor
Condensed Consolidated Balance Sheets
(In thousands of US Dollars)
(Unaudited)
| July 1, 2007 | December 31, 2006 |
|||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 54,734 | $ | 89,173 | ||||
| Accounts receivable, net |
117,212 | 76,665 | ||||||
| Inventories, net |
71,723 | 57,846 | ||||||
| Other current assets |
26,824 | 20,380 | ||||||
| Total current assets |
270,493 | 244,064 | ||||||
| Property, plant and equipment, net |
278,529 | 336,279 | ||||||
| Goodwill and intangible assets, net |
123,495 | 139,729 | ||||||
| Other non-current assets |
49,328 | 49,981 | ||||||
| Total assets |
$ | 721,845 | $ | 770,053 | ||||
| Liabilities & Unitholders’ Equity |
||||||||
| Current liabilities |
||||||||
| Accounts and other payable |
$ | 114,103 | $ | 94,822 | ||||
| Short-term borrowings |
40,000 | 0 | ||||||
| Other current liabilities |
27,426 | 26,627 | ||||||
| Total current liabilities |
181,529 | 121,449 | ||||||
| Long-term borrowings |
750,000 | 750,000 | ||||||
| Other non-current liabilities |
75,651 | 65,771 | ||||||
| Total liabilities |
1,007,180 | 937,220 | ||||||
| Redeemable convertible preferred units |
123,227 | 117,374 | ||||||
| Unitholders’ equity |
(408,562 | ) | (284,541 | ) | ||||
| Total liabilities, redeemable convertible preferred units and unitholders’ equity |
$ | 721,845 | $ | 770,053 | ||||
MagnaChip Semiconductor
Condensed Consolidated Statements of Cash Flows
(In thousands of US Dollars)
(Unaudited)
| Six Months Ended | ||||||||
| July 1, 2007 | July 2, 2006 | |||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | (112,306 | ) | $ | (135,954 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
||||||||
| Depreciation and amortization |
89,974 | 102,509 | ||||||
| Provision for severance benefits |
9,379 | 5,357 | ||||||
| Gain on foreign currency translation, net |
(6,326 | ) | (42,367 | ) | ||||
| Impairment of long-term assets |
10,106 | 92,540 | ||||||
| Changes in accounts and other receivable |
(40,853 | ) | 28,121 | |||||
| Changes in inventories |
(13,237 | ) | 31,539 | |||||
| Changes in accounts and other payable |
10,722 | (63,173 | ) | |||||
| Changes in accrued expenses |
392 | (2,088 | ) | |||||
| Other |
2,182 | (6,015 | ) | |||||
| Net cash provided by (used in) operating activities |
(49,967 | ) | 10,469 | |||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(24,960 | ) | (20,510 | ) | ||||
| Other |
834 | 5,945 | ||||||
| Net cash used in investing activities |
(24,126 | ) | (14,565 | ) | ||||
| Cash flows from financing activities |
||||||||
| Exercise of unit options |
80 | 82 | ||||||
| Repurchase of common units |
(414 | ) | ||||||
| Proceeds from short-term borrowings |
40,000 | |||||||
| Net cash provided by financing activities |
40,080 | (332 | ) | |||||
| Effect of exchange rates on cash and cash equivalents |
(426 | ) | 4,342 | |||||
| Net increase (decrease) in cash and cash equivalents |
(34,439 | ) | (86 | ) | ||||
| Cash and cash equivalents |
||||||||
| Beginning of the period |
89,173 | 86,574 | ||||||
| End of the period |
$ | 54,734 | $ | 86,488 | ||||