MagnaChip Reports First Quarter 2015 Financial Results

May 28, 2015
- Reports Revenue of $164.9 million and gross margin of 21.2%
- Announces YJ Kim as CEO and a Member of Board of Directors; Jonathan Kim as CFO
- Launched a Comprehensive Cost and Portfolio Optimization Program; Engages Independent Business Advisory Firm to Assist with Evaluation
- Combines Display and Power Solutions into Newly Formed Standard Products Group
- Names a Chief Compliance Officer to Executive Team

SEOUL, South Korea and CUPERTINO, Calif., May 28, 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 first quarter ended March 31, 2015.

The Company also announced the appointment of YJ Kim, a semiconductor industry veteran, as Chief Executive Officer and a member of the Company's Board of Directors, and Jonathan Kim as Executive Vice President and Chief Financial Officer. Both held the same posts on an interim basis for the past year. In addition, the Company named Theodore Kim as Executive Vice President and Chief Compliance Officer, a newly created position, reporting directly to the Board of Directors. He continues to serve as General Counsel.

On behalf of MagnaChip's Board, Chairman Doug Norby said, "I am pleased that, after conducting a broad and thorough search process, the Board has unanimously appointed YJ to lead MagnaChip and Jonathan to serve as CFO. As interim CEO, YJ provided strong leadership and strategic vision to the Company during this important period. Jonathan successfully led the completion of the restatement process, and has proven himself to be a very capable financial executive. The Board looks forward to working with the two leaders to improve MagnaChip's performance."

Revenue for the first quarter of 2015 was $164.9 million, a 1.7% decline compared to $167.7 million for the fourth quarter of 2014 and flat compared to $164.2 million for the first quarter of 2014.

Gross profit was $35.0 million or 21.2%, as a percent of revenue, for the first quarter of 2015. This compares to gross profit of $34.5 million or 20.6% for the fourth quarter of 2014 and $40.3 million or 24.5% for the first quarter of 2014.

Net loss, on a GAAP basis, for the first quarter of 2015 totaled $20.0 million or $0.59 per diluted share. This compares to a net loss of $63.8 million or $1.87 per diluted share for the fourth quarter of 2014 and a net loss of $21.6 million or $0.63 per diluted share for the first quarter of 2014. Net loss was impacted primarily by lower revenue and gross margin as well as by substantial accounting, legal and other related costs associated with our restatement and certain related litigation and other regulatory investigations and actions.

"We continue to face major challenges as a result of strategic missteps in the past, so we have implemented a comprehensive cost and portfolio optimization program to position MagnaChip for growth over the long-term while we also work to improve fab utilization and boost engineering efficiencies," said CEO YJ Kim. "Our goal is to broaden our customer base, expand into new markets including sensors and the Internet of Things (IoT), accelerate product innovation and improve engineering productivity. To help achieve these goals and streamline product functions, we recently combined our Display Solutions and Power Solutions divisions into a single Standard Products Group."

MagnaChip also announced today that HK Kim, Executive Vice President and General Manager of the Power Solutions Division, and Brent Rowe, Executive Vice President of Worldwide Sales, have resigned. The Company announced earlier this month that TY Hwang, formerly the President and Chief Operating Officer, resigned effective April 30. 

"We devoted substantial efforts and resources to getting caught up on our delayed SEC filings.  With today's filing of our 2014 10-K and with the filing of our 10-Q for the first quarter of 2015, which we expect to file within the next two weeks, we will be current with our filings and plan to be a timely filer starting in the second quarter," said Jonathan Kim, Chief Financial Officer. "We are committed to achieving and maintaining a strong internal control over financial reporting and financial reporting integrity." In addition, Mr. Kim said, "We have engaged a global consulting firm with considerable expertise in cost and portfolio optimization to help us focus on strategies to emerge from our current challenges and to drive our business forward and return long-term value to our shareholders."

Adjusted net loss, a non-GAAP measurement, for the first quarter of 2015 totaled $9.6 million or $0.28 per diluted share compared to an adjusted net loss of $10.8 million or $0.32 per diluted share for the fourth quarter of 2014 and an adjusted net loss of $6.4 million or $0.19 per diluted share for the first 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.

Combined cash balances (cash and cash equivalents) totaled $91.4 million at the end of the first quarter of 2015, a decrease of $11.0 million from the end of the prior quarter.

First Quarter and Recent Company Events

  • Appointed YJ Kim as CEO and Jonathan Kim as CFO
  • Appointed Theodore Kim as Chief Compliance Officer
  • Announced Diversified Products for Internet of Things Applications
  • Announced 5th Annual Foundry Technology Symposium in Taiwan, California, and Texas
  • Introduced Automotive Qualified Display Driver ICs for Major Japanese LCM Maker
  • Completed Review and Restatement of Financial Results
  • Introduced New Step-Down LED Backlight Drivers
  • Offered Enhanced 0.13 Micron Embedded EEPROM Process Technology

The Company today filed its Annual Report on Form 10-K for the year ended Dec. 31, 2014, with the Securities and Exchange Commission. A copy of this and other MagnaChip SEC filings is available at www.magnachip.com.

Business Outlook

For the second quarter of 2015, MagnaChip anticipates:

  • Revenue will be in the range of $155 million to $165 million.
  • Gross margin will be 17.0% to 19.0% as a percent of revenue.

Conference Call

MagnaChip will hold a conference call at 5 p.m. EDT today to discuss the first 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 49272803 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 49272803.

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 ability to capitalize on improving market dynamics and future operating and financial performance including second quarter 2015 revenue and gross margin. 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

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



March 31,
2015



December 31,
2014



March 31,
2014

Net sales

$

164,885


$

167,652


$

164,164

Cost of sales


129,908



133,154



123,887










Gross profit


34,977



34,498



40,277

Gross profit %


21.2%



20.6%



24.5%










Operating expenses









Selling, general and administrative expenses


25,030



32,491



25,027

Research and development expenses


22,160



22,147



23,137

Restructuring and impairment charges




10,269



     Total operating expenses


47,190



64,907



48,164










Operating loss


(12,213)



(30,409)



(7,887)










Interest expense, net


(4,063)



(4,134)



(4,070)

Foreign currency loss, net


(3,176)



(30,160)



(9,406)

Other income, net


556



626



561

Loss before income taxes


(18,896)



(64,077)



(20,802)










Income tax expense (benefit)


1,133



(247)



803










Net loss

$

(20,029)


$

(63,830)


$

(21,605)










Loss per common share :









        - Basic

$

(0.59)


$

(1.87)


$

(0.63)

        - Diluted

$

(0.59)


$

(1.87)


$

(0.63)

Weighted average number of shares—Basic


34,056,468



34,056,413



34,052,875

Weighted average number of shares—Diluted


34,056,468



34,056,413



34,052,875

 

 

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



March 31,
2015



December 31,
2014



March 31,
2014

Net loss

$

(20,029)


$

(63,830)


$

(21,605)

Adjustments:









Depreciation and amortization


6,870



7,143



7,268

Interest expense, net


4,063



4,134



4,070

Income tax expense (benefit)


1,133



(247)



803

Restructuring and impairment charges




10,269



Equity-based compensation expense


185



407



617

Foreign currency loss, net


3,176



30,161



9,407

Derivative valuation loss (gain), net




(49)



16

Restatement related expenses


7,058



12,145



4,797

Adjusted EBITDA

$

2,456


$

133


$

5,373

Adjusted EBITDA per common share:









- Diluted

$

0.07


$

0.00


$

0.16

Weighted average number of shares - Diluted


34,056,468



34,056,413



34,052,875










Net loss

$

(20,029)


$

(63,830)


$

(21,605)

Adjustments:









Restructuring and impairment charges




10,269



Equity-based compensation expense


185



407



617

Amortization of intangibles




120



357

Foreign currency loss, net


3,176



30,161



9,407

Derivative valuation loss (gain), net




(49)



16

Restatement related expenses


7,058



12,145



4,797

Adjusted net loss

$

(9,610)


$

(10,777)


$

(6,411)

Adjusted net loss per common share:









- Diluted

$

(0.28)


$

(0.32)


$

(0.19)

Weighted average number of shares - Diluted


34,056,468



34,056,413



34,052,875

 

We define Adjusted EBITDA for the periods indicated as net income (loss), 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 as a further supplemental measure of our performance. We prepare Adjusted Net Income 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 is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income for the periods as net income (loss), 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)




March 31, 
2015


December 31,
2014

Assets







Current assets







Cash and cash equivalents


$

91,395


$

102,434

Accounts receivable, net



71,848



72,957

Inventories, net



76,422



75,334

Other receivables



4,535



10,616

Prepaid expenses



10,311



7,560

Current deferred income tax assets



43



237

Other current assets



7,224



6,898








Total current assets



261,778



276,036








Property, plant and equipment, net



216,486



223,766

Intangible assets, net



2,422



2,451

Long-term prepaid expenses



9,951



10,916

Deferred income tax assets



281



415

Other non-current assets



14,548



14,147








Total assets


$

505,466


$

527,731








Liabilities and Stockholders' Equity







Current liabilities







Accounts payable


$

73,812


$

70,767

Other accounts payable



8,195



10,986

Accrued expenses



74,573



81,060

Other current liabilities



4,616



6,460








Total current liabilities



161,196



169,273








Long-term borrowings, net



224,065



224,035

Accrued severance benefits, net



144,491



139,289

Other non-current liabilities



11,489



13,636








Total liabilities



541,241



546,233

Commitments and contingencies







Stockholders' equity







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



406



406

Additional paid-in capital



118,604



118,419

Accumulated deficit



(31,372)



(11,343)

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



(90,918)



(90,918

Accumulated other comprehensive loss



(32,495)



(35,066








Total stockholders' equity (deficit)



(35,775)



(18,502








Total liabilities and stockholders' equity


$

505,466


$

527,731

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)




Three Months Ended




March 31,
2015


March 31,
2014


Cash flows from operating activities








Net loss


$

(20,029)


$

(21,605)


Adjustments to reconcile net loss to net cash used in operating activities








Depreciation and amortization



6,870



7,268


Provision for severance benefits



7,260



4,034


Bad debt expenses (reversal of allowance)



(20)



94


Amortization of debt issuance costs and original issue discount



162



149


Loss on foreign currency, net



4,179



11,007


Stock-based compensation



185



617


Other



(222)



367


Changes in operating assets and liabilities








Accounts receivable



133



(28,094)


Inventories, net



(1,701)



(10,028)


Other receivables



6,140



691


Other current assets



(1,653)



(806)


Deferred tax assets



324



366


Accounts payable



5,902



(837)


Other accounts payable



(4,881)



(1,230)


Accrued expenses



(7,626)



(3,273)


Other current liabilities



(1,774)



(1,790)


Other non-current Liabilities



(220)



548


Payment of severance benefits



(1,341)



(1,514)


Other



(367)



(150)









Net cash used in operating activities



(8,679)



(44,186)









Cash flows from investing activities








Purchase of plant, property and equipment



(557)



(6,259)


Payment for intellectual property registration



(77)



(92)


Payment of guarantee deposits



(411)



(289)


Other



15



7









Net cash used in investing activities



(1,030)



(6,633)









Cash flows from financing activities








Proceeds from issuance of common stock





67









Net cash provided by financing activities





67


Effect of exchange rates on cash and cash equivalents



(1,330)



1,914









Net decrease in cash and cash equivalents



(11,039)



(48,838)









Cash and cash equivalents








Beginning of the period



102,434



153,606









End of the period


$

91,395


$

104,768


 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/magnachip-reports-first-quarter-2015-financial-results-300090538.html

SOURCE MagnaChip Semiconductor Corporation

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