Form 8-K

 

 

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): October 29, 2015

 

 

MagnaChip Semiconductor Corporation

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware   001-34791   83-0406195

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

c/o MagnaChip Semiconductor S.A.
1, Allée Scheffer, L-2520
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 MagnaChip Semiconductor Corporation and its consolidated subsidiaries for the third quarter ended September 30, 2015, as presented in a press release dated October 29, 2015.

The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is furnished as part of this report:

 

Exhibit

No.

  

Description

99.1    Press release for MagnaChip Semiconductor Corporation dated October 29, 2015, announcing the results for the third quarter ended September 30, 2015.


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 CORPORATION

Dated: October 29, 2015

  By:   

/s/ Theodore Kim

    Theodore Kim
    Chief Compliance Officer, Executive Vice President, General Counsel and Secretary


Exhibit Index

 

Exhibit

No.

  

Description

99.1    Press release for MagnaChip Semiconductor Corporation dated October 29, 2015, announcing the results for the third quarter ended September 30, 2015.
EX-99.1

Exhibit 99.1

 

LOGO  

            Press Release

 

 

 

LOGO

MagnaChip Reports Third Quarter 2015 Financial Results

SEOUL, South Korea and SAN JOSE, Calif., October 29, 2015 — 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,
2015
     September 30,
2014
     September 30,
2015
     September 30,
2014
 

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,
2015
     September 30,
2014
     September 30,
2015
     September 30,
2014
 

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

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  
     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 shares issued and 34,568,542 outstanding at September 30, 2015 and 40,635,233 shares issued and 34,056,468 outstanding at December 31, 2014

     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