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MagnaChip Reports Third Quarter 2016 Financial Results
[October 27, 2016]

MagnaChip Reports Third Quarter 2016 Financial Results


SEOUL, South Korea and SAN JOSE, Calif., Oct. 27, 2016 /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 third quarter ended September 30, 2016.

Revenue for the third quarter of 2016 was $192.3 million, an increase of 15.1% compared to $167.1 million for the second quarter of 2016, and up 24.6% as compared to $154.4 million for the third quarter of 2015. The increase in sequential revenue was 4% higher than the top end of prior guidance and reflected across-the-board strength in customer demand for the Company's foundry services, display and power products.        

Foundry Services revenue in the third quarter of 2016 was $73.9 million, a sequential increase of 18.5%, marking the third consecutive quarter of growth. Revenue in the Standard Products Group was $118.3 million, a 13.1% sequential increase and the fourth consecutive quarter of growth. Standard Product Group revenue in the third quarter was at its highest level since 2012 and Foundry Services revenue rebounded to mid-2015 levels.    

Gross profit was $39.1 million, or 20.4% as a percent of revenue for the third quarter of 2016. This compared with gross profit of $36.7 million, or 22.0%, for the second quarter of 2016 and $34.7 million, or 22.5%, for the third quarter of 2015. Foundry gross profit was 23.5% and Standard Products Group gross profit was 18.3% in the third quarter of 2016.

Net income, on a GAAP basis, for the third quarter of 2016 totaled $29.9 million or $0.86 per basic share and $0.85 per diluted share, as compared to net loss of $17.8 million or $0.51 per basic share for the second quarter of 2016 and a net loss of $57.1 million or $1.65 per basic share for the third quarter of 2015. Net income in the third quarter of 2016 was attributable primarily to a non-cash foreign exchange gain on the Company's intercompany loans.

"Demand was strong across the board in the third quarter, with our Power, Display and Foundry businesses each recording a double digit gain in revenue as compared with the prior quarter," said YJ Kim, Chief Executive Officer of MagnaChip. "Our foundry business was especially strong, and our fab utilization climbed to the highest level in more than three years."  

In commenting on the third quarter, Chief Financial Officer Jonathan Kim said, "We continued to execute on our strategy to increase fab utilization in order to reduce unit costs and prudently manage cash flows." Mr. Kim added, "We now are implementing a comprehensive plan to improve gross profit margin."

Adjusted Net Loss, a non-GAAP financial measure, for the third quarter of 2016 totaled $1.3 million or $0.04 per basic share, compared to Adjusted Net Loss of $1.9 million or $0.05 per basic share in the second quarter of 2016, and compared to Adjusted Net Loss of $10.4 million or $0.30 per basic share in the third quarter of 2015.

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 $75.4 million at the end of the 2016 third quarter, down from $83.9 million at the end of our 2016 second quarter.

As previously announced, the Board of Directors has established a Strategic Review Committee ("SRC") to assist the Board in reviewing, considering and evaluating strategic alternatives that may be available to MagnaChip, including the potential sale of all or a substantial portion of the Company.  The SRC continues to evaluate strategic alternatives but is not currently engaged in an active process of considering alternatives for the sale of the entire Company.  The SRC will consider any strategic opportunities that arise in the future.

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
























Three Months Ended



Nine Months Ended




September 30,

2016



September 30,

2015



September 30,

2016



September 30,

2015


Net Sales













Foundry Services Group


$

73,863



$

71,471



$

196,152



$

224,953


Standard Products Group













Display Solutions



84,706




48,314




217,171




153,585


Power Solutions



33,619




34,406




93,750




102,238


Total Standard Products Group



118,325




82,720




310,921




255,823


All other



108




191




434




506


Total net sales


$

192,296



$

154,382



$

507,507



$

481,282







Three Months Ended

September 30, 2016



Three Months Ended

September 30, 2015




Amount



% of

Net Sales



Amount



% of

Net Sales


Gross Profit













Foundry Services Group


$

17,340




23.5

%


$

18,681




26.1

%

Standard Products Group



21,691




18.3




15,827




19.1


All other



108




100.0




191




100.0


Total gross profit


$

39,139




20.4

%


$

34,699




22.5

%






Nine Months Ended

September 30, 2016



Nine Months Ended

September 30, 2015




Amount



% of

Net Sales



Amount



% of

Net Sales


Gross Profit













Foundry Services Group


$

45,820




23.4

%


$

51,241




22.8

%

Standard Products Group



64,836




20.9




53,216




20.8


All other



(519)




(119.6)




505




99.8


Total gross profit


$

110,137




21.7

%


$

104,962




21.8

%


 

Third Quarter and Recent Company Highlights

  • The Foundry Services Group and the Standard Products Group both recorded double-digit increases in revenue
  • Hosted its annual Foundry Technology Symposium in Taiwan
  • Selected by a leading Taiwanese fabless company to begin volume production on jointly developed power management IC

Business Outlook
For the fourth quarter of 2016, MagnaChip anticipates:

  • Revenue will be in the range of $174 million to $180 million, a sequential decline of 6% to 10%, reflecting a typical seasonal decline, but representing double-digit year-over-year growth. 
  • Gross profit to be in the range of 22% to 24% as a percent of revenue, representing a sequential and year-over-year improvement.

Conference Call
MagnaChip will hold a conference call at 5 p.m. EDT today (October 27, 2016) to discuss the third quarter financial results. The conference call will be webcast live and is also available by dialing 1-216-562-0462. The conference ID number is 1615389 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 number is 1-404-537-3406 or toll-free at 1-855-859-2056.  The access code is 1615389.

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 3,500 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

[email protected]

 



In Korea:

Chankeun Park

Director, Public Relations

Tel. +82-2-6903-3195

[email protected]

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars, except share data)

(Unaudited)








Three Months Ended




September 30,

2016



June 30,

2016



September 30,

2015


Net sales


$

192,296



$

167,106



$

154,382


Cost of sales



153,157




130,357




119,683


Gross profit



39,139




36,749




34,699


Gross profit %



20.4

%



22.0

%



22.5

%

Operating expenses













Selling, general and administrative expenses



20,082




25,948




22,107


Research and development expenses



18,439




18,178




20,450


Total operating expenses



38,521




44,126




42,557


Operating income (loss)



618




(7,377)




(7,858)


Interest expense



(4,055)




(4,073)




(4,075)


Foreign currency gain (loss), net



33,174




(7,101)




(44,139)


Other income, net



887




1,007




256


Income (loss) before income tax expenses



30,624




(17,544)




(55,816)


Income tax expenses



758




272




1,250


Net income (loss)


$

29,866



$

(17,816)



$

(57,066)


Earnings (loss) per common share :













- Basic


$

0.86



$

(0.51)



$

(1.65)


- Diluted


$

0.85



$

(0.51)



$

(1.65)


Weighted average number of shares - Basic



34,849,805




34,716,081




34,664,246


Weighted average number of shares - Diluted



35,302,706




34,716,081




34,664,246


 

 

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,
2016



June 30,

2016



September 30,

2015


Net income (loss)


$

29,866



$

(17,816)



$

(57,066)


Adjustments:













Interest expense, net



3,996




4,001




4,023


Income tax expenses



758




272




1,250


Depreciation and amortization



6,539




6,228




6,399


EBITDA


$

41,159



$

(7,315)



$

(45,394)


Restructuring and other






5,545





Equity-based compensation expense



1,462




968




393


Foreign currency loss (gain), net



(33,174)




7,101




44,139


Derivative valuation loss, net



32




8




270


Restatement related expenses



476




2,306




1,891


Adjusted EBITDA


$

9,955



$

8,613



$

1,299















Net income (loss)


$

29,866



$

(17,816)



$

(57,066)


Adjustments:













Restructuring and other






5,545





Equity-based compensation expense



1,462




968




393


Foreign currency loss (gain), net



(33,174)




7,101




44,139


Derivative valuation loss, net



32




8




270


Restatement related expenses



476




2,306




1,891


Adjusted net loss


$

(1,338)



$

(1,888)



$

(10,373)


Adjusted net loss per common share:













- Basic / Diluted


$

(0.04)



$

(0.05)



$

(0.30)


Weighted average number of shares – Basic / Diluted



34,849,805




34,716,081




34,664,246


 

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, net and (v) restatement related expenses. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expenses 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, 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,

2016



December 31,

2015


Assets









Current assets









Cash and cash equivalents


$

75,428



$

90,882


Restricted cash



6,118





Accounts receivable, net



66,013




63,498


Inventories, net



72,056




57,619


Other receivables



5,931




31,932


Prepaid expenses



12,860




7,075


Hedge collateral



2,100




6,000


Other current assets



4,405




3,228


Total current assets



244,911




260,234


Property, plant and equipment, net



195,553




191,985


Intangible assets, net



3,229




2,629


Long-term prepaid expenses



12,435




12,117


Deferred income tax assets



249




238


Other non-current assets



7,038




6,897


Total assets


$

463,415



$

474,100


Liabilities and Stockholders' Equity









Current liabilities









Accounts payable


$

66,514



$

55,476


Other accounts payable



12,332




10,961


Accrued expenses



58,284




76,721


Deferred revenue



12,780




10,060


Deposits received






8,165


Other current liabilities



2,920




5,128


Total current liabilities



152,830




166,511


Long-term borrowings, net



220,902




220,375


Accrued severance benefits, net



142,846




134,148


Other non-current liabilities



11,758




15,396


Total liabilities



528,336




536,430


Stockholders' equity









Common stock, $0.01 par value, 150,000,000 shares authorized, 41,566,019 shares issued 
     and 34,987,254 outstanding at September 30 2016, and 41,147,707 shares issued and 
     34,568,942 outstanding at December 31, 2015



415




411


Additional paid-in capital



129,083




124,618


Accumulated deficit



(76,035)




(96,210)


Treasury stock, 6,578,765 shares at September 30, 2016 and December 31, 2015



(90,918)




(90,918)


Accumulated other comprehensive loss



(27,466)




(231)


Total stockholders' deficit



(64,921)




(62,330)


Total liabilities and stockholders' equity


$

463,415



$

474,100


 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)








Three Months

Ended



Nine Months

Ended




September 30,

2016



September 30,

2016



September 30,

2015


Cash flows from operating activities













Net income (loss)


$

29,866



$

20,175



$

(107,721)


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













Depreciation and amortization



6,539




18,791




20,066


Provision for severance benefits



3,782




13,609




14,173


Amortization of debt issuance costs and original issue discount



180




527




491


Loss (gain) on foreign currency, net



(37,042)




(38,182)




65,730


Restructuring gain






(7,785)





Stock-based compensation



1,462




2,966




2,370


Other



257




421




(352)


Changes in operating assets and liabilities













Accounts receivable, net



(7,528)




977




8,672


Inventories, net



2,534




(9,412)




11,302


Other receivables



23,849




20,214




7,115


Other current assets



(1,613)




510




669


Deferred tax assets



(6)




31




367


Accounts payable



(691)




7,088




(18,894)


Other accounts payable



392




(4,764)




(10,199)


Accrued expenses



(24,000)




(22,087)




(32,731)


Other current liabilities



(2,505)




(3,869)




(686)


Deferred revenue



1,185




2,662




(1,236)


Other non-current liabilities



(751)




(1,412)




190


Payment of severance benefits



(1,076)




(14,178)




(7,905)


Other



(76)




(213)




141


Net cash used in operating activities



(5,242)




(13,931)




(48,438)


Cash flows from investing activities













Proceeds from settlement of hedge collateral



400




6,317




10,841


Payment of hedge collateral



(2,494)




(2,494)




(17,182)


Proceeds from disposal of plant, property and equipment



182




185




1,698


Purchase of plant, property and equipment



(5,511)




(11,345)




(4,250)


Payment for intellectual property registration



(276)




(754)




(550)


Collection of guarantee deposits



93




476




123


Payment of guarantee deposits



(174)




(185)




(670)


Other



1




9




179


Net cash used in investing activities



(7,779)




(7,791)




(9,811)


Cash flows from financing activities













Proceeds from issuance of common stock



1,502




1,502




3,434


Net cash provided by financing activities



1,502




1,502




3,434


Effect of exchange rates on cash and cash equivalents



3,033




4,766




20,891


Net decrease in cash and cash equivalents



(8,486)




(15,454)




(33,924)


Cash and cash equivalents













Beginning of the period



83,914




90,882




102,434


End of the period


$

75,428



$

75,428



$

68,510


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/magnachip-reports-third-quarter-2016-financial-results-300352448.html

SOURCE MagnaChip Semiconductor Corporation


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