SEOUL, South Korea, Oct. 23 /PRNewswire/ -- MagnaChip Semiconductor today announced results for the third quarter ended September 28, 2008.
Revenue for the three months ended September 28, 2008 was $176 million, compared to $200 million in the third quarter of 2007.
Sang Park, Chairman and CEO of MagnaChip Semiconductor, commented, "Due to the current economic environment and tightened credit supply, Q3 demand from customers was much weaker than expected. Q3 revenue came in at $176.0 million, a decrease of 9.6% as compared to the second quarter of 2008 and a decrease of 12.0% as compared to the third quarter of 2007. Looking ahead, we expect current market conditions and weak customer demand to continue in the short term. Despite the challenging economic environment, we see opportunities for growth through new product ramp-ups and new customers going into 2009."
Subsequent to the quarter end, we announced the closing of our Imaging Solutions business segment, subject to our continuing support for existing customers. In connection with this action, we recorded impairment charges of $26.3 million at the end of the quarter, in accordance with FAS 144. We expect to record approximately $15.2 million in restructuring charges in the fourth quarter, in accordance with FAS 146. Of a total of approximately $41.5 million in restructuring and impairment charges, $27.6 million relates to non-cash charges and approximately $13.9 million relates to cash expenditures, which are expected to be paid over the next 18 months.
Gross margin was $40.5 million or 23.0% of revenue for the quarter ended September 28, 2008, compared to $31.3 million or 15.6 % of revenue for the third quarter of 2007.
Operating expenses were $79.7 million in the current quarter. This included $26.3 million in impairment charges for the closing of our Imaging Solutions business segment. Excluding impairment charges, operating expenses for the third quarter of 2008 were $53.4 million or 30.4% of revenue, compared to $57.0 million or 28.5% of revenue for the third quarter of 2007.
Operating loss was $39.2 million during the third quarter. Excluding the impairment charges, the operating loss for the third quarter of 2008 was $12.9 million compared to $25.7 million in the prior year's third quarter.
Net interest expense for the third quarter of 2008 was $15.6 million compared to $15.3 million in the third quarter of 2007.
Net loss for the three months ended September 28, 2008 was $139.8 million. Excluding impairment charges, the loss was $113.5 million, compared to a net loss of $38.8 million in the prior year's third quarter. The net loss results were negatively impacted by a foreign currency loss of $81.6 million in the third quarter of 2008, compared to a foreign currency gain of $4.9 million in the third quarter of 2007. A substantial portion of this net foreign currency loss resulted from a non-cash translation loss recorded for intercompany borrowings at our Korea subsidiary that are denominated in U.S. dollars.
Robert Krakauer, President and CFO of MagnaChip Semiconductor, said, "In spite of the tough environment, we recorded a gross margin of over 23.0%. As a result of the closing of our Imaging Solutions business segment, the Company expects cost savings, including reductions in research and development and capital expenditures, of approximately $50.0 million in the Company's fiscal year 2009 as compared to 2008. To further improve on our margin and cash flow, we have started cost management initiatives to improve our cost structure a further $20 million over the coming year."
Investor Conference Call / Webcast Details
MagnaChip will report full results for the third quarter 2008 on Thursday, October 23, 2008 at 6:30 p.m. in New York (7:30 a.m., Friday, October 24, 2008 in Seoul). The conference call will be available at www.magnachip.com at +1-201-689-8560. A replay of the call will be available in two hours after the call through midnight on Thursday, October 30, 2008 in New York (1 p.m. on Friday, October 31, 2008 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 298925, respectively.
About MagnaChip Semiconductor
Headquartered in Seoul, South Korea, MagnaChip Semiconductor is a leading, Asia-based designer and manufacturer of analog and mixed-signal semiconductor products for high volume consumer applications, such as mobile phones, digital televisions, flat panel displays, notebook computers, mobile multimedia devices and digital cameras. The Company has a broad range of analog and mixed-signal semiconductor technology, supported by its 29-year operating history, large portfolio of registered and pending patents and extensive engineering and manufacturing process expertise. For more information, visit www.magnachip.com.
Forward-Looking Statements:
Certain statements contained in this press release contain forward-looking statements regarding MagnaChip Semiconductor's operations, economic performance and financial condition, including, but not limited to, expected future costs savings. Although MagnaChip Semiconductor believes that the expectations reflected in these statements are reasonable, no assurance can be given that such expectations will prove to have been correct as a result of many factors, including those described in our annual report on Form 10-K for the year ended December 31, 2007 and our other filings with the Securities and Exchange Commission.
CONTACT:
In Korea: In the U.S.:
Bohye Jeon, PR Manager Joseph Villalta at The Ruth Group
Tel: 82-2-6903-3316 Tel: +646-536-7003
bohye.jeon_mpr@magnachip.com jvillalta@theruthgroup.com
MagnaChip Semiconductor
Condensed Consolidated Statements of Operations
(In thousands of U.S. Dollars, except per unit data)
(Unaudited)
Three months ended
September 28, September 30,
2008 2007
Net sales $ 176,012 $ 200,045
Cost of sales 135,505 168,702
Gross profit 40,507 31,343
Operating expenses:
Selling, general and administrative 21,226 23,644
Research and development 32,199 33,437
Restructuring and impairment charges 26,285 -
Operating loss (39,203) (25,738)
Other income (expenses):
Interest expenses, net (15,631) (15,336)
Foreign currency gain (loss), net (81,640) 4,855
Loss before income taxes (136,474) (36,219)
Income tax expenses 3,317 2,547
Net loss $(139,791) $ (38,766)
Dividends accrued on preferred units 3,306 3,010
Net loss attributable to common units $(143,097) $ (41,776)
Net loss per common unit $ (2.71) $ (0.79)
Basic and Diluted
Common units used in per common
unit calculation:
Basic and Diluted (in thousands) 52,832 52,814
Key Ratios & Information:
-------------------------
Gross Margin 23.0% 15.6%
Operating Expenses as a % of Revenue 45.3% 28.5%
Operating Margin (22.3)% (12.9)%
Depreciation & Amortization Expense 20,870 48,812
Capital Expenditures 4,673 39,962
MagnaChip Semiconductor
Condensed Consolidated Balance Sheets
(In thousands of US Dollars)
(Unaudited)
September 28, December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents $23,870 $64,345
Accounts receivable, net 140,441 123,789
Inventories, net 59,768 75,867
Other current assets 24,019 16,722
Total current assets 248,098 280,723
Property, plant and equipment, net 204,196 279,669
Goodwill and intangible assets, net 55,077 104,725
Other non-current assets 39,784 42,766
Total assets $547,155 $707,883
Liabilities & Unitholders' Equity
Current liabilities
Accounts and other payable $125,419 $120,638
Short-term borrowings 90,000 80,000
Other current liabilities 28,890 24,477
Total current liabilities 244,309 225,115
Long-term borrowings 750,000 750,000
Other non-current liabilities 78,778 80,842
Total liabilities 1,073,087 1,055,957
Redeemable convertible preferred units 139,110 129,405
Unitholders' equity (665,042) (477,479)
Total liabilities, redeemable convertible
preferred units and unitholders' equity $547,155 $707,883
MagnaChip Semiconductor
Condensed Consolidated Statements of Cash Flows
(In thousands of US Dollars)
(Unaudited)
Nine months ended
September 28, September 30,
2008 2007
Cash flows from operating activities
Net loss $(267,281) $(151,072)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Depreciation and amortization 62,752 138,787
Provision for severance benefits 13,444 13,985
(Gain) loss on foreign currency
translation, net 155,929 (9,623)
Impairment charges 26,285 10,106
Changes in accounts and other
receivable (41,181) (46,699)
Changes in inventories 1,919 (34,528)
Changes in accounts and other
payable 15,873 51,687
Changes in accrued expenses 10,701 6,118
Other (5,169) 8,014
Net cash used in operating
activities (26,728) (13,225)
Cash flows from investing activities
Capital expenditures (25,864) (64,922)
Other 3,023 486
Net cash used in investing activities (22,841) (64,436)
Cash flows from financing activities
Exercise of unit options 183 111
Repurchase of common units (496) -
Proceeds from short-term borrowings 175,000 70,397
Repayment of short-term borrowings (165,000) (20,000)
Net cash provided by financing
activities 9,687 50,508
Effect of exchange rates on cash
and cash equivalents (593) (86)
Net decrease in cash and cash
equivalents (40,475) (27,239)
Cash and cash equivalents
Beginning of the period 64,345 89,173
End of the period $23,870 $61,934
Web site: http://www.magnachip.com/