MagnaChip Semiconductor Reports Third Quarter Results
MagnaChip Semiconductor 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."