Revenue for the three months ended April 2, 2006 was $213.1 million, compared to $213.4 million in the first quarter of 2005.
Gross margin was $40.3 million or 18.9% of revenue for the quarter ended April 2, 2006, compared to $26.0 million or 12.2% of revenue for the quarter ended April 3, 2005. The first quarter of 2005 included a non-cash charge of $4.5 million for the write up of inventory to fair market value, which were subsequently sold during the first quarter of 2005. On a non-GAAP basis, gross margin in the current quarter increased by 460 basis points from 14.3% in the first quarter of 2005.
Operating expenses were $51.4 million in the first quarter or 24.1% of revenue compared to $54.6 million or 25.6% of revenue during the first quarter of 2005. The decrease of $3.2 million from the prior year quarter was primarily due to lower amortization of intangible assets associated with sale of the Application Processor business and ongoing cost controls. Operating loss was $11.1 million during the quarter compared to an operating loss of $28.6 million in the prior year quarter.
Net interest expense for the first quarter was $14.7 million, compared to $13.9 million in the first quarter of 2005. Net loss for the three months ended April 2, 2006 was $3.9 million compared to a net loss of $31.3 million in the prior year quarter.
Dr. Youm Huh, President and CEO of MagnaChip Semiconductor, commented, "Revenue was in-line with guidance despite a seasonally slow quarter for the industry due to our participation in fast growth end markets in image sensor solutions, and mixed-signal and digital multimedia semiconductors. We were able to achieve essentially flat revenue on a year over year basis, even though the prior year included a full quarter's revenue from our Application Processor business, which we have now sold. We continue to build MagnaChip's brand name and visibility world-wide. We launched our new line of CMOS Image Sensors this quarter - our 2 Megapixel CMOS image sensor SOC and our high- performance 1.3 Megapixel CMOS image sensor SOC, which we believe will be growth drivers for us in 2006 and beyond. Overall, we continue to leverage our expansive R&D and manufacturing resources to increase market penetration. In line with these efforts, we held a very successful SMS technology symposium in Beijing with attendees from IC design houses, customers and technology partners from China and showcased our line of Imaging Solutions at the 3GSM World Congress."
Robert Krakauer, EVP of Strategic Operations and CFO of MagnaChip Semiconductor, said, "During the quarter, we initiated a Six Sigma management system that is expected to result in improved product quality, substantial cost savings, and enhance our industry leading profile. This initiative specifically focuses on three areas within MagnaChip: Sales & marketing, Research & Development, and Production. Our Six Sigma initiatives will allow us to more effectively deliver industry-leading solutions to our consumer electronics and communications customers worldwide and place us on the same corporate development path as recognized global industry leaders. This program is not only limited to enhancing cost savings and quality but will be actively used to improve overall business management, innovation and execution."
Krakauer, continued, "We also completed the sale of our Application Processor business to ABOV Semiconductor Co., Ltd. The close of this sale allows us to now focus further on our three core businesses - Display Solutions, Imaging Solutions and our Semiconductor Manufacturing Services. MagnaChip will continue to provide foundry services to the new entity."
Second Quarter 2006 Outlook
For the second quarter of 2006, the Company expects reduced revenues due to the transition to new products that are expected to improve revenue growth into the second half of the year.
Investor Conference Call / Webcast Details
MagnaChip will report full results for the first quarter 2006 on Monday, May 1, 2006 at 10:00 a.m. in New York (11:00 p.m., Monday, May 1 in South Korea). The conference call will be available at http://www.magnachip.com and by telephone at +1-(201) 689-8470. A replay of the call will be available in two hours after the call through midnight on Tuesday, May 9, 2006 in New York (noon on Tuesday, May 9, 2006 in Seoul) at http://www.magnachip.com and by telephone at +1-(201) 612-7415. The account number to access the replay is 3055 and the confirmation ID number is 196939, respectively.
About MagnaChip Semiconductor
MagnaChip Semiconductor is a leading designer, developer and manufacturer of mixed-signal and digital multimedia semiconductors addressing the convergence of consumer electronics and communications devices. We focus on CMOS image sensors and flat panel display drivers, which are complex, high performance, mixed signal semiconductors that capture images and enable and enhance the features and capabilities of both small and large flat panel displays. MagnaChip also provides wafer foundry services utilizing CMOS high voltage, embedded memory, analog and power process technologies for the manufacture of IC's for customer-owned designs. MagnaChip has world-class manufacturing capabilities and an extensive portfolio of approximately 11,900 registered and pending patents. As a result, MagnaChip is a valued partner in providing leading technology solutions to its customers worldwide. For more information, visit http://www.magnachip.com.
Certain statements in this press release including statements regarding expected future financial and industry growth are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimated," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include general business and economic conditions and the state of the semiconductor industry; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in customer order patterns; changes in product mix; capacity utilization; level of competition; pricing pressure and declines in average selling price; delays in new product introduction; continued success in technological innovations and delivery of products with the features customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange rate fluctuations; litigation and other risks as described in the Company's SEC filings, including its annual report on Form 10-K for the year ended December 31, 2005.
Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements.
In Korea: In the U.S.: Robert Krakauer, EVP Strategic David Pasquale, EVP at The Ruth Operations, CFO Group Tel: 82-2-3459-3682 Tel: +646-536-7006 Email Contact Email Contact MagnaChip Semiconductor Condensed Consolidated Income Statements (In thousands of U.S. Dollars, except unit data) (Unaudited) Three Months Ended April 2, 2006 April 3, 2005 Net sales $213,143 $213,390 Cost of sales 172,815 187,438 Gross profit 40,328 25,952 Operating expenses: Selling, general and administrative 21,531 28,479 Research and development 29,918 26,099 Operating loss (11,121) (28,626)