Published: July 27, 2005
STATS ChipPAC Reports Second Quarter Results
STATS ChipPAC Ltd. ("STATS ChipPAC" or the
"Company") (NASDAQ: STTS) (SGX: STATSChP), a leading independent
semiconductor test and advanced packaging service provider, today announced
results for the second quarter ended June 30, 2005.
Revenue for the three months ended June 30, 2005 increased 90% to $264.3
million, compared to $139.0 million in the same quarter a year ago. This
represents a sequential increase of 13% compared to the prior quarter and
is in line with prior guidance. On a US GAAP basis, net loss for the three
months ended June 30, 2005 was $15.1 million or $0.08 per diluted ADS,
compared to net income of $4.7 million or $0.04 per diluted ADS in the same
quarter a year ago. US GAAP results for the second quarter of 2005 include
$14.1 million in special items and costs associated with the merger of
STATS and ChipPAC. Excluding the special items and including certain
adjustments, non-US GAAP adjusted net loss in the second quarter ended June
30, 2005 was $1.0 million or $0.01 per diluted ADS, compared to net income
of $4.7 million or $0.04 per diluted ADS in the same quarter a year ago.
Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said,
"We improved our financial performance and returned to growth in the second
quarter with volumes and revenue increasing over the prior quarter.
Revenue in the second quarter showed typical seasonal strength and was up
across all segments reinforcing our belief that a recovery is underway.
Importantly, the quarter progressed in a more linear fashion and was not as
back-end loaded as prior quarters. From a mix standpoint, PBGA packages
used largely in chipsets and broadband access were strongest in the quarter
despite capacity constraints. 3D packages used mainly in wireless handsets
started slowly, but gained momentum as the quarter closed. We continue to
gain traction in the marketplace, and have accelerated our new 300mm
bumping line and are in the process of expanding our facilities in China to
better serve our existing and future customers."
Michael G. Potter, Chief Financial Officer of STATS ChipPAC, said, "We
ended the second quarter with $222 million in cash, cash equivalents and
marketable securities, an increase from the prior quarter. Gross margin
improved as we benefited from an improved mix, and better utilization rates
compared to the prior quarter, partially offset by higher volumes of lower
margin PBGA. We expect to achieve additional gross margin improvements led
by continued improvements in utilization rates, a recovery in services for
the handset end market and more stable pricing. At the same time, we
remain committed to controlling our capital expenditures to keep them in
line with expected revenue growth. Capital expenditures for the first six
months of 2005 were less than our cash flow from operations for that
period. Finally, our private placement (the "Private Placement") of $150
million aggregate principal amount of 7.5% Senior Notes due 2010 that
closed on July 19, 2005 is another example of our desire to control total
debt levels, while ensuring that we maintain financial flexibility. We
plan to use approximately $99 million of the net proceeds from the Private
Placement to repay certain of our short-term borrowings. We drew down these
short-term borrowings to finance part of the redemption of our 1.75%
convertible notes due 2007 on March 18, 2005. We intend to use the
remaining net proceeds from the offering for general corporate purposes."
Outlook
Tan Lay Koon commented, "We believe that our ability to provide turnkey
solutions, leadership in high growth 3D packaging, seasonal strength in end
markets and the return to more normal inventory levels at our customers
will contribute to improvement in financial results in 2005.
Specifically, for the third quarter 2005, we expect revenue to be
approximately 9% to 14% higher than the second quarter 2005, with US GAAP
net loss per ADS of $0.07 to $0.04 and non-US GAAP adjusted net income per
ADS in the range of $0.01 to $0.04 per ADS for the third quarter of 2005.
Non-US GAAP adjusted net income is calculated without the effect of certain
merger and integration expenses and purchase accounting adjustments."
Investor Conference Call / Webcast Details
A conference call has been scheduled for 8:00 a.m. in Singapore on July 28,
2005. This will be 8:00 p.m. on July 27 in New York. During the call, time
will be set aside for analysts and interested investors to ask questions of
executive officers.
The call may be accessed by dialing +1-201-689-8261 and referencing
confirmation code 157834. A replay of the call will be available
immediately following the call through noon on Thursday, August 4, 2005 in
Singapore (midnight in New York on Thursday, August 4, 2005) at
www.statschippac.com and by telephone at +1-201-612-7415. The account
number to access the replay is 3055 and the conference ID number is 157834.
About STATS ChipPAC Ltd.
STATS ChipPAC Ltd. ("STATS ChipPAC" or "the Company") (NASDAQ: STTS) (SGX:
STATSChP) is a leading service provider of semiconductor packaging design,
assembly, test and distribution solutions. A trusted partner and supplier
to leading semiconductor companies worldwide, STATS ChipPAC provides fully
integrated, multi-site, end-to-end packaging and testing solutions that
bring products to market faster. Our customers are some of the largest
wafer foundries, integrated device manufacturers (IDMs) and fabless
companies in the United States, Europe and Asia. STATS ChipPAC is a leader
in mixed signal testing and advanced packaging technology for
semiconductors used in diverse end market applications including
communications, power, digital consumer and computing. With advanced
process technology capabilities and a global manufacturing presence
spanning Singapore, South Korea, China, Malaysia and Taiwan, STATS ChipPAC
has a reputation for providing dependable, high quality test and packaging
solutions. The Company's customer support offices are centered in the
United States (California's Silicon Valley, Arizona, Texas, Massachusetts,
Florida, Colorado and North Carolina). Our offices outside the United
States are located in the Netherlands, United Kingdom, China, Singapore,
Japan, Taiwan, South Korea and Malaysia. STATS ChipPAC's facilities include
those of its subsidiary, Winstek Semiconductor Corporation in Hsinchu
Valley, Taiwan. These facilities offer new product introduction support,
pre-production wafer sort, final test, packaging and other high volume
preparatory services. Together with our research and development centers in
Singapore and South Korea as well as test facilities in the United States,
this forms a global network providing dedicated test engineering
development and product engineering support for customers from design to
volume production. STATS ChipPAC is listed on both the Nasdaq National
Market and The Singapore Exchange. In addition, STATS ChipPAC is also
listed on the Morgan Stanley Capital International (MSCI) Index and the
Straits Times Industrial Index. Further information is available at
www.statschippac.com. Information contained in this website does not
constitute a part of this release.
Certain statements in this press release, including statements regarding
expected future financial results and industry growth, are forward-looking
statements that involve a number of risks and uncertainties that could
cause actual results to differ materially. Factors that could cause actual
results to differ include our ability to successfully integrate the
operations of former STATS and ChipPAC and their employees; general
business and economic conditions and the state of the semiconductor
industry; demand for end-use applications products such as communications
equipment and personal computers; reliance on a small group of principal
customers; decisions by customers to discontinue outsourcing of test and
packaging services; changes in customer order patterns; rescheduling or
canceling of customer orders; changes in product mix; capacity utilization;
level of competition; pricing pressures including declines in average
selling prices; continued success in technological innovations; delays in
acquiring or installing new equipment; shortages in supply of key
components; availability of financing; exchange rate fluctuations;
litigation and other risks described from time to time in the Company's SEC
filings, including its annual report on Form 20-F dated March 18, 2005, and
the Registration Statement on Form F-3/S-3 (File Nos. 333-119705 and
333-119705-1) of STATS ChipPAC and STATS ChipPAC, Inc., respectively. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. Unless otherwise specified, references to ''$'' are to the
lawful currency of the United States of America. Unless otherwise
specified, references to "US GAAP" are to Generally Accepted Accounting
Principles as practiced in the United States of America.
STATS ChipPAC Ltd.
Condensed Consolidated Statements of Operations
(In thousands of U.S. Dollars, except share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2005 2004 2005
---------- ---------- ---------- ----------
Net revenues $ 138,995 $ 264,346 $ 271,323 $ 498,492
Cost of revenues (114,358) (228,541) (226,306) (438,289)
---------- ---------- ---------- ----------
Gross profit 24,637 35,805 45,017 60,203
Operating expenses:
Selling, general
and administrative 11,648 33,766 21,901 66,051
Research and development 2,903 6,536 5,989 12,478
Restructuring charges - - - 830
Other general expenses
(income), net (511) (5) (548) (44)
---------- ---------- ---------- ----------
Total operating
expenses 14,040 40,297 27,342 79,315
---------- ---------- ---------- ----------
Operating income (loss) 10,597 (4,492) 17,675 (19,112)
Non-operating income
(expenses), net (5,354) (8,055) (7,575) (19,437)
---------- ---------- ---------- ----------
Income (loss) before
income taxes 5,243 (12,547) 10,100 (38,549)
Income tax expense (123) (1,159) (632) (2,298)
---------- ---------- ---------- ----------
Income (loss) before
minority interest 5,120 (13,706) 9,468 (40,847)
Minority interest (463) (1,357) (745) (1,335)
---------- ---------- ---------- ----------
Net income (loss) $ 4,657 $ (15,063) $ 8,723 $ (42,182)
========== ========== ========== ==========
Net income (loss) per
ordinary share:
Basic $ 0.00 $ (0.01) $ 0.01 $ (0.02)
Diluted $ 0.00 $ (0.01) $ 0.01 $ (0.02)
Net income (loss) per
ADS:
Basic $ 0.04 $ (0.08) $ 0.08 $ (0.22)
Diluted $ 0.04 $ (0.08) $ 0.08 $ (0.22)
Ordinary shares (in
thousands) used in
per ordinary share
calculation:
Basic 1,076,823 1,954,500 1,076,768 1,951,440
Diluted 1,077,776 1,954,500 1,079,371 1,951,440
ADS (in thousands) used
in per ADS calculation:
Basic 107,682 195,450 107,677 195,144
Diluted 107,778 195,450 107,937 195,144
Key Ratios & Information:
Gross Margin 17.7% 13.5% 16.6% 12.1%
Operating Expenses
as a % of Revenue 10.1% 15.2% 10.1% 15.9%
Operating Margin 7.6% -1.7% 6.5% -3.8%
Depreciation & Amortization,
including amortization
of debt issuance costs $ 37,803 64,099 $ 73,431 125,269
Capital Expenditures $ 67,027 53,392 $ 136,825 70,539
STATS ChipPAC Ltd.
Reconciliation of US GAAP Net Income (Loss) to
Non-GAAP Net Income (Loss)
(In thousands of U.S. Dollars)
(Unaudited)
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial statements presented on
a US GAAP basis, STATS ChipPAC uses a non-US GAAP conforming measure of net
income (loss), that is US GAAP net income (loss) adjusted to exclude
certain costs, expenses or gains, referred to as special items. Non-US GAAP
adjusted net income (loss) measure gives an indication of our baseline
performance before other charges that are considered by management to be
outside of our core operating results. In addition, our non-US GAAP
adjusted measure of net income (loss) is among the primary indicators
management uses as a basis for our planning and forecasting of future
periods. The presentation of this additional information should not be
considered in isolation or as a substitute for net income (loss) prepared
in accordance with generally accepted accounting principles in the United
States of America.
Three Months Ended Six Months Ended
June 30, June 30,
2004 2005 2004 2005
---------- ---------- ---------- ----------
US GAAP net income
(loss) $ 4,657 $ (15,063) $ 8,723 $ (42,182)
Special items
Merger and integration
related expenses
Cost of revenues (1) - 65 - 130
Operating expenses (1) - 500 - 1,053
Restructuring
charges (2) - - - 830
Purchase accounting
items
Amortization of
intangibles - SG&A (3) - 12,687 - 25,374
Amortization of
intangibles - R&D (3) - 800 - 1,600
Write-off of capitalized
debt issuance cost (4) - - - 1,654
Purchase price adjustment
on tax (5) - - - 1,003
---------- ---------- ---------- ----------
Total special items - 14,052 - 31,644
---------- ---------- ---------- ----------
Non-US GAAP adjusted net
income (loss) $ 4,657 $ (1,011) $ 8,723 $ (10,538)
========== ========== ========== ==========
Non-US GAAP adjusted condensed consolidated statements of operations are
intended to present the Company's operating results, excluding special
items. The special items excluded for the three and six months ended
June 30, 2004 and 2005 were:
(1) We incurred direct merger and integration expenses in both our costs
of revenue and operating expenses in the three and six months ended
June 30, 2005. These legal, professional, and other expenses including
retention programs are temporary in nature and relate to the merger and not
our ongoing business.
(2) In order to more closely align expenses with revenues, the Company
reduced headcount by 88 employees in the Singapore and the United States
facilities during the first quarter ended March 31, 2005. This reduction of
headcount resulted in a charge of $0.8M for severance payments.
(3) As part of the purchase accounting for the merger, certain intangible
assets, including customer relationships and intellectual property, were
either created or revalued. The increased amortization due to these assets
was excluded as it is a non-cash charge and arose solely because of
purchase accounting. In addition, due to purchase accounting, the net book
value of ChipPAC's fixed assets was reduced. This resulted in depreciation
being approximately $2.2M and $4.5M lower in the three and six months ended
June 30, 2005 than it would have been without the revaluation due to
purchase accounting. As this is ongoing and a reflection of the value
assets used in production, no adjustment was made for this item.
(4) As a result of the repurchase of $26.1M and the redemption of the put
of $125.9M of our 1.75% convertible notes due 2007, we incurred write-off
charges in our capitalized debt issuance costs during the first quarter
ended March 31, 2005.
(5) Adjustment to original purchase price to benefit acquired tax
attributes based on increased taxable income during the first quarter ended
March 31, 2005, due to foreign currency fluctuations.
STATS ChipPAC Ltd.
Non-GAAP Condensed Consolidated Statements of Operations
Excludes Special Items
(In thousands of U.S. Dollars, except for share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2005 2004 2005
---------- ---------- ---------- ----------
Net revenues $ 138,995 $ 264,346 $ 271,323 $ 498,492
Cost of revenues (114,358) (228,476) (226,306) (438,159)
---------- ---------- ---------- ----------
Gross profit 24,637 35,870 45,017 60,333
Operating expenses:
Selling, general
and administrative 11,648 20,623 21,901 39,743
Research and development 2,903 5,692 5,989 10,759
Restructuring charges - - - -
Other general expenses
(income), net (511) (5) (548) (44)
---------- ---------- ---------- ----------
Total operating
expenses 14,040 26,310 27,342 50,458
---------- ---------- ---------- ----------
Operating income (loss) 10,597 9,560 17,675 9,875
Non-operating income
(expenses), net (5,354) (8,055) (7,575) (17,783)
---------- ---------- ---------- ----------
Income (loss) before
income taxes 5,243 1,505 10,100 (7,908)
Income tax expense (123) (1,159) (632) (1,295)
---------- ---------- ---------- ----------
Income (loss) before
minority interest 5,120 346 9,468 (9,203)
Minority interest (463) (1,357) (745) (1,335)
---------- ---------- ---------- ----------
Net income (loss) $ 4,657 $ (1,011) $ 8,723 $ (10,538)
========== ========== ========== ==========
Net income (loss),
excluding special
items per ordinary
share:
Basic $ 0.00 $ (0.00) $ 0.01 $ (0.01)
Diluted $ 0.00 $ (0.00) $ 0.01 $ (0.01)
Net income (loss),
excluding special
items per ADS:
Basic $ 0.04 $ (0.01) $ 0.08 $ (0.05)
Diluted $ 0.04 $ (0.01) $ 0.08 $ (0.05)
Ordinary shares
(in thousands) used
in per ordinary share
calculation:
Basic 1,076,823 1,954,500 1,076,768 1,951,440
Diluted 1,077,776 1,954,500 1,079,371 1,951,440
ADS (in thousands) used
in per ADS calculation:
Basic 107,682 195,450 107,677 195,144
Diluted 107,778 195,450 107,937 195,144
Key Ratios & Information:
Gross Margin 17.7% 13.6% 16.6% 12.1%
Operating Expenses
as a % of Revenue 10.1% 10.0% 10.1% 10.1%
Operating Margin 7.6% 3.6% 6.5% 2.0%
Depreciation & Amortization,
including amortization
of debt issuance costs $ 37,803 $ 50,612 $ 73,431 $ 98,295
Capital Expenditures $ 67,027 $ 53,392 $ 136,825 $ 70,539
The format presented above is not in accordance with Generally Accepted
Accounting Principles.
See Statement of Reconciliation of GAAP net income (loss) to Non-GAAP net
income (loss) and notes to the reconciliation.
STATS ChipPAC Ltd.
Condensed Consolidated Balance Sheets
(In thousands of U.S. Dollars)
(Unaudited)
December 31, June 30,
2004 2005
---------- ----------
ASSETS
Current assets:
Cash, cash equivalents and marketable securities $ 229,569 $ 203,548
Accounts receivable, net 149,650 162,272
Inventories 54,690 53,881
Other current assets 58,272 55,068
---------- ----------
Total current assets 492,181 474,769
Marketable securities 18,121 18,364
Property, plant and equipment, net 1,035,803 1,011,406
Goodwill and intangible assets 649,428 622,319
Other non-current assets 76,169 69,407
---------- ----------
Total assets $2,271,702 $2,196,265
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and other payables $ 120,211 $ 122,069
Other current liabilities 66,074 87,939
Short-term debts 181,868 35,758
---------- ----------
Total current liabilities 368,153 245,766
Long-term debts and short-term debts expected
to be refinanced 652,946 724,467
Other non-current liabilities 50,362 61,495
---------- ----------
Total liabilities 1,071,461 1,031,728
---------- ----------
Minority interest 40,891 42,718
---------- ----------
Shareholders' equity 1,159,350 1,121,819
---------- ----------
Total liabilities and shareholders' equity $2,271,702 $2,196,265
---------- ----------
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