SOURCE: STATS ChipPAC

January 25, 2006 16:00 ET

STATS ChipPAC Reports Fourth Quarter Results

UNITED STATES -- (MARKET WIRE) -- January 25, 2006 -- SINGAPORE -- 1/26/2006

--  Revenue grows 34% year over year to record quarterly level
--  Gross margin improves 510 basis points over prior quarter
--  Company expects sequential revenue growth
    
STATS ChipPAC Ltd. ("STATS ChipPAC" or the "Company") -- (NASDAQ: STTS) and (SGX-ST: STATSChP), a leading independent semiconductor test and advanced packaging service provider, today announced results for the fourth quarter ended December 31, 2005.

Revenue for the three months ended December 31, 2005 increased 34.5% to $357.5 million, compared to $265.8 million in the same quarter a year ago. This represents a sequential increase of 18.6% compared to the prior quarter and better than prior guidance. On a US GAAP basis, net income for the three months ended December 31, 2005 was $16.9 million or $0.08 per diluted ADS, compared to a net loss of $469.0 million or a loss of $2.41 per diluted ADS in the same quarter a year ago. US GAAP results for the fourth quarter of 2005 include $13.9 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 income in the fourth quarter ended December 31, 2005 was $30.8 million or $0.15 per diluted ADS, compared to net income of $6.2 million or $0.03 per diluted ADS in the same quarter a year ago.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "This was another record quarter for us. We achieved continued strong revenue growth that exceeded the high end of our guidance. Importantly, our net income came in above the high end of our prior guidance due to higher sales combined with a favorable product mix and increased operating synergies resulting from our merger. Our revenue momentum was strong across all geographies and all product lines, and was strongest in our advanced packaging and testing business. Of note, our new wafer bumping line in Taiwan operated at full utilization during the quarter. With our 300mm wafer bumping capability, we are now able to offer a total flip chip solution to our customers. This translated into more flip chip packaging and test business in the quarter. Our 3D packaging and test remained growth areas for STATS ChipPAC. Overall, we made good progress in 2005 in establishing a more robust and sustainable business model. We maintained capital expenditure and operating expense discipline throughout the year. In 2005, our customers responded well to our business model platform and value proposition. We saw significant ramps of new products and new customers in the latter half of 2005, which position us well for 2006."

Michael G. Potter, Chief Financial Officer of STATS ChipPAC, said, "We continue to achieve gross margin expansion, with a 510 basis points improvement over the prior quarter in this quarter alone. Gross profit for 4Q 2005 was $78.3 million, compared to $42.2 million in the same quarter a year ago, and $50.7 million in the prior quarter. Gross margin was 21.9% in the fourth quarter of 2005 compared to 15.9% in the same quarter a year ago, and 16.8% in the prior quarter. Operating margin for the fourth quarter of 2005 was 9.9% compared to 3.5% in the prior quarter as we benefited from continued operating leverage. We will continue to practice discipline in capital expenditures while investing in the areas we have identified as strategic growth opportunities. We expect our capital expenditures in 2006 to be comparable to 2005. We will also continue to target improved efficiencies across our operation, as we take advantage of our larger scale and better position in the industry."

Outlook

Tan Lay Koon commented, "We expect that positive momentum in our business will continue into the first quarter and full year of 2006, with revenues improving faster than the semiconductor industry as a whole. Our new customer wins and traction from our new product ramps in 2005 will provide us with increased opportunities in 2006. This upside in revenue growth should flow through to the bottom line as we achieve further leverage in our business model. In terms of guidance for the first quarter of 2006, we expect revenue in the first quarter of 2006 will be approximately 3% to 8% higher than the fourth quarter of 2005, with US GAAP net income per diluted ADS of $0.03 to $0.06, including the impact of $0.02 per ADS for the expensing of options. Non-US GAAP adjusted net income per diluted ADS is expected to be in the range of $0.10 to $0.13 per ADS, including the impact of $0.02 per ADS for the expensing of options. 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 January 26, 2006. This will be 7:00 p.m. on January 25 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 +1-201-689-8560. A replay of the call will be available approximately two hours after the live call through 12:30 p.m. on Thursday, February 2, 2006 in Singapore (11:30 p.m. in New York on Wednesday, February 1, 2006) 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 185173.

About STATS ChipPAC Ltd.

STATS ChipPAC Ltd. ("STATS ChipPAC" or the "Company") -- (NASDAQ: STTS) and (SGX-ST: 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 Securities Trading Limited. 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 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 events or results to differ materially from those described in this release. 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-4 (File No. 333-128061) of STATS ChipPAC and the Registration Statements 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. Since the beginning of fiscal 2005, we employed quarterly and fiscal year reporting periods that end on the Sunday nearest to the calendar month end of that period. Our fourth quarter and fiscal year 2005 ended on December 25, 2005, the Sunday nearest to December 31, 2005, while our fourth quarter and fiscal year 2004 ended on December 31, 2004. For ease of presentation, our fourth quarter and fiscal year 2005 have been presented as ending on December 31, 2005. References to "US GAAP" are to Generally Accepted Accounting Principles as practiced in the United States of America and references to "$" are to the lawful currency of 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         Twelve Months Ended
                           December 31,                December 31,
                        2004          2005          2004          2005
                    ------------  ------------  ------------  ------------
Net revenues        $    265,847  $    357,463  $    769,121  $  1,157,253
Cost of revenues        (223,634)     (279,146)     (643,540)     (968,023)
                    ------------  ------------  ------------  ------------

Gross profit              42,213        78,317       125,581       189,230

Operating expenses:
  Selling, general
   and
   administrative         34,778        35,679        84,965       135,771
  Research and
   development             5,867         7,350        17,637        26,071
  Restructuring
   charges                     -             -             -           830
  Goodwill
   impairment            453,000             -       453,000             -
  Other general
   expenses
   (income), net              73            31          (464)          (20)
                    ------------  ------------  ------------  ------------
      Total
       operating
       expenses          493,718        43,060       555,138       162,652
                    ------------  ------------  ------------  ------------

Operating income
 (loss)                 (451,505)       35,257      (429,557)       26,578

Non-operating income
 (expenses), net         (10,217)       (9,282)      (26,444)      (36,760)
                    ------------  ------------  ------------  ------------

Income (loss) before
 income taxes           (461,722)       25,975      (456,001)      (10,182)
Income tax expense        (5,549)       (6,144)       (7,894)       (9,689)
                    ------------  ------------  ------------  ------------
Income (loss) before
 minority interest      (467,271)       19,831      (463,895)      (19,871)
Minority interest         (1,731)       (2,949)       (3,828)       (6,440)
                    ------------  ------------  ------------  ------------
Net income (loss)   $   (469,002) $     16,882  $   (467,723) $    (26,311)
                    ============  ============  ============  ============
Net income (loss)
 per ordinary share:
  Basic             $      (0.24) $       0.01  $      (0.33) $      (0.01)
  Diluted           $      (0.24) $       0.01  $      (0.33) $      (0.01)

Net income (loss)
 per ADS:
  Basic             $      (2.41) $       0.09  $      (3.27) $      (0.13)
  Diluted           $      (2.41) $       0.08  $      (3.27) $      (0.13)

Ordinary shares
 (in thousands)
 used in per
 ordinary share
 calculation:
  Basic                1,943,189     1,976,012     1,428,954     1,961,950
  Diluted              1,943,189     2,146,792     1,428,954     1,961,950

ADS (in thousands)
 used in per ADS
 calculation:
  Basic                  194,319       197,601       142,895       196,195
  Diluted                194,319       214,679       142,895       196,195

Key Ratios &
 Information:
Gross Margin                15.9%         21.9%         16.3%         16.4%
Operating Expenses
 as a % of Revenue         185.7%         12.0%         72.2%         14.1%
Operating Margin          -169.8%          9.9%        -55.9%          2.3%

Depreciation &
 Amortization,
 including
 amortization of
 debt issuance
 costs              $     61,722  $     66,237  $    188,683  $    256,099
Capital
 Expenditures       $     58,122  $    105,742  $    270,785  $    277,712


                           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     Twelve Months Ended
                                 December 31,            December 31,
                               2004        2005        2004        2005
                            ----------  ----------  ----------  ----------
US GAAP net income (loss)   $ (469,002) $   16,882  $ (467,723) $  (26,311)

Special items
  Merger and integration
   related expenses
    Cost of revenues (1)            58          77         115         283
    Operating expenses (1)       2,350         376       5,284       1,844
    Restructuring charges (2)        -           -           -         830
  Purchase accounting items
    Amortization of
     intangibles - SG&A (3)     12,687      12,687      20,959      50,748
    Amortization of
     intangibles - R&D (3)         800         800       1,119       3,200
    WIP revaluation (4)              -           -         942           -
  Harmonization of
   accounting policies for
   the third quarter ended
   September 30, 2004 (5)            -           -       3,100           -
  Purchase price adjustment
   on tax (6)                    6,042           -       6,042       1,003
  Goodwill impairment (7)      453,000           -     453,000           -
  Write-off of capitalized
   debt issuance cost (8)          266           -         266       1,654
                            ----------  ----------  ----------  ----------

Total special items            475,203      13,940     490,827      59,562
                            ----------  ----------  ----------  ----------

Non-US GAAP adjusted net
 income (loss)              $    6,201  $   30,822  $   23,104  $   33,251
                            ==========  ==========  ==========  ==========

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 twelve months ended
December 31, 2004 and 2005 were:

(1) We incurred direct merger and integration expenses in both our cost of
    revenues and operating expenses in the three and twelve months ended
    December 31, 2004 and 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 $1.5M and $7.6M
    lower in the three and twelve months ended December 31, 2005 and
    $2.7M and $4.3M lower than in the three and twelve months ended
    December 31, 2004 than it would have been without the revaluation due
    to purchase accounting. As this is ongoing and a reflection of the
    assets value used in production, no adjustment was made for this item.
(4) As part of the purchase accounting for the merger, work-in-process
    inventory (WIP) was revalued upwards to reflect profit in inventory at
    the point of merger. This WIP was subsequently sold post merger and
    the revaluation resulted in higher cost of revenues. This higher
    expense is non-cash and arose solely because of purchase accounting.
(5) Post merger, the former STATS entities changed their estimated useful
    lives of production equipment from 5 years for testing equipment and
    7 years for assembly equipment to 8 years for both. This is the same
    estimated useful lives used by former ChipPAC entities. In order to
    make the reported results for the quarter more directly comparable
    with future quarters, the impact of changing the estimated useful
    lives from the beginning of the quarter ended September 30, 2004 is
    included.
(6) Adjustment to original purchase price to benefit acquired tax
    attributes based on increased taxable income during quarters ended
    December 31, 2004 and March 31, 2005 due to foreign currency
    fluctuations.
(7) Goodwill impairment per SFAS No. 142, "Goodwill and Other Intangible
    Assets" during the quarter ended December 31, 2004.
(8) 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 on our capitalized debt issuance costs in the first
    quarter ended March 31, 2005. In the quarter ended December 31, 2004,
    we incurred write-off charges on our capitalized debt issuance costs
    resulting from repurchase of $16.5M of our 1.75% convertible notes due
    2007.


                           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          Twelve Months Ended
                           December 31,                December 31,
                        2004          2005          2004          2005
                    ------------  ------------  ------------  ------------
Net revenues        $    265,847  $    357,463  $    769,121  $  1,157,253
Cost of revenues        (223,576)     (279,069)     (639,383)     (967,740)
                    ------------  ------------  ------------  ------------
Gross profit              42,271        78,394       129,738       189,513

Operating expenses:
  Selling, general
   and
   administrative         19,811        22,678        58,836        83,414
  Research and
   development             4,997         6,488        16,404        22,636
  Other general
   expenses
   (income), net              73            31          (464)          (20)
                    ------------  ------------  ------------  ------------
      Total
       operating
       expenses           24,881        29,197        74,776       106,030
                    ------------  ------------  ------------  ------------

Operating income          17,390        49,197        54,962        83,483

Non-operating income
 (expenses), net          (9,951)       (9,282)      (26,178)      (35,106)
                    ------------  ------------  ------------  ------------

Income before income
 taxes                     7,439        39,915        28,784       48,377
Income tax expense           493        (6,144)       (1,852)      (8,686)
                    ------------  ------------  ------------  ------------
Income before
 minority interest         7,932        33,771        26,932        39,691
Minority interest         (1,731)       (2,949)       (3,828)       (6,440)
                    ------------  ------------  ------------  ------------
Net income          $      6,201  $     30,822  $     23,104  $     33,251
                    ============  ============  ============  ============

Net income,
 excluding special
 items per ordinary
 share:
  Basic             $       0.00  $       0.02  $       0.02  $       0.02
  Diluted           $       0.00  $       0.01  $       0.02  $       0.02

Net income,
 excluding special
 items per ADS:
  Basic             $       0.03  $       0.16  $       0.16  $       0.17
  Diluted           $       0.03  $       0.15  $       0.16  $       0.17

Ordinary shares (in
 thousands) used in
 per ordinary share
 calculation:
  Basic                1,943,189     1,976,012     1,428,954     1,961,950
  Diluted              1,958,151     2,146,792     1,440,930     1,974,786

ADS (in thousands)
 used in per ADS
 calculation:
  Basic                  194,319       197,601       142,895       196,195
  Diluted                195,815       214,679       144,093       197,479

Key Ratios &
 Information:
Gross Margin                15.9%         21.9%         16.9%         16.4%
Operating Expenses
 as a % of Revenue           9.4%          8.1%          9.7%          9.2%
Operating Margin             6.5%         13.8%          7.2%          7.2%

Depreciation &
 Amortization,
 including
 amortization of
 debt issuance
 costs              $     48,235  $     52,750  $    163,505  $    202,151
Capital
 Expenditures       $     58,122  $    105,742  $    270,785  $    277,712

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, December 31,
                                                      2004         2005
                                                  ------------ ------------
ASSETS
Current assets:
   Cash, cash equivalents and marketable
    securities                                    $    229,569 $    242,368
   Accounts receivable, net                            149,650      240,990
   Inventories                                          54,690       79,483
   Other current assets                                 58,272       44,873
                                                  ------------ ------------
      Total current assets                             492,181      607,714

   Marketable securities                                18,121       17,803
   Property, plant and equipment, net                1,035,803    1,107,031
   Goodwill and intangible assets                      649,428      595,405
   Other non-current assets                             76,169       65,429
                                                  ------------ ------------
      Total assets                                $  2,271,702 $  2,393,382
                                                  ------------ ------------

   LIABILITIES AND SHAREHOLDERS' EQUITY
   Current liabilities:
      Accounts and other payables                 $    120,211 $    215,483
      Other current liabilities                         66,074       99,229
      Short-term debts                                 181,868       42,633
                                                  ------------ ------------
         Total current liabilities                     368,153      357,345
      Long-term debts                                  652,946      779,105
      Other non-current liabilities                     50,362       66,611
                                                  ------------ ------------
         Total liabilities                           1,071,461    1,203,061
                                                  ------------ ------------
      Minority interest                                 40,891       48,669
                                                  ------------ ------------
      Shareholders' equity                           1,159,350    1,141,652
                                                  ------------ ------------
         Total liabilities and shareholders'
          equity                                  $  2,271,702 $  2,393,382
                                                  ------------ ------------


                            STATS ChipPAC Ltd.
                     Other Supplemental Information
                               (Unaudited)

                                          4Q 2004    3Q 2005    4Q 2005
                                          -------    -------    -------
Net Revenues by Product Line
Packaging - array                            51.5%      51.3%      53.0%
Packaging - leaded                           18.7%      21.2%      19.6%
Test and other services                      29.8%      27.5%      27.4%
                                          -------    -------    -------
                                            100.0%     100.0%     100.0%
                                          =======    =======    =======

Net Revenues by End User Segment
Communications                               56.3%      56.5%      55.7%
Personal Computers                           23.3%      18.3%      20.9%
Consumer, Multi-applications and Others      20.4%      25.2%      23.4%
                                          -------    -------    -------
                                            100.0%     100.0%     100.0%
                                          =======    =======    =======

Net Revenues by Region
United States of America                     74.1%      75.9%      73.7%
Europe                                        3.6%       2.1%       2.5%
Asia                                         22.3%      22.0%      23.8%
                                          -------    -------    -------
                                            100.0%     100.0%     100.0%
                                          =======    =======    =======

Number of Testers                             874        892        932
Number of Wirebonders                       3,061      3,292      3,532

Overall Equipment Utilization Rate             67%        75%        76%

Contact Information

  • Singapore Contact :
    Lee Ching Ching
    Senior Investor Relations Manager
    Tel : (65) 6824 7705
    Fax : (65) 6720 7826
    email : Email Contact

    US Contacts :
    Drew Davies
    Director, Investor Relations
    Tel : (408) 586 0608
    Fax : (408) 586 0652
    email : Email Contact

    Lisa Lavin
    Marcom Manager
    Tel : (208) 939 3104
    Fax : (208) 939 4817
    email : Email Contact

    The Ruth Group
    David Pasquale
    Executive Vice President
    Tel : (646) 536 7006
    email : Email Contact