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 25, December 31, December 25, December 31,
2005 2006 2005 2006
---------- ---------- ----------- -----------
Net revenues $ 357,463 $ 415,982 $ 1,157,253 $ 1,616,933
Cost of revenues (1) (279,146) (332,145) (968,023) (1,290,773)
---------- ---------- ----------- -----------
Gross profit 78,317 83,837 189,230 326,160
Operating expenses:
Selling, general and
administrative (2) 35,710 29,134 135,751 139,466
Research and
development (3) 7,350 7,932 26,071 30,446
Restructuring charges
(4) - - 830 1,938
---------- ---------- ----------- -----------
Total operating
expenses 43,060 37,066 162,652 171,850
---------- ---------- ----------- -----------
Operating income (loss) 35,257 46,771 26,578 154,310
Other income (expenses),
net (5) (9,282) (10,920) (36,760) (41,733)
---------- ---------- ----------- -----------
Income (loss) before
income taxes 25,975 35,851 (10,182) 112,577
Income tax expense (6) (6,144) (5,493) (9,689) (25,759)
---------- ---------- ----------- -----------
Income (loss) before
minority interest 19,831 30,358 (19,871) 86,818
Minority interest (2,949) (2,083) (6,440) (10,010)
---------- ---------- ----------- -----------
Net income (loss) $ 16,882 $ 28,275 $ (26,311) $ 76,808
========== ========== =========== ===========
Net income (loss) per
ordinary share:
Basic $ 0.01 $ 0.01 $ (0.01) $ 0.04
Diluted $ 0.01 $ 0.01 $ (0.01) $ 0.04
Net income (loss) per ADS:
Basic $ 0.09 $ 0.14 $ (0.13) $ 0.39
Diluted $ 0.08 $ 0.13 $ (0.13) $ 0.37
Ordinary shares (in
thousands) used in per
ordinary share
calculation:
Basic 1,976,012 2,000,590 1,961,950 1,991,110
Diluted 2,146,792 2,169,571 1,961,950 2,161,545
ADS (in thousands) used in
per ADS calculation:
Basic 197,601 200,059 196,195 199,111
Diluted 214,679 216,957 196,195 216,154
Key Ratios and
Information:
Gross Margin 21.9% 20.2% 16.4% 20.2%
Operating Expenses as a %
of Revenue 12.0% 8.9% 14.1% 10.6%
Operating Margin 9.9% 11.3% 2.3% 9.6%
Depreciation &
Amortization,
including
Amortization of
Debt Issuance Costs $ 66,237 $ 64,538 $ 256,099 $ 268,689
Capital Expenditures $ 105,742 $ 54,019 $ 277,712 $ 348,495
Share-based compensation
expense included under
SFAS 123(R) were as
follows:
Cost of revenues $ - $ 1,435 $ - $ 5,965
Selling, general and
administrative - 1,259 - 6,143
Research and
development - 332 - 1,580
---------- ---------- ----------- -----------
$ - $ 3,026 $ - $ 13,688
========== ========== =========== ===========
Certain reclassifications have been made to prior period amounts to conform
with classifications used in the current periods.
Listed below are the items included in net income (loss) that management
excludes in computing the non-GAAP financial measures. See Statement of
Reconciliation of US GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
and notes to the reconciliation.
Three Months Ended Twelve Months Ended
----------------------- -------------------------
December 25, December 31, December 25, December 31,
2005 2006 2005 2006
----------- ----------- ------------ ------------
(1) Cost of revenues
Merger and integration
related expenses $ 77 $ - $ 283 $ 517
=========== =========== ============ ============
(2) Selling, general and
administrative
Merger and integration
related expenses $ 314 $ - $ 1,609 $ 645
Purchase accounting
items 12,687 275 50,748 30,061
----------- ----------- ------------ ------------
$ 13,001 $ 275 $ 52,357 $ 30,706
=========== =========== ============ ============
(3) Research and development
Merger and integration
related expenses $ 62 $ - $ 235 $ 238
Purchase accounting
items 800 800 3,200 3,200
----------- ----------- ------------ ------------
$ 862 $ 800 $ 3,435 $ 3,438
=========== =========== ============ ============
(4) Restructuring charges
Severance payment
expenses $ - $ - $ 830 $ 1,938
=========== =========== ============ ============
(5) Other income (expenses), net
Write-off of
capitalized debt
issuance cost $ - $ 500 $ 1,654 $ 500
=========== =========== ============ ============
(6) Income tax expense
Purchase price
adjustment on tax $ - $ 6,602 $ 1,003 $ 11,667
=========== =========== ============ ============
STATS ChipPAC Ltd.
Reconciliation of 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 GAAP basis, STATS ChipPAC uses a non-GAAP conforming measure of net
income (loss), that is GAAP net income (loss) adjusted to exclude certain
costs, expenses or gains, referred to as special items. Non-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-GAAP adjusted measure of net
income (loss) and non-GAAP net income (loss) per share/ADS are among the
primary indicators management use for the following purposes:
-- As a basis for our planning and forecasting future periods;
-- Managing and benchmarking performance internally across our business
and externally against our peers;
-- Determining a portion of bonus compensation for executive officers and
certain other key employees;
-- Calculating return on investment for development programs and growth
initiatives;
-- Comparing performance with internal forecasts and targeted business
models; and
-- Evaluating and valuing potential acquisition candidates.
We believe these non-GAAP measures are useful to investors in enabling them
to perform additional analyses of past, present and future operating
performance and as a supplemental means to evaluate our core operating
results. 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 25, December 31, December 25, December 31,
2005 2006 2005 2006
----------- ----------- ----------- ------------
US GAAP net income (loss) $ 16,882 $ 28,275 $ (26,311) $ 76,808
Special items
Merger and integration
related expenses (1)
Cost of revenues 77 - 283 517
Selling, general and
administrative 314 - 1,609 645
Research and
development 62 - 235 238
Restructuring charges(2) - - 830 1,938
Purchase accounting
items (3)
Selling, general and
administrative 12,687 275 50,748 30,061
Research and
development 800 800 3,200 3,200
Write-off of capitalized
debt issuance cost (4) - 500 1,654 500
Purchase price
adjustment on tax (5) - 6,602 1,003 11,667
----------- ----------- ----------- ------------
Total special items 13,940 8,177 59,562 48,766
----------- ----------- ----------- ------------
Non-GAAP adjusted net
income $ 30,822 $ 36,452 $ 33,251 $ 125,574
=========== =========== =========== ============
US GAAP net income (loss)
per ordinary share
(basic) $ 0.01 $ 0.01 $ (0.01) $ 0.04
Adjustments for special
items detailed above 0.01 0.01 0.03 0.02
----------- ----------- ----------- ------------
Non-GAAP net income per
ordinary share (basic) $ 0.02 $ 0.02 $ 0.02 $ 0.06
=========== =========== =========== ============
US GAAP net income (loss)
per ordinary share
(diluted) $ 0.01 $ 0.01 $ (0.01) $ 0.04
Adjustments for special
items detailed above - 0.01 0.03 0.02
----------- ----------- ----------- ------------
Non-GAAP net income per
ordinary share (diluted) $ 0.01 $ 0.02 $ 0.02 $ 0.06
=========== =========== =========== ============
US GAAP net income (loss)
per ADS (basic) $ 0.09 $ 0.14 $ (0.13) $ 0.39
Adjustments for special
items detailed above 0.07 0.04 0.30 0.24
----------- ----------- ----------- ------------
Non-GAAP net income per
ADS (basic) $ 0.16 $ 0.18 $ 0.17 $ 0.63
=========== =========== =========== ============
US GAAP net income (loss)
per ADS (diluted) $ 0.08 $ 0.13 $ (0.13) $ 0.37
Adjustments for special
items detailed above 0.07 0.04 0.30 0.22
----------- ----------- ----------- ------------
Non-GAAP net income per
ADS (diluted) $ 0.15 $ 0.17 $ 0.17 $ 0.59
=========== =========== =========== ============
Three Months Ended Twelve Months Ended
-------------------- --------------------
December December December December
25, 31, 25, 31,
2005 2006 2005 2006
--------- --------- --------- ---------
US GAAP ordinary shares (in
thousands) used in per
ordinary share calculation
(diluted) 2,146,792 2,169,571 1,961,950 2,161,545
Non-GAAP adjustments - 65,618 12,836 -
--------- --------- --------- ---------
Non-GAAP ordinary shares (in
thousands) used in per
ordinary share calculation
(diluted) 2,146,792 2,235,189 1,974,786 2,161,545
========= ========= ========= =========
US GAAP ADS (in thousands) used
in per ADS calculation
(diluted) 214,679 216,957 196,195 216,154
Non-GAAP adjustments - 6,562 1,284 -
--------- --------- --------- ---------
Non-GAAP ADS (in thousands)
used in per ADS calculation
(diluted) 214,679 223,519 197,479 216,154
========= ========= ========= =========
Key Ratios & Information:
Gross Margin 21.9% 20.2% 16.4% 20.2%
Operating Expenses as a % of
Revenue 8.1% 8.7% 9.2% 8.4%
Operating Margin 13.8% 11.5% 7.2% 11.8%
Depreciation & Amortization,
including $ 52,750 $ 63,463 $ 202,151 $ 235,428
Amortization of Debt
Issuance Costs
Capital Expenditures $ 105,742 $ 54,019 $ 277,712 $ 348,495
Share-based compensation
expense included under SFAS
123(R) were as follows:
Cost of revenues $ - $ 1,435 $ - $ 5,965
Selling, general and
administrative - 1,259 - 6,143
Research and development - 332 - 1,580
--------- --------- --------- ---------
$ - $ 3,026 $ - $ 13,688
========= ========= ========= =========
Non-GAAP financial measures are intended to present the Company's operating
results, excluding special items. The special items excluded for the three
and twelve months ended December 25, 2005 and December 31, 2006 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 25, 2005 and December 31, 2006. 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 in the three months ended March 27, 2005 and by 556 employees in
Singapore during the three months ended September 24, 2006. This reduction
of headcount resulted in a charge of $0.8M and $1.9M for severance payments
in the three months ended March 27, 2005 and September 24, 2006,
respectively.
(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 $1.7M and $6.4M lower in the three and twelve months
ended December 31, 2006 and $1.5M and $7.6M lower in the three and twelve
months ended December 25, 2005 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 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 three months ended
March 27, 2005. In the three months ended December 31, 2006, we incurred
write-off charges on our capitalized debt issuance costs resulting from
repurchase of the entire $50.0M of our 8.0% convertible notes due 2011.
(5) Adjustment to original purchase price to benefit acquired tax
attributes based on increased taxable income during three and twelve months
ended December 25, 2005 and December 31, 2006 due to foreign operating
income results, resulting in the release of ChipPAC acquisition date
valuation allowances, and including currency fluctuations.
STATS ChipPAC Ltd.
Condensed Consolidated Balance Sheets
(In thousands of U.S. Dollars)
December 25, December 31,
2005 2006
============== ==============
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and marketable
securities $ 242,368 $ 216,583
Accounts receivable, net 240,990 243,779
Inventories 79,483 111,614
Other current assets * 44,873 27,845
============== ==============
Total current assets 607,714 599,821
Marketable securities 17,803 15,358
Property, plant and equipment, net 1,107,031 1,192,830
Investment in equity investee - 10,292
Goodwill and intangible assets 595,405 555,358
Other non-current assets * 65,429 84,621
============== ==============
Total assets $ 2,393,382 $ 2,458,280
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and other payables $ 215,483 $ 201,999
Other current liabilities 99,229 104,482
Short-term debts 42,633 65,373
============== ==============
Total current liabilities 357,345 371,854
Long-term debts 779,105 697,523
Other non-current liabilities 66,611 84,807
============== ==============
Total liabilities 1,203,061 1,154,184
============== ==============
Minority interest 48,669 57,946
============== ==============
Shareholders' equity 1,141,652 1,246,150
============== ==============
Total liabilities and shareholders'
equity $ 2,393,382 $ 2,458,280
============== ==============
* Includes $nil and $1.0M of current and non-current restricted cash as of
December 31, 2006 and $0.4M and $2.2M as of December 25, 2005,
respectively.
STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
4Q 2005 3Q 2006 4Q 2006
Net Revenues by Product Line
Packaging - array 53.0% 54.3% 57.8%
Packaging - leaded 19.6% 19.3% 17.1%
Test and other services 27.4% 26.4% 25.1%
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Net Revenues by End User Market
Communications 55.7% 56.9% 57.0%
Personal Computers 20.9% 18.0% 17.5%
Consumer, Multi-applications and Others 23.4% 25.1% 25.5%
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Net Revenues by Region
United States of America 73.7% 73.0% 74.3%
Europe 2.5% 2.6% 3.2%
Asia 23.8% 24.4% 22.5%
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
Number of Testers 932 1,002 985
Number of Wirebonders 3,532 3,801 3,812
Overall Equipment Utilization Rate 76% 75% 75%
Contact Information: Singapore Contact: Bryan Ong Investor Relations Tel: (65) 6824 7477 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