SOURCE: STATS ChipPAC

STATS ChipPAC

August 08, 2014 05:30 ET

STATS ChipPAC Reports Second Quarter 2014 Results

SINGAPORE -- 08 AUGUST 2014, UNITED STATES--(Marketwired - Aug 8, 2014) - STATS ChipPAC Ltd. ("STATS ChipPAC" or the "Company") (SGX-ST: STATSChP) (SGX: S24), a leading provider of advanced semiconductor packaging and test services, today announced results for the second quarter 2014.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "Revenue for the second quarter of 2014 increased by 12.2% to $409.9 million from prior quarter and increased by 3.4% from the second quarter of 2013, at the high end of our guidance. We saw strength in the mobile communications segment, driven by multiple important production ramp for the emerging market wireless chipsets and next-generation LTE processors. In addition, we saw general seasonal market rebound in the computing and consumer segments."

Operating margin for the second quarter of 2014 improved to 3.4% of revenue, compared to 0.7% in the prior quarter and 0.9% in second quarter of 2013. Net loss for the second quarter of 2014 was $4.2 million compared to net loss of $15.8 million in the prior quarter and $52.2 million in second quarter of 2013, which included plant closure costs of $36.5 million. Adjusted EBITDA(1) in the second quarter of 2014 was $88.1 million or 21.5% of revenue, compared to $78.4 million or 21.4% of revenue in the prior quarter and $92.5 million and 23.3% in the second quarter of 2013.

Dennis Chia, Chief Financial Officer of STATS ChipPAC, said, "Gross margin for the second quarter of 2014 was higher at 12.2% compared to 10.0% in the prior quarter as we improved revenue sequentially. Gross margin this quarter included higher production ramp-up cost associated with our expansion for several key advanced packaging programs. This quarter, we expanded our advanced flip chip, wafer level and turnkey test capacity to support expected higher demand from our customers in the mobile communications segment. Excluding the new factory construction in Korea, capital expenditure for the second quarter of 2014 was $153.0 million or 37.3% of revenue. Overall capital spending in the second quarter of 2014 was $195.3 million or 47.7% of revenue compared to $113.6 million or 31.1% of revenue in the first quarter of 2014. Cash, cash equivalents and bank deposits were $185.3 million compared to $176.9 million and debt was $1,064.6 million compared to $1,011.9 million at the end of second quarter of 2014 and first quarter of 2014, respectively."

Outlook
Tan Lay Koon commented, "Based on current visibility, we expect third quarter 2014 revenues to increase 2% to 8% compared to the prior quarter, with adjusted EBITDA1 in the range of 20% to 25% of revenue. We expect capital expenditure(2) in the third quarter of 2014 to be approximately $175 million to $205 million, including approximately $75 million to $95 million for progressive construction of the new factory in Korea."

The outlook for the third quarter of 2014 is subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those disclosed in the outlook statements. These statements are based on our management's beliefs and assumptions, which involve judgments about future trends, events and conditions, all of which are subject to change and many of which are beyond our control. Please refer to our Financial Statements for the three and six months ended 29 June 2014 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the third quarter of 2014. Investors should consider these assumptions and make their own assessment of the future performance of STATS ChipPAC and note that there may not be a direct correlation between the net income of the Company with adjusted EBITDA1 as a percentage of revenue.

Investor Conference Call / Live Audio Webcast Details
A conference call has been scheduled for 8:00 a.m. in Singapore on Tuesday, 12 August 2014. During the call, time will be set-aside for analysts and investors to ask questions of executive officers.

The call may be accessed by dialing +65-6823-2299. A live audio webcast of the conference call will be available on STATS ChipPAC's website at www.statschippac.com. A replay of the call will be available 2 hours after the live call through 27 August 2014 at www.statschippac.com and by telephone at 800-616-2127. The conference ID number to access the conference call and replay is 1797158.

Forward-looking Statements
Certain statements in this release are forward-looking statements, including our outlook for the third quarter of 2014, that involve a number of risks and uncertainties that could cause actual results to differ materially from those described in this release. Factors that could cause actual results to differ include, but are not limited to, general business and economic conditions and the state of the semiconductor industry; prevailing market conditions; demand for end-use applications products such as communications equipment, consumer and multi-applications and personal computers; decisions by customers to discontinue outsourcing of test and packaging services; level of competition; our reliance on a small group of principal customers; our continued success in technological innovations; pricing pressures, including declines in average selling prices; intellectual property rights disputes and litigation; our ability to control operating expenses; our substantial level of indebtedness and access to credit markets; potential impairment charges; availability of financing; changes in our product mix; our capacity utilisation; delays in acquiring or installing new equipment; limitations imposed by our financing arrangements which may limit our ability to maintain and grow our business; returns from research and development investments; changes in customer order patterns; customer credit risks; disruption of our operations; shortages in supply of key components and disruption in supply chain; inability to consolidate our Malaysia operations into our China operations and uncertainty as to whether such plan will achieve the expected objectives and results; loss of key management or other personnel; defects or malfunctions in our testing equipment or packages; rescheduling or cancelling of customer orders; adverse tax and other financial consequences if the taxing authorities do not agree with our interpretation of the applicable tax laws; classification of our Company as a passive foreign investment company; our ability to develop and protect our intellectual property; changes in environmental laws and regulations; exchange rate fluctuations; regulatory approvals for further investments in our subsidiaries; majority ownership by Temasek Holdings (Private) Limited ("Temasek") that may result in conflicting interests with Temasek and our affiliates; unsuccessful acquisitions and investments in other companies and businesses; labour union problems in South Korea; uncertainties of conducting business in China and changes in laws, currency policy and political instability in other countries in Asia; natural calamities and disasters, including outbreaks of epidemics and communicable diseases; the continued trading and listing of our ordinary shares on the Singapore Exchange Securities Trading Limited ("SGX-ST"). You should not unduly rely on such statements. We do not intend, and do not assume any obligation, to update any forward-looking statements to reflect subsequent events or circumstances.

Basis of Preparation of Results

The financial statements included in this release have been prepared in accordance with the Singapore Financial Reporting Standards ("FRS").

Our 52-53 week fiscal year ends on the Sunday nearest and prior to 31 December. Our fiscal quarters end on a Sunday and our 13-week second quarter of 2014 ended on 29 June 2014, while our 13-week second quarter of 2013, 13-week fourth quarter of 2013 and 13-week first quarter of 2014 ended on 30 June 2013, 29 December 2013 and 30 March 2014, respectively. References to "$" are to the lawful currency of the United States of America.

About STATS ChipPAC Ltd.
STATS ChipPAC Ltd. (SGX-ST Code: S24) is a leading service provider of semiconductor packaging design, assembly, test and distribution solutions in diverse end market applications including communications, digital consumer and computing. With global headquarters in Singapore, STATS ChipPAC has design, research and development, manufacturing or customer support offices throughout Asia, the United States and Europe. STATS ChipPAC is listed on the SGX-ST. Further information is available at www.statschippac.com. Information contained in this website does not constitute a part of this release.

1 Adjusted EBITDA is not required by, or presented in accordance with, Singapore Financial Reporting Standards ("FRS"). We define adjusted EBITDA as net income attributable to STATS ChipPAC Ltd. plus income tax expense, interest expense, net, depreciation and amortisation, restructuring charges, share-based compensation, goodwill and equipment impairment, tender offer, debt exchange or debt redemption expenses and write-off of debt issuance costs. Adjusted EBITDA excludes the plant closure costs related to our Malaysia plant and our restructuring actions. We present adjusted EBITDA as a supplemental measure of our performance. Management believes the non-FRS financial measure is useful to investors in enabling them to perform additional analysis.

2 Capital expenditure refers to acquisitions of production equipment, asset upgrades and infrastructure investments.

       
STATS ChipPAC Ltd.
Consolidated Income Statement
(Unaudited)

 
             
    Three Months Ended     Six Months Ended  
    29 June     30 June     29 June     30 June  
    2014 $'000     2013 $'000     2014 $'000     2013 $'000  
Net revenues   409,912     396,366     775,388     802,727  
Cost of revenues   (359,862 )   (339,455 )   (688,818 )   (683,382 )
Gross profit   50,050     56,911     86,570     119,345  
                         
Operating expenses:                        
  Selling, general and administrative   25,128     24,268     49,250     47,560  
  Research and development   10,751     12,700     20,683     25,075  
  Exchange offer and redemption expenses   -     14,129     -     15,701  
  Write-off of debt issuance costs   -     2,176     -     2,392  
    Operating expenses   35,879     53,273     69,933     90,728  
                         
Equipment impairment   -     -     2,261     -  
Total operating expenses   35,879     53,273     72,194     90,728  
Operating income before exceptional item   14,171     3,638     14,376     28,617  
  Plant closure costs   -     (36,530 )   -     (36,530 )
Operating income (loss) after exceptional item   14,171     (32,892 )   14,376     (7,913 )
                         
Other income (expenses), net:                        
  Interest income   388     353     950     680  
  Interest expense   (12,676 )   (13,536 )   (25,051 )   (28,794 )
  Foreign currency exchange loss   (347 )   (8 )   (557 )   (324 )
  Other non-operating income, net   152     53     161     45  
    Total other expenses, net   (12,483 )   (13,138 )   (24,497 )   (28,393 )
                         
Income (loss) before income taxes   1,688     (46,030 )   (10,121 )   (36,306 )
Income tax expense   (3,273 )   (3,850 )   (6,211 )   (8,521 )
Net loss   (1,585 )   (49,880 )   (16,332 )   (44,827 )
Less: Net income attributable to the non-controlling interest   (2,597 )   (2,368 )   (3,657 )   (3,892 )
Net loss attributable to STATS ChipPAC Ltd.   (4,182 )   (52,248 )   (19,989 )   (48,719 )
                         
Net loss per ordinary share attributable to STATS ChipPAC Ltd.:                        
  Basic   $(0.00 )   $(0.02 )   $(0.01 )   $(0.02 )
  Diluted   $(0.00 )   $(0.02 )   $(0.01 )   $(0.02 )
                         
Ordinary shares (in thousands) used in per ordinary share calculation:                        
  Basic and Diluted   2,202,218     2,202,218     2,202,218     2,202,218  
                         
Key Ratios and Information:                        
Gross Margin   12.2 %   14.4 %   11.2 %   14.9 %
Operating Expenses as a % of Revenue   8.8 %   13.5 %   9.0 %   11.3 %
Operating Margin   3.4 %   0.9 %   2.2 %   3.6 %
                         
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs   78,468     76,486     157,420     148,930  
Capital Expenditures   195,345     105,774     308,965     198,180  
                         
                         
                         
STATS ChipPAC Ltd.  
Consolidated Statement of Financial Position
(Unaudited)
 
             
    29 June     29 December  
    2014     2013  
    $'000     $'000  
ASSETS            
Current assets:            
  Cash and cash equivalents   126,892     129,136  
  Short-term bank deposits   57,978     42,042  
  Accounts receivable, net   235,945     238,441  
  Other receivables   30,711     15,239  
  Inventories   80,049     71,055  
  Prepaid expenses and other current assets   22,364     18,970  
    Total current assets   553,939     514,883  
Non-current assets:            
  Long-term bank deposits   446     11,604  
  Property, plant and equipment, net   1,586,897     1,431,247  
  Intangible assets   34,799     35,117  
  Goodwill   381,487     381,487  
  Deferred tax assets   223     186  
  Prepaid expenses and other non-current assets   3,010     3,146  
    Total non-current assets   2,006,862     1,862,787  
Total assets   2,560,801     2,377,670  
             
LIABILITIES            
Current liabilities:            
  Accounts and other payables   162,369     138,004  
  Payables related to property, plant and equipment purchases   172,121     141,998  
  Accrued operating expenses   129,824     124,640  
  Income taxes payable   11,838     18,207  
  Short-term bank borrowings   100,000     37,947  
  Short-term amounts due to related parties   216     100  
    Total current liabilities   576,368     460,896  
Non-current liabilities:            
  Long-term borrowings   964,644     874,281  
  Deferred tax liabilities   50,253     47,476  
  Other non-current liabilities   21,751     24,228  
    Total non-current liabilities   1,036,648     945,985  
  Total liabilities   1,613,016     1,406,881  
             
EQUITY            
  Share capital   873,666     873,666  
  Retained earnings   31,489     51,478  
  Other reserves   (8,881 )   (7,712 )
    Equity attributable to equity holders of STATS ChipPAC Ltd.   896,274     917,432  
  Non-controlling interest   51,511     53,357  
  Total equity   947,785     970,789  
  Total liabilities and equity   2,560,801     2,377,670  
               
               
 
 
STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
             
             
    2Q 2014   1Q 2014   2Q 2013
Net Revenues by Product Line            
Advanced Packaging ##   49.2%   49.1%   45.6%
Wirebond Packaging   30.0%   29.7%   32.0%
Test   20.8%   21.2%   22.4%
    100.0%   100.0%   100.0%
Net Revenues by End User Market            
Communications   67.5%   67.2%   70.3%
Personal Computers   8.5%   8.6%   8.5%
Consumer, Multi-applications and Others   24.0%   24.2%   21.2%
    100.0%   100.0%   100.0%
Net Revenues by Region            
United States of America   63.0%   65.1%   68.8%
Asia   28.8%   24.6%   19.6%
Europe   8.2%   10.3%   11.6%
    100.0%   100.0%   100.0%
             
Number of Testers   943   948   992
Number of Wirebonders   4,164   4,118   4,012
             
             

## Advanced Packaging includes flip-chip and wafer level packaging.

Contact Information

  • Investor Relations Contact:
    Tham Kah Locke
    Vice President of Corporate Finance
    Tel: (65) 6824 7788
    Fax: (65) 6720 7826
    email: Email Contact

    Media Contact:
    Lisa Lavin
    Deputy Director of Marketing Communications
    Tel: (208) 867-9859
    email: Email Contact