SOURCE: STATS ChipPAC

July 27, 2005 16:01 ET

STATS ChipPAC Reports Second Quarter Results

SINGAPORE -- (MARKET WIRE) -- July 27, 2005 -- 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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