STATS ChipPAC Reports Third Quarter 2011 Results

SINGAPORE--10/28/2011, UNITED STATES--(Marketwire - Oct 28, 2011) - ChipPAC Ltd. ("STATS ChipPAC" or the "Company") (SGX-ST: STATSChP), a leading semiconductor test and advanced packaging service provider, today announced results for the third quarter 2011.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "Revenue for the third quarter of 2011 increased by 3.8% to $443.4 million over the prior quarter and increased by 2.6% over the third quarter of 2010, at the high end of our guidance. Our third quarter revenue reflected higher demand in the communications market offset by weakness in the consumer market. Our customers were more cautious as they continued to aggressively manage inventory in view of the uncertain macroeconomic outlook."

Net income for the third quarter of 2011 was $18.0 million or $0.01 of net income per diluted ordinary share compared to net income of $19.2 million or $0.01 of net income per diluted ordinary share in the second quarter of 2011 and net income of $24.2 million or $0.01 of net income per diluted ordinary share in the third quarter of 2010. The net income in the third quarter and first three quarters of 2011 included interest expense of $11.2 million and $33.6 million, respectively, from our offering of $600.0 million Senior Notes due 2015 to fund our capital reduction.

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Our third quarter gross margin was 17.0% compared to 17.2% in the second quarter of 2011 and 20.2% in the third quarter of 2010 mainly due to unfavorable product mix and higher material costs. Operating margin for third quarter of 2011 was 8.3% of revenue compared to 8.3% in the second quarter of 2011 and 10.6% in the third quarter of 2010. Our adjusted EBITDA¹ in the third quarter of 2011 was 24.3% of revenue compared to 26.3% in the second quarter of 2011 and 27.0% in the third quarter of 2010. Capital spending in the third quarter of 2011 was $70.3 million or 15.9% of revenue compared to $94.1 million or 22.0% of revenue in the second quarter of 2011 and $56.4 million or 13.1% of revenue in the third quarter of 2010. We ended the third quarter of 2011 with cash, cash equivalents and marketable securities of $212.4 million and debt of $820.2 million compared to $301.7 million and $844.2 million as of the end of fourth quarter of 2010, respectively."

Outlook
Tan Lay Koon commented, "Based on current visibility and current assessment of the ongoing flood situation in Thailand, we expect net revenues in the fourth quarter of 2011 to be single digit decrease from prior quarter, with adjusted EBITDA¹ in the range of 20% to 25% of revenue. We expect capital expenditure² in the fourth quarter of 2011 to be approximately $50 million to $60 million. Solely for this guidance purpose, we have assumed that our Thailand Plant operations will continue to be suspended until the beginning of December 2011."

The outlook 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 nine months ended 25 September 2011 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the fourth quarter of 2011. 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 EBITDA as a percentage of revenue.

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 amortization, restructuring charges, share-based compensation, goodwill and equipment impairment, tender offer expenses and write-off of debt issuance cost. 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 and asset upgrades.

Investor Conference Call / Live Audio Webcast Details
A conference call has been scheduled for 8:00 a.m. in Singapore on Monday, 31 October 2011. 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 +65-6723-9381. 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 14 November 2011 at www.statschippac.com and by telephone at 800-616-3021. The conference ID number to access the conference call and replay is 12952553.

Forward-looking Statements
Certain statements in this release are forward-looking statements, including our outlook for the fourth quarter of 2011, 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, but are not limited to, uncertainty surrounding the ongoing impact of the flood in Thailand and its impact to STATS ChipPAC (Thailand) Ltd. ("Thailand Plant"), shortages in supply of key components and disruption in supply chain; 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; 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 are generally thirteen weeks in length. Our third quarter of 2011 ended on 25 September 2011, while our first quarter of 2011, second quarter of 2011, third quarter of 2010 and fiscal year 2010 ended on 27 March 2011, 26 June 2011, 27 June 2010 and 26 December 2010, respectively. References to "$" are to the lawful currency of the United States of America.

Commencing with the second quarter of 2011, we are reporting the overall equipment utilization for the second and third quarter of 2011 based on total equipment operating capacity adjusted for set-up and maintenance time. We have similarly disclosed overall equipment utilization for the third quarter of 2010. We have previously reported overall equipment utilization based on total equipment operating capacity.

About STATS ChipPAC Ltd.
STATS ChipPAC Ltd. 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 in 10 different countries. 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.

STATS ChipPAC Ltd.
Consolidated Income Statement
(Unaudited)
				Three Months Ended								Nine Months Ended
				25 September				26 September				25 September				26 September
				2011				2010				2011				2010
				$'000				$'000				$'000				$'000
Net revenues					443,414				432,208				1,279,789				1,255,475
Cost of revenues					(368,186	)			(345,097	)			(1,062,150	)			(997,093	)
Gross profit					75,228				87,111				217,639				258,382
Operating expenses:
	Selling, general and administrative				24,683				25,576				75,114				73,549
	Research and development				13,709				11,245				39,406				35,037
	Tender offer expense				-				3,107				-				3,107
	Restructuring charges				-				1,421				-				1,421
	Write-off of debt issuance costs				-				-				7,593				-
		Total operating expenses			38,392				41,349				122,113				113,114
Operating income					36,836				45,762				95,526				145,268
Other income (expenses), net:
	Interest income				396				573				1,150				1,473
	Interest expense				(14,911	)			(12,081	)			(45,065	)			(26,999	)
	Foreign currency exchange gain (loss)				(1,076	)			(221	)			2,537				(2,265	)
	Share of profit (loss) of associate				(476	)			414				(151	)			789
	Other non-operating income (expense), net				22				(1,506	)			140				(1,355	)
		Total other expenses, net			(16,045	)			(12,821	)			(41,389	)			(28,357	)
Income before income taxes					20,791				32,941				54,137				116,911
Income tax expense					(1,892	)			(6,725	)			(7,175	)			(22,590	)
Net income					18,899				26,216				46,962				94,321
Less: Net income attributable to the non-controlling interest					(908	)			(2,031	)			(3,472	)			(5,354	)
Net income attributable to STATS ChipPAC Ltd.					17,991				24,185				43,490				88,967
Net income per ordinary share attributable to STATS ChipPAC Ltd.:
	Basic			$	0.01			$	0.01			$	0.02			$	0.04
	Diluted			$	0.01			$	0.01			$	0.02			$	0.04
Ordinary shares (in thousands) used in per ordinary share calculation:
	Basic				2,202,218				2,202,218				2,202,218				2,202,218
	Diluted				2,202,229				2,202,274				2,202,232				2,202,251
Key Ratios and Information:
Gross Margin					17.0	%			20.2	%			17.0	%			20.6	%
Operating Expenses as a % of Revenue					8.7	%			9.6	%			9.5	%			9.0	%
Operating Margin					8.3	%			10.6	%			7.5	%			11.6	%
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs					74,013				71,739				221,819				208,919
Capital Expenditures					70,329				56,428				250,991				223,465

STATS ChipPAC Ltd.
Consolidated Statement of Financial Position (Unaudited)
			25 September		26 December
			2011		2010
			$'000		$'000
ASSETS
Current assets:
	Cash and cash equivalents		168,576		196,395
	Financial assets, available-for-sale		43,827		88,642
	Accounts receivable, net		261,975		230,777
	Other receivables		16,435		9,435
	Inventories		105,477		69,791
	Prepaid expenses and other current assets		23,498		17,227
	Short-term amount due from related party		-		17,105
		Total current assets	619,788		629,372
Non-current assets:
	Financial assets, available-for-sale		-		16,646
	Property, plant and equipment, net		1,157,914		1,123,809
	Investment in associate		8,842		8,104
	Intangible assets		38,395		38,857
	Goodwill		430,134		430,134
	Long-term restricted cash		416		416
	Prepaid expenses and other non-current assets		3,666		2,578
		Total non-current assets	1,639,367		1,620,544
	Total assets		2,259,155		2,249,916
LIABILITIES
Current liabilities:
	Accounts and other payables		164,479		151,473
	Payables related to property, plant and equipment purchases		38,185		42,734
	Accrued operating expenses		138,931		113,584
	Income taxes payable		3,222		12,385
	Short-term borrowings		30,449		61,768
	Short-term amounts due to related parties		39		22
		Total current liabilities	375,305		381,966
Non-current liabilities:
	Long-term borrowings		789,798		782,434
	Deferred tax liabilities		56,098		44,335
	Other non-current liabilities		11,561		13,467
		Total non-current liabilities	857,457		840,236
	Total liabilities		1,232,762		1,222,202
EQUITY
	Share capital		873,666		873,666
	Retained earnings		128,400		84,910
	Other reserves		(23,055	)	(278	)
		Equity attributable to equity holders of STATS ChipPAC Ltd.	979,011		958,298
	Non-controlling interest		47,382		69,416
	Total equity		1,026,393		1,027,714
	Total liabilities and equity		2,259,155		2,249,916

STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
		3Q 2011			2Q 2011			3Q 2010
Net Revenues by Product Line
Packaging - laminate		54.4	%		52.8	%		56.5	%
Packaging - leaded		17.2	%		17.5	%		15.2	%
Test		19.5	%		19.5	%		20.0	%
Wafer level processing and other services		8.9	%		10.2	%		8.3	%
		100.0	%		100.0	%		100.0	%
Net Revenues by End User Market
Communications		61.4	%		55.9	%		53.9	%
Personal Computers		14.3	%		14.5	%		13.0	%
Consumer, Multi-applications and Others		24.3	%		29.6	%		33.1	%
		100.0	%		100.0	%		100.0	%
Net Revenues by Region
United States of America		66.3	%		65.2	%		64.7	%
Asia		22.3	%		23.5	%		26.7	%
Europe		11.4	%		11.3	%		8.6	%
		100.0	%		100.0	%		100.0	%
Number of Testers		945			913			957
Number of Wirebonders		5,045			4,957			4,458
Overall Equipment Utilisation Rate		81	%		82	%		84	%