STATS ChipPAC Reports Third Quarter 2013 Results

SINGAPORE--6 NOVEMBER 2013, UNITED STATES--(Marketwired - Nov 6, 2013) -  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 third quarter 2013.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "Revenue for the third quarter of 2013 increased by 1.1% to $400.8 million from the prior quarter and decreased by 1.8% from third quarter of 2012. We continued to see a bifurcation of the smartphone market with sluggish demand in the high-end segment partially offset by strength in the low-cost segment."

Gross margin for the third quarter of 2013 was 14.2% compared to 14.4% in the prior quarter and 16.0% in the third quarter of 2012. Gross margin for the third quarter of 2013 decreased compared to the third quarter of 2012 mainly due to lower third quarter 2013 revenue. Operating margin¹ for the third quarter of 2013 was 5.3% of revenue compared to 0.9% in the prior quarter and 6.5% in the third quarter of 2012. Operating margin¹ for the second quarter of 2013 included $16.3 million for redemption of the outstanding $241.6 million of 7.5% Senior Notes due 2015. Excluding this redemption expense, operating margin¹ was 5.0%.

Net income for the third quarter of 2013 was $13.3 million compared to net loss of $52.2 million in the prior quarter and net income of $3.2 million in the third quarter of 2012. The net income in the third quarter of 2013 included insurance settlement of $19.6 million as announced in our press release, STATS ChipPAC Provides Update on Insurance Recovery, on 30 September 2013. The net loss in the prior quarter included $36.5 million costs for the planned closure of our Malaysia plant and $16.3 million of redemption expense.

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Our adjusted EBITDA² in the third quarter of 2013, including the insurance settlement of $19.6 million, was $112.1 million or 28.0% of revenue, compared to $92.5 million or 23.3% of revenue in the prior quarter and $121.9 million or 29.9% in the third quarter of 2012. Capital spending in the third quarter of 2013 was $108.7 million or 27.1% of revenue, compared to $105.8 million or 26.7% of revenue in the prior quarter and $159.6 million or 39.1% of revenue in the third quarter of 2012. We ended the third quarter of 2013 with cash, cash equivalents and bank deposits of $194.8 million and debt of $908.5 million compared to $210.6 million and $843.3 million as of the end of fourth quarter of 2012, respectively."

To align costs with current business conditions, the Company will undertake restructuring actions to reduce operating costs in operations and support functions. The Company expects to incur restructuring charges of approximately $3 million to $4 million in the fourth quarter of 2013. These actions are anticipated to generate cost reduction of approximately $6 million to $8 million in financial year 2014.

Outlook
Tan Lay Koon commented, "Based on current visibility, we expect fourth quarter 2013 revenues to be flat to 5% decrease compared to the prior quarter, with adjusted EBITDA² in the range of 21% to 25% of revenue. We expect capital expenditure³ in the fourth quarter of 2013 to be approximately $90 million to $100 million, including approximately $19 million to $21 million for progressive construction of the new factory in Korea."

The outlook for the fourth quarter of 2013 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 29 September 2013 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the fourth quarter of 2013. 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 EBITDA² 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 Thursday, 7 November 2013. 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 22 November 2013 at www.statschippac.com and by telephone at 800-616-2305. The conference ID number to access the conference call and replay is 82192169.

¹ Operating margin is stated before goodwill impairment, equipment impairment and exceptional items which comprised plant closure costs and flood related plan income (expenses).

² 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 announced plan for the 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.

³  Capital expenditure refers to acquisitions of production equipment, asset upgrades and infrastructure investments.

Forward-looking Statements
Certain statements in this release are forward-looking statements, including our outlook for the fourth quarter of 2013, 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 third quarter of 2013 ended on 29 September 2013, while our 13-week first quarter of 2012, 13-week second quarter of 2012, 13-week third quarter of 2012, 14-week fourth quarter of 2012, 13-week first quarter of 2013 and 13-week second quarter of 2013 ended on 25 March 2012, 24 June 2012, 23 September 2012, 30 December 2012, 31 March 2013 and 30 June 2013, 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.

STATS ChipPAC Ltd. Consolidated Income Statement (Unaudited)
				Three Months Ended								Nine Months Ended
				29 September				23 September				29 September				23 September
				2013 $'000				2012 $'000				2013 $'000				2012 $'000
Net revenues					400,775				408,323				1,203,502				1,221,192
Cost of revenues					(343,963	)			(343,145	)			(1,027,345	)			(1,021,675	)
Gross profit					56,812				65,178				176,157				199,517
Operating expenses:
	Selling, general and administrative				24,645				24,997				72,205				75,711
	Research and development				10,855				12,518				35,930				36,744
	Exchange offer and redemption expenses				--				--				15,701				--
	Write-off of debt issuance costs				--				--				2,392				--
	Restructuring charges				--				1,113				--				1,113
		Operating expenses			35,500				38,628				126,228				113,568
Goodwill impairment					--				24,100				--				24,100
Equipment impairment					--				3,819				--				3,819
Total operating expenses					35,500				66,547				126,228				141,487
Operating income (loss) before exceptional items					21,312				(1,369	)			49,929				58,030
	Plant closure costs*				(379	)			--				(36,909	)			--
	Flood related insurance settlement				19,582				26,741				19,582				26,741
	Flood related plan charges **				(3,000	)			(1,908	)			(3,000	)			(9,224	)
Operating income after exceptional items					37,515				23,464				29,602				75,547
Other income (expenses), net:
	Interest income				296				283				976				1,160
	Interest expense				(12,747	)			(14,637	)			(41,541	)			(44,023	)
	Foreign currency exchange gain (loss)				244				613				(80	)			226
	Share of loss of associate				--				(85	)			--				(739	)
	Other non-operating income (expenses), net				(20	)			186				25				326
		Total other expenses, net			(12,227	)			(13,640	)			(40,620	)			(43,050	)
Income (loss) before income taxes					25,288				9,824				(11,018	)			32,497
Income tax expense					(9,615	)			(5,471	)			(18,136	)			(11,953	)
Net income (loss)					15,673				4,353				(29,154	)			20,544
Less: Net income attributable to the non-controlling interest					(2,375	)			(1,184	)			(6,267	)			(5,674	)
Net income (loss) attributable to STATS ChipPAC Ltd.					13,298				3,169				(35,421	)			14,870
Net income (loss) per ordinary share attributable to STATS ChipPAC Ltd.:
	Basic			$	0.01			$	0.00			$	(0.02	)		$	0.01
	Diluted			$	0.01			$	0.00			$	(0.02	)		$	0.01
Ordinary shares (in thousands) used in per ordinary share calculation:
	Basic				2,202,218				2,202,218				2,202,218				2,202,218
	Diluted				2,202,218				2,202,218				2,202,218				2,202,223
Key Ratios and Information:
Gross Margin					14.2	%			16.0	%			14.6	%			16.3	%
Operating Expenses as a % of Revenue					8.9	%			9.5	%			10.5	%			9.3	%
Operating Margin					5.3	%			6.5	%			4.1	%			7.0	%
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs					75,200				70,545				224,130				212,269
Capital Expenditures					108,694				159,618				306,874				354,705

* Plant closure costs relate to the restructuring, plant shutdown and associated charges related to the announced plan for the Malaysia plant.

** Flood related plan charges of $3.0 million in the third quarter of 2013 primarily relate to additional land and building impairment on the Thailand plant. Flood related plan charges of $1.9 million in the third quarter of 2012 and $9.2 million in the first three quarters of 2012 primarily relate to depreciation on suspended production operations and labour and other expenses to support production shift from the Thailand plant to other manufacturing locations of STATS ChipPAC.

STATS ChipPAC Ltd.
Consolidated Statement of Financial Position (Unaudited)
				29 September			30 December
				2013			2012
				$'000			$'000
ASSETS
Current assets:
	Cash and cash equivalents			147,514			170,558
	Short-term bank deposits			35,859			39,601
	Accounts receivable, net			241,230			258,043
	Other receivables #			33,356			20,726
	Inventories			91,996			90,203
	Prepaid expenses and other current assets			22,057			24,559
		Total current assets		572,012			603,690
Non-current assets:
	Long-term bank deposits			11,434			489
	Property, plant and equipment, net			1,313,837			1,242,950
	Intangible assets			35,228			36,361
	Goodwill			381,487			381,487
	Deferred tax assets			210			--
	Prepaid expenses and other non-current assets			3,027			3,299
		Total non-current assets		1,745,223			1,664,586
	Total assets			2,317,235			2,268,276
LIABILITIES
Current liabilities:
	Accounts and other payables			168,791			164,301
	Payables related to property, plant and equipment purchases			46,601			42,746
	Accrued operating expenses			100,486			113,476
	Income taxes payable			14,798			13,155
	Short-term bank borrowings			60,000			50,690
	Short-term amounts due to related parties			79			28
		Total current liabilities		390,755			384,396
Non-current liabilities:
	Long-term borrowings			848,482			792,609
	Deferred tax liabilities			52,963			47,141
	Other non-current liabilities			38,039			21,532
		Total non-current liabilities		939,484			861,282
	Total liabilities			1,330,239			1,245,678
EQUITY
	Share capital			873,666			873,666
	Retained earnings			63,550			98,971
	Other reserves			(2,180	)		(1,828	)
		Equity attributable to equity holders of STATS ChipPAC Ltd.		935,036			970,809
	Non-controlling interest			51,960			51,789
	Total equity			986,996			1,022,598
	Total liabilities and equity			2,317,235			2,268,276

^# Other receivables include insurance settlement receivable of $19.6 million.

STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
		3Q 2013			2Q 2013			3Q 2012
Net Revenues by Product Line
Advanced Packaging ##		44.9	%		45.6	%		41.3	%
Wirebond Packaging		32.4	%		32.0	%		39.0	%
Test		22.7	%		22.4	%		19.7	%
		100.0	%		100.0	%		100.0	%
Net Revenues by End User Market
Communications		65.0	%		70.3	%		70.8	%
Personal Computers		9.1	%		8.5	%		8.6	%
Consumer, Multi-applications and Others		25.9	%		21.2	%		20.6	%
		100.0	%		100.0	%		100.0	%
Net Revenues by Region
United States of America		71.8	%		68.8	%		65.5	%
Asia		19.2	%		19.6	%		18.6	%
Europe		9.0	%		11.6	%		15.9	%
		100.0	%		100.0	%		100.0	%
Number of Testers		947			992			959
Number of Wirebonders		4,107			4,012			4,193
Overall Equipment Utilisation Rate		67	%		66	%		75	%

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