SOURCE: STATS ChipPAC

STATS ChipPAC

November 06, 2013 04:30 ET

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.                  

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