STATS ChipPAC Reports Second Quarter 2013 Results

SINGAPORE--06 AUGUST 2013, UNITED STATES--(Marketwired - Aug 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 second quarter 2013.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "We had a disappointing second quarter. Revenue for the second quarter of 2013 decreased by 2.5% to $396.4 million from the prior quarter and by 6.2% from second quarter of 2012. We saw weak demand in wireless communications market targeted at high-end smartphone segment that was partially offset by strength in the low-cost smartphone segment."

Gross margin for the second quarter of 2013 was 14.4% compared to 15.4% in the first quarter of 2013 and 17.0% in the second quarter of 2012 mainly due to the lower revenue compared to the first quarter of 2013 and second quarter of 2012. Operating margin for the second quarter of 2013 was 0.9% and included $16.3 million of expenses related to redemption of the outstanding $241.6 million of 7.5% Senior Notes due 2015. Excluding these redemption expenses, operating margin¹ for the second quarter of 2013 was 5.0% of revenue compared to 6.1% in the first quarter of 2013 and 7.9% in the second quarter of 2012.

Net loss for the second quarter of 2013 was $52.2 million compared to net profit of $3.5 million in the first quarter of 2013 and $8.9 million in the second quarter of 2012. In the second quarter of 2013, the Company recorded plant closure costs of $36.5 million relating to the announced plan for its Malaysia Plant as detailed in its press release, STATS ChipPAC Announces Plan for its Malaysia Plant and Provides Update for the Second Quarter 2013, on 28 June 2013. The plant closure costs included employee severance and benefit costs of $17.8 million, non-cash asset impairment charges of $17.7 million and other associated costs of $1.0 million. Excluding the plant closure costs and the redemption expenses, net profit was $0.6 million.

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Our adjusted EBITDA² in the second quarter of 2013 was $92.5 million or 23.3% of revenue, compared to $96.4 million or 23.7% of revenue in the first quarter of 2013 and $97.3 million or 23.0% in the second quarter of 2012. Capital spending in the second quarter of 2013 was $105.8 million or 26.7% of revenue as we invested in long lead-time equipment for wafer level packaging and test turnkey services, compared to $92.4 million or 22.7% of revenue in the first quarter of 2013 and $96.8 million or 22.9% of revenue in the second quarter of 2012. We ended the second quarter of 2013 with cash, cash equivalents and marketable securities of $184.2 million and debt of $874.7 million compared to $210.2 million and $843.3 million as of the end of fourth quarter of 2012, respectively."

Outlook
Tan Lay Koon commented, "Based on current visibility, we expect third quarter 2013 revenues to be flat to 6% higher compared to the prior quarter, with adjusted EBITDA² in the range of 21% to 24% of revenue. We expect capital expenditure³ in the third quarter of 2013 to be approximately $100 million to $120 million to expand our wafer level packaging capacity in support of anticipated customer demand for advanced packaging and test turnkey services."

The outlook for the third 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 six months ended 30 June 2013 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the third 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 EBITDA 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 Wednesday, 7 August 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 +65-6823-2299. 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 22 August 2013 at www.statschippac.com and by telephone at 800-616-2127. The conference ID number to access the conference call and replay is 3818159.

¹  Operating margin is stated before 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. 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 third 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; the amount of recovery from the business interruption insurance claim due to flooding of the Thailand plant; 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 2013 ended on 30 June 2013, while our 13-week second quarter of 2012, 14-week fourth quarter of 2012 and 13-week first quarter of 2013 ended on 24 June 2012, 30 December 2012 and 31 March 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								Six Months Ended
				30 June				24 June				30 June				24 June
				2013 $'000				2012 $'000				2013 $'000				2012 $'000
Net revenues					396,366				422,684				802,727				812,869
Cost of revenues					(339,455	)			(351,015	)			(683,382	)			(678,530	)
Gross profit					56,911				71,669				119,345				134,339
Operating expenses:
	Selling, general and administrative				24,268				25,893				47,560				50,714
	Research and development				12,700				12,485				25,075				24,226
	Exchange offer and redemption expenses				14,129				--				15,701				--
	Write-off of debt issuance costs				2,176				--				2,392				--
		Total operating expenses			53,273				38,378				90,728				74,940
Operating income before exceptional items					3,638				33,291				28,617				59,399
	Plant closure costs*				(36,530	)			--				(36,530	)			--
	Flood related plan charges				--				(2,720	)			--				(7,316	)
Operating income (loss) after exceptional items					(32,892	)			30,571				(7,913	)			52,083
Other income (expenses), net:
	Interest income				353				436				680				877
	Interest expense				(13,536	)			(14,676	)			(28,794	)			(29,386	)
	Foreign currency exchange loss				(8	)			(605	)			(324	)			(387	)
	Share of loss of associate				--				(196	)			--				(654	)
	Other non-operating income, net				53				92				45				140
		Total other expenses, net			(13,138	)			(14,949	)			(28,393	)			(29,410	)
Income (loss) before income taxes					(46,030	)			15,622				(36,306	)			22,673
Income tax expense					(3,850	)			(4,030	)			(8,521	)			(6,482	)
Net income (loss)					(49,880	)			11,592				(44,827	)			16,191
Less: Net income attributable to the non-controlling interest					(2,368	)			(2,675	)			(3,892	)			(4,490	)
Net income (loss) attributable to STATS ChipPAC Ltd.					(52,248	)			8,917				(48,719	)			11,701
Net income (loss) per ordinary share attributable to STATS ChipPAC Ltd.:
	Basic			$	(0.02	)		$	0.00			$	(0.02	)		$	0.01
	Diluted			$	(0.02	)		$	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				2,202,223				2,202,218				2,202,226
Key Ratios and Information:
Gross Margin					14.4	%			17.0	%			14.9	%			16.5	%
Operating Expenses as a % of Revenue					13.5	%			9.1	%			11.3	%			9.2	%
Operating Margin					0.9	%			7.9	%			3.6	%			7.3	%
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs					76,486				70,846				148,930				141,724
Capital Expenditures					105,774				96,752				198,180				195,087

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

STATS ChipPAC Ltd.
Consolidated Statement of Financial Position
(Unaudited)
				30 June			30 December
				2013			2012
				$'000			$'000
ASSETS
Current assets:
	Cash and cash equivalents			144,767			170,558
	Financial assets, available-for-sale			39,408			39,601
	Accounts receivable, net			203,209			258,043
	Other receivables			15,037			20,726
	Inventories			92,330			90,203
	Prepaid expenses and other current assets			27,967			24,559
		Total current assets		522,718			603,690
Non-current assets:
	Property, plant and equipment, net			1,276,391			1,242,950
	Intangible assets			35,565			36,361
	Goodwill			381,487			381,487
	Long-term restricted cash			442			489
	Deferred tax assets			37			--
	Prepaid expenses and other non-current assets			2,982			3,299
		Total non-current assets		1,696,904			1,664,586
Total assets				2,219,622			2,268,276
LIABILITIES
Current liabilities:
	Accounts and other payables			142,223			164,301
	Payables related to property, plant and equipment purchases			37,778			42,746
	Accrued operating expenses			92,681			113,476
	Income taxes payable			7,045			13,155
	Short-term borrowings			94,759			50,690
	Short-term amounts due to related parties			223			28
		Total current liabilities		374,709			384,396
Non-current liabilities:
	Long-term borrowings			779,940			792,609
	Deferred tax liabilities			53,605			47,141
	Other non-current liabilities			43,579			21,532
		Total non-current liabilities		877,124			861,282
Total liabilities				1,251,833			1,245,678
EQUITY
	Share capital			873,666			873,666
	Retained earnings			50,252			98,971
	Other reserves			(4,842	)		(1,828	)
		Equity attributable to equity holders of STATS ChipPAC Ltd.		919,076			970,809
	Non-controlling interest			48,713			51,789
	Total equity			967,789			1,022,598
	Total liabilities and equity			2,219,622			2,268,276

STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
		2Q 2013			1Q 2013			2Q 2012
Net Revenues by Product Line
Advanced Packaging #		45.6	%		49.0	%		43.4	%
Wirebond Packaging		32.0	%		29.6	%		37.8	%
Test		22.4	%		21.4	%		18.8	%
		100.0	%		100.0	%		100.0	%
Net Revenues by End User Market
Communications		70.3	%		74.1	%		61.9	%
Personal Computers		8.5	%		6.7	%		11.6	%
Consumer, Multi-applications and Others		21.2	%		19.2	%		26.5	%
		100.0	%		100.0	%		100.0	%
Net Revenues by Region
United States of America		68.8	%		68.9	%		67.4	%
Asia		19.6	%		16.4	%		19.1	%
Europe		11.6	%		14.7	%		13.5	%
		100.0	%		100.0	%		100.0	%
Number of Testers		992			963			976
Number of Wirebonders		4,012			3,723			4,252
Overall Equipment Utilisation Rate		66	%		68	%		76	%

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