STATS ChipPAC Ltd. Condensed Consolidated Statements of Operations (In thousands of U.S. Dollars, except share and per share data) (Unaudited) Three Months Ended Nine Months Ended ------------------------ ------------------------ September September September September 25, 24, 25, 24, 2005 2006 2005 2006 ----------- ----------- ----------- ----------- Net revenues $ 301,298 $ 397,109 $ 799,790 $ 1,200,951 Cost of revenues (1) (250,588) (318,185) (688,877) (958,628) ----------- ----------- ----------- ----------- Gross profit 50,710 78,924 110,913 242,323 Operating expenses: Selling, general and administrative (2) 34,034 30,707 100,041 110,332 Research and development (3) 6,243 7,632 18,721 22,514 Restructuring charges (4) - 1,938 830 1,938 ----------- ----------- ----------- ----------- Total operating expenses 40,277 40,277 119,592 134,784 ----------- ----------- ----------- ----------- Operating income (loss) 10,433 38,647 (8,679) 107,539 Other income (expenses), net (5) (8,041) (10,808) (27,478) (30,813) ----------- ----------- ----------- ----------- Income (loss) before income taxes 2,392 27,839 (36,157) 76,726 Income tax expense (6) (1,247) (7,137) (3,545) (20,266) ----------- ----------- ----------- ----------- Income (loss) before minority interest 1,145 20,702 (39,702) 56,460 Minority interest (2,156) (2,205) (3,491) (7,927) ----------- ----------- ----------- ----------- Net income (loss) $ (1,011) $ 18,497 $ (43,193) $ 48,533 =========== =========== =========== =========== Net income (loss) per ordinary share: Basic $ (0.00) $ 0.01 $ (0.02) $ 0.02 Diluted $ (0.00) $ 0.01 $ (0.02) $ 0.02 Net income (loss) per ADS: Basic $ (0.01) $ 0.09 $ (0.22) $ 0.24 Diluted $ (0.01) $ 0.09 $ (0.22) $ 0.23 Ordinary shares (in thousands) used in per ordinary share calculation: Basic 1,968,330 1,993,778 1,957,175 1,987,707 Diluted 1,968,330 2,161,980 1,957,175 2,158,626 ADS (in thousands) used in per ADS calculation: Basic 196,833 199,378 195,717 198,771 Diluted 196,833 216,198 195,717 215,863 Key Ratios and Information: Gross Margin 16.8% 19.9% 13.9% 20.2% Operating Expenses as a % of Revenue 13.3% 10.2% 15.0% 11.2% Operating Margin 3.5% 9.7% -1.1% 9.0% Depreciation & Amortization, including Amortization of Debt Issuance Costs $ 64,593 $ 62,595 $ 189,862 $ 204,151 Capital Expenditures $ 101,431 $ 49,169 $ 171,970 $ 294,476 Share-based compensation expense included under SFAS 123(R) were as follows: Cost of revenues $ - $ 1,387 $ - $ 4,530 Selling, general and administrative - 1,651 - 4,884 Research and development - 396 - 1,248 ----------- ----------- ----------- ----------- $ - $ 3,434 $ - $ 10,662 =========== =========== =========== =========== Certain reclassifications have been made to prior period amounts to conform with classifications used in the current periods. Listed below are the items included in net income (loss) that management excludes in computing the non-GAAP financial measures. See Statement of Reconciliation of US GAAP Net Income (Loss) to Non-GAAP Net Income (Loss) and notes to the reconciliation. Three Months Ended Nine Months Ended --------------------- --------------------- September September September September 25, 24, 25, 24, 2005 2006 2005 2006 ---------- ---------- ---------- ---------- (1) Cost of revenues Merger and integration related expenses $ 76 $ 262 $ 206 $ 517 ========== ========== ========== ========== (2) Selling, general and administrative Merger and integration related expenses $ 361 $ 84 $ 1,295 $ 645 Purchase accounting items 12,687 4,412 38,061 29,786 ---------- ---------- ---------- ---------- $ 13,048 $ 4,496 $ 39,356 $ 30,431 ========== ========== ========== ========== (3) Research and development Merger and integration related expenses $ 54 $ 23 $ 173 $ 238 Purchase accounting items 800 800 2,400 2,400 ---------- ---------- ---------- ---------- $ 854 $ 823 $ 2,573 $ 2,638 ========== ========== ========== ========== (4) Restructuring charges Severance payment expenses $ - $ 1,938 $ 830 $ 1,938 ========== ========== ========== ========== (5) Other income (expenses), net Write-off of capitalized debt issuance cost $ - $ - $ 1,654 $ - ========== ========== ========== ========== (6) Income tax expense Purchase price adjustment on tax $ - $ 1,315 $ 1,003 $ 5,065 ========== ========== ========== ========== 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-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-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-GAAP adjusted measure of net income (loss) and non-GAAP net income (loss) per ordinary share/ADS are among the primary indicators management use for the following purposes: - As a basis for our planning and forecasting future periods; - Managing and benchmarking performance internally across our business and externally against our peers; - Determining a portion of bonus compensation for executive officers and certain other key employees; - Calculating return on investment for development programs and growth initiatives; - Comparing performance with internal forecasts and targeted business models; and - Evaluating and valuing potential acquisition candidates. We believe these non-GAAP measures are useful to investors in enabling them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate our core operating results. 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 Nine Months Ended --------------------- --------------------- September September September September 25, 24, 25, 24, 2005 2006 2005 2006 --------- ---------- --------- ---------- US GAAP net income (loss) $ (1,011) $ 18,497 $ (43,193) $ 48,533 Special items Merger and integration related expenses (1) Cost of revenues 76 262 206 517 Selling, general and administrative 361 84 1,295 645 Research and development 54 23 173 238 Restructuring charges (2) - 1,938 830 1,938 Purchase accounting items (3) Selling, general and administrative 12,687 4,412 38,061 29,786 Research and development 800 800 2,400 2,400 Write-off of capitalized debt issuance cost (4) - - 1,654 - Purchase price adjustment on tax (5) - 1,315 1,003 5,065 --------- ---------- --------- ---------- Total special items 13,978 8,834 45,622 40,589 --------- ---------- --------- ---------- Non-GAAP adjusted net income $ 12,967 $ 27,331 $ 2,429 $ 89,122 ========= ========== ========= ========== US GAAP net income (loss) per ordinary share (basic) $ (0.00) $ 0.01 $ (0.02) $ 0.02 Adjustments for special items detailed above 0.01 0.00 0.02 0.02 --------- ---------- --------- ---------- Non-GAAP net income per ordinary share (basic) $ 0.01 $ 0.01 $ 0.00 $ 0.04 ========= ========== ========= ========== US GAAP net income (loss) per ordinary share (diluted) $ (0.00) $ 0.01 $ (0.02) $ 0.02 Adjustments for special items detailed above 0.01 0.00 0.02 0.02 --------- ---------- --------- ---------- Non-GAAP net income per ordinary share (diluted) $ 0.01 $ 0.01 $ 0.00 $ 0.04 ========= ========== ========= ========== US GAAP net income (loss) per ADS (basic) $ (0.01) $ 0.09 $ (0.22) $ 0.24 Adjustments for special items detailed above 0.08 0.05 0.23 0.21 --------- ---------- --------- ---------- Non-GAAP net income per ADS (basic) $ 0.07 $ 0.14 $ 0.01 $ 0.45 ========= ========== ========= ========== US GAAP net income (loss) per ADS (diluted) $ (0.01) $ 0.09 $ (0.22) $ 0.23 Adjustments for special items detailed above 0.07 0.04 0.23 0.19 --------- ---------- --------- ---------- Non-GAAP net income per ADS (diluted) $ 0.06 $ 0.13 $ 0.01 $ 0.42 ========= ========== ========= ========== Three Months Ended Nine Months Ended --------------------- --------------------- September September September September 25, 24, 25, 24, 2005 2006 2005 2006 --------- ---------- --------- ---------- US GAAP ordinary shares (in thousands) used in per ordinary share calculation (diluted) 1,968,330 2,161,980 1,957,175 2,158,626 Non-GAAP adjustments 174,420 - 14,145 43,674 --------- ---------- --------- ---------- Non-GAAP ordinary shares (in thousands) used in per ordinary share calculation (diluted) 2,142,750 2,161,980 1,971,320 2,202,300 ========= ========== ========= ========== US GAAP ADS (in thousands) used in per ADS calculation (diluted) 196,833 216,198 195,717 215,863 Non-GAAP adjustments 17,442 - 1,415 4,367 --------- ---------- --------- ---------- Non-GAAP ADS (in thousands) used in per ADS calculation (diluted) 214,275 216,198 197,132 220,230 ========= ========== ========= ========== Key Ratios and Information: Gross Margin 16.9% 19.9% 13.9% 20.2% Operating Expenses as a % of Revenue 8.8% 8.3% 9.6% 8.3% Operating Margin 8.1% 11.6% 4.3% 11.9% Depreciation & Amortization, including Amortization of Debt Issuance Costs $ 51,106 $ 57,383 $ 149,901 $ 171,965 Capital Expenditures $ 101,431 $ 49,169 $ 171,970 $ 294,476 Share-based compensation expense included under SFAS 123(R) were as follows: Cost of revenues $ - $ 1,387 $ - $ 4,530 Selling, general and administrative - 1,651 - 4,884 Research and development - 396 - 1,248 --------- ---------- --------- ---------- $ - $ 3,434 $ - $ 10,662 ========= ========== ========= ========== Non-GAAP financial measures are intended to present the Company's operating results, excluding special items. The special items excluded for the three and nine months ended September 25, 2005 and September 24, 2006 were: (1) We incurred direct merger and integration expenses in both our cost of revenues and operating expenses in the three and nine months ended September 25, 2005 and September 24, 2006. 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 in the three months ended March 27, 2005 and by 556 employees in Singapore during the three months ended September 24, 2006. This reduction of headcount resulted in a charge of $0.8M and $1.9M for severance payments in the three months ended March 27, 2005 and September 24, 2006, respectively. (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 $1.5M and $4.7M lower in the three and nine months ended September 24, 2006 and $1.6M and $6.1M lower in the three and nine months ended September 25, 2005 than it would have been without the revaluation due to purchase accounting. As this is ongoing and a reflection of the assets value 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 on our capitalized debt issuance costs in the three months ended March 27, 2005. (5) Adjustment to original purchase price to benefit acquired tax attributes based on increased taxable income during three and nine months ended September 25, 2005 and September 24, 2006 due to expected foreign operating income results, including currency fluctuations, resulting in the release of ChipPAC acquisition date valuation allowances. STATS ChipPAC Ltd. Condensed Consolidated Balance Sheets (In thousands of U.S. Dollars) December September 25, 24, 2005 2006 =========== =========== (Unaudited) ASSETS Current assets: Cash, cash equivalents and marketable securities $ 242,368 $ 206,835 Accounts receivable, net 240,990 253,983 Inventories 79,483 108,772 Other current assets * 44,873 43,318 =========== =========== Total current assets 607,714 612,908 Marketable securities 17,803 15,268 Property, plant and equipment, net 1,107,031 1,201,185 Investment in equity investee - 10,257 Goodwill and intangible assets 595,405 564,903 Other non-current assets * 65,429 72,142 =========== =========== Total assets $ 2,393,382 $ 2,476,663 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts and other payables $ 215,483 $ 189,712 Other current liabilities 99,229 113,097 Short-term debts 42,633 77,950 =========== =========== Total current liabilities 357,345 380,759 Long-term debts 779,105 751,889 Other non-current liabilities 66,611 75,104 =========== =========== Total liabilities 1,203,061 1,207,752 =========== =========== Minority interest 48,669 55,337 =========== =========== Shareholders' equity 1,141,652 1,213,574 =========== =========== Total liabilities and shareholders' equity $ 2,393,382 $ 2,476,663 =========== =========== * Include $nil and $1.1M of current and non-current restricted cash as of September 24, 2006 and $0.4M and $2.2M as of December 25, 2005, respectively. STATS ChipPAC Ltd. Other Supplemental Information (Unaudited) 3Q 2Q 3Q 2005 2006 2006 Net Revenues by Product Line Packaging - array 51.3% 55.3% 54.3% Packaging - leaded 21.2% 18.4% 19.3% Test and other services 27.5% 26.3% 26.4% ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== ===== Net Revenues by End User Market Communications 56.5% 57.3% 56.9% Personal Computers 18.3% 19.1% 18.0% Consumer, Multi-applications and Others 25.2% 23.6% 25.1% ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== ===== Net Revenues by Region United States of America 75.9% 72.3% 73.0% Europe 2.0% 2.9% 2.6% Asia 22.1% 24.8% 24.4% ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== ===== Number of Testers 892 996 1,002 Number of Wirebonders 3,292 3,801 3,801 Overall Equipment Utilization Rate 75% 77% 75%
Contact Information: Singapore Contact: Bryan Ong Investor Relations Tel: (65) 6824 7477 Fax: (65) 6720 7826 email: Email Contact US Contacts: Drew Davies Director, Investor Relations Tel: (408) 586 0608 Fax: (408) 586 0652 email: Email Contact Lisa Lavin Marcom Manager Tel: (208) 939 3104 Fax: (208) 939 4817 email: Email Contact The Ruth Group David Pasquale Executive Vice President Tel: (646) 536 7006 email: Email Contact