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