STATS ChipPAC Reports Fourth Quarter and Full Year 2012 Results

SINGAPORE--31 JANUARY 2013, UNITED STATES--(Marketwire - Jan 31, 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 fourth quarter and full year 2012.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "We ended the year 2012 on a strong note with record revenue of $480.4 million in the fourth quarter of 2012, an increase of 17.6% over the prior quarter and 12.6% over the fourth quarter of 2011. Fourth quarter 2012 revenue reflected strong demand in advanced packaging and test services for high end smartphones and tablets and the benefit of an extra week in the quarter. Revenue for the full year 2012 of $1.7 billion was flat to the prior year." 

Gross margin for the fourth quarter of 2012 improved to 18.3% compared to 16.0% in the third quarter of 2012 and 16.9% in the fourth quarter of 2011. Operating margin before goodwill and equipment impairment and flood related income (expenses) for the fourth quarter of 2012, including litigation settlement charges announced on 29 January 2013, decreased to 4.4% of revenue compared to 6.5% in the third quarter of 2012 and 6.6% in the fourth quarter of 2011.

Net income(1) for the fourth quarter of 2012 was $1.7 million compared to net income of $3.2 million in the third quarter of 2012 and net loss of $46.0 million in the fourth quarter of 2011. Net income(1) for the full year 2012, including litigation settlement charges(2), was $16.6 million compared to net loss of $2.5 million in the full year 2011. Excluding the litigation settlement charges(2), the net income for the fourth quarter and full year 2012 were $23.7 million and $38.6 million, respectively.

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Gross margin for the full year 2012 was 16.9% compared to 17.0% in the full year 2011. Our adjusted EBITDA(3) including litigation settlement charges(2), in the fourth quarter and full year 2012 was $100.1 million and $408.9 million or 20.8% and 24.0% of revenue, respectively, compared to $85.2 million and $406.6 million or 20.0% and 23.8% in the fourth quarter and full year 2011, respectively. Excluding the litigation settlement charges(2), adjusted EBITDA in the fourth quarter and full year 2012 was $122.1 million and $430.9 million or 25.4% and 25.3% of revenue, respectively. Capital spending in the fourth quarter and full year 2012 was $55.2 million and $409.9 million or 11.5% and 24.1% of revenue, respectively, compared to $53.2 million and $304.2 million or 12.5% and 17.8% of revenue in the fourth quarter and full year 2011. We ended the fourth quarter of 2012 with cash, cash equivalents and marketable securities of $210.2 million and debt of $843.3 million compared to $238.1 million and $810.3 million as of the end of fourth quarter of 2011, respectively."

Outlook
Tan Lay Koon commented, "Based on current visibility, we expect net revenues in the first quarter of 2013 to be approximately 13% to 19% decrease compared to the prior quarter, with adjusted EBITDA(3) in the range of 20% to 25% of revenue. Compared to the prior quarter, the revenue outlook for first quarter of 2013 is impacted by seasonality and excludes the benefit of an extra week. We expect capital expenditure(4) in the first quarter of 2013 to be approximately $80 million to $100 million."

The outlook for the first quarter of 2013 is based on a fiscal 13-week quarter and 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 twelve months ended 30 December 2012 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the first 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 Friday, 1 February 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 16 February 2013 at www.statschippac.com and by telephone at 800-616-2305. The conference ID number to access the conference call and replay is 86638473.

(1)  The net income in the fourth quarter and the full year 2012 included interest expense of $12.1 million and $45.7 million, respectively, and the net loss in the fourth quarter and full year 2011 included interest expense of $11.2 million and $44.8 million, respectively, from our $600.0 million Senior Notes due 2015 which were issued to fund our capital reduction in 2010.
(2) Litigation settlement charges are recorded based on the discounted value of the scheduled payments.
(3) 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 expenses and write-off of debt issuance cost. 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.
(4)  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 first 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, the amount of recovery from the business interruption insurance claim due to flooding of the Thailand plant; shortages in supply of key components and disruption in supply chain; 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; 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 14-week fourth quarter of 2012 and 53-week year 2012 ended on 30 December 2012, while our 13-week third quarter of 2012, fourth quarter of 2011 and 52-week year 2011 ended on 23 September 2012, 25 December 2011 and 25 December 2011, respectively. Our 13-week first quarter of 2013 will end on 31 March 2013. References to "$" are to the lawful currency of the United States of America.

Commencing with the third quarter of 2012, we are reporting net revenues by the advanced packaging, wirebond packaging and test product lines to align with our business focus. We have similarly disclosed net revenues by advanced packaging, wirebond packaging and test for the comparative quarters. We have previously reported net revenues by packaging-laminate, packaging-leaded, test and wafer level processing and other services.

About STATS ChipPAC Ltd.

STATS ChipPAC Ltd. 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								Twelve Months Ended
				30 December				25 December				30 December				25 December
				2012 $'000				2011 $'000				2012 $'000				2011 $'000
Net revenues					480,357				426,711				1,701,549				1,706,500
Cost of revenues					(392,370	)			(354,683	)			(1,414,045	)			(1,416,833	)
Gross profit					87,987				72,028				287,504				289,667
Operating expenses:
	Selling, general and administrative*				47,247				30,427				122,958				105,541
	Research and development				14,978				13,556				51,722				52,962
	Restructuring charges				4,602				-				5,715				-
	Write-off of debt issuance costs				-				-				-				7,593
		Operating expenses			66,827				43,983				180,395				166,096
Goodwill impairment					-				-				24,100				-
Equipment impairment					-				-				3,819				-
Total operating expenses					66,827				43,983				208,314				166,096
Operating income before flood related income (expenses)					21,160				28,045				79,190				123,571
	Property damage insurance settlement				-				-				26,741				-
	Flood related plan charges **				(837	)			(55,504	)			(10,061	)			(55,504	)
Operating income (loss) after flood related income (expenses)					20,323				(27,459	)			95,870				68,067
Other income (expenses), net:
	Interest income				358				762				1,518				1,912
	Interest expense				(15,806	)			(14,707	)			(59,829	)			(59,772	)
	Foreign currency exchange gain				357				549				583				3,086
	Share of loss of associate				-				(894	)			(739	)			(1,045	)
	Other non-operating income, net				151				28				477				168
		Total other expenses, net			(14,940	)			(14,262	)			(57,990	)			(55,651	)
Income (loss) before income taxes					5,383				(41,721	)			37,880				12,416
Income tax expense					(2,070	)			(3,419	)			(14,023	)			(10,594	)
Net income (loss)					3,313				(45,140	)			23,857				1,822
Less: Net income attributable to the non-controlling interest					(1,620	)			(852	)			(7,294	)			(4,324	)
Net income (loss) attributable to STATS ChipPAC Ltd.					1,693				(45,992	)			16,563				(2,502	)
Net income (loss) per ordinary share attributable to STATS ChipPAC Ltd.:
	Basic			$	0.00			$	(0.02	)		$	0.01			$	(0.00	)
	Diluted			$	0.00			$	(0.02	)		$	0.01			$	(0.00	)
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				2,202,220				2,202,218
Key Ratios and Information:
Gross Margin					18.3	%			16.9	%			16.9	%			17.0	%
Operating Expenses as a % of Revenue					13.9	%			10.3	%			10.6	%			9.7	%
Operating Margin before impairment expenses and flood related income (expenses)					4.4	%			6.6	%			6.3	%			7.3	%
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs					76,938				73,679				289,207				295,498
Capital Expenditures					55,244				53,240				409,949				304,231

* Selling, general and administrative expenses in the fourth quarter and full year 2012 included litigation settlement charges recorded based on the discounted value of the scheduled payments.
** Flood related plan charges of $0.8 million in the fourth quarter of 2012 and $10.1 million in the full year 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)
				30 December			25 December
				2012			2011
				$'000			$'000
ASSETS
Current assets:
	Cash and cash equivalents			170,558			194,811
	Financial assets, available-for-sale			39,601			43,249
	Accounts receivable, net			258,043			223,082
	Other receivables			20,726			13,879
	Inventories			90,203			89,434
	Short-term restricted cash			-			58
	Prepaid expenses and other current assets			24,559			19,071
		Total current assets		603,690			583,584
Non-current assets:
	Property, plant and equipment, net			1,242,950			1,123,061
	Investment in associate			-			8,407
	Intangible assets			36,361			37,179
	Goodwill			381,487			405,587
	Long-term restricted cash			489			410
	Prepaid expenses and other non-current assets			3,299			5,550
		Total non-current assets		1,664,586			1,580,194
Total assets				2,268,276			2,163,778
LIABILITIES
Current liabilities:
	Accounts and other payables			164,301			132,852
	Payables related to property, plant and equipment purchases			42,746			19,864
	Accrued operating expenses			113,476			150,342
	Income taxes payable			13,155			13,344
	Short-term borrowings			50,690			20,000
	Short-term amounts due to related parties			28			28
		Total current liabilities		384,396			336,430
Non-current liabilities:
	Long-term borrowings			792,609			790,339
	Deferred tax liabilities			47,141			49,509
	Other non-current liabilities			21,532			1,805
		Total non-current liabilities		861,282			841,653
Total liabilities				1,245,678			1,178,083
EQUITY
	Share capital			873,666			873,666
	Retained earnings			98,971			82,408
	Other reserves			(1,828	)		(17,981	)
		Equity attributable to equity holders of STATS ChipPAC Ltd.		970,809			938,093
	Non-controlling interest			51,789			47,602
	Total equity			1,022,598			985,695
	Total liabilities and equity			2,268,276			2,163,778

STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
		4Q 2012			3Q 2012			4Q 2011
Net Revenues by Product Line
Advanced Packaging #		51.2	%		41.3	%		42.1	%
Wirebond Packaging		27.9	%		39.0	%		38.4	%
Test		20.9	%		19.7	%		19.5	%
		100.0	%		100.0	%		100.0	%
Net Revenues by End User Market
Communications		75.8	%		70.8	%		67.1	%
Personal Computers		6.0	%		8.6	%		9.4	%
Consumer, Multi-applications and Others		18.2	%		20.6	%		23.5	%
		100.0	%		100.0	%		100.0	%
Net Revenues by Region
United States of America		70.0	%		65.5	%		68.6	%
Asia		15.9	%		18.6	%		18.8	%
Europe		14.1	%		15.9	%		12.6	%
		100.0	%		100.0	%		100.0	%
Number of Testers		950			959			975
Number of Wirebonders		4,352			4,193			4,734
Overall Equipment Utilisation Rate		78	%		75	%		76	%

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