STATS ChipPAC Reports Fourth Quarter and Full Year 2011 Results

SINGAPORE--1/2/2012, UNITED STATES--(Marketwire - Jan 31, 2012) - STATS ChipPAC Ltd. ("STATS ChipPAC" or the "Company") (SGX-ST: STATSChP), a leading semiconductor test and advanced packaging service provider, today announced results for the fourth quarter and full year 2011.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "We achieved record revenue for the full year 2011 of $1,706.5 million, an increase of 1.7% over the prior year. Revenue from the communications market grew for four consecutive quarters in 2011 to a record $1,011.8 million, an increase of 12.2% over the prior year. Revenue for the fourth quarter of 2011 increased by 1.0% to $426.7 million compared to the same period in 2010. Despite a revenue reduction of 7.6% for the fourth quarter of 2011 compared to the prior quarter resulting from the suspension of our Thailand operation due to flood, our revenue for the fourth quarter of 2011 only decreased by 3.8% over prior quarter as we benefited from strong demand for our services in the communications market."

Our fourth quarter gross margin was 16.9% compared to 17.0% in the third quarter of 2011 and 19.3% in the fourth quarter of 2010 mainly due to higher material costs, rise in labour costs arising from appreciation of Asian currencies against United States dollar, and unfavorable mix. Operating margin before flood related charges for the fourth quarter of 2011 was 6.6% of revenue compared to 8.3% in the third quarter of 2011 and 9.9% in the fourth quarter of 2010.

Net loss for the full year 2011 was $2.5 million, or $0.00 of net loss per diluted ordinary share compared to net income of $108.0 million or $0.05 of net income per diluted ordinary share in the full year of 2010. Net loss for the fourth quarter of 2011 was $46.0 million, or $0.02 of net loss per diluted ordinary share compared to net income of $19.0 million or $0.01 of net income per diluted ordinary share in the fourth quarter of 2010. The net loss for the fourth quarter and the full year 2011 included flood related charges totalling $55.5 million comprising goodwill impairment ($24.5 million), plant and equipment impairment ($16.3 million), and other related charges ($14.7 million) arising from the flood in Thailand which adversely affected our Thailand plant operations as detailed in our press release, STATS ChipPAC Announces Plan for its Thailand Plant, on 1 February 2012. Excluding these charges, net income for the fourth quarter and full year 2011 were $9.5 million and $53.0 million compared to $19.0 million and $108.0 million, respectively, in the fourth quarter and full year 2010. The net loss and net income in the fourth quarter and full year of 2011 also included interest expense of $11.2 million and $44.8 million, respectively, from our offering of $600.0 million Senior Notes due 2015 to fund our capital reduction in 2010.

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Gross profit for the fourth quarter and full year 2011 was $72.0 million and $289.7 million, or 16.9% and 17.0% of revenue, compared to $81.5 million and $339.9 million, or 19.3% and 20.3% in the fourth quarter and full year of 2010, respectively. Our adjusted EBITDA(1) in the fourth quarter of 2011 was 20.0% of revenue, which included impact of the non-impairment flood related charges of $14.7 million or 3.4% of revenue, compared to 24.3% in the third quarter of 2011 and 26.7% in the fourth quarter of 2010. Capital spending in the fourth quarter and full year of 2011 was $53.2 million and $304.2 million or 12.5% and 17.8% of revenue, respectively, compared to $53.2 million and $276.7 million or 12.6% and 16.5% of revenue in the fourth quarter and full year of 2010, respectively. We ended the fourth quarter of 2011 with cash, cash equivalents and marketable securities of $238.1 million and debt of $810.3 million compared to $301.7 million and $844.2 million as of the end of fourth quarter of 2010, respectively."

Outlook
Tan Lay Koon commented, "Based on current visibility, we expect net revenues in the first quarter of 2012 to be mid single digit decrease from prior quarter, with adjusted EBITDA(1) in the range of 20% to 24% of revenue. We expect capital expenditure(2) in the first quarter of 2012 to be approximately $95 million to $105 million."

The outlook 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 25 December 2011 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the first quarter of 2012. 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 9:00 a.m. in Singapore on Wednesday, 1 February 2012. 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 15 February 2012 at www.statschippac.com and by telephone at 800-616-3021. The conference ID number to access the conference call and replay is 42305876.

(1) 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.

(2) Capital expenditure refers to acquisitions of production equipment and asset upgrades.

Forward-looking Statements
Certain statements in this release are forward-looking statements, including our outlook for the first quarter of 2012, that involve a number of risks and uncertainties that could cause actual events or 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 timing and impact of the expected closure of the Thailand Plant as well as the estimated associated cost for the closure; the amount of the property damage and business interruption insurance claim due to flooding of the Thailand Plant; the ability to shift production to other manufacturing locations, 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 are generally thirteen weeks in length. Our fourth quarter and fiscal year of 2011 ended on 25 December 2011, while our fourth quarter and fiscal year of 2010 ended on 26 December 2010. References to "$" are to the lawful currency of the United States of America.

Commencing with the second quarter of 2011, we are reporting the overall equipment utilisation for the third and fourth quarter of 2011 based on total equipment operating capacity adjusted for set-up and maintenance time. We have similarly disclosed overall equipment utilisation for the fourth quarter of 2010. We have previously reported overall equipment utilisation based on total equipment operating capacity. Overall equipment utilisation for the fourth quarter 2011 is adjusted for the suspension of the Thailand Plant capacity.

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 in 10 different countries. 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
				25 December				26 December				25 December				26 December
				2011				2010				2011				2010
				$'000				$'000				$'000				$'000
Net revenues					426,711				422,359				1,706,500				1,677,834
Cost of revenues					(354,683	)			(340,857	)			(1,416,833	)			(1,337,950	)
Gross profit					72,028				81,502				289,667				339,884
Operating expenses:
	Selling, general and administrative				30,427				25,195				105,541				98,744
	Research and development				13,556				12,425				52,962				47,462
	Write-off of debt issuance costs				-				1,970				7,593				1,970
	Tender offer expense				-				-				-				3,107
	Restructuring charges				-				-				-				1,421
		Total operating expenses			43,983				39,590				166,096				152,704
Operating income before flood related charges					28,045				41,912				123,571				187,180
	Flood related charges*				55,504				-				55,504				-
Operating income (loss) after flood related charges					(27,459	)			41,912				68,067				187,180
Other income (expenses), net:
	Interest income				762				855				1,912				2,328
	Interest expense				(14,707	)			(16,461	)			(59,772	)			(43,460	)
	Foreign currency exchange gain (loss)				549				(323	)			3,086				(2,587	)
	Share of profit (loss) of associate				(894	)			(324	)			(1,045	)			465
	Other non-operating income (expense), net				28				(245	)			168				(1,601	)
		Total other expenses, net			(14,262	)			(16,498	)			(55,651	)			(44,855	)
Income (loss) before income taxes					(41,721	)			25,414				12,416				142,325
Income tax expense					(3,419	)			(4,387	)			(10,594	)			(26,977	)
Net income (loss)					(45,140	)			21,027				1,822				115,348
Less: Net income (loss) attributable to the non-controlling interest					(852	)			(2,016	)			(4,324	)			(7,370	)
Net income (loss) attributable to STATS ChipPAC Ltd.					(45,992	)			19,011				(2,502	)			107,978
Net income (loss) per ordinary share attributable to STATS ChipPAC Ltd.:
	Basic			$	(0.02	)		$	0.01			$	(0.00	)		$	0.05
	Diluted			$	(0.02	)		$	0.01			$	(0.00	)		$	0.05
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				2,202,238				2,202,218				2,202,234
Key Ratios and Information:
Gross Margin					16.9	%			19.3	%			17.0	%			20.3	%
Operating Expenses as a % of Revenue					10.3	%			9.4	%			9.7	%			9.1	%
Operating Margin before flood related charges					6.6	%			9.9	%			7.3	%			11.2	%
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs					73,679				73,348				295,498				282,267
Capital Expenditures					53,240				53,211				304,231				276,676

*Flood related charges comprise goodwill impairment of $24.5 million, plant and equipment impairment of $16.3 million, and other related charges of $14.7 million.

STATS ChipPAC Ltd.
Consolidated Statement of Financial Position (Unaudited)
				25 December			26 December
				2011			2010
				$'000			$'000
ASSETS
Current assets:
	Cash and cash equivalents			194,811			196,395
	Financial assets, available-for-sale			43,249			88,642
	Accounts receivable, net			223,082			230,777
	Other receivables			13,879			9,435
	Inventories			89,434			69,791
	Prepaid expenses and other current assets			19,129			17,227
	Short-term amount due from related party			-			17,105
		Total current assets		583,584			629,372
Non-current assets:
	Financial assets, available-for-sale			-			16,646
	Property, plant and equipment, net			1,123,061			1,123,809
	Investment in associate			8,407			8,104
	Intangible assets			37,179			38,857
	Goodwill			405,587			430,134
	Long-term restricted cash			410			416
	Prepaid expenses and other non-current assets			5,550			2,578
		Total non-current assets		1,580,194			1,620,544
	Total assets			2,163,778			2,249,916
LIABILITIES
Current liabilities:
	Accounts and other payables			132,852			151,473
	Payables related to property, plant and equipment purchases			19,864			42,734
	Accrued operating expenses			150,342			113,584
	Income taxes payable			13,344			12,385
	Short-term borrowings			20,000			61,768
	Short-term amounts due to related parties			28			22
		Total current liabilities		336,430			381,966
Non-current liabilities:
	Long-term borrowings			790,339			782,434
	Deferred tax liabilities			49,509			44,335
	Other non-current liabilities			1,805			13,467
		Total non-current liabilities		841,653			840,236
	Total liabilities			1,178,083			1,222,202
EQUITY
	Share capital			873,666			873,666
	Retained earnings			82,408			84,910
	Other reserves			(17,981	)		(278	)
		Equity attributable to equity holders of STATS ChipPAC Ltd.		938,093			958,298
	Non-controlling interest			47,602			69,416
	Total equity			985,695			1,027,714
	Total liabilities and equity			2,163,778			2,249,916

STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
		4Q 2011			3Q 2011			4Q 2010
Net Revenues by Product Line
Packaging - laminate		59.7	%		54.4	%		57.9	%
Packaging - leaded		10.7	%		17.2	%		12.4	%
Test		19.4	%		19.5	%		20.3	%
Wafer level processing and other services		10.2	%		8.9	%		9.4	%
		100.0	%		100.0	%		100.0	%
Net Revenues by End User Market
Communications		67.1	%		61.4	%		57.4	%
Personal Computers		9.4	%		14.3	%		11.6	%
Consumer, Multi-applications and Others		23.5	%		24.3	%		31.0	%
		100.0	%		100.0	%		100.0	%
Net Revenues by Region
United States of America		68.6	%		66.3	%		63.0	%
Asia		18.8	%		22.3	%		26.7	%
Europe		12.6	%		11.4	%		10.3	%
		100.0	%		100.0	%		100.0	%
Number of Testers		975			945			942
Number of Wirebonders		4,734			5,045			4,460
Overall Equipment Utilisation Rate		76	%		81	%		79	%