STATS ChipPAC Reports Second Quarter 2012 Results

SINGAPORE--26/07/2012, UNITED STATES--(Marketwire - Jul 26, 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 second quarter 2012.

Tan Lay Koon, President and Chief Executive Officer of STATS ChipPAC, said, "Revenue for the second quarter of 2012 increased by 8.3% to $422.7 million from the prior quarter and decreased by 1.0% from the second quarter of 2011. Our second quarter revenue reflected growth from seasonal demand tempered by macroeconomic concerns. We saw higher demand in storage and strong demand for our advanced packaging services driven by demand for smartphones and tablets. Our customers however remained cautious and continued to tightly manage inventory due to the deteriorating macroeconomic conditions."

Net income for the second quarter of 2012 was $8.9 million, or $0.00 of net income per diluted ordinary share compared to net income of $19.2 million or $0.01 of net income per diluted ordinary share in the second quarter of 2011 and $2.8 million or $0.00 of net income per diluted ordinary share in the first quarter of 2012. The net income in the second quarter and first half of 2012 included interest expense of $11.2 million and $22.4 million, respectively, from our offering of $600.0 million Senior Notes due 2015 to fund our capital reduction in 2010, and flood related plan charges of $2.7 million and $7.3 million, respectively, arising from the announced plan for our Thailand plant operations. The net income in the first quarter of 2011 included debt issuance cost write-off of $7.6 million from the voluntary repayment of our senior credit facility of $234.5 million. 

John Lau, Chief Financial Officer of STATS ChipPAC, said, "Gross profit for the second quarter of 2012 was $71.7 million or 17.0% of revenue, compared to $62.7 million or 16.1% in the first quarter of 2012 and $73.7 million or 17.2% in the second quarter of 2011. Operating margin before flood related plan charges for the second quarter of 2012 was 7.9% of revenue compared to 6.7% in the first quarter of 2012 and 8.3% in the second quarter of 2011. Our adjusted EBITDA¹ in the second quarter of 2012 was 23.0% of revenue, compared to 23.0% in the first quarter of 2012 and 26.3% in the second quarter of 2011. Capital spending in the second quarter of 2012 was $96.8 million or 22.9% of revenue compared to $98.3 million or 25.2% in the first quarter of 2012 and $94.1 million or 22.0% in the second quarter of 2011 mainly for investments in advanced packaging and turnkey test and included $9.3 million for the new factory building in Singapore. We ended the second quarter of 2012 with cash, cash equivalents and marketable securities of $192.7 million and debt of $814.5 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 third quarter of 2012 to be flat compared to the prior quarter, with adjusted EBITDA¹ in the range of 21% to 23% of revenue. We expect capital expenditure² in the third quarter of 2012 to be approximately $170 million to $190 million and includes approximately $20 million for the new factory building in Singapore. The capital intensity in the third quarter is unique as we stage capacity in advance to support anticipated demand later this year for advanced packaging and test turnkey services for customers in the high end smartphone market."

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 six months ended 24 June 2012 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the third 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 8:00 a.m. in Singapore on Friday, 27 July 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 11 August 2012 at www.statschippac.com and by telephone at 800-616-3021. The conference ID number to access the conference call and replay is 93314053.

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, 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 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 second quarter of 2012 ended on 24 June 2012, while our first quarter of 2012, first quarter of 2011, second quarter of 2011 and fiscal year 2011 ended on 25 March 2012, 27 March 2011, 26 June 2011 and 25 December 2011, respectively. References to "$" are to the lawful currency of the United States of America.

Overall equipment utilisation for the first quarter of 2012 and second quarter of 2012 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								Six Months Ended
				24 June				26 June				24 June				26 June
				2012 $'000				2011 $'000				2012 $'000				2011 $'000
Net revenues					422,684				426,995				812,869				836,375
Cost of revenues					(351,015	)			(353,342	)			(678,530	)			(693,964	)
Gross profit					71,669				73,653				134,339				142,411
Operating expenses:
	Selling, general and administrative				25,893				24,879				50,714				50,431
	Research and development				12,485				13,393				24,226				25,697
	Write-off of debt issuance costs				-				-				-				7,593
		Total operating expenses			38,378				38,272				74,940				83,721
Operating income before flood related charges					33,291				35,381				59,399				58,690
	Flood related plan charges *				2,720				-				7,316				-
Operating income after flood related charges					30,571				35,381				52,083				58,690
Other income (expenses), net:
	Interest income				436				365				877				754
	Interest expense				(14,676	)			(15,089	)			(29,386	)			(30,154	)
	Foreign currency exchange gain (loss)				(605	)			4,182				(387	)			3,613
	Share of profit (loss) of associate				(196	)			235				(654	)			325
	Other non-operating income (expenses), net				92				34				140				118
		Total other expenses, net			(14,949	)			(10,273	)			(29,410	)			(25,344	)
Income before income taxes					15,622				25,108				22,673				33,346
Income tax expense					(4,030	)			(4,904	)			(6,482	)			(5,283	)
Net income					11,592				20,204				16,191				28,063
Less: Net income attributable to the non-controlling interest					(2,675	)			(977	)			(4,490	)			(2,564	)
Net income attributable to STATS ChipPAC Ltd.					8,917				19,227				11,701				25,499
Net income per ordinary share attributable to STATS ChipPAC Ltd.:
	Basic			$	0.00			$	0.01			$	0.01			$	0.01
	Diluted			$	0.00			$	0.01			$	0.01			$	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				2,202,223				2,202,232				2,202,226				2,202,233
Key Ratios and Information:
Gross Margin					17.0	%			17.2	%			16.5	%			17.0	%
Operating Expenses as a % of Revenue					9.1	%			8.9	%			9.2	%			10.0	%
Operating Margin					7.9	%			8.3	%			7.3	%			7.0	%
Depreciation & Amortisation, including Amortisation of Debt Issuance Costs					70,846				74,274				141,724				147,806
Capital Expenditures					96,752				94,118				195,087				180,662

* Flood related plan charges of $2.7 million in the second quarter of 2012 and $7.3 million in the first half 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)
				24 June			25 December
				2012			2011
				$'000			$'000
ASSETS
Current assets:
	Cash and cash equivalents			144,970			194,811
	Financial assets, available-for-sale			47,741			43,249
	Accounts receivable, net			253,437			223,082
	Other receivables			16,488			13,879
	Inventories			89,311			89,434
	Short-term restricted cash			382			58
	Prepaid expenses and other current assets			28,891			19,071
		Total current assets		581,220			583,584
Non-current assets:
	Property, plant and equipment, net			1,180,778			1,123,061
	Investment in associate			7,850			8,407
	Intangible assets			36,792			37,179
	Goodwill			405,587			405,587
	Long-term restricted cash			476			410
	Prepaid expenses and other non-current assets			3,647			5,550
		Total non-current assets		1,635,130			1,580,194
Total assets				2,216,350			2,163,778
LIABILITIES
Current liabilities:
	Accounts and other payables			168,144			132,852
	Payables related to property, plant and equipment purchases			34,566			19,864
	Accrued operating expenses			130,144			150,342
	Income taxes payable			7,517			13,344
	Short-term borrowings			23,000			20,000
	Short-term amounts due to related parties			30			28
		Total current liabilities		363,401			336,430
Non-current liabilities:
	Long-term borrowings			791,453			790,339
	Deferred tax liabilities			51,262			49,509
	Other non-current liabilities			1,323			1,805
		Total non-current liabilities		844,038			841,653
Total liabilities				1,207,439			1,178,083
EQUITY
	Share capital			873,666			873,666
	Retained earnings			94,109			82,408
	Other reserves			(6,484	)		(17,981	)
		Equity attributable to equity holders of STATS ChipPAC Ltd.		961,291			938,093
	Non-controlling interest			47,620			47,602
	Total equity			1,008,911			985,695
	Total liabilities and equity			2,216,350			2,163,778

STATS ChipPAC Ltd.
Other Supplemental Information
(Unaudited)
		2Q 2012			1Q 2012			2Q 2011
Net Revenues by Product Line
Packaging - laminate		55.1	%		56.9	%		52.8	%
Packaging - leaded		14.0	%		11.6	%		17.5	%
Test		18.8	%		21.0	%		19.5	%
Wafer level processing and other services		12.1	%		10.5	%		10.2	%
		100.0	%		100.0	%		100.0	%
Net Revenues by End User Market
Communications		61.9	%		63.5	%		55.9	%
Personal Computers		11.6	%		10.3	%		14.5	%
Consumer, Multi-applications and Others		26.5	%		26.2	%		29.6	%
		100.0	%		100.0	%		100.0	%
Net Revenues by Region
United States of America		67.4	%		69.5	%		65.2	%
Asia		19.1	%		20.7	%		23.5	%
Europe		13.5	%		9.8	%		11.3	%
		100.0	%		100.0	%		100.0	%
Number of Testers		976			967			913
Number of Wirebonders		4,252			4,598			4,957
Overall Equipment Utilisation Rate		76	%		71	%		82	%

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