Jul 1 2013
STATS ChipPAC Ltd. (“STATS ChipPAC” or the “Company”), a leading provider of advanced semiconductor packaging and test services, today announced the plan to consolidate its leaded wirebond packaging and related test operations in Kuala Lumpur, Malaysia into its Qingpu, Shanghai, China operations over several phases in 2013 and 2014, and the closure of its Malaysia plant by the end of 2014.
Tan Lay Koon, President and Chief Executive Officer, STATS ChipPAC, said, “The announced plan will consolidate our manufacturing footprint into larger scale plants and achieve a more competitive cost structure over the longer term.”
The Company currently expects to incur total charges of approximately $39 million, comprising employee severance and benefit costs of approximately $19 million, non-cash asset impairment charges of approximately $18 million and other associated costs of approximately $2 million. Of the total charges, approximately $37 million and $2 million will be incurred in the second quarter of 2013 and in 2014, respectively.
The plant closure will affect approximately 1,100 of our employees in Malaysia, representing approximately 11% of our total global workforce. The Company will ensure that fair severance benefits and outplacement support will be provided to affected employees.
The consolidation into China will position the Company to better engage its customers with broader product offerings and at a more competitive cost structure for its leaded wirebond solutions.
Outlook
STATS ChipPAC provided its outlook for the second quarter 2013 on 24 April 2013 when the Company expected net revenues to increase approximately 2% to 6% compared to the prior quarter, with adjusted EBITDA in the range of 21% to 25% of revenue. The Company now expects net revenues for the second quarter of 2013 to decrease approximately 3% to 4% compared to the prior quarter, with adjusted EBITDA in the range of 21% to 23% of revenue. We expect capital expenditure in the second quarter of 2013 to remain at approximately $100 million to $120 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 months ended 31 March 2013 filed with the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the major assumptions made in preparing our outlook for the second quarter 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.
[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, debt exchange or debt redemption expenses and write-off of debt issuance costs. Adjusted EBITDA excludes the restructuring, plant closure and associated charges related to our announced plan for the Malaysia plant. 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.