Chartered Semiconductor Manufacturing Ltd. (Regn. No.: 198703584-K) www.charteredsemi.com | 880 N. McCarthy Blvd., Ste. 100 Milpitas, California 95035 Tel: (1) 408.941.1100 Fax: (1) 408.941.1101 | 60 Woodlands Industrial Park D Street Two Singapore 738406 Tel: (65) 6362.2838 Fax: (65) 6362.2938 |
NE W S RE L E A S E
Investor Contacts: | ||
Suresh Kumar (1) 408.941.1110 sureshk@charteredsemi.com | Lim Li Chuen (65) 6360.4060 lclim@charteredsemi.com | |
Media Contacts: | ||
Chartered U.S.: Tiffany Sparks (1) 408.941.1185 tiffanys@charteredsemi.com | Chartered Singapore: Winnie Tan (65) 6360.4705 winnietan@charteredsemi.com |
All currency figures stated in this report are in US dollars.
The financial statement amounts in this report are determined in accordance with US GAAP.
The financial statement amounts in this report are determined in accordance with US GAAP.
In order to provide investors additional information regarding the Company’s financial results as determined in accordance with US GAAP, in this report Chartered also provides information on its total business base revenues, which include the Company’s share of Silicon Manufacturing Partners (“Revenues including Chartered’s share of SMP”). Silicon Manufacturing Partners (SMP or Fab 5) is a minority-owned joint-venture company and under US GAAP reporting, SMP revenues are not consolidated into Chartered’s revenues (“Revenues”). References to revenues including Chartered’s share of SMP in this report are therefore not in accordance with US GAAP. To ensure clarity, in Appendix A of this report we have included a reconciliation table which provides comparable data based on revenues determined in accordance with US GAAP, which do not include the Company’s share of SMP.
CHARTERED REPORTS RESULTS FOR SECOND QUARTER 2006
• | Chartered revenues of $364.8 million in 2Q 2006, up 88.0 percent from 2Q 2005 and up 2.7 percent sequentially. Revenues including Chartered’s share of SMP of $393.7 million, up 79.0 percent from 2Q 2005 and up 2.0 percent sequentially. | ||
• | Net income of $12.3 million, compared to net loss of $67.1 million in 2Q 2005 and net income of $25.3 million in the previous quarter. |
SINGAPORE — July 21, 2006 — Chartered Semiconductor Manufacturing (Nasdaq: CHRT and SGX-ST: CHARTERED), one of the world’s top dedicated semiconductor foundries, today announced its results for second quarter 2006.
“Chartered revenues in second quarter 2006 were up 88 percent and revenues including our share of SMP were up 79 percent compared to the year-ago quarter, in line with the guidance we provided on June 6, 2006. Revenues from 0.13-micron and more advanced technologies accounted for approximately 50 percent of our total business base revenues, reflecting the technology position we have today,” said George Thomas, senior vice president and CFO of Chartered.
Summary of Second Quarter 2006 Performance
• | Revenues were $364.8 million in second quarter 2006, up 88.0 percent from $194.0 million in second quarter 2005. Revenues including Chartered’s share of SMP were $393.7 million, up 79.0 percent from $219.9 million in second quarter 2005, primarily due to significant growth in the consumer sector followed by the communications and computer sectors. Sequentially, revenues were up 2.7 percent from $355.2 million in first quarter 2006. Revenues including Chartered’s share of SMP were up 2.0 percent from $386.1 million in first quarter 2006 primarily due to strength in the computer sector and to a lesser extent the communications sector, partially offset by weakness in the consumer sector. | |
• | Gross profit was $87.9 million, or 24.1 percent of revenues, up from a gross profit of $0.4 million, or 0.2 percent of revenues in the year-ago quarter, primarily due to significantly higher revenues. Gross profit was down $4.5 million sequentially from $92.4 million, or 26.0 percent of revenues in first quarter 2006, despite higher revenues, due to higher cost per wafer resulting from a less favorable mix associated with production levels during the quarter. | |
• | Research and development (R&D) expenses were $38.2 million, compared to $27.7 million in the year-ago quarter, primarily due to higher activities related to the advanced 65nm technology node and development of design kits and intellectual property solutions. Sequentially, R&D expenses were higher compared to $34.1 million in first quarter 2006, primarily due to higher activities related to the advanced 65nm technology node. | |
• | Pre-production fab start-up cost was nil in second quarter 2006 as Fab 7 started commercial production during second quarter 2005. Pre-production fab start-up cost was $7.9 million in second quarter 2005. | |
• | Sales and marketing expenses were $12.2 million, up 20.2 percent compared to $10.1 million in the year-ago quarter, primarily due to higher payroll related expenses and higher financial support for pre-contract customer prototyping activities. Compared to the previous quarter, sales and marketing expenses were down 11.7 percent from $13.8 million, primarily due to lower expenses related to Electronic Design Automation (EDA) offerings. |
• | General and administrative (G&A) expenses were $9.9 million, compared to $10.7 million in second quarter 2005. | |
• | Equity in income of Chartered’s minority-owned joint-venture fab, SMP (Fab 5), was an income of $7.9 million compared to an income of $0.8 million in the year-ago quarter, primarily due to lower depreciation and higher revenues. Compared to the previous quarter, equity in income of SMP was down 21.9 percent from $10.2 million, primarily due to lower revenues. | |
• | Other income (loss), net, was a charge of $7.8 million compared to a credit of $3.6 million in the year-ago quarter and compared to a charge of $2.5 million in the previous quarter, primarily due to losses resulting from foreign currency fluctuations and changes in fair value of an interest rate swap. | |
• | Net interest expense was $10.1 million, compared to $8.6 million in the year-ago quarter, primarily due to higher interest expense resulting from higher interest rates and lower interest capitalization associated with the ramp of Fab 7, partially offset by higher interest income. Compared to the previous quarter, net interest expense was down 27.5 percent from $14.0 million primarily due to higher interest income resulting from higher principal balances and interest rates. | |
• | The financial position of Chartered’s consolidated joint venture fab, Chartered Silicon Partners (CSP or Fab 6), continued to be in capital deficit in second quarter 2006, and therefore none of the loss of $7.8 million in the second quarter was allocated to the minority interest. At the end of second quarter 2006, CSP’s capital deficit was $408.5 million. | |
• | Net income was $12.3 million, or 3.4 percent of revenues, compared to a net loss of $67.1 million, or negative 34.6 percent of revenues, in the year-ago quarter, and a net income of $25.3 million, or 7.1 percent of revenues, in the previous quarter. | |
• | Basic earnings per American Depositary Share (ADS) and basic earnings per share in second quarter 2006 were $0.04 and $0.00 respectively, compared with basic loss per ADS and basic loss per share of $0.27 and $0.03 respectively in second quarter 2005. Basic earnings (loss) per share is computed by deducting from net income or adding to net (loss) the accretion to redemption value of the convertible redeemable preference shares and using the weighted-average number of common shares outstanding. |
Wafer Shipments and Average Selling Prices (eight-inch equivalent)
• | Shipments in second quarter 2006 were 327.0 thousand wafers, an increase of 60.4 percent compared to 203.8 thousand wafers in second quarter 2005, and an increase of 2.7 percent compared to 318.2 thousand wafers shipped in first quarter 2006. Shipments including Chartered’s share of SMP in second quarter 2006 were 355.7 thousand wafers, an increase of 58.5 percent |
compared to 224.5 thousand wafers in second quarter 2005 and an increase of 1.8 percent compared to 349.4 thousand wafers in first quarter 2006. | ||
• | Average selling price (ASP) was $1,089 per wafer in first quarter and second quarter 2006. ASP including Chartered’s share of SMP was $1,082 per wafer in second quarter 2006, compared to $1,080 per wafer in first quarter 2006. |
Capacity and Utilization
• | Capacity utilization in second quarter 2006 was 82 percent compared to 65 percent in the year-ago quarter, and 82 percent in first quarter 2006. Capacity in second quarter 2006 was up approximately 26 percent compared to second quarter 2005 and up approximately two percent compared to first quarter 2006. Capacity utilization is based on total wafer shipments and total capacity, both of which include Chartered’s share of SMP. |
Utilization Table
Data including Chartered’s share of SMP |
Thousand 8” equivalent wafers | 2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | |||||
Total wafers shipped | 224.5 | 295.2 | 345.8 | 349.4 | 355.7 | |||||
Total capacity | 346.5 | 401.4 | 435.9 | 427.5 | 436.4 | |||||
Utilization | 65% | 74% | 79% | 82% | 82% |
Capacity by Fab
(Thousand 8” equivalent wafers) | 2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | Est. 3Q 2006 | ||||||
Fab 2 | 137.7 | 139.2 | 145.7 | 142.6 | 144.1 | 145.7 | ||||||
Fab 3 | 74.3 | 74.2 | 74.2 | 69.5 | 70.3 | 71.0 | ||||||
Fab 5 (Chartered’s share) | 35.8 | 36.2 | 35.6 | 34.3 | 34.6 | 35.0 | ||||||
Fab 6 | 89.4 | 100.5 | 112.9 | 114.5 | 115.8 | 117.0 | ||||||
Fab 7 (a) | 9.3 | 51.3 | 67.5 | 66.6 | 71.6 | 89.5 | ||||||
Total | 346.5 | 401.4 | 435.9 | 427.5 | 436.4 | 458.2 | ||||||
(a) | Fab 7 started commercial shipment in June 2005. |
Market Dynamics
The following business statistics tables provide information on revenues including Chartered’s share of SMP by market sector, region and technology.
Breakdown by Market Sector
Revenues including Chartered’s share of SMP(Percentage of Total) |
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Communications | 44% | 38% | 29% | 34% | 34% | |||||
Computer | 34% | 25% | 22% | 19% | 25% | |||||
Consumer | 16% | 32% | 45% | 45% | 39% | |||||
Other (b) | 6% | 5% | 4% | 2% | 2% | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Breakdown by Region
Revenues including Chartered’s share of SMP(Percentage of Total) |
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Americas | 58% | 72% | 74% | 70% | 75% | |||||
Europe | 17% | 10% | 9% | 12% | 9% | |||||
Asia-Pacific | 16% | 11% | 11% | 15% | 14% | |||||
Japan | 5% | 4% | 4% | 3% | 2% | |||||
Other (b) | 4% | 3% | 2% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Breakdown by Technology (micron)
Revenues including Chartered’s share of SMP(Percentage of Total) |
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
0.09 and below | 0% | 24% | 28% | 25% | 22% | |||||
Up to 0.13 | 23% | 17% | 20% | 25% | 28% | |||||
Up to 0.15 | 6% | 4% | 4% | 2% | 1% | |||||
Up to 0.18 | 18% | 9% | 12% | 11% | 14% | |||||
Up to 0.25 | 11% | 10% | 6% | 9% | 9% | |||||
Up to 0.35 | 26% | 21% | 20% | 18% | 15% | |||||
Above 0.35 | 12% | 12% | 8% | 10% | 11% | |||||
Other (b) | 4% | 3% | 2% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
(b) | 2Q 2005 — 4Q 2005: Includes revenues from services related to generation of customers’ mask sets. |
Recent Highlights and Events
• | Chartered signed an agreement with Microsoft for the manufacturing of CPU products — using 65nm Silicon-on-Insulator (SOI) semiconductor technology — for Microsoft’s Xbox 360 game consoles. Production is expected to begin in the first quarter of 2007. This follows Chartered’s successful manufacturing of 90nm SOI CPU products for Xbox 360 game consoles, through an agreement with IBM. | |
• | Chartered announced the licensing of 90nm SOI technology from IBM. The agreement enables Chartered to expand the use of the technology to areas such as consumer, multi-media, |
communications, automotive and industrial applications, thereby delivering more choice and flexibility to foundry customers for manufacturing their leading-edge products. | ||
• | Chartered began first revenue shipments of AMD64 processors in June 2006. AMD and Chartered ramped 300mm production at Fab 7 in record time, hitting all major milestones and starting production at mature yields. Initial shipments out of Chartered consisted of microprocessors manufactured on 90nm process technology. |
Review and Outlook
“As we go into the third quarter, we are seeing changes in outlook from our customers,” said Thomas. “We believe customers are cautious about their inventory positions, and some are reacting to softer-than-usual seasonality in some of the end markets. As a result of this, our outlook for the third quarter 2006 is now weaker than what we had anticipated earlier. However, this weakness is offset to a significant extent by the new businesses such as the AMD microprocessor ramp in the third quarter.”
“Based on our current outlook, we expect Chartered revenues for third quarter 2006 to be essentially flat and revenues including our share of SMP to be slightly down, compared to the second quarter. In comparison to the second quarter, we see significant weakness in the consumer sector, primarily due to decline in revenues from video game devices. The communications sector is expected to be weaker to a lesser extent, offset by strength in the computer sector. We expect a utilization rate of approximately 75 percent for the third quarter, after comprehending a sequential increase in capacity of approximately five percent. Revenues from 0.13-micron and below technologies, including 90nm, are expected to represent around 51 percent of our total business base revenues. 90nm revenues alone are expected to grow approximately 25 percent sequentially and contribute approximately 28 percent of our total business base revenues.”
The outlook for third quarter 2006 is as follows:
2Q 2006 | 3Q 2006 Guidance | |||||
Actual | Midpoint and range | Sequential change | ||||
Revenues | $364.8M | $362M,± $6M | Down 2% to up 1% | |||
Revenues including Chartered’s share of SMP | $393.7M | $387M,± $7M | Flat to down 3% | |||
ASP (c) | $1,089 | $1,117,± $20 | Up 1% to up 5% | |||
ASP including Chartered’s share of SMP (c) | $1,082 | $1,102,± $25 | Flat to up 4% | |||
Utilization | 82% | 75%,± 3% | — | |||
Gross profit (loss) | $87.9M | $90M,± $6M | — | |||
Net income (loss) (d) | $12.3M | $11M,± $5M | — | |||
Basic earnings (loss) per ADS | $0.04 | $0.03,± $0.02 | — |
(c) | Eight-inch equivalent wafers. | |
(d) | Net income includes the negative profit impact from losses attributable to minority interest, which was $3.8 million in second quarter 2006, and is projected to be approximately$4.0 million in third quarter 2006. |
CEO Closing Comments
“The recent change in the semiconductor market outlook is largely unanticipated. While we are on track to capitalize on new engagements such as AMD and customers using our value-added solutions, we do see the general market weakness slowing our overall growth plan for this year,” said Chia Song Hwee, president & CEO of Chartered.
“There are near-term challenges that we need to address due to the current market environment. However, we remain committed to our growth strategy and the direction of our company remains unchanged. As we execute on our 90nm engagements, we are also currently engaging multiple customers at the 65nm node and are pursuing opportunities from new markets and customers,” concluded Chia.
Webcast Conference Call Today
Chartered will be discussing its second quarter 2006 results and third quarter 2006 outlook on a conference call today, July 21, 2006, at 8:30 a.m. Singapore time (US time 5:30 p.m. PT/8:30 p.m. ET, Thursday, July 20, 2006). A webcast of the conference call will be available to all interested parties on Chartered’s Web site at www.charteredsemi.com, under Investor Relations, or at http://ir.charteredsemi.com.
Mid-Quarter Guidance
The Company provides a guidance update midway through each quarter. For third quarter 2006, the Company anticipates issuing its mid-quarter guidance update, via news release, on Wednesday, September 6, 2006, Singapore time.
APPENDIX A
US GAAP Reconciliation Table
In order to provide investors additional information regarding the company’s financial results as determined in accordance with US GAAP, in this report Chartered also provides information on its total business base revenues, which include the Company’s share of Silicon Manufacturing Partners (“Revenues including Chartered’s share of SMP”). SMP is a minority-owned joint-venture company and under US GAAP reporting, SMP revenues are not consolidated into Chartered’s revenues (“Revenues”). References to revenues including Chartered’s share of SMP in this report are therefore not in accordance with US GAAP. To ensure clarity, the tables below provide a reconciliation.
3Q 2006 | ||||||||
2Q 2005 | 1Q 2006 | 2Q 2006 | Guidance | |||||
Actual | Actual | Actual | Midpoint | |||||
Revenues (e) | $194.0M | $355.2M | $364.8M | $362M | ||||
Chartered’s share of SMP revenues | $25.9M | $30.9M | $28.9M | $25M | ||||
Revenues including Chartered’s share of SMP | $219.9M | $386.1M | $393.7M | $387M | ||||
ASP (e) (f) | $913 | $1,089 | $1,089 | $1,117 | ||||
ASP of Chartered’s share of SMP revenues (f) | $1,253 | $992 | $1,004 | $925 | ||||
ASP including Chartered’s share of SMP (f) | $944 | $1,080 | $1,082 | $1,102 |
(e) | Determined in accordance with US GAAP. | |
(f) | Eight-inch equivalent wafers. |
Breakdown by Market Sector
Revenues (US GAAP)(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Communications | 43% | 36% | 28% | 31% | 32% | |||||
Computer | 32% | 24% | 19% | 18% | 24% | |||||
Consumer | 18% | 35% | 48% | 49% | 41% | |||||
Other (g) | 7% | 5% | 5% | 2% | 3% | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Chartered’s share of SMP revenues(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Communications | 44% | 54% | 42% | 75% | 63% | |||||
Computer | 51% | 37% | 51% | 22% | 32% | |||||
Consumer | 3% | 7% | 6% | 3% | 5% | |||||
Other | 2% | 2% | 1% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Revenues including Chartered’s share of SMP(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Communications | 44% | 38% | 29% | 34% | 34% | |||||
Computer | 34% | 25% | 22% | 19% | 25% | |||||
Consumer | 16% | 32% | 45% | 45% | 39% | |||||
Other (g) | 6% | 5% | 4% | 2% | 2% | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Breakdown by Region
Revenues (US GAAP)(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Americas | 63% | 74% | 76% | 72% | 78% | |||||
Europe | 11% | 9% | 8% | 12% | 8% | |||||
Asia-Pacific | 17% | 11% | 11% | 13% | 13% | |||||
Japan | 5% | 3% | 3% | 3% | 1% | |||||
Other (g) | 4% | 3% | 2% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Chartered’s share of SMP Revenues(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Americas | 17% | 43% | 49% | 45% | 37% | |||||
Europe | 66% | 28% | 28% | 18% | 21% | |||||
Asia-Pacific | 4% | 9% | 17% | 30% | 29% | |||||
Japan | 13% | 20% | 6% | 7% | 13% | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Revenues including Chartered’s share of SMP(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
Americas | 58% | 72% | 74% | 70% | 75% | |||||
Europe | 17% | 10% | 9% | 12% | 9% | |||||
Asia-Pacific | 16% | 11% | 11% | 15% | 14% | |||||
Japan | 5% | 4% | 4% | 3% | 2% | |||||
Other (g) | 4% | 3% | 2% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Breakdown by Technology (micron)
Revenues (US GAAP)(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
0.09 and below | — | 26% | 31% | 27% | 24% | |||||
Up to 0.13 | 26% | 18% | 21% | 27% | 30% | |||||
Up to 0.15 | — | — | — | — | — | |||||
Up to 0.18 | 14% | 6% | 9% | 7% | 9% | |||||
Up to 0.25 | 12% | 11% | 7% | 9% | 9% | |||||
Up to 0.35 | 29% | 23% | 21% | 19% | 16% | |||||
Above 0.35 | 15% | 13% | 9% | 11% | 12% | |||||
Other (g) | 4% | 3% | 2% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Chartered’s share of SMP Revenues(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
0.09 and below | — | — | — | — | — | |||||
Up to 0.13 | 3% | — | — | — | — | |||||
Up to 0.15 | 50% | 47% | 45% | 26% | 19% | |||||
Up to 0.18 | 47% | 43% | 40% | 56% | 75% | |||||
Up to 0.25 | — | 5% | 3% | 5% | 4% | |||||
Up to 0.35 | — | 5% | 12% | 13% | 2% | |||||
Above 0.35 | — | — | — | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
Revenues including Chartered’s share of SMP(Percentage of Total)
2Q 2005 | 3Q 2005 | 4Q 2005 | 1Q 2006 | 2Q 2006 | ||||||
0.09 and below | — | 24% | 28% | 25% | 22% | |||||
Up to 0.13 | 23% | 17% | 20% | 25% | 28% | |||||
Up to 0.15 | 6% | 4% | 4% | 2% | 1% | |||||
Up to 0.18 | 18% | 9% | 12% | 11% | 14% | |||||
Up to 0.25 | 11% | 10% | 6% | 9% | 9% | |||||
Up to 0.35 | 26% | 21% | 20% | 18% | 15% | |||||
Above 0.35 | 12% | 12% | 8% | 10% | 11% | |||||
Other (g) | 4% | 3% | 2% | — | — | |||||
Total | 100% | 100% | 100% | 100% | 100% | |||||
(g) | 2Q 2005 — 4Q 2005: Includes revenues from services related to generation of customers’ mask sets. |
About Chartered
Chartered Semiconductor Manufacturing (Nasdaq: CHRT, SGX-ST: CHARTERED), one of the world’s top dedicated semiconductor foundries, offers leading-edge technologies down to 65 nanometer (nm), enabling today’s system-on-chip designs. The company further serves the needs of customers through its collaborative, joint development approach on a technology roadmap that extends to 45nm. Chartered’s strategy is based on open and comprehensive design enablement solutions, manufacturing enhancement methodologies, and a commitment to flexible sourcing. In Singapore, the company operates a 300mm fabrication facility and four 200mm facilities. Information about Chartered can be found at www.charteredsemi.com.
Safe Harbor Statement under the provisions of the United States Private Securities Litigation Reform Act of 1995
This news release contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including without limitation, statements relating to our outlook for the third quarter of 2006; projected revenues and average selling prices (including Chartered’s share of SMP), utilization rate, gross profit, net income or profit and earnings per ADS and the expected growth of wafer shipments and revenue (including Chartered’s share of SMP); our expectation of revenue contribution from 0.13-micron and below technologies including 90nm; the revenue from (i) 0.13-micron and below technologies and (ii) 90nm as a percentage of our total business base revenues; the percentage growth of 90nm revenues; the inventory positions of our customers; the weakness in our outlook for the third quarter 2006 and the possible offset by new businesses such as the AMD microprocessor ramp; the weakness in the consumer sector and communications sector and possible offset by the strength in the computer sector; our commitment to our growth strategy and the direction of our company; our customer engagement at 65nm node and the estimated capacity by fabs for the third quarter 2006 reflect our current views with respect to future events and financial performance and are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results or those anticipated. Among the factors that could cause actual results to differ materially are changes in the demands from our major customers, excess inventory, life cycle, market outlook and trends or specific products; competition from other foundries; unforeseen delays, interruptions, performance level and technology mix in our fabrication facilities; our progress on leading-edge products; changes in capacity plans, allocation and process technology mix, unavailability of materials, equipment, manpower and expertise; access to or delays in technological advances or our development of process technologies; the successful implementation of our partnership, technology and supply alliances (including our joint development agreements with IBM, Infineon and Samsung); the growth rate of fabless companies, the outsourcing strategy of integrated device manufacturers (“IDM”) and our expectation that IDMs will utilize foundry capacity more extensively; demand and supply outlook in the semiconductor market and the economic conditions in the United States as well as globally. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained. In addition to the foregoing factors, a description of certain other risks and uncertainties which cause actual results to differ materially can be found in “Item 3. Key Information — D. Risk Factors” in our 2005 annual report on Form 20-F filed with the US SEC. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US Dollars, except share and per share data)
Determined in accordance with US GAAP | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Net revenue | $ | 194,035 | $ | 364,829 | $ | 375,388 | $ | 720,060 | ||||||||
Cost of revenue | 193,591 | 276,965 | 384,658 | 539,807 | ||||||||||||
Gross profit (loss) | 444 | 87,864 | (9,270 | ) | 180,253 | |||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 27,676 | 38,173 | 54,991 | 72,317 | ||||||||||||
Fab start-up costs | 7,876 | — | 22,697 | — | ||||||||||||
Sales and marketing | 10,112 | 12,158 | 20,619 | 25,928 | ||||||||||||
General and administrative | 10,663 | 9,856 | 19,974 | 20,153 | ||||||||||||
Other operating expense (income) | 3,874 | 184 | 3,850 | (3,767 | ) | |||||||||||
Total operating expenses | 60,201 | 60,371 | 122,131 | 114,631 | ||||||||||||
Operating income (loss) | (59,757 | ) | 27,493 | (131,401 | ) | 65,622 | ||||||||||
Equity in income (loss) of SMP | 776 | 7,947 | (8,256 | ) | 18,117 | |||||||||||
Other income (loss), net | 3,628 | (7,821 | ) | 5,651 | (10,350 | ) | ||||||||||
Interest expense, net | (8,601 | ) | (10,125 | ) | (11,027 | ) | (24,097 | ) | ||||||||
Income (loss) before income taxes | (63,954 | ) | 17,494 | (145,033 | ) | 49,292 | ||||||||||
Income tax expense | 3,147 | 5,170 | 6,586 | 11,698 | ||||||||||||
Net income (loss) | (67,101 | ) | 12,324 | (151,619 | ) | 37,594 | ||||||||||
Less: Accretion to redemption value of convertible redeemable | ||||||||||||||||
preference shares | — | 2,358 | — | 4,782 | ||||||||||||
Net income (loss) available to common shareholders | $ | (67,101 | ) | $ | 9,966 | $ | (151,619 | ) | $ | 32,812 | ||||||
Net earnings (loss) per common share and ADS | ||||||||||||||||
Basic net earnings (loss) per common share | $ | (0.03 | ) | $ | 0.00 | $ | (0.06 | ) | $ | 0.01 | ||||||
Diluted net earnings (loss) per common share | $ | (0.03 | ) | $ | 0.00 | $ | (0.06 | ) | $ | 0.01 | ||||||
Basic net earnings (loss) per ADS | $ | (0.27 | ) | $ | 0.04 | $ | (0.60 | ) | $ | 0.13 | ||||||
Diluted net earnings (loss) per ADS | $ | (0.27 | ) | $ | 0.03 | $ | (0.60 | ) | $ | 0.11 | ||||||
Number of common shares (in millions) used in computing: | ||||||||||||||||
Basic net earnings (loss) per common share | 2,511.0 | 2,527.2 | 2,510.4 | 2,520.5 | ||||||||||||
Effect of dilutive options | — | 332.6 | — | 339.4 | ||||||||||||
Diluted net earnings (loss) per common share | 2,511.0 | 2,859.8 | 2,510.4 | 2,859.9 | ||||||||||||
Number of ADS (in millions) used in computing: | ||||||||||||||||
Basic net earnings (loss) per ADS | 251.1 | 252.7 | 251.0 | 252.1 | ||||||||||||
Effect of dilutive options | — | 33.3 | — | 33.9 | ||||||||||||
Diluted net earnings (loss) per ADS | 251.1 | 286.0 | 251.0 | 286.0 | ||||||||||||
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US Dollars)
Determined in accordance with US GAAP | ||||||||
As of | ||||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 819,856 | $ | 937,942 | ||||
Marketable investments | 22,467 | 23,078 | ||||||
Receivables, net | 184,897 | 219,261 | ||||||
Inventories | 134,240 | 167,576 | ||||||
Other current assets | 122,116 | 17,018 | ||||||
Total current assets | 1,283,576 | 1,364,875 | ||||||
Investment in SMP | 50,384 | 47,825 | ||||||
Technology licenses, net | 106,612 | 97,101 | ||||||
Property, plant and equipment, net | 2,049,695 | 2,092,971 | ||||||
Other non-current assets | 27,027 | 44,622 | ||||||
Total assets | $ | 3,517,294 | $ | 3,647,394 | ||||
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERENCE SHARES AND | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Payables | $ | 166,681 | $ | 230,987 | ||||
Current installments of long-term debt and capital lease obligations | 322,453 | 161,746 | ||||||
Other current liabilities | 244,119 | 211,332 | ||||||
Total current liabilities | 733,253 | 604,065 | ||||||
Long-term debt and capital lease obligations, excluding current installments | 1,169,034 | 1,363,681 | ||||||
Other non-current liabilities | 17,970 | 28,163 | ||||||
Total liabilities | 1,920,257 | 1,995,909 | ||||||
Convertible redeemable preference shares | 250,663 | 241,481 | ||||||
Shareholders’ equity | 1,346,374 | 1,410,004 | ||||||
Total liabilities, convertible redeemable preference shares and shareholders’ equity | $ | 3,517,294 | $ | 3,647,394 | ||||
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US Dollars)
Determined in accordance with US GAAP | ||||||||
For The Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2006 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (151,619 | ) | $ | 37,594 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Equity in income (loss) of SMP | 8,256 | (18,117 | ) | |||||
Cash dividends received from SMP | 6,300 | 20,683 | ||||||
Depreciation and amortization | 239,356 | 264,458 | ||||||
Foreign exchange (gain) loss, net | 354 | 2,503 | ||||||
Gain on disposal of property, plant and equipment | (91 | ) | (4,025 | ) | ||||
Others, net | 5,309 | 12,481 | ||||||
Changes in assets and liabilities: | ||||||||
Receivables | 14,321 | (38,227 | ) | |||||
Inventories | (44,393 | ) | (33,336 | ) | ||||
Other current assets | (2,528 | ) | (2,820 | ) | ||||
Payables and other liabilities | 103,891 | 20,861 | ||||||
Net cash provided by operating activities | 179,156 | 262,055 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Payments for property, plant and equipment | (347,950 | ) | (231,507 | ) | ||||
Payments for technology licenses | (3,088 | ) | (5,000 | ) | ||||
Purchases of other investments | — | (600 | ) | |||||
Refundable deposits placed with a vendor | — | (15,000 | ) | |||||
Refund of deposits placed with a vendor | — | 111,656 | ||||||
Proceeds from sale of property, plant and equipment | 127 | 8,659 | ||||||
Proceeds from redemption and maturity of marketable investments | 30,000 | — | ||||||
Return of capital from SMP | — | 4,133 | ||||||
Others | (950 | ) | (3,537 | ) | ||||
Net cash used in investing activities | (321,861 | ) | (131,196 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Debt | ||||||||
Borrowings | 472,124 | 493,100 | ||||||
Repayments | (343,134 | ) | (513,548 | ) | ||||
Capital lease payments | — | (2,185 | ) | |||||
Receipts of customer deposits | 80,000 | 45,183 | ||||||
Refund of customer deposits | (1,634 | ) | (42,707 | ) | ||||
Issuance of ordinary shares | 1,162 | 1,612 | ||||||
Others | — | 5,752 | ||||||
Net cash provided by (used in) financing activities | 208,518 | (12,793 | ) | |||||
Net increase in cash and cash equivalents | 65,813 | 118,066 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (352 | ) | 20 | |||||
Cash and cash equivalents at the beginning of the period | 539,399 | 819,856 | ||||||
Cash and cash equivalents at the end of the period | $ | 604,860 | $ | 937,942 | ||||