Chartered Reports Results for Third Quarter 2008 (Revenue up 28%)

MILPITAS, Calif.—(BUSINESS WIRE)—October 30, 2008— Chartered Semiconductor Manufacturing Ltd. (Nasdaq:CHRT)(SGX-ST:CHARTERED), one of the worlds top dedicated semiconductor foundries, today announced its results for third quarter 2008.

 

Chartered revenues in the third quarter of 2008 were up 31 percent, and revenues including our share of SMP were up approximately 28 percent compared to the year-ago quarter. Excluding Fab 3E which we acquired in March 2008, revenues in the third quarter of 2008 were up approximately 19 percent, and revenues including our share of SMP were up approximately 17 percent compared to the year-ago quarter. Revenues from 0.13-micron and below technologies, including those from 65 nanometer (nm), accounted for 56 percent of our total business base revenues. Revenues from 65nm alone, including both SOI and bulk technologies, grew approximately 48 percent sequentially and represented 19 percent of our total business base revenues. We ended the quarter with a net loss of approximately $24 million, said George Thomas, senior vice president and CFO of Chartered.

Summary of Third Quarter 2008 Performance

  • Revenues were $463.7 million in third quarter 2008, including $41.1 million from Fab 3E. Revenues in third quarter 2008 were up 30.7 percent from $354.8 million in third quarter 2007. Revenues including Chartereds share of SMP were $487.2 million, up 27.6 percent from $381.8 million in the year-ago quarter, primarily due to strength in the communications sector and to a lesser extent the consumer sector, partially offset by weakness in the computer sector. Excluding Fab 3E, revenues in third quarter 2008 were up 19.1 percent, and revenues including Chartereds share of SMP were up 16.8 percent compared to the year-ago quarter. Sequentially, revenues were up 1.3 percent compared to $457.6 million in second quarter 2008. Revenues including Chartereds share of SMP were up 1.0 percent from $482.5 million in second quarter 2008, primarily due to strength in the communications sector and to a lesser extent the consumer sector, partially offset by weakness in the computer sector.
  • Gross profit was $65.6 million, or 14.1 percent of revenues, compared to a gross profit of $67.2 million, or 19.0 percent of revenues in the year-ago quarter, primarily due to lower selling prices and higher cost per wafer resulting from a richer mix in production levels, despite higher revenues. Gross profit was down 6.1 percent sequentially from $69.9 million, or 15.3 percent of revenues in second quarter 2008, primarily due to higher cost per wafer resulting from lower production volumes over which fixed costs are allocated, partially offset by a higher average selling price resulting from a more favorable product mix.
  • Other revenue which primarily relates to rental income from SMP (Fab 5) was $2.7 million, down 53.5 percent from $5.7 million in the year-ago quarter, due to the renewal of the lease with SMP. The rental charged to SMP is arrived at based on the terms of the original joint-venture agreement, which is a function of recovering the cost of the building and facility machinery and equipment over the period of the joint-venture agreement. The lower rental starting from second quarter 2008 reflects Chartereds recovery of the majority of these costs over the initial 10 years of the joint venture.
  • Research and development (R&D) expenses were $44.2 million, an increase of 13.5 percent from the year-ago quarter, primarily due to higher development activities related to the advanced 32nm technology node and higher payroll-related expenses. Compared to the previous quarter, R&D expenses were up 3.1 percent from $42.8 million, primarily due to higher cost of development activities related to the advanced 32nm technology node.
  • Sales and marketing expenses were $19.5 million, up 33.4 percent compared to $14.6 million in the year-ago quarter and up 9.3 percent from $17.8 million in the previous quarter, primarily due to higher expenses related to Electronic Design Automation (EDA) offerings and higher financial support for pre-contract customer design validation activities.
  • General and administrative (G&A) expenses were $11.2 million, up 19.8 percent compared to $9.3 million in the year-ago quarter, primarily due to higher payroll-related expenses.
  • Equity in income of Chartereds minority-owned joint-venture fab, SMP (Fab 5), was $8.7 million compared to $8.9 million in the year-ago quarter. Compared to the previous quarter, equity in income of SMP was down 8.8 percent from $9.6 million, primarily due to lower selling prices resulting from a less favorable product mix and lower shipments.
  • Net interest expense was $13.6 million, compared to $8.4 million in the year-ago quarter, primarily due to higher interest expense resulting from higher outstanding debt and to a lesser extent lower interest income arising from lower interest rates and lower interest capitalization associated with the ramp of Fab 7. Compared to the previous quarter, net interest expense was down 4.8 percent from $14.2 million, primarily due to lower interest expense resulting from lower interest rates.
  • The financial position of Chartered s consolidated joint-venture fab, Chartered Silicon Partners (CSP or Fab 6), continued to be in a shareholders deficit in third quarter 2008, and therefore none of the loss of $3.1 million in the third quarter was allocated to the minority interest. At the end of third quarter 2008, CSP s shareholders deficit was $421.2 million.
  • Net loss was $24.4 million, or negative 5.3 percent of revenues, compared to a net income of $114.8 million, or 32.3 percent of revenues in the year-ago quarter, and a net income of $43.4 million or 9.5 percent of revenues in the previous quarter.
  • Net income in third quarter 2007 included a tax benefit of $118.5 million, resulting from a retroactive change of tax status for Fab 3 from pioneer to non-pioneer. Net income for second quarter 2008, included a tax benefit of $48.7 million, resulting from a retroactive change of tax status for Fab 7 from pioneer to non-pioneer. This tax benefit arose primarily from the carry forward of prior years wear-and-tear allowances on plant and machinery and tax losses, net of valuation allowances, and was based on Chartered s projection of its future taxable income. In view of the rapid slowing down of demand and worsening economic outlook, Chartered has revised downwards its projections of future taxable income and as such, established an additional valuation allowance of $10.7 million against a portion of the deferred tax asset that is assessed to be not realizable. This resulted in a tax expense of $10.7 million in third quarter 2008.
  • Basic loss per American Depositary Share (ADS) and basic loss per share in third quarter 2008 were ($0.11) and ($0.01) respectively, compared with basic earnings per ADS and basic earnings per share of $0.44 and $0.04 respectively in third quarter 2007. Diluted loss per ADS and diluted loss per share in third quarter 2008 were ($0.11) and ($0.01) respectively, compared with diluted earnings per ADS and diluted earnings per share of $0.40 and $0.04 respectively in third quarter 2007.

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