Operating expenses increased slightly to NT$6.1 billion. R&D expenditures were sequentially higher due mainly to further development efforts related to 65-nm process technology and more engineering wafers to support the Fab14 ramp-up. SG&A expenditures were sequentially lower mainly because Fab14 stopped incurring opening expenses as it commenced commercial production during 4Q04. Overall, operating expenses represented 9.6% of net sales, compared to last quarter's 8.6%.
III - 3. Non-Operating Items (Amount: NT$ million) 4Q04 3Q04 4Q03 Non-Operating Income/(Exp.) 457 630 (193) Net Interest Income/(Exp.) 227 228 (14) Other Non-Operating 230 402 (178) L-T Investments 609 1,378 1,135 WaferTech* 891 1,643 549 SSMC 31 268 131 Vanguard 423 326 99 TSMC (Shanghai) (359) (237) (1) Miscellaneous (377) (622) 357 Total Non-Operating Items 1,066 2,008 942 * Operation results only; does not include amortization of impaired assets. Non-Operating Items:
Combined non-operating income and long-term investment gains decreased 46.9% to NT$1.1 billion from NT$2.0 billion in the previous quarter.
During the quarter, non-operating income amounted to NT$457 million, NT$173 million lower than last quarter's income of NT$630 million. This decrease was due mainly to lower royalty income accrued and the revaluation losses of short-term investments in marketable securities, offset partially by higher foreign exchange gains from hedging activities.
Long-term investment gains declined to NT$609 million, compared to NT$1,378 million in 3Q04. The decrease mainly resulted from lower utilization levels at WaferTech and SSMC, and higher expenses incurred at TSMC (Shanghai). These were offset partially by the continuous improvement in Vanguard and smaller losses in miscellaneous others.
IV. Financial Condition Review IV - 1. Liquidity Analysis (Amount: NT$ billion) 4Q04 3Q04 4Q03 Cash & S-T Investments 118.5 124.4 110.8 Accounts Receivable - Trade 27.2 33.4 25.6 Inventory 14.2 12.6 10.9 Deferred Income Tax Assets 8.8 2.5 8.3 Total Current Assets 173.7 177.7 158.5 Accounts Payable 40.8 28.3 17.7 Current Portion of Bonds Payable 10.5 5.0 5.0 Accrued Liabilities and Others 9.3 11.0 7.8 Total Current Liabilities 60.6 44.2 30.5 Current Ratio (x) 2.9 4.0 5.2 Net Working Capital 113.0 133.4 128.0 Liquidity Analysis:
Total current assets were NT$4.0 billion lower on a sequential basis. The decrease was mainly attributable to lower cash & short-term investment and accounts receivable, partially offset by higher inventory and deferred income tax assets. The NT$5.9 billion decrease in cash and short-term investment was due mainly to a long-term investment of NT$5.6 billion in a structured note during this quarter, and a reclassification of NT$4.9 billion of such notes from short-term to long-term investment made in the previous quarter.
Meanwhile, total current liabilities increased significantly due mainly to the increase of accounts payable resulting from the faster move-in of 12-inch production equipment in this quarter and the increase of the current portion of bonds payable.
As a result, the Company's current ratio declined to 2.9x and net working capital reduced to NT$113.0 billion, a decrease of NT$20.4 billion over the previous quarter.
Receivable/Inventory Days Trend:
Days of receivables increased to 45 days compared with 43 days in 3Q04, reflecting slower business activities during 4Q04.
Days of Inventory increased to 41 days as compared to 38 days in the previous quarter. The increase was due mainly to the combination of higher values of WIP for increased 12-inch production and higher finished goods. To view IV-2. Receivable/Inventory Days Trend, please visit