As announced on 18 October 2011, our wholly-owned subsidiary, STATS ChipPAC (Thailand ) Ltd., which is situated at 101/32-33 Navanakorn Industrial Estate, Moo 20, Paholyothin Road, KM 46, Ampoe Klong Luang, Pathum Thani (the "Thailand Plant") has been suspended since 17 October 2011 due to the recent flood in Thailand.
As the flood water level is receding in the Navanakorn Industrial Estate, the Company has been able to gain access to the Thailand Plant and is in the process of assessing damages, evaluating recoverability of assets and planning restoration of the Thailand Plant for production. The Company is as yet unable to determine when full operations might resume at the Thailand Plant, and currently expects the Thailand Plant to remain suspended through January 2012, with partial factory operation in the first quarter of 2012. Meanwhile, the Company has set up a global support and recovery management team and engaged equipment restoration specialists to expedite the restoration of the Thailand Plant. The Company has also shifted production to its other manufacturing sites to support demand from its customers that are affected by the disruption of the Thailand Plant operations.
Despite that, the Company affirms its current outlook of net revenues in the fourth quarter of 2011 to be single digit decrease from prior quarter, with adjusted EBITDA(1) in the range of 20% to 25% of revenue, and capital expenditure to be approximately $50 million to $60 million. The Thailand Plant suspension from 17 October 2011 to the end of December 2011 is expected to account for approximately 7% reduction in revenue for the fourth quarter of 2011 compared to the third quarter of 2011.
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 nine months ended 25 September 2011 filed with the Singapore Exchange Securities Trading Limited ("SGX-ST") for the major assumptions made in preparing our outlook for the fourth quarter of 2011. 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.
Certain statements in this release are forward-looking statements, including our outlook for the fourth quarter of 2011, 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, uncertainty surrounding the ongoing impact of the flood in Thailand and its impact to our Thailand Plant, 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.
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.
(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.
Investor Relations Contact: Tham Kah Locke Vice President of Corporate Finance Tel: (65) 6824 7788 Fax: (65) 6720 7826 email: Email Contact Media Contact: Lisa Lavin Deputy Director of Corporate Communications Tel: (208) 867 9859 email: Email Contact