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Advanced Semiconductor Engineering, Inc. Reports Unaudited Consolidated Financial Results for the Third Quarter of 2017

TAIPEI, Taiwan, Oct. 27, 2017 /PRNewswire/ -- Advanced Semiconductor Engineering, Inc. (TAIEX: 2311, NYSE: ASX) ("We", "ASE", or the "Company"), among the world's leading companies in semiconductor packaging and testing, today reported unaudited net revenues[1] of NT$73,878 million for the third quarter of 2017 (3Q17), up by 2% year-over-year and up by 12% sequentially. Net income attributable to shareholders of the parent for the quarter totaled NT$6,336 million, up from a net income attributable to shareholders of the parent of NT$5,502 million in 3Q16 and down from a net income attributable to shareholders of the parent of NT$7,847 million in 2Q17. Basic earnings per share for the quarter were NT$0.76 (or US$0.125 per ADS), compared to basic earnings per share of NT$0.72 for 3Q16 and NT$0.97 for 2Q17. Diluted earnings per share for the quarter were NT$0.69 (or US$0.115 per ADS), compared to diluted earnings per share of NT$0.64 for 3Q16 and NT$0.89 for 2Q17.

RESULTS OF OPERATIONS

3Q17 Results Highlights - Consolidated

  • Net revenue contribution from packaging operations, testing operations, EMS operations, substrates sold to third parties and others, each represented approximately 45%, 9%, 45%, 1% and 0%, respectively, of total net revenues for the quarter.
  • Cost of revenue was NT$60,030 million for the quarter, up from NT$53,910 million in 2Q17.
    • Raw material cost totaled NT$36,018 million for the quarter, representing 49% of total net revenues.
    • Labor cost totaled NT$9,110 million for the quarter, representing 12% of total net revenues.
    • Depreciation, amortization and rental expenses totaled NT$6,938 million for the quarter.
  • Gross margin increased 0.4 percentage points to 18.7% in 3Q17 from 18.3% in 2Q17.
  • Operating margin was 9.6% in 3Q17 compared to 7.9% in 2Q17.
  • In terms of non-operating items:
    • Net interest expense was NT$350 million.
    • Net foreign exchange gain of NT$33 million was primarily attributable to the depreciation of the U.S. dollar against the NT dollar.
    • Gain on valuation of financial assets and liabilities was NT$598 million.
    • Net gain on equity-method investments was NT$323 million, including NT$389 million of the share of gain from our investment in Siliconware Precision Industries Co., Ltd. ("SPIL").
    • Other net non-operating income of NT$143 million were primarily related to miscellaneous income. Total non-operating income for the quarter was NT$747 million.
  • Income before tax was NT$7,815 million for 3Q17, compared to NT$11,390 million in 2Q17. We recorded income tax expenses of NT$1,083 million for the quarter, compared to NT$3,207 million in 2Q17.
  • In 3Q17, net income attributable to shareholders of the parent was NT$6,336 million, compared to net income attributable to shareholders of the parent of NT$5,502 million in 3Q16 and net income attributable to shareholders of the parent of NT$7,847 million in 2Q17.
  • Our total number of shares outstanding at the end of the quarter was 8,724,619,364, including treasury stock owned by our subsidiaries. Our 3Q17 basic earnings per share of NT$0.76 (or US$0.125 per ADS) were based on 8,350,512,180 weighted average number of shares outstanding in 3Q17. Our 3Q17 diluted earnings per share of NT$0.69 (or US$0.115 per ADS) were based on 8,624,804,592 weighted average number of shares outstanding in 3Q17.

3Q17 Results Highlights - IC ATM[2]

  • Cost of revenues was NT$31,368 million for the quarter, up by 4% sequentially.
    • Raw material cost totaled NT$9,715 million for the quarter, representing 23% of total net revenues.
    • Labor cost totaled NT$7,870 million for the quarter, representing 19% of total net revenues.
    • Depreciation, amortization and rental expenses totaled NT$6,463 million for the quarter.
  • Gross margin increased 2 percentage points to 25.1% in 3Q17 from 23.1% in 2Q17.
  • Operating margin was 13.7% in 3Q17 compared to 10.5% in 2Q17.

3Q17 Results Highlights - EMS

  • Cost of revenues for the quarter was NT$29,691 million, up by 18% sequentially.
    • Raw material cost totaled NT$26,400 million for the quarter, representing 80% of total net revenues.
    • Labor cost totaled NT$1,226 million for the quarter, representing 4% of total net revenues.
    • Depreciation, amortization and rental expenses totaled NT$436 million for the quarter.
  • Gross margin decreased to 10.3% in 3Q17 from 11.1% in 2Q17.
  • Operating margin increased to 4.3% in 3Q17 from 4.0% in 2Q17.

LIQUIDITY AND CAPITAL RESOURCES

  • Capital expenditures in 3Q17 totaled US$130 million, of which US$84million were used in packaging operations, US$29 million in testing operations, US$13 million in EMS operations and US$4 million in interconnect materials operations.
  • As of September 30, 2017, total unused credit lines amounted to NT$165,583 million.
  • Current ratio was 1.37 and net debt to equity ratio was 0.20 as of September 30, 2017.
  • Total number of employees was 68,227 as of September 30, 2017, compared to 66,996 as of June 30, 2017.

BUSINESS REVIEW

Packaging Operations[3]

  • Gross margin for our packaging operations during the quarter was 22.3%, up by 1.7 percentage points from 2Q17.
  • Capital expenditures for our packaging operations amounted to US$84 million for the quarter, of which US$30 million were used in purchases of wafer bumping and flip chip packaging equipment, and US$54 million were used in purchase of common equipment, SiP equipment and wirebond packaging equipment.

Testing Operations

  • Depreciation, amortization and rental expense associated with our testing operations amounted to NT$1,659 million during the quarter, down from NT$1,673 million in 2Q17.
  • Gross margin for our testing operations amounted to 37.8% during the quarter, up by 3.6 percentage points from 2Q17.
  • Capital expenditures for our testing operations amounted to US$29 million during the quarter.

EMS Operations

  • Gross margin for our EMS operations amounted to 10.3% during the quarter, down by 0.8 percentage points from 2Q17.
  • Capital expenditures for our EMS operations amounted to US$13 million during the quarter.

Substrate Operations

  • PBGA substrate manufactured by ASE amounted to NT$2,178 million for the quarter, up by NT$34 million, or by 2% from 2Q17. Of the total output of NT$2,178 million, NT$948 million was from sales to external customers.
  • Gross margin for substrate operations was 13.1% for the quarter, down by 1.3 percentage points from 2Q17.
  • In 3Q17, our internal substrate manufacturing operations supplied 25% (by value) of our total substrate requirements.

Customers

IC ATM consolidated Basis

  • Our five largest customers together accounted for approximately 36% of our total net revenues for the quarter and in 2Q17. One customer accounted for more than 10% of our total net revenues in 3Q17.
  • Our top 10 customers contributed 50% of our total net revenues for the quarter, compared to 51% in 2Q17.
  • Our customers that are integrated device manufacturers, or IDMs, accounted for 44% of our total net revenues for the quarter, compared to 43% in 2Q17.

EMS BASIS

  • Our five largest customers together accounted for approximately 80% of our total net revenues in 3Q17, compared to 79% in 2Q17. One customer accounted for more than 10% of our total net revenues in 3Q17.
  • Our top 10 customers contributed 89% of our total net revenues during the quarter, which remained the same as 2Q17.

OUTLOOK

Based on our current business outlook and exchange rate assumptions, management projects overall performance for the fourth quarter of 2017 to be as follows:

  • IC ATM 4Q17 business and gross margin should both be similar with 3Q17 level;
  • EMS 4Q17 business should be similar with IC ATM 4Q17 level;
  • EMS 4Q17 gross margin should be above 1Q16 level.

[1] All financial information presented in this press release is unaudited, consolidated and prepared in accordance with Taiwan-IFRS (International Financial Reporting Standards as endorsed for use in the R.O.C.). Such financial information is generated internally by us and has not been subjected to the same review and scrutiny, including internal auditing procedures and audit by our independent auditors, to which we subject our audited consolidated financial statements, and may vary materially from the audited consolidated financial information for the same period. Any evaluation of the financial information presented in this press release should also take into account our published audited consolidated financial statements and the notes to those statements. In addition, the financial information presented is not necessarily indicative of our results of operations for any future period.

[2] ATM stands for Semiconductor Assembly, Testing and Material.

[3] IC packaging services include module assembly services.

About ASE, Inc.

ASE is among the world's leading companies in semiconductor packaging and testing sector, including front-end engineering testing, wafer probing and final testing services. With advanced technological capabilities and a global presence spanning Taiwan, China, Korea, Japan, Singapore, Malaysia and the United States, ASE, Inc. has established a reputation for reliable, high quality products and services. For more information, please visit our website at http://www.aseglobal.com.

Safe Harbor Notice

This press release contains "forward-looking statements" within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Although these forward-looking statements, which may include statements regarding our future results of operations, financial condition or business prospects, are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on these forward-looking statements, which apply only as of the date of this press release. The words "anticipate," "believe," "estimate," "expect," "intend," "plan" and similar expressions, as they relate to us, are intended to identify these forward-looking statements in this press release. Our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons, including risks associated with cyclicality and market conditions in the semiconductor or electronic industry; changes in our regulatory environment, including our ability to comply with new or stricter environmental regulations and to resolve environmental liabilities; demand for the outsourced semiconductor packaging, testing and electronic manufacturing services we offer and for such outsourced services generally; the highly competitive semiconductor or manufacturing industry we are involved in; our ability to introduce new technologies in order to remain competitive; international business activities; our business strategy; our future expansion plans and capital expenditures; the uncertainties as to whether we can complete the share exchange contemplated by a joint share exchange agreement between Siliconware Precision Industries Co., Ltd. and us; the strained relationship between the Republic of China and the People's Republic of China; general economic and political conditions; the recent global economic crisis; possible disruptions in commercial activities caused by natural or human-induced disasters; fluctuations in foreign currency exchange rates; and other factors. For a discussion of these risks and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including our 2016 Annual Report on Form 20-F filed on April 21, 2017.

Supplemental Financial Information


IC ATM Consolidated Operations


Amounts in NT$ Millions

3Q/17

2Q/17

3Q/16

Net Revenues

41,854

39,048

43,006

Revenues by Application




Communication

49%

48%

53%

Computer

10%

11%

12%

Automotive, Consumer & Others

41%

41%

35%


Packaging Operations


Amounts in NT$ Millions

3Q/17

2Q/17

3Q/16

Net Revenues

33,897

31,718

34,832

Revenues by Packaging Type




Bumping, Flip Chip, WLP & SiP

32%

31%

33%

IC Wirebonding

57%

58%

57%

Discrete and Others

11%

11%

10%

Capacity




CapEx (US$ Millions)*

84

161

112

Number of Wirebonders

16,083

16,118

15,905


Testing Operations


Amounts in NT$ Millions

3Q/17

2Q/17

3Q/16

Net Revenues

6,889

6,350

7,232

Revenues by Testing Type




Final test

79%

83%

75%

Wafer sort

18%

14%

21%

Engineering test

3%

3%

4%

Capacity




CapEx (US$ Millions)*

29

47

57

Number of Testers

3,739

3,796

3,725


EMS Operations


Amounts in NT$ Millions

3Q/17

2Q/17

3Q/16

Net Revenues

33,100

28,248

31,190

Revenues by End Application




Communication

45%

48%

51%

Computer

14%

17%

16%

Consumer

26%

20%

20%

Industrial

8%

8%

7%

Automotive

6%

6%

5%

Others

1%

1%

1%

Capacity




CapEx (US$ Millions)*

13

4

10


* Capital expenditure excludes building construction costs.


Advanced Semiconductor Engineering, Inc.

Summary of Consolidated Statement of Comprehensive Income Data

(In NT$ millions, except per share data)

(Unaudited)



For the three months ended


For the nine months ended



Sep. 30

2017


Jun. 30

2017


Sep. 30

2016


Sep. 30

2017


Sep. 30

2016


Net revenues:











Packaging

32,880


30,494


33,449


93,180


91,663


Testing

6,889


6,350


7,231


19,604


19,729


Direct Material

948


928


805


2,768


2,456


EMS

33,098


28,210


31,174


90,663


80,768


Others

63


44


125


240


3,140


Total net revenues

73,878


66,026


72,784


206,455


197,756













Cost of revenues4

(60,030)


(53,910)


(58,673)


(168,516)


(159,943)


Gross profit

13,848


12,116


14,111


37,939


37,813













Operating expenses:











Research and development

(2,986)


(2,952)


(2,947)


(8,701)


(8,300)


Selling, general and administrative4

(3,794)


(3,945)


(3,728)


(11,726)


(10,983)


Total operating expenses

(6,780)


(6,897)


(6,675)


(20,427)


(19,283)


Operating income

7,068


5,219


7,436


17,512


18,530













Net non-operating (expenses) income:











Interest expense - net

(350)


(365)


(478)


(1,150)


(1,536)


Foreign exchange gain (loss)

33


(201)


1,593


2,723


2,236


Gain (loss) on valuation of financial assets
and liabilities

598


800


(1,998)


(2,566)


(1,500)


Gain (loss) on equity-method investments4

323


253


454


405


1,098


Others

143


5,684


(137)


6,126


(504)


Total non-operating income (expenses)

747


6,171


(566)


5,538


(206)


Income before tax

7,815


11,390


6,870


23,050


18,324













Income tax expense

(1,083)


(3,207)


(976)


(5,176)


(3,817)


Income from continuing operations and
before non-controlling interest

6,732


8,183


5,894


17,874


14,507


Non-controlling interest

(396)


(336)


(392)


(1,132)


(821)













Net income attributable to
shareholders of the parent

6,336


7,847


5,502


16,742


13,686













Per share data:











Earnings (losses) per share











– Basic

NT$0.76


NT$0.97


NT$0.72


NT$2.08


NT$1.79


– Diluted

NT$0.69


NT$0.89


NT$0.64


NT$1.89


NT$1.50













Earnings (losses) per equivalent ADS











– Basic

US$0.125


US$0.160


US$0.113


US$0.340


US$0.276


– Diluted

US$0.115


US$0.148


US$0.101


US$0.310


US$0.231













Number of weighted average shares used in
diluted EPS calculation (in thousands)

8,624,804


8,604,623


8,252,369


8,266,095


8,272,939













Exchange rate (NT$ per US$1)

30.22


30.18


31.78


30.54


32.42


[4] As of September 30, 2017, we have completed the identification of the difference between the cost of the investment and our share of the net fair value of subsidiary and associates' identifiable assets and liabilities. Accordingly, we retrospectively adjusted the provisional amounts recognized at the acquisition dates in May , July and November 2016, respectively.

Advanced Semiconductor Engineering, Inc.

Summary of Consolidated Statement of Comprehensive Income Data - IC ATM

(In NT$ millions, except per share data)

(Unaudited)



For the three months ended


For the nine months ended



Sep. 30

2017


Jun. 30

2017


Sep. 30

2016


Sep. 30

2017


Sep. 30

2016


Net revenues:











Packaging

33,897


31,718


34,832


96,676


94,609


Testing

6,889


6,350


7,232


19,604


19,729


Direct Material

1,048


960


920


2,943


2,652


Others

20


20


22


64


63


Total net revenues

41,854


39,048


43,006


119,287


117,053













Cost of revenues4

(31,368)


(30,021)


(32,040)


(90,941)


(88,696)


Gross profit

10,486


9,027


10,966


28,346


28,357













Operating expenses:











Research and development

(2,123)


(2,113)


(2,130)


(6,236)


(6,073)


Selling, general and administrative4

(2,639)


(2,812)


(2,646)


(8,301)


(7,957)


Total operating expenses

(4,762)


(4,925)


(4,776)


(14,537)


(14,030)


Operating income

5,724


4,102


6,190


13,809


14,327













Net non-operating (expenses) income:











Interest expense - net

(416)


(443)


(525)


(1,357)


(1,705)


Foreign exchange gain (loss)

129


(162)


1,504


2,835


2,032


Gain (loss) on valuation of financial assets
and liabilities

365


522


(1,987)


(3,185)


(1,420)


Gain (loss) on equity-method investments4

1,249


5,410


1,284


7,260


3,577


Others

154


33


(152)


512


(425)


Total non-operating income (expenses)

1,481


5,360


124


6,065


2,059


Income before tax

7,205


9,462


6,314


19,874


16,386













Income tax expense

(784)


(1,541)


(719)


(2,895)


(2,514)


Income from continuing operations and
before non-controlling interest

6,421


7,921


5,595


16,979


13,872


Non-controlling interest

(85)


(74)


(93)


(237)


(186)













Net income attributable to
shareholders of the parent

6,336


7,847


5,502


16,742


13,686














Advanced Semiconductor Engineering, Inc.

Summary of Consolidated Statement of Comprehensive Income Data - EMS

(In NT$ millions, except per share data)

(Unaudited)



For the three months ended


For the nine months ended



Sep. 30

2017


Jun. 30

2017


Sep. 30

2016


Sep. 30

2017


Sep. 30

2016


Net revenues:











Total net revenues

33,100


28,248


31,190


90,711


80,864













Cost of revenues

(29,691)


(25,127)


(28,066)


(81,067)


(73,173)


Gross profit

3,409


3,121


3,124


9,644


7,691













Operating expenses:











Research and development

(877)


(859)


(841)


(2,516)


(2,293)


Selling, general and administrative

(1,101)


(1,126)


(1,053)


(3,328)


(2,969)


Total operating expenses

(1,978)


(1,985)


(1,894)


(5,844)


(5,262)


Operating income

1,431


1,136


1,230


3,800


2,429













Net non-operating (expenses) income:











Total non-operating income

235


366


224


818


492


Income before tax

1,666


1,502


1,454


4,618


2,921













Income tax expense

(293)


(284)


(249)


(880)


(535)


Income from continuing operations and
before non-controlling interest

1,373


1,218


1,205


3,738


2,386


Non-controlling interest

(338)


(289)


(289)


(940)


(601)













Net income attributable to

shareholders of the parent

1,035


929


916


2,798


1,785


Advanced Semiconductor Engineering, Inc.

Summary of Consolidated Balance Sheet Data

(In NT$ millions)

(Unaudited)




As of Sep. 30, 2017


As of Jun. 30, 2017






Current assets:





Cash and cash equivalents


38,975


43,891

Financial assets – current


3,989


4,138

Notes and accounts receivable


51,830


46,156

Inventories


37,266


42,818

Others


7,852


10,001

Total current assets


139,912


147,004






Financial assets – non current & Investments -
equity method


51,107


50,878

Property plant and equipment


136,982


140,378

Intangible assets


11,830


11,885

Prepaid lease payments


7,810


2,065

Others


12,358


4,413

Total assets


359,999


356,623






Current liabilities:





Short-term borrowings


19,638


14,209

Current portion of bonds payable


6,137


15,236

Current portion of long-term borrowings & capital
lease obligations


6,882


7,454

Notes and accounts payable


41,077


32,471

Others


28,665


43,765

Total current liabilities


102,399


113,135






Bonds payable


16,981


25,845

Long-term borrowings & capital lease obligations


32,908


28,823

Other liabilities


9,755


9,757

Total liabilities


162,043


177,560

Shareholders of the parent


185,160


166,838






Non-controlling interest


12,796


12,225

Total liabilities & shareholders' equity


359,999


356,623











Current Ratio


1.37


1.30

Net Debt to Equity


0.20


0.24











IR Contact:

Iris Wu, Manager
irissh_wu@aseglobal.com
Tel: +886.2.6636.5678
http://www.aseglobal.com

Grace Teng, Manager
grace_teng@aseglobal.com
Tel: +886.2.6636.5678

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SOURCE Advanced Semiconductor Engineering, Inc.