Business Context and Reporting Period
Company: Advanced Semiconductor Engineering, Inc. (ASE)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2009
Release Date: February 5, 2010
ASE is the world's largest independent provider of IC packaging and testing services. The financial data presented is unaudited and prepared in accordance with ROC GAAP.
Key Financial Metrics
Fourth Quarter 2009 (4Q09)
- Net Revenues: NT$26,293 million (Up 44% YoY, Up 4% QoQ)
- Net Income: NT$3,450 million (vs. Net Loss of NT$800 million in 4Q08)
- Diluted EPS: NT$0.66 (US$0.102 per ADS)
- Operating Income: NT$3,962 million
- Operating Margin: 15%
- Cash and Financial Assets: NT$27,578 million (as of Dec 31, 2009)
- Total Bank Debt: NT$63,040 million
- Current Ratio: 1.78
- Net Debt to Equity: 0.47
Full Year 2009
- Net Revenues: NT$85,775 million (Down 9% YoY)
- Net Income: NT$6,744 million (Up from NT$6,160 million in 2008)
- Diluted EPS: NT$1.29 (US$0.195 per ADS)
- Operating Income: NT$9,014 million
- Operating Margin: 11%
- Gross Margin: 21% (Down from 23% in 2008)
- Capital Expenditures: US$349 million
Material Changes vs. Prior Period
- Revenue Recovery: 4Q09 revenues surged 44% year-over-year, reversing the 9% full-year decline seen in 2009 compared to 2008.
- Profitability Turnaround: The company returned to profitability in 4Q09 with NT$3,450 million in net income, compared to a loss of NT$800 million in 4Q08.
- Margin Compression: Despite revenue growth, operating margins decreased slightly to 15% in 4Q09 from 16% in 3Q09. Full-year gross margin declined to 21% from 23% in 2008 due to higher depreciation relative to revenue.
- Cost Structure: Raw material costs as a percentage of revenue increased to 31% in 4Q09 from 30% in 3Q09. Depreciation expenses decreased 5% YoY.
- Debt Reduction: Total bank debt decreased to NT$63,040 million from NT$66,381 million in the prior quarter.
Guidance, Outlook, and Risks
Management Commentary:
- Segment Performance: IC packaging revenues grew 51% YoY, while testing revenues grew 19% YoY. Substrate operations saw a 53% YoY increase in output.
- Customer Concentration: The top five customers accounted for 27% of 4Q09 revenues; no single customer exceeded 10%.
- Capacity Expansion: Added 796 wirebonders and 51 testers in 4Q09. Capital spending focused on wirebonding and flip chip packaging.
Risks and Contingencies:
- Forward-Looking Statements: The filing includes a Safe Harbor notice regarding risks associated with semiconductor industry cyclicality, market conditions, and competition.
- Geopolitical and Economic Risks: Risks include the strained relationship between the Republic of China and the People's Republic of China, global financial crisis impacts, and foreign currency exchange rate fluctuations.
- Operational Risks: Potential disruptions from natural or human-induced disasters and the ability to integrate future mergers and acquisitions.
Investor Verification Checklist
- Verify the reconciliation of ROC GAAP financials to US GAAP standards, as this filing uses ROC GAAP.
- Confirm the sustainability of the 44% YoY revenue growth in 4Q09 against the 9% full-year decline.
- Monitor the trend in gross margins, which declined to 21% for the full year 2009.
- Review the composition of the NT$63,040 million bank debt and the utilization of the NT$67,319 million in unused credit lines.
- Assess the impact of the 31% raw material cost ratio on future profitability if input costs rise further.