“Chartered revenues and revenues including our share of SMP were up about 20 percent compared to the year ago period. Sequentially, Chartered revenues and revenues including our share of SMP were up about 10 percent, coming in above the high end of the guidance we had provided on March 14, 2008. Revenues from 90 nanometer (nm) and 65 nm, including both SOI and bulk technologies, grew approximately 10 percent compared to fourth quarter 2007, and represented 17 percent of our total business base revenues. We ended the quarter with a net income of $2 million, which included income related to a licensing arrangement,” said George Thomas, senior vice president and CFO of Chartered.
Summary of First Quarter 2008 Performance
- Revenues were $388.2 million in first quarter 2008, up 19.9 percent from $323.8 million in first quarter 2007. Revenues including Chartered’s share of SMP were $414.1 million, up 19.9 percent from $345.3 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. Sequentially, revenues were up 10.1 percent compared to $352.6 million in fourth quarter 2007. Revenues including Chartered’s share of SMP were up 9.6 percent from $377.8 million in fourth quarter 2007, 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 $64.6 million, or 16.6 percent of revenues, down from a gross profit of $71.8 million, or 22.2 percent of revenues in the year-ago quarter, primarily due to lower selling prices, partially offset by lower cost per wafer resulting from higher production volumes over which fixed costs are allocated. Gross profit was up 6.8 percent sequentially from $60.5 million, or 17.2 percent of revenues in fourth quarter 2007, primarily due to higher revenues resulting from higher shipments.
- Other revenue which primarily relates to rental income from SMP (Fab 5) was $5.6 million, essentially flat compared to the year-ago quarter.
- Research and development (R&D) expenses were $45.4 million, an increase of 21.0 percent from the year-ago quarter, primarily due to higher development activities related to the advanced 45nm technology node and higher payroll-related expenses.
- Sales and marketing expenses were $17.6 million, up 23.5 percent compared to $14.2 million in the year-ago quarter, primarily due to higher payroll-related expenses and higher financial support for pre-contract customer design validation activities. Compared to the previous quarter, sales and marketing expenses were up 11.3 percent from $15.8 million, primarily due to higher financial support for pre-contract customer design validation activities.
- General and administrative (G&A) expenses were $10.8 million, up 8.9 percent compared to $9.9 million in the year-ago quarter, primarily due to higher cost for external services.
- Equity in income of Chartered’s minority-owned joint-venture fab, SMP (Fab 5), was $9.9 million compared to $6.1 million in the year-ago quarter, primarily due to lower cost per wafer resulting from lower depreciation and higher production volumes over which fixed costs are allocated. Compared to the previous quarter, equity in income of SMP was up 10.5 percent from $9.0 million, primarily due to higher selling prices and a more favorable product mix.
- Other income (loss), net, was an income of $10.5 million, compared to a loss of $2.4 million in fourth quarter 2007, primarily due to the recognition of income arising from a technology licensing arrangement.
- Net interest expense was $10.6 million, compared to $8.1 million in the year-ago quarter, primarily due to lower interest income arising from lower interest rates and to a lesser extent lower principal balances. Compared to the previous quarter, net interest expense was up 30.5 percent from $8.1 million, primarily due to lower interest income arising from lower interest rates and to a lesser extent lower interest capitalization associated with the ramp of Fab 7.
- Net income for Chartered’s consolidated joint venture fab, Chartered Silicon Partners (CSP or Fab 6), was $8.6 million in first quarter 2008. Due to CSP ’ s cumulative losses, the obligation of its minority shareholders was reduced to zero in first quarter 2003 and none of its losses from that point forward have been allocated to the minority shareholders. When CSP subsequently becomes profitable, the profits applicable to the minority shareholders are taken to the consolidated statements of operations until the minority shareholders ’ share of losses previously taken to the consolidated statement of operations is fully recovered. As such, all of CSP ’ s $8.6 million income in first quarter 2008 was taken to Chartered ’ s consolidated statement of operations. At the end of first quarter 2008, CSP ’ s shareholders ’ deficit was $422.5 million.
- Net income was $2.4 million, or 0.6 percent of revenues, compared to a net income of $6.3 million, or 2.0 percent of revenues in the year-ago quarter and a net income of $5.9 million or 1.7 percent of revenues in the previous quarter.
- Basic loss per American Depositary Share (ADS) and basic loss per share in first quarter 2008 were ($0.00) and ($0.00) respectively, compared with basic earnings per ADS and basic earnings per share of $0.02 and $0.00 respectively in first quarter 2007. Diluted loss per ADS and diluted loss per share in first quarter 2008 were ($0.00) and ($0.00) respectively, compared with diluted earnings per ADS and diluted earnings per share of $0.02 and $0.00 respectively in first quarter 2007.
