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

TAIPEI, Taiwan, April 28, 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$66,551 million for the first quarter of 2017 (1Q17), up by 7% year-over-year and down by 14% sequentially. Net income attributable to shareholders of the parent for the quarter totaled NT$2,569 million, down from a net income attributable to shareholders of the parent of NT$3,882 million in 1Q16 and down from a net income attributable to shareholders of the parent of NT$7,965 million in 4Q16.  Basic earnings per share for the quarter were NT$0.33 (or US$0.054 per ADS), compared to basic earnings per share of NT$0.51 for 1Q16 and NT$1.04 for 4Q16. Diluted earnings per share for the quarter were NT$0.30 (or US$0.047 per ADS), compared to diluted earnings per share of NT$0.40 for 1Q16 and NT$0.88 for 4Q16.

RESULTS OF OPERATIONS

1Q17 Results Highlights -- Consolidated

• Net revenue contribution from packaging operations, testing operations, EMS operations, substrates sold to third parties and others, each represented approximately 45%, 10%, 44%, 1% and 0%, respectively, of total net revenues for the quarter.
• Cost of revenue was NT$54,573 million for the quarter, down from NT$61,751 million in 4Q16.
• Raw material cost totaled NT$31,285 million for the quarter, representing 47% of total net revenues
• Labor cost totaled NT$8,857 million for the quarter, representing 13% of total net revenues.
• Depreciation, amortization and rental expenses totaled NT$6,937 million for the quarter.
• Gross margin decreased 1.9 percentage points to 18.0% in 1Q17 from 19.9% in 4Q16.
• Operating margin was 7.9% in 1Q17 compared to 10.5% in 4Q16.
• In terms of non-operating items:
• Net interest expense was NT$435 million.
• Net foreign exchange gain of NT$2,891 million was primarily attributable to the depreciation of the U.S. dollar against the NT dollar.
• Loss on valuation of financial assets and liabilities was NT$3,964 million.
• Net loss on equity-method investments was NT$162 million, including NT$54 million of the share of loss from our investment in Siliconware Precision Industries Co., Ltd.
• Other net non-operating income of NT$299 million were primarily related to miscellaneous income.  Total non-operating expenses for the quarter was NT$1,371 million.
• Income before tax was NT$3,857 million for 1Q17, compared to NT$9,669 million in 4Q16. We recorded income tax expenses of NT$886 million for the quarter, compared to NT$1,274 million in 4Q16.
• In 1Q17, net income attributable to shareholders of the parent was NT$2,569 million, compared to net income attributable to shareholders of the parent of NT$3,882 million in 1Q16 and net income attributable to shareholders of the parent of NT$7,965 million in 4Q16.
• Our total number of shares outstanding at the end of the quarter was 8,273,546,046, including treasury stock owned by our subsidiaries. Our 1Q17 basic earnings per share of NT$0.33 (or US$0.054 per ADS) were based on 7,700,388,418 weighted average number of shares outstanding in 1Q17. Our 1Q17 diluted earnings per share of NT$0.30 (or US$0.047 per ADS) were based on 7,931,316,437 weighted average number of shares outstanding in 1Q17.

1Q17 Results Highlights -- IC ATM^[2]

• Cost of revenues was NT$29,550 million for the quarter, down by 7% sequentially.
• Raw material cost totaled NT$8,698 million for the quarter, representing 23% of total net revenues
• Labor cost totaled NT$7,750 million for the quarter, representing 20% of total net revenues.
• Depreciation, amortization and rental expenses totaled NT$6,454 million for the quarter.
• Gross margin decreased 3.8 percentage points to 23.0% in 1Q17 from 26.8% in 4Q16.
• Operating margin was 10.4% in 1Q17 compared to 14.7% in 4Q16.

1Q17 Results Highlights -- EMS

• Cost of revenues for the quarter was NT$26,249 million, down by 15% sequentially.
• Raw material cost totaled NT$22,631 million for the quarter, representing 77% of total net revenues.
• Labor cost totaled NT$1,097 million for the quarter, representing 4% of total net revenues.
• Depreciation, amortization and rental expenses totaled NT$502 million for the quarter.
• Gross margin increased to 10.6% in 1Q17 from 10.4% in 4Q16.
• Operating margin increased to 4.2% in 1Q17 from 4.8% in 4Q16.

LIQUIDITY AND CAPITAL RESOURCES

• Capital expenditures in 1Q17 totaled US$155 million, of which US$120 million were used in packaging operations, US$31 million in testing operations, US$3 million in EMS operations and US$1 million in interconnect materials operations.
• As of March 31, 2017, total unused credit lines amounted to NT$183,034 million.
• Current ratio was 1.38 and net debt to equity ratio was 0.30 as of March 31, 2017.
• Total number of employees was 66,164 as of March 31, 2017, compared to 66,711 as of December 31, 2016.

Business Review

Packaging Operations^[3]

• Gross margin for our packaging operations during the quarter was 20.7%, down by 3.4 percentage points from 4Q16.
• Capital expenditures for our packaging operations amounted to US$120 million for the quarter, of which US$78 million were used in purchases of wafer bumping and flip chip packaging equipment, and US$42 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$1,759 million during the quarter, up from NT$1,806 million in 4Q17.
• Gross margin for our testing operations amounted to 33.4% during the quarter, down by 5.0 percentage points from 4Q16.
• Capital expenditures for our testing operations amounted to US$31 million during the quarter.

EMS Operations

• Gross margin for our EMS operations amounted to 10.6% during the quarter, up by 0.2 percentage points from 4Q16.
• Capital expenditures for our EMS operations amounted to US$3 million during the quarter.

Substrate Operations

• PBGA substrate manufactured by ASE amounted to NT$2,090 million for the quarter, down by NT$81 million, or by 4% from 4Q16. Of the total output of NT$2,090 million, NT$892 million was from sales to external customers.
• Gross margin for substrate operations was 12.0% for the quarter, down by 1.8 percentage points from 4Q16.
• In 1Q17, our internal substrate manufacturing operations supplied 27% (by value) of our total substrate requirements.

Customers
IC ATM consolidated Basis

• Our five largest customers together accounted for approximately 31% of our total net revenues in 1Q17, compared to 33% in 4Q16. No customer accounted for more than 10% of our total net revenues in 1Q17.
• Our top 10 customers contributed 47% of our total net revenues for the quarter, compare to 50% in 4Q16.
• Our customers that are integrated device manufacturers or IDMs accounted for 36% of our total net revenues for the quarter, compared to 35% in 4Q16.

EMS Basis

• Our five largest customers together accounted for approximately 81% of our total net revenues in 1Q17, compared to 83% in 4Q16.  One customer accounted for more than 10% of our total net revenues in 1Q17.
• Our top 10 customers contributed 90% of our total net revenues during the quarter, compared to 91% in 4Q16.

ASE-SPIL TRANSACTION UPDATE

• ASE and SPIL submitted the required materials to the Taiwan Fair Trade Commission (the "TFTC") on July 29, 2016 and the TFTC issued a no objection letter in respect of the transaction.
• ASE and SPIL submitted the required materials to the Ministry of Commerce of the People's Republic of China ("MOFCOM") on August 25, 2016.  MOFCOM formally accepted the parties' notification materials on December 14, 2016. On April 12, 2017, ASE received MOFCOM's notice extending its review to Phase III review.
• The parties are continuing to cooperate with the U.S. Federal Trade Commission's ("FTC") investigation, and are working toward a goal of successfully completing the investigation as soon as possible.

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

• IC ATM 2Q17 business and gross margin should both be similar to previous quarter;
• EMS 2Q17 business should be similar to the average of 2Q16 and 3Q16 levels;
• EMS 2Q17 gross margin should be similar to previous quarter.

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 athttp://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

Packaging Operations

Testing Operations

EMS Operations

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SOURCE Advanced Semiconductor Engineering, Inc.