-- All currency figures stated in this report are in US Dollars unless
stated otherwise.
-- The financial statement amounts in this report are determined in
accordance with US GAAP.
Overview:
* Sales increased to $388.3 million in 1Q07, up 10.6% from 1Q06 and up
1.2% sequentially.
* Gross margins of 9.5% in 1Q07 from 5.1% in 4Q06.
* Net income of $8.8 million in 1Q07, compared to a net loss of $9.6
million in 1Q06 and net income of $0.1 million in the previous quarter.
SHANGHAI, China, April 27 /Xinhua-PRNewswire-FirstCall/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) ("SMIC" or the "Company"), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended March 31, 2007. Sales increased 1.2% in the first quarter of 2007 to $388.3 million from $383.8 million in the fourth quarter of 2006. The Company reported a decrease in capacity to 177,150 8-inch equivalent wafers per month and a utilization rate of 86.2% in the first quarter of 2007. Gross margins were 9.5% in the first quarter of 2007 compared to 5.1% in the fourth quarter of 2006. Net income of $8.8 million in the first quarter of 2007, compared to a net loss of $9.6 million in the first quarter of 2006 and a net income of $0.1 million in the fourth quarter of 2006.
"SMIC posted quarterly revenues of $388.3 million dollars during the first quarter of 2007," said Dr. Richard Chang, Chief Executive Officer of SMIC. "Gross profit increased to $36.9 million in 1Q07 up 89.2% QoQ from $19.5 million in 4Q06. Management fees from the Wuhan and Chengdu managed projects contributed to the revenue while demonstrating our ability to continue to grow our business".
Despite operating in a difficult business environment, SMIC was able to grow its revenues through several channels this quarter. We have seen several orders come back from major customers. During the quarter, we have seen significant growth in orders from the Chinese local design companies, which accounts for 12.8% of the revenue in 1Q07 as compared to 8.8% in 4Q06. We expect continued growth in the business from the Chinese local design companies for the rest of this year.
We will continue to focus on sustainable profitability and strategically identify opportunities to enhance shareholder value in the company. We are currently on track with our technology roadmap with 65nm technology development making good progress.
In the second quarter of 2007, we believe the steady development of advanced technology nodes for leading customers along with additional logic orders and revenue from our peripheral businesses positions SMIC for continual growth in 2007."
Conference Call / Webcast Announcement
Date: April 27, 2007
Time: 10:00 a.m. Shanghai time
Dial-in numbers and pass code: U.S. 1-617-597-5342 or HK 852-3002-1672
(Pass code: SMIC).
A live webcast of the 2007 first quarter announcement will be available at http://www.smics.com under the "Investor Relations" section. An archived version of the webcast, along with a soft copy of this news release will be available on the SMIC website for a period of 12 months following the webcast.
About SMIC
SMIC (NYSE: SMI; SEHK: 981) is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in Mainland China, providing integrated circuit (IC) manufacturing service at 0.35mm to 90nm and finer line technologies. Headquartered in Shanghai, China, SMIC operates three 200mm fabs in Shanghai and one in Tianjin, and one 300mm fab in Beijing, the first of its kind in Mainland China. SMIC has customer service and marketing offices in the U.S., Italy, and Japan as well as a representative office in Hong Kong. For additional information, please visit http://www.smics.com .
Safe Harbor Statements
(Under the Private Securities Litigation Reform Act of 1995)
This press release may contain, in addition to historical information, "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements concerning SMIC's plans to develop its capabilities, build its China customer base and expand its capacity, anticipated decreases in depreciation expenses, the percentage of total wafer revenue expected to come from 90nm sales, SMIC's ability to grow and improve profitability in 2007, and statements under "Capex Summary" and "Second Quarter 2007 Guidance" are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of SMIC's senior management and involve significant risks, both known and unknown, uncertainties and other factors that may cause SMIC's actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks associated with cyclicality and market conditions in the semiconductor industry, intense competition, timely wafer acceptance by SMIC's customers, timely introduction of new technologies, SMIC's ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment, components and raw materials, availability of manufacturing capacity and financial stability in end markets.
Investors should consider the information contained in SMIC's filings with the U.S. Securities and Exchange Commission (SEC), including its annual report on 20-F, as amended, filed with the SEC on June 29, 2006, especially in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections, and its registration statement on Form A-1 as filed with the Stock Exchange of Hong Kong (SEHK) on March 8, 2004, and such other documents that SMIC may file with the SEC or SEHK from time to time, including on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on SMIC's future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. Except as required by law, SMIC undertakes no obligation and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Material Litigation
Overview of TSMC Litigation:
Beginning in December 2003 through August 2004, the Company became subject to several lawsuits brought by Taiwan Semiconductor Manufacturing Company, Limited ("TSMC") relating to alleged infringement of certain patents and misappropriation of alleged trade secrets relating to methods for conducting semiconductor fab operations and manufacturing integrated circuits.
On January 31, 2005, the Company entered into a settlement agreement, without admission of liability, which provided for the dismissal of all pending legal actions without prejudice between the two companies (the "Settlement Agreement"). The terms of the Settlement Agreement also included:
-- The Company and TSMC agreed to cross-license each other's patent
portfolio for all semiconductor device products, effective from
January 2005 through December 2010.
-- TSMC covenanted not to sue the Company for trade secret
misappropriation as alleged in TSMC's legal actions as it related to
.15um and larger processes subject to certain conditions ("TSMC
Covenant"). The TSMC Covenant did not cover .13um and smaller
technologies after 6 months following execution of the Settlement
Agreement (July, 31, 2005). Excluding the .13um and smaller
technologies, the TSMC Covenant remains in effect indefinitely,
terminable upon a breach by the Company.
-- The Company is required to deposit certain Company materials relating
to .13um and smaller technologies into an escrow account until December
31, 2006 or under certain circumstances for a longer period of time.
-- The Company agreed to pay TSMC an aggregate of $175 million in
installments of $30 million for each of the first five years and $25
million in the sixth year.
Accounting under the Settlement Agreement:
Current Accounting
In accounting for the Settlement Agreement, the Company determined that there were several components of the Settlement Agreement -- settlement of litigation, TSMC Covenant, patents licensed by us to TSMC and the use of TSMC's patent license portfolio both prior and subsequent to the settlement date.
The Company does not believe that the settlement of litigation, TSMC Covenant or patents licensed by us to TSMC qualify as accounting elements. In regard to the settlement of litigation, the Company cites the following:
-- The Settlement Agreement expressly stated that there was no admission
of liability by either party;
-- The Settlement Agreement required all parties to bear their own legal
costs;
-- There were no damages recited in, or associated with, the Settlement
Agreement;
-- There was a provision in the Settlement Agreement for a grace period to
resolve any misappropriation issues had they existed;
-- Albeit a complaint had been filed by TSMC on trade secret infringement,
TSMC has never identified which trade secrets it claimed were being
infringed upon by the Company;
-- The Settlement Agreement was concluded when the litigation process was
still at a relatively early stage and the outcome of the litigation
was therefore highly uncertain.
The TSMC Covenant does not qualify as a separable asset in accordance with either SFAS 141 of SFAS 142 as TSMC had never specified or identified which trade secrets it claimed were misappropriated, the Company's belief that TSMC's alleged trade secrets may be obtained within the marketplace by other legal means and the Company never obtained the legal right to use TSMC's trade secrets.
In addition, the Company did not attribute any value to the patents licensed to TSMC under the Settlement Agreement due to the limited number of patents held by the Company at the time of the Settlement Agreement.
As a result, the Company determined that only the use of TSMC's patent license portfolio prior and subsequent to the settlement date were considered elements of an arrangement for accounting purposes. In attributing value to these two elements, the Company first discounted the payment terms of the $175 million settlement amount using an annual 3.4464% interest rate to arrive at a net present value of $158 million. This amount was then allocated to the pre- and post-settlement periods based on relative fair value, as further described below.
Based on this approach, $16.7 million was allocated to the pre-settlement period, reflecting the amount that the Company would have paid for use of the patent license portfolio prior to the date of the Settlement Agreement. The remaining $141.3 million, representing the relative fair value of the licensed patent license portfolio, was recorded on the Company's consolidated balance sheets as a deferred cost and is being amortized over a six-year period, which represents the life of the licensed patent license portfolio. The amortization of the deferred cost is included as a component of cost of sales in the consolidated statements of operations.
Valuation of Deferred Cost:
The fair value of the patent license portfolio was calculated by applying the estimated royalty rate to the specific revenue generated and expected to be generated from the specific products associated with the patent license portfolio.
-- The selected royalty rate was based on the review of median and mean
royalty rates for the following categories of licensing arrangements:
-- Existing third-party license agreements with SMIC;
-- The analysis of comparable industry royalty rates related to
semiconductor chip/integrated circuit ("IC") related technology;
and
-- The analysis of comparable industry royalty rates related to
semiconductor fabrication.
On an annualized basis, the amounts allocated to past periods was lower than that allocated to future periods as the Company assumed increases in revenues relating to the specific products associated with the patent license portfolio.
As the total estimated fair value of the patent license portfolio exceeded the present value of the settlement amount, the Company allocated the present value of the settlement amount based on the relative fair value of the amounts calculated prior and subsequent to the settlement date.
Recent TSMC Legal Developments:
On August 25, 2006, TSMC filed a lawsuit against the Company and certain subsidiaries (SMIC (Shanghai), SMIC (Beijing) and SMIC (Americas) in the Superior Court of the State of California, County of Alameda for alleged breach of the Settlement Agreement, alleged breach of promissory notes and alleged trade secret misappropriation by the Company. TSMC seeks, among other things, damages, injunctive relief, attorneys' fees, and the acceleration of the remaining payments outstanding under the Settlement Agreement.
In the present litigation, TSMC alleges that the Company has incorporated TSMC trade secrets in the manufacture of the Company's 0.13 micron or smaller process products. TSMC further alleges that as a result of this claimed breach, TSMC's patent license is terminated and the covenant not to sue is no longer in effect with respect to the Company's larger process products.
The Company has vigorously denied all allegations of misappropriation. Moreover, TSMC has not yet proven, nor produced evidence of, any trade secret misappropriation by the Company. At present, the claims rest as unproven allegations, denied by the Company. The Court has made no finding that TSMC's claims are valid, nor has it set a trial date.
On September 13, 2006, the Company announced that in addition to filing a response strongly denying the allegations of TSMC in the United States lawsuit, it filed on September 12, 2006, a cross-complaint against TSMC seeking, among other things, damages for TSMC's breach of contract and breach of implied covenant of good faith and fair dealing.
On November 16, 2006, the High Court in Beijing, the People's Republic of China, accepted the filing of a complaint by the Company and its wholly-owned subsidiaries, SMIC (Shanghai) and SMIC (Beijing), regarding the unfair competition arising from the breach of bona fide (i.e. integrity, good faith) principle and commercial defamation by TSMC ("PRC Complaint"). In the PRC Complaint, the Company is seeking, among other things, an injunction to stop TSMC's infringing acts, public apology from TSMC to the Company and compensation from TSMC to the Company, including profits gained by TSMC from their infringing acts.
In March 2007, the California Court denied TSMC's motion to enjoin the PRC action. TSMC has appealed this ruling to the California Court of Appeal.
Under the provisions of SFAS 144, the Company is required to make a determination as to whether or not this pending litigation represents an event that requires a further analysis of whether the patent license portfolio has been impaired. We believe that the lawsuit is at a very early stage and we are still evaluating whether or not the litigation represents such an event. The Company expects further information to become available to us, which will aid us in making a determination. The outcome of any impairment analysis performed under SFAS 144 might result in a material impact to our financial position and results of operations.
Change of Accounting Estimate
With effect from the first quarter of 2007, the Company has changed the estimated useful life of fab-related machinery and equipment in the computation of annual depreciation. This change has an effect on the Company's gross profit and gross margin. Previously, we used a five-year straight-line depreciation method. We consider the previous useful life estimate overly conservative in light of the expected economic life of the equipment. We have changed the useful life estimate to a five to seven year range, which is consistent with industry practice and more accurately reflect the economics associated with the ownership of the equipment.
Summary of First Quarter 2007 Operating Results
Amounts in US$ thousands, except for EPS and operating data
1Q07 4Q06 QoQ 1Q06 YoY
Sales 388,284 383,813 1.2% 351,138 10.6%
Cost of sales 351,345 364,339 -3.6% 313,654 12.0%
Gross profit 36,940 19,474 89.7% 37,484 -1.5%
Operating expenses 21,722 5,762 277.0% 44,335 -51.0%
Income (Loss) from operations 15,218 13,712 11.0% (6,852) --
Other income (expenses)，net (12,187) (16,468) -26.0% (7,806) 56.1%
Income tax credit (expense) 5,964 3,002 98.7% (14) --
Net income (loss) after
income taxes 8,995 246 3556.5% (14,671) --
Minority interest 977 941 3.8% 947 3.2%
Share of loss of affiliate
company (1,212) (1,044) 16.1% (1,059) 14.4%
Income (loss) attributable to
holders of ordinary shares
8,760 143 6025.9% (9,628) --
Operating margin 3.9% 3.6% -2.0%
Net income (loss) per ordinary
share - basic(1) 0.0005 0.0000 (0.0005)
Net income (loss) per ADS -
basic 0.0237 0.0004 (0.0263)
Net income (loss) per ordinary
share - diluted(1) 0.0005 0.0000 (0.0005)
Net income (loss) per ADS -
diluted 0.0234 0.0004 (0.0263)
Wafers shipped (in 8"
wafers)(2) 450,592 424,395 6.2% 388,010 16.1%
ASP(3) $904 -4.6% $905 -4.8%
Capacity utilization 86.2% 86.6% 94.9%
Note:
(1) Based on weighted average ordinary shares of 18,451 million (basic)
and 18,706 million (diluted) in 1Q07, 18,398 million (basic) and
18,609 million (diluted) in 4Q06 and 18,278 million in 1Q06
(2) Including copper interconnects
-- Sales increased slightly to $388.3 million in 1Q07, up 1.2% QoQ from
$383.8 million in 4Q06 and up 10.6% YoY from $351.1 million in 1Q06.
-- Cost of sales decreased to $351.3 million in 1Q07, down 3.6% QoQ from
$364.3 million in 4Q06, primarily due to lower depreciation expense.
-- Amortization of deferred cost associated with TSMC settlement has been
reclassified to a component of cost of sales from operating expenses
for all periods presented. Such reclassification has reduced the gross
margin by 1.5% for 1Q07 and 4Q06.
-- Gross profit increased to $36.9 million in 1Q07, up 89.7% QoQ from
$19.5 million in 4Q06 and down 1.5% YoY from $37.5 million in 1Q06.
-- Gross margin increased to 9.5% in 1Q07 from 5.1% in 4Q06 primarily due
to higher management service fees and lower depreciation expense.
-- Total operating expenses increased to $21.7 million in 1Q07 from $5.8
million, an increase of 277.0% QoQ, primarily due to lower operating
income recorded in 1Q07 from the sale of properties.
-- R&D expenses remained flat in 1Q07.
-- G&A expenses increased to $17.1 million in 1Q07 from $14.6 million in
4Q06 primarily due to an increase in general and administrative costs
related to legal fees and tax increases.
-- Selling & marketing expenses decreased to $3.9 million in 1Q07, down
17.7% QoQ from $4.7 million in 4Q06, primarily due to a decrease in
engineering material expenses associated with selling activities.
Analysis of Revenues
Sales Analysis
By Application 1Q07 4Q06 3Q06 2Q06 1Q06
Computer 33.0% 36.3% 33.0% 30.6% 36.0%
Communications 41.3% 40.1% 37.1% 46.2% 45.8%
Consumer 18.3% 19.3% 25.2% 18.6% 13.3%
Others 7.4% 4.3% 4.7% 4.6% 4.9%
By Device 1Q07 4Q06 3Q06 2Q06 1Q06
Logic (including copper interconnect) 58.2% 57.4% 65.4% 66.6% 62.8%
DRAM 34.7% 38.6% 30.1% 28.8% 32.4%
Other (mask making & probing, etc.) 7.1% 4.0% 4.5% 4.6% 4.8%
By Customer Type 1Q07 4Q06 3Q06 2Q06 1Q06
Fabless semiconductor companies 47.1% 36.1% 36.9% 49.8% 41.8%
Integrated device manufacturers (IDM) 43.2% 55.8% 50.4% 41.9% 52.8%
System companies and others 9.7% 8.1% 12.7% 8.3% 5.4%
By Geography 1Q07 4Q06 3Q06 2Q06 1Q06
North America 40.6% 36.3% 38.6% 46.7% 43.5%
Asia Pacific (ex. Japan) 24.2% 20.0% 25.4% 20.9% 21.3%
Japan 9.9% 11.3% 7.5% 4.9% 3.3%
Europe 25.2% 32.4% 28.5% 27.5% 31.9%
Wafer Revenue Analysis
By Technology (logic, DRAM & copper
interconnect only) 1Q07 4Q06 3Q06 2Q06 1Q06
0.09um 14.4% 14.4% 4.9% 0.9% --
0.13um 38.1% 43.0% 41.2% 46.6% 46.6%
0.15um/0.18um 37.0% 35.7% 43.3% 42.7% 44.4%
0.25um 0.7% 1.6% 2.6% 2.0% 1.6%
0.35um 9.8% 5.3% 8.0% 7.8% 7.4%
By Logic Only(1) 1Q07 4Q06 3Q06 2Q06 1Q06
0.09um 10.0% 14.7% 4.6% 0.2% --
0.13um(2) 17.6% 14.0% 11.1% 22.3% 13.3%
0.15um/0.18um 54.8% 59.0% 67.1% 63.0% 72.2%
Note:
(1) Excluding 0.13um copper interconnects
(2) Represents revenues generated from manufacturing full flow wafers
Capacity
Fab / (Wafer Size) 1Q07* 4Q06*
Shanghai Mega Fab (8")(1) 98,000 106,000
Beijing Mega Fab (12")(2) 57,150 56,250
Tianjin Fab (8") 22,000 20,000
Total monthly wafer
fabrication capacity 177,150 182,250
Note:
* Wafers per month at the end of the period in 8" wafers
(1) Shanghai Mega Fab is now comprised of Fab 1, Fab 2, and Fab 3
(2) Beijing Mega Fab is now comprised of Fab 4, Fab 5, and Fab 6
-- As of the end of 1Q07, monthly capacity decreased to 177,150 8-inch
equivalent wafers due to the asset disposal from SMIC to Chengdu
Cension.
Shipment and Utilization
8" equivalent wafers 1Q07 4Q06 3Q06 2Q06 1Q06
Wafer shipments including
copper interconnects 450,592 424,395 413,985 388,498 388,010
Utilization rate(1) 86.2% 86.6% 84.3% 93.5 % 94.9%
Note:
(1) Capacity utilization based on total wafer out divided by estimated
capacity
-- Wafer shipments increased to 450,592 units of 8-inch equivalent wafers
in 1Q07 up 6.2% QoQ from 424,395 units of 8-inch equivalent wafers in
4Q06, and up 16.1% YoY from 388,010 8-inch equivalent wafers in 1Q06.
Detailed Financial Analysis
Gross Profit Analysis
Amounts in US$ thousands 1Q07 4Q06 QoQ 1Q06 YoY
Cost of sales 351,345 364,339 -3.6% 313,654 12.0%
Depreciation 185,707 210,045 -11.6% 189,054 -1.8%
Other manufacturing costs 159,752 148,407 7.6% 118,714 34.6%
Deferred Cost Amortization 5,886 5,886 -- 5,886 --
Gross Profit 36,940 19,474 89.7% 37,484 -1.5%
Gross Margin 9.5 % 5.1 % -- 10.7% --
-- Cost of sales decreased to $351.3 million in 1Q07, down 3.6 % QoQ from
$364.3 million in 4Q06, primarily due to lower depreciation expense.
-- Amortization of deferred cost associated with TSMC settlement has been
reclassified to a component of cost of sales from operating expenses
for all periods presented. Such reclassification has reduced the gross
margin by 1.5% for 1Q07 and 4Q06.
-- Gross profit increased to $36.9 million in 1Q07, up 89.7% QoQ from
$19.5 million in 4Q06 and down 1.5% YoY from $37.5 million in 1Q06.
-- Gross margin increased to 9.5% in 1Q07 from 5.1% in 4Q06. This was
primarily due to higher management service fees and lower depreciation
expense.
Operating Expense Analysis
Amounts in US$ thousands 1Q07 4Q06 QoQ 1Q06 YoY
Total operating expenses 21,722 5,762 277.0% 44,335 -51.0%
Research and development 21,733 21,913 -0.8% 20,593 5.5%
General and administrative 17,087 14,563 17.3% 11,749 45.4%
Selling and marketing 3,893 4,729 -17.7% 5,970 -34.8%
Amortization of intangible
assets 6,229 6,291 -1.0% 6,023 3.4%
Income from disposal of
properties (27,221) (41,734) -34.8% 1 0.0%
-- Total operating expenses increased to $21.7 million in 1Q07 from $5.8
million, an increase of 277.0% QoQ primarily due to lower operating
income from the disposal of properties in 1Q07.
-- R&D expenses remained flat in 1Q07.
-- G&A expenses increased to $17.1 million in 1Q07 from $14.6 million in
4Q06, primarily due to an increase in general and administrative costs
related to legal fees and tax increases.
-- Selling & marketing expenses decreased to $3.9 million in 1Q07, down
17.7% QoQ from $4.7 million in 4Q06, primarily due to a decrease in
engineering material expenses associated with selling activities.
Other Income (Expenses)
Amounts in US$ thousands 1Q07 4Q06 QoQ 1Q06 YoY
Other income (expenses) (12,187) (16,468) -26.0% (7,806) 56.1%
Interest income 1,972 3,311 -40.4% 4,595 -57.1%
Interest expense (15,003) (14,263) 5.2%(12,201) 23.0%
Other, net 844 (5,516) -- (200) --
-- Other non-operating loss of $12.2 million in 1Q07 as compared to a loss
of $16.5 million in 4Q06, primarily to foreign exchange gain associated
with non-operating activities during the quarter relative a loss
recorded in the previous quarter.
-- Interest income fell to $2.0 million in 1Q07 from $3.3 million in 4Q06
due to lower average cash balance held during the quarter.
-- Interest expenses of $15.0 million in 1Q07, up 5.2% QoQ from $14.3
million in 4Q06.
Liquidity
Amounts in US$ thousands 1Q07 4Q06
Cash and cash equivalents 341,704 363,620
Short term investments 79,830 57,950
Accounts receivable 288,027 252,185
Inventory 237,619 275,179
Others 128,080 100,732
Total current assets 1,075,260 1,049,666
Accounts payable 237,135 309,129
Short-term borrowings 43,000 71,000
Current portion of long-term debt 170,839 170,797
Others 138,758 126,436
Total current liabilities 589,732 677,362
Cash Ratio 0.6x 0.5x
Quick Ratio 1.2x 1.0x
Current Ratio 1.8x 1.5x
Capital Structure
Amounts in US$ thousands 1Q07 4Q06
Cash and cash equivalents 341,704 363,620
Short-term investment 79,830 57,951
Current portion of promissory note 29,493 29,242
Promissory note 78,267 77,602
Short-term borrowings 43,000 71,000
Current portion of long-term debt 170,839 170,797
Long-term debt 719,697 719,571
Total debt 933,536 961,368
Net cash (619,762) (646,641)
Shareholders' equity 3,022,697 3,007,420
Total debt to equity ratio 30.9% 32.0%
Cash Flow
Amounts in US$ thousands 1Q07 4Q06
Net income (loss) 8,760 143
Depreciation & amortization 173,370 245,365
Amortization of acquired intangible assets 6,229 6,291
Net change in cash (21,916) (191,706)
Capex Summary
-- Capital expenditures for 1Q07 was $90.9 million.
-- Total planned capital expenditures for 2007 will be approximately $720
million and will be adjusted based on market conditions.
Second Quarter 2007 Guidance
The following statements are forward looking statements which are based on current expectation and which involve risks and uncertainties, some of which are set forth under "Safe Harbor Statements" above.
-- Revenues expected to remain flat from the first quarter.
-- Depreciation and amortization expected to be approximately $185 million
to $190 million.
-- Capital expenditures expected to be approximately $450 million to $510
million.
-- Operating expense as a percentage of sales expected to be in the mid-
teens.
Recent Highlights and Announcements
-- Announcement of 2006 annual results (2007-4-24)
-- Postponement of meeting of Board of Directors (2007-3-29)
-- SMIC Participates in SEMICON China 2007 (2007-3-21)
-- SMIC and Cascade Microtech Partner to Establish New Mixed-signal RFIC
Design Service Lab in Shanghai (2007-3-15)
-- SMIC and Agilent Technologies Joint Establish RFIC Test Lab Shanghai
(2007-03-14)
-- SMIC reports results for the Three Months Ended Dec 31th, 2006
(2007-1-31)
-- SMIC(BJ) Passes QC 080000 System Audit (2007-1-9)
-- SMIC Announcement on "Unusual Moment in Trading Volume" (2007-1-3)
Please visit SMIC's website at
http://www.smics.com/website/enVersion/Press_Center/pressRelease.jsp
for further details regarding the recent announcements.
Semiconductor Manufacturing International Corporation
CONSOLIDATED BALANCE SHEET
(In US dollars)
As of the end of
March 31, 2007 December 31, 2006
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $341,703,889 $363,619,731
Short term investments 79,829,802 57,950,603
Accounts receivable, net of
allowances of $3,924,775 and
$4,048,845 at March 31, 2007
and at Dec31, 2006, respectively 288,026,530 252,184,975
Inventories 237,619,469 275,178,952
Prepaid expense and other
current assets 17,161,431 20,766,945
Receivable for sale of
manufacturing equipments 110,136,499 70,544,560
Assets held for sale 781,985 9,420,729
Total current assets 1,075,259,605 1,049,666,495
Land use rights, net 38,005,628 38,323,333
Plant and equipment, net 3,149,255,434 3,244,400,822
Acquired intangible assets, net 65,866,883 71,692,498
Deferred cost, net 88,296,594 94,183,034
Equity investment 12,408,090 13,619,643
Other long-term prepayments 3,748,557 4,119,433
Deferred tax assets 31,356,917 25,286,900
TOTAL ASSETS $4,464,197,708 $4,541,292,158
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $237,134,879 $309,129,198
Accrued expenses and other
current liabilities 109,059,238 97,121,231
Short-term borrowings 43,000,000 71,000,000
Current portion of promissory
note 29,492,873 29,242,001
Current portion of long-term debt 170,839,010 170,796,968
Income tax payable 206,071 72,417
Total current liabilities 589,732,071 677,361,815
Long-term liabilities:
Promissory note 78,267,417 77,601,657
Long-term debt 719,697,029 719,570,905
Long-term payables relating to
license agreements 15,733,116 20,326,283
Other long-term payables -- --
Deferred tax liabilities 246,695 210,913
Total long-term liabilities 813,944,257 817,709,758
Total liabilities $1,403,676,328 $1,495,071,573
Minority interest 37,824,139 38,800,666
Stockholders' equity:
Ordinary shares，$0.0004 par
value, 50,000,000,000
shares authorized, shares
issued and outstanding
18,470,365,166 and
18,432,756,463 at 2007Q1
and 2006 respectively 7,388,146 7,373,103
Warrants 32,387 32,387
Additional paid-in capital 3,295,215,798 3,288,733,078
Accumulated other comprehensive
income 111,027 91,841
Accumulated deficit (280,050,117) (288,810,490)
Total stockholders' equity 3,022,697,241 3,007,419,919
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $4,464,197,708 $4,541,292,158
Semiconductor Manufacturing International Corporation
CONSOLIDATED STATEMENT OF OPERATIONS
(In US dollars)
For the three months ended
March 31, 2007 December 31, 2006
(unaudited) (unaudited)
Sales $388,284,436 $383,812,708
Cost of sales 351,344,670 364,338,733
Gross profit 36,939,766 19,473,975
Operating expenses:
Research and development 21,733,055 21,913,465
General and administrative 17,087,309 14,562,807
Selling and marketing 3,893,369 4,728,691
Litigation settlement -- --
Amortization of acquired
intangible assets 6,228,616 6,290,991
Income from sale of plant and
equipment and other fixed
assets (27,220,665) (41,733,713)
Total operating expenses 21,721,684 5,762,241
Income from operations 15,218,082 13,711,734
Other income (expenses):
Interest income 1,971,672 3,311,293
Interest expense (15,003,379) (14,263,257)
Foreign currency exchange gain
(loss) 428,279 (7,091,494)
Other income (expenses), net 416,621 1,575,094
Total other income (expenses), net (12,186,807) (16,468,364)
Net income (loss) before income tax 3,031,275 (2,756,630)
Income tax credit (expense) 5,964,124.00 3,002,499
Minority interest 976,527.00 940,520
Loss from equity investment (1,211,553.00) (1,043,727)
Net income attributable to holders
of ordinary shares $8,760,373 $142,662
Net income per share, basic 0.0005 0.0000
Net income per ADS, basic 0.0237 0.0004
Net income per share, diluted 0.0005 0.0000
Net income per ADS, Diluted 0.0234 0.0004
Ordinary shares used in calculating
basic income per ordinary share (in
millions) 18,451 18,398
Ordinary shares used in calculating
diluted income per ordinary share
(in millions) 18,706 18,609
Semiconductor Manufacturing International Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS
(In US dollars)
For the three months ended
March 31, 2007 December 31, 2006
(Unaudited) (Unaudited)
Operating activities
Net income 8,760,373 142,662
Adjustments to reconcile net income
to net cash provided
by (used in) operating activities:
Minority interest (976,527) (940,520)
Gain on disposal of plant and
equipment (27,220,665) (41,733,713)
Depreciation and amortization 173,370,422 245,364,902
Amortization of acquired intangible
assets 6,228,615 6,290,991
Share-based compensation 4,996,846 5,632,158
Non cash interest expense on
promissory notes 1,207,020 1,365,080
Loss from equity investment 1,211,553 1,043,728
Changes in operating assets and
liabilities:
Accounts receivable, net (35,841,556) 13,337,566
Inventories 37,559,483 (31,222,108)
Prepaid expense and other current
assets 8,328,368 (2,753,096)
Accounts payable (6,657,095) 27,419,295
Accrued expenses and other current
liabilities 18,951,309 (17,425,744)
Other long term liabilities (3,333,333) (3,333,334)
Income tax payable 133,654 32,542
Deferred tax assets (6,070,017) (3,272,506)
Deferred tax liabilities 35,782 210,913
Net cash provided by operating
activities 180,684,232 200,158,816
Investing activities:
Purchase of plant and equipment (157,728,647) (278,677,400)
Proceeds from government grant to
purchase plant and equipment -- 2,208,758
Proceeds from disposal of plant and
equipment 1,823,994 532,214
Proceeds received from sale of
assets held for sale 3,963,708 1,609,274
Purchases of acquired intangible
assets (2,468,200) (4,327,949)
Purchase of short-term investments (48,838,238) (60,729,572)
Sale of short-term investments 26,959,039 55,208,572
Net cash used in investing
activities (176,288,344) (284,176,103)
Financing activities:
Proceeds from short-term borrowing 2,000,000 31,000,000
Proceeds from long-term debt 168,165
Repayment of promissory notes (15,000,000)
Repayment of long-term debt -- (119,931,070)
Repayment of short-term debt (30,000,000) (5,000,000)
Payment of loan initiation fee
Proceeds from exercise of employee
stock options 1,500,918 1,296,973
Repurchase of restricted ordinary
shares 14,589
Net cash provided by (used in)
financing activities (26,330,917) (107,619,508)
Effect of exchange rate changes 19,187 (69,110)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (21,915,842) (191,705,905)
CASH AND CASH EQUIVALENTS,
beginning of period 363,619,731 555,325,636
CASH AND CASH EQUIVALENTS, end of
period 341,703,889 363,619,731
For more information, please contact:
Peter Yu
Tel: +86-21-5080-2000 x11319
Mobile: +86-139-1894-0553
Email: peter_yu@smics.com
Douglas Hsiung
Tel: +86-21-5080-2000 x 12804
Mobile: +86-137-9527-2240
Email: douglas_hsiung@smics.com
Deborah Hom
Tel: +86-21-5080-2000 x11967
Mobile: +86-139-1775-4411
Email: deborah_hom@smics.com
