MANILA, Philippines, Oct. 20 /PRNewswire-FirstCall/ -- PSi Technologies Holdings, Inc., (Pink Sheets: PSITY), an independent provider of assembly and test services for the power semiconductor market, today announced financial results for the third quarter ended September 30, 2008.
Third Quarter Financial Results
The third quarter revenue totaled $24.8 million, an increase of 8.3% compared to $22.9 million in the second quarter of 2008, and an increase of 10.2% as compared to the same quarter in 2007. The sequential increase in sales compared to the second quarter was largely driven by a steady month-to-month increase in the Company's standard package for high power, medium current and fast-switching power devices. These are commonly used for home appliances, office and industrial equipment, and personal and consumer electronic applications.
The top five customers for the third quarter of 2008 (in alphabetical order) were Infineon Technologies, NXP Semiconductors, ON Semiconductors, Power Integrations, and ST Microelectronics. The products assembled and tested for these customers are used in various end user applications, such as automotive systems, consumer electronics, communications equipment, industrial applications, home appliances and PC motherboards.
The cost of sales remained flat at $21.7 million in the third quarter of 2008, even with an increase in sales volume in the third quarter as compared to second quarter of 2008. As a percentage of sales, our cost of sales improved to 87.6% of sales in the third quarter, down from 94.7% of sales in the second quarter of 2008 and from 94.8% of sales in the third quarter of 2007.
The cost of sales remaining flat despite the increase in sales volume for third quarter of 2008 is attributable to the cost reduction initiatives focused on raw materials usage, manpower deployment and management, energy conservation projects and supplies and overhead expenses.
The increase in sales, together with the cost of sales remaining flat in the third quarter of 2008, resulted to a 152% increase in gross profit, from $1.2 million in the second quarter to $3.1 million in the third quarter of 2008. Compared to the same period in 2007, gross profit grew by 163%.
Total operating expenses of $2.4 million in the third quarter of 2008 were higher by 7.6% as compared to $2.2 million in the second quarter. The increase in operating expenses is due to an increase in marketing and administrative related activities covering new markets and new packages. We achieved an income from operations of $0.7 million in the third quarter of 2008, from a loss from operations of $1.0 million in the second quarter of 2008 primarily due to the improvement in our gross profit. Income (loss) from operations improved by 164% as compared to the second quarter of 2008.
Net other expense increased to $0.6 million from $0.4 million in the second quarter of 2008 due to lower foreign exchange gain recognized in the third quarter of 2008.
Due to improved operating results, we recorded a net income of $42,000 as compared to a net loss of $1.4 million in the second quarter of 2008, an improvement of $1.5 million, or 103%.
Balance Sheet Highlights
Cash and cash equivalents totaled $0.6 million as of September 30, 2008, compared to $3.4 million as of December 31, 2007. The decrease in cash and cash equivalents is largely attributable to the increase in payments for purchases of raw materials driven by the increase in sales volume and the acquisition of equipment. As of September 30, 2008 and December 31, 2007, cash held in escrow amounting to $1.3 million and $1.1 million, respectively, was restricted for withdrawal and is classified as "Restricted Cash" in the consolidated balance sheet. Other current and non-current assets increased due to various deposits to suppliers of raw materials and equipments.
New acquisitions of property, plant and equipment totaled $2.9 million for the first nine months of 2008, mostly related to the purchase of machinery and equipment to improve capacity and support ramp up for new products.
Total current liabilities increased by $5.0 million, from $37.4 million as of December 31, 2007 to $42.5 million as of September 30, 2008, mainly due to the reclassification as current liability of our 2005 Exchangeable Senior Subordinated Note which will mature on June 1, 2009.
As of December 31, 2007, the 2003 Exchangeable Senior Subordinated Note (the "2003 Note") was classified as current liability in the Company's consolidated balance sheet. The 2003 Note issued to Merrill Lynch LLC was amended to mature on July 31, 2008, and subsequently amended again to mature on August 15, 2008. All other terms and conditions remained the same. On August 15, 2008, the 2003 Note was amended to mature on June 1, 2009. The August 15, 2008, amendment, dated August 15, 2008, increases the principal amount of the 2003 Note from $4 million to $5.7 million. The 2003 Note is issued by the Company's principal operating subsidiary, and it accrues interest at 10% per year, net of Philippine withholding tax. The 2003 Note is exchangeable into the Company's common stock at a price equal to $0.2682 per share, the average price per share of the publicly traded ADS for a 90 consecutive days trading period prior to August 15, 2008. On June 1, 2009, Merrill Lynch LLC may redeem the note together with the accrued interest and any unpaid interest.
Business Outlook
Commenting on PSi's business outlook, Arthur J. Young, Jr., Chairman and CEO said, "The third quarter reversed the Net Loss to a modest Net Income, and I am happy that improvements were visible in all aspects of our business. Continuous cost savings in our direct and indirect materials and labor complemented the sales volume increase from last quarter, thereby contributing to a positive net income. While the current market condition continues to remain uncertain, we are taking measures to further drive efficiencies in all aspects of our business. Our continuing activities towards expanding our customer base and entry into new markets with our high power voltage family of packages is intended to help cushion the market weakness and volatility in the coming quarters."
In addition, George A. Shaw, COO commented, "In this quarter, the company continued to effectively address costs. We achieved good improvement in our overall labor cost, which has been reduced through elimination and consolidation of some indirect positions and through operational improvements in direct labor. The ongoing work to improve our materials cost has also helped to offset continued increases in commodity prices such as copper and plastic resins used in our product. The company's Quality First emphasis has continued to have benefits in improved product quality to our customers and remains a priority initiative for the company. Growth in new products continued as we added capacity for the single gauge DPAK that went into production at the end of the second quarter of 2008. Six customer qualifications were successfully completed on the company's Power QFN package, and additional capacity for the QFN will be installed in the fourth quarter of 2008 to accommodate the growth in this package. First mechanical samples of our new SOT 227 High Voltage package were completed and shipped to the customer, with qualification expected to be completed in the fourth quarter of 2008."
About PSi Technologies
PSi Technologies is a focused independent semiconductor assembly and test service provider to the power semiconductor market. The Company provides comprehensive package design, assembly and test services for power semiconductors used in telecommunications and networking systems, computers and computer peripherals, consumer electronics, electronic office equipment, automotive systems and industrial products. Their customers include most of the major power semiconductor manufacturers in the world such as Infineon Technologies, ON Semiconductor, Philips Semiconductor, and ST Microelectronics. For more information, visit the Company's web site at http://www.psitechnologies.com/ or call:
At PSi Technologies Holdings, Inc.:
Larry Cajucom
(63 2) 838 4489
lvcajucomjr @psitechnologies.com.ph
At Financial Relations Board:
Lasse Glassen
(213) 486 6546
This press release contains forward-looking statements that involve risks and uncertainties. Actual results and outcomes may differ materially. Factors that might cause a difference include, but are not limited to, the pace of development and market acceptance of PSi's products and the power semiconductor market generally, commercialization and technological delays or difficulties, the impact of competitive products and technologies, competitive pricing pressures, manufacturing risks, the possibility of our products infringing patents and other intellectual property of third parties, product defects, costs of product development, manufacturing and government regulation, risks inherent in emerging markets, including but not limited to, currency volatility and depreciation, restricted access to financing and political and social unrest and the possibility that the initiatives described herein may not produce the intended results. PSi undertakes no responsibility to update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect PSi's financial results is included in the documents PSi files from time to time with the Securities and Exchange Commission.
-Financial Tables Follow- PSi Technologies Holdings, Inc. Unaudited Income Statement (In US Dollars) For the Three Months Ended For the Nine Months Ended 30-Sep-08 30-Jun-08 30-Sep-07 30-Sep-08 30-Sep-07 Unaudited Unaudited Unaudited Unaudited Unaudited REVENUES $24,804,867 $22,897,981 $22,502,430 $69,161,350 $69,856,734 COST OF SALES 21,734,692 21,678,534 21,335,464 64,518,132 66,556,075 GROSS PROFIT 3,070,175 1,219,447 1,166,966 4,643,218 3,300,659 OPERATING EXPENSES Research and development 378,606 397,350 308,405 1,106,664 834,460 Administrative expenses 1,714,374 1,606,729 1,832,910 5,307,491 5,200,273 Marketing expenses 321,532 239,191 223,628 757,104 678,141 Total Operating Expenses 2,414,512 2,243,270 2,364,943 7,171,259 6,712,874 INCOME (LOSS) FROM OPERATIONS 655,663 (1,023,823) (1,197,977) (2,528,042) (3,412,215) Interest and bank charges-net (244,684) (144,694) (262,954) (624,534) (852,280) Foreign exchange gains(losses) -net 208,498 447,891 (123,317) 502,425 (729,097) Lease income 41,370 41,370 41,370 124,110 124,110 Exchangeable Note interest and financing charges (675,382) (732,827) (638,130) (2,124,258) (1,868,038) Gain on disposal of assets 23,578 (33,719) - (6,241) - Miscellaneous 33,017 36,428 33,451 88,703 81,702 Net Other Expense (613,603) (385,551) (949,580) (2,039,796) (3,243,603) NET INCOME (LOSS) $42,060 $(1,409,374)$(2,147,557) $(4,567,838) $(6,655,818) No. of Shares Out- standing 13,289,525 13,289,525 13,289,525 13,289,525 13,289,525 EPS- based on Outstanding Shares $0.00 $(0.11) $(0.16) $(0.34) $(0.50) PSi Technologies Holdings, Inc. Unaudited Consolidated Balance Sheet (In US Dollars) 30-Sep-08 31-Dec-07 Unaudited Audited ASSETS Current Assets Cash and cash equivalents $625,967 $3,414,322 Restricted cash 1,304,722 1,096,376 Accounts receivable-net 13,830,047 12,752,236 Inventories-net 6,838,051 4,477,486 Other current assets-net 1,576,948 438,430 Total Current Assets 24,175,735 22,178,850 Noncurrent Assets Property, plant and equipment-net 22,165,503 26,723,243 Other noncurrent assets-net 1,471,478 876,565 Total Noncurrent Assets 23,636,981 27,599,808 $47,812,716 $49,778,658 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $24,177,090 $21,647,112 Accounts payable CAPEX 636,720 425,120 Loans Payable 9,150,000 10,020,000 Exchangeable notes 8,499,675 4,816,349 Advance from customer - 466,503 Trust receipts payable - 52,520 Total Current Liabilities 42,463,485 37,427,604 Noncurrent Liabilities Noncurrent portion of exchangeable notes - 2,027,347 Accrued retirement benefit cost 1,063,080 1,475,276 Total Noncurrent Liabilities 1,063,080 3,502,623 Stockhoders' Equity Capital stock-Philippine peso 1-2/3 par value Authorized-37,058,100 shares Issued and outstanding-13,289,525 shares 590,818 590,818 Additional paid-in capital 79,427,132 79,421,574 Other comprehensive loss 280,257 280,257 Deficit (76,012,056) (71,444,218) Total Stockholders' Equity 4,286,151 8,848,431 $47,812,716 $49,778,658 PSi Technologies Holdings, Inc Unaudited Consolidated Statement of Cash Flows (In US Dollars) For the Nine Months Ended September 30, 2008 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(4,567,838) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 7,494,676 Stock compensation costs 5,558 Amortization of debt issuance costs and discount 886,296 Interest on exchangeable notes converted to principal 788,786 Accretion of interest receivable from Manila Electric Company (17,779) Unrealized foreign exchange gain (405,604) Provision for pension expense 279,489 Loss on disposal of inventories 71,689 Loss on disposal on property and equipment 6,241 Changes in operating assets and liabilities: Decrease (increase) in: Trade and other receivables (1,553,924) Inventories (2,432,254) Other current assets (1,157,294) Decrease in trade and other payables 1,955,975 Net cash provided by (used in) operating activities 1,354,017 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of property and equipment (2,306,457) Increase in other noncurrent assets (702,689) Net cash used in investing activities (3,009,146) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from (payments of) trust receipts payable (870,000) Net proceeds from (payments of) loans payable (52,520) Increase in restricted cash (208,347) Net cash provided by financing activities (1,130,867) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (2,359) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,788,355) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,414,322 CASH AND CASH EQUIVALENTS, END OF PERIOD $625,967 SUPPLEMENTAL INFORMATION ON NONCASH INVESTING AND FINANCING ACTIVITIES Property and equipment acquired on account under accounts payable $636,720
