PSi Technologies Reports Fourth Quarter 2004 Results

PSi Technologies Reports Fourth Quarter 2004 Results


SOUTH SAN FRANCISCO, Calif. and MANILA, Philippines, Feb. 15
 /PRNewswire-FirstCall/ -- PSi Technologies Holdings, Inc., (NASDAQ:PSIT), a
leading independent provider of assembly and test services for the power
semiconductor market, today announced financial results for the third quarter
ended December 31, 2004:

   Highlights

   *  Revenue of $18.1 million, a decrease of (17.4)% on a
      quarter-over-quarter basis, and an increase of 1.1% on year-over-year
      basis.

   *  Gross margin of (1.5)%, versus 5.5% in the previous quarter and
      6.5% in 4Q03.

   *  Operating loss margin, excluding China related expenses, of
      (13.4)% versus (5.8)% in the previous quarter and (5.0)% in the same
      period last year.  Operating loss margin, including China related
      expenses, was (16.5)% in 4Q04 versus (10.9)% in 3Q04 and (5.0)% in
      4Q03.

   *  EBITDA margin, excluding China related expenses, of 8.8%, versus
      12.5% in the previous quarter and 16.3% in 4Q03.

   *  Fully diluted EPS of $(0.23) per share, versus EPS of
      $(0.17) per share in the previous quarter and $(0.07) in 4Q03.

   Fourth Quarter Financial Results


Revenues for the fourth quarter of 2004 totaled $18.1 million, a (17.4)%
sequential decline compared to $21.9 million in the previous quarter, and a
1.1% increase compared to $17.9 million in revenues for the fourth quarter of
2003.  Revenues from the top 5 customers of the Company were $15.0 million, a
(21.0)% decline compared to $19.0 million in the previous quarter, and a 2.6%
increase over the same period last year.

The Company's largest customers for the fourth quarter (in alphabetical order)
were Infineon Technologies, ON Semiconductor, Philips and ST Microelectronics. 
Products packaged for those customers are used in a variety of end user
applications, with particular focus on automotive systems, consumer
electronics, communications equipment, industrial applications, home appliances
and PC motherboards.

Sales of power semiconductor packages comprised 96.4% of fourth quarter
revenues, or $17.4 million, a 17.0% sequential decline versus $21.0 million in
the previous quarter, and a 2.8% increase compared to the same period last
year.

"Looking back at the quarter, our results were a reflection of challenging
conditions that resulted in the deterioration of PSi's loadings as the quarter
progressed," said Arthur J. Young, Jr., Chairman and CEO.  "This progression
was a direct result of the reduced sales volumes and softer than expected
demand of our customers' end markets, causing a further pullback in orders as
customers aggressively reduced inventories and adjusted for anticipated
seasonality during the first quarter."

Cost of goods sold declined by (11.2)% on a sequential basis, due primarily to
the lower rate of decline in fixed costs -- specifically, fixed depreciation
expenses -- relative to the decline in revenues.  Gross profit margin was
(1.5)% in the fourth quarter, versus 5.5% in the third quarter and 6.5% in the
same period last year.

"While we were successful in reducing variable costs by (15.1)% and removing
$437.4 thousand in labor and other fixed costs during the quarter, depreciation
as a component of COGS increased by 2.5%, leading to a (4.6)% sequential
reduction in our fixed costs," said Young."

Operating expenses, excluding China and freight related costs, declined by
(13.1)% during the quarter, due to tighter cost controls.  Operating loss for
the fourth quarter was $(2.9) million, compared to $(2.4) million in the
previous quarter.  Operating loss margin was (16.5)%, compared to (10.9)% in
the previous quarter and (5.0)% in the year ago period.

EBITDA margin was 6.1% for the fourth quarter, down from 7.3% in the previous
quarter.

Fourth quarter net loss was $(3.8) million or $(0.23) per diluted share,
compared to $(2.8) million in the previous quarter or $(0.17) per diluted
share.

Full Year Financial Results

Revenues for the full year were higher by 1.6% to $78.2 million, compared to
revenue of $76.9 million in 2003.

Gross profit margin was 3.5%, versus 2.3% in 2003.  The increase in gross
profit margin is attributable to improved manufacturing efficiencies, better
usage of supplies and chemicals, deployment of labor and reduction of other
fixed costs.

Operating expenses excluding asset impairment charges, were higher by 26.1% to
$10.8 million, due to $2.3 million in China expenses incurred during the year. 
Excluding this, operating expenses would have been lower by (0.6)% against the
previous quarter, to $8.5 million.  Operating loss excluding asset impairment
charge and other special charges would have decreased to $(5.8) million, from a
$(6.8) million operating loss in 2003.

Full year net loss was $(14.9) million versus $(21.0) million in 2003. The net
loss figure includes asset impairment charges of $12.9 million and $4.4 million
for 2003 and 2004, respectively, that were incurred after a review of
long-lived assets determined that the carrying amount of such assets may not be
recoverable based on estimated undiscounted future cash flows to be generated
by the assets.  A further $0.7 million charge representing the amortization of
the existing $4 million Exchangeable Note's embedded conversion feature was
incurred in 2004.  Such amortization has increased the carrying amount of the
Exchangeable Note as shown in the Long-term liability line item in the Balance
Sheet.

China

PSi Chengdu currently has eight production lines installed in China, with four
lines allocated for SOT78, two lines for SOT82, one for SOT186B and another for
SOT399.  All of the SOT78 & SOT82 lines in Chengdu have been given production
release by Philips, and we are building risk build lots for SOT186B.

Another SOT78 line is scheduled for transfer in February.

For the quarter, PSi incurred $0.6 million in China related expenses,
equivalent to 3.1% of consolidated sales.  Excluding these expenses, PSi's
operating loss would have been $(2.4) million, versus $ (1.3) million in the
previous quarter.  Net loss for the fourth quarter would have been $(3.3)
million or ($0.20) per diluted share.  Net loss margin would have been (18.0)%.

Balance Sheet Highlights

Cash and cash equivalents totaled $1.9 million on December 31, 2004, versus
$0.9 million at the end of 2003.

The Company spent $13.3 million in capital expenditures, including $2.6 million
for China.  This was offset by $11.6 million in cash generated from operating
activities and $3.1 million in cash generated from financing activities.

We have made progress in disposing and realizing values on unutilized assets
and equipment by entering into a contract on January 28, 2005 to sell our
unutilized third site in Laguna to an unrelated Philippine corporation in the
business of commercial and industrial property development and leasing, for
$2.5 million.  Of this amount, $1 million was paid upon the signing of the
agreement, with the balance payable every 6 months in six equal payments.
Because of this transaction, we have written down the carrying value of such
properties by recognizing an asset impairment charge in 2004 amounting to $0.9
million.  We are still in discussion with third parties for the disposal of
other unutilized properties and equipments.

The Long-term liability account of $1.6 million as of December 31, 2004
represents the carrying amount of the Exchangeable Note raised in July 2003,
net of the amortization of discount representing the embedded conversion
feature of the Note.

As of December 31, 2004, PSi is in violation of two loan covenants relating to
its $10 million Receivable Financing Facility from the Singapore Branch of
Raiffeisen Zentralbank Osterreich (RZB-Austria).  The loan covenants were
established in 2002, prior to the asset impairment charges of 2003, and require
the maintenance of a 1:1 current ratio and a minimum stockholders' equity,
including $1.6 million Long-term liability account, of not less than $50
million, with which we are not in compliance.  Without the non-cash asset
impairment charges incurred in 2003 and 2004, our stockholders equity including
the $1.6 million Long-term liability account relating to the Senior
Subordinated Exchangeable Note issued in 2003, would have been $59.9 million.
On December 31, 2004, RZB-Austria waived the violations and extended the
Facility to December 2005, subject to a review in the first quarter and the
possibility of a capital injection from our major shareholder in 2005.

As of December 31, 2004, tangible book value was $3.08 per share on 13,289,525
outstanding shares, or $2.44 per share on a fully diluted basis.

Business Outlook

Commenting on the Company's business outlook and going-forward strategies,
Young said: "Today, existing customer loadings appear to be recovering from
their lows."

The Company is also undertaking the following initiatives to address
profitability:

   1.  Increase research and development emphasis on more advanced packages
       such as PowerQFN and powermite and allocate a larger portion of
       capital expenditures to support these emerging businesses.  The
       PowerQFN family of packages is expected to represent a new source of
       growth for PSi.  To this end, we signed a multi-year patent
       licensing agreement in December 2004 that allows PSi to practice
       under Amkor's portfolio of MicroLeadframe(R) patents and will grant
       Amkor access to the intellectual property being developed by PSi
       related to its PowerQFN technology;

   2.  Conduct a package portfolio review to determine additional measures
       to improve the profitability of loss-making and marginal packages,
       including the substitution to lower cost materials and suppliers,
       reduction in packaging costs through strategic and China sourcing,
       sale of capacity to non-IDM customers, and negotiated price
       increases with existing customers;

   3.  Set the Philippine business up to consistently make profits at lower
       run-rates and mitigate the impact of a sudden and unanticipated
       decline in revenues as had occurred in the fourth quarter, through
       further reductions in manpower and other fixed and administrative
       expenses;

   4.  Grow PSi Chengdu into a self-sustaining and independent business
       unit through the completion of the transfer of remaining
       manufacturing lines from Philips and the ramp up of volumes towards
       capacity;

   5.  To execute the above, we are strengthening management and
       re-assigning responsibilities and accountabilities through the:

       a.  Appointment of a Chief Operating Officer to plan, oversee and
           manage the day-to-day operations of PSi's three main
           manufacturing facilities.  We will make a formal announcement of
           such appointment in the coming months;

       b.  Appointment of Mr. Ruffy Granada for Senior Vice President for
           Sales, Marketing and Customer Service.  Mr. Granada was formerly
           Amkor's Executive Director for Sales & Customer Service.
           Mr. Granada has been given the mandate of diversifying PSi's
           customer base and managing business relationships for consistent
           profitability and market share growth.

   Conference Call and Webcast


Company management will hold a conference call to discuss its fourth quarter
2004 operating results on Tuesday, February 15, 2005, at 5:00 p.m. Eastern/2:00
p.m. Pacific.  Interested parties should call 800-218-0713 (for domestic
callers) or 303-262-2052 (for international callers) at least 5 minutes before
start time, and ask the operator for the PSi conference call.  A live webcast
will also be available through http://www.companyboardroom.com/, and the
Investor Relations section of the Company's website at
http://www.psitechnologies.com/.

A replay of the conference call will be available at 800-405-2236 (for domestic
callers) and 303-590-3000 (for international callers) through February 22,
2005; the access code is 11023587.  The webcast replay will be available for 90
days.

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 Fairchild
Semiconductor, 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.:
   Edison G. Yap, CFA
   (63 917) 894 1335
   

   At Financial Relations Board:
   Amy Cozamanis
   [phone]
   

  Safe Harbor Statement


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, those relating 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.

                     PSi Technologies Holdings, Inc.
                          Unaudited Income Statement
                               (In US Dollars)

                             3 Months                    12 Months
                                                  Unaudited      Audited
                       31-Dec-04    31-Dec-03     31-Dec-04     31-Dec-03

  Sales               $18,087,852  $17,895,277   $78,196,111   $76,932,587

  Cost of Sales       $18,356,510  $16,738,526   $75,457,606   $75,172,428

  Gross Profit          $(268,658)  $1,156,751    $2,738,505    $1,760,159

  Operating Expense
    Research and
     Development         $222,892     $275,040      $942,254      $722,857
    Stock compensation
     cost                 $59,988      $59,988      $239,953      $239,953
    Administrative
     Expenses          $1,674,075   $1,553,029    $6,572,738    $6,846,354
    Special Charges                               $4,436,594   $12,895,769
    China Expenses       $569,105          $--    $2,287,355           $--
    Marketing Expenses   $195,777     $168,173      $767,190      $762,071
      Subtotal         $2,721,837   $2,056,231   $15,246,084   $21,467,004

  Operating Profit/
   (Loss)             $(2,990,496)   $(899,480) $(12,507,579) $(19,706,845)

  Other Income/
   (Charges)            $(830,672)   $(310,894)  $(2,559,264)  $(1,458,618)

  Loss before
   Income Tax         $(3,821,168) $(1,210,374) $(15,066,843) $(21,165,463)

  Provision for
   (Benefit From)
   Income Tax                $508                     $1,527     $(172,781)

  Loss before
   Minority Interest  $(3,821,676) $(1,210,374) $(15,068,370) $(20,992,682)

  Minority Interest          $(16)     $(3,671)     $205,960      $(10,840)

  Net Loss            $(3,821,692) $(1,214,046) $(14,862,409) $(21,003,522)

  EBITDA                1,098,360   $2,922,839     7,674,354     8,433,597

  No. of Shares
   Fully Diluted       16,767,786   16,767,786    16,767,786    16,767,786

  EPS                       (0.23)       (0.07)        (0.89)        (1.25)



                       PSi Technologies Holdings, Inc.
                    Unaudited Consolidated Balance Sheet
                               (In US Dollars)

                                               31-Dec-04         31-Dec-03
   ASSETS                                      Unaudited          Audited
      Cash & Cash Equivalents                  1,862,069           935,792
      Accounts Receivable                     11,803,098        11,454,512
      Inventories                              8,141,131         5,868,621
      Prepaid Expenses & Tax Credits             494,097         1,779,705
    Total Current Assets                      22,300,396        20,038,630
    Property Plant & Equipment - Net          63,468,827        68,408,783
    Investment & Advances                        143,719           143,343
    Other Assets                               1,492,542         1,000,993
   TOTAL ASSETS                               87,405,483        89,591,749

   LIABILITIES & STOCKHOLDER'S EQUITY
      Accounts Payable and Other Expenses     23,211,512        15,466,239
      Accounts Payable CAPEX                   5,726,212         3,967,002
      Bank Loans                              11,800,000         8,600,000
      Trust Receipts                           3,237,411         2,348,943
      Current Portion of Long-term Debt          885,928         1,630,604
      Current Portion of Obligation under
       Capital Lease                              32,021           135,403
    Total Current Liabilities                 44,893,084        32,148,191
   Long-term liability (net of current)        1,564,306         1,649,884
   Obligation Under Capital Leases (net
    of current)                                       --            17,163
   TOTAL LIABILITIES                          46,457,389        33,815,239
   Minority Interest                             (26,467)          179,493
   Equity
     Subtotal Equity                          72,038,923        71,798,970
     Subtotal Retained Earnings              (31,064,362)      (16,201,953)
   TOTAL EQUITY                               40,974,561        55,597,017

   TOTAL LIABILITIES & S'HOLDERS' EQUITY      87,405,483        89,591,749



                       PSi Technologies Holdings, Inc.
                Unaudited Consolidated Statement of Cash Flows
                               (In US Dollars)
                                                                 For the 12
                                                               Months ended
                                                                 31-Dec-04
  CASH FLOWS FROM OPERATING ACTIVITIES                                   --
    Net Income                                                  (14,862,409)
    Adjustments to reconcile net income to net cash
     provided by operating activities:
        Minority interest                                          (205,960)
        Equity in net loss (gain) of an investee 2002
        Stock compensation cost                                     239,953
        Depreciation and amortization                            15,546,963
        Loss on Asset Impairment                                  4,436,594
        Provision for (benefit from) deferred income tax
        Equity in net loss (gain) of an investee
     Change in assets and liabilities:
      Decrease (increase) in:
              Accounts receivables                                 (348,586)
              Inventories                                        (2,272,510)
              Other Current Assets and tax credit receivable      1,285,608
      Increase (decrease) in:
              Accounts payable and other expenses                 7,745,273
  Net cash provided by operating activities                      11,564,925

  CASH FLOWS FROM INVESTING ACTIVITIES
    Additions to property and equipment                         (13,284,391)
     Proceeds from sale of Property & Equipment                          --
    Decrease (increase) in investments and advances                    (376)
    Decrease (increase) in other assets                            (491,549)
  Net cash used in investing activities                         (13,776,316)

  CASH FLOWS FROM FINANCING ACTIVITIES
    Net availment/(payments) of short-term loans                  3,200,000
    Trust receipts and acceptances payable                          888,468
    Net availment/(payments) of stock issuance cost                      --
    Net availment/(payments) of long term loan                     (830,255)
    Net availment/(payments) of obligation under capital leases    (120,545)
  Net cash provided by (used in) financing activities             3,137,668

  NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              926,277

  CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD              935,792

  CASH AND CASH EQUIVALENTS AT END OF PERIOD                      1,862,069

  SUPPLEMENTAL INFORMATION ON NONCASH FINANCING & INVESTING ACTIVITIES
        Property and equipment acquired (paid)
         on account under accounts payable                        1,759,210


DATASOURCE: PSi Technologies Holdings, Inc.



CONTACT:  Edison G. Yap, CFA of PSi Technologies Holdings, Inc.,

(63 917) 894 1335, ; or Amy Cozamanis of Financial

Relations Board, [phone], , for

PSi Technologies Holdings, Inc.



Web site:  http://www.psitechnologies.com/ 

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