<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ACT OF 1934
For the period ended September 30, 2000
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 333-91641
CHIPPAC, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 77-0463-48
State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
3151 Coronado Drive
Santa Clara, California 95054
Address of Principal Executive Offices (Zip Code)
(408) 486-5900
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-
Indicate the number of shares of the issuer's class of common stock, as of the
latest practical date:
Class Outstanding as of September 30, 2000
-------------------------------------------------------------------------------
Class A Common stock, $.01 par value 68,469,829
Class B Common stock, $.01 par value 0
<PAGE>
ChipPAC INC
Part I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets................. 3
Unaudited Condensed Consolidated Statements of Operations....... 4
Unaudited Condensed Consolidated Statements of Cash Flows....... 5
Notes to Unaudited Condensed Consolidated Financial Statements.. 6
Item 2. Management's Discussion and Analysis of Financial Condition....... 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 20
Part II -- OTHER INFORMATION
Item 1. Legal Proceedings................................................ 20
Item 2. Changes in Securities and Use of Proceeds........................ 20
Item 3. Defaults Upon Senior Securities.................................. 21
Item 4. Submission of Matters to a Vote of Security Holders.............. 21
Item 5. Other Information................................................ 21
Item 6. Exhibits and Reports on Form 8-K................................. 22
Signatures............................................................... 25
<PAGE>
ChipPAC Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 30,818 $ 32,117
Receivable from shareholder -- 11,662
Accounts receivable 57,004 30,003
Inventories 19,808 17,497
Deferred taxes 622 775
Prepaid expenses and other current assets 9,732 2,386
--------- ---------
Total currrent assets 117,984 94,440
Property, plant and equipment, net 320,523 226,931
Other assets 31,421 22,058
--------- ---------
Total assets $ 469,928 $ 343,429
Liabilities and Equity
Current liabilities:
Accounts payable $ 49,211 $ 52,208
Accrued expenses and other liabilities 31,467 27,208
Short-term debt 29,810 --
Current portion of long-term debt 10,800 4,800
--------- ---------
Total current liabilities 121,288 84,216
--------- ---------
Long-term debt, less current portion 279,490 295,200
Other long-term liabilities 6,179 3,929
--------- ---------
Total liabilities 406,957 383,345
--------- ---------
Mandatorily redeemable preferred stock -- 82,970
--------- ---------
Shareholders' and divisional equity
Common stock 685 407
Warrants-common stock 1,250 1,250
Additional paid in capital-common stock 272,266 86,410
Divisional equity, net of capital (167,714) (167,714)
distributions
Receivable from shareholders (1,565) (1,128)
Accumulated deficit (51,120) (51,280)
Accumulated other comprehensive income 9,169 9,169
--------- ---------
Total shareholders' and divisional equity 62,971 (122,886)
--------- ---------
Total liabilities and equity $ 469,928 $ 343,429
========= =========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 3
<PAGE>
ChipPAC Inc.
Condensed Consolidated Statements Of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
September 30 September 30 September 30 September 30
2000 1999 2000 1999
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $155,795 $101,270 $362,243 $267,671
Costs & expenses:
Cost of sales 120,227 84,479 280,113 227,778
Selling, general &
administrative 9,667 5,075 24,007 14,407
Research & development 2,839 2,640 7,981 8,628
Change of control expenses -- 11,850 -- 11,850
--------- -------- -------- --------
Total costs and expenses 132,733 104,044 312,101 262,663
--------- -------- -------- --------
Income from operations 23,062 (2,774) 50,142 5,008
Interest & other income, net (10,134) (6,440) (25,475) (8,939)
Other non-operating expenses (Note 8) (8,000) (8,000)
--------- -------- -------- --------
Income (loss) before income taxes 4,928 (9,214) 14,667 (3,931)
(Provision) benefit for income taxes (984) 5,043 (2,930) 2,095
--------- -------- -------- --------
Net income (loss) before extraordinary charge 3,944 (4,171) 11,737 (1,836)
Extraordinary charge, net of tax of $0 and $272 2,390 1,373 2,390 1,373
---------- --------- -------- ---------
Net income (loss) 1,554 (5,544) 9,347 (3,209)
Accretion of dividends on
preferred stock (2,974) (1,210) (8,197) (1,210)
Accretion of the recorded value
of the Intel preferred stock (678) (156) (990) (156)
---------- --------- -------- ---------
Net income (loss) available to
common shareholders ($ 2,098) ($ 6,910) $ 160 ($ 4,575)
========== ========= ======== =========
Comprehensive income:
Net income (loss) 1,554 (5,544) 9,347 (3,209)
Currency translation loss -- (5,976) -- (1,309)
---------- --------- -------- ---------
Comprehensive income (loss) 1,554 (11,520) 9,347 (4,518)
Net income (loss) per share:
Income (loss) before extraordinary item $ 0.07 $ (0.10) $ 0.22 $ (0.05)
Extraordinary item $ (0.04) $ (0.03) $ (0.04) $ (0.03)
Basic net income (loss) per share $ (0.03) $ (0.16) $ 0.00 $ (0.11)
Diluted net income (loss) per share $ (0.03) $ (0.16) $ 0.00 $ (0.11)
Weighted Average shares used in per share calculations:
Basic 60,295 43,540 53,162 40,420
Diluted 60,295 43,540 56,827 40,420
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 4
<PAGE>
ChipPAC Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) $9,347 ($3,209)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 33,849 41,850
Provision for inventory and accounts receivable (491) (427)
Foreign currency (gains) losses (467) 359
(Gain) loss on sale of equipment (19) (241)
Changes in assets and liabilities:
Accounts receivable (15,858) 9,843
Inventories 2,268 (1,889)
Prepaid expenses and other assets (9,364) (20,832)
Advances (to) from affiliates-trade -- (6,190)
Accounts payable (7,074) (22,193)
Accrued expenses and other current liabilities (16,597) 7,063
Other long-term liabilities 2,753 1,768
_______ _______
Net cash provided by (used in) operating activities (1,653) 5,902
_______ _______
Cash flows used in investing activities:
Acquisition of property and equipment (61,092) (29,052)
Proceeds from sale of equipment 15,250 1,253
Purchase of intellectual property (12,655) --
Malaysian acquisition (37,232) --
_______ _______
Net cash used in investing activities (95,729) (27,799)
_______ _______
Cash flows provided by financing activities:
Advances to employees and affiliates (225) (4,430)
Proceeds from short-term loans 45,600 1,169
Repayment of short-term loans (15,790) (19,469)
Proceeds from term loans 53,236 300,000
Repayment of long-term debt and capital leases (64,710) (133,615)
Dividend paid -- (9,435)
Net proceeds from stock issuance (Note 8) 157,282 123,415
Retirement of Class B Preferred Stock (79,310) (270,916)
_______ _______
Net cash provided by (used in) financing activities 96,083 (13,281)
_______ _______
Effect on cash from changes in exchange rates -- (447)
_______ _______
Net increase (decrease) in cash and cash equivalents (1,299) (35,625)
Cash and cash equivalents at beginning of period 32,117 68,767
_______ _______
Cash and cash equivalents at end of period $30,818 $33,142
======= =======
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 5
<PAGE>
ChipPAC, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2000
(Unaudited)
Note 1: Interim Statements
In the opinion of management of ChipPAC, Inc. ("ChipPAC"), the accompanying
unaudited condensed consolidated financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial information included therein. ChipPAC believes that the
disclosures are adequate to make the information not misleading. However, it is
suggested that this financial data be read in conjunction with the audited
consolidated financial statements and related notes thereto for the year ended
December 31, 1999 included in ChipPAC's 2000 Registration on Form S-1
(Registration No. 333-39428) as declared effective by the Securities and
Exchange Commission on August 8, 2000.
The results of operations for interim periods are not necessarily
indicative of the results of operations that may be expected for any other
period or the fiscal year which ends on December 31, 2000.
Basis of Presentation
Prior to August 5, 1999 the Company represented the combination of three
business units of Hyundai Electronics Industries Co., Ltd. ("HEI") which
operated collectively as HEI's worldwide packaging and testing operations.
On August 5, 1999, affiliates of Bain Capital, Inc. and SXI Group LLC, a
portfolio concern of Citicorp Venture Capital Ltd., which we refer to
collectively as the "Equity Investors", and management acquired a controlling
interest in the Company from Hyundai Electronics and Hyundai Electronics
America, the prior stockholders, through a series of transactions, including a
merger into ChipPAC, Inc. of a special purpose corporation organized by the
Equity Investors. The merger was structured to be accounted for as a
recapitalization.
The financial statements for the period subsequent to the recapitalization
and as at December 31, 1999 and September 30, 2000 have been prepared on a
consolidated basis. The consolidated financial statements include the accounts
of ChipPac, Inc. and its majority controlled and owned subsidiaries. All
significant intercompany balances have been eliminated on consolidation.
For the comparative disclosures for the three months and nine months ended
September 30, 2000, the company represents the combination of four corporations
then owned by Hyundai Electronics Industries., Ltd (HEI) and Hyundai Electronics
America (HEA). These four corporations are ChipPac, Inc. (CPI), ChipPac Korea
Co., Ltd (CPK) ChipPac Assembly and Test Co. Ltd. (CATS) and Hyundai Electronics
Co. (Shanghai) Ltd., (HECS). Accordingly, the financial statements for the
comparative periods are prepared on a combined basis. These comparative
financial statements include the accounts of CPI, CPK, HECS and CATS, or the
divisional accounts of the predecessor Assembly and Test Divisions for the
periods prior to the business transfers referred to above, and reflect the
combined financial position, results of operation, and cash flows of these
entities. All inter-company or inter-divisional transactions have been
eliminated in the combination.
Foreign Currency Translation
Upon completion of the recapitalization on August 5, 1999, management
decided to change the functional currency of its foreign operations to the US
Dollar effective October 1, 1999. Previously, the Company's functional
currencies of its foreign operations were the respective local currencies and
the net of the effect of the translation of the accounts of the foreign
operation was included in equity as a cumulative translation adjustment.
Foreign Exchange Contracts
In the ordinary course of business the Company enters into foreign exchange
forward contracts to mitigate the effect of foreign currency movements
associated with its international operations. The contracts entered into require
the purchase of Korean won or Japanese yen, and the delivery of US dollars, and
generally have maturities which do not exceed six months. To date contracts
entered into by the Company do not qualify as hedges and therefore are included
in foreign currency gains and losses in the period in which the exchange rates
change. There were no deferred gains or losses at December 31, 1999. At December
31, 1999 the Company had outstanding forward contracts to purchase Japanese yen
totaling $25.5 million.
Note 2: Acquisition of Malaysian business from Intersil
On June 30, 2000, the Company consummated its acquisition of Intersil's
packaging and test operations located in Kuala Lumpur, Malaysia along with
related intellectual property for approximately $70.0 million in cash and
preferred stock. In connection with the acquisition, we entered into a five-year
supply agreement with Intersil to provide assembly and test services on an
exclusive basis. The Malaysian business increases our exposure to high growth
advanced communications products, provides a presence in Malaysia and enhances
our intellectual property in key areas. In addition, the Malaysian business
expands our mixed-signal testing capabilities and provides us with critical
expertise in RF testing. For its fiscal year ended July 2, 1999, the Malaysian
business had revenues of $110.5 million.
The acquisition has been accounted for using purchase accounting. Under purchase
accounting, the total purchase price of the Malaysian business is allocated to
the acquired assets and liabilities based on their relative fair values as of
the closing date of the acquisition. We are undertaking a study to determine the
final allocation of the total purchase price to the various assets acquired and
the liabilities assumed. Accordingly, the final allocations could be different
from the amounts reflected below, and these differences may be significant. The
purchase price of $70.0 million represents the total of the cash consideration
and the estimated fair value of the Class C preferred stock exchanged for the
whole of the issued shares of the Malaysian business and certain intellectual
property. The amount and components of the estimated purchase price along with
the allocation of the estimated purchase price to assets purchased and
liabilities assumed are as follows:
(in millions)
Purchase Price:
Cash consideration............................................... $52.5
Estimated fair value of Class C preferred stock.................. 15.8
Estimated expenses............................................... 3.5
Less: payment due from Intersil................................... (1.8)
-----
$70.0
=====
Allocation of Purchase Price:
Estimated fair value of
Buildings....................................................... $16.9
Plant and equipment............................................. 56.9
Intellectual property........................................... 12.7
Restructuring accrual........................................... (5.0)
Deferred taxes.................................................. (4.1)
Net other assets and liabilities................................ (7.4)
-----
$70.0
=====
There is no goodwill arising from the acquisition of the Malaysian business.
The estimated fair value of total assets and liabilities exceeded the purchase
price, resulting in negative goodwill of $56.1 million. The negative goodwill
has been allocated in full to non-current assets as summarized below:
<TABLE>
<CAPTION>
Estimated Negative
Fair Goodwill Adjusted
Non-current asset Value Allocated Fair Value
----------------- --------- --------- ----------
(in millions)
<S> <C> <C> <C>
Buildings................................................... $ 27.9 $(11.0) $16.9
Plant and equipment......................................... 93.9 (37.0) 56.9
Intellectual property....................................... 20.9 (8.2) 12.7
------ ------ -----
$142.7 $(56.2) $86.5
====== ====== =====
</TABLE>
Intellectual property primarily consists of trade secrets and patents. The
Company expects that the estimated average useful life of these assets will be
seven years. An accrual of $5.0 million has been established for expected costs
of restructuring the Malaysian business. These one time non-recurring costs are
expected to be incurred in connection with factory reorganization, product
discontinuance and employee related costs.
The terms of the acquisition of the Malaysian business require, for the
period from the closing of the acquisition to June 30, 2003, the payment of
additional contingent incentive payments to the seller based on the achievement
of milestones with respect to the transfer of the seller's packaging business,
currently subcontracted by the seller to a third party, to us. These contingent
payments will be recorded as additional purchase price if and when earned and
paid on a quarterly basis. In the event that Intersil were to achieve all the
milestones, we would pay Intersil an additional sum of approximately $17.9
million in the aggregate.
The results of operations of the Malaysian business will be included with those
of the Company for periods subsequent to the date of acquisition. Set forth
below is the unaudited pro forma combined summary of operations of the Company
for the nine months ended September 30, 2000 and 1999, as if the acquisition had
been made on January 1, 1999 (in thousands, except per share amounts).
<TABLE>
<CAPTION>
Nine Months Ended September 30:
2000 1999
----------------------
<S> <C> <C>
Net sales $433,453 $338,607
Net income $ 13,088 $ 589
Earnings per share
Basic $ 0.22 $ 0.01
======== ========
Diluted $ 0.22 $ 0.01
======== ========
Shares used in per share
calculation
Basic 53,162 40,420
======== ========
Diluted 56,827 40,420
======== ========
</TABLE>
In addition, Intersil assigned to us patents, copyrights and technical
information used exclusively in or associated exclusively with the Malaysian
business. Furthermore, Intersil granted us a worldwide, non-exclusive, royalty-
free license under other Intersil patents, copyrights and technical information
which is also used in or related to the operation of the Malaysian business.
This license is perpetual and irrevocable. Any intellectual property rights in
the bounding diagrams, test programs, maskworks and test boards uniquely related
to the Intersil products for which we will provide packaging and test services
under the supply agreement with Intersil are licensed to us only for use in
providing those services.
Note 3: Property, Plant and Equipment
Effective January 1, 2000 we re-evaluated the estimated useful lives of our
property, plant and equipment. Based on an independent appraisal to evaluate the
useful lives of such equipment and our internal assessment, we changed the
estimated useful lives of assembly and test product equipment, and furniture and
fixtures from five years to eight years. Previously, such equipment was
depreciated on a straight line basis over and an estimated useful life of five
years.
The net book values of assembly and test product equipment and furniture
and fixtures already in use are now being depreciated over the remaining useful
life, based on eight years from the date such assets were originally place in
service. This change resulted in depreciation expense in the quarter ended
September 30, 2000 and the nine months ended September 30, 2000 being $6.9
million and $20.5 million, respectively, lower than would have been recorded
using five year lives.
Page 6
<PAGE>
Note 4: Inventories
Septemeber 30, December 31,
2000 1999
-------------- ------------
(In thousands)
Raw materials................... $15,638 $12,274
Work-in-process................. 3,425 3,003
Finished goods.................. 745 2,220
------- -------
Total.......................... $19,808 $17,497
======= =======
Note 5: Earnings per share
Statement of Accounting Standards No. 128 ("SFAS 128") requires a reconciliation
of the numerators and denominators of the basic and diluted per share
computations. Basic earnings per share ("EPS") is computed by dividing net
income available to stockholders (numerator) by the weighted average number of
common shares outstanding (denominator) during the period. Diluted EPS is
computed using the weighted average number of common and all potentially
dilutive common shares outstanding during the period. In computing diluted EPS,
the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options and the if-
converted method is used for determining the number of shares assumed issued
from the conversion of the convertible subordinated notes. Following is a
reconciliation of the numerators and denominators of the basic and diluted EPS
computations for the periods presented below.
Three months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
---------------------------- ----------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
--------- -------- -------- --------- -------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net Income (loss) available
to common shareholders......... (2,098) 60,295 (0.03) (6,910) 43,540 (0.16)
Effects of dilutive securities:
Stock options and warrants....... 0 0
Diluted EPS
Net Income...................... (2,098) 60,295 (0.03) (6,910) 43,540 (0.16)
</TABLE>
Nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
---------------------------- ----------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
--------- -------- -------- --------- -------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net Income (loss) available
to common shareholders......... 160 53,162 0.00 (4,575) 40,430 (0.11)
Effects of dilutive securities:
Stock options and warrants....... 3,665 0
Diluted EPS
Net Income....................... 160 56,827 0.00 (4,575) 40,420 (0.11)
</TABLE>
At September 30, 2000 stock options outstanding were 1,912,742.
Note 6: Comprehensive Income
In fiscal 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income".
Comprehensive income refers to the change in the equity of a company during a
period from transactions except those resulting from investments by owners and
distributions to owners. ChipPAC adopted this statement as of the first quarter
of 1998. Accumulated other comprehensive income at December 31, 1999 and
September 30, 2000 comprised cumulative gains and losses prior to the change of
functional currency to the U.S. dollar for the overseas operations on October
1, 1999.
Page 7
<PAGE>
Note 7: Segment Reporting
The Company is engaged in one industry segment, the packaging and testing of
integrated circuits.
Note 8: Initial Public Offering, the Reclassification, the Reverse Stock Split
and Adoption of new stock plans
On August 8, 2000 the Securities and Exchange Commission declared effective the
Company's Registration Statement on Form S-1 (Registration No. 333-39428)
relating to the initial public offering of the Company's Class A common stock.
In connection with the closing of the initial public offering the Company issued
10,000,000 shares of Class A Common Stock in for gross proceeds of $120.0
million in an Initial Public Offering. The company concurrently completed the
private placements described below. The total proceeds from the offering and
the concurrent private placements, net of issuance costs, was $152.1 million.
The net proceeds have been used to redeem in full the Class B Preferred Stock
and to repay senior credit facilities of $55.8 million.
On August 18, 2000 in connection with the underwriters exercise of their
overallotment option to purchase additional shares of the Company's Class A
common stock, the Company issued an additional 1,500,000 shares of Class A
common stock for gross proceeds of $18.0 million. Total proceeds from the
issuance of the additional shares, net of issuance costs, was $16.9 million.
In connection with the closing of the initial public offering, all outstanding
shares of Class A convertible preferred stock and Class C preferred stock were
automatically converted into an aggregate of 4,349,254 shares of Class A common
stock.
In July 2000, the Company effected a 0.38098771 for 1 reverse stock split of its
capital stock. All share and per share information presented herein has been
restated to give effect to the stock split. In addition, the Board of Directors
and stockholders adopted the 2000 Equity Incentive Plan and 2000 Employee Stock
Purchase Plan.
Concurrent private placement
On July 13, 2000, Qualcomm agreed to enter into a three-year supply
agreement with us under which we will provide packaging and test services for
integrated circuit devices for Qualcomm and to purchase from us $25.0 million
of our Class A common stock at a purchase price per share equal to 95% of the
initial public offering price in a private placement that occurred concurrently
with the closing of this offering. Based on the initial public offering price of
$12.00, Qualcomm purchased 2,192,983 shares of Class A Common Stock.
Equity investors
At the time of our 1999 recapitalization, we entered into an advisory agreement
with certain Equity Investors under which the Equity Investors may provide
financial, advisory and consulting services to us. Commencing with the three
months ended March 31, 2000, the Equity Investors are entitled to an annual
advisory fee for the remaining term of the advisory agreement. Each advisory
agreement was to remain in effect for an initial term of ten years.
The Company and the Equity Investors agreed to terminate the advisory
agreement upon the closing of the initial public offering in exchange for a
one-time aggregate payment of $8.0 million consisting of a $3.6 million cash
payment and the issuance of $4.4 million of our Class A common stock at a
price per share equal to the initial public offering price in a private
placement concurrent with the closing of the offering. The Company recorded a
one time charge to income of $8.0 million in the third quarter of fiscal 2000
in respect of this agreement termination.
Page 8
<PAGE>
Summary Sources and Uses of IPO and Private Placements August 11, 2000
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Expenses Net Cash
-------- --------- --------
<S> <C> <C> <C>
I. Sources of Funds
A. IPO net proceeds 138,000 (10,912) 127,088
B. Qualcomm net proceeds 25,000 25,000
------- ------- -------
163,000 (10,912) 152,088
II. Uses of Cash Proceeds
A. Retirement of Series B preferred stock, including accreted
dividends 79,310
B. Retirement of Term Debt 55,845
C. Corporate Purposes 16,933
-------
152,088
</TABLE>
Note 9: Recent Accounting Pronouncements
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ("SAB 101") "Views on Selected Revenue
Recognition Issues" which provides the staff's views when applying generally
accepted accounting principles to selected revenue recognition issues. Adoption
of SAB 101 is required by the second quarter of 2000. Management is currently
evaluating SAB 101 and its effects on company revenue recognition policies and
practices. At this time, management believes that there is no significant effect
on the revenue recognition policies currently in place.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes a new model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS 133 requires that all derivatives
be recognized in the balance sheet at their fair market value. In addition,
corresponding derivative gains and losses should be either reported in the
statement of operations and stockholders equity, depending on the type of
hedging relationship that exists with respect to such derivatives. Adopting the
provisions of SFAS 133, which will be effective in fiscal year 2001, are not
expected to have a material effect on ChipPac's consolidated financial
statements.
In April 2000, the Financial Accounting Standards Board issued FASB
interpretation of No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25 ("FIN44"). Among other
issues, FIN 44 clarifies (a) the definition of employees for purposes of
applying Opinion No. 25 (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 was effective July 1, 2000, but certain conclusions in the
interpretation cover specific events that occur after either December 15, 1998
or January 12, 2000. To the extent that this interpretation covers events
occurring during the period after December 15, 1998 or January 12, 2000, but
before the effective date of July 1, 2000, the effect of applying this
interpretation are recognized on a prospective basis from July 1, 2000. The
Company is currently reviewing stock grants to determine the impact, if any,
that may arise from implementation of FIN 44, although management does not
expect the impact, if any, to be material to the financial statements.
Note 10: Supplemental Financial Statements of Guarantor/Non-Guarantor Entities
In connection with the recapitalization, ChipPAC International Company
Limited (CP Int'l) issued senior subordinated debt securities which are fully
and unconditionally guaranteed, jointly and severally, on a senior subordinated
basis, by the parent company, ChipPAC, Inc. (CPI) and by ChipPAC (Barbados)
Ltd., ChipPAC Limited, ChipPAC Korea Company Limited (CPK), ChipPAC Luxembourg
S.a.R. L., and ChipPAC Liquidity Management Hungary Limited Liability Company
(the "Guarantor Subsidiaries"). All guarantor subsidiaries are wholly-owned
direct or indirect subsidiaries of ChipPAC, Inc. Hyundai Electronics Co.
(Shanghai) Ltd. (HECS) and ChipPAC Assembly & Test Co. Ltd. (CATS) (collectively
the Chinese entities) and ChipPAC Malaysia Sdn. Bhd. (CPM) will not provide
guarantees (the "Non-Guarantor Subsidiaries"). The following is consolidated and
combining financial information for CP Int'l CPI, CPM, CPK, HECS, CATS, ChipPAC
(Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L., and ChipPAC
Liquidity Management Hungary Limited Liability Company, segregated between the
Guarantor and Non-Guarantor Subsidiaries. ChipPAC (Barbados) Ltd., ChipPAC
Limited, ChipPAC Luxembourg S.a.R.L. and ChipPAC Liquidity Management Hungary
Limited Liability Company were formed by Hyundai in 1999 and have no historical
operating results or balances for the four years ended December 31, 1998. As a
result, it is not possible to include these entities in the supplemental
financial statements for these periods. Separate financial statements and other
disclosures concerning the Guarantor Subsidiaries are not presented herein
because management has determined that they are not material to investors.
Financial information for ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC
Luxembourg S.a.R.L. and ChipPAC Liquidity Management has not been presented as
these entities have no historical financial results and future transactions will
primarily consist of inter-company transactions. The following HECS financial
statements in the condensed combining financial statements include the accounts
of CATS.
Page 9
<PAGE>
ChipPAC, Inc.
Supplemental Combining Condensed Balance Sheets
September 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
Issuer Guarantor
--------- ---------- Other Non-
CPI Int'l CPI Guarantors Guarantors Eliminations Combined
--------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........ $ 1 $ 10,622 $ 12,822 $ 9,697 -- $ 33,142
Intercompany
accounts
receivable......... 3,416 30,022 77,165 4,830 (115,433) --
Accounts receivable
from customers..... -- 21,171 11,395 -- -- 32,566
Inventories......... -- 5 12,102 313 -- 12,420
Deferred taxes...... -- 420 1,687 -- -- 2,107
Prepaid expenses &
other current
assets............. -- 416 7,344 381 -- 8,141
--------- --------- --------- ------- ---------- ---------
Total current
assets........... 3,417 62,656 122,515 15,221 (115,433) 88,376
Property, plant and
equipment, net....... 6,168 129,133 77,968 -- 213,269
Intercompany loans
receivable........... 271,000 145,000 -- -- (416,000) --
Other assets.......... 42,307 5,087 5,139 -- (33,830) 18,703
--------- --------- --------- ------- ---------- ---------
Total assets...... $ 316,724 $ 218,911 $ 256,787 $93,189 $ (565,263) $ 320,348
========= ========= ========= ======= ========== =========
Liabilities and Equity
Current liabilities:
Intercompany
accounts payable... -- $ 77,222 $ 8,025 $30,186 $ (115,433) --
Accounts payable.... $ 40 2,540 37,558 1,081 -- $ 41,219
Accrued expenses and
other liabilities.. 3,861 4,970 1,783 3,817 -- 14,431
Short-term debt..... -- -- -- -- -- --
Current portion of
long-term debt..... 2,600 -- -- -- -- 2,600
--------- --------- --------- ------- ---------- ---------
Total current
liabilities...... 6,501 84,732 47,366 35,084 (115,433) 58,250
Long-term debt, less
current portion.... 297,400 -- -- -- 297,400
Intercompany loans
payable............ -- 237,000 145,000 34,000 (416,000) --
Other long-term
liabilities........ -- -- 3,052 -- -- 3,052
--------- --------- --------- ------- ---------- ---------
Total liabilities.. 303,901 321,732 195,418 69,084 (531,433) 358,702
--------- --------- --------- ------- ---------- ---------
Mandatorily redeemable
preferred stock........ -- 80,116 -- -- -- 80,116
Shareholders' and
divisional equity
Preferred stock and
paid in capital...... 13,399 (176,846) 28,683 85,283 (33,830) (83,311)
Accumulated earnings
(deficit)............ (576) (6,091) 23,983 (61,642) -- (44,326)
Accumulated other
comprehensive income
(loss)............... -- -- 8,703 464 -- 9,167
--------- --------- --------- ------- ---------- ---------
Shareholders' and
divisional
equity........... 12,823 (182,937) 61,369 24,105 (33,830) (118,470)
--------- --------- --------- ------- ---------- ---------
Total liabilities
and equity....... $ 316,724 $ 218,911 $ 256,787 $93,189 $ (565,263) $ 320,348
========= ========= ========= ======= ========== =========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 10
<PAGE>
ChipPAC, Inc.
Supplemental Combining Condensed Statements of Operations
Nine Months September 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
Issuer Guarantor
-------- ---------- Other Non-
CP Int'l CPI Guarantors Guarantors Eliminations Combined
-------- --------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue.. -- -- $231,903 $ 11,057 $ (242,960) --
Customer revenue...... -- 247,535 20,005 131 -- $267,671
------- -------- ---------- ---------- ------------ --------
Revenue............... -- 247,535 251,907 11,188 (242,960) 267,671
Cost of revenue......... -- 235,541 218,468 19,729 (242,960) 227,778
------- -------- ---------- ---------- ------------ --------
Gross profit............ -- 14,994 33,440 (8,541) -- 39,893
Operating expenses:
Selling, general &
administrative....... -- 10,019 4,397 -- -- 14,407
Research &
development.......... -- 4,278 4,350 -- -- 8,628
Change of control
expenses............. -- 188 11,662 -- -- 11,850
------- -------- ---------- ---------- ------------ --------
Total operating
expenses........... -- 14,476 20,409 -- -- 34,885
------- -------- ---------- ---------- ------------ --------
Operating income........ -- 518 13,031 (8,541) -- 5,008
Non-operating Income
(Expense)
Interest income....... $ 119 588 1,275 352 -- 2,334
Interest (expense).... (5,331) (1) (5,184) (1,844) -- (12,360)
Intercompany interest
income (expense)..... 4,685 (1,522) (2,626) (537) -- --
------- -------- ---------- ---------- ------------ --------
Interest expense...... (646) (1,523) (7,810) (2,381) -- (12,360)
Foreign currency gains
(losses)............. -- -- 516 (10) -- 506
Other income
(expenses), net...... -- (568) 1,046 103 -- 581
------- -------- ---------- ---------- ------------ --------
Non-operating income
(expenses)......... (527) (1,503) (4,973) (1,936) -- (8,939)
------- -------- ---------- ---------- ------------ --------
Income (loss) before
income taxes........... (527) (985) 8,058 (10,477) -- (3,931)
Provision for (benefit
from) income taxes..... 50 (5) (2,150) -- -- (2,095)
------- -------- ---------- ---------- ------------ --------
Income before
extraordinary item..... (575) (990) 10,208 (10,477) -- (1,836)
Extraordinary item:
Loss from early
extinguishment of
debt, net of related
income tax benefit... -- -- 1,373 -- -- 1,373
------- -------- ---------- ---------- ------------ --------
Net Income (loss)....... $ (575) $ (990) $ 8,835 $ (10,477) -- $ (3,209)
======= ======== ========== ========== ============ ========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 11
<PAGE>
ChipPAC, Inc.
Supplemental Combining Condensed Statements of Cash Flows
Nine Months Ended September 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
Issuer Guarantor
-------- --------- Other Non-
CP Int'l CPI Guarantors Guarantors Eliminations Combined
-------- --------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income........... $ (576) $ (989) $ 8,833 $ (10,477) $ -- $(3,209)
Adjustments to
reconcile net income
Depreciation and
amortization...... 250 1,070 32,726 7,804 -- 41,850
Provision for
inventory and
receivables....... -- (110) (317) -- -- (427)
Foreign currency
(gains) losses.... -- -- 349 10 -- 359
(Gain) loss on
external sales of
equipment......... -- -- (241) -- -- (241)
Changes in assets and
liabilities:
Intercompany
accounts
receivable........ (3,416) (19,177) 29,707 (2,882) (4,232) --
Accounts
receivable........ -- 13,881 (4,038) -- -- 9,843
Inventories........ -- (5) (1,785) (99) -- (1,889)
Prepaid expenses
and other assets.. (11,027) (5,520) (4,247) (36) -- (20,832)
Advances (to) from
affiliates........ -- 791 (6,981) -- -- (6,190)
Intercompany
accounts payable.. -- (14,698) 14,401 (3,935) 4,232 --
Accounts payable... 40 296 (21,803) (726) -- (22,193)
Accrued expenses &
other liabilities. 3,911 1,936 (444) 772 -- 7,063
Other long-term
liabilities....... -- -- 1,768 -- -- 1,768
-------- -------- -------- --------- ------ --------
Net cash
provided/(used)
by operating
activities...... (10,818) (22,547) 48,816 (9,569) -- 5,902
-------- -------- -------- --------- ------ --------
Cash flows used in
investing activities:
Acquisition of
property and
equipment........... -- (1,430) (26,299) (6,651) 5,328 (29,052)
Proceeds, external
equipment sales..... -- -- 4,756 1,825 (5,328) 1,253
Investment in
subsidiaries........ (29,030) 29,030 -- -- -- --
-------- -------- -------- --------- ------ --------
Net cash used in
investing
activities...... (29,030) 27,600 (21,543) (4,826) -- (27,799)
-------- -------- -------- --------- ------ --------
Cash flows provided by
financing activities:
Loans & advances with
affiliates.......... -- (178,900) 144,900 29,570 -- (4,430)
Proceeds from short-
term loans.......... -- 476 693 -- -- 1,169
Repayment of short-
term loans.......... -- -- (3,769) (15,700) -- (19,469)
Proceeds from term
loans............... 300,000 -- -- -- -- 300,000
Repayment, term loans
and capital leases.. -- -- (105,387) (28,228) -- (133,615)
Intercompany loan
(advances) payments. (271,000) 271,000 -- -- -- --
Dividend paid........ -- -- (9,435) -- -- (9,435)
Issuance of stock.... 10,849 112,566 -- -- -- 123,415
Contributions
(withdrawals) of
capital............. -- (210,419) (85,300) 24,803 -- (270,916)
-------- -------- -------- --------- ------ --------
Net cash provided
by financing
activities...... 39,849 (5,277) (58,298) 10,445 -- (13,281)
-------- -------- -------- --------- ------ --------
Effect from changes in
exchange rates........ -- -- (447) -- -- (447)
-------- -------- -------- --------- ------ --------
Net increase (decrease)
in cash and cash
equivalents........... 1 (204) (31,472) (3,950) -- (35,625)
Cash and equivalents a
beginning of period... -- 10,827 44,293 13,647 -- 68,767
-------- -------- -------- --------- ------ --------
Cash and equivalents at
end of period......... $ 1 $ 10,623 $ 12,821 $ 9,697 -- $ 33,142
======== ======== ======== ========= ====== ========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 12
<PAGE>
ChipPAC, Inc.
Supplemental Condensed Consolidating Balance Sheets
September 30, 2000
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
Issuer Guarantor
--------------------- Other Non-
CP Int'l CPI Guarantors Guarantors Eliminations Consolidated
-------- ----------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $654 $1,969 $21,995 $6,200 $-- $30,818
Intercompany accounts receivable 29,413 3,867 35,852 15,340 (84,472) --
Accounts receivable from customers -- 8 56,976 20 -- 57,004
Inventories -- -- 13,433 6,375 -- 19,808
Deferred taxes -- -- 622 -- -- 622
Prepaid expenses & other current assets -- 798 7,873 1,061 -- 9,732
-------- -------- -------- -------- ----------- --------
Total current assets 30,067 6,642 136,751 28,996 (84,472) 117,984
Property, plant and equipment, net -- 5,863 159,769 154,891 -- 320,523
Intercompany loans receivable 323,500 -- -- (34,000) (289,500) --
Investment in subsidiaries 33,388 187,946 308,512 -- (529,846) --
Other assets 12,137 1,537 117,747 -- (100,000) 31,421
-------- -------- -------- -------- ----------- --------
Total assets $399,092 $201,988 $722,779 $149,887 ($1,003,818) $469,928
======== ======== ======== ======== =========== ========
Liabilities and Equity
Current liabilities:
Short term bank borrowings $29,810 $-- $-- $-- $-- $29,810
Intercompany accounts payable 59 -- 52,973 31,438 (84,470) --
Accounts payable 73 1,707 38,038 9,393 -- 49,211
Accrued expenses and other liabilities 4,550 7,479 4,269 17,396 (6,368) 27,326
Deferred taxes -- -- -- 4,141 -- 4,141
Short-term debt -- -- -- -- -- --
Current portion of long-term debt 10,800 -- -- -- -- 10,800
-------- -------- -------- -------- ----------- --------
Total current liabilities 45,292 9,186 95,280 62,368 (90,838) 121,288
Long-term debt, less current portion 279,490 -- -- -- -- 279,490
Intercompany loans payable -- -- 289,500 -- (289,500) --
Other long-term liabilities -- 240 5,939 -- -- 6,179
-------- -------- -------- -------- ----------- --------
Total liabilities 324,782 9,426 390,719 62,368 (380,338) 406,957
-------- -------- -------- -------- ----------- --------
Mandatorily redeemable preferred stock -- -- -- -- -- --
Shareholders' and divisional equity
Common stock -- 685 -- -- -- 685
Common stock-Subsidiaries 81,714 -- 216,071 53,884 (351,669) --
Warrants-Class A Common Stock -- 1,250 -- -- -- 1,250
Additional paid in capital (25) 272,320 (29) -- -- 272,266
Receivable from shareholder -- (1,565) -- -- -- (1,565)
Divisional equity, net of capital distributions -- (58,658) 29,623 85,096 (223,775) (167,714)
Accumulated earnings (deficit) (7,379) (21,470) 77,690 (51,925) (48,036) (51,120)
Accumulated other comprehensive income (loss) -- -- 8,705 464 -- 9,169
-------- -------- -------- -------- ----------- --------
Shareholders' and divisional equity 74,310 192,562 332,060 87,519 (623,480) 62,971
-------- -------- -------- -------- ----------- --------
Total liabilities and equity $399,092 $201,988 $722,779 $149,887 ($1,003,818) $469,928
======== ======== ======== ======== =========== ========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 13
<PAGE>
ChipPAC, Inc.
Supplemental Combining Condensed Statements of Operations
Nine Months Ended September 30, 2000
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
Issuer Guarantor
---------------------- Other Non-
CP Int'l CPI Guarantors Guarantors Eliminations Consolidated
----------- --------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Intercompany revenue $-- $21,206 $8,306 $61,309 ($90,821) $0
Customer revenue -- -- 362,217 26 -- $362,243
---------- ------- --------- -------- -------- --------
Revenue -- 21,206 370,523 61,335 (90,821) 362,243
--
Cost of revenue -- 662 296,884 52,182 (69,615) 280,113
---------- ------- --------- -------- -------- --------
Gross profit -- 20,544 73,639 9,153 (21,206) 82,130
Operating expenses:
Selling, general & administrative 30 17,273 26,204 1,706 (21,206) 24,007
Research & development -- 3,749 4,214 18 -- 7,981
---------- ------- --------- -------- -------- --------
Total operating expenses 30 21,022 30,418 1,724 (21,206) 31,988
---------- ------- --------- -------- -------- --------
Operating income (30) (478) 43,221 7,429 -- 50,142
Non-operating Income (Expense)
Interest income 22,976 81 23,697 63 (46,264) 553
Interest expense (29,926) -- (43,688) (2,580) 46,264 (29,930)
Foreign currency gains (losses) -- -- 887 (71) -- 796
Income (loss) from investment in
subsidiaries 2,856 15,157 41,875 -- (59,888) --
Other income (expenses), net -- (7,864) 371 599 -- (6,894)
---------- ------- --------- -------- -------- --------
Non-operating income (expenses) (4,094) 7,374 23,122 (1,989) (59,888) (35,475)
---------- ------- --------- -------- -------- --------
Income (loss) before income taxes (4,124) 6,896 66,343 5,440 (59,888) 14,667
Provision for (benefit from) income taxes 242 3,917 4,696 442 (6,367) 2,930
---------- ------- --------- -------- -------- --------
Income before extraordinary item (4,366) 2,979 61,647 4,998 (53,521) 11,737
Extraordinary item:
Loss from early extinguishment of debt,
net of related income tax benefit 2,390 -- -- -- -- 2,390
---------- ------- --------- -------- -------- --------
Net Income (loss) ($6,756) $2,979 $61,647 $4,998 ($53,521) $9,347
========== ======= ========= ======== ======== ========
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements
--------------------------------------------------------------------------------
Page 14
<PAGE>
ChipPAC, Inc.
Supplemental Combining Condensed Statements of Cash Flows
Nine Months Ended September 30, 2000
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
Issuer Guarantor
---------------------- Other Non-
CP Int'l CPI Guarantors Guarantors Eliminations Consolidated
---------- -------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net Income ($6,756) $2,979 $61,648 $4,997 ($53,521) $9,347
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization $3,842 $1,542 $19,828 $8,637 $0 33,849
Provision for inventory and receivables -- -- (491) -- -- (491)
Foreign currency (gains) losses -- -- (467) -- -- (467)
(Gain) loss on external
sales of equipment -- -- 165 (184) -- (19)
Equity income from investment in subsidiaries ($2,856) ($15,157) ($41,875) $-- 59,888 --
Changes in assets and liabilities:
Intercompany accounts receivable (25,360) 2,912 8,876 (6,541) 20,113 --
Accounts receivable -- (36) (15,822) -- -- (15,858)
Inventories -- -- 4,879 (2,611) -- 2,268
Prepaid expenses and other assets (620) (2,080) (6,217) (447) -- (9,364)
Advances (to) from affiliates -- -- -- -- -- --
Intercompany accounts payable 58 28 20,185 (5,107) (15,164) --
Accounts payable 33 457 (11,729) 4,165 -- (7,074)
Accrued expenses & other liabilities (4,496) 3,019 (5,332) 1,626 (11,414) (16,597)
Other long-term liabilities -- -- 2,753 -- -- 2,753
______ ______ ______ ______ ______ ______
Net cash provided by operating activities (36,155) (6,336) 36,401 4,535 (98) (1,653)
______ ______ ______ ______ ______ ______
Cash flows used in investing activities:
Acquisition of property and equipment -- (1,359) (49,929) (10,066) 262 (61,092)
Proceeds, from equipment sales -- 248 16,666 (1,495) (169) 15,250
Investment in subsidiaries -- (85,123) (83,272) 864 130,299 (37,232)
Purchase of intangible assets -- -- (12,655) -- -- (12,655)
______ ______ ______ ______ ______ ______
Net cash used in investing activities -- (86,234) (129,190) (10,697) 130,392 (95,729)
______ ______ ______ ______ ______ ______
Cash flows provided by financing activities:
Loans and advances (to) from employees-net -- (225) -- -- -- (225)
Proceeds from short-term loans 45,600 -- -- -- -- 45,600
Repayment of short-term loans (15,790) -- -- -- -- (15,790)
Net proceeds from long-term loans 53,236 -- -- -- -- 53,236
Repayment of term loans (64,710) -- -- -- -- (64,710)
Intercompany loan (advances) payments (52,500) -- 52,500 -- -- --
Intercompany capital contributions 67,500 -- 40,008 7,000 (114,508) --
Dividend paid -- -- -- -- -- --
Net proceeds from common stock issuance -- 157,282 -- -- -- 157,282
Net proceeds from mandatorily redeemable --
preferred stock issuance -- 15,786 -- -- (15,786) --
Retirement of Preferred Stock B -- (79,310) -- -- -- (79,310)
______ ______ ______ ______ ______ ______
Net cash provided by financing activities 33,336 93,533 92,508 7,000 (130,294) 96,083
______ ______ ______ ______ ______ ______
Net increase (decrease) in cash (2,819) 963 (281) 838 -- (1,299)
Cash and equivalents at beginning of period 3,474 1,007 22,273 5,363 -- 32,117
______ ______ ______ ______ ______ ______
Cash and equivalents at end of period $655 $1,970 $21,992 $6,201 $-- $30,818
====== ====== ====== ====== ====== ======
</TABLE>
The accompanying notes form an integral part of these condensed consolidated
financial statements.
--------------------------------------------------------------------------------
Page15
<PAGE>
Item 2 : Management's discussion and analysis of financial condition and results
of operations
All references are to ChipPAC's fiscal quarters ended September 30, 2000,
and September 30, 1999, unless otherwise indicated. This quarterly report on
Form 10-Q contains forward-looking statements, including, without limitation,
statements concerning the conditions in the semiconductor and semiconductor
capital equipment industries, our operations, economic performance and
financial condition, including in particular statements relating to our
business and growth strategy and product development efforts. The words
"believe," "expect," "anticipate," "intend" and other similar expressions
generally identify forward-looking statements. Potential investors are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
largely on our current expectations and are subject to a number of risks and
uncertainties, incl uding, without limitation, those identified under the
heading "Risk Factors" beginning on page 11 of our registration statement on
Form S-1 (No. 333-39428) and other risks and uncertainties indicated from time
to time in our filings with the SEC. Actual results could differ materially
from these forward-looking statements. We have experienced and expect to
continue to experience significant fluctuations in our quarterly results of
operations. Our expense levels are based, in part, on expectations of future
revenues. If revenue levels in a particular quarter do not meet expectations,
operating results are adversely affected. A variety of factors could have an
influence on the level of our revenues in a particular quarter. These factors
include the cyclical nature of the semiconductor industry, the risk that
factors which allowed us to experience relatively good performance in industry
downturns may not protect us in future downturns, the timing of the receipt of
orders from major customers, customer cancellations or delay of shipments,
specific feature requests by customers, production delays or manufacturing
inefficiencies, exchange rate fluctuations, management decisions to commence
or discontinue product lines, our ability to design, introduce and manufacture
new products on a cost effective and timely basis, the introduction of new
products by ourselves or our competitors, the timing of research and
development expenditures, and expenses attendant to acquisitions, strategic
alliances and the future development of marketing and service capabilities. In
light of these risks and uncertainties, there can be no assurance that the
matters referred to in the forward-looking statements contained in this
quarterly report will in fact occur.
Overview
In 1984, our packaging business began operating as a separate division of
Hyundai Electronics Industries Co., Ltd., one of the world's largest
semiconductor manufacturers and a member of the Hyundai Group, the Korean
conglomerate. In 1997, we were incorporated as a distinct entity and established
as the parent of a stand-alone worldwide business. In 1999, as part of our
recapitalization, affiliates of Bain Capital Inc. and SXI Group LLC, a portfolio
concern of Citicorp Venture Capital Ltd., which we refer to collectively as the
"Equity Investors," obtained control of our company and Hyundai Electronics
America retained approximately 10.0% of our outstanding common stock.
We changed the functional currency of ChipPAC Korea and our Chinese
subsidiaries, which we refer to throughout this document as ChipPAC China, from
the respective local currencies to the U.S. Dollar, effective October 1, 1999.
The consolidated effect of this change was to reduce net income for the year
ended December 31, 1999, by $4.8 million and to reduce both total assets and
stockholders' equity as at December 31, 1999, by $9.5 million. This change had
no effect on cash flows from operations or net cash flows for the year ended
December 31, 1999.
--------------------------------------------------------------------------------
Page 16
<PAGE>
Malaysian Business
On June 30, 2000, we consummated our acquisition of Intersil's packaging and
test operations located in Kuala Lumpur, Malaysia along with related
intellectual property for approximately $70.0 million in cash and preferred
stock. In connection with the acquisition, we entered into a five-year supply
agreement with Intersil to provide assembly and test services on an exclusive
basis. The Malaysian business increases our exposure to high growth advanced
communications products, establishes us as a leader in power packaging, provides
a presence in Malaysia and enhances our intellectual property in key areas. In
addition, the Malaysian business expands our mixed-signal testing capabilities
and provides us with critical expertise in RF testing. The Malaysian business
had revenues of $83.7 million, $80.4 million and $110.5 million for the fiscal
years ended June 27, 1997, July 3, 1998 and July 2, 1999, respectively. All of
these revenues represented intercompany sales to Intersil.
Results of Operations
Three and Nine Months Ended September 30, 2000 Compared to the Three and Nine
Months Ended September 30, 1999
Revenues
Revenues were $155.8 million and $362.2 million for the three months and nine
months ended September 30, 2000, respectively, an increase of 53.8% and 35.3%
over the prior year periods, respectively. The nine month period only includes
the Malaysian acquisition for the third quarter of 2000.
Our total packaging unit volume was 615 million and 1.375 billion for the three
months and nine months ended September 30, 2000, an increase of 91.8% and 86.2%,
respectively, over the prior year periods. Unit volume for the three and nine
months ended September 30, 2000 includes 185 million from our Malaysia
acquisition. Leaded product assembly unit volume increased by 91.8% and 84.5%,
respectively, over the prior year three and nine month periods. Laminate product
assembly unit volume increased by 92.1% and 100.6%, respectively, over the
comparable prior year periods.
Test service revenues were $7.8 million and $29 million for the three months and
nine months ended September 30, 2000, respectively, an increase of 424.7% and
335.5% over the prior year periods, respectively.
Gross Profit
Gross profit during the three months and nine months ended September 30, 2000
was $35.6 million and $82.1 million, respectively and increased by 211.9% and
205.9%, respectively, over the comparable prior year periods. Gross margin
percentage was 22.8% and 22.7% for the three months and nine months ended
September 30, 2000, an increase of 137.5% and 152.3%, respectively, over the
comparable periods in the prior year.
The margin improvement during the three months and nine months periods ended
September 30, 2000 were primarily attributable to increased efficiency in the
utilization of our production capacity and labor resources and lower
depreciation expense resulting from the change in the estimated useful lives in
production equipment made effective from January 1, 2000. This change in
accounting estimate resulted in lowered depreciation expense for the three
months and six months ended September 30, 2000 of approximately $6.9 million and
$20.5 million, respectively.
Selling, General and Administrative
Selling, general and administrative expenses increased to $9.7 million and $24.0
million for the three months and nine months ended September 30, 2000,
respectively, an increase of 90.5% and 66.7%, respectively, over the comparable
prior year periods. As a percentage of revenue these expenses for the three
months and six months ended September 30, 2000 increased to 6.2% and 6.6%,
respectively, from 5.0% and 5.4% in the
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prior year periods. This increase in spending was primarily due to the addition
of our Malaysian acquisition and to a lesser extent, the additions of management
personnel, MIS development, and management advisory fees. The remaining increase
was due to additional sales, marketing and customer service headcount in support
of the acquisition of new customers.
Research and Development
Research and development expense increased to $2.8 million and decreased to $8.0
million during the three and nine months ended September 30, 2000, respectively.
This represents a 7.5% increase and a 7.5% decrease, respectively, in research
and development costs over the comparable prior year periods. During both the
three and nine months ended September 30, 2000 spending on consumable materials,
supplies, and tooling was lower due to timing of projects and a focus of our
research efforts on highly collaborative development programs with major
customers, including expenses related to the Malaysian acquisition.
Additionally, there were non-recurring start up costs in the first quarter of
1999 associated with the Santa Clara flip-chip and advanced packaging prototype
design and development laboratory.
Change of Control Expenses
During the three months ended September 30, 1999, a $11.8 million change in
control charge was paid in the form of a special bonus to employees of our
Korean subsidiary arising from the change in control in our recapitalization
transaction. This resulted in a corresponding reduction to the recapitalization
consideration paid to Hyundai.
Net Interest Expense
Total outstanding interest bearing debt increased to $320.1 million at September
30, 2000 from $300.0 million at September 30, 1999 due primarily to purchases of
capital equipment. Related interest expense was $10.6 million and $29.9 million
for the three and nine months ended September 30, 2000, respectively. This
represents an increase of $4.3 million and $17.8 million over the comparable
prior year periods. Interest expense was higher in the 2000 periods than the
1999 periods as the debt related to recapitalization was outstanding for all of
2000 and only for part of three month period ended September 30, 1999. Interest
income for the three months and nine months ended September 30, 2000, decreased
to $0.2 million and $0.6 million, respectively, from $0.5 and $2.3 million
during the comparable three and nine month periods in 1999.
Termination of Management Advisory Services Contracts
In connection with the Company's recapitalization in 1999, the Company entered
into an advisory agreement with Bain Capital, Inc. and SXI Group LLC. Concurrent
with our initial public offering, on August 14, 2000 this agreement was
terminated in exchange for a one-time payout to Bain Capital and SXI Group of
$8.0 million in cash and stock.
Foreign Currency Gains (Losses)
Net foreign currency gains (losses) were ($0.2) million and $0.8 million during
the three and nine months ended September 30, 2000, respectively, compared to
net gains(losses) of $(0.9) million and $0.5 million during the three and nine
months ended September 30, 1999, respectively. During 2000 our exposure to
foreign currency gains and losses has been significantly mitigated by two
related factors. First, on October 1, 1999 we changed our functional currency to
the U.S. Dollar from the local currencies of our Korean and Chinese
subsidiaries. Second, beginning in late 1999 we negotiated and denominated the
large majority of our material and equipment purchases in U.S. Dollars.
Income Taxes
Income tax expense for the quarter and nine months ended September 30, 2000 was
approximately $1.0 million and $2.9 million, respectively, for an effective tax
rate of 20% for both periods. Concurrent with the recapitalization on August 5,
1999, the company was reorganized and as a result now has operations and
earnings in jurisdictions with relatively low income tax rates, or where we
enjoy tax holidays or other similar tax benefits. During the three and nine
months ended September 30,
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1999, much of it prior to this reorganization of the company, the company had an
income tax benefit of $5.0 million, and $2.1 million, respectively.
Extraordinary Items
A portion of the initial public offering proceeds was used to fully extinguish
the loan related to the purchase of the Malaysian business. Capitalized debt
issuance costs of $2.4 million were written off and the charge is included in
the results for the three and nine months ended September 30, 2000. As part of
the recapitalization in three months ended September 30, 1999, there was an
early extinguishment of debt, and the loss of $1.4 million, net of an income tax
benefit of $0.3 million, is included in the results for the three and nine
months ended September 30, 1999.
Net Income:
As a result of the various items described above, we had net income of $1.6 and
$9.3 million for the three and nine months ended September 30, 2000,
respectively, compared to a net (loss) of ($5.5) million and ($3.2) million for
the three and nine months ended September 30, 1999, respectively.
Liquidity and Capital Resources
At September 30, 2000 we had and continue to have a borrowing capacity of $50.0
million for working capital and general corporate purposes under the revolving
credit line portion of our senior credit facilities. In connection with our
June 30, 2000 acquisition of the Malaysian business, we obtained the ability to
increase our revolving credit line by $25.0 million without further consent from
our existing lenders. This additional capacity has not been activated. In
addition, borrowings of up to $20.0 million are available for acquiring
equipment and making other specified capital expenditures under the capital
expenditure line of our senior credit facilities. We may borrow and repay under
the capital expenditure line until August 5, 2001. Amounts that we repay under
the capital expenditure line after August 5, 2001 may not be reborrowed by us
later. The final maturity for both these facilities is August 5, 2005.
Our ongoing primary cash needs are for operations and equipment purchases. As at
September 2000, we had borrowings of $29.8 million on our revolving line of
credit.
We have spent $61.1 million on capital expenditures during the nine months ended
September 30, 2000. We also entered into a leasing transaction in 2000 whereby
we received $15.3 million in proceeds from a leasing company and then leased
equipment from them. We spent $29.1 million in capital expenditures during the
nine months ended September 30, 1999.
Under the terms of the agreement relating to our acquisition of the Malaysian
business, during the period from June 1, 2000 to June 30, 2003, Intersil will be
entitled to receive additional contingent incentive payments based upon the
achievement of milestones relating to the transfer of business currently
subcontracted by Intersil to a third party. In the event that Intersil were to
achieve all the milestones, we would pay Intersil an additional sum of
approximately $17.9 million in the aggregate.
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As of September 30, 2000, our debt consisted of $320.1 million of borrowings
which were comprised of $29.8 million of revolving loans, $140.3 million in term
loans and $150.0 million of senior subordinated notes.
On August 18, 2000 the company completed an initial public offering and
concurrent private placement which has generated net cash proceeds of
approximately $152.1 million to-date including the net proceeds from the sale of
shares available to the underwriters for over subscription in the initial
closing. Based upon certain requirements imposed by the senior bank facilities,
at least $41.0 million of the net initial public offering proceeds were required
to be used to retire bank term debt. The company has met this minimum
requirement and chose to use $55.8 million of the initial public offering net
proceeds to retire the term debt acquired to partially finance the acquisition
of the Malaysian facility. See Note 8 for further disclosure of the sources and
uses of the initial public offering and private placement proceeds.
We believe that our existing cash balances, cash flows from operations,
available equipment lease financing, available borrowings under our senior
credit facilities and the net proceeds from the completed initial public
offering and the concurrent private placement will be sufficient to meet our
projected capital expenditures, working capital and other cash requirements for
the next twelve months.
Our debt instruments require that we meet specified financial tests, including,
without limitation, a maximum leverage ratio, a minimum interest coverage ratio
and minimum fixed charge coverage ratio. These debt instruments also contain
covenants restricting our operations.
There were no violations of these covenants through September 30, 2000 and we
expect to comply with all these covenants during the next twelve months.
Therefore, our liquidity and capital resources are not expected to be impacted
by these covenants.
Item 3: Quantitative and Qualitative Disclosure about Market Risk
We are exposed to financial market risks, including changes in interest
rates and foreign currency exchange rates. We utilize derivative financial
instruments but do not use derivative financial instruments for speculative or
trading purposes. We have long-term debt that carries fixed and variable
interest rates. A fluctuation in interest rates of 1% would increase our annual
interest charge by approximately $1.5 million. A majority of our revenue and
capital spending is transacted in U.S. Dollars. We do, however, enter into
transactions in other currencies, primarily the Korean Won. With effect from
October 1, 1999 we have changed the functional currency of ChipPAC Korea and
ChipPAC China from their respective local currencies to the U.S. Dollar. The use
of the U.S. Dollar as the functional currency is expected to result in a much
lower level of foreign exchange gains and losses in our overseas subsidiaries.
Factors Affecting Future Results
For a statement of the factors which may affect our future results, we refer you
to our registration statement on Form S-1 (No. 333-39428) relating to our
proposed initial public offering of our Class A common stock. Please see in
particular those factors mentioned under the heading "Risk Factors" beginning on
page 10 and information mentioned under the heading "Cautionary Note Regarding
Forward-Looking Statements" on page 18 of that registration statement.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
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Item 2. Changes in Securities and Use of Proceeds
On August 14, 2000 the company completed an initial public offering (the
"Offering") of its Class A common stock. The managing underwriters in the
Offering were Credit Suisse First Boston Corporation, Deutsche Bank Securities
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, FleetBoston Robertson
Stephens Inc. and Thomas Weisel Partners LLC (the "Underwriters"). The shares of
Class A common stock sold in the Offering were registered under the Securities
Act of 1933, as amended, on a Registration Statement on Form S-1 (the
"Registration Statement") (Reg. No. 333-39428) that was declared effective by
the SEC on August 8, 2000. The offering commenced on August 9, 2000. All
11,500,000 shares of Class A common stock registered under the Registration
Statement (including 1,500,000 shares sold pursuant to the exercise of the
Underwriters' overallotment option) were sold at a price of $12.00 per share.
The aggregate price of the offering amount registered was $172,500,000. The
Company paid an aggregate of $10,912,000 in fees, commissions and underwriting
discounts associated with the Offering. The Company received net proceeds from
the Offering of $127,088,000 and an additional $25,000,000 from a concurrent
private placement with Qualcomm. The Company has used $79,310,000 of the
proceeds to fully retire the Series B preferred stock, $55,845,000 to retire
Term Debt and $16,933,000 for other corporate purposes.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
In June 2000, the stockholders voted on a consent in lieu of special
meeting of stockholders. The following matters were voted on: (1) the
reincorporation of the Company under the laws of the State of Delaware; (2)
the merger agreement relating to such reincorporation; (3) Amended and
Restated Certificate of Incorporation; (4) Amended and restated Bylaws; (5)
appointment of independent public accountants; (6) form of Indemnification
agreement; (7) 2000 Equity Incentive Plan and (8) 2000 Employee Stock Purchase
Plan. On all matters the vote tally was 47,293,280 votes for, with the
remainder of the outstanding share abstaining.
In July 2000, the stockholders voted on a consent in lieu of special meeting of
stockholders approving the 0.38098771 for 1 reverse stock split of the Company's
capital stock. The vote tally was 47,293,280 votes for, with the remainder of
the outstanding share abstaining.
Item 5. Other Information
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Not applicable
Item 6. Exhibits and Reports on from 8-K
(a) Exhibits
Exhibit
Number Description
2.1 First Amendment to Agreement and Plan of Recapitalization and Merger,
dated as of June 16, 1999 by and among Hyundai Electronics Industries Co.,
Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
2.2 Agreement and Plan of Recapitalization and Merger, dated as of March 13,
1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai
Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.*
2.3 Second Amendment to Agreement and Plan of Recapitalization and Merger,
dated as of August 5, 1999, by and among Hyundai Electronics Industries
Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger
Corp.*
3.1 Amended and Restated Articles of Incorporation of ChipPAC, Inc.*
3.2 Amended and Restated By-Laws of ChipPAC, Inc.*
3.3 Memorandum of Association of ChipPAC International Company Limited
(formerly known as ChipPAC Finance Limited).*
3.4 Articles of Association of ChipPAC International Company Limited (formerly
known as ChipPAC Finance Limited).*
3.5 Articles of Incorporation of ChipPAC (Barbados) Ltd.*
3.6 By-Law No. 1 of ChipPAC (Barbados) Ltd.*
3.7 Memorandum of Association of ChipPAC Limited.*
3.8 Articles of Association of ChipPAC Limited.*
3.9 Articles of Incorporation of ChipPAC Luxembourg S.a.R.L.*
3.10 Deed of Foundation of ChipPAC Liquidity Management Hungary Limited
Liability Company.*
3.11 Policy and Operating Guidelines of ChipPAC Liquidity Management Hungary
Limited Liability Company (abbreviated as ChipPAC Ltd.)*
3.12 Articles of Incorporation of ChipPAC Korea Company Ltd.*
4.2 Indenture, dated as of July 29, 1999, by and among ChipPAC International
Limited, ChipPAC Merger Corp. and Firstar Bank of Minnesota, N.A., as
trustee.*
4.3 First Supplemental Indenture, dated as of August 5, 1999, by and among
ChipPAC International Company Limited, ChipPAC, Inc. and Firstar Bank of
Minnesota, N.A., as trustee.*
4.4 12 3/4% Senior Subordinated Notes Due 2009.*
4.5 Form of Series B 12 3/4% Senior Subordinated Notes Due 2009.*
10.1 Credit Agreement, dated as of August 5, 1999, by and among ChipPAC
International Company Limited, ChipPAC, Inc., the Lenders listed therein
and Credit Suisse First Boston, as Administrative Agent, Sole Lead Manager
and Collateral Agent.*
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10.2 Guaranty, dated as of August 5, 1999, by and among ChipPAC, Inc. and
certain subsidiaries of ChipPAC, Inc., in favor of Credit Suisse First
Boston.*
10.3 Subsidiary Guaranty Agreement, dated as of August 5, 1999, by and among
ChipPAC Korea Company Ltd., ChipPAC Limited, ChipPAC (Barbados) Ltd.,
ChipPAC Luxembourg S.a.R.L., ChipPAC Liquidity Management Hungary Limited
Liability Company and ChipPAC International Company Limited, in favor of
Firstar Bank of Minnesota, N.A.*
10.4 Amended and Restated Stockholders Agreement, dated as of August 5, 1999,
by and among ChipPAC, Inc. the Hyundai Group (as defined therein), the
Bain Group (as defined therein), the SXI Group (as defined therein),
Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield
Asset Partners, L.P.*
10.5 Amended and Restated Registration Agreement, dated as of August 5, 1999,
by and among ChipPAC, Inc., the Hyundai Stockholders (as defined
therein), the Bain Stockholders (as defined therein), the SXI
Stockholders (as defined therein), Intel Corporation, ChipPAC Equity
Investors LLC, and Sankaty High Yield Asset Partners, L.P.*
10.5.1 Amendment No. 1 to Amended and Restated Registration Agreement,
dated as of June 30, 2000, by and among ChipPAC, Inc., Sapphire
Worldwide Investments, Inc., the Bain Stockholders (as defined
therein) and SXI Group LLC.**
10.5.2 Form of Amendment No. 2 to Amended and Restated Registration
Agreement, dated as of July 13, 2000, by and among ChipPAC, Inc.,
Qualcomm Incorporated, SXI Group LLC and the Bain Shareholders (as
defined therein).**
10.5.3 Form of Amendment No. 3 to Amended and Restated Registration
Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc.,
Bain Capital, Inc., SXI Group LLC and the Bain Shareholders (as
defined therein). **
10.6 Transition Services Agreement, dated as of August 5, 1999, by and among
Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America,
ChipPAC, Inc., ChipPAC Korea Company Ltd., Hyundai Electronics Company
(Shanghai) Ltd., ChipPAC Assembly and Test (Shanghai) Company Ltd.,
ChipPAC Barbados Limited and ChipPAC Limited.*
10.7 Lease Agreement, dated as of June 30, 1998, by and between Hyundai
Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.7.1 Amendment Agreement, dated September 30, 1998, to Lease Agreement, dated
June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd.
and ChipPAC Korea Ltd.*
10.7.2 Amendment Agreement 2, dated September 30, 1999, to Lease Agreement,
dated June 30, 1998, by and between Hyundai Electronics Industries Co.,
Ltd. and ChipPAC Korea Ltd.*
10.8 Agreement Concerning Supply of Utilities, Use of Welfare Facilities and
Management Services for Real Estate, dated as of June 30, 1998, by and
between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.*
10.9 Service Agreement, dated as of August 5, 1999, by and between Hyundai
Electronics Industries Co. Ltd. and ChipPAC Limited..* +
10.10 Sublease Agreement, dated as of May 1, 1998, by and between Hyundai
Electronics America and ChipPAC, Inc.*
10.11 Patent Sublicense Agreement, dated as of August 5, 1999, by and between
Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.*
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10.12 TCC License Agreement, dated December 22, 1998, between Tessera Inc.,
the Tessera Affiliates (as defined therein), ChipPAC, Inc. and the
Licensee Affiliates (as defined therein)..* +
10.12.1 Letter Agreement, dated July 15, 1999, by and among ChipPAC, Inc.,
Hyundai Electronics America, ChipPAC Limited and Tessera, Inc.*
10.13 Materials Agreement, dated as of July 1, 1999, by and between ChipPAC
Limited and Intel Corporation..* +
10.14 Assembly Services Agreement, dated as of August 5, 1999, by and between
Intel Corporation and ChipPAC Limited.. * +
10.15 Stock Purchase Agreement, dated as of August 5, 1999, by and between
ChipPAC, Inc. and Intel Corporation.*
10.16 Warrant to Purchase Class B Common Stock of ChipPAC, Inc., dated as of
August 5, 1999, issued to Intel Corporation.*
10.17 Advisory Agreement, dated as of August 5, 1999, by and among ChipPAC,
Inc., ChipPAC Limited, ChipPAC Operating Limited and Bain Capital, Inc.*
10.18 Advisory Agreement, dated as of August 5, 1999, by and among ChipPAC,
Inc., ChipPAC Limited, ChipPAC Operating Limited and SXI Group LLC.*
10.19 Employment Agreement, dated as of October 1, 1999, between ChipPAC, Inc.
and Dennis McKenna.*
10.20 ChipPAC, Inc. 1999 Stock Purchase and Option Plan.*
10.21 ChipPAC, Inc. 2000 Equity Incentive Plan.**
10.22 ChipPAC, Inc. 2000 Employee Stock Purchase Plan.**
10.23.1 Form of Key Employee Purchased Stock Agreement.*
10.23.2 Form of Key Employee Purchased Stock Agreement (with Loan).*
10.24 Form of Employee Restricted Stock Agreement.*
10.25 Form of Directors Tranche I Stock Option Agreement.*
10.26 Form of Employees Tranche I Stock Option Agreement.*
10.27 Form of Tranche II Stock Option Agreement.*
10.28 Intellectual Property Rights Agreement, entered into as of June
30, 2000, by and between Intersil Corporation and ChipPAC
Limited.**
10.29 Supply Agreement, entered into as of June 30, 2000, by and between
Intersil Corporation and ChipPAC Limited.**
10.30 Shareholders Agreement, dated as of June 30, 2000, by and among
ChipPAC, Inc., the Bain Group (as defined therein), the SXI Group
as defined therein) and Sapphire Worldwide Investments, Inc.**
10.31 Class A Common Stock Purchase Agreement, dated as of July 13,
2000, by and between ChipPAC, Inc. and Qualcomm Incorporated.**
10.32 Promissory Note, dated as of August 2, 2000, by and between Dennis
McKenna and ChipPAC, Inc.**
10.33 Promissory Note, dated as of August 2, 2000, by and between Robert
Krakauer and ChipPAC, Inc.**
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10.34 Form of Amended and Restated Supplemental Agreement No. 1 to the
Advisory Agreement, dated as of August 2, 2000, by and among
ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company
Limited and Bain Capital, Inc. **
10.35 Amended and Restated Supplemental Agreement No. 1 to the Advisory
Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc.,
ChipPAC Limited, ChipPAC International Company Limited and SXI
Group LLC. **
21.1 Subsidiaries of ChipPAC, Inc., ChipPAC International Company Limited,
ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Liquidity Management
Limited Liability Company, ChipPAC Luxembourg S.a.R.L. and ChipPAC Korea
Company Ltd.*
27.1 Financial Data Schedule.
-----------------------
* Incorporated by reference to the similarly numbered exhibit in the
Registrant's Form S-4 (No. 333-91641).
** Incorporated by reference to the similarly numbered exhibit in the
Registrant's Form S-1 (No. 333-39428).
+ Confidential treatment has been granted as to certain portions of these
exhibits, which are incorporated by reference.
(b) Reports on Form 8-K
On July 14, 2000 ChipPAC filed a report on Form 8-K under Item 2 that the
Company had completed its acquisition of Intersil Technology Sdn. Bhd., a
Malaysian corporation and wholly-owned subsidiary of Sapphire Worldwide
Investments,Inc., a British Virgin Islands corporation and wholly-owned
subsidiary of Intersil Corporation, a Delaware corporation. Pursuant to Item 7
of Form 8-K, we attached the financial statements and pro forma financial
statements of Intersil Technology Sdn. Bhd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHIPPAC, INC.
(Registrant)
/s/ Robert Krakauer
---------------------------------------
ROBERT KRAKAUER
Chief Financial Officer
(as Registrant and as Principal Accounting Officer)
November 16, 2000
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