<PAGE>
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
June 30, 2000
CHIPPAC, INC.
____________
(Exact name of registrant as specified in its charter)
California 333-91641 77-0463-48
---------------------------- ------------------------- ------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3151 Coronado Drive
Santa Clara, California 95054
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (408) 486-5900
Not Applicable
-----------------------
(Former name or former address, if changed since last report)
--------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OF INTERSIL TECHNOLOGY SDN. BHD.
On June 30, 2000, ChipPAC, Inc. (the "Company") completed its acquisition
of Intersil Technology Sdn. Bhd., a Malaysian corporation ("Intersil
Technology") and wholly-owned subsidiary of Sapphire Worldwide Investments,
Inc., a British Virgin Islands corporation ("Sapphire" or the "Seller") and
wholly-owned subsidiary of Intersil Corporation, a Delaware corporation
("Intersil"), pursuant to that Stock Purchase Agreement (the "Purchase
Agreement"), dated as of June 30, 2000, by and among ChipPAC Limited, a Virgin
Islands corporation ("ChipPAC Limited" or the "Buyer") and wholly-owned
subsidiary of the Company, the Company, Sapphire and Intersil. In the
acquisition, ChipPAC Limited acquired all of the outstanding equity interests in
Intersil Technology and related intellectual property. In consideration
therefor, the Seller received $52.5 million in cash and 17,500 shares of the
Class C Preferred Stock of the Company. In addition, pursuant to the terms of
the Purchase Agreement, during the period from June 1, 2000 to June 30, 2003,
Intersil shall 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 third parties. In the event that Intersil
were to achieve all the milestones, the Buyer would pay to Intersil an
additional sum of approximately $17.9 million in the aggregate. The cash portion
of the consideration paid in connection with the acquisition was financed by
amending the Company's senior credit facilities with Credit Suisse First Boston
to provide for a term C loan for $55.0 million.
Pursuant to the acquisition, the Buyer acquired Intersil Technology's
semiconductor packaging and test operations located in Kuala Lumpur, Malaysia.
In connection with the acquisition, the Buyer entered into a five-year supply
agreement with Intersil under which the Company will supply Intersil and each of
its current and future affiliates with their semiconductor packaging and test
services requirements. In addition, the Buyer entered into an intellectual
property rights agreement pursuant to which Intersil assigned to the Company
patents, copyrights and technical information used exclusively in or associated
exclusively with the business of Intersil Technology. Furthermore, Intersil
granted to the Company a worldwide, non-exclusive, royalty-free license under
other Intersil patents, copyrights and technical information which are also used
in or related to the operation of Intersil Technology. This license is
perpetual and irrevocable. Any intellectual property rights in the bonding
diagrams, test programs, maskworks and test boards uniquely related to Intersil
products for which the Company expects to provide packaging and test services
under the supply agreement is licensed to the Company only for use in providing
those services.
The summary of the provisions in the Purchase Agreement and related
agreements set forth above is qualified in its entirety by reference to the
Purchase Agreement and related agreements, which have been filed as exhibits to
this Current Report on Form 8-K or incorporated herein by reference to the
Company's Registration Statement on Form S-1, Registration No. 333-39428.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
2
<PAGE>
Page
----
Annual Financial Statements for Intersil Technology Sdn. Bhd.
Independent Certified Public Accountants' Report F-1
Balance Sheet as of July 3, 1998 and July 2, 1999 F-2
Statement of Income for the Fiscal Years Ended,
June 27, 1997, July 3, 1998 and July 2, 1999 F-3
Statement of Cash Flows for the Fiscal Years Ended
June 27, 1997, July 3, 1998 and July 2, 1999 F-4
Notes to Financial Statements F-5
Interim Financial Statements (unaudited) for Intersil Technology Sdn. Bhd.
Condensed Balance Sheets as of July 2, 1999 and March 31, 2000 F-9
Condensed Statements of Income for the Nine Months Ended
April 2, 1999 and March 31, 2000 F-10
Condensed Statements of Cash Flows for the Nine Months Ended
April 2, 1999 and March 31, 2000 F-11
Notes to Condensed Consolidated Financial Statements F-12
(b) PRO FORMA FINANCIAL INFORMATION
Page
----
Unaudited Pro Forma Combined Condensed Financial Data
Unaudited Pro Forma Combined Condensed Statement of
Operations for the Year Ended December 31, 1999 F-14
Unaudited Pro Forma Combined Condensed Statement of
Operations for the Three Months Ended March 31, 1999 F-15
Unaudited Pro Forma Combined Condensed Statement of
Operations for the Three Months Ended March 31, 2000 F-16
3
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Statement
of Operations F-17
Unaudited Pro Forma Balance Sheet as of March 31, 2000 F-20
Notes to Unaudited Pro Forma Balance Sheet F-21
(c) EXHIBITS
2.1 Stock Purchase Agreement among ChipPAC Limited, the Company,
Sapphire Worldwide Investments, Inc. and Intersil Corporation
dated as of June 30, 2000.
10.1 Supply Agreement entered into as of June 30, 2000 by and between
ChipPAC Limited and Intersil Corporation. (1)
10.2 Intellectual Property Rights Agreement entered into as of June
30, 2000 between Intersil Corporation and ChipPAC Limited. (2)
10.3 Amendment No. 1 to Amended and Restated Registration Agreement
entered into as of June 30, 2000 by and among the Company,
Sapphire Worldwide Investments, Inc. and certain listed parties
thereto. (3)
10.4 Shareholders Agreement made as of June 30, 2000 by and among the
Company, certain listed parties thereto, the SXI Group (as
defined therein) and Sapphire Worldwide Investments, Inc. (4)
10.5 Credit Agreement, dated as of August 5, 1999, as amended and
restated as of June 30, 2000, by and among ChipPAC International
Company Limited, the Company, the Lenders listed therein and
Credit Suisse First Boston, as Administrative Agent, Sole Lead
Manager and Collateral Agent. (5)
23.1 Consent of Ernst & Young LLP.
______________________________
(1) Incorporated by reference to Exhibit 10.33 to the Company's Registration
Statement on Form S-1, Registration No. 333-39428 (the "Form S-1").
(2) Incorporated by reference to Exhibit 10.32 to the Form S-1.
(3) Incorporated by reference to Exhibit 10.5.1 to the Form S-1.
(4) Incorporated by reference to Exhibit 10.34 to the Form S-1.
(5) Incorporated by reference to Exhibit 10.1 to the Form S-1.
4
<PAGE>
SIGNATURE
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 hereunto duly authorized.
ChipPAC, Inc.
Date: July 14, 2000 By: /s/ Robert Krakauer
------------------------------------
Robert Krakauer
Senior Vice President and
Chief Financial Officer
5
<PAGE>
Independent Certified Public Accountants' Report
Board of Directors
Intersil Holding Corporation
We have audited the accompanying balance sheets of Intersil Technology Sdn.
Bhd. (the "Company"), which is wholly-owned by Intersil Holding Corporation
("Intersil"), as of July 2, 1999 and July 3, 1998 and the related statements of
income and cash flows for each of the three fiscal years in the period ended
July 2, 1999. These financial statements are the responsibility of Intersil's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying consolidated financial statements were prepared on the
basis of presentation as described in Note A. The results of operations are not
necessarily indicative of the results of operations that would be recorded by
the Company on a stand-alone basis.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at July 2, 1999
and July 3, 1998 and the results of its operations and its cash flows for each
of the three fiscal years in the period ended July 2, 1999, on the basis
described in Note A, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
May 16, 2000
Jacksonville, Florida
F-1
<PAGE>
Intersil Technology Sdn. Bhd.
BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
July 3, July 2,
1998 1999
-------- --------
<S> <C> <C>
ASSETS
------
Current assets:
Cash....................................................... $ 131 $ 802
Short-term investments..................................... 651 2,952
Inventories................................................ 5,886 6,528
Prepaid expenses and other current assets.................. 656 847
Due from parent............................................ 125,139 45,502
Deferred income taxes...................................... 674 --
-------- --------
Total current assets..................................... 133,137 56,631
Plant and equipment, net..................................... 116,795 118,619
Deferred income taxes........................................ 732 275
-------- --------
Total assets............................................. $250,664 $175,525
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Trade accounts payable..................................... $ 7,691 $ 7,310
Accrued compensation....................................... 1,803 2,060
Other accrued items........................................ 3,611 765
Deferred income taxes...................................... -- 51
-------- --------
Total current liabilities................................ 13,105 10,186
Stockholder's Equity:
Common stock............................................... 81,092 81,092
Additional paid-in capital................................. 5,923 5,923
Retained earnings.......................................... 150,544 78,324
-------- --------
237,559 165,339
-------- --------
Total liabilities and stockholder's equity............... $250,664 $175,525
======== ========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
Intersil Technology Sdn. Bhd.
STATEMENT OF INCOME
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------
June
27, July 3, July 2,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenue:
Intercompany sales................................ $83,674 $80,376 $110,504
Costs and expenses:
Cost of intercompany sales........................ 69,073 70,110 94,426
Interest income................................... (160) (139) (134)
Other............................................. 95 57 69
------- ------- --------
Income before income taxes.......................... 14,666 10,348 16,143
Pro forma income tax expense/(benefit).............. 3,060 (5,911) 1,182
------- ------- --------
Net income.......................................... $11,606 $16,259 $ 14,961
======= ======= ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
Intersil Technology Sdn. Bhd.
STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
June 27, July 3, July 2,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net income...................................... $ 11,606 $ 16,259 $ 14,961
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 12,308 14,823 18,289
Deferred income taxes......................... 2,300 (5,950) 1,182
Changes in assets and liabilities
Inventories................................. 6,757 353 (642)
Prepaid expenses and other current assets... 18 102 (191)
Due from parent............................. 16,077 16,758 79,636
Due from affiliates......................... 3,672 -- --
Trade payables and accrued liabilities...... 3,391 1,392 (2,969)
-------- -------- --------
Net cash provided by operating
activities............................... 56,129 43,737 110,266
Investing Activities:
Purchases of short-term investments, net........ (27) (624) (2,301)
Purchases of plant and equipment................ (37,016) (38,798) (20,113)
-------- -------- --------
Net cash used in investing activities..... (37,043) (39,422) (22,414)
Financing Activities:
Dividends paid to parent........................ (17,036) -- (91,877)
Net cash transfers and billings from (to)
parent......................................... (1,583) (6,146) 4,696
-------- -------- --------
Net cash used in financing activities..... (18,619) (6,146) (87,181)
Net increase (decrease) in cash................. 467 (1,831) 671
Cash at beginning of period..................... 1,495 1,962 131
-------- -------- --------
Cash at end of period........................... $ 1,962 $ 131 $ 802
======== ======== ========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
Intersil Technology Sdn. Bhd.
NOTES TO FINANCIAL STATEMENTS
July 2, 1999
NOTE A--ORGANIZATION AND BASIS OF PRESENTATION
Intersil Technology Sdn. Bhd. (the "Company"), a Malaysian corporation
located in Kuala Lumpur, Malaysia, is a wholly-owned subsidiary of Intersil
Corporation ("Intersil"), which is a wholly-owned subsidiary of Intersil
Holding Corporation ("Intersil Holding"). The Company's principal activities
include the assembly and testing of integrated circuits for Intersil. All
revenue transactions are intercompany.
Intersil Holding was formed on August 13, 1999 through a series of
transactions, in which Intersil Holding acquired the Semiconductor Business of
Harris Corporation ("Harris"), which included Harris Advanced Technology Sdn.
Bhd., the predecessor of the Company.
On May 5, 2000, Intersil Holding announced that it entered into a Letter of
Intent to sell 100% of the issued and outstanding capital stock of the Company
to ChipPAC, Inc. ("ChipPAC") and will enter into an outsourcing agreement with
ChipPAC for its assembly and testing requirements. The Letter of Intent does
not include finished goods inventory and all die and wafer inventory which will
be retained by Intersil. Accordingly, the accompanying financial statements
include the assets, liabilities and results of operations for the assembly and
testing operations of the Company that are to be sold as part of the Letter of
Intent.
Interest expense of Intersil has not been allocated to the Company.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The 1997 fiscal year includes the 52 weeks ended June 27, 1997; fiscal year
1998 includes the 53 weeks ended July 3, 1998; and fiscal year 1999 includes
the 52 weeks ended July 2, 1999.
Short-Term Investments
Short-term investments consist of certificates of deposit which are due in
one year or less. Certificates of deposit are readily convertible to cash and
are stated at cost.
Inventories
Inventories are carried at the lower of standard cost, which approximates
actual cost, determined by the First-In-First-Out (FIFO) method, or market.
Inventories represent raw materials and supplies (exclusive of die stock
received from Intersil), labor and overhead held for or incurred in the course
of performing contract manufacturing activities on behalf of Intersil.
Plant and Equipment
Plant and equipment are carried on the basis of cost. The estimated useful
lives of buildings range between 8 and 45 years. The estimated useful lives of
machinery and equipment range between 5 and 8 years. Leasehold improvements are
amortized over the life of the lease. Depreciation of buildings and machinery
and equipment is computed by straight-line and accelerated methods.
Revenue Recognition
All revenue transactions are with Intersil. The Company records revenue upon
shipment to Intersil based upon cost plus a fixed mark-up, pursuant to an
agreement with Intersil. Revenues and cost of intercompany sales exclude costs
of die stock received from Intersil to be subject to the Company's processing
activities.
F-5
<PAGE>
Intersil Technology Sdn. Bhd.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Income Taxes
Income taxes have been provided on a pro forma basis related to the
operations of the Company presented as described in footnote A "Organization
and Basis of Presentation". The Company follows the liability method of
accounting for income taxes. Deferred income taxes are provided for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
Financial Instruments
The carrying values of short-term investments and accounts payable
approximate their fair values.
Asset Impairment
The Company accounts for long-lived asset impairment under Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company
recognizes impairment losses on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. The
impairment loss is measured by comparing the fair value of the asset to its
carrying amount. Fair value is estimated based on discounted future cash flows.
Long-lived assets to be disposed of are recorded at the lower of their carrying
amount or estimated fair value less cost to sell.
Foreign Currency Translation
The functional currency of the Company is the U.S. dollar. Remeasurement
gains and losses, resulting from the process of remeasuring non-U.S. dollar
transactions and assets and liabilities into U.S. dollars, are included in cost
of intercompany sales.
Use of Estimates
These statements have been prepared in conformity with generally accepted
accounting principles and require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE C--ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The statement
establishes standards for recording derivative financial instruments and the
recognition of gains or losses resulting from changes in the fair values of
those instruments. The Company plans to adopt the new standard no later than
the first quarter of fiscal 2001. However, the Company has not determined the
anticipated impact of FAS No. 133.
NOTE D--INVENTORIES
Inventories are summarized below:
<TABLE>
<CAPTION>
July 3, July 2,
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Work in process.............................................. $1,382 $3,384
Raw materials and supplies................................... 4,504 3,144
------ ------
$5,886 $6,528
====== ======
</TABLE>
F-6
<PAGE>
Intersil Technology Sdn. Bhd.
NOTES TO FINANCIAL STATEMENTS--(Continued)
At July 2, 1999, the Company was committed to purchase $12.9 million of
inventory from suppliers. Management believes the cost of this inventory
approximates current market value.
NOTE E--PLANT AND EQUIPMENT
Plant and equipment are summarized below:
<TABLE>
<CAPTION>
July 3, July 2,
1998 1999
-------- --------
(In thousands)
<S> <C> <C>
Leasehold improvements................................... $ 784 $ 784
Buildings................................................ 36,544 38,614
Machinery and equipment.................................. 242,552 239,361
-------- --------
279,880 278,759
Less allowances for depreciation......................... 163,085 160,140
-------- --------
$116,795 $118,619
======== ========
</TABLE>
NOTE F--STOCKHOLDER'S EQUITY
Changes in the stockholder's equity are as follows:
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings
------- ---------- --------
(In thousands)
<S> <C> <C> <C>
Balance at July 1, 1996... $81,092 $5,923 $147,444
Net income.............. -- -- 11,606
Dividends paid to
parent................. -- -- (17,036)
Net cash transfers and
billings to Intersil... -- -- (1,583)
------- ------ --------
Balance at June 27, 1997.. 81,092 5,923 140,431
Net income.............. -- -- 16,259
Dividends paid to
parent................. -- -- --
Net cash transfers and
billings to Intersil... -- -- (6,146)
------- ------ --------
Balance at July 3, 1998... 81,092 5,923 150,544
Net income.............. -- -- 14,961
Dividends paid to
parent................. -- -- (91,877)
Net cash transfers and
billings to Intersil... -- -- 4,696
------- ------ --------
Balance at July 2, 1999... $81,092 $5,923 $ 78,324
======= ====== ========
</TABLE>
NOTE G--INCOME TAXES (PRO FORMA)
The Company incurs and pays tax exclusively in Malaysia. Pro forma income
tax expense/(benefit) is summarized below:
<TABLE>
<CAPTION>
June 27, July 3, July 2,
1997 1998 1999
-------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current............................................ $ 760 $ 39 $ --
Deferred........................................... 2,300 (5,950) 1,182
------ ------- ------
$3,060 $(5,911) $1,182
====== ======= ======
</TABLE>
F-7
<PAGE>
Intersil Technology Sdn. Bhd.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In the year 2000, the Malaysian taxing authority will convert its income tax
system to a self-assessment system. The new self-assessment system will require
Malaysian corporate taxpayers to begin making estimated tax payments in the
year 2000 based on year 2000 estimated taxable income. Currently, Malaysian
corporate taxpayers submit tax payments following the year of assessment. In
1999, the Company made Malaysian taxing payments based on 1998's taxable
income. As a result of the change in the Malaysian taxing system, the Company
will not be required to make tax payments on its 1999 Malaysian taxable income
and, therefore, has not provided a current tax provision for Malaysian taxes in
1999, which would have amounted to approximately $.9 million.
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
July 3, 1998 July 2, 1999
------------------- -------------------
Current Non-Current Current Non-Current
------- ----------- ------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Depreciation....................... $-- $(6,373) $-- $(8,881)
Reinvestment allowance
carryforward...................... -- 7,105 -- 9,156
All other--net..................... 674 -- (51) --
---- ------- ---- -------
$674 $ 732 $(51) $ 275
==== ======= ==== =======
</TABLE>
Income taxes paid were $8.3 million in 1997, $.1 million in 1998, and $0 in
1999.
NOTE H--LEASE COMMITTMENTS
The Company leases land for its assembly and test facilities under leases
that expire from 2072 to 2081. Total rental expense for the leased land
amounted to $.05 million in 1997, $.03 million in 1998 and $.03 million in
1999. Future minimum rental commitments under the land leases amounted to
approximately $2.95 million at July 2, 1999. The commitments for the years
following 1999 are: 2000--$.03 million, 2001--$.03 million, 2002--$.03 million,
2003--$.03 million, 2004--$.03 million and $2.80 million thereafter.
F-8
<PAGE>
Intersil Technology Sdn. Bhd.
CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Predecessor Successor
July 2, March 31,
1999 2000
----------- -----------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash, cash equivalents and restricted cash............ $ 802 $ 2,082
Short-term investments................................ 2,952 --
Inventories........................................... 6,528 5,612
Prepaids and other current assets..................... 847 373
Due from parent....................................... 45,502 --
-------- --------
Total current assets................................ 56,631 8,067
Property and equipment, net............................. 118,619 83,983
Deferred income taxes................................... 275 --
-------- --------
Total assets........................................ $175,525 $ 92,050
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Trade accounts payable................................ $ 7,310 $ 7,369
Accrued compensation.................................. 2,060 1,932
Other accrued items................................... 765 994
Due to parent......................................... -- 14,934
Deferred income taxes................................. 51 --
-------- --------
Total current liabilities........................... 10,186 25,229
Deferred income taxes................................... -- 4,622
-------- --------
Total liabilities..................................... 10,186 29,851
Stockholders' equity:
Common stock.......................................... 81,092 81,092
Additional paid in capital............................ 5,923 5,923
Retained earnings..................................... 78,324 (24,816)
-------- --------
Total stockholders' equity ........................... 165,339 62,199
-------- --------
Total liabilities and stockholders' equity ......... $175,525 $ 92,050
======== ========
</TABLE>
See accompanying notes to Intersil's condensed financial statements.
F-9
<PAGE>
Intersil Technology Sdn. Bhd.
CONDENSED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
Successor
Predecessor Combined
April 2, March 31,
1999 2000
----------- ---------
<S> <C> <C>
Revenues
Intercompany sales...................................... $77,837 $68,473
Costs and expenses
Cost of intercompany sales.............................. 66,712 58,566
Interest income........................................... (106) (49)
Other..................................................... 55 40
------- -------
Income before income taxes................................ 11,176 9,916
Pro forma income tax expense/(benefit).................... (1,180) 6,528
------- -------
Net income ............................................... $12,356 $ 3,388
======= =======
</TABLE>
See accompanying notes to Intersil's condensed financial statements.
F-10
<PAGE>
Intersil Technology Sdn. Bhd.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
Successor
Predecessor Combined
April 2, March 31,
1999 2000
----------- ---------
<S> <C> <C>
Operating Activities:
Net income ............................................. $12,356 $ 3,388
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization......................... 13,646 11,771
Deferred income taxes................................. (1,180) 4,846
Changes in assets and liabilities:
Inventories......................................... (3,047) 916
Prepaid expenses and other assets................... (496) 475
Due from parent..................................... 8,787 60,437
Trade payables and accrued liabilities ............. (4,882) 159
------- -------
Net cash provided by operating activities......... 25,184 81,992
Investing Activities:
Sale of short-term investments, net..................... 651 2,952
Purchases of plant and equipment........................ (14,836) (3,896)
------- -------
Net cash used for investing activities............ (14,185) (944)
Financing Activities:
Dividends paid to parent................................ -- (85,411)
Net cash transfer and billings from (to) parent......... (8,446) 5,643
------- -------
Net cash used for financing activities............ (8,446) (79,768)
Net increase in cash and cash equivalents............... 2,553 1,280
Cash and cash equivalents at beginning of period........ 131 802
------- -------
Cash and cash equivalents at end of period.............. $ 2,684 $ 2,082
======= =======
</TABLE>
See accompanying notes to Intersil's condensed financial statements.
F-11
<PAGE>
Intersil Technology Sdn. Bhd.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2000
(Unaudited)
Note A--Organization and Basis of Presentation
Intersil Technology Sdn. Bhd. (the "Company or "Successor"), a Malaysian
corporation located in Kuala Lumpur, Malaysia, is a wholly-owned subsidiary of
Intersil Corporation ("Intersil"), which is a wholly-owned subsidiary of
Intersil Holding Corporation ("Intersil Holding"). The Company's principal
activities include the assembly and testing of integrated circuits for
Intersil. All revenue transactions are intercompany.
Intersil Holding was formed on August 13, 1999 through a series of
transactions, in which Intersil Holding acquired the Semiconductor Business of
Harris Corporation ("Harris"), which included Harris Advanced Technology Sdn.
Bhd. (Predecessor), the predecessor of the Company. The unaudited condensed
consolidated balance sheet as of July 2, 1999 and the unaudited condensed
consolidated statements of operations and cash flows for the nine months ended
March 31, 1999, include the accounts of the Predecessor company. The unaudited
combined condensed consolidated statements of operations and cash flows for the
nine months ended March 31, 1999, include the accounts of the Predecessor
company from July 3, 1999 to August 13, 1999.
On May 5, 2000, Intersil Holding announced that it entered into a Letter of
Intent to sell 100% of the issued and outstanding capital stock of the Company
to ChipPAC Inc. ("ChipPAC") and will enter into an outsourcing agreement with
ChipPAC for its assembly and testing requirements. The Letter of Intent does
not include finished goods inventory and all die and wafer inventory, which
will be retained by Intersil. Accordingly, the accompanying unaudited condensed
financial statements include the assets, liabilities and results of operations
for the assembly and testing operations of the Company that are to be sold as
part of the Letter of Intent.
Interest expense of Intersil has not been allocated to the Company.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, all of which are of
a normal recurring nature, necessary for a fair presentation of the results for
these interim periods and are not necessarily indicative of full year results.
This financial information should be read in conjunction with the audited
financial statements and notes thereto for the year ended July 2, 1999.
Note B--Inventories
<TABLE>
<CAPTION>
Successor
Predecessor Combined
July 2, March 31,
1999 2000
----------- ---------
(In thousands)
<S> <C> <C>
Raw materials.......................................... $3,144 $2,055
Work-in-process........................................ 3,384 3,557
------ ------
Total................................................ $6,528 $5,612
====== ======
</TABLE>
F-12
<PAGE>
Intersil Technology Sdn. Bhd.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note C--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 in applying generally
accepted accounting principles to selected revenue recognition issues. Adoption
of SAB 101 is required by the second quarter of fiscal 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 FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The statement
establishes standards for recording derivative financial instruments and the
recognition of gains or losses resulting from changes in the fair values of
those instruments. The Company plans to adopt the new standard no later than
the first quarter of fiscal 2001. However, the Company has not determined the
anticipated impact of FAS No. 133.
F-13
<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
ChipPAC, Inc.
Recapitalization Malaysian Acquisition Pro Forma ChipPAC, Inc.
ChipPAC, Inc. Pro Forma Business Pro Forma Before Offering Pro Forma
Historical Adjustments Historical Adjustments Offering Adjustments As Adjusted
------------- ---------------- ---------- ----------- ------------- ----------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Combined
Condensed Statements of
Operations:
Revenues................ $375,530 $ -- $101,864 $ -- $477,394 $ -- $477,394
Costs of revenues....... 317,488 -- 85,952 1,687 (3) 405,127 -- 405,127
-------- ------- -------- ------- -------- -------- --------
Gross profit............ 58,042 -- 15,912 (1,687) 72,267 -- 72,267
Operating expenses:
Selling, general and
administrative........ 21,219 -- -- -- 21,219 -- 21,219
Research and
development........... 12,362 -- -- -- 12,362 -- 12,362
Change of control
expense............... 11,842 (11,842)(1) -- -- -- -- --
-------- ------- -------- ------- -------- -------- --------
Operating income........ 12,619 11,842 15,912 (1,687) 38,686 -- 38,686
Interest expense........ 21,241 12,976 (2) -- 5,844 (4) 40,061 (20,809)(6) 19,252
Interest income......... (2,751) -- (86) -- (2,837) -- (2,837)
Foreign currency gain... (1,224) -- -- -- (1,224) -- (1,224)
Other income............ (650) -- 102 -- (548) -- (548)
-------- ------- -------- ------- -------- -------- --------
Income (loss) before
provision for income
taxes.................. (3,997) (1,134) 15,896 (7,531) 3,234 20,809 24,043
Provision (benefit) for
income taxes........... 1,938 (227) 7,745 (8,809)(5) 647 4,162 (5) 4,809
-------- ------- -------- ------- -------- -------- --------
Net income (loss) from
continuing
operations............ $ (5,935) $ (907) $ 8,151 $ 1,278 $ 2,587 $ 16,647 $ 19,234
======== ======= ======== ======= ======== ======== ========
Net income (loss)
available to common
stockholders(7)....... $(11,528) $(6,103) $ 8,151 $ 403 $ (7,704) $ 26,678 $ 18,974
======== ======= ======== ======= ======== ======== ========
Earnings per common
share:
Basic................... $ 0.33
Diluted................. 0.33
Weighted average common
shares outstanding:
Basic .................. 57,590
Diluted(8) ............. 58,132
Other Data:
Dividends accreted on
Class B preferred
stock(9)............... 3,554 5,196 -- -- 8,750 (8,750) --
Dividends accreted on
Class A convertible
preferred stock(10).... 406 -- -- -- 406 (406) --
Dividends accreted on
Class C preferred
stock(11).............. -- -- -- 875 875 (875) --
Accretion of recorded
value of the Intel
warrant................ 260 -- -- -- 260 -- 260
</TABLE>
-------------------
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations.
F-14
<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Operations
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
ChipPAC, Inc.
Recapitalization Malaysian Acquisition Pro Forma ChipPAC, Inc.
ChipPAC, Inc. Pro Forma Business Pro Forma Before Offering Pro Forma
Historical Adjustments Historical Adjustments Offering Adjustments As Adjusted
------------- ---------------- ---------- ----------- ------------- ----------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Combined
Condensed Statements of
Operations:
Revenues................ $85,548 $ -- $23,647 $ -- $109,195 $ -- $109,195
Costs of revenues....... 72,131 -- 19,908 422 (3) 92,461 -- 92,461
------- ------- ------- ------- -------- ------ --------
Gross profit............ 13,417 -- 3,739 (422) 16,734 -- 16,734
Operating expenses:
Selling, general and
administrative........ 4,511 -- -- -- 4,511 4,511
Research and
development........... 3,003 -- -- -- 3,003 -- 3,003
------- ------- ------- ------- -------- ------ --------
Operating income........ 5,903 -- 3,739 (422) 9,220 9,220
Interest expense........ 3,007 5,547 (2) -- 1,461 (4) 10,015 (5,202)(6) 4,813
Interest income......... (950) -- (20) -- (970) -- (970)
Foreign currency gain... (946) -- -- -- (946) -- (946)
Other income............ (127) -- 15 -- (112) -- (112)
------- ------- ------- ------- -------- ------ --------
Income (loss) before
provision for income
taxes.................. 4,919 (5,547) 3,744 (1,883) 1,233 5,202 6,435
Provision (benefit) for
income taxes........... 3,115 (1,109)(5) -- (1,759)(5) 247 1,040 (5) 1,287
------- ------- ------- ------- -------- ------ --------
Net income (loss)...... $ 1,804 $(4,438) $ 3,744 $ (124) $ 986 $4,162 $ 5,148
======= ======= ======= ======= ======== ====== ========
Net income (loss)
available to common
stockholders(7)....... $ 1,804 $(6,626) $ 3,744 $ (343) $ (1,421) $6,569 $ 5,148
======= ======= ======= ======= ======== ====== ========
Earnings per common
shares:
Basic................... $ 0.09
Diluted................. $ 0.09
Weighted average common
shares outstanding:
Basic................... 56,491
Diluted(8).............. 56,491
Other Data:
Dividends accreted on
Class B preferred
stock(9)............... -- 2,188 -- -- 2,188 (2,188) --
Dividends accreted on
Class A convertible
preferred stock(10).... -- -- -- -- -- -- --
Dividends accreted on
Class C preferred
stock(11).............. -- -- -- 219 219 (219) --
</TABLE>
-------------------
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations.
F-15
<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Operations
Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
ChipPAC, Inc.
Malaysian Acquisition Pro Forma ChipPAC Pro
ChipPAC, Inc. Business Pro Forma Before Offering Forma
Historical Historical Adjustments Offering Adjustments As Adjusted
------------- ---------- ----------- ------------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Pro Forma Combined
Condensed Statements of
Operations:
Revenues................ $97,469 $22,923 $ -- $120,392 $ -- $120,392
Costs of revenues....... 77,044 20,185 422 (3) 97,651 -- 97,651
------- ------- ------- -------- ------ --------
Gross profit............ 20,425 2,738 (422) 22,741 -- 22,741
Operating expenses:
Selling, general and
administrative........ 7,099 -- -- 7,099 -- 7,099
Research and
development........... 2,631 -- -- 2,631 -- 2,631
------- ------- ------- -------- ------ --------
Operating income........ 10,695 2,738 (422) 13,011 -- 13,011
Interest expense........ 8,764 -- 1,461 (4) 10,225 (5,523)(6) 4,702
Interest income......... (238) (10) -- (248) -- (248)
Foreign currency gain... (399) -- -- (399) -- (399)
Other income............ (134) 18 -- (116) -- (116)
------- ------- ------- -------- ------ --------
Income (loss) before
provision for income
taxes.................. 2,702 2,730 (1,883) 3,549 5,523 9,072
Provision (benefit) for
income taxes........... 542 3,165 (2,997)(5) 710 1,105 (5) 1,815
------- ------- ------- -------- ------ --------
Net income (loss)...... $ 2,160 $ (435) $ 1114 $ 2,839 $4,418 $ 7,257
======= ======= ======= ======== ====== ========
Net income (loss)
available to common
stockholders(7)....... $ (555) $ (435) $ 896 $ (84) $7,185 $ 7,101
======= ======= ======= ======== ====== ========
Earnings per common
share:
Basic................... $ 0.12
Diluted................. 0.11
Weighted average common
shares outstanding:
Basic................... 61,090
Diluted(8).............. 62,313
Other Data:
Dividends accreted on
Class B preferred
stock(9)............... 2,299 -- -- 2,299 (2,299) --
Dividends accreted on
Class A convertible
preferred stock(10).... 250 -- -- 250 (250) --
Dividends accreted on
Class C preferred
stock(11).............. -- -- 218 218 (218) --
Accretion of recorded
value of the Intel
Warrant................ 156 -- -- 156 -- 156
</TABLE>
-------------------
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations.
F-16
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 1999 and Three Months Ended March 31, 1999 and 2000
(1) As a result of our recapitalization, we were contractually required to
make a one-time change of control payment to our unionized Korean employees of
approximately $11.8 million, which resulted in a corresponding reduction to the
recapitalization consideration paid to Hyundai. The payment was recorded as an
operating expense during the three months ended September 30, 1999. This amount
has been excluded from the pro forma operating results for the year ended
December 31, 1999, as it represents a one-time charge directly related to our
recapitalization.
(2) The increase to pro forma interest expense as a result of our
recapitalization is summarized as follows:
<TABLE>
<CAPTION>
Three Months
Year Ended Ended
December 31, March 31,
1999 1999
------------ ------------
(in millions)
<S> <C> <C>
Interest on term loans--8.86%.................... $ 13.3 $ 3.3
Interest on senior subordinated notes due 2009--
12.75%.......................................... 19.1 4.8
Amortization of debt issuance costs ($14.4
million over 8 years) .......................... 1.8 0.5
------ -----
Interest expense from recapitalization debt
requirements.................................... 34.2 8.6
Less: historical interest expense................ (21.2) (3.0)
------ -----
Net increase................................... $ 13.0 $ 5.5
====== =====
</TABLE>
An increase or decrease in the assumed weighted average interest rate on the
senior credit facilities of 0.125% would change pro forma interest expense by
$187,500 for the year ended December 31, 1999.
(3) As part of cost of revenues, we expect to include amortization expense
based on the fair value of acquired intangibles over a period of seven years.
The pro forma expense for the year ended December 31, 1999 is $1.7 million and
the pro forma expense for the three months ended March 31, 1999 and 2000 is
$0.4 million. Acquired intangibles comprise the estimated fair value of
intellectual property, primarily trade secrets and patents.
(4) The increase to pro forma interest as a result of the acquisition of the
Malaysian business is summarized as follows:
<TABLE>
<CAPTION>
Three Months Three Months
Year Ended Ended Ended
December 31, 1999 March 31, 1999 March 31, 2000
----------------- -------------- --------------
(in millions)
<S> <C> <C> <C>
Interest on term C loan--
10.62625%................ $5.8 $1.5 $1.5
==== ==== ====
</TABLE>
(5) As a result of the recapitalization, we believe our effective tax rate
will be 20% on an ongoing basis. We believe that the acquisition of the
Malaysian business did not change our effective 20% tax rate. Accordingly, the
pro forma adjustments reflect the income tax required to result in a pro forma
income tax provision based on a 20% effective tax rate.
F-17
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed
Statement of Operations--(Continued)
(6) A portion of the proceeds of the offering will be used to repay a
portion of our senior subordinated notes and amounts outstanding under our
senior credit facilities, resulting in lower debt after the offering and lower
interest expense. The estimated pro forma reductions to interest expense for
the pro forma year ended December 31, 1999 and the three months ended March 31,
1999 and 2000 are set forth below:
<TABLE>
<CAPTION>
Three Months Three Months
Year Ended Ended Ended
December 31, 1999 March 31, 1999 March 31, 2000
----------------- -------------- --------------
(in millions)
<S> <C> <C> <C>
Senior subordinated notes--
12 3/4%.................. $ 6.6 $1.6 $1.6
Senior credit facilities:
term A loan--9.3825% in
2000, 8.86% in 1999..... 6.2 1.5 1.6
term B loan--10.1325% in
2000, 8.86% in 1999..... 2.4 0.6 0.7
term C loan--10.1325%.... 5.6 1.4 1.4
revolving loans--11.25%.. -- -- 0.1
----- ---- ----
$20.8 $5.2 $5.5
===== ==== ====
</TABLE>
(7) Net income (loss) available to common stockholders represents net income
(loss) from continuing operations less dividends accreted on preferred stock,
the accretion of the recorded value on the Intel warrant and, for the pro forma
year ended December 31, 1999, the extraordinary loss on retirement of a portion
of the debt in connection with recapitalization. The following table sets forth
the computation of net income (loss) per share of common stock:
<TABLE>
<CAPTION>
Pro Forma As Adjusted
--------------------------------
Three Months Ended
Year Ended December 31, Year Ended March 31,
---------------------------- December 31, -------------------
1997 1998 1999 1999 1999 2000
--------- -------- -------- ------------ --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....... $ (46,118) $ 32,303 $ (5,935) $ 19,234 $ 5,148 $ 7,257
Extraordinary item(a).. -- -- (1,373) -- -- --
Mandatorily redeemable
preferred stock
dividends............. -- -- (3,960) -- -- --
Accretion of the
recorded value of the
Intel warrant......... -- -- (260) (260) -- (156)
--------- -------- -------- -------- --------- ---------
Net income (loss)
available to common
stockholders........... $(46,118) $ 32,303 $(11,528) $ 18,974 $ 5,148 $ 7,101
========= ======== ======== ======== ========= =========
Weighted average shares
outstanding used for
basic and diluted
income (loss) per
share:
Class A common stock.... 57,590 56,491 61,090
Class L common stock.... -- -- --
-------- --------- ---------
Common Stock............ 57,590 56,491 61,090
-------- --------- ---------
Basic earnings per
share.................. $ 0.33 $ 0.09 $ 0.12
======== ========= =========
Fully diluted shares
outstanding............ 58,132 56,491 62,313
Diluted earnings per
share.................. $ 0.33 $ 0.09 $ 0.11
======== ========= =========
</TABLE>
---------------------
(a) On early retirement of some of the debt upon recapitalization, we incurred
termination penalties and recorded an extraordinary loss of $1.4 million,
net of related tax benefit.
F-18
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed
Statement of Operations--(Continued)
(8) The estimated fully-diluted number of shares expected to be outstanding
after this offering and the concurrent private placement, including the shares
of Class A common stock issuable upon the exercise of options outstanding or
expected to be issued prior to the closing of this offering and the shares of
Class B common stock issuable upon the exercise of a warrant held by Intel, is
68,604,714 shares.
(9) Dividends on our Class B preferred stock accrete on a daily basis at a
rate of 12.5% per annum. Until February 5, 2005, dividends will not be paid in
cash, but will be capitalized as accumulated and unpaid dividends as part of
mandatorily redeemable preferred stock.
(10) Dividends on our Class A convertible preferred stock accrete on a daily
basis at a rate of 10% per annum. Accumulated and unpaid dividends as of the
balance sheet date are capitalized as part of mandatorily redeemable preferred
stock.
(11) Dividends on our Class C preferred stock accrete on a daily basis at a
rate of 5% per annum. Accumulated and unpaid dividends as of the balance sheet
date are capitalized as part of mandatorily redeemable preferred stock. The
Class C preferred stock has been valued at $15.8 million and has a liquidation
value of $17.5 million, with the difference being accreted over a three-year
period to the redemption date.
F-19
<PAGE>
UNAUDITED PRO FORMA
BALANCE SHEET AS OF MARCH 31, 2000
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
Malaysian Acquisition Pro Forma as Adjusted
ChipPAC, Inc. Business Pro Forma Before Offering for the
Historical Historical Adjustments Offering Adjustments Offering
------------- ---------- ----------- --------- ----------- -----------
ASSETS
------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 19,538 $ 2,082 $ -- $ 21,620 $ 25,000 (8) $ 46,620
Accounts receivable,
less allowance for
doubtful accounts..... 35,535 -- -- 35,535 -- 35,535
Inventories............ 14,941 5,612 -- 20,553 -- 20,553
Deferred taxes......... 716 -- -- 716 -- 716
Prepaid expenses and
other current assets
...................... 7,799 373 1,800 (1) 9,972 -- 9,972
--------- -------- -------- --------- --------- ---------
Total current
assets.............. 78,529 8,067 1,800 88,396 25,000 113,396
Property, plant and
equipment, net......... 229,430 83,983 (10,623)(2) 302,790 -- 302,790
Intangibles ............ -- -- 11,806 (3) 11,806 -- 11,806
Other assets............ 20,995 -- -- 20,995 -- 20,995
--------- -------- -------- --------- --------- ---------
Total assets......... $ 328,954 $ 92,050 $ 2,983 $ 423,987 $ 25,000 $ 448,987
========= ======== ======== ========= ========= =========
LIABILITIES, MANDATORILY
REDEEMABLE PREFERRED
STOCK AND EQUITY
------------------------
Current liabilities:
Revolving loans........ $ 7,500 $ -- $ -- $ 7,500 $ (7,500)(9) $ --
Accounts payable....... 35,723 7,369 -- 43,092 -- 43,092
Accrued expenses and
other liabilities .... 18,725 2,926 7,500 (4) 29,151 -- 29,151
Current portion of
long-term debt........ 7,300 -- -- 7,300 -- 7,300
Payable to parent ..... -- 14,934 (14,934) (5) -- -- --
--------- -------- -------- --------- --------- ---------
Total current
liabilities......... 69,248 25,229 (7,434) 87,043 (7,500) 79,543
--------- -------- -------- --------- --------- ---------
Long-term debt, less
current portion........ 292,700 -- 55,000 347,700 (205,400)(9) 142,300
Deferred taxes.......... -- 4,622 1,830 6,452 -- 6,452
Other long-term
liabilities............ 4,514 -- -- 4,514 -- 4,514
--------- -------- -------- --------- --------- ---------
Total liabilities.... 366,462 29,851 49,396 445,709 (212,900) 232,809
--------- -------- -------- --------- --------- ---------
Commitments and
contingencies
Mandatorily redeemable
preferred stock:
10.0% cumulative
convertible preferred
stock, class A held
by Intel--par value
$0.01 per share:
10,000 shares
authorized, issued
and outstanding at
March 31, 2000,
actual and pro forma;
no shares issued and
outstanding, pro
forma as adjusted..... 9,832 -- -- 9,832 (9,832)(9) --
12.5% cumulative
preferred stock,
class B held by
Hyundai--par value
$0.01 per share:
105,000 shares
authorized and 70,000
shares issued and
outstanding at March
31, 2000, actual and
pro forma; no shares
issued and
outstanding, pro
forma as adjusted..... 75,853 -- -- 75,853 (75,853)(9) --
5% cumulative
convertible preferred
stock, class C held
by Intersil--par
value $0.01 per
share; 17,500 shares
authorized, no shares
issued and
outstanding at March
31, 2000, actual;
17,500 shares issued
and outstanding, pro
forma; no shares
issued and
outstanding, pro
forma as adjusted .... -- -- 15,786 (6) 15,786 (15,786)(9) --
Stockholders' equity
(deficit):
Common stock, class
A--par value $0.01
per share;
180,000,000 shares
authorized,
96,254,000 shares
issued and
outstanding at March
31, 2000, actual and
pro forma
(250,000,000 shares
authorized and
68,604,714 issued,
pro forma as
adjusted)............. 974 81,092 (81,092) (7) 974 (288)(9) 686
Common stock, class
B--par value $0.01
per share;
180,000,000 shares
authorized, no shares
issued or outstanding
at March 31, 2000,
actual and pro forma
(250,000,000 shares
authorized and no
shares issued pro
forma as adjusted).... -- -- -- -- -- --
Common stock, class
L--par value $0.01
per share; 20,000,000
shares authorized,
10,456,000 shares
issued and
outstanding at
March 31, 2000,
actual and pro forma
(no shares authorized
or issued, pro forma
as adjusted).......... 104 -- -- 104 (104)(9) --
Warrants, class B
Common Stock (the
Intel Warrant)........ 1,250 -- -- 1,250 -- 1,250
Additional paid-in-
capital............... 86,336 5,923 (5,923)(7) 86,336 348,392 (9) 434,728
Divisional equity, net
of capital
redemption............ (167,714) -- (167,714) -- (167,714)
Receivable from
shareholders.......... (1,478) -- -- (1,478) -- (1,478)
Accumulated deficit ... (51,834) (24,816) (24,816) (7) (51,834) (8,629)(10) (60,463)
Accumulated other
comprehensive income
(loss)................ 9,169 -- -- 9,169 -- 9,169
--------- -------- -------- --------- --------- ---------
Total stockholders'
equity (deficit).... (123,193) 62,199 (46,413) (123,193) 339,371 216,178
--------- -------- -------- --------- --------- ---------
Total liabilities,
mandatorily
redeemable preferred
stock and equity.... $ 328,954 $ 92,050 $ 2,983 $ 423,987 $ 25,000 $ 448,987
========= ======== ======== ========= ========= =========
</TABLE>
-------------------
See Notes to Unaudited Pro Forma Balance Sheet.
F-20
<PAGE>
Notes to Unaudited Pro Forma Balance Sheet
On June 30, 2000, we consummated the acquisition of Intersil's Malaysian
business. The acquisition is being accounted for using purchase accounting.
Under purchase accounting, the total purchase price of the Malaysian business
is being 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 which will be finalized to determine the 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 stated
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 as though
the Malaysian business acquisition had occurred on March 31, 2000 are as
follows:
<TABLE>
<CAPTION>
(in millions)
<S> <C>
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............................................. 56.5
Intellectual property........................................... 11.8
Restructuring accrual........................................... (7.5)
Deferred taxes.................................................. (6.9)
Net other assets and liabilities................................ (0.8)
-----
$70.0
=====
</TABLE>
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 $57.7 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..................................... $ 29.0 $(12.1) $16.9
Plant and equipment........................... 93.0 (36.5) 56.5
Intellectual property......................... 20.9 (9.1) 11.8
------ ------ -----
$142.9 $(57.7) $85.2
====== ====== =====
</TABLE>
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.
(1) The terms of the transaction require Intersil to pay $1.8 million to us
on October 1, 2000. This payment for expenses expected to be incurred by us
after the acquisition is completed has been recorded as a receivable and a
reduction in purchase price.
F-21
<PAGE>
Notes to Unaudited Pro Forma Balance Sheet--(Continued)
(2) The acquisition pro forma adjustment to property, plant and equipment
has been computed as set out below:
<TABLE>
<CAPTION>
As of
March 31, 2000
----------------
(in millions)
<S> <C> <C>
Malaysian business historical basis........................ $ 84.0
Fair value adjustments..................................... $ 38.0
Allocation of negative goodwill............................ (48.6) (10.6)
------- -------
Pro forma basis............................................ $ 73.4
=======
</TABLE>
(3) Intangibles comprise the estimated fair value of intellectual property
acquired, primarily consisting of trade secrets and patents. The pro forma
adjustment is a result of the purchase price allocation.
(4) An accrual of $7.5 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.
(5) Reflects the elimination of the liability payable to the parent entity
in accordance with the terms of the purchase agreement for the Malaysian
business.
(6) The Class C preferred stock has been independently valued at $15.8
million and has a liquidation value of $17.5 million.
(7) Reflects the elimination of the Malaysian business' historical equity
as a result of purchase accounting.
(8) Reflects the net proceeds from the concurrent private placement.
(9) The offering and the concurrent private placement contemplate using the
estimated net proceeds of $320.5 million for the repayment of amounts owing
under the revolving loans of $7.5 million, the senior subordinated notes of
$52.5 million, exclusive of the redemption premium and accrued interest, and
term loans of $152.9 million. The remaining $25.0 million of net proceeds has
been added to cash balances. The offering also contemplates the conversion of
Class A convertible preferred stock and Class C preferred stock into shares of
our Class A common stock and the redemption of Class B preferred stock.
(10) Pro forma adjustments to accumulated deficit arising from the
offering are set forth below:
<TABLE>
<CAPTION>
(in millions)
<S> <C>
Prepayment fee on redemption of senior subordinated notes.... $6.7
Accretion to liquidation value:
Class A convertible preferred stock........................ 0.1
Class B preferred stock.................................... 0.1
Class C preferred stock.................................... 1.7
----
$8.6
====
</TABLE>
F-22
