<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer Pursuant
to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended September 30, 2000
Commission File Number 000-27811
CHARTERED SEMICONDUCTOR MANUFACTURING LTD
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of registrant's name into English)
Republic of Singapore
(Jurisdiction of incorporation or organization)
60 Woodlands Industrial Park D
Street 2, Singapore 738406
(65) 362-2838
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to registrant in
connection with Rule 12g3-2(b). Not applicable.
<PAGE> 2
CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
Unless the context otherwise requires, references herein to "we," "us," the
"company" or "Chartered" are to Chartered Semiconductor Manufacturing Ltd, a
company organized under the laws of the Republic of Singapore.
In this Quarterly Report on Form 6-K ("Quarterly Report"), all references
to "$" are to the legal currency of the United States. References to a
particular "fiscal" year are to our fiscal year ended December 31 of that year.
Our financial statements are presented in accordance with United States
generally accepted accounting principles ("U.S. GAAP"). In this Quarterly
Report, any discrepancies in any table between totals and the sums of the
amounts listed are due to rounding.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This Quarterly Report contains forward-looking statements, as defined in
the safe harbor provisions of the United States Private Securities Litigation
Reform Act of 1995. These forward-looking statements, including without
limitation, statements relating to our new fabrication facility and the accrual
we have made for the estimated loss on a licensing agreement, reflect our
current views with respect to future events and financial performance, and are
subject to certain risks and uncertainties, which could cause actual results to
differ materially from historical results or those anticipated. Among the
factors that could affect the forward looking statements are: changes in the
market outlook and trends, the rate of technology migration, the competitiveness
of our technology roadmap, customer demands, availability of materials,
equipment, manpower and timely regulatory approvals for the construction and
ramp of our new fabrication facility. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, we can give no assurance that our expectations will be attained. In
addition, a description of certain other risks and uncertainties which could
cause actual results to differ materially from those indicated in the
forward-looking statements can be found in the section captioned "Risk Factors"
in our Annual Report on Form 20-F filed with the Securities and Exchange
Commission. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
<PAGE> 3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US Dollars, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $183,287 $305,630 $478,025 $815,421
Cost of revenue 134,917 202,048 382,174 532,974
-------- -------- -------- --------
Gross profit 48,370 103,582 95,851 282,447
-------- -------- -------- --------
Operating expenses:
Research and development 13,506 17,388 36,461 52,502
Fab start-up costs -- 1,590 -- 18,832
Sales and marketing 9,169 9,182 29,737 26,177
General and administrative 9,775 22,476 32,476 60,912
Stock-based compensation 8,849 470 12,138 2,311
Costs incurred on termination of
development -- -- 6,500 --
Other nonrecurring operating expenses -- 11,570 -- 11,570
-------- -------- -------- --------
Total operating expenses 41,299 62,676 117,312 172,304
-------- -------- -------- --------
Operating income (loss) 7,071 40,906 (21,461) 110,143
Equity in loss of CSP (3,591) -- (9,528) --
Equity in income (loss) of SMP (6,647) 4,960 (18,698) 2,932
Other income 148 4,778 798 7,421
Interest income 474 17,101 1,681 37,945
Interest expense (4,531) (5,081) (13,625) (12,868)
Exchange gain 1,116 2,917 6,181 7,042
-------- -------- -------- --------
Income (loss) before income taxes (5,960) 65,581 (54,652) 152,615
Income taxes (211) (4,721) (39) (12,733)
-------- -------- -------- --------
Income (loss) before minority interest (6,171) 60,860 (54,691) 139,882
Minority interest in loss of CSP -- 10,776 -- 27,532
-------- -------- -------- --------
Net income (loss) $ (6,171) $ 71,636 $(54,691) $167,414
======== ======== ======== ========
Net income (loss) per share and ADS
Basic net income (loss) per share $ (0.01) $ 0.05 $ (0.06) $ 0.13
Diluted net income (loss) per share (0.01) 0.05 (0.06) 0.12
Basic net income (loss) per ADS $ (0.06) $ 0.52 $ (0.55) $ 1.26
Diluted net income (loss) per ADS (0.06) 0.51 (0.55) 1.24
Number of shares (in millions) used in computing:
-- basic net income (loss) per share 987.2 1,376.8 986.1 1,330.4
-- effect of dilutive options -- 20.1 -- 24.2
-------- -------- -------- --------
-- diluted net income (loss) per share 987.2 1,396.9 986.1 1,354.6
-------- -------- -------- --------
Number of ADS (in millions) used in computing:
-- basic net income (loss) per ADS 98.7 137.7 98.6 133.0
-- effect of dilutive options -- 2.0 -- 2.4
-------- -------- -------- --------
-- diluted net income (loss) per ADS 98.7 139.7 98.6 135.4
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US Dollars)
<TABLE>
<CAPTION>
As of
-----------------------------
December 31, September 30,
1999 2000
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 544,996 $1,021,203
Accounts receivable 141,226 155,491
Inventories 33,619 37,971
Other current assets 9,946 12,634
---------- ----------
Total current assets 729,787 1,227,299
Property, plant and equipment, net 1,282,106 1,672,363
Investment in SMP 47,036 85,753
Other non-current assets 73,979 45,231
---------- ----------
Total assets $2,132,908 $3,030,646
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 152,401 $ 111,335
Current installments of obligations under
capital leases 5,767 6,363
Current installments of long-term debt 119,991 155,887
Accrued operating expenses 127,147 227,208
Other current liabilities 29,919 39,402
---------- ----------
Total current liabilities 435,225 540,195
Obligations under capital leases, excluding
current installments 7,822 4,615
Long-term debt, excluding current installments 423,668 429,979
Other liabilities 67,279 58,063
---------- ----------
Total liabilities 933,994 1,032,852
Minority interests 57,164 109,347
Shareholders' equity 1,141,750 1,888,447
---------- ----------
Total liabilities and shareholders' equity $2,132,908 $3,030,646
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US Dollars)
<TABLE>
<CAPTION>
For The Nine Months Ended
------------------------------
September 30, September 30,
1999 2000
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (54,691) $ 167,414
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in loss of CSP 9,528 --
Equity in (income) loss of SMP 18,698 (2,932)
Depreciation and amortization 206,577 243,613
Foreign exchange gain on financing activities (6,306) (2,631)
Minority interest in loss of CSP -- (27,532)
Loss on disposal of property, plant and equipment 7,138 2,991
Stock-based compensation 12,138 2,311
Other (1,258) (7,721)
Changes in operating working capital:
Accounts receivable (15,771) (17,454)
Amount due to ST, ST affiliates, CSP and SMP, net (5,605) (4,203)
Inventories (350) (4,352)
Prepaid expenses (2,099) (1,317)
Trade accounts payable (3,418) 684
Accrued operating expenses 2,411 106,647
Other current liabilities 5,878 10,436
--------- ----------
Net cash provided by operating activities: 172,870 465,954
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 12,097 32,407
Purchase of property, plant and equipment (157,864) (695,122)
Technology license fees paid (10,500) (6,180)
Investment in SMP (40,353) (35,784)
--------- ----------
Net cash used in investing activities: (196,620) (704,679)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdrafts (3,082) --
Customer deposits, net (27,446) (2,886)
Long term debt
Borrowings 18,500 149,929
Repayments (47,248) (84,609)
Issuance of shares by the Company, net 2,408 576,025
Issuance of shares by CSP to minority shareholders -- 79,716
Capital lease payments (2,131) (2,692)
--------- ----------
Net cash provided by (used in) financing activities: (58,999) 715,483
--------- ----------
Net increase (decrease) in cash and cash equivalents (82,749) 476,758
Effect of exchange rate changes on cash and cash equivalents 196 (551)
Cash at the beginning of the period 99,619 544,996
--------- ----------
Cash at the end of the period $ 17,066 $1,021,203
========= ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 6
CHARTERED SEMICONDUCTOR MANUFACTURING LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
1. Business and Organization
Chartered Semiconductor Manufacturing Ltd currently owns, or has an
interest in, five fabrication facilities, all of which are located in Singapore.
We are currently in the process of constructing a sixth fabrication facility in
Singapore. Fabs 1, 2 and 3 are wholly-owned. Fab 5 is operated by Silicon
Manufacturing Partners, or SMP, which is jointly-owned with Lucent Technologies
Microelectronics Pte Ltd. Fab 6 is operated by Chartered Silicon Partners, or
CSP, which is jointly-owned with a subsidiary of Agilent Technologies B.V. and
an affiliate of the Government of Singapore. Fab 7, which is wholly-owned, is
currently under construction.
We were incorporated in Singapore in 1987. As of September 30, 2000, we
were 60.9% owned by Singapore Technologies Pte Ltd, or ST, and its affiliates.
ST is one of Singapore's largest industrial conglomerates and is indirectly
wholly-owned by the Government of Singapore.
2. Basis of Presentation
The results of operations reflect the interim adjustments, all of which are
of a normal recurring nature and which, in the opinion of management, are
necessary for a fair presentation of the results for such interim period. The
results reported in these unaudited condensed consolidated financial statements
should not be regarded as necessarily indicative of results that may be expected
for the entire year. These financial statements should be read in conjunction
with the audited consolidated financial statements included in our Annual Report
on Form 20-F for the year ended December 31, 1999.
3. Principles of Consolidation
The accompanying condensed quarterly financial statements reflect the
consolidated financial statements of Chartered Semiconductor Manufacturing Ltd
and its majority owned and controlled affiliates. All significant transactions
among the parent and consolidated affiliates have been eliminated.
4. Investment in CSP and SMP
We have applied the equity accounting method for the investments in CSP and
SMP for the period prior to October 1, 1999. Effective October 1, 1999, we have
accounted for CSP as a consolidated subsidiary. We have not changed the
accounting method for the investment in SMP.
<PAGE> 7
5. Contingencies
As is typical in the semiconductor industry, we have from time to time
received communications from third parties asserting patents that cover certain
of our technologies and alleging infringements of certain intellectual property
rights of others. We have acquired certain technology licenses and may seek to
obtain other licenses in the future. There can be no assurance that we will be
able to obtain such future licenses on commercially reasonable terms, or at all.
We have accrued a liability for, and charged to the results of operations,
the estimated costs of obtaining such licenses. The amount accrued was
$10.9 million as of September 30, 2000. No assurance can be given that such
provisions are adequate.
6. Inventories
We state inventories at the lower of cost, determined on the weighted
average basis, or market (net realizable value) and they consist of the
following:
<TABLE>
<CAPTION>
As of
----------------------------
December 31, September 30,
1999 2000
----------- -------------
(In thousands of US Dollars)
<S> <C> <C>
Raw materials $ 3,908 $ 2,620
Work in process 21,650 29,016
Consumable supplies and spares 8,186 6,413
------- -------
33,744 38,049
Allowance for inventory obsolescence (125) (78)
------- -------
$33,619 $37,971
======= =======
</TABLE>
7. Capital leases
Future minimum lease payments under the US dollar denominated capital
leases for equipment and machinery are as follows:
<TABLE>
<CAPTION>
As of
----------------------------
December 31, September 30,
1999 2000
------------ -------------
(In thousands of US Dollars)
<S> <C> <C>
Payable in year ending December 31,
2000 $ 6,496 $ 3,317
2001 8,196 8,196
------- -------
Total minimum lease payments 14,692 11,513
Amounts representing interest at rates ranging from
5.90% to 6.06% per month (1,103) (535)
------- -------
Present value of minimum lease payments 13,589 10,978
Less current installments of capital lease
obligations (5,767) (6,363)
------- -------
Obligations under capital leases, excluding
current installments $ 7,822 $ 4,615
======= =======
</TABLE>
<PAGE> 8
8. Long-term debt
Our long-term debt is summarized below:
<TABLE>
<CAPTION>
As of
----------------------------
December 31, September 30,
1999 2000
------------ -------------
(In thousands of US Dollars)
<S> <C> <C>
Singapore dollar loans at fixed rates of 4% to
4.25% repayable in semi-annual installments $ 355,903 $ 385,426
Singapore dollar loans at floating rates repayable
in February 2002 and June 2002 59,756 57,240
US dollar loan at floating rates repayable in
semi-annual installments 128,000 143,200
------------ -------------
543,659 585,866
Less current installments (119,991) (155,887)
------------ -------------
Long-term debt, excluding current installments $ 423,668 $ 429,979
============ =============
</TABLE>
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
net revenue for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
----- ----- ----- -----
(as a percentage of net revenue)
<S> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0%
Cost of revenue 73.6 66.1 79.9 65.4
----- ----- ----- -----
Gross profit 26.4 33.9 20.1 34.6
----- ----- ----- -----
Operating expenses:
Research and development 7.4 5.7 7.6 6.4
Fab start-up costs -- 0.5 -- 2.3
Sales and marketing 5.0 3.0 6.2 3.2
General and administrative 5.3 7.3 6.8 7.5
Stock-based compensation 4.8 0.2 2.5 0.3
Costs incurred on termination of
development program -- -- 1.4 --
Other nonrecurring operating expenses -- 3.8 -- 1.4
----- ----- ----- -----
Total operating expenses 22.5 20.5 24.5 21.1
----- ----- ----- -----
Operating income (loss) 3.9 13.4 (4.5) 13.5
Equity in loss of CSP (2.0) -- (2.0) --
Equity in income (loss) of SMP (3.6) 1.6 (3.9) 0.3
Other income 0.1 1.6 0.2 0.9
Interest income 0.3 5.6 0.4 4.7
Interest expense (2.5) (1.7) (2.9) (1.6)
Exchange gain 0.6 1.0 1.3 0.9
----- ----- ----- -----
Income (loss) before income taxes (3.3) 21.5 (11.4) 18.7
Income taxes (0.1) (1.6) 0.0 (1.5)
----- ----- ----- -----
Income (loss) before minority interest (3.4) 19.9 (11.4) 17.2
Minority interest in loss of CSP -- 3.5 -- 3.3
----- ----- ----- -----
Net income (loss) (3.4)% 23.4% (11.4)% 20.5%
===== ===== ===== =====
</TABLE>
Three months ended September 30, 1999 and September 30, 2000
Net revenue. Net revenue grew 66.7% from $183.3 million for the three
months ended September 30, 1999 to $305.6 million for the three months ended
September 30, 2000. The increase was primarily due to higher shipments and
higher average selling price.
The number of eight-inch equivalent wafers shipped increased from 176,800
for the three months ended September 30, 1999 to 246,000 for the three months
ended September 30, 2000. High growth communications and consumer markets
accounted for the majority of this increased demand.
Average selling price increased from $1,014 per wafer (adjusted to exclude
the terminated print-head business) for three months ended September 30, 1999 to
$1,242 per wafer
<PAGE> 10
for the three months ended September 30, 2000, as a result of customer and
product mix enrichment and enhanced pricing.
Cost of revenue and gross profit. Cost of revenue increased 49.8% from
$134.9 million for the three months ended September 30, 1999 to $202.0 million
for the three months ended September 30, 2000, principally due to the increase
in production volumes. As a percentage of net revenue, cost of revenue decreased
from 73.6% for the three months ended September 30, 1999 to 66.1% for the three
months ended September 30, 2000. Gross profit was $103.6 million, or 33.9% of
net revenue, up from $48.4 million, or 26.4% of net revenue, for the same
quarter a year ago, driven primarily by higher revenues and strong operational
improvement across the fabs.
Research and development expenses. Research and development expenses
increased by 28.7% from $13.5 million for the three months ended September 30,
1999 to $17.4 million for the three months ended September 30, 2000 primarily
due to additional investments in next generation technology and modules,
including the 0.13um joint development program with Lucent Technologies, in
support of our strategy to provide a full suite of process technologies
necessary for enabling system level integration.
Fab start-up costs. Fab start-up costs for the three months ended
September 30, 2000 related to the start-up costs at Fab 7.
General and administrative expenses. General and administrative expenses
increased by 129.9% from $9.8 million for the three months ended September 30,
1999 to $22.5 million for the three months ended September 30, 2000, primarily
due to increased staffing and other payroll related expenses.
Other nonrecurring operating expenses. During the three months ended
September 30, 2000, we accrued a liability of $11.6 million to reflect the
estimated loss on a licensing agreement. In light of faster technology migration
in the marketplace which has occurred since this licensing agreement was entered
into over a year ago, and in light of the recent acceleration of our technology
roadmap, the value which we originally expected to derive from this license has
diminished. Therefore, the accrual was made to reflect the estimated payment
obligation. We believe that the accrual fully covers the specified issue under
this agreement and do not anticipate additional charges related to this matter
in the future.
Stock-based compensation. Stock-based compensation decreased from
$8.8 million for the three months ended September 30, 1999 to $0.5 million for
the three months ended September 30, 2000. The higher stock-based compensation
for the three months ended September 30, 1999 was the result of the 1995 and
1997 Employees' Share Ownership Schemes, which were accounted for in accordance
with variable plan accounting. Both the 1995 and 1997 schemes were terminated
effective September 30, 1999 and all unpaid portions of partly paid shares under
these schemes were replaced with share options under the 1999 Share Option Plan.
Equity in loss of CSP. Prior to October 1, 1999, we accounted for CSP
using the equity method. Effective October 1, 1999, as a result of an amendment
to the CSP strategic alliance agreement, we have treated CSP as a consolidated
subsidiary. Our share of the losses in CSP was $3.6 million for the three months
ended September 30, 1999 (the period of time during which CSP was accounted for
using the equity method).
Equity in income (loss) of SMP. Our share of the loss in SMP was
$6.6 million for the three months ended September 30, 1999. For the second
quarter 2000, SMP recorded net income,
<PAGE> 11
as a result of which our share of income for the three months ended
September 30, 2000 was $5.0 million.
Other income. Other income increased from $0.1 million for the three
months ended September 30, 1999 to $4.8 million for the three months ended
September 30, 2000, primarily due to grant income from the Government of
Singapore for our research and development activities and staff training.
Interest income. Interest income increased from $0.5 million for the three
months ended September 30, 1999 to $17.1 million for the three months ended
September 30, 2000 due to interest earned on cash proceeds from our initial
public offering in October 1999 and the follow-on offering in May 2000 which
were placed in fixed deposits.
Exchange gain. Exchange gain increased from $1.1 million for the three
months ended September 30, 1999 to $2.9 million for the three months ended
September 30, 2000, primarily due to currency fluctuations between the U.S.
dollar against the Singapore dollar and the Japanese Yen.
Income taxes. Income taxes increased from $0.2 million for the three
months ended September 30, 1999 to $4.7 million for the three months ended
September 30, 2000 due to taxes payable on the higher level of interest income.
Minority interest in loss of CSP. Minority interest in loss of CSP of
$10.8 million for the three months ended September 30, 2000 resulted from the
consolidation of CSP as a subsidiary effective October 1, 1999.
Nine months ended September 30, 1999 and September 30, 2000
Net revenue. Net revenue increased 70.6% from $478.0 million for the nine
months ended September 30, 1999 to $815.4 million for the nine months ended
September 30, 2000. The increase was primarily due to higher shipments and
higher average selling price.
The number of eight-inch equivalent wafers shipped increased from 468,400
(adjusted to exclude the terminated print-head business) for the nine months
ended September 30, 1999 to 682,400 for the nine months ended September 30,
2000, an increase of 214,000 wafers or 45.7%. High growth communications and
consumer markets accounted for the majority of this increased demand.
Average selling price increased from $983 per wafer (adjusted to exclude
the terminated print-head business) for the nine months ended September 30, 1999
to $1,195 per wafer for the nine months ended September 30, 2000, as a result of
customer and product mix enrichment and enhanced pricing.
Cost of revenue and gross profit. Cost of revenue increased 39.5% from
$382.2 million for the nine months ended September 30, 1999 to $533.0 million
for the nine months ended September 30, 2000, principally due to the increase in
production volumes. As a percentage of net revenue, cost of revenue decreased
from 79.9% for the nine months ended September 30, 1999 to 65.4% for the nine
months ended September 30, 2000. Gross profit for the nine months ended
September 30, 2000 was $282.4 million, or 34.6% of net revenue, up from
$95.9 million for the nine months ended September 30, 1999, or 20.1% of net
revenue, driven primarily by higher revenue and strong operational improvement
across the fabs.
<PAGE> 12
Research and development expenses. Research and development expenses
increased by 44.0% from $36.5 million for the nine months ended September 30,
1999 to $52.5 million for the nine months ended September 30, 2000 primarily due
to additional investments in next generation technology and modules, including
the 0.13um joint development program with Lucent Technologies, in support of our
strategy to provide a full suite of process technologies necessary for enabling
system level integration.
Fab start-up costs. Fab start-up costs for the nine months ended
September 30, 2000 related to the start-up costs at CSP and to a lesser extent,
at Fab 7. There were no corresponding expenses for the fab start-up costs of CSP
for the nine months ended September 30, 1999 because CSP was not consolidated as
a subsidiary for that period.
Sales and marketing expenses. Sales and marketing expenses decreased by
12.0% from $29.7 million for the nine months ended September 30, 1999 to
$26.2 million for the nine months ended September 30, 2000.
General and administrative expenses. General and administrative expenses
increased 87.6% from $32.5 million for the nine months ended September 30, 1999
to $60.9 million for the nine months ended September 30, 2000, primarily due to
increased staffing and other payroll related expenses.
Other nonrecurring operating expenses. During the three months ended
September 30, 2000, we accrued a liability of $11.6 million to reflect the
estimated loss on a licensing agreement. In light of faster technology migration
in the marketplace which has occurred since this licensing agreement was entered
into over a year ago, and in light of the recent acceleration of our technology
roadmap, the value which we originally expected to derive from this license has
diminished. Therefore, the accrual was made to reflect the estimated payment
obligation. We believe that the accrual fully covers the specified issue under
this agreement and do not anticipate additional charges related to this matter
in the future.
Stock-based compensation. Stock-based compensation decreased from
$12.1 million for the nine months ended September 30, 1999 to $2.3 million for
the nine months ended September 30, 2000. The higher stock-based compensation
for the three months ended September 30, 1999 was the result of the 1995 and
1997 Employees' Share Ownership Schemes, which were accounted for in accordance
with variable plan accounting. Both the 1995 and 1997 schemes were terminated
effective September 30, 1999 and all unpaid portions of partly paid shares under
these schemes were replaced with share options under the 1999 Share Option Plan.
Equity in loss of CSP. Prior to October 1, 1999, we accounted for CSP
using the equity method. Effective October 1, 1999, as a result of an amendment
to the CSP strategic alliance agreement, we have treated CSP as a consolidated
subsidiary. Our share of the losses in CSP was $9.5 million for the nine months
ended September 30, 1999 (the period of time during which CSP was accounted for
using the equity method).
Equity in income (loss) of SMP. Our share of the loss in SMP was
$18.7 million for the nine months ended September 30, 1999 compared with income
of $2.9 million for the nine months ended September 30, 2000. SMP recorded net
income for the first time during the quarter ended June 30, 2000.
<PAGE> 13
Other income. Other income increased from $0.8 million for the nine months
ended September 30, 1999 to $7.4 million for the nine months ended September 30,
2000 mainly due to compensation from one of our customers for a shortfall in
capacity utilization as well as higher grant income from the Government of
Singapore for our research and development activities and staff training.
Interest income. Interest income increased from $1.7 million for the nine
months ended September 30, 1999 to $37.9 million for the nine months ended
September 30, 2000 due to interest earned on cash proceeds from our initial
public offering in October 1999 and the follow-on offering in May 2000 which
were placed in fixed deposits.
Income taxes. Income taxes increased from $0.04 million for the nine
months ended September 30, 1999 to $12.7 million for the nine months ended
September 30, 2000 due to taxes payable on the higher level of interest income.
In addition, there was a tax refund for the nine months ended September 30,
1999.
Minority interest in loss of CSP. The minority interest in loss of CSP of
$27.5 million for the nine months ended September 30, 2000 resulted from the
consolidation of CSP as a subsidiary effective October 1, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, our principal sources of liquidity included
$1,021.2 million in cash and cash equivalents and $998.8 million of unutilized
banking and credit facilities consisting of short and medium term advances and
bank guarantees.
As of September 30, 2000, unutilized facilities included a $820 million
term loan and guarantee facility available to CSP for its capital expenditure
requirements. No drawings have been made on this facility. The term loan matures
on September 27, 2006 and bears interest at a margin rate of 0.60% per annum to
0.85% per annum above LIBOR. Interest is payable monthly, quarterly or
semi-annually, at CSP's election, and principal is payable in six equal
semi-annual installments commencing March 27, 2004. Borrowings under this
facility are secured by two charges on the assets in certain bank accounts of
CSP.
Net cash provided by operating activities totaled $466.0 million for the
nine months ended September 30, 2000 and $172.9 million for the nine months
ended September 30, 1999. The net cash generated for the nine months ended
September 30, 2000 was mainly attributable to an improvement in net income and a
favorable working capital change.
Net cash used in investing activities totaled $704.7 million for the nine
months ended September 30, 2000 and $196.6 million for the nine months ended
September 30, 1999. Investing activities included capital expenditures totaling
$695.1 million for the nine months ended September 30, 2000 and $157.9 million
for the nine months ended September 30, 1999. Capital expenditures for the nine
months ended September 30, 2000 resulted from the purchase of semiconductor
equipment and the construction costs for Fab 7.
Net cash provided by financing activities totaled $715.5 million for the
nine months ended September 30, 2000. This was principally the cash proceeds
from the follow-on offering in May 2000, long term borrowings incurred to
finance the capital expenditures at CSP and the issuance of shares by CSP to
minority shareholders, partly offset by the repayment of loans. Net
<PAGE> 14
cash used in financing activities totaled $59.0 million for the nine months
ended September 30, 1999 and was principally due to the repayment of loans and
the refund of customer deposits.
INVESTMENT IN SMP
Our investment in SMP as of December 31, 1999 and September 30, 2000 is
shown below:
<TABLE>
<CAPTION>
As of
-----------------------------
December 31, September 30,
1999 2000
------------ -------------
(in thousands of US Dollars)
<S> <C> <C>
Cost $ 85,175 $120,960
Share of retained post-formation loss (38,139) (35,207)
-------- --------
$ 47,036 $ 85,753
======== ========
</TABLE>
We account for our 49% investment in SMP using the equity method. Under the
terms of the strategic alliance agreement, we are committed to making an equity
investment in SMP of up to $121.0 million. As of September 30, 2000, we have
fulfilled our committed equity investment in SMP.
Under the strategic alliance agreement, the parties are not expected to
share SMP's net results in the same ratio as the equity holding. Instead, each
party is entitled to the gross profits from sales to the customers that it
directs to SMP, after deducting its share of the overhead costs of SMP.
Accordingly, we account for our share of SMP's net results based on the gross
profits from sales to the customers that we direct to SMP, after deducting our
49% share of the overhead costs.
The summarized financial information for SMP is shown below:
<TABLE>
<CAPTION>
As of
------------------------------
December 31, September 30,
1999 2000
------------ -------------
(in thousands of US Dollars)
<S> <C> <C>
Current assets $ 40,495 $ 80,701
Property, plant and equipment 300,556 548,005
Current liabilities 52,821 92,022
Long term debt 187,000 355,000
Shareholders' equity 101,230 181,684
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $ 10,729 $67,396 $ 14,242 $148,901
Gross profit (loss) (9,961) 17,128 (20,723) 21,562
Operating profit (loss) (12,220) 15,922 (35,913) 18,552
Net profit (loss) (12,334) 11,563 (36,928) 7,424
</TABLE>
<PAGE> 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of the above, please see the section captioned
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Quantitative and Qualitative Disclosures About Market Risk" in our
Annual Report on Form 20-F dated March 20, 2000, which is incorporated herein by
reference.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings that we believe would
be harmful to the Company.
Item 2. Changes in Securities and Use of Proceeds
As of September 30, 2000, of the net proceeds from our initial public
offering, we have used approximately $83.0 million for an equity injection in
CSP, $35.8 million for an equity injection in SMP and $391.6 million for capital
expenditures. The remaining proceeds are invested in various fixed deposits with
institutions.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
On September 28, 2000, CSP entered into a Credit Agreement to borrow up to
$820 million to finance its capital expenditure requirements.
<PAGE> 16
Item 6. Exhibits and Reports on Form 6-K
(a) Exhibits
*10.1 Amendment Agreement (No. 1) to License and Technology Transfer
Agreement dated July 27, 2000 by and between the Company, Lucent
Technologies Microelectronics Pte Ltd and Silicon Manufacturing
Partners Pte Ltd.
*10.2 Patent License Agreement Amendment dated August 18, 2000 by and
between the Company and Lucent Technologies Inc.
+10.3 Credit Agreement dated September 28, 2000 by and among Chartered
Silicon Partners Pte Ltd, the banks on the signature pages thereto,
as Lenders, and ABN Amro Bank N.V., Singapore Branch, as agent and
security trustee.
+10.4 Trust Deed dated September 28, 2000 by and between Chartered Silicon
Partners Pte Ltd and ABN Amro Bank N.V., Singapore Branch, as
security trustee.
+10.5 Project Account Charge dated September 28, 2000 by and between
Chartered Silicon Partners Pte Ltd and ABN Amro Bank N.V., Singapore
Branch, as security trustee.
+10.6 DSRA Account Charge dated September 28, 2000 by and between Chartered
Silicon Partners Pte Ltd and ABN Amro Bank N.V., Singapore Branch, as
security trustee.
(b) Reports on Form 6-K
During the quarter ended September 30, 2000, we filed the following current
reports on Form 6-K:
1. On July 21, 2000, we filed a Form 6-K to report the announcement of
our unaudited results for the quarter ended June 30, 2000.
2. On July 25, 2000, we filed a Form 6-K to report the exercise of share
options and the sale of ordinary shares by our Chairman, Ho Ching, as
reported to the Singapore Exchange Securities Trading Limited.
3. On Aug 14, 2000, we filed a Form 6-K to report our quarterly
information for the quarter ended June 30, 2000.
4. On Aug 25, 2000, we filed a Form 6-K to report the exercise of share
options and the sale of ordinary shares by our President and Chief
Executive Officer, Barry Waite, as reported to the Singapore Exchange
Securities Trading Limited.
5. On September 1, 2000, we filed a Form 6-K to report the sale of
ordinary shares by our Senior Vice-President, Chief Financial Officer
and Chief Administration Officer, Chia Song Hwee, as reported to the
Singapore Exchange Securities Trading Limited.
------------
* Certain portions of these exhibits have been omitted pursuant to a request
for confidential treatment filed with the Securities and Exchange
Commission. The omitted portions have been separately filed with the
Commission.
+ Filed as an exhibit to the Company's Current Report on Form 6-K dated
September 28, 2000 (File No. 000-27811), which is incorporated herein by
reference.
<PAGE> 17
6. On September 28, 2000, we filed a Form 6-K to report that Chartered
Silicon Partners Pte Ltd had entered into a Credit Agreement to
borrow up to $820 million to finance its capital expenditure
requirements. The Credit Agreement and material related agreements
were attached as exhibits to the Form 6-K and were incorporated
therein by reference.
<PAGE> 18
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, thereunder duly authorized.
Date: November 14, 2000
CHARTERED SEMICONDUCTOR
MANUFACTURING LTD
By: /s/ Barry Waite
-----------------------------------
Name: Barry Waite
Title: President and
Chief Executive Officer
By: /s/ Chia Song Hwee
-----------------------------------
Name: Chia Song Hwee
Title: Senior Vice President,
Chief Financial Officer and
Chief Administration
Officer
<PAGE> 19
Exhibit Index
-------------
<TABLE>
<CAPTION>
<S> <C>
*10.1 Amendment Agreement (No. 1) to License and Technology Transfer
Agreement dated July 27, 2000 by and between the Company, Lucent
Technologies Microelectronics Pte Ltd and Silicon Manufacturing
Partners Pte Ltd.
*10.2 Patent License Agreement Amendment dated August 18, 2000 by and
between the Company and Lucent Technologies Inc.
+10.3 Credit Agreement dated September 28, 2000 by and among Chartered
Silicon Partners Pte Ltd, the banks on the signature pages thereto,
as Lenders, and ABN Amro Bank N.V., Singapore Branch, as agent and
security trustee.
+10.4 Trust Deed dated September 28, 2000 by and between Chartered Silicon
Partners Pte Ltd and ABN Amro Bank N.V., Singapore Branch, as
security trustee.
+10.5 Project Account Charge dated September 28, 2000 by and between
Chartered Silicon Partners Pte Ltd and ABN Amro Bank N.V., Singapore
Branch, as security trustee.
+10.6 DSRA Account Charge dated September 28, 2000 by and between Chartered
Silicon Partners Pte Ltd and ABN Amro Bank N.V., Singapore Branch, as
security trustee.
</TABLE>
------------
* Certain portions of these exhibits have been omitted pursuant to a request
for confidential treatment filed with the Securities and Exchange
Commission. The omitted portions have been separately filed with the
Commission.
+ Filed as an exhibit to the Company's Current Report on Form 6-K dated
September 28, 2000 (File No. 000-27811), which is incorporated herein by
reference.
