<PAGE> 1
CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
Unless the context otherwise requires, references herein to "we," "us," the
"company" or "STATS" are to ST Assembly Test Services 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 U.S. dollar. References to a particular "fiscal year" are to the
Company's fiscal year ended December 31 of that year.
The Company's 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.
Certain of the statements in this Form 6-K are forward-looking statements that
involve a number of risks and uncertainties that could cause actual results to
differ materially. Factors that could cause actual results to differ include
general business and economic conditions and the state of the semiconductor
industry; demand for end-use applications products such as communications
equipment and personal computers; decisions by customers to discontinue
outsourcing of test and assembly services; changes in customer order patterns;
rescheduling or canceling of customer orders; changes in product mix; capacity
utilization; level of competition; pricing pressures; continued success in
technological innovations; delays in acquiring or installing new equipment;
shortages in supply of key components; litigation and other risks described in
"Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Risk Factors" section in the Form 20-F we filed with the
Securities Exchange Commission on March 30, 2000. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
4
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
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 revenues $ 53,688 $ 90,538 $135,981 $ 238,473
Cost of revenues (34,692) (63,202) (93,582) (158,668)
-------- -------- -------- ---------
Gross profit 18,996 27,336 42,399 79,805
-------- -------- -------- ---------
Operating expenses:
Selling, general and administrative 7,223 10,151 19,194 29,484
Research and development 2,359 4,078 5,125 10,972
Stock-based compensation 6,699 17 8,456 363
Other general expenses (income), net 25 41 23 (192)
-------- -------- -------- ---------
Total operating expenses 16,306 14,287 32,798 40,627
-------- -------- -------- ---------
Operating income: 2,690 13,049 9,601 39,178
-------- -------- -------- ---------
Other income (expense):
Interest income (expense), net (1,262) 2,684 (4,118) 5,756
Foreign currency exchange gain (loss) (506) 606 1,873 1,068
Other non-operating income, net 656 967 1,790 2,741
-------- -------- -------- ---------
Total other income (expense) (1,112) 4,257 (455) 9,565
-------- -------- -------- ---------
Income before income taxes 1,578 17,306 9,146 48,743
Income tax expense (148) (851) (660) (2,390)
-------- -------- -------- ---------
Net income $ 1,430 $ 16,455 $ 8,486 $ 46,353
======== ======== ======== =========
Basic net income per ordinary share $ 0.002 $ 0.017 $ 0.011 $ 0.049
Diluted net income per ordinary share $ 0.002 $ 0.017 $ 0.011 $ 0.048
Basic net income per ADS $ 0.02 $ 0.17 $ 0.11 $ 0.49
Diluted net income per ADS $ 0.02 $ 0.17 $ 0.11 $ 0.48
Ordinary shares (in thousands) used in
per ordinary share calculation:
-- basic 769,407 984,774 769,144 955,160
-- effect of dilutive options 10,714 7,200 7,941 7,894
-------- -------- -------- ---------
-- diluted 780,121 991,974 777,085 963,054
-------- -------- -------- ---------
</TABLE>
5
<PAGE> 3
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
------------------------ --------------------------
<S> <C> <C> <C> <C>
ADS (in thousands) used in per ADS
Calculation:
-- basic 76,941 98,477 76,914 95,516
-- effect of dilutive options 1,071 720 794 789
-------- -------- -------- ---------
-- diluted 78,012 99,197 77,708 96,305
-------- -------- -------- ---------
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE> 4
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,568 $161,521
Accounts receivable, net 37,404 65,529
Amounts due from ST affiliates 6,532 5,115
Other receivables 9,572 10,811
Inventories 11,313 15,652
Marketable securities -- 11,460
Prepaid expenses 7,079 15,092
-------- --------
Total current assets 88,468 285,180
Property, plant and equipment, net 251,298 420,915
Other receivables 1,835 --
Marketable securities -- 8,635
Prepaid expenses 10,364 17,839
-------- --------
Total Assets $351,965 $732,569
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 60,000 $ --
Current installments of long-term debt 7,420 14,719
Accounts payable 13,070 13,568
Amounts due to ST and ST affiliates 5,533 2,445
Accrued operating expenses 20,559 4,189
Other payables 55,238 66,123
Income taxes payable 678 2,446
-------- --------
Total current liabilities 162,498 123,490
Deferred grant 1,923 2,736
Long-term debt, excluding current installments 46,360 29,438
-------- --------
Total Liabilities 210,781 155,664
SHAREHOLDERS' EQUITY
Share capital 129,827 159,314
Additional paid-in capital 26,305 386,186
Accumulated other comprehensive loss (9,731) (9,731)
Retained earnings (deficit) (5,217) 41,136
-------- --------
Total Shareholders' Equity 141,184 576,905
-------- --------
Total Liabilities and Shareholders' Equity $351,965 $732,569
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
7
<PAGE> 5
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1999 2000
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,486 $ 46,353
Adjustments to reconcile net income to net cash provided by
Depreciation and amortization 44,486 51,706
Loss (gain) on sale of property, plant and equipment 22 (195)
Provision for doubtful accounts receivable (185) 655
Provision for stock obsolescence (123) 23
Unrealized foreign currency exchange loss (gain) (2,337) 3,633
Changes in working capital:
Accounts receivable (10,611) (28,780)
Amounts due from ST affiliates (237) 1,417
Inventories (887) (4,362)
Other receivables and prepaid expenses (4,110) 6,800
Accounts payable (1,416) 5,726
Amounts due to ST and ST affiliates 986 (3,088)
Accrued operating expenses and other payables 13,758 1,904
------- --------
Net cash provided by operating activities 47,832 81,792
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities -- (20,095)
Purchase of property, plant and equipment (43,970) (240,320)
Sale of property, plant and equipment 43 5,978
------- --------
Net cash used in investing activities (43,927) (254,437)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term debt -- (60,000)
Repayment of long-term debt -- (7,468)
Proceeds from issuance of shares 119 389,019
------- --------
Net cash provided by financing activities 119 321,551
------- --------
Net increase in cash and cash equivalents for the period 4,024 148,906
Effect of exchange rate changes on cash and cash equivalents -- (3,953)
Cash and cash equivalents at beginning of the period 12,692 16,568
------- --------
Cash and cash equivalents at end of the period $16,716 $161,521
======= ========
SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for:
Interest $ 5,259 $ 3,045
Income taxes $ 158 $ 461
Non cash item:
Share issue subscriptions receivable $ 2,262 $ --
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
8
<PAGE> 6
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
ST Assembly Test Services Ltd is a leading semiconductor test and assembly
service provider to fabless companies, integrated device manufacturers and
wafer foundries. The Company, with its principal operations in Singapore
and global operations in the United States, United Kingdom, Japan and
Taiwan, offers full back-end turnkey solutions to customers worldwide. The
Company also offers advanced assembly services and has developed a wide
array of traditional and advanced leadframe and laminate based products,
including various ball grid array packages, to serve some of the world's
technological leaders.
The Company was incorporated in Singapore in October 1994. As of September
30, 2000, we were 72.3% owned by Singapore Technologies Pte Ltd and its
affiliates.
2. BASIS OF PRESENTATION
The interim condensed consolidated financial statements are prepared in
accordance with U.S. GAAP and reflect normal recurring adjustments which,
in the opinion of the management, are necessary for a fair presentation of
the results for such interim periods. The results reported in these
condensed consolidated financial statements should not be regarded as
necessarily indicative of the results that may be expected for the entire
year. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in
the Company's Annual Report on Form 20-F for the year ended December 31,
1999.
3. PRINCIPLES OF CONSOLIDATION
The accompanying interim condensed consolidated financial statements
include the financial statements of ST Assembly Test Services Ltd and its
subsidiary. All significant intercompany balances and transactions have
been eliminated in consolidation.
4. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of the interim condensed consolidated financial statements
in accordance with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported revenue and expenses during the
reporting period. Actual results could differ from these estimates.
5. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISKS
The Company has a number of major customers in North America, Europe and
Asia. During the three-month periods ended September 30, 1999 and 2000,
the five largest customers collectively accounted for approximately 73.0%
and 71.8% of revenues, respectively. During the nine-month periods ended
September 30, 1999 and 2000, the five largest customers collectively
accounted for approximately 72.9% and 71.7% respectively. The Company
anticipates that significant customer concentration will continue for the
foreseeable future, although the companies that constitute the Company's
largest customers may change. The Company believes that the concentration
of its credit risk in trade receivables is mitigated substantially by its
credit evaluation process, credit policies and credit control and
collection procedures.
9
<PAGE> 7
6. RISKS AND UNCERTAINTIES
The Company's future results of operations include a number of risks and
uncertainties. Factors that could affect the Company's future operating
results and cause actual results to vary materially from expectations
include, but are not limited to, dependence on the highly cyclical nature
of both the semiconductor and the communications and personal computer
industries, competitive pricing and declines in average selling prices,
reliance on a small group of principal customers, timing and volume of
orders relative to the Company's production capacity, availability of
manufacturing capacity and fluctuations in manufacturing yields,
availability of financing, competition, dependence on raw materials and
equipment suppliers, exchange rate fluctuations, dependence on key
personnel, enforcement of intellectual property rights, environmental
regulations and fluctuations in quarterly operating results.
7. INVENTORIES
Inventories at December 31, 1999 and September 30, 2000 consist of (in
thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------ -------------
<S> <C> <C>
Raw materials $ 8,440 $ 9,764
Factory supplies 1,268 1,586
Work-in-progress 2,360 5,278
Finished goods 348 130
------- -------
12,416 16,758
Allowance for inventory obsolescene (1,103) (1,106)
------- -------
$11,313 $15,652
------- -------
</TABLE>
8. MARKETABLE SECURITIES
Marketable securities at September 30, 2000 consist of high quality
corporate debt securities. The Company may classify its debt securities in
one of three categories: trading, available-for-sale, or held-to-maturity.
Trading securities are bought and held principally for the purpose of
selling them in the near term. Held-to-maturity securities are those
securities in which the Company has the ability and intent to hold the
security until maturity. All securities not included in trading or
held-to-maturity are classified as available-for-sale.
Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported
as a separate component of other comprehensive income until realized. At
September 30, 2000, the debt securities held were classified as
available-for-sale and their fair values approximated amortized costs.
10
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULT 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 revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues (64.6) (69.8) (68.8) (66.5)
----- ----- ----- -----
Gross profit 35.4 30.2 31.2 33.5
----- ----- ----- -----
Operating expenses:
Selling, general and administrative 13.5 11.2 14.1 12.4
Research and development 4.4 4.5 3.8 4.6
Stock-based compensation 12.5 0.0 6.2 0.2
Other general expenses (income), net 0.0 0.0 0.0 (0.1)
----- ----- ----- -----
Total operating expenses 30.4 15.7 24.1 17.1
----- ----- ----- -----
Operating income 5.0 14.5 7.1 16.4
----- ----- ----- -----
Other income (expense):
Interest income (expense), net (2.4) 3.0 (3.0) 2.4
Foreign currency exchange gain (loss) (0.9) 0.7 1.4 0.4
Other non-operating income, net 1.2 1.1 1.3 1.1
----- ----- ----- -----
Total other income (expense) (2.1) 4.8 (0.3) 3.9
----- ----- ----- -----
Income before income taxes 2.9 19.3 6.8 20.3
Income tax expense (0.3) (0.9) (0.5) (1.0)
----- ----- ----- -----
Net income 2.6% 18.4% 6.3% 19.3%
----- ----- ----- -----
</TABLE>
11
<PAGE> 9
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 2000
NET REVENUES. Net revenues increased by 68.5% from $53.7 million in the three
months ended September 30, 1999 to $90.5 million in the three months ended
September 30, 2000. This increase was primarily due to the increase in unit
volumes for test and assembly services. Net revenues from test services
increased by 38.5% from $25.1 million in the three months ended September 30,
1999 to $41.0 million in the three months ended September 30, 2000. The increase
in test services net revenues was attributable primarily to growth in test
volumes reflecting increased demand and expanded capacity. Revenues from
assembly services increased by 73.1% from $28.6 million in the three months
ended September 30, 1999 to $49.5 million in the three months ended September
30, 2000. The increase was primarily due to greater demand for both leadframe
and laminate packages.
COST OF REVENUES AND GROSS PROFIT MARGIN. Cost of revenues increased by 82.1%
from $34.7 million in the three months ended September 30, 1999 to $63.2 million
in the three months ended September 30, 2000. The increase was primarily due to
increased sales volume and higher depreciation expense and cost of leasing as a
result of placing into service additional test and assembly equipment to meet
the increased demand for test and assembly services. Depreciation expense and
cost of leasing for production equipment increased from $12.6 million in the
three months ended September 30, 1999 to $23.8 million in the three months ended
September 30, 2000. Gross profit was $27.3 million, or 30.2% of net revenue as
compared to $19.0 million, or 35.4% of net revenue, in the same quarter a year
ago. The higher gross profit was the result of increased sales volume. The
decrease in profit margin in the current quarter was due to higher proportion of
sales of array packages which have lower profit contribution.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by 41.7% from $7.2 million in the three months
ended September 30, 1999 to $10.2 million in the three months ended
September 30, 2000. The increase was due primarily to higher administrative
headcount to support increased operating activities which resulted in higher
payroll and staff related expenses. As a percentage of net revenue, however,
selling, general and administrative expenses decreased from 13.4% in the
three months ended September 30, 1999 to 11.3% in the three months ended
September 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
by 70.8% from $2.4 million in the three months ended September 30, 1999 to $4.1
million in the three months ended September 30, 2000. The increased expenses
were for additional investments (employees, equipment and operating supplies)
primarily in advanced packaging technologies in support of our strategy of
offering complete backend turnkey services to our customers.
STOCK-BASED COMPENSATION EXPENSE. Stock-based compensation expense decreased by
99.7% from $6.7 million in the three months ended September 30, 1999 to $0.02
million in the three months ended September 30, 2000. The decrease was primarily
due to the effect of adopting a new employee share ownership scheme in
December 1999.
NET INTEREST INCOME (EXPENSE). Net interest income (expense) increased
substantially from a net interest expense of $1.3 million in the three months
ended September 30, 1999 to a net interest income of $2.7 million in the three
months ended September 30, 2000. The increase was due to interest earned on cash
proceeds from our initial public offering in February 2000, the uninvested
proceeds of which were invested generally in marketable debt securities and
fixed term time deposits with financial institutions, and from partial repayment
of $7.5 million towards our long-term loan.
FOREIGN CURRENCY EXCHANGE GAIN (LOSS). We recognized an exchange loss of $0.5
million in the three months ended September 30, 1999 and a gain of $0.6 million
in the three months ended September 30, 2000 due primarily to currency
fluctuations of the U.S. dollar against the Singapore dollar and Japanese yen.
OTHER NON-OPERATING INCOME. Other non-operating income increased from $0.7
million in the three months ended September 30, 1999 to $1.0 million in the
three months ended September 30, 2000. The increased income was mainly due to an
increase in government grants for the purchase of equipment, and training
subsidies used for research and development activities.
12
<PAGE> 10
INCOME TAX EXPENSE. Income tax expense in the three months ended September 30,
1999 was $0.1 million compared to $0.9 million for the three months ended
September 30, 2000. The higher tax expense was due to a substantial increase in
interest income earned in the current quarter.
The Company has been granted pioneer trade enterprise status in Singapore for a
five-year period from January 1, 1996. As a result, income derived, during this
period, from subcontract assembly and testing of integrated circuits, including
wafer probe services, is exempt from Singapore income tax, subject to compliance
with certain conditions. Income from non-pioneer activities is subject to income
tax at the prevailing enacted rate of tax. Our pioneer status is renewable for
an additional three years subject to compliance with certain conditions.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 2000
NET REVENUES. Net revenues increased by 75.4% from $136.0 million in the nine
months ended September 30, 1999 to $238.5 million in the nine months ended
September 30, 2000. This increase was primarily due to the increase in unit
volumes for test and assembly services. Net revenues from test services
increased by 77.0% from $62.3 million in the nine months ended September 30,
1999 to $110.3 million in the nine months ended September 30, 2000. The increase
in test services net revenues was attributable primarily to growth in test
volumes reflecting increased demand and expanded capacity. Revenues from
assembly services increased by 74.1% from $73.7 million in the nine months ended
September 30, 1999 to $128.3 million in the nine months ended September 30,
2000. The increase was primarily due to greater demand for both leadframe and
laminate packages.
COST OF REVENUES AND GROSS PROFIT MARGIN. Cost of revenue increased by 69.6%
from $93.6 million in the nine months ended September 30, 1999 to $158.7 million
in the nine months ended September 30, 2000. The increase was primarily due to
increased sales volume and higher depreciation expense and cost of leasing as a
result of placing into service additional test and assembly equipment to meet
the increased demand for test and assembly services. Depreciation expense and
cost of leasing for production equipment increased from $35.5 million in the
nine months ended September 30, 1999 to $60.8 million in the nine months ended
September 30, 2000. Gross profit was $79.8 million, or 33.5% of net revenue as
compared to $42.4 million, or 31.2% of net revenue, in the nine-month period a
year ago. The higher gross profit was the result of increased sales volume.
Higher gross profit margin for the current nine-month period was primarily
attributed to improved utilization of materials and of test and assembly
equipment. The overall improved profit margin was partially reduced by a higher
proportion of sales of array packages with a lower profit contribution in the
three-month period ending September 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by 53.6% from $19.2 million in the nine months
ended September 30, 1999 to $29.5 million in the nine months ended September 30,
2000. The increase was due primarily to higher administrative headcount to
support increased operating activities which resulted in higher payroll and
staff related expenses. As a percentage of net revenue, however, selling,
general and administrative expenses decreased from 14.1% in the nine months
ended September 30, 1999 to 12.4% in the nine months ended September 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
by 115.7% from $5.1 million in the nine months ended September 30, 1999 to $11.0
million in the nine months ended September 30, 2000. The increased expenses were
for additional investments (employees, equipment and operating supplies)
primarily in advanced packaging technologies in support of our strategy of
offering complete backend turnkey services to our customers.
STOCK-BASED COMPENSATION EXPENSE. Stock-based compensation expense decreased by
95.7% from $8.5 million in the nine months ended September 30, 1999 to $0.4
million in the nine months ended September 30, 2000. The decrease was primarily
due to the effect of adopting a new employee share ownership scheme in December
1999.
NET INTEREST INCOME (EXPENSE). Net interest income (expense) increased
substantially from a net interest expense of $4.1 million in the nine months
ended September 30, 1999 to a net interest income of $5.8 million in the nine
months ended September 30, 2000. The increase was due to interest earned on cash
proceeds from our initial public offering in February 2000, the uninvested
proceeds of which were invested generally in marketable debt
13
<PAGE> 11
securities and fixed term time deposits with financial institutions, and from
the repayment of our loans of $67.5 million.
FOREIGN CURRENCY EXCHANGE GAIN (LOSS). Exchange gain of $1.9 million was
recognized in the nine months ended September 30, 1999 and gain of $1.1 million
in the nine months ended September 30, 2000. The exchange gain was due primarily
to currency fluctuations of the U.S. dollar against the Singapore dollar and
Japanese yen.
OTHER NON-OPERATING INCOME. Other non-operating income increased from $1.8
million in the nine months ended September 30, 1999 to $2.7 million in the nine
months ended September 30, 2000. The increased income was mainly due to an
increase in government grants for the purchase of equipment, and training
subsidies used for research and development activities.
INCOME TAX EXPENSE. Income tax expense in the nine months ended September 30,
1999 was $0.7 million compared to $2.4 million in the nine months ended
September 30, 2000. The higher tax expense was due to a substantial increase in
interest income earned in the nine months ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, our principal sources of liquidity included $161.5
million in cash and cash equivalent and a $20.0 million of unutilized banking
and credit facilities consisting of short-term advances and bank guarantees.
On June 5, 1998 we entered into a Singapore dollar denominated long-term loan
agreement with the Economic Development Board for a loan amount of S$90.0
million ($54.3 million). The loan bears interest, payable semi-annually, at 1%
over the prevailing annual interest rate offered by the Central Provident Fund
Board, a Singapore Government Statutory Board. The principal sum is repayable
over seven equal semi-annual installments commencing from September 1, 2000 and
ending on September 1, 2003. The loan amount outstanding at September 30, 2000
was S$77.1 million ($44.1 million) and the prevailing annual loan interest rate
at September 30, 2000 was 3.5%.
The loan agreement restricts us from paying dividends, from incurring further
indebtedness and from undertaking any form of reconstruction, including
amalgamation with another company, which would result in a change in the control
of the Company, in each case without prior lender consent.
We have an unutilized working capital credit facility with Citibank, N.A. for
$20.0 million. Interest on borrowings under this facility is charged at the
bank's prevailing rate.
Net cash provided by operating activities totaled $81.8 million for the nine
months ended September 30, 2000 and $47.8 million for the nine months ended
September 30, 1999. The net cash of $81.8 million generated from operating
activities for the current nine months ended September 30, 2000 was primarily
attributable to higher operating income and changes in the working capital
components.
Net cash used in investing activities totaled $254.4 million for the nine months
ended September 30, 2000 and $43.9 million for the nine months ended
September 30, 1999. The net cash used in investing activities of $254.4 million
in the nine months ended September 30, 2000 consisted of capital expenditure of
$240.3 and purchase of marketable debt securities of $20.1 million. The total
investment was reduced by receipt of $6.0 million relating to the sale and lease
back of equipment. The capital expenditure consisted mainly of acquisition of
test and assembly equipment, peripherals and equipment upgrades to meet the
increased demand for test and assembly services. Our budgeted capital
expenditures remain at $290.0 million for the year 2000. From time to time we
may require or make investments in additional businesses, products and
technologies or establish joint ventures or strategic partnerships that we
believe will complement our current and future business. Some of these
acquisitions or investments could be material.
Net cash provided by financing activities totaled $321.6 for the nine months
ended September 30, 2000 and $0.1 million for the nine months ended
September 30, 1999. The cash generated from financing activities of $389.0
14
<PAGE> 12
million for the nine months ended September 30, 2000 was mainly from the initial
public offering in February 2000. The cash outflow from financing activities for
the same period was for repayment of loans totaling $67.5 million.
FOREIGN CURRENCY EXCHANGE EXPOSURE
We experience foreign currency exchange gains and losses arising from
transactions in currencies, principally the Singapore dollar and the Japanese
yen, other than our functional currency, the U.S. dollar.
We have adopted a hedging policy that we believe adequately covers any material
exposure to our non-U.S. dollar assets and liabilities. To minimize foreign
currency exchange risk, we selectively hedge our foreign currency exposure
through forward foreign currency swap contracts and options. However, we cannot
assure you that sudden or rapid movement in exchange or interest rates will not
have a material adverse effect on our business, financial condition or results
of operations.
15
