<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
--------
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
ASAT Holdings Limited
---------------------
(Exact name of Registrant as specified in its Charter)
14/th/ Floor
138 Texaco Road
Tsuen Wan, New Territories
Hong Kong
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover of 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 the registrant
in connection with Rule 12g3-2(b): 82-________________.
<PAGE>
This report contains (i) Condensed Consolidated Financial Statements,
(ii) a Management's Discussion and Analysis of Financial Condition and Results
of Operations for the three months and six months ended October 31, 2000, and
(iii) other information, and is being made pursuant to Section 4.8 of the
Indenture, dated as of October 29, 1999, by and between ASAT (Finance) LLC, a
Delaware limited liability company (the "Company"), ASAT Holdings Limited and
its subsidiaries referred to therein as guarantors, and The Chase Manhattan
Bank, as trustee.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I Financial Information
-----------------------------
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of April 30, 2000 and October 31, 2000................... 1
Condensed Consolidated Statements of Operations and Comprehensive Income
for the three months and six months ended October 31, 1999 and 2000............................. 2
Condensed Consolidated Statements of Cash Flows for the three months and six months
ended October 31, 1999 and 2000................................................................. 4
Notes to Condensed Consolidated Financial Statements.............................................. 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
for the three months and six months ended October 31, 1999 and 2000............................. 8
Part II Other Information
--------------------------
Item 1 Legal Proceedings................................................................................. 16
Signature................................................................................................. 17
</TABLE>
All financial information in this report on Form 6-K is in United States
dollars, which are referred to as "Dollars" and "$".
iii
<PAGE>
ASAT HOLDINGS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 2000 AND OCTOBER 31, 2000
(In thousands)
<TABLE>
<CAPTION>
April 30, October 31,
2000 2000
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 10,892 $100,566
Accounts receivable-trade (net of allowance for doubtful accounts
of $290 and $303 at April 30, 2000 and October 31, 2000, respectively).. 40,566 42,066
Inventories (Note 3)..................................................... 23,302 27,878
Prepaid expenses and other current assets................................ 10,911 19,470
-------- --------
Total current assets..................................................... 85,671 189,980
Property, plant and equipment, net of accumulated depreciation............ 166,461 216,397
Option to acquire ASAT, S.A., at cost..................................... 20,000 20,000
Deferred charges.......................................................... 10,907 4,996
Noncompete covenants, net................................................. 442 -
-------- --------
Total assets............................................................. $283,481 $431,373
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings............................................... $ 9,000 $ -
Current portion of other long-term debt.................................. 5,000 -
Accounts payable......................................................... 24,549 19,063
Accrued liabilities...................................................... 6,155 10,038
Income taxes payable..................................................... 12,847 12,345
Amount due to QPL Group.................................................. 5,300 4,714
Amount due to a related company.......................................... 297 572
-------- --------
Total current liabilities................................................ 63,148 46,732
Deferred income taxes..................................................... 21,992 28,344
12.5% Senior notes due 2006............................................... 149,217 97,277
Other long-term debt...................................................... 35,000 -
Shareholders' equity:
Common stock............................................................. 5,760 6,760
Additional paid-in capital............................................... 12,457 233,457
(Accumulated deficit)/Retained earnings.................................. (4,093) 18,803
-------- --------
Total shareholders' equity............................................... 14,124 259,020
-------- --------
Total liabilities and shareholders' equity............................... $283,481 $431,373
======== ========
</TABLE>
1
<PAGE>
ASAT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND 2000
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
- Third parties.................................................. $ 78,749 $ 104,130 $ 144,611 $ 207,163
- QPL Group...................................................... - - 101 -
----------- ----------- ----------- -----------
Total net sales.................................................... 78,749 104,130 144,712 207,163
----------- ----------- ----------- -----------
Cost of sales:
- Purchases from QPL Group and other related party............... 17,170 16,286 29,168 32,504
- Other costs.................................................... 30,857 51,216 60,820 102,452
----------- ----------- ----------- -----------
Total cost of sales................................................ 48,027 67,502 89,988 134,956
----------- ----------- ----------- -----------
Gross profit....................................................... 30,722 36,628 54,724 72,207
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative............................... 7,550 8,812 14,116 17,219
Research and development.......................................... 1,182 1,390 2,339 2,951
----------- ----------- ----------- -----------
Total operating expenses........................................... 8,732 10,202 16,455 20,170
----------- ----------- ----------- -----------
Income from operations............................................. 21,990 26,426 38,269 52,037
Other (expense) income, net........................................ (141) 2,049 (76) 3,200
Interest expense:
- amortization of deferred charges............................... (14) (235) (14) (688)
- third parties.................................................. (1,927) (3,956) (3,464) (10,315)
- QPL Group...................................................... (2,059) - (2,404) -
Recapitalization costs......................................... (6,493) - (6,493) -
----------- ----------- ----------- -----------
Income before income taxes and extraordinary charge................ 11,356 24,284 25,818 44,234
Provision for income taxes......................................... (3,262) (4,375) (5,456) (8,215)
----------- ----------- ----------- -----------
Income before extraordinary charge................................. 8,094 19,909 20,362 36,019
Extraordinary charge on early extinguishment of debt
(net of income tax benefit of $885 for the three months
ended October 31, 2000 and $1,108 for the six months
ended October 31, 2000) (Note 4)................................. - (10,561) - (13,126)
----------- ----------- ----------- -----------
Net income......................................................... 8,094 9,348 20,362 22,893
Other comprehensive income:
Unrealized holding loss on marketable securities.................. (83) - - -
----------- ----------- ----------- -----------
Comprehensive income............................................... $ 8,011 $ 9,348 $ 20,362 $ 22,893
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
ASAT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND 2000 - Continued
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income per ordinary share:
Basic:
Income before extraordinary charge....... $ 0.01 $ 0.03 $ 0.04 $ 0.06
Extraordinary charge..................... - (0.02) - (0.02)
------------ ------------ ------------ ------------
Net income $ 0.01 $ 0.01 $ 0.04 $ 0.04
------------ ------------ ------------ ------------
Basic weighted average number of ordinary
shares outstanding....................... 576,000,000 676,000,000 576,000,000 635,782,609
------------ ------------ ------------ ------------
Net income per ADS :
Basic:
Income before extraordinary charge..... $ 0.07 $ 0.15 $ 0.18 $ 0.28
Extraordinary charge................... - (0.08) - (0.10)
------------ ------------ ------------ ------------
Net income $ 0.07 $ 0.07 $ 0.18 $ 0.18
------------ ------------ ------------ ------------
Basic weighted average number of ADSs
outstanding............................ 115,200,000 135,200,000 115,200,000 127,156,522
------------ ------------ ------------ ------------
</TABLE>
The dilutive earnings per share and ADS are the same as the basic earnings per
share and ADS for the three months ended October 31, 2000 and the six months
ended October 31, 2000.
The extraordinary charge of $10.6 million and $13.1 million for the three months
and six months ended October 31, 2000, respectively, consisted of the redemption
premium and a non-cash charge of approximately $5 million of unamortized
deferred charges and was net of income tax benefit of approximately $0.9 million
and $1.1 million for the three months and six months ended October 31, 2000,
respectively.
3
<PAGE>
ASAT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating activities:
Net income..................................................... $ 8,094 $ 9,348 $ 20,362 $ 22,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization:
Property, plant and equipment and noncompete covenants.. 6,171 8,065 12,376 14,794
Deferred charges and debt discount...................... 14 397 14 1,070
Deferred income taxes...................................... 733 3,362 479 6,352
Loss (gain) on disposal of property, plant and equipment... 504 - 603 (360)
Loss on disposal of marketable securities.................. 156 - 156 -
Deferred charges written off............................... - 2,707 - 5,496
Cost incurred by QPL Group on behalf of ASAT............... 350 - 701 -
Others..................................................... (359) - (44) -
Changes in operating assets and liabilities:
Accounts receivable-trade...................................... 6,314 8,597 1,940 (1,500)
Inventories.................................................... 1,230 (2,688) (1,617) (4,576)
Prepaid expenses and other current assets...................... (1,433) (68) (594) (2,113)
Accounts payable............................................... 2,782 (4,876) 4,071 (8,374)
Accrued liabilities............................................ 2,902 (5,746) 3,768 3,883
Amount due to a related company................................ 75 53 373 275
Income taxes payable........................................... 3,313 (591) 4,978 (502)
--------- -------- --------- --------
Net cash provided by operating activities.................... 30,846 18,560 47,566 37,338
--------- -------- --------- --------
Investing activities:
Acquisition of property, plant and equipment................... (9,310) (34,867) (15,625) (68,114)
Proceeds from sale of property, plant and equipment............ 1,860 (331) 5,023 628
Options to acquire ASAT S.A.................................... (20,000) - (20,000) -
Sale proceeds of marketable securities......................... 119 - 119 -
Decrease in restricted cash.................................... 695 - 665 -
--------- -------- --------- --------
Net cash used in investing activities........................ (26,636) (35,198) (29,818) (67,486)
--------- -------- --------- --------
Financing activities:
Proceeds from initial public offerings, net of expenses........ - - - 222,001
Issue of shares................................................ 120 - 120 -
Issue of 12.5% senior notes due 2006........................... 151,502 - 151,502 -
35% redemption of 12.5% senior notes due 2006.................. - (52,321) - (52,321)
Increase in other long-term debt............................... 40,000 - 40,000 -
Repayment of other long-term debt.............................. (38,288) - (39,348) (40,000)
Net (decrease) in short-term bank borrowings................... (42,771) - (44,873) (9,000)
Net increase (decrease) in other amounts due to QPL Group...... 8,196 (349) 477 (586)
Dividend paid to QPL........................................... (101,374) - (101,374) -
Deferred charges............................................... (10,984) (127) (10,984) (272)
Proceeds from accounts receivable financing.................... 21,285 - 40,221 -
Repayment under accounts receivable financing.................. (29,315) - (47,709) -
--------- -------- --------- --------
Net cash (used in) provided by financing activities.......... (1,629) (52,797) (11,968) 119,822
--------- -------- --------- --------
Net increase (decrease) in cash and cash equivalents............. 2,581 (69,435) 5,780 89,674
Cash and cash equivalents at beginning of the period............. 4,608 170,001 1,409 10,892
--------- -------- --------- --------
Cash and cash equivalents at end of the period................... $ 7,189 $100,566 $ 7,189 $100,566
========= ======== ========= ========
</TABLE>
4
<PAGE>
ASAT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 1999 AND 2000--continued
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.......................................... $ 4,656 $1,118 $ 5,940 $ 9,791
35% redemption of 12.5% senior notes due 2006, - 61,031 - 61,031
including $6,781 charged related primarily to
premium for early redemption and associated fees
Income taxes...................................... - 538 - 1,790
</TABLE>
5
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)
1. PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements have been prepared by the
Company in accordance with generally accepted accounting principles. The
April 30, 2000 balance sheet date was derived from audited financial
statements but does not include all disclosures required by generally
accepted accounting principles. The interim financial statements and notes
thereto should be read in conjunction with the financial statements and
notes included in the annual report of ASAT Holdings Limited (the
"Company") on Form 20-F for the fiscal year ended April 30, 2000. The
interim financial statements for fiscal 2000 and 2001 were not audited, but
in the opinion of management reflect all adjustments necessary for a fair
presentation of the results for the interim periods presented.
2. FOREIGN CURRENCY TRANSLATION
Effective May 1, 2000, the Company changed its functional currency to the
US dollar. The change was necessitated by significant changes in the
economic environment in which the Company operates. The Company's business
has changed in that a more significant portion of its revenues and sources
of its financing are in US dollars. In addition, subsequent to the
Company's recapitalization in October 1999, the Company has diminished the
interdependencies with its affiliates. The impact of the change on the
Company's financial position and operations is not material.
3. INVENTORIES
The components of inventories were as follows:
April October
30, 2000 31, 2000
-------- --------
(Unaudited)
Raw materials................................... $ 20,726 $25,783
Work-in-progress................................ 2,576 2,095
--------- -------
$ 23,302 $27,878
========= =======
4. INITIAL PUBLIC OFFERING
On July 14, 2000, the Company issued 20,000,000 American depository shares
("ADS") representing 100,000,000 ordinary shares at $12.00 per ADS in the
initial public offering of the Company's ADSs on the Nasdaq National
Market. Offering proceeds, net of expenses, amounted to approximately $222
million.
6
<PAGE>
ASAT HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(In thousands)
During the quarter ended July 31, 2000, the Company used a portion of the
proceeds to repay early its $40 million senior secured loan and its
revolving credit facility outstanding loan of $17 million. As a result of
this early repayment, the Company recorded an extraordinary charge of $2.6
million. The charge represented a non-cash item and consisted of the
unamortized deferred charges and is net of income tax benefit of $0.2
million.
On August 23, 2000, the Company used an additional portion of the proceeds
to redeem 35% or $53 million of the outstanding aggregate principal amount
of the 12.5% senior notes due November 2006. The redemption price was
112.5% of the principal, as provided in the senior notes. As a result of
this early redemption, the Company recorded an extraordinary charge of
approximately $10.6 million. The charge consists primarily of the
redemption premium plus a non-cash charge of approximately $5 million
related to the unamortized deferred charges plus fees and net of income tax
benefit of approximately $0.9 million.
5. COMMITMENTS
As of April 30, 2000 and October 31, 2000, the Company had contracted for
capital expenditure on property, plant and equipment of $55,561 and $43,940
respectively.
7
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations for the three months and six months ended October 31, 1999
------------------------------------------------------------------------
and 2000
--------
You should read the following discussion and analysis together with our
condensed consolidated financial statements and related notes included elsewhere
in this document, which contain additional information helpful in evaluating our
operating results and financial condition.
Overview
We are one of the world's largest independent providers of semiconductor
assembly and testing services. We offer a broad selection of semiconductor
packages, including standard and advanced leaded and ball grid array, or BGA,
packages. We also are a leading provider of semiconductor testing services,
particularly for mixed-signal semiconductors.
We target the communications sector of the semiconductor industry, including
data networking, broadband applications, and mobile communications. We have
over 123 customers and many of our top customers are among the world's largest
and fastest growing semiconductor companies.
We provide assembly and testing services from our Hong Kong facilities. We also
provide package design, thermal and electrical simulation services and testing
support services from our facilities in Fremont, California and Hong Kong. Our
sales offices and representatives are strategically located in the United
States, Europe, Hong Kong, South Korea and Singapore.
Industry Demand. Our business is substantially affected by market conditions in
the semiconductor industry. Semiconductor growth continues to be driven by
strong end-use demand for networking applications, telecommunications services,
computers and consumer products. The semiconductor business is highly cyclical.
The industry experienced sustained growth during the first half of the 1990s as
global demand for semiconductors expanded at an accelerated pace, but
subsequently experienced downturns characterized by reduced product demand,
production over-capacity, increased competition and lower pricing.
We have pursued a strategy of reducing our exposure to the semiconductor
industry's cycles by (1) developing a customer base that produces semiconductor
products for end-use applications that have experienced sustained growth in
recent years, and (2) decreasing our exposure to the personal computer and
memory markets, which have experienced particularly sharp price declines and
demand volatility in recent years.
Due to a variety of factors, our quarterly operating results will vary. These
factors could include: general economic conditions in the semiconductor
industry, the short-term nature of our customers' commitments, capacity
utilization, erosion of the selling prices of packages, changes in our product
mix, and timing of our receipt of semiconductor chips from our customers.
Interim results of operations do not necessarily indicate the results that may
be expected for the full year. You should read the following information in
conjunction with our consolidated financial statements and the related notes
included in this document.
8
<PAGE>
Results of Operations
The following table contains certain items as a percentage of net sales for the
periods listed:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
--------------- ---------------- ---------------- ----------------
($ in millions, except margin amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales...................... 78.7 100.0% 104.1 100.0% 144.7 100.0% 207.2 100.0%
Cost of Sales.................. 48.0 61.0% 67.5 64.8% 90.0 62.2% 135.0 65.2%
Gross Profit................... 30.7 39.0% 36.6 35.2% 54.7 37.8% 72.2 34.8%
Selling, general and
administrative................. 7.5 9.5% 8.8 8.5% 14.1 9.7% 17.2 8.3%
Research and development....... 1.2 1.5% 1.4 1.3% 2.3 1.6% 3.0 1.4%
Total operating expenses....... 8.7 11.0% 10.2 9.8% 16.4 11.3% 20.2 9.7%
Income from operations......... 22.0 28.0% 26.4 25.4% 38.3 26.5% 52.0 25.1%
</TABLE>
The following table sets forth our unaudited gross profit, gross margin, EBITDA
and EBITDA margin for the periods listed:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
--------------- ---------------- ---------------- ----------------
($ in millions, except margin amounts)
<S> <C> <C> <C> <C>
Gross Profit................... 30.7 36.6 54.7 72.2
Gross Margin................... 39.0% 35.2% 37.8% 34.8%
EBITDA/(1)/.................... 28.2 34.5 50.6 66.8
EBITDA Margin/(1)/............. 35.8% 33.1% 35.0% 32.2%
</TABLE>
_______________
(1) "EBITDA" is income from operations plus depreciation and amortization, non-
recurring charges and extraordinary charge and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service and/or incur debt. EBITDA should not be considered in
isolation or as a substitute for operating income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with generally accepted accounting principles or as a measure
of our profitability or liquidity. EBITDA, as defined in this footnote, may
not be comparable to similarly titled measures used by other companies.
EBITDA increased in dollar terms in the three-month period ended October 31,
2000, compared with October 31, 1999. This improvement is the result of the
increase in sales and reduced selling and general administration expenses as a
percentage of sales.
Market indicators for the second half of our fiscal 2001 lead management to
anticipate that the second half of our fiscal 2001 may experience a decline in
sales growth. A decline in sales in 2001 would lead to a decrease in sales
growth.
9
<PAGE>
Three Months Ended October, 1999 Compared to Three Months Ended Oct 31, 2000
Net Sales
The following table contains a breakdown of net sales by product category for
the periods listed (U.S. dollars in millions and as a percentage of net sales):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
October 31, October 31, October 31, October 31,
1999 2000 1999 2000
--------------- ---------------- ---------------- ----------------
($ in millions, % of net sales)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leaded:
Standard............... 26.3 33.4% 21.7 20.8% 49.5 34.2% 47.1 22.7%
Advanced............... 21.3 27.1% 27.2 26.1% 37.5 25.9% 51.4 24.8%
BGA:
Standard............... 6.1 7.8% 0.8 0.8% 11.1 7.7% 5.7 2.8%
Advanced............... 19.3 24.5% 48.7 46.8% 33.0 22.8% 90.7 43.8%
Testing........................ 5.7 7.2% 5.7 5.5% 13.6 9.4% 12.3 5.9%
Total................ 78.7 100.0% 104.1 100.0% 144.7 100.0% 207.2 100.0%
</TABLE>
Net sales increased 32.3% to $104.1 million in the three months ended October
31, 2000 from $78.7 million for the three months ended October 31, 1999. This
increase was mainly due to strong volume growth in assembly sales of advanced
BGA and leaded packages. Revenue from advanced packages accounted for 51.6% of
sales in the three months ended October 31, 1999 and grew to 72.9% of sales in
the three months ended October 31, 2000. The sales growth reflected a
continuation of growth of our core business in advance packaging to the
communication sectors.
Gross Profit
Gross profit increased 19.2% to $36.6 million in the three months ended October
31, 2000 from $30.7 million in the three months ended October 31, 1999. Gross
margin was 35.2% in the three months ended October 31, 2000 compared to 39.0% in
the three months ended October 31, 1999. Gross margin decreased primarily due to
(1) a non-recurring consignment contract for the assembly business in the
October 1999 quarter and (2) a decrease in testing revenue as a percentage of
net sales. In the October 2000 quarter, the higher volume of production enabled
ASAT to increase manufacturing efficiency and reduce unit fixed manufacturing
costs.
Selling, General and Administrative
Selling, general and administrative expenses increased 17.3% to $8.8 million in
the three months ended October 31, 2000 from $7.5 million in the three months
ended October 31, 1999. As a percentage of net sales, operating and sales,
general and administrative expenses decreased from 9.5% to 8.5%. The increase is
attributed primarily to an increase in headcount. These increases were partly
offset by the elimination of the management fee paid to QPL in the three months
ended October 31, 1999.
Research and Development
Research and development increased 16.7% to $1.4 million for the three months
ended October 31, 2000 from $1.2 million for the three months ended October 31,
1999. These costs decreased, however, as a percentage of net sales from 1.5% to
1.3%. A significant portion of these expenditures, including additional staff
costs and outside consulting services, was focused on developing additional
advanced semiconductor packaging technologies which have introduced to the
market in recent quarters.
10
<PAGE>
Interest Expense
Interest expense increased from $4.0 million during the three months ended
October 31, 1999 to $4.2 million during the same period in 2000, a $0.2 million
increase. Interest in the period ended October 31, 2000 was related to our
senior unsecured notes of which 35% were early redeemed in August 2000. Interest
in the quarter ended October 1999 was attributed to term debt and a revolving
credit line, both of which were extinguished subsequent to IPO.
Recapitalization Cost
Recapitalization costs represent primarily professional fees in conjunction with
disposition of 50% of ASAT shares previously held by QPL to various private
equity funds including Chase Capital Partners, Olympus Capital Holdings Asia,
and Orchid Asia Holdings.
Other Income and Expense
Other income and expense, combined, increased from $0.1 million net expenses in
the three months ended October 31, 1999 to $2.0 million net income in the three
months ended October 31, 2000. This increase was due to increased interest
income arising from investment of cash generated from operations net of
investment spending and debt repayment, plus unspent IPO proceeds to date.
Income Taxes
Income tax expense increased by $1.1 million to $4.4 million in the three months
ended October 31, 2000 from $3.3 million in the three months ended October 31,
1999 mainly due to an increase in pre-tax income. The effective tax rate was
18.0% in the three months ended October 31, 2000 and 18.3% (excluding the non-
deductible recapitalization costs) in the three months ended October 31, 1999.
Extraordinary Charge
During the quarter ended October 31, 2000, we used a portion of the proceeds
from our initial public offering of ADSs to repay early our 35% of senior
unsecured notes. As a result of the early repayment of these notes, we recorded
an extraordinary loss of $10.6 million representing a non-cash charge consisting
of the unamortized deferred costs related to obtaining the refinancing, which is
net of an income tax benefit of $0.9 million.
11
<PAGE>
Six Months Ended October, 1999 Compared to Six Months Ended October 31, 2000
Net Sales
The following table contains a breakdown of net sales by product category for
the periods listed (U.S. dollars in millions and as a percentage of net sales):
<TABLE>
<CAPTION>
Six Months Ended
----------------
October 31, October 31,
1999 2000
----------- -----------
($ in millions; % of net sales)
<S> <C> <C> <C> <C>
Assembly Leaded:
Standard............................ 49.5 34.2% 47.1 22.7%
Advanced............................ 37.5 25.9% 51.4 24.8%
Assembly BGA:
Standard............................ 11.1 7.7% 5.7 2.8%
Advanced............................ 33.0 22.8% 90.7 43.8%
Testing.................................. 13.6 9.4% 12.3 5.9%
Total............................... 144.7 100.0% 207.2 100.0%
</TABLE>
Net sales increased 43.2% to $207.2 million in the six months ended October 31,
2000 from $144.7 million in the six months ended October 31, 1999. This increase
was mainly due to strong volume growth in assembly sales of BGA and advanced
leaded packages. Revenue from advanced packages accounted for 68.6% of sales in
the six months ended October 31, 2000, compared with 48.7% of sales in the six
months ended October 31, 1999. The sales growth reflected a continuation of
growth of our core business in advance packaging to the communication sectors.
Gross Profit
Gross profit increased 32.0% to $72.2 million in the six months ended October
31, 2000, compared with $54.7 million in the six months ended October 31, 1999.
Gross margin was 34.8% in the six months ended October 31, 2000, compared to
37.8% in the six months ended October 31, 1999. Gross margin decreased primarily
due to (1) a non-recurring consignment revenue contract experienced in 1999, and
(2) a decrease in testing revenue as a percentage of net sales. Higher sales
volumes in the six months ended October 2000 enabled us to increase our
manufacturing efficiency and reduce fixed manufacturing costs per unit of
product.
Selling, General and Administrative
Selling, general and administrative expenses increased 22.0% to $17.2 million in
the six months ended October 31, 2000 from $14.1 million in the six months ended
October 31, 1999. The increase resulted primarily from additions to sales and
marketing personnel to help grow the business. Administration costs increases
were offset to some extent by the elimination of the management fee paid
historically to QPL in the six months ended October 31, 1999.
As a percentage of net sales, selling, general and administrative expenses
decreased from 9.7% to 8.3%.
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Research and Development
Research and development increased 30.4% to $3.0 million in the six months ended
October 31, 2000 from $2.3 million in the six months ended October 31, 1999.
These costs decreased, however, as a percentage of net sales from 1.6% to 1.4%.
A significant portion of these expenditures was for staffing and consulting
services which developed new packages introduced to the market in recent
quarters.
Interest Expense
Interest expense increased from $5.9 million during the six months ended October
31, 1999 to $11.0 million during the same period in 2000, a $5.1 million
increase. Interest in the period ended October 31, 2000 was related to our
secured term loan facility, our senior unsecured notes and our revolving banking
facility all of which were obtained as part of our recapitalization in October,
1999.
Recapitalization Costs
Recapitalization costs represent primarily professional fees in conjunction with
disposition of 50% of ASAT shares previously held by QPL to various private
equity funds including Chase Capital Partners, Olympus Capital Holdings Asia,
and Orchid Asia Holdings.
Other Income and Expense
Other income and expense, combined, increased from $0.1 million net expenses in
the six months ended October 31, 1999 to $3.2 million net income in the six
months ended October 31, 2000. This increase was due to increased interest
income arising primarily from investment of net cash flow generated from the
business plus unspent proceeds arising from IPO.
Income Taxes
Income tax expense increased by $2.7 million to $8.2 million in the six months
ended October 31, 2000 from $5.5 million in the six months ended October 31,
1999 mainly due to an increase in pre-tax income. The effective tax rate was
18.6% in the six months ended October 31, 2000, and was 16.9% (excluding the
non-deductible recapitalization costs) in the six months ended October 31, 1999.
Extraordinary Charge
During the six months ended October 31, 2000, we used a portion of the proceeds
from our initial public offering of ADSs to repay early our $40.0 million senior
secured loan, the outstanding balance on our revolving credit facility of $17
million and 35% of senior unsecured notes. As a result of the early repayment of
these obligations, we recorded an extraordinary charge of $13.1 million
representing a non-cash charge consisting of the unamortized deferred costs
related to obtaining the refinancing and is net of an income tax benefit of $1.1
million.
Liquidity and Capital Resources
In fiscal years 1998, 1999 and 2000 and for the three months ended October,
2000, our capital expenditures totaled approximately $44.0 million, $27.5
million, $56.0 million and $34.9 million, respectively. These expenditures were
incurred primarily for equipment and facilities acquired for production of
assembly products and for test equipment. The fiscal year ended April 2000
included $10 million for the purchase of a facility from Motorola Corporation to
house test and administration functions.
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ASAT has historically financed capital expenditures through net operating cash
flow, debt from outside financial institutions, including capital leases, and
advances from QPL. Net cash generated by operating activities was $47.2 million,
$62.3 million, $81.7 million and $18.6 million in fiscal years 1998, 1999 and
2000 and the three months ended October 31, 2000, respectively. Our net
operating cash flow was also used to support QPL during the financial
difficulties it incurred during the fiscal years 1998 and 1999 and the period in
fiscal 2000 until our recapitalization. Since our recapitalization, we have
discontinued our financial support of QPL.
In October 1999 (i.e. fiscal year 2000) we refinanced outstanding debt with
$155.0 million in senior notes at 12.5% due November 1, 2006. Additionally, we
obtained a five year $40.0 million secured term loan facility plus a $25.0
million revolving credit facility.
With $222 million net proceeds generated from our IPO in July 2000, we
liquidated in August the $40 million term facility and $17 million borrowed
against our revolving credit line. By end of the quarter ended October 2000, we
reduced 35% or $54 million of the senior notes. At quarter end October 2000, the
principal balance of the senior notes was $97 million, compared with over $100
million in cash on the balance sheet.
Capital expenditures in the quarter ended October 2000 were financed by
operating cash flows and a portion of IPO proceeds.
We expect future capital requirements to consist primarily of purchases of
production machinery and equipment to expand capacity, serving growth of the
company. We expect capital expenditures through fiscal year end April 2002 to be
financed through cash flow generated from operations plus remaining unspent IPO
proceeds. We anticipate using up to $50 million of cash in fiscal 2001 and
fiscal 2002 to construct and equip with assembly equipment an additional
manufacturing operation in mainland China. The purpose is to expand capacity to
accommodate high volume production, adding capacity for growth.
Market Sensitivity
We have market risk primarily in connection with the pricing of our packaging
products and services and the purchase of raw materials. Both pricing and cost
of raw materials are significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have been able
to offset pricing declines for our products through a combination of improved
product mix and success in obtaining price reductions in raw material costs.
We generally have not been significantly affected by foreign exchange
fluctuations because (1) substantially all of our revenues are in U.S. dollars
and (2) the largest share of our non-U.S. dollar costs historically has been
denominated in Hong Kong dollars which have been pegged to the U.S. dollar at a
relatively constant exchange rate since 1983.
Inflation
We do not believe that inflation has had a material effect on our business,
financial condition or results of operations. If our costs were to become
subject to significant inflationary pressures, we may not able to fully offset
such higher costs through price increases. Our inability or failure to do so
could adversely affect our business, financial conditions and results of
operations.
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Forward Looking Statements Disclaimer
This document contains forward-looking statements and information that involve
risks, uncertainties and assumptions. Forward-looking statements are all
statements that concern plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements that are other than
statements of historical fact, including those that are identified by the use of
words such as "anticipates," "believes," "estimates," "expects," "intends,"
"plans," "predicts," "anticipates," "projects" and similar expressions. Risks
and uncertainties that could affect us include technology changes, overall
semiconductor industry conditions, timing of customers' orders and our capacity
at the time to meet such orders, adverse developments affecting major customers,
fluctuations in market prices for our products, variations in product mix,
timing of expenditures in anticipation of future sales, increased inflation and
interest rates on our debt and effects of our substantial level of debt,
including the cash required to service our debt and the possible difficulties in
obtaining additional financing. Should one or more of such risks and
uncertainties materialize, or should any underlying assumption prove incorrect,
actual outcomes may vary materially from those indicated in the applicable
forward looking statements. Any forward-looking statement or information
contained in this document speaks only as of the date the statement was made. We
are not required to update any such statement or information to either reflect
events or circumstances that occur after the date the statement or information
is made or to account for unanticipated events.
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Part II
Item 1 Legal Proceedings
-----------------
We are not a party to any material litigation.
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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, thereunto duly authorized.
ASAT Holdings Limited
By:/s/ Stan Baumgartner
-----------------------
Name: Stan Baumgartner
Title: Chief Financial Officer
Date: December 22, 2000
17
