10-Q 1 d10q.txt 10-Q FOR THE PERIOD ENDING 03/31/2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 000-31173 CHIPPAC, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 77-0463048 State or other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization 3151 Coronado Drive Santa Clara, California 95054 Address of Principal Executive Offices (Zip Code) (408) 486-5900 Registrant's Telephone Number, Including Area Code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No - Indicate the number of shares of the issuer's class of common stock, as of the latest practicable date: Class Outstanding as of May 2, 2001 ------------------------------------------------------------------------------- Class A Common stock, $.01 par value 68,650,124 Class B Common stock, $.01 par value 0 ChipPAC INC Part I -- FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Condensed Consolidated Balance Sheets................. 3 Unaudited Condensed Consolidated Statements of Operations....... 4 Unaudited Condensed Consolidated Statements of Cash Flows....... 5 Notes to Unaudited Condensed Consolidated Financial Statements.. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 19 Part II -- OTHER INFORMATION Item 1. Legal Proceedings........................................... 19 Item 2. Changes in Securities and Use of Proceeds................... 20 Item 3. Defaults Upon Senior Securities............................. 20 Item 4. Submission of Matters to a Vote of Security Holders......... 20 Item 5. Other Information........................................... 21 Item 6. Exhibits and Reports on Form 8-K............................ 24 Signatures.......................................................... 28 ChipPAC, Inc. Condensed Consolidated Balance Sheets (In thousand, except for share amounts) (Unaudited)
March 31, December 31, 2001 2000 ------------- ---------------- Assets Current assets: Cash and cash equivalents $ 7,524 $ 18,850 Accounts receivable, less allowance for doubtful accounts of $620 and $972 35,521 45,904 Inventories 19,558 21,250 Prepaid expenses and other current assets 7,882 6,720 ------------- ---------------- Total current assets 70,485 92,724 Property and equipment, net 336,023 334,733 Other assets 40,636 41,788 ------------- ---------------- Total assets $447,144 $469,245 ------------- ---------------- Liabilities and Stockholders' Equity Current liabilities: Bank borrowings $ 20,000 $ 7,800 Accounts payable 36,083 54,663 Accrued expenses and other liabilities 38,171 43,899 Current portion of long-term debt 9,800 6,800 ------------- ---------------- Total current liabilities 104,054 113,162 Long-term debt, less current portion 280,200 283,400 Other long-term liabilities 5,475 6,986 ------------- ---------------- Total liabilities 389,729 403,548 ------------- ---------------- Stockholders' equity Common stock, Class A, par value $0.01 per share; 250,000,000 shares authorized, 68,645,000 and 68,438,000 shares issued and outstanding at March 31, 2001 and December 31, 2000 687 685 Common stock, Class B, par value $0.01 per share; 250,000,000 shares authorized, no shares issued or outstanding at March 31, 2001 and December 31, 2000 - - Additional paid in capital 106,892 105,759 Receivable from stockholders (1,255) (1,505) Accumulated deficit (58,078) (48,411) Accumulated other comprehensive income 9,169 9,169 ------------- ---------------- Total stockholders' equity 57,415 65,697 ------------- ---------------- Total liabilities and stockholders' equity $447,144 $469,245 ------------- ----------------
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc Condensed Consolidated Statements of Operations (In thousands, except for share and per share amounts) (Unaudited)
Three Months Ended March 31, March 31, 2001 2000 ------------------ ------------------- Revenue $ 89,859 $ 97,469 Cost of revenue 78,138 77,044 ------------------ ------------------- Gross profit 11,721 20,425 Operating expenses: Selling, general and administrative 12,244 7,099 Research and development 3,513 2,631 ------------------ ------------------- 15,757 9,730 ------------------ ------------------- Operating income (loss) (4,036) 10,695 Non-operating (income) expense: Interest expense 8,832 8,764 Interest income (148) (238) Foreign currency gains (441) (399) Other income, net (196) (134) ------------------ ------------------- Non-operating expense 8,047 7,993 ------------------ ------------------- Income (loss) before income taxes (12,083) 2,702 Provision for (benefit from) income taxes (2,416) 542 ------------------ ------------------- Net income (loss) (9,667) 2,160 ------------------ ------------------- Accretion of dividends on mandatorily redeemable preferred stock - (2,559) Accretion of recorded value of the Intel warrant - (156) ------------------ ------------------- Net loss available to common stockholders $ (9,667) $ (555) ------------------ ------------------- Net loss per share available to common stockholders Basic $ (0.14) $ (0.01) Diluted $ (0.14) $ (0.01) Weighted average shares used in per share calculation: Basic 68,588 57,502 Diluted 68,588 57,502
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Three Months Ended March 31, 2001 2000 -------------------- ------------------ Cash flows from operating activities: Net income (loss) $ (9,667) $ 2,160 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 14,037 8,515 Debt issue amortization 465 376 Foreign currency gains (441) (399) (Gain) loss on sale of equipment 75 (132) Changes in assets and liabilities: Accounts receivable 10,383 6,461 Inventories 1,691 2,196 Prepaid expenses and other assets (3,249) (4,338) Other assets (3,245) - Accounts payable (18,580) (16,989) Accrued expenses and other current liabilities (6,574) (8,652) Other long-term liabilities (227) 1,020 -------------------- ------------------- Net cash used in operating activities (15,332) (9,782) -------------------- ------------------- Cash flows used in investing activities: Acquisition of property and equipment (9,443) (11,042) Proceeds from sale of equipment 61 154 -------------------- ------------------- Net cash used in investing activities (9,382) (10,888) -------------------- ------------------- Cash flows provided by financing activities: Advances (to) from affiliates 250 (350) Net Proceeds from short-term loans 12,200 7,500 Repayment of long-term debt (200) - Net proceeds from common stock issuance 1,138 599 -------------------- ------------------- Net cash provided by financing activities 13,388 7,749 -------------------- ------------------- Effect on cash from changes in exchange rates - 342 Net decrease in cash (11,326) (12,579) Cash and cash equivalents at beginning of period 18,850 32,117 -------------------- ------------------- Cash and cash equivalents at end of period $ 7,524 $ 19,538 ==================== ===================
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended March 31, 2001 (Unaudited) Note 1: Interim Statements In the opinion of management of ChipPAC, Inc. ("ChipPAC" or the "Company"), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial information included therein. This financial data should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2000 included in ChipPAC's 2000 Annual Report. The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for any other period or the fiscal year which ends on December 31, 2001. Basis of Presentation Prior to August 5, 1999, the Company represented the combination of four business units of Hyundai Electronics Industries Co., Ltd. (currently Hynix Semiconductor, Inc.) ("HEI"), which operated collectively as HEI's worldwide packaging and testing operations. These four business units historically consisted of the Assembly and Test Division of HEI, Hyundai Electronics Co. (Shanghai) Ltd. ("HECS"), and the Assembly and Test Division of Hyundai Electronics America ("HEA"), a majority owned subsidiary of HEI. Sales and marketing services were primarily performed by the Assembly and Test Division of HEA, and packaging and testing services were performed by HECS and the Assembly and Test Division of HEI. Also included was ChipPAC,Inc. (CPI), which was owned by HEA. On August 5, 1999, affiliates of Bain Capital, Inc. and SXI Group LLC, a portfolio concern of Citicorp Venture Capital Ltd., which we refer to collectively as the "Equity Investors", and management acquired a controlling interest in the Company from Hyundai Electronics and Hyundai Electronics America, through a series of transactions, including a merger into ChipPAC, Inc. of a special purpose corporation organized by the Equity Investors. The merger was structured to be accounted for as a recapitalization. The financial statements for the periods subsequent to the recapitalization have been prepared on a consolidated basis. The consolidated financial statements include the accounts of ChipPac, Inc. and its majority controlled and owned subsidiaries. All significant intercompany balances have been eliminated on consolidation. Note 2: Recent Accounting Pronouncements In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133." SFAS 137 amends Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," to defer its effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments including standalone instruments, such as forward currency exchange contracts and interest rate swaps or embedded derivatives and requires that these instruments be marked-to-market on an ongoing basis. These market value adjustments are to be included either in the income statement or stockholders' equity, depending on the nature of the transaction. The Company was required to adopt SFAS 133 in the first quarter of its fiscal year 2001 and the impact of SFAS 133 had no material effect on its financial opinion or results of operations. Note 3: Selected Balance Sheet Accounts The components of inventories are as follows (in thousands):
March 31, December 31, 2001 2000 ------- ------- Raw materials .......................... $14,726 $16,935 Work in process ........................ 3,085 2,935 Finished goods ......................... 1,747 1,380 ------- ------- $19,558 $21,250 ======= =======
Accrued expenses and other liabilities are comprised of the following (in thousands):
March 31, December 31, 2001 2000 ------- ------- Payroll and related items .................... $14,914 $12,556 Interest payable ............................. 5,814 8,768 Customer rebate .............................. 15 3,613 Deferred taxes ............................... 4,142 4,142 Streamlining and restructuring reserve ....... 2,184 - Warranty and other expenses .................. 11,102 14,820 ------- ------- $38,171 $43,899 ======= =======
A total of $3.0 million has been recorded as a result of the streamlining and restructuring activities, of which $0.8 million has been paid as of March 31, 2001, leaving a reserve of $2.2 million for actions planned for the remainder of the year 2001. Two hundred employees will be terminated for an estimated cost of $1.3 million, and employees will be furloughed for an estimated cost of $0.9 million. Note 4: Proforma Disclosure Relating to the Acquisition of Malaysian Business: The results of operations of the Malaysian business have been included with those of the Company for periods subsequent to the date of acquisition. Set forth below is the unaudited pro forma combined summary of operations of the Company for the three months ended March 31, 2000, (in thousands, except for per share amounts).
March 31, 2000 -------------------- Net sales $120,392 Net income 2,820 Basic and diluted earnings per share $ 0.05 Shares used in per share calculation: Basic 57,502 ------ Diluted 60,056 ------
Note 5: Earnings per share Statement of Accounting Standards No. 128 ("SFAS 128") requires a reconciliation of the numerators and denominators of the basic and diluted per share computations. Basic earnings per share ("EPS") is computed by dividing net income available to stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS is computed using the weighted average number of common and all potentially dilutive common shares outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and the if-converted method is used for determining the number of shares assumed issued from the conversion of convertible securities. Following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented below. Three months ended March 31, 2001 and 2000:
March 31, 2001 March 31, 2000 ------------------------------ -------------------- Net Loss Net Loss Available to Per-Share Available to Per-Share Common Stockholders Shares Amount Common Stockholders Shares Amount ------------------- -------- -------- ------------------- -------- --------- (In thousands, except per share amounts) Basic EPS: $(9,667) 68,588 $(0.14) $(555) 57,502 $(0.01) Diluted EPS $(9,667) 68,588 $(0.14) $(555) 57,502 $(0.01)
All stock options were excluded from diluted earning per share since their effect would be antidilutive. At March 31, 2001 and 2000, stock options outstanding were 5,099,835 and 1,207,732, respectively. Note 6: Supplemental Condensed Consolidating Financial Statements of Guarantor/Non-Guarantor Entities In connection with the recapitalization, ChipPAC International Company Limited, (CP Int'l), issued senior subordinated debt securities which are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by the parent company, ChipPAC, Inc. ("CPI") and by ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Korea Company Limited ("CPK"), ChipPAC Malaysia Sdn. Bhd. ("CPM"), ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company (the "Guarantor Subsidiaries"). All guarantor subsidiaries are wholly-owned direct or indirect subsidiaries of ChipPAC, Inc. ChipPAC Shanghai Limited ("CPS") and ChipPAC Electronic Technology Ltd. ("CETS") (collectively the Chinese entities), will not provide guarantees (the "Non-Guarantor Subsidiaries"). The following is consolidated and combining financial information for CP Int'l, CPI, and CPK, CPS, CETS, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company, segregated between the Guarantor and Non-Guarantor Subsidiaries. ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L. and ChipPAC Liquidity Management Hungary Limited Liability Company were formed by Hyundai in 1999, CPM was acquired in 2000, these entities have no historical operating results or balances for the year ended December 31, 1998. As a result, it is not possible to include these entities in the supplemental financial statements for these periods. Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented herein because management has determined that they are not material to investors. Financial information for ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L. and ChipPAC Liquidity Management have not been presented as these entities have no historical financial results and future transactions will primarily consist of inter-company transactions. The following HECS financial statements in the condensed combining financial statements include the accounts of CATS. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Guarantor --------- -------- Other --------- CPI CP Int'l Guarantors CPS Eliminations Consolidated --------- -------- ---------- --------- ------------ ------------ Assets Current assets: Cash and cash equivalents 815 26 3,635 3,048 -- 7,524 Intercompany accounts receivable 12,341 21,268 26,978 10,906 (71,493) -- Accounts receivable from customers 31 -- 35,490 -- -- 35,521 Inventory -- -- 15,862 3,696 -- 19,558 Prepaid expenses and other current assets 397 -- 6,665 820 -- 7,882 -------- -------- -------- -------- --------- -------- Total current assets 13,584 21,294 88,630 18,470 (71,493) 70,485 Property, and equipment, net 2,165 -- 238,082 95,776 -- 336,023 Intercompany loans receivable -- 323,500 -- -- (323,500) -- Investment in subsidiaries 179,132 35,178 -- -- (214,310) -- Other assets 3,555 11,209 25,489 383 -- 40,636 -------- -------- -------- -------- --------- -------- Total assets 198,436 391,181 352,201 114,629 (609,303) 447,144 -------- -------- -------- -------- --------- -------- Liabilities and Stockholders' Equity Current liabilities: Intercompany accounts payable -- 2,488 40,546 28,459 (71,493) -- Bank borrowings -- 20,000 -- -- -- 20,000 Accounts payable 2,734 -- 25,243 8,106 -- 36,083 Accrued expenses and other liabilities 6,582 5,829 19,898 5,862 -- 38,171 Current portion of long-term debt -- 9,800 -- -- -- 9,800 -------- -------- -------- ------- --------- -------- Total current liabilities 9,316 38,117 85,687 42,427 (71,493) 104,054 Long-term debt, less current portion -- 280,200 -- -- -- 280,200 Intercompany loans payable -- -- 289,500 34,000 (323,500) -- Other long-term liabilities -- -- 5,475 -- -- 5,475 -------- -------- -------- ------- --------- -------- Total liabilities 9,316 318,317 380,662 76,427 (394,993) 389,729 Stockholders' equity: Common stock 687 -- -- -- -- 687 Additional paid in capital 106,892 -- -- -- -- 106,892 Receivable from stockholder (1,255) -- -- -- -- (1,255) Accumulated earning (deficit) 82,796 72,864 (37,166) 37,738 (214,310) (58,078) Accumulated other comprehensive income -- -- 8,705 464 -- 9,169 -------- -------- -------- ------- --------- -------- Total stockholders' equity 189,120 72,864 (28,461) 38,202 (214,310) 57,415 Total liabilities and stockholders' equity 198,436 391,181 352,201 114,629 (608,303) 447,144 -------- -------- -------- ------- --------- --------
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Guarantor --------- -------- Other --------- CPI CP Int'l Guarantors CPS Eliminations Consolidated --------- -------- ---------- --------- ------------ ------------ Revenue: Intercompany revenue 7,408 -- -- 13,783 (21,191) -- Customer revenue -- 89,859 -- -- 89,859 ------- ------- -------- ------ -------- ------- Revenue 7,408 -- 89,859 13,783 (21,191) 89,859 Cost of revenue -- -- 78,954 12,968 (13,783) 78,139 ------- ------- -------- ------ -------- ------- Gross profit 7,408 -- 10,905 815 (7,408) 11,720 Operating expenses: Selling, general & administrative 5,893 -- 12,683 1,075 (7,408) 12,243 Research & development 1,271 -- 2,242 -- -- 3,513 ------- ------- --------- ------ -------- ------- 7,164 -- 14,925 1,075 (7,048) 15,756 ------- ------- --------- ------ -------- ------- Operating income (loss) 244 -- (4,021) (260) -- (4,036) Non-operating Income (expense): Interest income 12 7,604 100 62 (7,630) 148 Interest expense -- (8,829) (6,797) (860) 7,654 (8,832) Income (loss) from investment in subsidiaries (9,851) 956 -- -- 8,895 -- Other income (expense), net (8) -- 559 115 (29) 637 ------- ------- -------- ------ -------- ------- Non-operating income (expense) (9,847) (269) (6,138) (683) 8,890 (8,047) ------- ------- -------- ------ -------- ------- Income (loss) before income taxes and extraordinary item (9,603) (269) (10,159) (943) 8,890 (12,083) Provision for (benefit from) income taxes 64 81 (2,561) -- -- (2,416) ------- ------- -------- ------ -------- ------- Net Income (loss) (9,667) (350) (7,598) (943) 8,890 (9,667) ------- ------- -------- ------ -------- -------
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Guarantor --------- --------- Other --------- CPI CP Int'l Guarantors China Eliminations Consolidated --------- --------- ---------- --------- ------------ ------------ Cash flows from operating activities: Net income (loss) $ (9,667) (350) $ (7,597) $ (943) $ 8,890 (9,667) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 492 -- 11,376 2,169 -- 14,037 Debt issue amortization -- 465 -- -- -- 465 Foreign currency (gains) losses -- -- (441) -- -- (441) (Gain) loss on sale of equipment -- -- 75 -- -- 75 Changes in assets and liabilities: Intercompany accounts receivable (2,316) (7,996) (30,424) (2,602) 43,338 -- Accounts receivable 14 -- 10,349 20 -- 10,383 Inventories -- -- 2,009 (318) -- (1,691) Prepaid expenses and other current assets 10 -- (5,437) 2,178 -- (3,249) Other long-term assets (233) -- (2,805) (207) -- (3,245) Intercompany accounts payable -- 2,489 38,385 2,459 (43,333) -- Accounts payable 1,725 -- (22,010) 1,705 -- (18,580) Accrued expenses and other current liabilities 237 (2,952) (4,335) 476 -- (6,574) Other long-term liabilities -- -- (227) -- -- (227) ------- ------- ------- ------ ------- ------- Net cash provided (used in) operating activities (9,738) (8,344) (11,082) 4,937 8,895 (15,332) ------- ------- ------- ------ ------- ------- Cash flows used in investing activities: Acquisition of property and equipment (867) -- (2,628) (5,948) -- (9,443) Proceeds from sale of equipment -- -- 61 -- -- 61 Investment in subsidiaries 9,851 (956) -- -- (8,895) -- ------- ------- ------- ------ ------- ------- Net cash used in investing activities 8,984 (956) (2,567) (5,948) (8,896) (9,382) ------- ------- ------- ------ ------- ------- Cash flows provided by financing activities: Advances (to) from affiliates 250 -- -- -- -- 250 Net Proceeds from short-term losses 12,200 -- -- -- 12,200 Repayment of long-term debt and capital losses -- (200) -- -- -- (200) Net proceeds from common stock issuance. 1,138 -- -- -- -- 1,138 Contributions to (withdrawals from) paid in capital -- -- -- -- -- -- ------- ------- ------- ------ ------- ------- Net cash provided by (used in) financing activities 1,388 12,000 -- -- -- 13,338 ------- ------- ------- ------ ------- ------- Net increase (decrease) in cash 634 2,700 (13,649) (1,011) -- (11,326) Cash and cash equivalents at beginning of year 181 (2,674) 17,284 4,059 -- 18,850 ------- ------- ------- ------ ------- ------- Cash and cash equivalents at end of year $ 815 $ 26 $ 3,635 $3,048 $ -- $7,524 ======= ======= ======= ====== ======= =======
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS December 31, 2000 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor CPI CP Int'l Guarantors China ----------- ---------- ----------- --------- Assets Current assets: Cash and cash equivalents $ 181 $ (2,674) $ 17,284 $ 4,059 Intercompany accounts receivable 8,062 13,275 -- -- Accounts receivable 45 -- 45,839 20 Inventory -- -- 17,872 3,378 Prepaid Expenses and other current assets 407 -- 3,315 2,998 --------- -------- ---------- --------- Total current assets 8,695 10,601 84,310 10,455 Property and Equipment, net 3,752 -- 239,002 91,979 Intercompany loans receivable -- 323,500 -- -- Investment in subsidiaries 188,987 34,222 -- -- Other Assets 3,322 11,673 26,617 176 --------- -------- ---------- --------- Total assets $ 204,756 $379,996 $ 349,929 $ 102,610 ========= ======== ========== ========= Liabilities and Equity (Deficit) Current liabilities: Intercompany accounts payable $ -- $ -- $ 2,161 $ 19,176 Accounts payable 1,009 -- 47,253 6,401 Accrued expense and other Liabilities 6,345 8,782 23,386 5,386 Short-term debt -- 7,800 -- -- Current portion of long-term debt -- 6,800 -- -- --------- -------- ---------- --------- Total current liabilities 7,354 23,382 72,800 30,963 Long-term debt, less current portion -- 283,400 -- -- Intercompany loans payable -- -- 289,500 34,000 Other long term liabilities -- -- 6,986 -- --------- -------- ---------- --------- Total liabilities 7,354 306,782 369,286 64,963 ========= ======== ========== ========= Stockholders' equity (deficit): Common Stock 685 -- -- -- Warrants 1,250 -- -- -- Additional Paid in Capital 104,509 -- -- -- Receivable from stockholders (1,505) -- -- -- Currency translation gain (loss) -- -- 8,704 465 Accumulated Earning (deficit) 92,463 73,214 (28,061) 37,182 --------- -------- ---------- --------- Stockholders' equity (deficit) 197,402 73,214 (19,357) 37,647 ========= ======== ========== ========= Total liabilities and stockholders' equity (deficit) $ 204,756 $379,996 $ 349,929 $ 102,610 ========= ======== ========== ========= Eliminations Consolidated ------------ ------------ Assets Current assets: Cash and marketable securities $ -- $ 18,850 Intercompany accounts receivable (21,337) -- Accounts receivable from Customers -- 45,904 Inventory -- 21,250 Prepaid Expenses & other current assets -- 6,720 --------- -------- Total current assets (21,337) 92,724 Plant, Property & Equipment , net -- 334,733 Intercompany loans receivable (323,500) -- Investment in subsidiaries (223,209) -- Other Assets -- 41,788 --------- -------- Total assets $(568,046) $469,245 ========= ======== Liabilities and Equity Current liabilities: Intercompany accounts payable $ (21,337) $ -- Bank borrowings -- 7,800 Accounts payable -- 54,663 Accrued expense and other Liabilities -- 43,899 Current portion of long-term debt -- 6,800 --------- -------- Total current liabilities (21,337) 113,162 Long-term debt, less current portion -- 283,400 Intercompany loans payable (323,500) -- Other long term liabilities -- 6,986 --------- -------- Total liabilities (344,837) 403,548 ========= ======== Stockholders' equity: Common Stock -- 685 Warrants -- 1,250 Additional Paid in Capital -- 104,509 Receivable from stockholders -- (1,505) Currency translation gain (loss) -- 9,169 Accumulated Earning (deficit) (223,209) (48,411) --------- -------- Stockholders' equity (deficit) (223,209) 65,697 ========= ======== Total liabilities and stockholders' equity (deficit) $(568,046) $469,245 ========= ========
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 2000 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Guarantor --------- -------- Other --------- CPI CP Int'l Guarantors CPS Eliminations Consolidated --------- -------- ---------- --------- ------------ ------------ Revenue: Intercompany revenue.. $ 7,263 -- $ 1 $8,306 $(15,570) -- Customer revenue...... 376 -- 97,090 3 -- $97,469 -------- ------- -------- ------ -------- ------- Revenue............... 7,639 -- 97,091 8,309 (15,570) 97,469 Cost of revenue......... 123 -- 77,663 7,565 (8,307) 77,044 -------- ------- -------- ------ -------- ------- Gross profit............ 7,516 -- 19,428 744 (7,263) 20,425 Operating expenses: Selling, general & administrative....... 5,390 $ 8 8,964 -- (7,263) 7,099 Research & development.......... 1,242 -- 1,389 -- -- 2,631 -------- ------- -------- ------ -------- ------- Total operating expenses............. 6,632 8 10,353 -- (7,263) 9,730 -------- ------- -------- ------ -------- ------- Operating income........ 884 (8) 9,075 744 -- 10,695 Non-operating Income (Expense): Interest income....... (10,373) 7,762 8,079 20 (5,250) 238 Interest expense...... 10,383 (8,757) (14,780) (860) 5,250 (8,764) Foreign currency gains (losses)............. -- -- 406 (7) -- 399 Income (loss) from investment in subsidiaries......... (461) 892 4,224 -- (4,655) -- Other income (expenses), net...... (2) -- 114 22 -- 134 -------- ------- -------- ------ -------- ------- Non-operating income (expenses)........... (453) (103) (1,957) (825) (4,655) (7,993) -------- ------- -------- ------ -------- ------- Income (loss) before income taxes........... 431 (111) 7,118 (81) (4,655) 2,702 Provision for (benefit from) income taxes..... (194) 81 2,190 -- (1,923) 542 -------- ------- -------- ------ -------- ------- Income before extraordinary item..... 237 (192) 4,928 (81) (2,732) 2,160 Extraordinary item: Loss from early extinguishment of debt, net of related income tax benefit... -- -- -- -- -- -- -------- ------- -------- ------ -------- ------- Net Income (loss)....... $ 237 $ (192) $ 4,928 $ (81) $ (2,732) $ 2,160 ======== ======= ======== ====== ======== =======
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2000 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Guarantor --------- -------- Other --------- CPI CP Int'l Guarantors CPS Eliminations Consolidated --------- -------- ---------- --------- ------------ ------------ Cash flows from operating activities: Net Income............. $ 237 $ (192) $ 4,928 $ (81) $(2,732) $ 2,160 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization......... 450 -- 6,374 1,691 -- 8,515 Debt issuance amortization.......... -- 376 -- -- -- 376 Foreign currency (gains) losses....... -- -- (399) -- -- (399) (Gain) loss on external sales of equipment............ -- -- (132) -- -- (132) Equity income from investment in subsidiaries......... 461 (892) (4,224) -- 4,655 -- Changes in assets and liabilities: Intercompany accounts receivable........... 2,091 (3,056) 7,863 663 (7,561) -- Accounts receivable... (7) -- 6,470 (2) -- 6,461 Inventories........... -- -- 4,356 (2,160) -- 2,196 Prepaid expenses and other assets......... (376) 58 (4,108) 88 -- (4,338) Intercompany accounts payable.............. 858 -- (3,331) (5,088) 7,561 -- Accounts payable...... (382) -- (18,388) 1,781 -- (16,989) Accrued expenses & other liabilities.... (559) (5,697) (1,289) 816 (1,923) (8,652) Other long-term liabilities.......... -- -- 1,020 -- -- 1,020 ------- ------- ------- ------ ------- ------- Net cash provided by operating activities........... 2,773 (9,403) (860) (2,292) -- (9,782) ------- ------- ------- ------ ------- ------- Cash flows used in investing activities: Acquisition of property and equipment............ (1,061) -- (7,383) (2,598) -- (11,042) Proceeds, external equipment sales...... -- -- (48) 202 -- 154 Investment in subsidiaries......... (438) -- (3,000) -- 3,438 -- ------- ------- ------- ------ ------- ------- Net cash used in investing activities........... (1,499) -- (10,431) (2,396) 3,438 (10,888) ------- ------- ------- ------ ------- ------- Cash flows provided by financing activities: Loans & advances with affiliates........... (350) -- -- -- -- (350) Net proceeds from short- term loans........... -- 7,500 -- -- -- 7,500 Net proceeds from long-term loans...... -- (502) 502 -- -- -- Intercompany capital contributions........ -- 354 84 -- (438) -- Net proceeds from common stock issuance............. 599 -- -- -- (599) -- Net proceeds from sale of stock to management........... -- -- -- -- 599 599 Contributions (withdrawals) of capital.............. -- -- -- 3,000 (3,000) -- ------- ------- ------- ------ ------- ------- Net cash provided by financing activities........... 249 7,352 586 3,000 (3,438) 7,749 ------- ------- ------- ------ ------- ------- Effect from changes in exchange rates......... -- -- 337 5 -- 342 ------- ------- ------- ------ ------- ------- Net increase (decrease) in cash................ 1,523 (2,051) (10,368) (1,683) -- (12,579) Cash and equivalents at beginning of period.... 1,007 3,474 22,273 5,363 -- 32,117 ------- ------- ------- ------ ------- ------- Cash and equivalents at end of period.......... $ 2,530 $ 1,423 $11,905 $3,680 $ -- $19,538 ======= ======= ======= ====== ======= =======
The accompanying notes are an integral part of these financial statements. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations All references are to ChipPAC's fiscal quarter ended March 31, 2001 and March 31, 2000, unless otherwise indicated. This quarterly report on Form 10-Q contains forward-looking statements, including, without limitation, statements concerning the conditions in the semiconductor and semiconductor capital equipment industries, our operations, economic performance and financial condition, including in particular statements relating to our business and growth strategy, sales of new products and services, cost-cutting measures and product development efforts. The words "believe," "expect," "anticipate," "intend" and other similar expressions generally identify forward-looking statements. Potential investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties, including, without limitation, those identified in Exhibit 99.1 filed with our annual report on Form 10-K for the period ended December 31, 2000 and other risks and uncertainties indicated from time to time in our filings with the SEC. Actual results could differ materially from these forward-looking statements. We have experienced and expect to continue to experience significant fluctuations in our quarterly results of operations. Our expense levels are based, in part, on expectations of future revenues. If revenue levels in a particular quarter do not meet expectations, operating results are adversely affected. A variety of factors could have an influence on the level of our revenues in a particular quarter. These factors include the cyclical nature of the semiconductor industry, the risk that factors which allowed us to experience relatively good performance in industry downturns may not protect us in future downturns, the timing of the receipt of orders from major customers, customer cancellations or delay of shipments, specific feature requests by customers, production delays or manufacturing inefficiencies, exchange rate fluctuations, management decisions to commence or discontinue product lines, our ability to design, introduce and manufacture new products on a cost effective and timely basis, the introduction of new products by ourselves or our competitors, the timing of research and development expenditures, and expenses attendant to acquisitions, strategic alliances and the future development of marketing and service capabilities. In light of these risks and uncertainties, there can be no assurance that the matters referred to in the forward-looking statements contained in this quarterly report will in fact occur. Results of Operations Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000: Revenue: Net revenues in the three months ended March 31, 2001 decreased 7.8% to $89.9 million from $97.5 million in the three months ended March 31, 2000. Increases in power packaging were offset by large decreases in our computing and communications end markets. The decreases appear to be end market demand driven and were caused by a drop in demand and excess inventories held by our customers and their end users. Gross Profit: Gross profit was $11.7 million for the three months ended March 31, 2001 compared to $20.4 million for the same period in 2000. The majority of the decrease was caused by soft demand leading to lower capacity utilization and lower average selling prices in the three months ended March 31, 2001 compared to the same period in 2000. Capacity utilization was approximately 50% and 75% for the three month periods ended March 31 2001 and 2000, respectively. Although reductions in work force, furloughs, and other cost saving methods were implemented in the three months ended March 31, 2001, they were not sufficient to offset the decline in revenue and our labor expenses were less efficient in the three months ended March 31, 2001 compared to the same period in 2000. Gross profit also was reduced by approximately $0.5 million in the three months ended March 31, 2001 as a result of a lower of cost or market charge for certain raw materials. There was no similar charge in the same period in 2000. Selling, General, and Administrative: Selling, general, and administrative expenses increased 72.5% to $12.2 million in the three months ended March 31, 2001 compared to the same period in 2000. Two items primarily caused this increase. The first was approximately $3.0 million in one time reduction-in- force and furlough costs that occurred in the three months ended March 31, 2001 or are anticipated to occur later in 2001. There were no comparable costs in the same period in 2000. In addition, in the second half of 2000 we hired new personnel at the management level to accommodate both our expanded operations and our transition to a public company. As a result, we incurred additional expenses associated with hiring in the areas of administration, sales, and marketing. This level of expense did not occur in the quarter ended March 31, 2000. Research and Development: Research and development expenses increased 33.5% to $3.5 million in the three months ended March 31, 2001 compared to $2.6 million in the three months ended March 31, 2000. This increase is mainly due to expenses for the development of the power packaging technology and process that did not occur in the same period in 2000. Interest and Other Income/Expense: Interest and other income/expense for the three months ended March 31, 2001 and 2000 was $8.0 million for both periods. Income Taxes: Income tax expense (benefit) for the quarters ended March 31, 2001 and 2000, was approximately ($2.4) million and $0.5 million, respectively, for an effective tax rate of 20% for both periods. Concurrently with our recapitalization on August 5, 1999, the company was reorganized and as a result now has operations and earnings in jurisdictions with relatively low income tax rates, or where we enjoy tax holidays or other similar tax benefits. Income tax expense (benefits) are recorded to the extent management believes they will be usable in the future. Accretion of Dividends on mandatorily redeemable preferred stock and Recorded Value of the Intel Warrant: Accretion of dividends on mandatorily redeemable preferred stock and the recorded value of Intel Corporation's warrant to purchase our common stock decreased 100% in the three months ended March 31, 2001 compared to $2.7 million in the three months ended March 31, 2000. All of the mandatorily redeemable preferred stock was redeemed or converted to non-dividend bearing common stock in connection with our initial public offering of stock in August 2000. Intel's warrant to purchase our common stock expired without being exercised on February 8, 2001. Net Loss Available to Common Stockholders: As a result of the items above, net loss available to common stockholders increased 1,642% to $9.7 million in the three months ended March 31, 2001 compared to a loss of $0.5 million for the three months ended March 31, 2000. Liquidity and Capital Resources At March 31, 2001 we continue to have a borrowing capacity of $50.0 million for working capital and general corporate purposes under the revolving credit line portion of our senior credit facilities. In connection with our June 30, 2000 acquisition of Intersil Corporation's Malaysian business, we obtained the ability to increase our revolving credit line by $25.0 million without further consent from our existing lenders. This additional capacity has not been activated. In addition, borrowings of up to $20.0 million are available for acquiring equipment and making other specified capital expenditures under the capital expenditure line of our senior credit facilities. We may borrow and repay under the capital expenditure line until August 5, 2001. Amounts that we repay under the capital expenditure line after August 5, 2001 will not be available to us as future credit facilities. The final maturity for both these facilities is August 5, 2005. Our ongoing primary cash needs are for operations and equipment purchases. As of March 31, 2001, we had borrowings of $20.0 million on our revolving line of credit. We have spent $9.4 million on capital expenditures during the three months ended March 31, 2001. We spent $11.0 million in capital expenditures during the three months ended March 31, 2000. Under the terms of the agreement relating to our acquisition of the Malaysian business, during the period from June 1, 2000 to June 30, 2003, Intersil will be entitled to receive additional contingent incentive payments based upon the achievement of milestones relating to the transfer of business currently subcontracted by Intersil to a third party. In the event that Intersil were to achieve all the milestones, we would pay Intersil an additional sum of approximately $17.9 million in the aggregate. As of March 31, 2001 we have paid Intersil $1.7 million and accrued $1.5 million of payments under this arrangement. As of March 31, 2001, our debt consisted of $310.0 million of borrowings, which was comprised of $20.0 million of revolving loans, $140.0 million in term loans and $150.0 million of senior subordinated notes. Our debt instruments require that we meet specified financial tests, including, without limitation, a maximum leverage ratio, a minimum interest coverage ratio and minimum fixed charge coverage ratio. These debt instruments also contain covenants restricting our operations. There were no violations of these covenants through March 31, 2001. The weakness in demand expected in 2001 for packaging and test services has and is expected to continue to adversely affect our cash flow from operations. We believe that our existing cash balances, cash flows from operations, available equipment lease financing, available borrowings under our senior credit facilities and the net proceeds from the completed initial public offering and the concurrent private placement will be sufficient to meet our projected capital expenditures, working capital and other cash requirements for the next twelve months. In addition, at present, our customers have much lower than normal visibility into the future. Financial covenants contained in agreements relating to our existing and future debt may not be met, resulting in a default in the event our results of operations do not meet our plans. An event of default under any debt instrument, if not cured or waived, could have a material adverse effect on us. We may require capital sooner than currently expected. We cannot assure you that additional financing will be available when we need it or, if available, that it will be available on satisfactory terms. In addition, the terms of our secured bank facility, senior notes and senior subordinated notes significantly reduce our ability to incur additional debt. Failure to obtain any such required additional financing could have a material adverse effect on our company. Item 3: Quantitative and Qualitative Disclosure about Market Risk We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates. We have no derivative financial instruments. We have long-term debt that carries fixed and variable interest rates. A fluctuation in interest rates of 1% would increase our annual interest charge by approximately $1.6 million. The exposure to foreign currency gains and losses has been significantly mitigated by two related factors. First, we negotiated with the large majority of our material and equipment suppliers to denominate purchase transactions in the U.S. Dollars. Second, on October 1, 1999, we changed our functional currency to the U.S. Dollar from the local currencies of the Korean and Chinese subsidiaries. Factors Affecting Future Results For a statement of the factors which may affect our future results, we refer you to the Risk Factors in Exhibit 99.1, filed with our annual report on Form 10-K for the year ended December 31, 2000. PART II. OTHER INFORMATION Item 1. Legal Proceedings We are not involved in any legal proceedings, the outcome of which we believe would have a material adverse effect on our business, financial condition or results of operations. From time to time, however, we are involved in claims that arise in the ordinary course of business, and we maintain insurance that we believe to be adequate to cover these claims. Item 2. Changes in Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders ChipPAC held a special meeting of its stockholders on March 16, 2001. At this meeting the stockholders voted on three proposals related to our 2000 Equity Incentive Plan. At the special meeting our stockholders approved an amendment to our 2000 Equity Incentive Plan to increase the number of shares of common stock that may be issued under the plan from 1,142,963 shares (plus any shares returned to the company as a result of terminated options granted under our 1999 Plan and plus an annual increase of one percent of the company's outstanding shares) to a total of 10,500,000 shares (plus any shares returned to the company as a result of terminated options granted under our 1999 Plan and plus an annual increase of one percent of the company's outstanding shares). Of all shares outstanding, 48,273,875 shares were voted in favor of this proposal, 3,359,229 shares were voted against this proposal, 5,900 shares abstained from voting on this proposal and 8,415,538 shares were broker non-votes. Also at the special meeting our stockholders approved an amendment to our 2000 Equity Incentive Plan to increase the number of shares of common stock that may be issued under the plan to each participant in each fiscal year from 266,691 to 700,000 and to increase the number of shares of common stock that may be issued under the plan to a participant upon the beginning of his or her initial relationship with the company from an additional 266,691 to 700,000. Of all shares outstanding, 50,451,388 shares were voted in favor of this proposal, 1,181,656 shares were voted against this proposal, 6,030 shares abstained from voting on this proposal and 8,415,538 shares were broker non-votes. Finally, our stockholders approved an amendment to our 2000 Equity Incentive Plan to allow a committee consisting of the Chief Executive Officer, the Chief Financial Officer and the General Counsel to administer the 2000 Plan and grant options to purchase less than 30,000 shares of common stock during any twelve-month period to any participant who is not a director, a reporting person under Section 16 of the Securities Exchange Act of 1934 or a member of the company's executive staff reporting directly to the Chief Executive Officer. Of all shares outstanding, 50,829,311 shares were voted in favor of this proposal, 806,308 shares were voted against this proposal, 3,455 shares abstained from voting on this proposal and 8,415,538 shares were broker non-votes. Item 5. Other Information The table on the next page updates certain information disclosed in our Proxy Statement for our 2001 Annual Meeting of Stockholders regarding the beneficial ownership of our Class A common stock as of April 5, 2001 by: . each person or group of affiliated persons who is known by us to beneficially owns five percent or more of our Class A common stock; . each director and each of our Named Executives, (the Chief Executive Officer and each of the four other most highly compensated executive officers of the Company as of the end of fiscal 2000) the, "Named Executives"; and . all directors and executive officers as a group. The table includes the number of shares and percentage ownership represented by the shares determined to be beneficially owned by a person under the rules of the Securities and Exchange Commission. The number of shares beneficially owned by a person includes: (a) shares of Class A common stock that are subject to options held by that person that are currently exercisable within 60 days of April 5, 2001 and (b) shares of Class A common stock that are subject to repurchase but vest within 60 days of April 5, 2001. These shares are deemed outstanding for the purpose of computing the percentage of outstanding shares owned by that person. These shares are not deemed outstanding, however, for the purposes of computing the percentage ownership of any other person. Unless otherwise stated, each of the persons named in the table has sole or shared voting and investment power with respect to the securities beneficially owned. Principal Stockholders Table
Shares Beneficially Owned -------------------------- Percentage Number of of Shares Name and Address Shares Outstanding ---------------- ----------- ----------- Principal Stockholders: Bain Capital Funds(1).............................. 21,387,396 31.2 c/o Bain Capital, Inc. Two Copley Place
Boston, Massachusetts 02116 Citicorp Venture Capital, Ltd (2)................. 18,823,818 27.4 399 Park Avenue New York, NY 10043 Hynex Semiconductor America....................... 4,655,117 6.8 3101 North First Street San Jose, California 95134 Directors and Named Executives: Dennis P. McKenna................................. 575,230 * Robert Krakauer................................... 322,989 * Gregory S. Bronzovic.............................. 88,389 * Robert Bowden..................................... 110,176 * Marcos Karnezos................................... 100,644 * Edward Conard(3).................................. 21,387,396 31.2 Michael A. Delaney(4)............................. 16,232,725 23.6 David Dominik(5).................................. -- -- Marshall Haines(6)................................ 21,387,396 31.2 Joseph Martin(7).................................. 18,784 * Chong Sup Park.................................... 7,715 * Paul C. Schorr, IV(8)............................. 16,000,243 23.3 All directors and executive officers as a group(14 persons)......................................... 38,854,348 56.6
-------- * Less than one percent. (1) Includes: (a) 16,303,749 shares of Class A common stock owned by Bain Capital Fund VI, L.P., whose sole general partner is Bain Capital Partners VI, L.P., whose sole general partner is Bain Capital Investors VI, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (b) 2,181,587 shares of Class A common stock owned by BCIP Associates II, whose managing partner is Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (c) 398,580 shares of Class A common stock owned by BCIP Associates II-B, whose managing partner is Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (d) 757,406 shares of Class A common stock owned by BCIP Trust Associates II, L.P., whose general partner is Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (e) 195,878 shares of Class A common stock owned by BCIP Trust Associates II-B, whose general partner is Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (f) 847,004 shares of Class A common stock owned by BCIP Associates II-C, whose managing partner is Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (g) 54,346 shares of Class A common stock owned by PEP Investments Pty, Ltd., whose controlling persons are Timothy J. Sims, Richard J. Gardell, Simon D. Pillar and Paul J. McCullagh; (h) 465,512 shares of Class A common stock owned by Sankaty High Yield Asset Partners, L.P., whose sole general partner is Sankaty High Yield Asset Investors, LLC, whose managing member is Sankaty High Yield Asset Investors, Ltd., a Bermuda corporation wholly owned by W. Mitt Romney; and (i) 183,334 shares of Class A common stock owned by Bain Capital, L.L.C. (2) The information concerning shares owned is form a Schedule 13G filed February 20, 2001, filed jointly by Citicorp Venture Capital, Ltd., Citibank, N.A., Citicorp, Citigroup Holdings Company, and Citigroup, Inc., which have shared voting and shared dispositive powers as to 18,823,818 shares of Class A common stock. Includes 2,823,573 shares of Class A common stock held by an affiliate of Citicorp Venture Capital, Ltd., for which Citicorp Venture Capital, Ltd., disclaims beneficial ownership. (3) Mr. Conard is a limited partner of Bain Capital Partners VI, L.P., which is the general partner of Bain Capital Fund VI, L.P. In addition, Mr. Conard is a general partner of BCIP Associates II and BCIP Trust Associates II, L.P. In such capacities, Mr. Conard has a pecuniary interest in certain of the shares held by the Bain Capital Funds. Mr. Conard's address is c/o Bain Capital, Inc., Two Copley Place, Boston, Massachusetts 02116. (4) Mr. Delaney is a Managing Director of Citicorp Venture Capital, Ltd. Accordingly, Mr. Delaney may be deemed to beneficially own 16,000,243 of the shares held by Citicorp Venture Capital, Ltd. Mr. Delaney disclaims beneficial ownership of all shares held by Citicorp Venture Capital, Ltd. Mr. Delaney's address is c/o Citicorp Venture Capital, Ltd., 399 Park Avenue, New York, New York 10043. (5) Mr. Dominik is a Managing Director of Golden Gate Capital and a special limited partner of Bain Capital Partners VI, L.P., which is the general partner of Bain Capital Fund VI, L.P. In addition, Mr. Dominik is a general partner of BCIP Associates II and BCIP Trust Associates II, L.P. In such capacities, Mr. Dominik has a pecuniary interest in certain shares held by the Bain Capital Funds. Mr. Dominik's address is One Embarcadero, Suite 3300, San Francisco, California 94111. (6) Mr. Haines is a general partner of BCIP Associates II-B, and BCIP Trust Associates II-B and in such capacity has a pecuniary interest in certain shares held by these funds. Mr. Haines' address is c/o Bain Capital, 600 Montgomery Street, 33rd Floor, San Francisco, California 94111. (7) The shares reported for Mr. Martin are owned by his minor children. Mr. Martin's address is c/o Fairchild Semiconductor Corporation, 82 Running Hill Road, South Portland, Maine 04106. (8) Mr. Schorr is a Managing Director of Citicorp Venture Capital, Ltd. Accordingly, Mr. Schorr may be deemed to beneficially own 16,000,243 of the shares held by Citicorp Venture Capital, Ltd. Mr. Schorr disclaims beneficial ownership of all shares held by Citicorp Venture Capital, Ltd. Mr. Schorr's address is c/o Citicorp Venture Capital, Ltd., 399 Park Avenue, New York, New York 10043. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description 2.1 Amended and Restated Agreement and Plan of Merger of ChipPAC, Inc., a California corporation, and ChipPAC, Inc., a Delaware corporation.** 2.2 Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.* 2.3 First Amendment to Agreement and Plan of Recapitalization and Merger, dated as of June 16, 1999 by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.* 2.4 Second Amendment to Agreement and Plan of Recapitalization and Merger, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.* 3.1 Amended and Restated Certificate of Incorporation of ChipPAC, Inc.** 3.2 Amended and Restated By-Laws of ChipPAC, Inc.** 4.1 Specimen certificate for ChipPAC, Inc. Common Stock.** 10.1 Credit Agreement, dated as of August 5, 1999, by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent.* 10.2 Guaranty, dated as of August 5, 1999, by and among ChipPAC, Inc. and certain subsidiaries of ChipPAC, Inc., in favor of Credit Suisse First Boston.* 10.3 Subsidiary Guaranty Agreement, dated as of August 5, 1999, by and among ChipPAC Korea Company Ltd., ChipPAC Limited, ChipPAC (Barbados) Ltd., ChipPAC Luxembourg S.a.R.L., ChipPAC Liquidity Management Hungary Limited Liability Company and ChipPAC International Company Limited, in favor of Firstar Bank of Minnesota, N.A.* 10.4 Amended and Restated Stockholders Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc. the Hyundai Group (as defined therein), the Bain Group (as defined therein), the SXI Group (as defined therein), Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield Asset Partners, L.P.* 10.5 Amended and Restated Registration Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc., the Hyundai Stockholders (as defined therein), the Bain Stockholders (as defined therein), the SXI Stockholders (as defined therein), Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield Asset Partners, L.P.* 10.5.1 Amendment No. 1 to Amended and Restated Registration Agreement, dated as of June 30, 2000, by and among ChipPAC, Inc., Sapphire Worldwide Investments, Inc., the Bain Stockholders (as defined therein) and SXI Group LLC.** 10.5.2 Form of Amendment No. 2 to Amended and Restated Registration Agreement, dated as of July 13, 2000, by and among ChipPAC, Inc., Qualcomm Incorporated, SXI Group LLC and the Bain Shareholders (as defined therein).** 10.5.3 Form of Amendment No. 3 to Amended and Restated Registration Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc., Bain Capital, Inc., SXI Group LLC and the Bain Shareholders (as defined therein).** 10.6 Transition Services Agreement, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc., ChipPAC Korea Company Ltd., Hyundai Electronics Company (Shanghai) Ltd., ChipPAC Assembly and Test (Shanghai) Company Ltd., ChipPAC Barbados Limited and ChipPAC Limited.* 10.7 Lease Agreement, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.7.1 Amendment Agreement, dated September 30, 1998, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.7.2 Amendment Agreement 2, dated September 30, 1999, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.8 Agreement Concerning Supply of Utilities, Use of Welfare Facilities and Management Services for Real Estate, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.9 Service Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.+* 10.10 Sublease Agreement, dated as of May 1, 1998, by and between Hyundai Electronics America and ChipPAC, Inc.* 10.11 Patent Sublicense Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.* 10.12 TCC License Agreement, dated December 22, 1998, between Tessera Inc., the Tessera Affiliates (as defined therein), ChipPAC, Inc. and the Licensee Affiliates (as defined therein).+* 10.12.1 Letter Agreement, dated July 15, 1999, by and among ChipPAC, Inc., Hyundai Electronics America, ChipPAC Limited and Tessera, Inc.* 10.13 Materials Agreement, dated as of July 1, 1999, by and between ChipPAC Limited and Intel Corporation.+* 10.14 Assembly Services Agreement, dated as of August 5, 1999, by and between Intel Corporation and ChipPAC Limited.+* 10.15 Stock Purchase Agreement, dated as of August 5, 1999, by and between ChipPAC, Inc. and Intel Corporation.* 10.16 Warrant to Purchase Class B Common Stock of ChipPAC, Inc., dated as of August 5, 1999, issued to Intel Corporation.* 10.17 Advisory Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc., ChipPAC Limited, ChipPAC Operating Limited and Bain Capital, Inc.* 10.18 Advisory Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc., ChipPAC Limited, ChipPAC Operating Limited and SXI Group LLC.* 10.19 Employment Agreement, dated as of October 1, 1999, between ChipPAC, Inc. and Dennis McKenna.* 10.20 ChipPAC, Inc. 1999 Stock Purchase and Option Plan.* 10.21 ChipPAC, Inc. 2000 Equity Incentive Plan.** 10.21.1 Amendment No. 1 to the 2000 Equity Incentive Plan. 10.22 ChipPAC, Inc. 2000 Employee Stock Purchase Plan.** 10.23.1 Form of Key Employee Purchased Stock Agreement.* 10.23.2 Form of Key Employee Purchased Stock Agreement (with Loan).* 10.24 Form of Employee Restricted Stock Agreement.* 10.25 Form of Directors Tranche I Stock Option Agreement.* 10.26 Form of Employees Tranche I Stock Option Agreement.* 10.27 Form of Tranche II Stock Option Agreement.* 10.28 Indenture, dated as of July 29, 1999, by and among ChipPAC International Limited, ChipPAC Merger Corp. and Firstar Bank of Minnesota, N.A., as trustee.* 10.29 First Supplemental Indenture, dated as of August 5, 1999, by and among ChipPAC International Company Limited, ChipPAC, Inc. and Firstar Bank of Minnesota, N.A., as trustee.* 10.30 12 3/4% Senior Subordinated Notes Due 2009.* 10.31 Form of Series B 12 3/4% Senior Subordinated Notes Due 2009.* 10.32 Intellectual Property Rights Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.** 10.33 Supply Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.** 10.34 Shareholders Agreement, dated as of June 30, 2000, by and among ChipPAC, Inc., the Bain Group (as defined therein), the SXI Group (as defined therein) and Sapphire Worldwide Investments, Inc.** 10.35 Class A Common Stock Purchase Agreement, dated as of July 13, 2000, by and between ChipPAC, Inc. and Qualcomm Incorporated.** 10.36 Promissory Note, dated as of August 2, 2000 by and between Dennis McKenna and ChipPAC, Inc.** 10.37 Promissory Note, dated as of August 2, 2000, by and between Robert Krakauer and ChipPAC, Inc.** 10.38 Form of Amended and Restated Supplemental Agreement No. 1 to the Advisory Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company Limited and Bain Capital, Inc.** 10.39 Amended and Restated Supplemental Agreement No. 4 to the Advisory Agreement, dated as of August 2, 2000 by and among ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company Limited and SXI Group LLC.** 10.40 Employment letter agreement, dated as of November 15, 1999 between ChipPAC, Inc. and Robert Krakauer.*** 10.41 Employment letter agreement, dated as of March 18, 1998 between ChipPAC, Inc. and Gregory Bronzovic.*** 10.42 Employment letter agreement, dated as of April 16, 1999 between ChipPAC, Inc. and Robert Bowden.*** 10.43 Employment letter agreement, dated as of September 2, 1998 between ChipPAC, Inc. and Marcos Karnezos.*** 99.1 Risk Factors.*** ----------------------- * Incorporated by reference to the Company's Form S-4 (No. 333-91641). ** Incorporated by reference to the Company's Form S-1 (No. 333-39428). *** Incorporated by reference to the Company's annual report on Form 10-K for the period ended December 31, 2000. + Confidential treatment has been granted as to certain portions of these exhibits, which are incorporated by reference. (b) Reports on Form 8-K. None. ------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHIPPAC, INC. (Registrant) /s/ Robert Krakauer ------------------------------------------ ROBERT KRAKAUER (as Registrant and Chief Financial Officer) /s/ Michael G. Potter ------------------------------------------ MICHAEL G. POTTER Controller (as Principle Accounting Officer) May 14, 2001 -------------------------------------------------------------------------------