10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDED JUNE 30, 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 June 30, 2001 OR __ 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) 47400 Kato Road Fremont, California 94538 (Address of Principal Executive Offices) (Zip Code) (510) 979-8000 Registrant's Telephone Number, Including Area Code 3151 Coronado Drive Santa Clara, California 94538 (Former Address) 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 August 9, 2001 -------------------------------------------------------------------------------- Class A common stock, $.01 par value 68,687,063 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....................................... 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 21 Part II -- OTHER INFORMATION Item 1. Legal Proceedings........................................... 21 Item 2. Changes in Securities and Use of Proceeds................... 22 Item 3. Defaults Upon Senior Securities............................. 22 Item 4. Submission of Matters to a Vote of Security Holders......... 22 Item 5. Other Information........................................... 22 Item 6. Exhibits and Reports on Form 8-K............................ 22 Signatures.......................................................... 26 ChipPAC, Inc. Condensed Consolidated Balance Sheets (In thousands, except for share amounts) (Unaudited)
June 30, December 31, 2001 2000 ---------- ------------ Assets Current assets: Cash and cash equivalents $ 13,564 $ 18,850 Accounts receivable, less allowance for doubtful accounts of $534 and $972 44,641 45,904 Inventories 17,292 21,250 Prepaid expenses and other current assets 10,937 6,720 ---------- ------------ Total current assets 86,434 92,724 Property, plant and equipment, net 340,703 334,733 Other non current assets 42,960 41,788 ---------- ------------ Total assets $470,097 $469,245 ---------- ------------ Liabilities and Stockholders' Equity Current liabilities: Bank borrowings $ 10,067 $ 7,800 Accounts payable 36,486 54,663 Accrued expenses and other liabilities 33,924 43,899 Current portion of long-term debt - 6,800 ---------- ------------ Total current liabilities 80,477 113,162 Long-term debt, less current portion 283,627 283,400 Convertible subordinated note 50,000 - Other long-term liabilities 5,819 6,986 ---------- ------------ Total liabilities 419,923 403,548 ---------- ------------ Stockholders' equity Common stock, Class A- par value $0.01 per share; 250,000,000 shares authorized, 68,687,000 and 68,438,000 shares issued and outstanding at June 30, 2001 and December 31, 2000, respectively 687 685 Common stock, Class B- par value $0.01 per share; 250,000,000 shares authorized, no shares issued or outstanding at June 30, 2001 and December 31, 2000 - - Additional paid in capital 107,014 105,759 Receivable from stockholders (1,105) (1,505) Accumulated deficit (65,591) (48,411) Accumulated other comprehensive income 9,169 9,169 ---------- ------------ Total stockholders' equity 50,174 65,697 ---------- ------------ Total liabilities and stockholders' equity $ 470,097 $ 469,245 ---------- ------------
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc Condensed Consolidated Statements of Operations (In thousands, except for per share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Revenue $ 87,373 $ 108,979 $ 177,232 $ 206,448 Cost of revenue 75,913 82,838 154,051 159,882 ---------- ---------- ---------- ---------- Gross profit 11,460 26,141 23,181 46,566 ---------- ---------- ---------- ---------- Operating expenses: Selling, general and administrative 7,480 7,239 19,724 14,338 Research and development 3,837 2,510 7,350 5,141 ---------- ---------- ---------- ---------- 11,317 9,749 27,074 19,479 ---------- ---------- ---------- ---------- Operating income (loss) 143 16,392 (3,893) 27,087 Non-operating (income) expenses: Interest expense 9,456 10,600 18,288 19,364 Interest income (74) (147) (222) (385) Foreign currency (gains) losses 186 (575) (255) (974) Other (income) expenses, net (33) (524) (229) (658) ---------- ---------- ---------- ---------- Non-operating expenses 9,535 9,354 17,582 17,347 ---------- ---------- ---------- ---------- Income (loss) before income taxes (9,392) 7,038 (21,475) 9,740 Provision for (benefit from) income taxes (1,879) 1,406 (4,295) 1,948 ---------- ---------- ---------- ---------- Net income (loss) (7,513) 5,632 ( 17,180) 7,792 Accretion of dividends on mandatorily redeemable preferred stock - (2,664) - (5,223) Accretion of recorded value of the Intel warrant - (156) - (312) ---------- ---------- ---------- ---------- Net income (loss) available to common stockholders $ (7,513) $ 2,812 $ (17,180) $ 2,257 ---------- ---------- ---------- ---------- Net income (loss) per share available to common stockholders Basic $ (0.11) $ 0.06 $ (0.25) $ 0.05 Diluted $ (0.11) $ 0.05 $ (0.25) $ 0.04 Weighted average shares used in per share calculation: Basic 68,605 49,753 68,626 49,516 Diluted 68,605 53,703 68,626 53,456
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
For the Six Months Ended June 30, 2001 2000 ----------- ---------- Cash flows from operating activities: Net income (loss) $ (17,180) $ 7,792 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 28,880 18,345 Debt issue amortization 942 - Foreign currency (gains) losses - (636) Loss on sale of equipment 53 44 Changes in assets and liabilities: Accounts receivable 1,263 (13,092) Inventories 3,958 728 Prepaid expenses and other assets (4,217) (5,280) Other non-current assets (310) - Accounts payable (18,177) (6,694) Accrued expenses and other current liabilities (17,069) 401 Other long-term liabilities (1,167) 1,856 ----------- ---------- Net cash provided by (used in) operating activities (23,024) 3,464 ----------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (25,868) (36,378) Proceeds from sale of equipment 476 15,018 Malaysian acquisition, net of cash and cash equivalents - (54,849) ----------- ---------- Net cash used in investing activities (25,392) (76,209) ----------- ---------- Cash flows from financing activities: Advances (to) from affiliates 400 (225) Net proceeds (repayments) from short-term loans (4,533) 69,211 Repayment of long-term debt (14,773) (1,400) Net proceeds from debt offering 60,779 - Net proceeds from issuance of common stock 1,257 583 ----------- ---------- Net cash provided by financing activities 43,130 68,169 ----------- ---------- Net decrease in cash (5,286) (4,576) Cash and cash equivalents at beginning of period 18,850 32,117 ----------- ---------- Cash and cash equivalents at end of period $ 13,564 $ 27,541 =========== ==========
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended June 30, 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. The interim period ended on July 1st, 2001, the Sunday nearest June 30th. For presentation purposes, the interim financial statements and accompanying notes refer to our interim period ending as of June 30, 2001. Basis of Presentation The financial statements 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 statements. In July 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that business combinations initiated after June 30, 2001 be accounted for under the purchase method of accounting. The use of the pooling-of-interest method of accounting is no longer allowed. SFAS No. 142 requires that goodwill and other intangible assets will no longer be amortized but shall be reviewed and tested annually for impairment. SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and early adoption is permitted for companies with a fiscal year beginning after March 15, 2001. The Company expects that the adoption of SFAS No.141 and 142 on January 1, 2002, will not have a material effect on its financial statements. Note 3: Selected Balance Sheet Accounts The components of inventories are as follows (in thousands): June 30, December 31, 2001 2000 -------- -------- Raw materials .......................... $ 12,722 $ 16,935 Work in process ........................ 2,395 2,935 Finished goods ......................... 2,175 1,380 -------- -------- $ 17,292 $ 21,250 ======== ======== Accrued expenses and other liabilities are comprised of the following (in thousands): June 30, December 31, 2001 2000 -------- -------- Payroll and related items .................... $ 11,963 $ 12,556 Interest payable ............................. 11,579 8,768 Customer rebate .............................. 15 3,613 Deferred taxes ............................... 4,882 4,142 Streamlining and restructuring accrual ....... 1,026 - Warranty and other expenses .................. 4,459 14,820 -------- -------- $ 33,924 $ 43,899 ======== ======== In the three months ended June 30, 2001, there was approximately $1.2 million of severance and restructuring expense at our Korean and United States headquarters sites that was applied against existing accruals. Our workforce was reduced by 276 employees as a result of these programs and approximately 300 were furloughed during the period. We expect the remainder of the accrual, $1.0 million, to be consumed during the three months ended September 30, 2001. Note 4: Convertible Subordinated Notes In June 2001, the Company issued $50.0 million of 8.00 percent Convertible Subordinated Notes due 2011, (the "Convertible Notes"), along with ChipPAC International Company Limited's (a wholly owned subsidiary) issuance of $15.0 million of 12.75 percent Senior Subordinated Notes due 2009, (the "Senior Subordinated Notes"), in a private placement. The holders of the Convertible Notes may convert the Convertible Notes into shares of Class A common stock at any time prior to the maturity date, unless previously redeemed or purchased, at a conversion price of $9.96 per share, subject to adjustment in certain circumstances. The Convertible Notes are currently convertible into 5,020,080 shares of Class A common stock. Interest on the Convertible Notes is payable on June 15 and December 15 of each year, beginning December 15, 2001 and will end on June 15, 2011, unless earlier redeemed. The Company may redeem any portion of the Convertible Notes at any time prior to June 15, 2004, upon at least 20 and not more than 60 days notice to the holders of the notes, at a redemption price equal to $1,000 per Convertible Note plus accrued and unpaid interest to the redemption date subject to adjustment in certain circumstances and provided that the Company's stock is consistently trading above a certain price and that the resales of the Convertible Notes will be registered under the Securities Act of 1933, as amended. The Company may, at its option, redeem the Convertible Notes on or after June 15, 2004, in whole or in part, upon at least 20 days and not more than 60 days notice to the holders of the notes, at redemption prices expressed as percentages of the principal amount ranging from 104.00 percent for the period June 15, 2004 to June 14, 2005 and reducing by 0.67 percent each subsequent period to 100.00 percent beginning June 15, 2010 and thereafter. Note 5: Pro Forma Disclosure Relating to the Acquisition of Malaysian Business The results of operations of the Malaysian business, acquired in June 2000, 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 six months ended June 30, 2000, (in thousands, except for per share amounts). Six months ended June 30, 2000 ---------- Net sales $ 277,658 Net income 11,534 Earnings per share Basic 0.23 ========== Diluted 0.22 ========== Shares used in per share calculation: Basic 49,516 ========== Diluted 53,456 ========== Note 6: 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(loss) 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 June 30, 2001 and 2000:
June 30, 2001 June 30, 2000 --------------------------- -------------------- Net Loss Net Income Available to Per-Share Available to Per-Share Common Stockholders Shares Amount Common Stockholders Shares Amount --------- -------- --------- --------- -------- --------- (In thousands, except per share amounts) Basic EPS $(7,513) 68,605 $(0.11) $ 2,812 49,753 $ 0.06 Diluted EPS $(7,513) 68,605 $(0.11) $ 2,812 53,703 $ 0.05
Six months ended June 30, 2001 and 2000:
June 30, 2001 June 30, 2000 --------------------------- -------------------- Net Loss Net Income Available to Per-Share Available to Per-Share Common Stockholders Shares Amount Common Stockholders Shares Amount --------- -------- --------- --------- -------- --------- (In thousands, except per share amounts) Basic EPS $(17,180) 68,626 $(0.25) $ 2,257 49,516 $ 0.05 Diluted EPS $(17,180) 68,626 $(0.25) $ 2,257 53,456 $ 0.04
For the periods ended June 30, 2001, all of the stock options were excluded from diluted earnings per share since their effect would be antidilutive. At June 30, 2001 and 2000, stock options outstanding were 5,029,949 and 1,297,666 respectively. Note 7: Supplemental Condensed Consolidating Financial Statements of Guarantor/Non-Guarantor Entities In connection with the recapitalization, ChipPAC International Company Limited, ("CP Int'l"), issued $150.0 million aggregate principal amount of Senior Subordinated Notes,(which notes have the same terms and are issued under the same indenture as the Senior Subordinated Notes mentioned in Note 4), which are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by the parent company, ChipPAC, Inc. 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 consolidating and financial information for CP Int'l, CPI, CPM 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. 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. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS June 30, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor --------- --------- --------- CPI CP Int'l Guarantors CPS Eliminations Consolidated --------- --------- ---------- --------- ------------ ------------ Assets Current assets: Cash and cash equivalents $ 898 $ 28 $ 10,902 $ 1,736 $ - $ 13,564 Intercompany accounts receivable 6,155 55,699 24,541 13,133 (99,528) - Accounts receivable 41 - 44,597 3 - 44,641 Inventories - - 13,378 3,914 - 17,292 Prepaid expenses and other current assets 273 - 7,351 3,313 - 10,937 --------- --------- ---------- --------- ------------ ------------ Total current assets 7,367 55,727 100,769 22,099 (99,528) 86,434 Property, plant and equipment , net 5,117 - 238,725 96,861 - 340,703 Intercompany loans receivable - 323,500 - - (323,500) - Investment in subsidiaries 23,598 36,130 16,298 - (76,026) - Other non current assets 7,067 14,948 20,370 575 - 42,960 --------- --------- ---------- --------- ------------ ------------ Total assets $ 43,149 $ 430,305 $ 376,162 $ 119,535 $ (499,054) $ 470,097 --------- --------- ---------- --------- ------------ ------------ Liabilities and Stockholders' Equity (Deficit) Current liabilities: Intercompany accounts payable $ 7 $ 3,173 $ 70,758 $ 25,590 $ (99,528) $ - Bank borrowings - 10,067 - - - 10,067 Accounts payable 1,693 4 26,141 8,648 - 36,486 Accrued expense and other liabilities 444 11,614 15,817 6,049 - 33,924 Current portion of long-term debt - - - - - - --------- --------- ---------- --------- ------------ ------------ Total current liabilities 2,144 24,858 112,716 40,287 (99,528) 80,477 Long- term debt, less current portion - 283,627 - - - 283,627 Intercompany loans payable - - 289,500 34,000 (323,500) - Convertible subordinated note - 50,000 - - - 50,000 Other long-term liabilities - - 5,819 - - 5,819 --------- --------- ---------- --------- ------------ ------------ Total liabilities 2,144 358,485 408,035 74,287 (423,028) 419,923 Stockholders' equity (deficit): Common stock 687 - - - - 687 Additional paid in capital 107,014 - - - - 107,014 Receivable from stockholders (1,105) - - - - (1,105) Accumulated earning (deficit) (65,591) 71,820 (40,578) 44,784 (76,026) (65,591) Accumulated other comprehensive income - - 8,705 464 - 9,169 --------- --------- ---------- --------- ------------ ------------ Total stockholders' equity (deficit) 41,005 71,820 (31,873) 45,248 (76,026) 50,174 --------- --------- ---------- --------- ------------ ------------ Total liabilities and stockholders' equity (deficit) $ 43,149 $ 430,305 $ 376,162 $ 119,535 $ (499,054) $ 470,097 ---------- --------- ---------- --------- ------------ ------------
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Six Months Ended June 30, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor ----------- ---------- ----------- CPI CP Int'l Guarantors CPS Eliminations Consolidated ----------- ---------- ------------ ----------- -------------- ------------- Revenue Intercompany revenue $ 13,224 $ - $ - $ 27,530 $ (40,754) $ - Customer revenue - - 177,230 2 - 177,232 --------- -------- ---------- --------- --------- ---------- Revenue 13,224 - 177,230 27,532 (40,754) 177,232 Cost of revenue - - 155,960 25,621 (27,530) 154,051 --------- -------- ---------- --------- --------- ---------- Gross profit 13,224 - 21,270 1,911 (13,224) 23,181 Operating expenses: - Selling, general & administrative 10,653 62 7,207 1,802 - 19,724 Research & development 2,436 - 18,138 - (13,224) 7,350 --------- -------- ---------- --------- --------- ---------- 13,089 62 25,345 1,802 (13,224) 27,074 --------- -------- ---------- --------- --------- ---------- Operating income (loss) 135 (62) (4,075) 109 - (3,893) Non-operating (income) expense: - Interest expense - 18,238 13,594 1,720 (15,264) 18,288 Interest income (24) (15,208) (191) (63) 15,264 (222) (Income) loss from investment in subsidiaries 17,256 (1,908) - - (15,348) - Foreign currency (gains) loss - - (223) (32) - (255) Other (income) expense, net (18) 48 (180) (79) - (229) --------- -------- ---------- --------- --------- ---------- Non-operating expense 17,214 1,170 13,000 1,546 (15,348) 17,582 --------- -------- ---------- --------- --------- ---------- Loss before income taxes (17,079) (1,232) (17,075) (1,437) (15,348) (21,475) Provision for (benefit from) income taxes 101 162 (4,558) - - (4,295) --------- -------- ---------- --------- --------- ---------- Net loss $ (17,180) $ (1,394) $ (12,517) $ (1,437) $ (15,348) $ (17,180) --------- -------- ---------- --------- --------- ----------
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Six Months Ended June 30,2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor --------- ------ --------- CPI CP Int'l Guarantors CPS --------- -------- ---------- --------- Cash flows from operating activities: Net loss $ (17,180) $ (1,394) $ (12,517) $ (1,437) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 970 - 23,247 4,663 Debt issue amortization - 942 - - Loss on sale of equipment - - 53 - Changes in assets and liabilities: Intercompany accounts receivable 1,903 (42,424) (24,541) (13,133) Accounts receivable 4 - 1,242 17 Inventories - - 4,494 (536) Prepaid expenses and other current assets 134 - (4,036) (315) Other non current assets (3,745) (2,413) 6,247 (399) Intercompany accounts payable 7 3,177 68,597 6,414 Accounts payable 684 4 (21,112) 2,247 Accrued expenses and other current liabilities (5,901) 2,832 (14,663) 663 Other long-term liabilities - - (1,167) - ----------------------------------------------------- Net cash provided by (used in) operating activities (23,124) (39,276) 25,844 (1,816) ----------------------------------------------------- Cash flows from investing activities: Acquisition of property, plant and equipment (2,083) - (14,131) (9,654) Proceeds from sale of equipment 200 - 130 146 Investment in subsidiaries 17,256 (1,908) - - ----------------------------------------------------- Net cash provided by (used in) investing activities 15,373 (1,908) (14,001) (9,508) ----------------------------------------------------- Cash flows from financing activities: Advances (to) from affiliates 7,211 2,413 (18,225) 9,001 Net repayment from short-term loans - (4,533) - - Repayment of long-term debt - (14,773) - - Net proceeds from debt issuance - 60,799 - - Net proceeds from issuance of common stock 1,257 - - - ----------------------------------------------------- Net cash provided by (used in) financing activities 8,468 43,886 (18,225) 9,001 ----------------------------------------------------- Net increase (decrease) in cash 717 2,702 (6,382) (2,323) Cash and cash equivalents at beginning of period 181 (2,674) 17,284 4,059 ----------------------------------------------------- Cash and cash equivalents at end of period $ 898 $ 28 $ 10,902 $ 1,736 ===================================================== Eliminations Consolidated ------------ ------------ Cash flows from operating activities: Net loss $ 15,348 $ (17,180) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization - 28,880 Debt issue amortization - 942 Loss on sale of equipment - 53 Changes in assets and liabilities: Intercompany accounts receivable 78,195 - Accounts receivable - 1,263 Inventories - 3,958 Prepaid expenses and other current assets - (4,217) Other non current assets - (310) Intercompany accounts payable (78,195) - Accounts payable - (18,177) Accrued expenses and other current liabilities - (17,069) Other long-term liabilities - (1,167) ---------------------------------- Net cash provided by (used in) operating activities 15,348 (23,024) ---------------------------------- Cash flows from investing activities: Acquisition of property, plant and equipment - (25,868) Proceeds from sale of equipment - 476 Investment in subsidiaries (15,348) - ---------------------------------- Net cash provided by (used in) investing activities (15,348) (25,392) ---------------------------------- Cash flows from financing activities: Advances (to) from affiliates - 400 Net repayment from short-term loans - (4,533) Repayment of long-term debt - (14,773) Net proceeds from debt issuance - 60779 Net proceeds from issuance of common stock - 1,257 ---------------------------------- Net cash provided by (used in) financing activities - 43,130 ---------------------------------- Net increase (decrease) in cash - (5,286) Cash and cash equivalents at beginning of period - 18,850 ---------------------------------- Cash and cash equivalents at end of period $ - $ 13,564 ==================================
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2000 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor CPI CP Int'l Guarantors CPS ----------- ---------- ----------- --------- 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 Inventories -- -- 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, plant and equipment, net 3,752 -- 239,002 91,979 Intercompany loans receivable -- 323,500 -- -- Investment in subsidiaries 188,987 34,222 -- -- Other non current assets 3,322 11,673 26,617 176 --------- -------- ---------- --------- Total assets $ 204,756 $379,996 $349,929 $102,610 ========= ======== ========== ========= Liabilities and Stockholders' Equity (Deficit) Current liabilities: Intercompany accounts payable $ -- $ -- $ 2,161 $ 19,176 Bank borrowing -- 7,800 -- -- Accounts payable 1,009 -- 47,253 6,401 Accrued expense and other Liabilities 6,345 8,782 23,386 5,386 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 -- -- -- Additional paid in capital 105,759 -- -- -- Receivable from stockholders (1,505) -- -- -- Accumulated other comprehensive income -- -- 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 cash equivalents $ -- $ 18,850 Intercompany accounts receivable (21,337) -- Accounts receivable from Customers -- 45,904 Inventories -- 21,250 Prepaid expenses & other current assets -- 6,720 --------- -------- Total current assets (21,337) 92,724 Property, plant and equipment, net -- 334,733 Intercompany loans receivable (323,500) -- Investment in subsidiaries (223,209) -- Other non current assets -- 41,788 --------- -------- Total assets $(568,046) $469,245 ========= ======== Liabilities and Stockholders' Equity (Deficit) 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 (deficit) Common stock -- 685 Additional paid in capital -- 105,759 Receivable from stockholders -- (1,505) Accumulated other comprehensive income -- 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 CONSOLIDATING STATEMENTS OF OPERATIONS Six Months Ended June 30, 2000 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Guarantor --------- -------- Other --------- CPI CP Int'l Guarantors CPS Eliminations Consolidated --------- -------- ---------- --------- ------------ ------------ Revenue: Intercompany revenue.......... $ 14,425 -- $ (5,758) $23,030 $(31,697) -- Customer revenue.............. -- -- 206,445 3 -- $206,448 -------- ------- -------- ------- -------- -------- Revenue....................... 14,425 -- 200,687 23,033 (31,697) 206,448 Cost of revenue................. 322 -- 157,109 19,723 (17,272) 159,882 -------- ------- -------- ------- -------- -------- Gross profit.................... 14,103 -- 43,578 3,310 (14,425) 46,566 Operating expenses: Selling, general & administrative............... 10,856 $ 21 17,886 -- (14,425) 14,338 Research & development.................. 2,522 -- 2,619 -- -- 5,141 -------- ------- -------- ------- -------- -------- Total operating expenses..................... 13,378 21 20,505 -- (14,425) 19,479 -------- ------- -------- ------- -------- -------- Operating income (loss)......... 725 (21) 23,073 3,310 -- 27,087 Non-operating (Income) Expense: Interest expense.............. (10,383) 19,357 29,234 1,724 (20,568) 19,364 Interest income............... 10,352 (15,363) (15,903) (37) 20,566 (385) Foreign currency (gains) losses....................... -- -- (1,032) 58 -- (974) (Income) loss from investment in subsidiaries................. (5,697) (1,808) (18,763) -- 26,268 -- Other (income) expenses, net................ (137) -- (48) (474) 1 (658) -------- ------- -------- ------- -------- ------- Non-operating (income) expenses..................... (5,865) 2,186 (6,512) 1,271 26,267 17,347 -------- ------- -------- ------- -------- ------- Income (loss) before income taxes................... 6,590 (2,207) 29,585 2,039 (26,267) 9,740 Provision for (benefit from) income taxes............. 3,084 162 3,206 -- (4,504) 1,948 -------- ------- -------- ------- -------- -------- Net Income (loss)............... $ 3,506 $(2,369) $ 26,379 $ 2,039 $(21,763) $ 7,792 Accretion of dividends on mandatorily Redeemable preferred stock...... (5,223) -- -- -- -- (5,223) Accretion of recorded value of the Intel warrant.................. (312) -- -- -- -- (312) -------- ------- -------- ------- -------- -------- Net income (loss) available to Common Stockholders............ $ (2,029) $(2,369) $ 26,379 $ 2,039 $(21,763) $ 2,257 ======== ======= ======== ======= ======== ========
The accompanying notes are an integral part of these financial statements. ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Six Months Ended June 30, 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 (loss).................... $ 3,506 $(2,369) $ 26,380 $ 2,039 $(21,764) $ 7,792 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization......................... 847 1,029 12,878 3,591 -- 18,345 Foreign currency gains............................... -- -- (636) -- -- (636) (Gain) loss on sales of equipment........................... -- -- 186 (142) -- 44 Equity income from investment in subsidiaries........................ (5,697) (1,808) (18,763) -- 26,268 -- Changes in assets and liabilities: Intercompany accounts receivable........... 753 (16,881) 5,693 (6,060) 16,495 -- Accounts receivable... 343 -- (13,370) (65) -- (13,092) Inventories........... -- -- 3,400 (2,672) -- 728 Prepaid expenses and other assets......... (444) -- (3,234) (1,602) -- (5,280) Intercompany accounts payable.............. 28 58 18,346 (1,937) (16,495) -- Accounts payable...... (849) -- (10,273) 4,428 -- (6,694) Accrued expenses & other liabilities.... 2,955 1,569 (999) 1,380 (4,504) 401 Other long-term liabilities.......... -- -- 1,856 -- -- 1,856 ------- ------- -------- -------- --------- ------- Net cash provided by (used in) operating activities........... 1,442 (18,402) 21,464 (1,040) -- 3,464 ------- ------- -------- -------- --------- ------- Cash flows from investing activities: Acquisition of property and equipment............ (1,230) -- (28,825) (7,401) 1,078 (36,378) Proceeds from sale of equipment............ -- -- 15,737 359 (1,078) 15,018 Malaysian acquisition, net of cash & cash equivalents.... (17,296) -- (78,141) -- 40,588 (54,849) ------- ------- -------- -------- --------- ------- Net cash used in investing activities........... (18,526) -- (91,229) (7,042) 40,588 (76,209) ------- ------- -------- -------- --------- ------- Cash flows from financing activities: Loans & advances with affiliates........... (225) -- -- -- -- (225) Net proceeds from short- term loans........... -- 68,709 502 -- -- 69,211 Repayment of term loans .......... -- (1,400) -- -- -- (1,400)
16 Intercompany loan (advances) payments........... -- (52,500) 52,500 -- -- -- Intercompany capital contributions................. -- 379 17,423 7,000 (24,802) -- Net proceeds from common stock issuance...................... 640 (26) (31) -- -- 583 Net proceeds from Mandatorily redeemable Preferred stock issuance...... 15,786 -- -- -- (15,786) -- ------- --------- --------- -------- -------- -------- Net cash provided by financing activities.................... 16,201 15,162 70,394 7,000 (40,588) 68,169 ------- --------- ---------- -------- -------- -------- Net increase (decrease) in cash....................... (883) (3,240) 629 (1,082) -- (4,576) Cash and equivalents at beginning of period........... 1,007 3,474 22,273 5,363 -- 32,117 ------- --------- ---------- -------- -------- -------- Cash and equivalents at end of period................... $ 124 $ 234 $ 22,902 $ 4,281 $ -- $ 27,541 ======= ========= ========== ======== ======== ========
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 quarters ended June 30, 2001 and June 30, 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 year 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 17 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. Three months and six ended June 30, 2001 compared to three and six months ended June 30, 2000: Revenue Revenues were $87.4 million and $177.2 million in the three and six months ended June 30, 2001, respectively, a decrease of 19.8% and 14.2% over the prior year periods, respectively. The drop in revenue is a product of lower end market demand for our customers' products. In most cases in the three and six months ended June 30, 2001, we won a larger portion of our customer's available outsourcing business than in the three and six months ended June 30, 2000, but the total available outsourcing dollars were lower. Gross Profit Gross profit during the three months and six months ended June 30, 2001 was $11.5 million and $23.2 million, respectively, and decreased 56.2% and 50.2%, respectively, over the comparable prior year periods. The majority of the decrease was caused by soft demand leading to lower equipment utilization and lower average selling prices in the three and six months ended June 30, 2001 compared to the same periods in 2000. Equipment utilization was approximately 53.0% and 65.0% in the three month periods ended June 30 2001 and 2000, respectively. Although reductions in force, furloughs, plant shutdown days and other cost saving methods were used in the three and six months ended June 30, 2001, they were insufficient to offset the decline in revenue and our labor expenses were less efficient in the three and six months ended June 30, 2001 compared to the same periods in 2000. Selling, General, and Administrative Selling, general, and administrative expenses were $7.5 million and $19.7 million in the three and six months ended June 30, 2001, respectively, an increase of 3.3% and 37.6%, respectively, over the comparable prior year periods. 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 and maintaining employees in the areas of administration, sales, and marketing. This level of expense did not occur in the quarter ended June 30, 2000. In addition, we recorded expenses associated with reduction in force and 18 furlough costs of $3.0 million, that occurred in the six months ended June 30, 2001 or will occur in future 2001 periods with no comparable costs in 2000. Research and Development Research and development expense increased to $3.8 million and $7.4 million in the three and six months ended June 30, 2001. This represents a 52.9% and 43.0% increase, respectively, over the prior year periods. The increases were mainly due to expenses in the three and six months ended June 30, 2001 on Power packaging technology and process that did not occur in the same period in 2000 plus additional spending on flip-chip technology development. Interest Expense Total outstanding interest bearing debt decreased to $343.7 million at June 30, 2001 compared to $369.5 million at June 30, 2000. The greater debt at June 30, 2000 was primarily due to purchases of capital equipment relating to business expansion offset by reductions due to debt pay down following our initial public offering in August 2000. Related interest expense was $9.5 million and $18.3 million for the three and six months ended June 30, 2001, a decrease of 10.8% and 5.6%, respectively, compared to the prior year periods, mainly due to lower total debt levels and reduced interest rates on our debt. Foreign Currency Losses (Gains) Net foreign currency losses (gains) were $0.2 million and ($0.3) million during the three and six months ended June 30, 2001, respectively, compared to net (gains) of ($0.6) million and ($1.0) million during the three and six months ended June 30, 2000, respectively. The gains and losses are primarily due to the fluctuations between the exchange rate of the United States Dollar and the South Korean Won related to long-term pension benefits payable to our Korean employees. Accretion of Dividends and Recorded Value of the Intel Warrant Accretion of dividends on preferred stock and recorded value of the Intel Warrant was $0 in the three and six months ended June 30, 2001, a 100% decrease compared to $2.8 million and $5.5 million in the three and six months ended June 30, 2000, respectively. All preferred stock was redeemed or converted to non-dividend bearing common stock subsequent to our initial public offering. The Intel Warrant expired unexecised in February 2001. Income Taxes Income tax expense (benefit) for the three months and six months ended June 30, 2001 was approximately $(1.9) million and $(4.3) million, respectively, compared to $1.4 million and $1.9 million for the same periods ended June 30, 2000, respectively. Our effective tax rate was 20% for both the three and six months periods ended June 30, 2001. Concurrently, with our recapitalization on August 5, 1999, the company was reorganized and as a result now has operations and earnings in jurisdictions with 19 relatively low income tax rates, or where we enjoy tax holidays or other similar tax benefits. Income tax expenses (benefits) are recorded to the extent management believes they will be usable in the future. Net (Loss) Income Available to Common Stockholders As a result of the items above, net loss available to common stockholders increased to ($7.5) million and ($17.2) million, respectively, in the three and six months ended June 30, 2001 compared to net income of $2.8 million and $2.3 million for the three months and six ended June 30, 2000, respectively. Liquidity and Capital Resources At June 30, 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 were able to borrow, repay and borrow again under the capital expenditure line until July 31, 2001. Amounts that we repay under the capital expenditure line after July 31, 2001 will not be available to us as future credit facilities. The final maturity for both these facilities is July 31, 2005. Our ongoing primary cash needs are for operations and equipment purchases. As of June 30, 2001, we had borrowings of $10.0 million on our revolving line of credit. We have spent $16.4 million on capital expenditures during the three months ended June 30, 2001. We spent $25.3 million in capital expenditures during the three months ended June 30, 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 is 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 June 30, 2001 we have paid Intersil $3.2 million and accrued $1.5 million under this arrangement. In June 2001, we issued $50.0 million of convertible notes and $15.0 million of senior subordinated notes. A majority of these funds were used to paydown our term loans and revolving loans. As of June 30, 2001, our debt consisted of $343.7 million of borrowings, which was comprised of $10.1 million of revolving loans, $118.6 million in term loans, $165.0 million of senior subordinated notes and $50.0 million of convertible subordinated notes. Our debt instruments require that we meet specified financial tests, including, without limitation, a maximum leverage ratio, a 20 minimum interest coverage ratio and minimum fixed charge coverage ratio. In conjunction with our $65.0 million private placement during the quarter, the lendors of our senior credit facility amended the financial tests for the period July 1, 2001 through December 31, 2004. These debt instruments also contain covenants restricting our operations. There were no violations of these covenants through June 30, 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 $1.2 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 21 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 (a) ChipPAC's Annual Meeting was held on May 24, 2001. (b) The following directors were elected at the meeting: Directors Name Total Shares Voting to Total Shares Voting to -------------- Elect Withhold Dennis P. McKenna 59,902,403 6,952 Edward Conard 59,890,540 18,815 Michael A. Delaney 59,903,003 6,352 David Dominik 59,901,535 7,820 Marshal Haines 59,889,990 19,365 Joseph Martin 59,903,003 6,352 Chong Sup Park 59,902,418 6,937 Paul C. Schorr, IV 59,902,503 6,852 (c) No other matters were submitted to vote of security holders. Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 22 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, as amended and restated as of June 30, 2000, 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.* 10.1.1 Amendment No. 1, dated as of March 13, 2001, to the Credit Agreement, dated as of August 5, 1999, as amended and restated as of June 30, 2000, 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. 10.1.2 Amendment No. 2, dated as of June 8, 2001, to the Credit Agreement, dated as of August 5, 1999, as amended and restated as of June 30, 2000, 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.** 23 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.* 24 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. 1 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.*** 25 10.43 Employment letter agreement, dated as of September 2, 1998 between ChipPAC, Inc. and Marcos Karnezos.*** 10.44 Indenture, dated as of June 15, 2001, by and among ChipPAC, Inc. and Firstar Bank, N.A. as trustee. 10.45 Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC International Company Limited and Citicorp Capital Investors Limited. 10.46 Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC, Inc. and Citicorp Mezzanine III, L.P . 99.1 Risk Factors*** _______________________ * Incorporated by reference to the Company's registration statement on Form S-4 (No. 333-91641). ** Incorporated by reference to the Company's registration statement on 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. **** Incorporated by reference to the Company's quarterly report on Form 10-Q for the period ended March 31, 2001. + 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) August 14, 2001 ________________________________________________________________________________ 26