-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NKfEyPeXp3YCdwi+yXq8DozYs/g+FkkoLM1DMGScroBwfxX4L4O5SKqwIr/DUDvs WIILTNrR+w3PbYMuu3eC8Q== /in/edgar/work/0001021408-00-003703/0001021408-00-003703.txt : 20001120 0001021408-00-003703.hdr.sgml : 20001120 ACCESSION NUMBER: 0001021408-00-003703 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIPPAC INC CENTRAL INDEX KEY: 0001093779 STANDARD INDUSTRIAL CLASSIFICATION: [3674 ] IRS NUMBER: 770463048 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-31173 FILM NUMBER: 772504 BUSINESS ADDRESS: STREET 1: 3151 CORONADO DR CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4084865900 MAIL ADDRESS: STREET 1: 3151 CORONADO DRIVE CITY: SANTA CLARA STATE: CA ZIP: 95054 10-Q 1 0001.txt FORM 10-Q 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 period ended September 30, 2000 __ 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 333-91641 CHIPPAC, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 77-0463-48 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 practical date: Class Outstanding as of September 30, 2000 - ------------------------------------------------------------------------------- Class A Common stock, $.01 par value 68,469,829 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....... 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 20 Part II -- OTHER INFORMATION Item 1. Legal Proceedings................................................ 20 Item 2. Changes in Securities and Use of Proceeds........................ 20 Item 3. Defaults Upon Senior Securities.................................. 21 Item 4. Submission of Matters to a Vote of Security Holders.............. 21 Item 5. Other Information................................................ 21 Item 6. Exhibits and Reports on Form 8-K................................. 22 Signatures............................................................... 25 ChipPAC Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
September 30, December 31, 2000 1999 ------------ ----------- Assets Current assets: Cash and cash equivalents $ 30,818 $ 32,117 Receivable from shareholder -- 11,662 Accounts receivable 57,004 30,003 Inventories 19,808 17,497 Deferred taxes 622 775 Prepaid expenses and other current assets 9,732 2,386 --------- --------- Total currrent assets 117,984 94,440 Property, plant and equipment, net 320,523 226,931 Other assets 31,421 22,058 --------- --------- Total assets $ 469,928 $ 343,429 Liabilities and Equity Current liabilities: Accounts payable $ 49,211 $ 52,208 Accrued expenses and other liabilities 31,467 27,208 Short-term debt 29,810 -- Current portion of long-term debt 10,800 4,800 --------- --------- Total current liabilities 121,288 84,216 --------- --------- Long-term debt, less current portion 279,490 295,200 Other long-term liabilities 6,179 3,929 --------- --------- Total liabilities 406,957 383,345 --------- --------- Mandatorily redeemable preferred stock -- 82,970 --------- --------- Shareholders' and divisional equity Common stock 685 407 Warrants-common stock 1,250 1,250 Additional paid in capital-common stock 272,266 86,410 Divisional equity, net of capital (167,714) (167,714) distributions Receivable from shareholders (1,565) (1,128) Accumulated deficit (51,120) (51,280) Accumulated other comprehensive income 9,169 9,169 --------- --------- Total shareholders' and divisional equity 62,971 (122,886) --------- --------- Total liabilities and equity $ 469,928 $ 343,429 ========= =========
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 3 ChipPAC Inc. Condensed Consolidated Statements Of Operations (In thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED --------------------------- --------------------------- September 30 September 30 September 30 September 30 2000 1999 2000 1999 ------- -------- -------- -------- Net revenue $155,795 $101,270 $362,243 $267,671 Costs & expenses: Cost of sales 120,227 84,479 280,113 227,778 Selling, general & administrative 9,667 5,075 24,007 14,407 Research & development 2,839 2,640 7,981 8,628 Change of control expenses -- 11,850 -- 11,850 --------- -------- -------- -------- Total costs and expenses 132,733 104,044 312,101 262,663 --------- -------- -------- -------- Income from operations 23,062 (2,774) 50,142 5,008 Interest & other income, net (10,134) (6,440) (25,475) (8,939) Other non-operating expenses (Note 8) (8,000) (8,000) --------- -------- -------- -------- Income (loss) before income taxes 4,928 (9,214) 14,667 (3,931) (Provision) benefit for income taxes (984) 5,043 (2,930) 2,095 --------- -------- -------- -------- Net income (loss) before extraordinary charge 3,944 (4,171) 11,737 (1,836) Extraordinary charge, net of tax of $0 and $272 2,390 1,373 2,390 1,373 ---------- --------- -------- --------- Net income (loss) 1,554 (5,544) 9,347 (3,209) Accretion of dividends on preferred stock (2,974) (1,210) (8,197) (1,210) Accretion of the recorded value of the Intel preferred stock (678) (156) (990) (156) ---------- --------- -------- --------- Net income (loss) available to common shareholders ($ 2,098) ($ 6,910) $ 160 ($ 4,575) ========== ========= ======== ========= Comprehensive income: Net income (loss) 1,554 (5,544) 9,347 (3,209) Currency translation loss -- (5,976) -- (1,309) ---------- --------- -------- --------- Comprehensive income (loss) 1,554 (11,520) 9,347 (4,518) Net income (loss) per share: Income (loss) before extraordinary item $ 0.07 $ (0.10) $ 0.22 $ (0.05) Extraordinary item $ (0.04) $ (0.03) $ (0.04) $ (0.03) Basic net income (loss) per share $ (0.03) $ (0.16) $ 0.00 $ (0.11) Diluted net income (loss) per share $ (0.03) $ (0.16) $ 0.00 $ (0.11) Weighted Average shares used in per share calculations: Basic 60,295 43,540 53,162 40,420 Diluted 60,295 43,540 56,827 40,420
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 4 ChipPAC Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Nine Months Ended September 30, 2000 1999 --------------- --------------- Cash flows provided by operating activities: Net income (loss) $9,347 ($3,209) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 33,849 41,850 Provision for inventory and accounts receivable (491) (427) Foreign currency (gains) losses (467) 359 (Gain) loss on sale of equipment (19) (241) Changes in assets and liabilities: Accounts receivable (15,858) 9,843 Inventories 2,268 (1,889) Prepaid expenses and other assets (9,364) (20,832) Advances (to) from affiliates-trade -- (6,190) Accounts payable (7,074) (22,193) Accrued expenses and other current liabilities (16,597) 7,063 Other long-term liabilities 2,753 1,768 _______ _______ Net cash provided by (used in) operating activities (1,653) 5,902 _______ _______ Cash flows used in investing activities: Acquisition of property and equipment (61,092) (29,052) Proceeds from sale of equipment 15,250 1,253 Purchase of intellectual property (12,655) -- Malaysian acquisition (37,232) -- _______ _______ Net cash used in investing activities (95,729) (27,799) _______ _______ Cash flows provided by financing activities: Advances to employees and affiliates (225) (4,430) Proceeds from short-term loans 45,600 1,169 Repayment of short-term loans (15,790) (19,469) Proceeds from term loans 53,236 300,000 Repayment of long-term debt and capital leases (64,710) (133,615) Dividend paid -- (9,435) Net proceeds from stock issuance (Note 8) 157,282 123,415 Retirement of Class B Preferred Stock (79,310) (270,916) _______ _______ Net cash provided by (used in) financing activities 96,083 (13,281) _______ _______ Effect on cash from changes in exchange rates -- (447) _______ _______ Net increase (decrease) in cash and cash equivalents (1,299) (35,625) Cash and cash equivalents at beginning of period 32,117 68,767 _______ _______ Cash and cash equivalents at end of period $30,818 $33,142 ======= =======
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 5 ChipPAC, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended September 30, 2000 (Unaudited) Note 1: Interim Statements In the opinion of management of ChipPAC, Inc. ("ChipPAC"), 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. ChipPAC believes that the disclosures are adequate to make the information not misleading. However, it is suggested that this financial data be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 1999 included in ChipPAC's 2000 Registration on Form S-1 (Registration No. 333-39428) as declared effective by the Securities and Exchange Commission on August 8, 2000. 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, 2000. Basis of Presentation Prior to August 5, 1999 the Company represented the combination of three business units of Hyundai Electronics Industries Co., Ltd. ("HEI") which operated collectively as HEI's worldwide packaging and testing operations. 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, the prior stockholders, 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 period subsequent to the recapitalization and as at December 31, 1999 and September 30, 2000 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. For the comparative disclosures for the three months and nine months ended September 30, 2000, the company represents the combination of four corporations then owned by Hyundai Electronics Industries., Ltd (HEI) and Hyundai Electronics America (HEA). These four corporations are ChipPac, Inc. (CPI), ChipPac Korea Co., Ltd (CPK) ChipPac Assembly and Test Co. Ltd. (CATS) and Hyundai Electronics Co. (Shanghai) Ltd., (HECS). Accordingly, the financial statements for the comparative periods are prepared on a combined basis. These comparative financial statements include the accounts of CPI, CPK, HECS and CATS, or the divisional accounts of the predecessor Assembly and Test Divisions for the periods prior to the business transfers referred to above, and reflect the combined financial position, results of operation, and cash flows of these entities. All inter-company or inter-divisional transactions have been eliminated in the combination. Foreign Currency Translation Upon completion of the recapitalization on August 5, 1999, management decided to change the functional currency of its foreign operations to the US Dollar effective October 1, 1999. Previously, the Company's functional currencies of its foreign operations were the respective local currencies and the net of the effect of the translation of the accounts of the foreign operation was included in equity as a cumulative translation adjustment. Foreign Exchange Contracts In the ordinary course of business the Company enters into foreign exchange forward contracts to mitigate the effect of foreign currency movements associated with its international operations. The contracts entered into require the purchase of Korean won or Japanese yen, and the delivery of US dollars, and generally have maturities which do not exceed six months. To date contracts entered into by the Company do not qualify as hedges and therefore are included in foreign currency gains and losses in the period in which the exchange rates change. There were no deferred gains or losses at December 31, 1999. At December 31, 1999 the Company had outstanding forward contracts to purchase Japanese yen totaling $25.5 million. Note 2: Acquisition of Malaysian business from Intersil On June 30, 2000, the Company consummated its acquisition of Intersil's packaging and test operations located in Kuala Lumpur, Malaysia along with related intellectual property for approximately $70.0 million in cash and preferred stock. In connection with the acquisition, we entered into a five-year supply agreement with Intersil to provide assembly and test services on an exclusive basis. The Malaysian business increases our exposure to high growth advanced communications products, provides a presence in Malaysia and enhances our intellectual property in key areas. In addition, the Malaysian business expands our mixed-signal testing capabilities and provides us with critical expertise in RF testing. For its fiscal year ended July 2, 1999, the Malaysian business had revenues of $110.5 million. The acquisition has been accounted for using purchase accounting. Under purchase accounting, the total purchase price of the Malaysian business is allocated to the acquired assets and liabilities based on their relative fair values as of the closing date of the acquisition. We are undertaking a study to determine the final allocation of the total purchase price to the various assets acquired and the liabilities assumed. Accordingly, the final allocations could be different from the amounts reflected below, and these differences may be significant. The purchase price of $70.0 million represents the total of the cash consideration and the estimated fair value of the Class C preferred stock exchanged for the whole of the issued shares of the Malaysian business and certain intellectual property. The amount and components of the estimated purchase price along with the allocation of the estimated purchase price to assets purchased and liabilities assumed are as follows: (in millions) Purchase Price: Cash consideration............................................... $52.5 Estimated fair value of Class C preferred stock.................. 15.8 Estimated expenses............................................... 3.5 Less: payment due from Intersil................................... (1.8) ----- $70.0 ===== Allocation of Purchase Price: Estimated fair value of Buildings....................................................... $16.9 Plant and equipment............................................. 56.9 Intellectual property........................................... 12.7 Restructuring accrual........................................... (5.0) Deferred taxes.................................................. (4.1) Net other assets and liabilities................................ (7.4) ----- $70.0 ===== There is no goodwill arising from the acquisition of the Malaysian business. The estimated fair value of total assets and liabilities exceeded the purchase price, resulting in negative goodwill of $56.1 million. The negative goodwill has been allocated in full to non-current assets as summarized below:
Estimated Negative Fair Goodwill Adjusted Non-current asset Value Allocated Fair Value - ----------------- --------- --------- ---------- (in millions) Buildings................................................... $ 27.9 $(11.0) $16.9 Plant and equipment......................................... 93.9 (37.0) 56.9 Intellectual property....................................... 20.9 (8.2) 12.7 ------ ------ ----- $142.7 $(56.2) $86.5 ====== ====== =====
Intellectual property primarily consists of trade secrets and patents. The Company expects that the estimated average useful life of these assets will be seven years. An accrual of $5.0 million has been established for expected costs of restructuring the Malaysian business. These one time non-recurring costs are expected to be incurred in connection with factory reorganization, product discontinuance and employee related costs. The terms of the acquisition of the Malaysian business require, for the period from the closing of the acquisition to June 30, 2003, the payment of additional contingent incentive payments to the seller based on the achievement of milestones with respect to the transfer of the seller's packaging business, currently subcontracted by the seller to a third party, to us. These contingent payments will be recorded as additional purchase price if and when earned and paid on a quarterly basis. 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. The results of operations of the Malaysian business will be 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 nine months ended September 30, 2000 and 1999, as if the acquisition had been made on January 1, 1999 (in thousands, except per share amounts).
Nine Months Ended September 30: 2000 1999 ---------------------- Net sales $433,453 $338,607 Net income $ 13,088 $ 589 Earnings per share Basic $ 0.22 $ 0.01 ======== ======== Diluted $ 0.22 $ 0.01 ======== ======== Shares used in per share calculation Basic 53,162 40,420 ======== ======== Diluted 56,827 40,420 ======== ========
In addition, Intersil assigned to us patents, copyrights and technical information used exclusively in or associated exclusively with the Malaysian business. Furthermore, Intersil granted us a worldwide, non-exclusive, royalty- free license under other Intersil patents, copyrights and technical information which is also used in or related to the operation of the Malaysian business. This license is perpetual and irrevocable. Any intellectual property rights in the bounding diagrams, test programs, maskworks and test boards uniquely related to the Intersil products for which we will provide packaging and test services under the supply agreement with Intersil are licensed to us only for use in providing those services. Note 3: Property, Plant and Equipment Effective January 1, 2000 we re-evaluated the estimated useful lives of our property, plant and equipment. Based on an independent appraisal to evaluate the useful lives of such equipment and our internal assessment, we changed the estimated useful lives of assembly and test product equipment, and furniture and fixtures from five years to eight years. Previously, such equipment was depreciated on a straight line basis over and an estimated useful life of five years. The net book values of assembly and test product equipment and furniture and fixtures already in use are now being depreciated over the remaining useful life, based on eight years from the date such assets were originally place in service. This change resulted in depreciation expense in the quarter ended September 30, 2000 and the nine months ended September 30, 2000 being $6.9 million and $20.5 million, respectively, lower than would have been recorded using five year lives. Page 6 Note 4: Inventories Septemeber 30, December 31, 2000 1999 -------------- ------------ (In thousands) Raw materials................... $15,638 $12,274 Work-in-process................. 3,425 3,003 Finished goods.................. 745 2,220 ------- ------- Total.......................... $19,808 $17,497 ======= ======= 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 the convertible subordinated notes. Following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented below. Three months ended September 30, 2000 and 1999:
September 30, 2000 September 30, 1999 ---------------------------- ---------------------------- Per-Share Per-Share Income Shares Amount Income Shares Amount --------- -------- -------- --------- -------- --------- (In thousands, except per share amounts) Basic EPS: Net Income (loss) available to common shareholders......... (2,098) 60,295 (0.03) (6,910) 43,540 (0.16) Effects of dilutive securities: Stock options and warrants....... 0 0 Diluted EPS Net Income...................... (2,098) 60,295 (0.03) (6,910) 43,540 (0.16)
Nine months ended September 30, 2000 and 1999:
September 30, 2000 September 30, 1999 ---------------------------- ---------------------------- Per-Share Per-Share Income Shares Amount Income Shares Amount --------- -------- -------- --------- -------- --------- (In thousands, except per share amounts) Basic EPS: Net Income (loss) available to common shareholders......... 160 53,162 0.00 (4,575) 40,430 (0.11) Effects of dilutive securities: Stock options and warrants....... 3,665 0 Diluted EPS Net Income....................... 160 56,827 0.00 (4,575) 40,420 (0.11)
At September 30, 2000 stock options outstanding were 1,912,742. Note 6: Comprehensive Income In fiscal 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". Comprehensive income refers to the change in the equity of a company during a period from transactions except those resulting from investments by owners and distributions to owners. ChipPAC adopted this statement as of the first quarter of 1998. Accumulated other comprehensive income at December 31, 1999 and September 30, 2000 comprised cumulative gains and losses prior to the change of functional currency to the U.S. dollar for the overseas operations on October 1, 1999. Page 7 Note 7: Segment Reporting The Company is engaged in one industry segment, the packaging and testing of integrated circuits. Note 8: Initial Public Offering, the Reclassification, the Reverse Stock Split and Adoption of new stock plans On August 8, 2000 the Securities and Exchange Commission declared effective the Company's Registration Statement on Form S-1 (Registration No. 333-39428) relating to the initial public offering of the Company's Class A common stock. In connection with the closing of the initial public offering the Company issued 10,000,000 shares of Class A Common Stock in for gross proceeds of $120.0 million in an Initial Public Offering. The company concurrently completed the private placements described below. The total proceeds from the offering and the concurrent private placements, net of issuance costs, was $152.1 million. The net proceeds have been used to redeem in full the Class B Preferred Stock and to repay senior credit facilities of $55.8 million. On August 18, 2000 in connection with the underwriters exercise of their overallotment option to purchase additional shares of the Company's Class A common stock, the Company issued an additional 1,500,000 shares of Class A common stock for gross proceeds of $18.0 million. Total proceeds from the issuance of the additional shares, net of issuance costs, was $16.9 million. In connection with the closing of the initial public offering, all outstanding shares of Class A convertible preferred stock and Class C preferred stock were automatically converted into an aggregate of 4,349,254 shares of Class A common stock. In July 2000, the Company effected a 0.38098771 for 1 reverse stock split of its capital stock. All share and per share information presented herein has been restated to give effect to the stock split. In addition, the Board of Directors and stockholders adopted the 2000 Equity Incentive Plan and 2000 Employee Stock Purchase Plan. Concurrent private placement On July 13, 2000, Qualcomm agreed to enter into a three-year supply agreement with us under which we will provide packaging and test services for integrated circuit devices for Qualcomm and to purchase from us $25.0 million of our Class A common stock at a purchase price per share equal to 95% of the initial public offering price in a private placement that occurred concurrently with the closing of this offering. Based on the initial public offering price of $12.00, Qualcomm purchased 2,192,983 shares of Class A Common Stock. Equity investors At the time of our 1999 recapitalization, we entered into an advisory agreement with certain Equity Investors under which the Equity Investors may provide financial, advisory and consulting services to us. Commencing with the three months ended March 31, 2000, the Equity Investors are entitled to an annual advisory fee for the remaining term of the advisory agreement. Each advisory agreement was to remain in effect for an initial term of ten years. The Company and the Equity Investors agreed to terminate the advisory agreement upon the closing of the initial public offering in exchange for a one-time aggregate payment of $8.0 million consisting of a $3.6 million cash payment and the issuance of $4.4 million of our Class A common stock at a price per share equal to the initial public offering price in a private placement concurrent with the closing of the offering. The Company recorded a one time charge to income of $8.0 million in the third quarter of fiscal 2000 in respect of this agreement termination. Page 8 Summary Sources and Uses of IPO and Private Placements August 11, 2000 ----------------------------------------------------------------------
Gross Expenses Net Cash -------- --------- -------- I. Sources of Funds A. IPO net proceeds 138,000 (10,912) 127,088 B. Qualcomm net proceeds 25,000 25,000 ------- ------- ------- 163,000 (10,912) 152,088 II. Uses of Cash Proceeds A. Retirement of Series B preferred stock, including accreted dividends 79,310 B. Retirement of Term Debt 55,845 C. Corporate Purposes 16,933 ------- 152,088
Note 9: Recent Accounting Pronouncements In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101") "Views on Selected Revenue Recognition Issues" which provides the staff's views when applying generally accepted accounting principles to selected revenue recognition issues. Adoption of SAB 101 is required by the second quarter of 2000. Management is currently evaluating SAB 101 and its effects on company revenue recognition policies and practices. At this time, management believes that there is no significant effect on the revenue recognition policies currently in place. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes a new model for accounting for derivatives and hedging activities and supercedes and amends a number of existing accounting standards. SFAS 133 requires that all derivatives be recognized in the balance sheet at their fair market value. In addition, corresponding derivative gains and losses should be either reported in the statement of operations and stockholders equity, depending on the type of hedging relationship that exists with respect to such derivatives. Adopting the provisions of SFAS 133, which will be effective in fiscal year 2001, are not expected to have a material effect on ChipPac's consolidated financial statements. In April 2000, the Financial Accounting Standards Board issued FASB interpretation of No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25 ("FIN44"). Among other issues, FIN 44 clarifies (a) the definition of employees for purposes of applying Opinion No. 25 (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN 44 was effective July 1, 2000, but certain conclusions in the interpretation cover specific events that occur after either December 15, 1998 or January 12, 2000. To the extent that this interpretation covers events occurring during the period after December 15, 1998 or January 12, 2000, but before the effective date of July 1, 2000, the effect of applying this interpretation are recognized on a prospective basis from July 1, 2000. The Company is currently reviewing stock grants to determine the impact, if any, that may arise from implementation of FIN 44, although management does not expect the impact, if any, to be material to the financial statements. Note 10: Supplemental 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 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. Hyundai Electronics Co. (Shanghai) Ltd. (HECS) and ChipPAC Assembly & Test Co. Ltd. (CATS) (collectively the Chinese entities) and ChipPAC Malaysia Sdn. Bhd. (CPM) will not provide guarantees (the "Non-Guarantor Subsidiaries"). The following is consolidated and combining financial information for CP Int'l CPI, CPM, CPK, HECS, CATS, 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 and have no historical operating results or balances for the four years 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 has 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. Page 9 ChipPAC, Inc. Supplemental Combining Condensed Balance Sheets September 30, 1999 (In thousands) (Unaudited)
Parent Issuer Guarantor --------- ---------- Other Non- CPI Int'l CPI Guarantors Guarantors Eliminations Combined --------- ---------- ---------- ---------- ------------ ---------- Assets Current assets: Cash and cash equivalents........ $ 1 $ 10,622 $ 12,822 $ 9,697 -- $ 33,142 Intercompany accounts receivable......... 3,416 30,022 77,165 4,830 (115,433) -- Accounts receivable from customers..... -- 21,171 11,395 -- -- 32,566 Inventories......... -- 5 12,102 313 -- 12,420 Deferred taxes...... -- 420 1,687 -- -- 2,107 Prepaid expenses & other current assets............. -- 416 7,344 381 -- 8,141 --------- --------- --------- ------- ---------- --------- Total current assets........... 3,417 62,656 122,515 15,221 (115,433) 88,376 Property, plant and equipment, net....... 6,168 129,133 77,968 -- 213,269 Intercompany loans receivable........... 271,000 145,000 -- -- (416,000) -- Other assets.......... 42,307 5,087 5,139 -- (33,830) 18,703 --------- --------- --------- ------- ---------- --------- Total assets...... $ 316,724 $ 218,911 $ 256,787 $93,189 $ (565,263) $ 320,348 ========= ========= ========= ======= ========== ========= Liabilities and Equity Current liabilities: Intercompany accounts payable... -- $ 77,222 $ 8,025 $30,186 $ (115,433) -- Accounts payable.... $ 40 2,540 37,558 1,081 -- $ 41,219 Accrued expenses and other liabilities.. 3,861 4,970 1,783 3,817 -- 14,431 Short-term debt..... -- -- -- -- -- -- Current portion of long-term debt..... 2,600 -- -- -- -- 2,600 --------- --------- --------- ------- ---------- --------- Total current liabilities...... 6,501 84,732 47,366 35,084 (115,433) 58,250 Long-term debt, less current portion.... 297,400 -- -- -- 297,400 Intercompany loans payable............ -- 237,000 145,000 34,000 (416,000) -- Other long-term liabilities........ -- -- 3,052 -- -- 3,052 --------- --------- --------- ------- ---------- --------- Total liabilities.. 303,901 321,732 195,418 69,084 (531,433) 358,702 --------- --------- --------- ------- ---------- --------- Mandatorily redeemable preferred stock........ -- 80,116 -- -- -- 80,116 Shareholders' and divisional equity Preferred stock and paid in capital...... 13,399 (176,846) 28,683 85,283 (33,830) (83,311) Accumulated earnings (deficit)............ (576) (6,091) 23,983 (61,642) -- (44,326) Accumulated other comprehensive income (loss)............... -- -- 8,703 464 -- 9,167 --------- --------- --------- ------- ---------- --------- Shareholders' and divisional equity........... 12,823 (182,937) 61,369 24,105 (33,830) (118,470) --------- --------- --------- ------- ---------- --------- Total liabilities and equity....... $ 316,724 $ 218,911 $ 256,787 $93,189 $ (565,263) $ 320,348 ========= ========= ========= ======= ========== =========
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 10 ChipPAC, Inc. Supplemental Combining Condensed Statements of Operations Nine Months September 30, 1999 (In thousands) (Unaudited)
Parent Issuer Guarantor -------- ---------- Other Non- CP Int'l CPI Guarantors Guarantors Eliminations Combined -------- --------- ---------- ---------- ------------ -------- Revenue Intercompany revenue.. -- -- $231,903 $ 11,057 $ (242,960) -- Customer revenue...... -- 247,535 20,005 131 -- $267,671 ------- -------- ---------- ---------- ------------ -------- Revenue............... -- 247,535 251,907 11,188 (242,960) 267,671 Cost of revenue......... -- 235,541 218,468 19,729 (242,960) 227,778 ------- -------- ---------- ---------- ------------ -------- Gross profit............ -- 14,994 33,440 (8,541) -- 39,893 Operating expenses: Selling, general & administrative....... -- 10,019 4,397 -- -- 14,407 Research & development.......... -- 4,278 4,350 -- -- 8,628 Change of control expenses............. -- 188 11,662 -- -- 11,850 ------- -------- ---------- ---------- ------------ -------- Total operating expenses........... -- 14,476 20,409 -- -- 34,885 ------- -------- ---------- ---------- ------------ -------- Operating income........ -- 518 13,031 (8,541) -- 5,008 Non-operating Income (Expense) Interest income....... $ 119 588 1,275 352 -- 2,334 Interest (expense).... (5,331) (1) (5,184) (1,844) -- (12,360) Intercompany interest income (expense)..... 4,685 (1,522) (2,626) (537) -- -- ------- -------- ---------- ---------- ------------ -------- Interest expense...... (646) (1,523) (7,810) (2,381) -- (12,360) Foreign currency gains (losses)............. -- -- 516 (10) -- 506 Other income (expenses), net...... -- (568) 1,046 103 -- 581 ------- -------- ---------- ---------- ------------ -------- Non-operating income (expenses)......... (527) (1,503) (4,973) (1,936) -- (8,939) ------- -------- ---------- ---------- ------------ -------- Income (loss) before income taxes........... (527) (985) 8,058 (10,477) -- (3,931) Provision for (benefit from) income taxes..... 50 (5) (2,150) -- -- (2,095) ------- -------- ---------- ---------- ------------ -------- Income before extraordinary item..... (575) (990) 10,208 (10,477) -- (1,836) Extraordinary item: Loss from early extinguishment of debt, net of related income tax benefit... -- -- 1,373 -- -- 1,373 ------- -------- ---------- ---------- ------------ -------- Net Income (loss)....... $ (575) $ (990) $ 8,835 $ (10,477) -- $ (3,209) ======= ======== ========== ========== ============ ========
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 11 ChipPAC, Inc. Supplemental Combining Condensed Statements of Cash Flows Nine Months Ended September 30, 1999 (In thousands) (Unaudited)
Parent Issuer Guarantor -------- --------- Other Non- CP Int'l CPI Guarantors Guarantors Eliminations Combined -------- --------- ---------- ---------- ------------ -------- Cash flows from operating activities: Net income........... $ (576) $ (989) $ 8,833 $ (10,477) $ -- $(3,209) Adjustments to reconcile net income Depreciation and amortization...... 250 1,070 32,726 7,804 -- 41,850 Provision for inventory and receivables....... -- (110) (317) -- -- (427) Foreign currency (gains) losses.... -- -- 349 10 -- 359 (Gain) loss on external sales of equipment......... -- -- (241) -- -- (241) Changes in assets and liabilities: Intercompany accounts receivable........ (3,416) (19,177) 29,707 (2,882) (4,232) -- Accounts receivable........ -- 13,881 (4,038) -- -- 9,843 Inventories........ -- (5) (1,785) (99) -- (1,889) Prepaid expenses and other assets.. (11,027) (5,520) (4,247) (36) -- (20,832) Advances (to) from affiliates........ -- 791 (6,981) -- -- (6,190) Intercompany accounts payable.. -- (14,698) 14,401 (3,935) 4,232 -- Accounts payable... 40 296 (21,803) (726) -- (22,193) Accrued expenses & other liabilities. 3,911 1,936 (444) 772 -- 7,063 Other long-term liabilities....... -- -- 1,768 -- -- 1,768 -------- -------- -------- --------- ------ -------- Net cash provided/(used) by operating activities...... (10,818) (22,547) 48,816 (9,569) -- 5,902 -------- -------- -------- --------- ------ -------- Cash flows used in investing activities: Acquisition of property and equipment........... -- (1,430) (26,299) (6,651) 5,328 (29,052) Proceeds, external equipment sales..... -- -- 4,756 1,825 (5,328) 1,253 Investment in subsidiaries........ (29,030) 29,030 -- -- -- -- -------- -------- -------- --------- ------ -------- Net cash used in investing activities...... (29,030) 27,600 (21,543) (4,826) -- (27,799) -------- -------- -------- --------- ------ -------- Cash flows provided by financing activities: Loans & advances with affiliates.......... -- (178,900) 144,900 29,570 -- (4,430) Proceeds from short- term loans.......... -- 476 693 -- -- 1,169 Repayment of short- term loans.......... -- -- (3,769) (15,700) -- (19,469) Proceeds from term loans............... 300,000 -- -- -- -- 300,000 Repayment, term loans and capital leases.. -- -- (105,387) (28,228) -- (133,615) Intercompany loan (advances) payments. (271,000) 271,000 -- -- -- -- Dividend paid........ -- -- (9,435) -- -- (9,435) Issuance of stock.... 10,849 112,566 -- -- -- 123,415 Contributions (withdrawals) of capital............. -- (210,419) (85,300) 24,803 -- (270,916) -------- -------- -------- --------- ------ -------- Net cash provided by financing activities...... 39,849 (5,277) (58,298) 10,445 -- (13,281) -------- -------- -------- --------- ------ -------- Effect from changes in exchange rates........ -- -- (447) -- -- (447) -------- -------- -------- --------- ------ -------- Net increase (decrease) in cash and cash equivalents........... 1 (204) (31,472) (3,950) -- (35,625) Cash and equivalents a beginning of period... -- 10,827 44,293 13,647 -- 68,767 -------- -------- -------- --------- ------ -------- Cash and equivalents at end of period......... $ 1 $ 10,623 $ 12,821 $ 9,697 -- $ 33,142 ======== ======== ======== ========= ====== ========
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 12 ChipPAC, Inc. Supplemental Condensed Consolidating Balance Sheets September 30, 2000 (In thousands) (Unaudited)
Parent Issuer Guarantor --------------------- Other Non- CP Int'l CPI Guarantors Guarantors Eliminations Consolidated -------- ----------- ----------- ---------- ------------- ------------- Assets Current assets: Cash and cash equivalents $654 $1,969 $21,995 $6,200 $-- $30,818 Intercompany accounts receivable 29,413 3,867 35,852 15,340 (84,472) -- Accounts receivable from customers -- 8 56,976 20 -- 57,004 Inventories -- -- 13,433 6,375 -- 19,808 Deferred taxes -- -- 622 -- -- 622 Prepaid expenses & other current assets -- 798 7,873 1,061 -- 9,732 -------- -------- -------- -------- ----------- -------- Total current assets 30,067 6,642 136,751 28,996 (84,472) 117,984 Property, plant and equipment, net -- 5,863 159,769 154,891 -- 320,523 Intercompany loans receivable 323,500 -- -- (34,000) (289,500) -- Investment in subsidiaries 33,388 187,946 308,512 -- (529,846) -- Other assets 12,137 1,537 117,747 -- (100,000) 31,421 -------- -------- -------- -------- ----------- -------- Total assets $399,092 $201,988 $722,779 $149,887 ($1,003,818) $469,928 ======== ======== ======== ======== =========== ======== Liabilities and Equity Current liabilities: Short term bank borrowings $29,810 $-- $-- $-- $-- $29,810 Intercompany accounts payable 59 -- 52,973 31,438 (84,470) -- Accounts payable 73 1,707 38,038 9,393 -- 49,211 Accrued expenses and other liabilities 4,550 7,479 4,269 17,396 (6,368) 27,326 Deferred taxes -- -- -- 4,141 -- 4,141 Short-term debt -- -- -- -- -- -- Current portion of long-term debt 10,800 -- -- -- -- 10,800 -------- -------- -------- -------- ----------- -------- Total current liabilities 45,292 9,186 95,280 62,368 (90,838) 121,288 Long-term debt, less current portion 279,490 -- -- -- -- 279,490 Intercompany loans payable -- -- 289,500 -- (289,500) -- Other long-term liabilities -- 240 5,939 -- -- 6,179 -------- -------- -------- -------- ----------- -------- Total liabilities 324,782 9,426 390,719 62,368 (380,338) 406,957 -------- -------- -------- -------- ----------- -------- Mandatorily redeemable preferred stock -- -- -- -- -- -- Shareholders' and divisional equity Common stock -- 685 -- -- -- 685 Common stock-Subsidiaries 81,714 -- 216,071 53,884 (351,669) -- Warrants-Class A Common Stock -- 1,250 -- -- -- 1,250 Additional paid in capital (25) 272,320 (29) -- -- 272,266 Receivable from shareholder -- (1,565) -- -- -- (1,565) Divisional equity, net of capital distributions -- (58,658) 29,623 85,096 (223,775) (167,714) Accumulated earnings (deficit) (7,379) (21,470) 77,690 (51,925) (48,036) (51,120) Accumulated other comprehensive income (loss) -- -- 8,705 464 -- 9,169 -------- -------- -------- -------- ----------- -------- Shareholders' and divisional equity 74,310 192,562 332,060 87,519 (623,480) 62,971 -------- -------- -------- -------- ----------- -------- Total liabilities and equity $399,092 $201,988 $722,779 $149,887 ($1,003,818) $469,928 ======== ======== ======== ======== =========== ========
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 13 ChipPAC, Inc. Supplemental Combining Condensed Statements of Operations Nine Months Ended September 30, 2000 (In thousands) (Unaudited)
Parent Issuer Guarantor ---------------------- Other Non- CP Int'l CPI Guarantors Guarantors Eliminations Consolidated ----------- --------- ------------ ---------- ------------- ------------ Revenue Intercompany revenue $-- $21,206 $8,306 $61,309 ($90,821) $0 Customer revenue -- -- 362,217 26 -- $362,243 ---------- ------- --------- -------- -------- -------- Revenue -- 21,206 370,523 61,335 (90,821) 362,243 -- Cost of revenue -- 662 296,884 52,182 (69,615) 280,113 ---------- ------- --------- -------- -------- -------- Gross profit -- 20,544 73,639 9,153 (21,206) 82,130 Operating expenses: Selling, general & administrative 30 17,273 26,204 1,706 (21,206) 24,007 Research & development -- 3,749 4,214 18 -- 7,981 ---------- ------- --------- -------- -------- -------- Total operating expenses 30 21,022 30,418 1,724 (21,206) 31,988 ---------- ------- --------- -------- -------- -------- Operating income (30) (478) 43,221 7,429 -- 50,142 Non-operating Income (Expense) Interest income 22,976 81 23,697 63 (46,264) 553 Interest expense (29,926) -- (43,688) (2,580) 46,264 (29,930) Foreign currency gains (losses) -- -- 887 (71) -- 796 Income (loss) from investment in subsidiaries 2,856 15,157 41,875 -- (59,888) -- Other income (expenses), net -- (7,864) 371 599 -- (6,894) ---------- ------- --------- -------- -------- -------- Non-operating income (expenses) (4,094) 7,374 23,122 (1,989) (59,888) (35,475) ---------- ------- --------- -------- -------- -------- Income (loss) before income taxes (4,124) 6,896 66,343 5,440 (59,888) 14,667 Provision for (benefit from) income taxes 242 3,917 4,696 442 (6,367) 2,930 ---------- ------- --------- -------- -------- -------- Income before extraordinary item (4,366) 2,979 61,647 4,998 (53,521) 11,737 Extraordinary item: Loss from early extinguishment of debt, net of related income tax benefit 2,390 -- -- -- -- 2,390 ---------- ------- --------- -------- -------- -------- Net Income (loss) ($6,756) $2,979 $61,647 $4,998 ($53,521) $9,347 ========== ======= ========= ======== ======== ========
The accompanying notes form an integral part of these condensed consolidated financial statements - -------------------------------------------------------------------------------- Page 14 ChipPAC, Inc. Supplemental Combining Condensed Statements of Cash Flows Nine Months Ended September 30, 2000 (In thousands) (Unaudited)
Parent Issuer Guarantor ---------------------- Other Non- CP Int'l CPI Guarantors Guarantors Eliminations Consolidated ---------- -------- ------------ ----------- ------------ ------------ Cash flows from operating activities: Net Income ($6,756) $2,979 $61,648 $4,997 ($53,521) $9,347 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization $3,842 $1,542 $19,828 $8,637 $0 33,849 Provision for inventory and receivables -- -- (491) -- -- (491) Foreign currency (gains) losses -- -- (467) -- -- (467) (Gain) loss on external sales of equipment -- -- 165 (184) -- (19) Equity income from investment in subsidiaries ($2,856) ($15,157) ($41,875) $-- 59,888 -- Changes in assets and liabilities: Intercompany accounts receivable (25,360) 2,912 8,876 (6,541) 20,113 -- Accounts receivable -- (36) (15,822) -- -- (15,858) Inventories -- -- 4,879 (2,611) -- 2,268 Prepaid expenses and other assets (620) (2,080) (6,217) (447) -- (9,364) Advances (to) from affiliates -- -- -- -- -- -- Intercompany accounts payable 58 28 20,185 (5,107) (15,164) -- Accounts payable 33 457 (11,729) 4,165 -- (7,074) Accrued expenses & other liabilities (4,496) 3,019 (5,332) 1,626 (11,414) (16,597) Other long-term liabilities -- -- 2,753 -- -- 2,753 ______ ______ ______ ______ ______ ______ Net cash provided by operating activities (36,155) (6,336) 36,401 4,535 (98) (1,653) ______ ______ ______ ______ ______ ______ Cash flows used in investing activities: Acquisition of property and equipment -- (1,359) (49,929) (10,066) 262 (61,092) Proceeds, from equipment sales -- 248 16,666 (1,495) (169) 15,250 Investment in subsidiaries -- (85,123) (83,272) 864 130,299 (37,232) Purchase of intangible assets -- -- (12,655) -- -- (12,655) ______ ______ ______ ______ ______ ______ Net cash used in investing activities -- (86,234) (129,190) (10,697) 130,392 (95,729) ______ ______ ______ ______ ______ ______ Cash flows provided by financing activities: Loans and advances (to) from employees-net -- (225) -- -- -- (225) Proceeds from short-term loans 45,600 -- -- -- -- 45,600 Repayment of short-term loans (15,790) -- -- -- -- (15,790) Net proceeds from long-term loans 53,236 -- -- -- -- 53,236 Repayment of term loans (64,710) -- -- -- -- (64,710) Intercompany loan (advances) payments (52,500) -- 52,500 -- -- -- Intercompany capital contributions 67,500 -- 40,008 7,000 (114,508) -- Dividend paid -- -- -- -- -- -- Net proceeds from common stock issuance -- 157,282 -- -- -- 157,282 Net proceeds from mandatorily redeemable -- preferred stock issuance -- 15,786 -- -- (15,786) -- Retirement of Preferred Stock B -- (79,310) -- -- -- (79,310) ______ ______ ______ ______ ______ ______ Net cash provided by financing activities 33,336 93,533 92,508 7,000 (130,294) 96,083 ______ ______ ______ ______ ______ ______ Net increase (decrease) in cash (2,819) 963 (281) 838 -- (1,299) Cash and equivalents at beginning of period 3,474 1,007 22,273 5,363 -- 32,117 ______ ______ ______ ______ ______ ______ Cash and equivalents at end of period $655 $1,970 $21,992 $6,201 $-- $30,818 ====== ====== ====== ====== ====== ======
The accompanying notes form an integral part of these condensed consolidated financial statements. - -------------------------------------------------------------------------------- Page15 Item 2 : Management's discussion and analysis of financial condition and results of operations All references are to ChipPAC's fiscal quarters ended September 30, 2000, and September 30, 1999, 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 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, incl uding, without limitation, those identified under the heading "Risk Factors" beginning on page 11 of our registration statement on Form S-1 (No. 333-39428) 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. Overview In 1984, our packaging business began operating as a separate division of Hyundai Electronics Industries Co., Ltd., one of the world's largest semiconductor manufacturers and a member of the Hyundai Group, the Korean conglomerate. In 1997, we were incorporated as a distinct entity and established as the parent of a stand-alone worldwide business. In 1999, as part of our recapitalization, 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," obtained control of our company and Hyundai Electronics America retained approximately 10.0% of our outstanding common stock. We changed the functional currency of ChipPAC Korea and our Chinese subsidiaries, which we refer to throughout this document as ChipPAC China, from the respective local currencies to the U.S. Dollar, effective October 1, 1999. The consolidated effect of this change was to reduce net income for the year ended December 31, 1999, by $4.8 million and to reduce both total assets and stockholders' equity as at December 31, 1999, by $9.5 million. This change had no effect on cash flows from operations or net cash flows for the year ended December 31, 1999. - -------------------------------------------------------------------------------- Page 16 Malaysian Business On June 30, 2000, we consummated our acquisition of Intersil's packaging and test operations located in Kuala Lumpur, Malaysia along with related intellectual property for approximately $70.0 million in cash and preferred stock. In connection with the acquisition, we entered into a five-year supply agreement with Intersil to provide assembly and test services on an exclusive basis. The Malaysian business increases our exposure to high growth advanced communications products, establishes us as a leader in power packaging, provides a presence in Malaysia and enhances our intellectual property in key areas. In addition, the Malaysian business expands our mixed-signal testing capabilities and provides us with critical expertise in RF testing. The Malaysian business had revenues of $83.7 million, $80.4 million and $110.5 million for the fiscal years ended June 27, 1997, July 3, 1998 and July 2, 1999, respectively. All of these revenues represented intercompany sales to Intersil. Results of Operations Three and Nine Months Ended September 30, 2000 Compared to the Three and Nine Months Ended September 30, 1999 Revenues Revenues were $155.8 million and $362.2 million for the three months and nine months ended September 30, 2000, respectively, an increase of 53.8% and 35.3% over the prior year periods, respectively. The nine month period only includes the Malaysian acquisition for the third quarter of 2000. Our total packaging unit volume was 615 million and 1.375 billion for the three months and nine months ended September 30, 2000, an increase of 91.8% and 86.2%, respectively, over the prior year periods. Unit volume for the three and nine months ended September 30, 2000 includes 185 million from our Malaysia acquisition. Leaded product assembly unit volume increased by 91.8% and 84.5%, respectively, over the prior year three and nine month periods. Laminate product assembly unit volume increased by 92.1% and 100.6%, respectively, over the comparable prior year periods. Test service revenues were $7.8 million and $29 million for the three months and nine months ended September 30, 2000, respectively, an increase of 424.7% and 335.5% over the prior year periods, respectively. Gross Profit Gross profit during the three months and nine months ended September 30, 2000 was $35.6 million and $82.1 million, respectively and increased by 211.9% and 205.9%, respectively, over the comparable prior year periods. Gross margin percentage was 22.8% and 22.7% for the three months and nine months ended September 30, 2000, an increase of 137.5% and 152.3%, respectively, over the comparable periods in the prior year. The margin improvement during the three months and nine months periods ended September 30, 2000 were primarily attributable to increased efficiency in the utilization of our production capacity and labor resources and lower depreciation expense resulting from the change in the estimated useful lives in production equipment made effective from January 1, 2000. This change in accounting estimate resulted in lowered depreciation expense for the three months and six months ended September 30, 2000 of approximately $6.9 million and $20.5 million, respectively. Selling, General and Administrative Selling, general and administrative expenses increased to $9.7 million and $24.0 million for the three months and nine months ended September 30, 2000, respectively, an increase of 90.5% and 66.7%, respectively, over the comparable prior year periods. As a percentage of revenue these expenses for the three months and six months ended September 30, 2000 increased to 6.2% and 6.6%, respectively, from 5.0% and 5.4% in the - ------------------------------------------------------------------------------- Page 17 prior year periods. This increase in spending was primarily due to the addition of our Malaysian acquisition and to a lesser extent, the additions of management personnel, MIS development, and management advisory fees. The remaining increase was due to additional sales, marketing and customer service headcount in support of the acquisition of new customers. Research and Development Research and development expense increased to $2.8 million and decreased to $8.0 million during the three and nine months ended September 30, 2000, respectively. This represents a 7.5% increase and a 7.5% decrease, respectively, in research and development costs over the comparable prior year periods. During both the three and nine months ended September 30, 2000 spending on consumable materials, supplies, and tooling was lower due to timing of projects and a focus of our research efforts on highly collaborative development programs with major customers, including expenses related to the Malaysian acquisition. Additionally, there were non-recurring start up costs in the first quarter of 1999 associated with the Santa Clara flip-chip and advanced packaging prototype design and development laboratory. Change of Control Expenses During the three months ended September 30, 1999, a $11.8 million change in control charge was paid in the form of a special bonus to employees of our Korean subsidiary arising from the change in control in our recapitalization transaction. This resulted in a corresponding reduction to the recapitalization consideration paid to Hyundai. Net Interest Expense Total outstanding interest bearing debt increased to $320.1 million at September 30, 2000 from $300.0 million at September 30, 1999 due primarily to purchases of capital equipment. Related interest expense was $10.6 million and $29.9 million for the three and nine months ended September 30, 2000, respectively. This represents an increase of $4.3 million and $17.8 million over the comparable prior year periods. Interest expense was higher in the 2000 periods than the 1999 periods as the debt related to recapitalization was outstanding for all of 2000 and only for part of three month period ended September 30, 1999. Interest income for the three months and nine months ended September 30, 2000, decreased to $0.2 million and $0.6 million, respectively, from $0.5 and $2.3 million during the comparable three and nine month periods in 1999. Termination of Management Advisory Services Contracts In connection with the Company's recapitalization in 1999, the Company entered into an advisory agreement with Bain Capital, Inc. and SXI Group LLC. Concurrent with our initial public offering, on August 14, 2000 this agreement was terminated in exchange for a one-time payout to Bain Capital and SXI Group of $8.0 million in cash and stock. Foreign Currency Gains (Losses) Net foreign currency gains (losses) were ($0.2) million and $0.8 million during the three and nine months ended September 30, 2000, respectively, compared to net gains(losses) of $(0.9) million and $0.5 million during the three and nine months ended September 30, 1999, respectively. During 2000 our exposure to foreign currency gains and losses has been significantly mitigated by two related factors. First, on October 1, 1999 we changed our functional currency to the U.S. Dollar from the local currencies of our Korean and Chinese subsidiaries. Second, beginning in late 1999 we negotiated and denominated the large majority of our material and equipment purchases in U.S. Dollars. Income Taxes Income tax expense for the quarter and nine months ended September 30, 2000 was approximately $1.0 million and $2.9 million, respectively, for an effective tax rate of 20% for both periods. Concurrent with the 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. During the three and nine months ended September 30, - -------------------------------------------------------------------------------- Page 18 1999, much of it prior to this reorganization of the company, the company had an income tax benefit of $5.0 million, and $2.1 million, respectively. Extraordinary Items A portion of the initial public offering proceeds was used to fully extinguish the loan related to the purchase of the Malaysian business. Capitalized debt issuance costs of $2.4 million were written off and the charge is included in the results for the three and nine months ended September 30, 2000. As part of the recapitalization in three months ended September 30, 1999, there was an early extinguishment of debt, and the loss of $1.4 million, net of an income tax benefit of $0.3 million, is included in the results for the three and nine months ended September 30, 1999. Net Income: As a result of the various items described above, we had net income of $1.6 and $9.3 million for the three and nine months ended September 30, 2000, respectively, compared to a net (loss) of ($5.5) million and ($3.2) million for the three and nine months ended September 30, 1999, respectively. Liquidity and Capital Resources At September 30, 2000 we had and 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 the 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 may not be reborrowed by us later. The final maturity for both these facilities is August 5, 2005. Our ongoing primary cash needs are for operations and equipment purchases. As at September 2000, we had borrowings of $29.8 million on our revolving line of credit. We have spent $61.1 million on capital expenditures during the nine months ended September 30, 2000. We also entered into a leasing transaction in 2000 whereby we received $15.3 million in proceeds from a leasing company and then leased equipment from them. We spent $29.1 million in capital expenditures during the nine months ended September 30, 1999. 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. - -------------------------------------------------------------------------------- Page 19 As of September 30, 2000, our debt consisted of $320.1 million of borrowings which were comprised of $29.8 million of revolving loans, $140.3 million in term loans and $150.0 million of senior subordinated notes. On August 18, 2000 the company completed an initial public offering and concurrent private placement which has generated net cash proceeds of approximately $152.1 million to-date including the net proceeds from the sale of shares available to the underwriters for over subscription in the initial closing. Based upon certain requirements imposed by the senior bank facilities, at least $41.0 million of the net initial public offering proceeds were required to be used to retire bank term debt. The company has met this minimum requirement and chose to use $55.8 million of the initial public offering net proceeds to retire the term debt acquired to partially finance the acquisition of the Malaysian facility. See Note 8 for further disclosure of the sources and uses of the initial public offering and private placement proceeds. 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. 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 September 30, 2000 and we expect to comply with all these covenants during the next twelve months. Therefore, our liquidity and capital resources are not expected to be impacted by these covenants. 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 utilize derivative financial instruments but do not use derivative financial instruments for speculative or trading purposes. 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 $1.5 million. A majority of our revenue and capital spending is transacted in U.S. Dollars. We do, however, enter into transactions in other currencies, primarily the Korean Won. With effect from October 1, 1999 we have changed the functional currency of ChipPAC Korea and ChipPAC China from their respective local currencies to the U.S. Dollar. The use of the U.S. Dollar as the functional currency is expected to result in a much lower level of foreign exchange gains and losses in our overseas subsidiaries. Factors Affecting Future Results For a statement of the factors which may affect our future results, we refer you to our registration statement on Form S-1 (No. 333-39428) relating to our proposed initial public offering of our Class A common stock. Please see in particular those factors mentioned under the heading "Risk Factors" beginning on page 10 and information mentioned under the heading "Cautionary Note Regarding Forward-Looking Statements" on page 18 of that registration statement. PART II. OTHER INFORMATION Item 1. Legal Proceedings Not applicable. - -------------------------------------------------------------------------------- Page 20 Item 2. Changes in Securities and Use of Proceeds On August 14, 2000 the company completed an initial public offering (the "Offering") of its Class A common stock. The managing underwriters in the Offering were Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, FleetBoston Robertson Stephens Inc. and Thomas Weisel Partners LLC (the "Underwriters"). The shares of Class A common stock sold in the Offering were registered under the Securities Act of 1933, as amended, on a Registration Statement on Form S-1 (the "Registration Statement") (Reg. No. 333-39428) that was declared effective by the SEC on August 8, 2000. The offering commenced on August 9, 2000. All 11,500,000 shares of Class A common stock registered under the Registration Statement (including 1,500,000 shares sold pursuant to the exercise of the Underwriters' overallotment option) were sold at a price of $12.00 per share. The aggregate price of the offering amount registered was $172,500,000. The Company paid an aggregate of $10,912,000 in fees, commissions and underwriting discounts associated with the Offering. The Company received net proceeds from the Offering of $127,088,000 and an additional $25,000,000 from a concurrent private placement with Qualcomm. The Company has used $79,310,000 of the proceeds to fully retire the Series B preferred stock, $55,845,000 to retire Term Debt and $16,933,000 for other corporate purposes. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders In June 2000, the stockholders voted on a consent in lieu of special meeting of stockholders. The following matters were voted on: (1) the reincorporation of the Company under the laws of the State of Delaware; (2) the merger agreement relating to such reincorporation; (3) Amended and Restated Certificate of Incorporation; (4) Amended and restated Bylaws; (5) appointment of independent public accountants; (6) form of Indemnification agreement; (7) 2000 Equity Incentive Plan and (8) 2000 Employee Stock Purchase Plan. On all matters the vote tally was 47,293,280 votes for, with the remainder of the outstanding share abstaining. In July 2000, the stockholders voted on a consent in lieu of special meeting of stockholders approving the 0.38098771 for 1 reverse stock split of the Company's capital stock. The vote tally was 47,293,280 votes for, with the remainder of the outstanding share abstaining. Item 5. Other Information - -------------------------------------------------------------------------------- Page 21 Not applicable Item 6. Exhibits and Reports on from 8-K (a) Exhibits Exhibit Number Description 2.1 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.* 2.2 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 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 Articles of Incorporation of ChipPAC, Inc.* 3.2 Amended and Restated By-Laws of ChipPAC, Inc.* 3.3 Memorandum of Association of ChipPAC International Company Limited (formerly known as ChipPAC Finance Limited).* 3.4 Articles of Association of ChipPAC International Company Limited (formerly known as ChipPAC Finance Limited).* 3.5 Articles of Incorporation of ChipPAC (Barbados) Ltd.* 3.6 By-Law No. 1 of ChipPAC (Barbados) Ltd.* 3.7 Memorandum of Association of ChipPAC Limited.* 3.8 Articles of Association of ChipPAC Limited.* 3.9 Articles of Incorporation of ChipPAC Luxembourg S.a.R.L.* 3.10 Deed of Foundation of ChipPAC Liquidity Management Hungary Limited Liability Company.* 3.11 Policy and Operating Guidelines of ChipPAC Liquidity Management Hungary Limited Liability Company (abbreviated as ChipPAC Ltd.)* 3.12 Articles of Incorporation of ChipPAC Korea Company Ltd.* 4.2 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.* 4.3 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.* 4.4 12 3/4% Senior Subordinated Notes Due 2009.* 4.5 Form of Series B 12 3/4% Senior Subordinated Notes Due 2009.* 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.* - -------------------------------------------------------------------------------- Page 22 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.* - -------------------------------------------------------------------------------- Page 23 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.** 10.22 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 Intellectual Property Rights Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.** 10.29 Supply Agreement, entered into as of June 30, 2000, by and between Intersil Corporation and ChipPAC Limited.** 10.30 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.** 10.31 Class A Common Stock Purchase Agreement, dated as of July 13, 2000, by and between ChipPAC, Inc. and Qualcomm Incorporated.** 10.32 Promissory Note, dated as of August 2, 2000, by and between Dennis McKenna and ChipPAC, Inc.** 10.33 Promissory Note, dated as of August 2, 2000, by and between Robert Krakauer and ChipPAC, Inc.** - -------------------------------------------------------------------------------- Page 24 10.34 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. ** 10.35 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. ** 21.1 Subsidiaries of ChipPAC, Inc., ChipPAC International Company Limited, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Liquidity Management Limited Liability Company, ChipPAC Luxembourg S.a.R.L. and ChipPAC Korea Company Ltd.* 27.1 Financial Data Schedule. - ----------------------- * Incorporated by reference to the similarly numbered exhibit in the Registrant's Form S-4 (No. 333-91641). ** Incorporated by reference to the similarly numbered exhibit in the Registrant's Form S-1 (No. 333-39428). + Confidential treatment has been granted as to certain portions of these exhibits, which are incorporated by reference. (b) Reports on Form 8-K On July 14, 2000 ChipPAC filed a report on Form 8-K under Item 2 that the Company had completed its acquisition of Intersil Technology Sdn. Bhd., a Malaysian corporation and wholly-owned subsidiary of Sapphire Worldwide Investments,Inc., a British Virgin Islands corporation and wholly-owned subsidiary of Intersil Corporation, a Delaware corporation. Pursuant to Item 7 of Form 8-K, we attached the financial statements and pro forma financial statements of Intersil Technology Sdn. Bhd. 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 Chief Financial Officer (as Registrant and as Principal Accounting Officer) November 16, 2000 - -------------------------------------------------------------------------------- Page 25 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 30,818 0 58,062 1,058 19,808 117,984 543,942 223,419 469,928 121,288 279,490 0 0 685 62,286 469,928 362,243 362,243 280,113 280,113 31,988 4,230 29,930 14,667 2,930 11,737 0 2,390 0 9,347 0.00 0.00
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