-----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, Hj2wRzVTiDVtNflIG8btyjjZVKaazdKzxIzhiLRzARde6nnJ33rbxRLE/xcns9Jc +QlrIRbYqMAOJi0ehmK3SA== 0001021408-02-006738.txt : 20020513 0001021408-02-006738.hdr.sgml : 20020513 ACCESSION NUMBER: 0001021408-02-006738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIPPAC INC CENTRAL INDEX KEY: 0001093779 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770463048 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-31173 FILM NUMBER: 02643898 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 d10q.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 quarterly period ended March 31, 2002. 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 Incorporation or Organization) Identification No.) 47400 Kato Road, Fremont, California 94538 (Address of Principal Executive Offices, Zip Code) Registrant's Telephone Number, Including Area Code (510) 979-8000 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 outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding as of May 1, 2002 Class A common stock, $.01 par value 81,090,375 Class B common stock, $.01 par value None ================================================================================ TABLE OF CONTENTS
PAGE PART I FINANCIAL INFORMATION............................................................. 3 Item 1. Financial Statements............................................................ 3 Unaudited Condensed Consolidated Balance Sheets................................... 3 Unaudited Condensed Consolidated Statements of Operations......................... 4 Unaudited Condensed Consolidated Statements of Cash Flows......................... 5 Notes to Unaudited Condensed Consolidated Financial Statements.................... 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................... 16 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................... 19 PART II OTHER INFORMATION Item 1. Legal Proceedings............................................................... 20 Item 2. Changes in Securities and Use of Proceeds....................................... 20 Item 3. Defaults Upon Senior Securities................................................. 20 Item 4. Submission of Matters to a Vote of Security Holders............................. 20 Item 5. Other Information............................................................... 20 Item 6. Exhibits and Reports on Form 8-K................................................ 20 Signatures............................................................................... 25
2 ChipPAC, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (Unaudited)
March 31, December 31, 2002 2001 ---- ---- Assets: Current assets: Cash and cash equivalents $ 64,345 $ 41,872 Accounts receivable, less allowance for doubtful accounts of $415 and $449 31,058 32,034 Inventories 13,051 12,481 Prepaid expenses and other current assets 4,950 4,515 --------- -------- Total current assets 113,404 90,902 Property, plant and equipment, net 301,557 304,650 Other assets 35,493 35,163 --------- -------- Total assets $ 450,454 $430,715 ========= ======== Liabilities and stockholders' equity (deficit) Current liabilities: Revolving loans $ 50,000 $ 50,000 Line of credit 5,596 -- Accounts payable 27,501 31,045 Accrued expenses and other current liabilities 23,153 27,838 Current portion of long-term debt 818 -- --------- -------- Total current liabilities 107,068 108,883 Long-term debt, less current portion 250,369 283,627 Convertible subordinated note 50,000 50,000 Other long-term liabilities 12,187 11,431 --------- -------- Total liabilities 419,624 453,941 --------- -------- Stockholders' equity (deficit): Common stock, Class A - par value $0.01 per share; 250,000,000 shares authorized, 81,078,000 and 69,404,000 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively 811 694 Common stock, Class B - par value $0.01 per share; 250,000,000 shares, no shares issued or outstanding at March 31, 2002 and December 31, 2001 -- -- Additional paid in capital 175,233 110,043 Receivable from stockholders (691) (985) Accumulated other comprehensive income 9,169 9,169 Accumulated deficit (153,692) (142,147) --------- -------- Total stockholders' equity (deficit) 30,830 (23,226) --------- -------- Total liabilities and stockholders' equity (deficit) $ 450,454 $430,715 ========= ========
The accompanying notes are an integral part of these financial statements. 3 ChipPAC, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
For the Three Months Ended March 31, 2002 2001 ---- ----- Revenue $ 79,213 $ 89,859 Cost of revenue 69,658 78,138 ---------- -------- Gross profit 9,555 11,721 Operating expenses: Selling, general and administrative 9,774 9,282 Research and development 2,336 3,513 Restructuring and other charges -- 2,962 ---------- -------- Total operating expenses 12,110 15,757 ---------- -------- Operating loss (2,555) (4,036) Non-operating (income) expenses: Interest expense 8,647 8,832 Interest income (70) (148) Foreign currency (gains) loss 78 (441) Other (income) expenses, net (165) (196) ---------- -------- Total non-operating expenses 8,490 8,047 ---------- -------- Loss before income taxes (11,045) (12,083) Provision for (benefit from) income taxes 500 (2,416) ---------- -------- Net loss $ (11,545) $ (9,667) ========== ======== Net loss Basic $ (0.15) $ (0.14) Diluted $ (0.15) $ (0.14) Weighted average shares used in per share calculation: Basic 76,794 68,588 Diluted 76,794 68,588
The accompanying notes are an integral part of these financial statements. 4 ChipPAC, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
For the Three Months Ended March 31, 2002 2001 ---- ---- Cash flows from operating activities: Net loss $(11,545) $ (9,667) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 13,389 14,037 Foreign currency (gains) losses 78 (441) (Gain) loss on sale of equipment (30) 75 Changes in assets and liabilities: Accounts receivable 976 10,383 Inventories (570) 1,691 Prepaid expenses and other current assets (435) (3,249) Other assets (1,770) (3,245) Accounts payable (3,544) (18,580) Accrued expenses and other current liabilities (4,763) (5,309) Other long-term liabilities 756 (10) -------- -------- Net cash used in operating activities (7,458) (14,315) -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment (7,773) (9,443) Proceeds from sale of equipment 36 61 Malaysian acquisition, net of cash and cash equivalents acquired (1,592) (1,482) -------- -------- Net cash used in investing activities (9,329) (10,864) -------- -------- Cash flows from financing activities: Advances to affiliates -- 250 Proceeds from revolving loans 50,000 12,200 Repayment of revolving loans (50,000) -- Proceeds from line of credit 5,596 -- Debt issuance cost (125) (200) Repayment of long-term debt (32,440) -- Amortization of debt issuance cost 628 465 Repayment of notes from stockholders 294 -- Proceeds from common stock issuance 65,320 1,138 Repurchase of common stock (13) -- -------- -------- Net cash provided by financing activities 39,260 13,853 -------- -------- Net increase (decrease) in cash 22,473 (11,326) Cash and cash equivalents at beginning of period 41,872 18,850 -------- -------- Cash and cash equivalents at end of period $ 64,345 $ 7,524 ======== ========
The accompanying notes are an integral part of these financial statements. 5 ChipPAC, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended March 31, 2002 (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, 2001 included in ChipPAC's 2001 Annual Report on Form 10-K. The results of operation 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, 2002. The interim period ended on March 31, 2002, the Sunday nearest March 31st. RECENT ACCOUNTING PRONOUNCEMENTS 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 indefinite life 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 adoption of SFAS No. 141 and 142 did not have a material effect on the Company's financial statements. In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of" and the accounting and reporting provision of Accounting Principles Board ("APB") No. 30, "Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 addresses financial accounting and reporting for impairment or disposal of long-lived assets including amortizable intangibles and is effective for fiscal years beginning December 15, 2001 as well as interim periods within those fiscal years. SFAS No. 144 does not apply to the impairment of goodwill and non-amortizable intangibles. The adoption of SFAS no. 144 did not have a material effect on the Company's financial statements. BASIS OF PRESENTATION The financial statements have been prepared on a consolidated basis. The condensed consolidated financial statements include the accounts of ChipPAC, Inc. and its subsidiaries. All significant intercompany balances have been eliminated on consolidation. NOTE 2: SELECTED BALANCE SHEET ACCOUNTS The components of inventories were as follows (in thousands): March 31, December 31, 2002 2001 ---- ---- Raw materials............................. $ 9,437 $ 7,949 Work in process........................... 2,880 3,080 Finished goods............................ 734 1,452 ------- ------- $13,051 $12,481 ======= ======= 6 Other assets were comprised of the following (in thousands):
March 31, December 31, 2002 2001 ---- ---- Deposits............................................................................ $ 1,621 $ 1,603 Long-term employee loans............................................................ 703 652 Debt issuance costs, net of amortization of $7,854 and $7,226....................... 14,212 14,715 Intangibles assets, net of amortization of $13,185 and $12,015...................... 18,933 18,038 Other............................................................................... 24 155 ------- ------- $35,493 $35,163 ======= =======
Accrued expenses and other liabilities were comprised of the following (in thousands): March 31, December 31, 2002 2001 ---- ---- Payroll and related items................. $10,886 $ 9,696 Interest payable.......................... 5,271 10,954 Restructuring reserve..................... 1,332 1,632 Other expenses............................ 5,664 5,556 ------- ------- $23,153 $27,838 ======= ======= In the first and fourth quarters of 2001, ChipPAC's management approved restructuring plans to realign its organization and reduce operating costs. These actions were designed to better align ChipPAC's workforce and to reduce operating expenses. These plans were a combination of reductions in work force and employee furloughs. Accordingly, ChipPAC planned to reduce associated employee positions by approximately 554 and 197 worldwide in connection with the first and fourth quarter plans, respectively. Restructuring and other charges of $3.0 million and $3.3 million were expensed during the first and fourth quarters of 2001, respectively. The entire first quarter charge of $3.0 million was related to employee separations and furloughs. The fourth quarter charge was comprised of $1.8 million related to employee separations and $1.5 million of other charges for the forgiveness of loans to executive officers. During the quarter ended March 31, 2002, the Company utilized $0.3 million of the restructuring accrual and completed another 14 of the planned 751 employee separations. Cumulatively, the Company has completed 568 of the planned 751 employee separations. ChipPAC expects to substantially complete the initiatives contemplated under the restructuring plans by December 31, 2002 for the estimated amount accrued with no significant differences. Components of accrued restructuring costs and amounts charged for restructuring as of March 31, 2002 were as follows (in thousands):
Adjustments Adjustments Beginning and December 31, and March 31, Accrual Expenditures 2001 Expenditures 2002 ------- ------------ ---- ------------ ---- Employee separations $4,732 $(3,100) $1,632 $ (300) $1,332 ====== ======== ====== ========= ======
NOTE 3: LINE OF CREDIT The Company had established two separate lines of credit with Korean banks in 1998, with credit limits of $12.5 million and $25.0 million, respectively. As of March 31, 2002, the Company had outstanding borrowings of $2.3 million and $3.3 million against these lines of credit for buy-downs of operating leases. As of March 31, 2002, the outstanding lines of credit bore weighted average interest rates of 2.7%. Both agreements are subject to an annual review by the Korean banks for the continued use of the credit line facility. 7 NOTE 4: COMMON STOCK OFFERING On January 30, 2002, the Company sold 10,000,000 shares of Class A common stock in an underwritten public offering based on the public offering price of $6.00 per share. On February 14, 2002, the Company sold an additional 1,425,600 shares of Class A common stock in conjunction with the underwriter's exercise of their over-allotment option at the public offering price of $6.00 per share. In connection with these sales, the Company received net proceeds of approximately $63.9 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $62.4 million from this offering were used to pay down term loans and revolving loans. The remaining $1.4 million was used for general corporate purposes. Sources and Use of Funds From Issuance of Common Stock In Public Offering - ------------------------------------------------------------------------- (in thousands) Gross proceeds from issuance of common stock $68,554 Less: related issuance costs (4,674) ------- Net proceeds from issuance of common stock $63,880 ======= Use of funds: Repayment of senior credit facilities $62,438 General corporate purposes 1,442 ------- $63,880 ======= NOTE 5: ACQUISITION OF MALAYSIAN BUSINESS On June 30, 2000, the Company consummated the acquisition of Intersil's packaging and test operations located in Kuala Lumpur, Malaysia along with related intellectual property for approximately $71.5 million in cash and preferred stock. The terms of the acquisition of the Malaysian business require the Company to pay until June 30, 2003 additional contingent incentive payments to Intersil based on the achievement of milestones with respect to the transfer of the seller's packaging business, currently subcontracted by Intersil to a third party, to the Company. The Company records these contingent payments as additional purchase price if and when they are earned. In the event that Intersil were to achieve all the milestones, Intersil would receive an additional sum of approximately $17.9 million in the aggregate. For the quarter ended March 31, 2002, the Company paid $1.6 million relating to the achievement of milestones and cumulatively $9.4 million of contingent incentive payments have been paid since the acquisition. Additionally, in 2001, $2.4 million of other purchase price adjustments were recorded based on the difference between the final closing balance sheet and the estimated closing balance sheet of the Malaysian business and deferred tax of $3.1 million on all of these adjustments. This resulted in a further increase in non-current assets. These payments increased the effective purchase price and were allocated to non-current assets. There is no goodwill arising from the acquisition of the Malaysian business. The fair value of total assets and liabilities exceeded the purchase price by $56.2 million as of July 1, 2000. This amount has been allocated in full to non-current assets as summarized below:
Excess of Fair Total Estimated Value of Additional Fair Acquired Net Purchase Adjusted Non-current assets Value Assets Over Cost Price Fair Value - ------------------ ------ ---------------- ----- ---------- (in millions) Land and buildings................................... $ 27.9 $ (11.1) $ 3.0 $ 19.8 Plant and equipment.................................. 93.9 (36.9) 10.2 67.2 Intellectual property................................ 20.9 (8.2) 1.7 14.4 ------ -------- ----- ------- $142.7 $ (56.2) $14.9 $ 101.4 ====== ======== ==== =======
8 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 stock outstanding (denominator) during the period. Diluted EPS is computed using the weighted average number of shares of common stock and all potentially dilutive shares of common stock 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. As of March 31, 2002, there were options outstanding to purchase 6.5 million shares of Class A common stock with a weighted average exercise price of $4.04, which could potentially dilute basic earnings per share in the future, but which were not included in diluted earnings per share as their effect would have been antidilutive. The Company also has outstanding the $50.0 million convertible subordinated notes which are convertible into approximately 5.0 million shares of Class A common stock at $9.96 per share but which were not included in diluted basic earnings per share as their effect would also have been antidilutive. Following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented below.
Three Months Ended Three Months Ended March 31, 2002 March 31, 2001 Net Per-Share Net Per-Share Loss Shares Amount Loss Shares Amount ---- ------ ------- ---- ------ ------ (In thousands, except per share amounts) Basic EPS: Net loss per share $ (11,545) 76,794 $(0.15) $ (9,667) 68,588 $(0.14) Diluted EPS: Net loss per share $ (11,545) 76,794 $(0.15) $ (9,667) 68,588 $(0.14)
NOTE 7: SUPPLEMENTAL FINANCIAL STATEMENTS OF GUARANTOR/NON-GUARANTOR ENTITIES In connection with the recapitalization, in August 1999, ChipPAC International Company Limited, ("CP Int'l"), issued senior subordinated debt securities which are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by the parent company, ChipPAC, Inc. ("CPI") and by ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Korea Company Limited ("CPK"), ChipPAC Malaysia Sdn. Bhd. ("CPM"), ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company (the "Guarantor Subsidiaries"). All Guarantor Subsidiaries are wholly-owned direct or indirect subsidiaries of CPI. ChipPAC Shanghai Limited ("CPS") and ChipPAC Electronic Technology Ltd. ("CETS"), did not provide guarantees (the "Non-Guarantor Subsidiaries"). The following is consolidated financial information for CP Int'l CPI, and CPK, CPS, CETS, ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company, segregated between the Guarantor and Non-Guarantor Subsidiaries. 9 ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS March 31, 2002 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor CPI CP Int'l Guarantors China Eliminations Consolidated --- ------- ---------- ----- ----------- ------------ Assets Current assets: Cash and cash equivalents $ 1,706 $ 356 $ 57,738 $ 4,545 $ -- $ 64,345 Intercompany accounts receivable 126,234 125,215 18,899 17,461 (287,809) -- Accounts receivable, net 17 -- 31,004 37 -- 31,058 Inventories -- -- 9,787 3,264 -- 13,051 Prepaid expenses and other current assets 336 -- 4,186 428 -- 4,950 -------- --------- -------- --------- --------- --------- Total current assets 128,293 125,571 121,614 25,735 (287,809) 113,404 Property, plant and equipment, net 5,870 -- 196,755 98,932 -- 301,557 Intercompany loans receivable -- 352,500 -- -- (352,500) -- Investment in subsidiaries (50,502) -- 59,720 -- (9,218) -- Other assets 4,084 11,177 19,479 753 -- 35,493 -------- --------- -------- --------- --------- --------- Total assets $ 87,745 $489,248 $397,568 $ 125,420 $(649,527) $ 450,454 ======== ======== ======== ========= ========= ========= Liabilities and stockholders' equity (deficit) Current liabilities: Intercompany accounts payable $ 99 $ 111,011 $156,195 $ 20,504 $(287,809) $ -- Revolving loans -- 50,000 -- -- -- 50,000 Line of credit -- -- 5,596 -- -- 5,596 Accounts payable 2,609 95 17,489 7,308 -- 27,501 Accrued expenses and other current liabilities 4,207 4,706 8,244 5,996 -- 23,153 Current portion of long-term debt -- 818 -- -- -- 818 -------- --------- -------- --------- --------- --------- Total current liabilities 6,915 166,630 187,524 33,808 (287,809) 107,068 Long-term debt, less current portion -- 250,369 -- -- -- 250,369 Convertible subordinated note 50,000 -- -- -- -- 50,000 Intercompany loans payable -- -- 318,500 34,000 (352,500) -- Other long-term liabilities -- -- 12,187 -- -- 12,187 -------- --------- -------- --------- --------- --------- Total liabilities 56,915 416,999 518,211 67,808 (640,309) 419,624 -------- --------- -------- --------- --------- --------- Stockholders' equity (deficit): Common stock 811 -- -- -- -- 811 Additional paid in capital 175,233 81,689 21,046 115,094 (217,829) 175,233 Receivable from stockholders (691) -- -- -- -- (691) Accumulated other comprehensive income 9,169 -- 8,705 464 (9,169) 9,169 Accumulated deficit (153,692) (9,440) (150,394) (57,946) 217,780 (153,692) -------- --------- -------- --------- --------- --------- Total stockholders' equity (deficit) 30,830 72,249 (120,643) 57,612 (9,218) 30,830 -------- --------- -------- --------- --------- --------- Total liabilities and stockholders' equity (deficit) $ 87,745 $ 489,248 $397,568 $ 125,420 $(649,527) $ 450,454 ======== ======== ======== ========= ========= =========
10 ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended March 31, 2002 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer CP Other Guarantor CPI Int'l Guarantors China Eliminations Consolidated --- ----- ---------- ----- ------------ ------------ Revenue Intercompany revenue $ 7,109 $ -- $ -- $ 15,398 $ (22,507) $ -- Customer revenue 1 -- 79,193 19 -- 79,213 ----------------------------------------------------------------------------- 7,110 -- 79,193 15,417 (22,507) 79,213 Cost of revenue 59 -- 77,687 14,419 (22,507) 69,658 ----------------------------------------------------------------------------- Gross profit 7,051 -- 1,506 998 -- 9,555 Operating expenses: Selling, general and administrative 6,335 74 2,573 792 -- 9,774 Research and development 651 -- 1,685 -- -- 2,336 ----------------------------------------------------------------------------- Total operating expenses 6,986 74 4,258 792 -- 12,110 ----------------------------------------------------------------------------- Operating income (loss) Non-operating (income) expenses 65 (74) (2,752) 206 -- (2,555) Inter-company interest expense -- -- 7,766 860 (8,626) -- Interest expense 1,082 7,538 27 -- -- 8,647 Interest income (20) (22) (17) (11) -- (70) Inter-company interest income -- (8,573) (53) -- 8,626 -- Loss from investment in subsidiaries 10,499 -- 550 -- (11,049) -- Foreign currency (gains) loss -- -- 166 (88) -- 78 Other expenses, net -- -- (160) (5) -- (165) ----------------------------------------------------------------------------- Total non-operating (income) expenses 11,561 (1,057) 8,279 756 (11,049) 8,490 ----------------------------------------------------------------------------- Income (loss) before income taxes (11,496) 983 (11,031) (550) 11,049 (11,045) Provision for income taxes 49 81 370 -- -- 500 ----------------------------------------------------------------------------- Net loss $ (11,545) $ 902 $ (11,401) $ (550) $ 11,049 $ (11,545) =============================================================================
11 ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2002 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor CPI CP Int'l Guarantors China Eliminations Consolidated --- -------- ---------- ----- ------------ ------------ Cash flows from operating activities: Net loss $ (11,545) $ 902 $(11,401) $ (550) $ 11,049 $ (11,545) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 389 -- 9,957 3,043 -- 13,389 Foreign currency (gains) loss -- -- 166 (88) -- 78 (Gain) loss on sale of equipment -- -- (32) 2 -- (30) Equity income from investment in subsidiaries 10,499 -- 550 -- (11,049) -- Changes in assets and liabilities: Intercompany accounts receivable (67,132) (39,355) 1,449 (5,295) 110,333 -- Accounts receivable 13 11 957 (5) -- 976 Inventories -- -- (105) (465) -- (570) Prepaid expenses and other current assets 58 -- (660) 167 -- (435) Other assets 42 -- (1,746) (66) -- (1,770) Intercompany accounts payable 76 60,994 49,998 (735) (110,333) -- Accounts payable 428 (653) (4,127) 808 -- (3,544) Accrued expenses and other current liabilities 1,448 (6,712) 250 251 -- (4,763) Other long-term liabilities -- -- 756 -- -- 756 ---------------------------------------------------------------------- Net cash provided by (used in) operating activities (65,724) 15,187 46,012 (2,933) -- (7,458) ---------------------------------------------------------------------- Cash flows from investing activities: Acquisition of property, plant and equipment -- -- (6,293) (1,480) -- (7,773) Proceeds from sale of equipment -- -- 36 -- -- 36 Malaysian acquisition, net of cash and cash -- -- (1,592) -- -- (1,592) equivalents acquired Investment in subsidiaries -- -- (6,960) -- 6,960 -- ---------------------------------------------------------------------- Net cash used in investing activities -- -- (14,809) (1,480) 6,960 (9,329) ---------------------------------------------------------------------- Cash flows from financing activities: Proceeds from revolving loans -- 50,000 -- -- -- 50,000 Repayment of revolving loans -- (50,000) -- -- -- (50,000) Proceeds from line of credit -- -- 5,596 -- -- 5,596 Debt issuance costs (95) (30) -- -- -- (125) Intercompany loan payments -- -- -- 6,960 (6,960) -- Repayment of long-term debt -- (32,440) -- -- -- (32,440) Debt issue amortization 82 546 -- -- -- 628 Repayment of notes from stockholders 294 -- -- -- -- 294 Proceeds from common stock issuance 65,320 -- -- -- -- 65,320 Repurchase of common stock (13) -- -- -- -- (13) ---------------------------------------------------------------------- Net cash provided by (used in) financing activities 65,588 (31,924) 5,596 6,960 (6,960) 39,260 ---------------------------------------------------------------------- Net increase (decrease) in cash (136) (16,737) 36,799 2,547 -- 22,473 Cash and cash equivalents at beginning of period 1,842 17,093 20,939 1,998 -- 41,872 ---------------------------------------------------------------------- Cash and cash equivalents at end of period $1,706 $ 356 $ 57,738 $ 4,545 $ -- $64,345 ======================================================================
12 ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor CPI CP Int'l Guarantors China Eliminations Consolidated --- -------- ---------- ----- ------------ ------------ Assets Current assets: Cash and cash equivalents $ 1,842 $ 17,093 $ 20,939 $ 1,998 $ -- $ 41,872 Intercompany accounts receivable 59,103 85,860 20,347 12,166 (177,476) -- Accounts receivable, net 30 11 31,961 32 -- 32,034 Inventories -- -- 9,682 2,799 -- 12,481 Prepaid expenses and other current assets 393 -- 3,527 595 -- 4,515 --------- --------- --------- --------- ---------- --------- Total current assets 61,368 102,964 86,456 17,590 (177,476) 90,902 Property, plant and equipment, net 6,054 -- 198,161 100,435 -- 304,650 Intercompany loans receivable -- 352,500 -- -- (352,500) -- Investment in subsidiaries (40,002) -- 49,171 -- (9,169) -- Other assets 4,319 11,694 18,402 748 -- 35,163 --------- --------- --------- --------- ---------- --------- Total assets $ 31,739 $ 467,158 $ 352,190 $ 118,773 $ (539,145) $ 430,715 ========= ========= ========= ========= ========== ========= Liabilities and stockholders' equity (deficit) Current liabilities: Intercompany accounts payable $ 25 $ 50,018 $ 106,196 $ 21,239 $ (177,478) $ -- Revolving loans -- 50,000 -- -- -- 50,000 Accounts payable 2,181 749 21,615 6,500 -- 31,045 Accrued expenses and other current liabilities 2,759 11,417 7,829 5,833 -- 27,838 --------- --------- --------- --------- ---------- --------- Total current liabilities 4,965 112,184 135,640 33,572 (177,478) 108,883 Long-term debt, less current portion -- 283,627 -- -- -- 283,627 Convertible subordinated note 50,000 -- -- -- -- 50,000 Intercompany loans payable -- -- 318,500 34,000 (352,500) -- Other long-term liabilities -- -- 11,431 -- -- 11,431 --------- --------- --------- --------- ---------- --------- Total liabilities 54,965 395,811 465,571 67,572 (529,978) 453,941 ========= ========= ========= ========= ========== ========= Stockholders' equity (deficit): Common stock 694 -- -- -- -- 694 Additional paid in capital 110,043 81,689 16,907 108,133 (206,729) 110,043 Receivable from stockholders (985) -- -- -- -- (985) Accumulated other comprehensive income 9,169 -- 8,705 464 (9,169) 9,169 Accumulated deficit (142,147) (10,342) (138,993) (57,396) 206,731 (142,147) --------- --------- --------- --------- ---------- --------- Total stockholders' equity (deficit) (23,226) 71,347 (113,381) 51,201 (9,167) (23,226) ========= ========= ========= ========= ========== ========= Total liabilities and stockholders' equity (deficit) $ 31,739 $ 467,158 $ 352,190 $ 118,773 $ (539,145) $ 430,715 ========= ========= ========= ========= ========== =========
13 ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended March 31, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer CP Other Guarantor CPI Int'l Guarantors China Eliminations Consolidated --- ----- ---------- ----- ------------ ------------ Revenue Intercompany revenue $ 7,408 $ -- $ -- $ 13,783 $ (21,191) $ -- Customer revenue -- -- 89,859 -- -- 89,859 ---------------------------------------------------------------------------- 7,408 -- 89,859 13,783 (21,191) 89,859 Cost of revenue -- -- 78,954 12,968 (13,784) 78,138 ---------------------------------------------------------------------------- Gross profit 7,408 -- 10,905 815 (7,407) 11,721 Operating expenses: Selling, general and administrative 5,893 -- 9,721 1,075 (7,407) 9,282 Research and development 1,271 -- 2,242 -- -- 3,513 Restructuring and other charges -- -- 2,962 -- -- 2,962 ---------------------------------------------------------------------------- Total operating expenses 7,164 -- 14,925 1,075 (7,407) 15,757 ---------------------------------------------------------------------------- Operating income (loss) 244 -- (4,020) (260) -- (4,036) Non-operating (income) expenses Interest expense -- 8,829 6,797 860 (7,654) 8,832 Interest income (12) (7,604) (100) (62) 7,630 (148) (Income) loss from investment in subsidiaries 9,851 (956) -- -- (8,895) -- Foreign currency gains -- -- (441) -- -- (441) Other (income) expenses, net 8 -- (118) (115) 29 (196) ---------------------------------------------------------------------------- Total non-operating expense 9,847 269 6,138 683 (8,890) 8,047 ---------------------------------------------------------------------------- Loss before income taxes (9,603) (269) (10,158) (943) 8,890 (12,083) Provision for (benefit from) income taxes 64 81 (2,561) -- -- (2,416) ---------------------------------------------------------------------------- Net loss $ (9,667) $ (350) $ (7,597) $ (943) $ 8,890 $ (9,667) ============================================================================
14 ChipPAC, Inc. SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2001 (In thousands) (Unaudited)
Parent Non- Guarantor Issuer Other Guarantor CPI CP Int'l Guarantors China Eliminations Consolidated --- -------- ---------- ----- ------------ ------------ Cash flows from operating activities: Net loss $ (9,667) $ (350) $ (7,597) $ (943) $ 8,890 $ (9,667) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 492 -- 11,376 2,169 -- 14,037 Foreign currency gains -- -- (441) -- -- (441) Loss on sale of equipment -- -- 75 -- -- 75 Changes in assets and liabilities: Intercompany accounts receivable (2,316) (9,959) (28,461) (2,602) 43,338 -- Accounts receivable 14 -- 10,349 20 -- 10,383 Inventories -- -- 2,009 (318) -- 1,691 Prepaid expenses and other current assets 10 -- (5,437) 2,178 -- (3,249) Other assets (233) -- (2,805) (207) -- (3,245) Intercompany accounts payable -- 2,489 38,385 2,459 (43,333) -- Accounts payable 1,725 -- (22,010) 1,705 -- (18,580) Accrued expenses and other current liabilities 1,502 (2,952) (4,335) 476 -- (5,309) Other long-term liabilities 217 -- (227) -- -- (10) ---------------------------------------------------------------------------- Net cash provided by (used in) operating activities (8,256) (10,772) (9,119) 4,937 8,895 (14,315) ---------------------------------------------------------------------------- Cash flows from investing activities: Acquisition of property, plant and equipment (867) -- (2,628) (5,948) -- (9,443) Proceeds from sale of equipment -- -- 61 -- -- 61 Malaysian acquisition, net of cash and cash equivalents acquired (1,482) -- -- -- -- (1,482) Investment in subsidiaries 9,851 (956) -- -- (8,895) -- ---------------------------------------------------------------------------- Net cash provided by (used in) investing activities 7,502 (956) (2,567) (5,948) (8,895) (10,864) ---------------------------------------------------------------------------- Cash flows from financing activities: Advances to affiliates 250 -- -- -- -- 250 Proceeds from revolving loans -- 12,200 -- -- -- 12,200 Repayment of long-term debt -- (200) -- -- -- (200) Debt issue amortization -- 465 -- -- -- 465 Proceeds from common stock issuance 1,138 -- -- -- -- 1,138 ---------------------------------------------------------------------------- Net cash provided by financing activities 1,388 12,465 -- -- -- 13,853 ---------------------------------------------------------------------------- Net increase (decrease) in cash 634 737 (11,686) (1,011) -- (11,326) Cash and cash equivalents at beginning of period 181 (711) 15,321 4,059 -- 18,850 ---------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 815 $ 26 $ 3,635 $ 3,048 $ -- $ 7,524 ============================================================================
15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All references are to ChipPAC's fiscal quarters ended March 31, 2002 and March 31, 2001, unless otherwise indicated. This quarterly report on Form 10-Q contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "target," "anticipate," "believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and 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 those identified under Exhibit 99.1 filed with our annual report on Form 10-K for the year ended December 31, 2001 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. In addition, important factors to consider in evaluating these forward-looking statements include changes in external market factors, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors and various other competitive factors. In light of these risks and uncertainties, there can be no assurance that the matters referred to in the forward-looking statements contained in this quarterly report will in fact occur. RESULTS OF OPERATIONS Three months ended March 31, 2002 compared to three months ended March 31, 2001 Revenue. Revenue was $79.2 million in the three months ended March 31, 2002, a decrease of 11.8% from the three months ended March 31, 2001. This decline in revenue is a result of a combination of lower end-market demand for our customers' products and lower average selling prices in the first three months of 2002 compared to the same period in 2001. This decrease was realized across all the end markets we serve and was not significantly concentrated in any one end market. Gross Profit. Gross profit during the three months ended March 31, 2002 was $9.6 million, a decrease of 18.5% compared to the three months ended March 31, 2001. Gross margin was 12.1% in the three months ended March 31, 2002 compared to 13.0% in the three months ended March 31, 2001. The actions taken by us, including reductions in work force, asset write-downs, and tight cost controls were able to partially but not completely offset the effect of lower average selling prices and reduced volumes. Overall equipment utilization was approximately 53.0% and 49.0% for the three months ended March 31, 2002 and 2001, respectively. Selling, General, and Administrative. Selling, general and administrative expenses were $9.8 million for the three months ended March 31, 2002 which is an increase of 5.3% from $9.3 million for the three months ended March 31, 2001. The increase for the 2002 period was due to additional expenses associated with hiring and maintaining employees in the areas of administration, sales and marketing in China which did not occur in the quarter ended March 31, 2001. These expenses were incurred to meet the increase in unit volumes and product mix occurring in our China plant. Research and Development. Research and development expenses for the three months ended March 31, 2002 were $2.3 million, a decrease of 33.5% from the three months ended March 31, 2001. Although we increased the number of employees and internal research and development resources in the three months ended March 31, 2002 compared to the same period in 2001, we were engaged in a significant project that required external spending during the 2001 period. A comparable level of external spending was not required in the three months ended March 31, 2002 compared to the three months ended March 31, 2001. Restructuring and Other Costs. We recorded expenses associated with reduction in work force and employee furlough costs of $3.0 million in the three months ended March 31, 2001 with no comparable costs in 2002. Interest Expense. Total outstanding interest-bearing debt increased to $356.8 million at March 31, 2002, compared to $310.0 million at March 31, 2001. The increase in total debt outstanding of $46.8 million was due to an increase of $30.0 million in draw down from our revolving loan, $5.6 million draw down from our line of credit facilities in South Korea, and $15.0 million and $50.0 million from issuance of additional senior subordinated notes and convertible debt, as of March 31, 2002, offset by down of our term loans in the amount of $53.8 million as of March 31, 2001. Related interest expense was $8.6 million for the three months ended March 31, 2002, a decrease of 2.1% compared to the same period ended in 2001. The reduction in interest expense was due to reduced interest rates on our borrowings. 16 Foreign Currency (Gains) Losses. Net foreign currency losses (gains) were $0.1 million and ($0.4) million for the three months ended March 31, 2002 and 2001, respectively. These non-cash gains 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 South Korean employees in Korean Won. Income Taxes. Income tax expense was $0.5 million for the three months ended March 31, 2002 and we recorded a tax benefit of $2.4 million for the three months ended March 31, 2001. In the fourth quarter of 2001, we recorded a valuation reserve that reversed previously recorded benefits in 2001 and previous years. We have a mix of rates across the various jurisdictions we do business in, and our currrent estimated expense for 2002 is $2.0 million with $0.5 million recognized in the three months ended March 31, 2002. This estimate does not take into account any future benefit from loss carryforwards, which we may realize once we again achieve profitability. Net Loss. As a result of the items above, net loss increased to $11.5 million for the three months ended March 31, 2002, compared to net loss of $9.7 million for the three months ended March 31, 2001. CRITICAL ACCOUNTING POLICIES For critical accounting policies affecting us, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2001. Critical accounting policies affecting us have not changed materially since December 31, 2001. LIQUIDITY AND CAPITAL RESOURCES Our ongoing primary cash needs are for operations and equipment purchases. We spent $7.8 million on capital expenditures during the three months ended March 31, 2002 compared to $9.4 million during the three months ended March 31, 2001. The terms of the acquisition of our Malaysian business require contingent incentive payments up to a maximum of $17.9 million through June 30, 2003. During the quarter ended March 31, 2002, we have paid $1.6 million relating to contingent incentive payments and cumulatively we have paid Intersil $9.4 million under this arrangement. On January 30, 2002, we sold 10,000,000 shares of Class A common stock in an underwritten public offering based on the public offering price of $6.00 per share. On February 14, 2002, we sold an additional 1,425,600 shares of Class A common stock in conjunction with the underwriter's exercise of their over-allotment option at the public offering price of $6.00 per share. In connection with these sales, we received net proceeds of approximately $63.9 million, after deducting underwriting discounts, commissions and estimated offering expenses. Net proceeds of $62.4 million from this offering were used to pay down term loans and revolving loans. The remaining $1.4 million was used for general corporate purposes. As of March 31, 2002, our total debt consisted of $356.8 million of borrowings, which was comprised of $50.0 million of revolving loans, (which fully utilized the borrowing capacity under our revolving loans), $5.6 million in line of credit borrowings, $86.2 million in term loans, $165.0 million of senior subordinated notes and $50.0 million of convertible subordinated notes. For the three months period ended March 31, 2002, these borrowings have weighted average interest rates of 7.3%, 2.7%, 5.9%, 12.75% and 8.0%, respectively. 17 Our total potential commitments on our loans, operating leases, Intersil incentive payments and restructuring reserve as of March 31, 2002, were as follows (in thousands):
Within 1 Total Year 2-3 Years 4-5 Years After 5 Years ----- ---- ----------- ----------- ------------- On balance sheet commitments: Senior credit facilities (revolving, capital expenditure and term loans) $136,187 $50,818 $33,605 $51,764 $ -- Senior subordinated notes 165,000 -- -- -- 165,000 Convertible subordinated notes 50,000 -- -- -- 50,000 Line of credit 5,596 5,596 -- -- -- Restructuring 1,332 1,332 -- -- -- -------------------------------------------------------------------------------- Total on balance sheet commitments 358,115 57,746 33,605 51,764 215,000 -------------------------------------------------------------------------------- Off balance sheet commitments: Operating leases 82,229 16,356 21,725 13,878 30,270 Contingent payments to Intersil (relating to purchase of Malaysian business) 8,526 6,789 1,737 -- -- -------------------------------------------------------------------------------- Total off balance sheet commitments 90,755 23,145 23,462 13,878 30,270 -------------------------------------------------------------------------------- Total commitments $448,870 $80,891 $57,067 $65,642 $245,270 ======== ======= ======= ====== ========
Our senior credit facilities require that we meet specified financial tests, including, without limitation, a maximum leverage ratio, a minimum interest coverage ratio, minimum fixed charge coverage ratio, a maximum senior leverage ratio and, for 2002 only, a minimum consolidated adjusted EBITDA amount. In conjunction with our $65.0 million private placement in June 2001, the lenders of our senior credit facilities amended the financial tests for the period July 1, 2001 through December 31, 2004. Our senior credit facilities also contain covenants restricting our operations. On December 31, 2001, these covenants were waived for 2002 and three new covenants were established for 2002: (1) a requirement to raise at least $20.0 million in junior capital by March 1, 2002, which was fulfilled by us through an underwritten public offering of our Class A common stock, completed in January 2002, (2) a minimum EBITDA requirement based on a rolling 12 months ending March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, of $30.0 million, $26.0 million, $32.0 million and $40.0 million, respectively; our actual rolling 12 month EBITDA for the period ended March 31, 2002 was $43.4 million and (3) a capital expenditures limit of $30.0 million in 2002 with an exemption for a buyout of existing operating leases. For the three months ended March 31, 2002, we have spent $7.8 million on capital expenditures. There were no violations of these covenants as amended through March 31, 2002. The weakness in demand in 2001 and in early 2002, for packaging and test services has adversely affected our cash flows from operations. We believe that our existing cash balances, cash flows from operations and available borrowings under our senior credit facilities provide sufficient cash resources to meet our projected operating and other cash requirements for the next twelve months. 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 senior credit facilities 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. Other than the covenants on the debt as discussed above, we have no performance guarantees. We also have no unconsolidated entities. Our off-balance sheet commitments are limited to equipment operating leases, leases on office and manufacturing space and additional contingent incentive payments to Intersil. Our total off-balance obligations are approximately $90.8 million. 18 For the quarter ended March 31, 2002 and 2001, cash used in operations was $7.5 million and $14.3 million, respectively. Cash used in operations mainly consisted of net loss plus depreciation and amortization less utilization for working capital. The reduction in cash used in the current quarter compared to the year ago quarter is primarily due to repayment of accounts payable that were higher at the end of 2000 and paid in the three months ended March 31, 2001 than the accounts payable at the end of 2001 that were paid in the three months ended March 31, 2002. For the quarter ended March 31, 2002 and 2001, cash used in investing activities was $9.3 million and $10.9 million, respectively. For the quarters ended March 31, 2002 and 2001, $7.8 million and 9.4 million were spent on capital expenditures, respectively. During the quarter ended March 31, 2002 and 2001, an additional $1.6 million and $1.5 million, respectively, was spent in the purchase of the Malaysian business, including purchased intellectual property. For the quarter ended March 31, 2002 and 2001, cash provided by financing activities was $39.3 million and $13.9 million, respectively. For the quarter ended March 31, 2002, $65.3 million and $5.6 million was provided by the issuance of common stock and borrowings from the line of credit, respectively. We used $32.4 million to repay long-term debt. For the quarter ended March 31, 2001, $12.2 million and $1.1 million was provided by the draw down of revolving loans and issuance of common stock, respectively. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For quantitative and qualitative disclosures about market risks affecting us, see Item 7A "Quantitative Disclosure About Market Risk" of our Annual Report on Form 10-K for the year ended December 31, 2001. Our exposure to market risks has not changed materially since December 31, 2001. 19 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not involved in any legal proceedings the outcome of which we believe would have a material adverse effect on our business, financial condition or results of operations. From time to time, however, we are involved in claims that arise in the ordinary course of business, and we maintain insurance that we believe to be adequate to cover these claims. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 4. OTHER INFORMATION On January 30, 2002, we sold 10,000,000 shares of Class A common stock in an underwritten public offering based on the public offering price of $6.00 per share. On February 14, 2002, we sold an additional 1,425,600 shares of Class A common stock in conjunction with the underwriters' exercise of their over-allotment option at the public offering price of $6.00 per share. In connection with these sales, we received net proceeds of approximately $63.9 million, after deducting underwriting discounts, commissions and estimated offering expenses. We used the net proceeds of $62.4 million from this offering to pay down term loans and revolving loans, respectively. The remaining $1.4 million was used for general corporate purposes. ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 2.1 Amended and Restated Agreement and Plan of Merger of ChipPAC, Inc., a California corporation, and ChipPAC, Inc., a Delaware corporation.** 2.2 Agreement and Plan of Recapitalization and Merger, dated as of March 13, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.* 2.3 First Amendment to Agreement and Plan of Recapitalization and Merger, dated as of June 16, 1999 by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.* 2.4 Second Amendment to Agreement and Plan of Recapitalization and Merger, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.* 3.1 Amended and Restated Certificate of Incorporation of ChipPAC, Inc.** 3.2 Amended and Restated By-Laws of ChipPAC, Inc.** 4.1 Specimen certificate for ChipPAC, Inc. Common Stock.** 10.1 Credit Agreement, dated as of August 5, 1999, by and among ChipPAC International Company Limited, ChipPAC, Inc., the Lenders listed therein and Credit Suisse First Boston, as Administrative Agent, Sole Lead Manager and Collateral Agent.* 10.2 Guaranty, dated as of August 5, 1999, by and among ChipPAC, Inc. and certain subsidiaries of ChipPAC, Inc., in favor of Credit Suisse First Boston (incorporated by reference to Exhibit 4.5 of the Company's registration statement on Form S-3 (Registration No. 333-69704)). 20 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.* 10.3.1 Subsidiary Guaranty Agreement, dated as of October 12, 2001, by ChipPAC Malaysia Sdn. Bhd, in favor of U.S. Bank, N.A.(incorporated by reference to Exhibit 4.7 of the Company's registration statement on Form S-3 (Registration No. 333-69704)). 10.4 Amended and Restated Stockholders Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc. the Hyundai Group (as defined therein), the Bain Group (as defined therein), the SXI Group (as defined therein), Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield Asset Partners, L.P.* 10.5 Amended and Restated Registration Agreement, dated as of August 5, 1999, by and among ChipPAC, Inc., the Hyundai Stockholders (as defined therein), the Bain Stockholders (as defined therein), the SXI Stockholders (as defined therein), Intel Corporation, ChipPAC Equity Investors LLC, and Sankaty High Yield Asset Partners, L.P.* 10.5.1 Amendment No. 1 to Amended and Restated Registration Agreement, dated as of June 30, 2000, by and among ChipPAC, Inc., Sapphire Worldwide Investments, Inc., the Bain Stockholders (as defined therein) and SXI Group LLC.** 10.5.2 Form of Amendment No. 2 to Amended and Restated Registration Agreement, dated as of July 13, 2000, by and among ChipPAC, Inc., Qualcomm Incorporated, SXI Group LLC and the Bain Shareholders (as defined therein).** 10.5.3 Form of Amendment No. 3 to Amended and Restated Registration Agreement, dated as of August 2, 2000, by and among ChipPAC, Inc., Bain Capital, Inc., SXI Group LLC and the Bain Shareholders (as defined therein).** 10.6 Transition Services Agreement, dated as of August 5, 1999, by and among Hyundai Electronics Industries Co., Ltd., Hyundai Electronics America, ChipPAC, Inc., ChipPAC Korea Company Ltd., Hyundai Electronics Company (Shanghai) Ltd., ChipPAC Assembly and Test (Shanghai) Company Ltd., ChipPAC Barbados Limited and ChipPAC Limited.* 10.7 Lease Agreement, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.7.1 Amendment Agreement, dated September 30, 1998, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.7.2 Amendment Agreement 2, dated September 30, 1999, to Lease Agreement, dated June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.8 Agreement Concerning Supply of Utilities, Use of Welfare Facilities and Management Services for Real Estate, dated as of June 30, 1998, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Korea Ltd.* 10.9 Service Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.+* 10.10 Sublease Agreement, dated as of May 1, 1998, by and between Hyundai Electronics America and ChipPAC, Inc.* 10.11 Patent Sublicense Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries Co., Ltd. and ChipPAC Limited.* 10.12 TCC License Agreement, dated December 22, 1998, between Tessera Inc., the Tessera Affiliates (as defined therein), ChipPAC, Inc. and the Licensee Affiliates (as defined therein).+* 10.12.1 Letter Agreement, dated July 15, 1999, by and among ChipPAC, Inc., Hyundai Electronics America, ChipPAC Limited and Tessera, Inc.* 10.13 Materials Agreement, dated as of July 1, 1999, by and between ChipPAC Limited and Intel Corporation.+* 21 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 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 12.75% Senior Subordinated Notes Due 2009.* 10.31 Form of Series B 12.75% 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.** 22 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 (incorporated by reference to the Company's annual report on Form 10-K for the period December 31, 2000). 10.41 Employment letter agreement, dated as of March 18, 1998 between ChipPAC, Inc. and Gregory Bronzovic (incorporated by reference to the Company's annual report on Form 10-K for the period December 31, 2000). 10.42 Employment letter agreement, dated as of October 4, 2000 between ChipPAC, Inc. and Richard Freeman (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). 10.43 Employment letter agreement, dated as of October 9, 2000 between ChipPAC, Inc. and Patricia McCall (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). 10.44 Indenture, dated as of June 15, 2001, by and between ChipPAC, Inc. and Firstar Bank, N.A. as trustee (incorporated by reference to the Company's quarterly report on Form 10-Q for the period ended June 30, 2001). 10.45 Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC International Company Limited and Citicorp Capital Investors Limited (incorporated by reference to the Company's quarterly report on Form 10-Q for the period ended June 30, 2001). 10.46 Registration Rights Agreement, dated June 22, 2001, by and between ChipPAC, Inc. and Citicorp Mezzanine III, L.P. (incorporated by reference to the Company's quarterly report on Form 10-Q for the period ended June 30, 2001). 10.47 Patent and Technology License Agreement, dated as of August 5, 1999, by and between Hyundai Electronics Industries, Co., Ltd. and ChipPAC Limited (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). +++ 10.48 License Agreement, dated as of February 1, 2001, by and between ChipPAC, Inc. and LSI Logic Corporation (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). +++ 10.49 License Agreement, dated as of February 10, 2001, by and between ChipPAC, Inc. and LSI Logic Corporation (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). +++ 10.50 License Agreement, dated as of August 27, 2001, by and between ChipPAC, Inc. and Fujitsu Limited (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). +++ 10.51 Amendment to License Agreement, dated as of March 5, 2002, by and between ChipPAC, Inc. and Fujitsu Limited (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). 10.52 License Agreement, dated as of September 8, 1999, by and between ChipPAC Ltd. and LSI Logic Corporation (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). +++ 10.53 Assembly/Final Test Subcontract Agreement, dated as of February 25, 2000, by and between ChipPAC Ltd. and its affiliates and Fairchild Semiconductor Corporation and its affiliates (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001). +++ 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 23 ChipPAC Korea Company Ltd.* 99.1 Risk Factors (incorporated by reference to the Company's annual report on Form 10-K for the year ended December 31, 2001) - -------------- * Incorporated by reference to the Company's Form S-4 (No. 333-91641). ** Incorporated by reference to the Company's Form S-1 (No. 333-39428). + Confidential treatment has been granted as to certain portions of these exhibits, which are incorporated by reference. +++ Confidential treatment has been requested for portions of this exhibit. (b) Reports on Form 8-K. On January 10, 2002, we filed a Current Report on Form 8-K regarding an amendment to our senior credit facility. 24 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, as of May 13, 2002. CHIPPAC, INC. (Registrant) /s/ Robert Krakauer -------------------------------------------- ROBERT KRAKAUER Chief Financial Officer /s/ Michael G. Potter -------------------------------------------- MICHAEL G. POTTER Controller and Principal Accounting Officer 25 -----END PRIVACY-ENHANCED MESSAGE-----