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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended June 30, 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
Incorporation or Organization)
     
(I.R.S. Employer
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 August 8, 2002
Class A common stock, $.01 par value
  
93,125,599
Class B common stock, $.01 par value
  
None
 
 

Table of Contents
TABLE OF CONTENTS
 
        
Page
  
3
Item 1.
     
3
      
3
      
4
      
5
      
6
Item 2.
     
18
Item 3.
     
21
          
    
Item 1.
     
22
Item 2.
     
22
Item 3.
     
22
Item 4.
     
22
Item 5.
     
22
Item 6.
     
22
     Signatures
   
27

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Table of Contents
 
ChipPAC, Inc.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
 
    
June 30,
2002
     
December 31,
2001
  
Assets:
                  
Current assets:
                  
Cash and cash equivalents
   
$
61,173
 
   
$
41,872
 
Accounts receivable, less allowance for doubtful accounts of $392 and $449
   
 
37,081
 
   
 
32,034
 
Inventories
   
 
17,503
 
   
 
12,481
 
Prepaid expenses and other current assets
   
 
9,780
 
   
 
4,515
 
    
  
Total current assets
   
 
125,537
 
   
 
90,902
 
Property, plant and equipment, net
   
 
322,419
 
   
 
304,650
 
Other assets
   
 
32,079
 
   
 
35,163
 
    
  
Total assets
   
$
480,035
 
   
$
430,715
 
    
  
Liabilities and stockholders’ equity (deficit)
                  
Current liabilities:
                  
Revolving loans
   
$
—  
 
   
$
50,000
 
Line of credit
   
 
5,596
 
   
 
—  
 
Accounts payable
   
 
37,213
 
   
 
31,045
 
Accrued expenses and other current liabilities
   
 
31,599
 
   
 
27,838
 
Current portion of long-term debt
   
 
—  
 
   
 
—  
 
    
  
Total current liabilities
   
 
74,408
 
   
 
108,883
 
Long-term debt, less current portion
   
 
217,887
 
   
 
283,627
 
Convertible subordinated note
   
 
50,000
 
   
 
50,000
 
Other long-term liabilities
   
 
14,446
 
   
 
11,431
 
    
  
Total liabilities
   
 
356,741
 
   
 
453,941
 
    
  
Stockholders’ equity (deficit):
                  
Common stock, Class A—par value $0.01 per share; 250,000,000 shares authorized, 93,121,000 and 69,404,000 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively
   
 
931
 
   
 
694
 
Common stock, Class B—par value $0.01 per share; 250,000,000 shares authorized no shares issued or outstanding at June 30, 2002 and December 31, 2001
   
 
—  
 
   
 
—  
 
Additional paid in capital
   
 
274,527
 
   
 
110,043
 
Receivable from stockholders
   
 
(493
)
   
 
(985
)
Accumulated other comprehensive income
   
 
9,169
 
   
 
9,169
 
Accumulated deficit
   
 
(160,840
)
   
 
(142,147
)
    
  
Total stockholders’ equity (deficit)
   
 
123,294
 
   
 
(23,226
)
    
  
Total liabilities and stockholders’ equity (deficit)
   
$
480,035
 
   
$
430,715
 
    
  
 
The accompanying notes are an integral part of these financial statements.

3

Table of Contents
 
ChipPAC, Inc.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
    
For the Three Months Ended June 30,
     
For the Six Months Ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenue
   
$
97,086
 
   
$
87,373
 
   
$
176,299
 
   
$
177,232
 
Cost of revenue
   
 
79,322
 
   
 
75,913
 
   
 
148,980
 
   
 
154,051
 
    
  
  
  
Gross profit
   
 
17,764
 
   
 
11,460
 
   
 
27,319
 
   
 
23,181
 
Operating expenses:
                                    
Selling, general and administrative
   
 
9,846
 
   
 
7,480
 
   
 
19,620
 
   
 
16,762
 
Research and development
   
 
2,372
 
   
 
3,837
 
   
 
4,708
 
   
 
7,350
 
Restructuring and other charges
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
2,962
 
    
  
  
  
Total operating expenses
   
 
12,218
 
   
 
11,317
 
   
 
24,328
 
   
 
27,074
 
    
  
  
  
Operating income (loss)
   
 
5,546
 
   
 
143
 
   
 
2,991
 
   
 
(3,893
)
Non-operating (income) expenses:
                                    
Interest expense
   
 
8,141
 
   
 
9,456
 
   
 
16,788
 
   
 
18,288
 
Interest income
   
 
(143
)
   
 
(74
)
   
 
(213
)
   
 
(222
)
Foreign currency (gains) loss
   
 
1,329
 
   
 
186
 
   
 
1,407
 
   
 
(255
)
Other income, net
   
 
(138
)
   
 
(33
)
   
 
(303
)
   
 
(229
)
    
  
  
  
Total non-operating expenses
   
 
9,189
 
   
 
9,535
 
   
 
17,679
 
   
 
17,582
 
    
  
  
  
Loss before income taxes
   
 
(3,643
)
   
 
(9,392
)
   
 
(14,688
)
   
 
(21,475
)
Provision for (benefit from) income taxes
   
 
500
 
   
 
(1,879
)
   
 
1,000
 
   
 
(4,295
)
    
  
  
  
Loss before extraordinary item
   
 
(4,143
)
   
 
(7,513
)
   
 
(15,688
)
   
 
(17,180
)
Extraordinary loss from early extinguishment of debt, net of related income tax of $0
   
 
(3,005
)
   
 
—  
 
   
 
(3,005
)
   
 
—  
 
    
  
  
  
Net loss
   
$
(7,148
)
   
$
(7,513
)
   
$
(18,693
)
   
$
(17,180
)
    
  
  
  
Loss per share before extraordinary item
                                    
Basic
   
$
(0.05
)
   
$
(0.11
)
   
$
(0.19
)
   
$
(0.25
)
Diluted
   
$
(0.05
)
   
$
(0.11
)
   
$
(0.19
)
   
$
(0.25
)
Extraordinary item
                                    
Basic
   
$
(0.03
)
   
$
—  
 
   
$
(0.04
)
   
$
—  
 
Diluted
   
$
(0.03
)
   
$
—  
 
   
$
(0.04
)
   
$
—  
 
Net loss per share
                                    
Basic
   
$
(0.08
)
   
$
(0.11
)
   
$
(0.23
)
   
$
(0.25
)
Diluted
   
$
(0.08
)
   
$
(0.11
)
   
$
(0.23
)
   
$
(0.25
)
Weighted average shares used in per share calculation:
                                    
Basic
   
 
85,237
 
   
 
68,605
 
   
 
81,016
 
   
 
68,626
 
Diluted
   
 
85,237
 
   
 
68,605
 
   
 
81,016
 
   
 
68,626
 
 
The accompanying notes are an integral part of these financial statements.

4

Table of Contents
ChipPAC, Inc.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    
For the Six Months Ended June 30,
  
    
2002
     
2001
  
Cash flows from operating activities:
                  
Net loss
   
$
(18,693
)
   
$
(17,180