6-K 1 d416166d6k.htm FORM 6-K Form 6-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2012

 

 

ChipMOS TECHNOLOGIES (Bermuda) LTD.

(Translation of Registrant’s Name Into English)

 

 

No. 1, R&D Rd. 1, Hsinchu Science Park

Hsinchu, Taiwan

Republic of China

(Address of Principal Executive Offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  x            Form 40-F  ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ¨            No  x

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            .)

 

 

 


This Report on Form 6-K shall be deemed incorporated by reference into the Registrant’s Registration Statement on
Form F-3, as amended (File No. 333-181367), and will be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

Operating and Financial Review and Prospects

This operating and financial review and prospects (“FRP”) discusses and analyzes the financial condition and results of ChipMOS TECHNOLOGIES (Bermuda) LTD, (also referred to as “we”, “our”, “ChipMOS” or “the Company”) for the six month period ended June 30, 2012. This should be read in conjunction with our unaudited condensed interim consolidated financial statements and accompanying notes for the six month period ended June 30, 2012 contained in this Form 6-K, which we prepared in accordance with accounting principles generally accepted in the Republic of China (“ROC GAAP”), using the standards and interpretations currently issued and effective for the six months ended June 30, 2012, and with our annual consolidated financial statements for the year ended December 31, 2011 contained in our Annual Report on Form 20-F filed on April 26, 2012, which we prepared in accordance with ROC GAAP. The financial statements have been prepared in accordance with ROC GAAP which differs in certain material respects from US GAAP, and include presentations reconciled to US GAAP.

Overview

We provide a broad range of back-end testing services, including wafer probing and final testing of memory and logic/mixed-signal semiconductors. We also offer a broad selection of leadframe-based and organic substrate-based package assembly services for memory and logic/mixed-signal semiconductors. Our advanced leadframe-based packages include thin small outline packages, or TSOPs, and our advanced organic substrate-based packages include fine-pitch ball grid array, or fine-pitch BGA, packages. In addition, we provide gold bumping, testing and assembly services for LCD and other flat-panel display driver semiconductors by employing TCP, COF and COG technologies. In the six months ended June 30, 2011 and 2012, our consolidated net revenue was NT$ 9,141 million and NT$ 9,213 million (US$309 million), respectively, and our net loss was NT$125 million and net income was NT$115 million (US$4 million), respectively.

We are a holding company, incorporated in Bermuda on August 1, 2000. We provide most of our services through our majority-owned subsidiary, ChipMOS TECHNOLOGIES INC. or ChipMOS Taiwan, and its subsidiaries and investees. ChipMOS Taiwan was incorporated in Taiwan in July 1997 as a joint venture company of Mosel Vitelic Inc., or Mosel, and Siliconware Precision Industries Co. Ltd., or Siliconware Precision and with the participation of other investors. Following the completion of the share exchange transaction between ChipMOS Bermuda and ChipMOS Taiwan on September 14, 2007, ChipMOS Taiwan became a wholly-owned subsidiary of ChipMOS Bermuda. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The share purchase transaction was completed in January 2011. As of June 30, 2012, we owned 84.2% of ChipMOS Taiwan’s outstanding shares. In Taiwan, we conduct testing operations in our facilities at the Hsinchu Science Park and the Hsinchu Industrial Park, gold bumping and wafer testing in our facility at Chupei, and testing and assembly operations in our facility at the Southern Taiwan Science Park. We also conduct operations in Mainland China through ChipMOS TECHNOLOGIES (Shanghai) LTD., or ChipMOS Shanghai, a wholly-owned subsidiary of Modern Mind Technology Limited, or Modern Mind. ChipMOS Shanghai operates a testing and assembly facility at the Qingpu Industrial Zone in Shanghai. Through our subsidiaries, we also have equity interests in other companies that are engaged in the semiconductor industry. On April 22, 2011, ChipMOS Bermuda entered into an assignment and assumption agreement (the “MMT Assignment Agreement”) with ThaiLin Semiconductor Corp., or ThaiLin to sell the demand notes issued by Modern Mind (“MMT Notes”) to ThaiLin for a purchase price of approximately US$40 million. The transaction was completed on October 3, 2011 and Modern Mind then became the wholly-owned subsidiary of ThaiLin.

The following key trends are important to understanding our business:

Capital Intensive Nature of Our Business. Our operations, in particular our testing operations, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses as a result of our previous acquisitions of testing and assembly equipment and facilities. Our profitability depends in part not only on absolute pricing levels for our services, but also on capacity utilization rates for our testing and assembly equipment. In particular, increases or decreases in our capacity utilization rates could significantly affect our gross margins since the unit cost of testing and assembly services generally decreases as fixed costs are allocated over a larger number of units.

We begin depreciating our equipment when it is placed into commercial operation. There may be a time lag between the time when our equipment is placed into commercial operation and when it achieves high levels of utilization. In periods of depressed semiconductor industry conditions, we may experience lower than expected demand from our customers and a sharp decline in the average selling prices of our testing and assembly services, resulting in an increase in depreciation expenses relative to net revenue. In particular, the capacity utilization rates for our testing equipment may be severely adversely affected during a semiconductor industry downturn as a result of the decrease in outsourcing demand from integrated device manufacturers, or IDMs, which typically maintain larger in-house testing capacity than in-house assembly capacity.

 

2


Highly Cyclical Nature of the Semiconductor Industry. Highly cyclical, the worldwide semiconductor industry has experienced peaks and troughs over the last decade, with a severe downturn beginning in the fourth quarter of 2000 that was followed by a recovery in early 2003. The significant decrease in market demand for semiconductors that began in 2000 adversely affected our results of operations for 2001 and 2002. Beginning in the fourth quarter of 2008, the semiconductor industry commenced another significant downturn which continued in 2009 and in 2010. Market demand for semiconductors significantly decreased across our industry during these periods, which adversely affected average selling prices for our services and our results of operations for 2008, 2009 and 2010. The impact on our results of operations of the decrease in market demand during these periods was partly offset by increases in our 2009 and 2010 net revenue from assembly services for logic/mixed-signal semiconductors due to higher customer demand for these services in 2009 and 2010. The overall outsourced assembly and testing services for memory and logic/mixed-signal semiconductors increased gradually since 2010 and are still continuing. During periods of decreased demand for assembled semiconductors, some of our customers may forego, delay or simplify final testing of certain types of semiconductors, such as DRAM, which may further decrease demand and average selling prices for our services and intensify our difficulties related to realizing pricing levels, capacity realization rates and gross margin during these periods.

Declining Average Selling Prices of Our Testing and Assembly Services. The semiconductor industry is characterized by a general decrease in prices for products and services over the course of their product and technology life cycles. The rate of decline is particularly steep during periods of intense competition and adverse market conditions. The average selling prices of our testing and assembly services experienced sharp declines during such periods as a result of intense price competition from other independent testing and assembly companies that attempt to maintain high capacity utilization levels in the face of reduced demand.

Market Conditions for the End-User Applications for Semiconductors. Market conditions in the semiconductor industry, to a large degree, track those for their end-user applications. Any deterioration in the market conditions for the end-user applications of semiconductors that we test and assemble may reduce demand for our services and, in turn, materially adversely affect our financial condition and results of operations. Our net revenue is largely attributable to fees from testing and assembling semiconductors for use in personal computers, consumer and portable electronic products, display applications and communications equipment. The markets for these products are intensely competitive, and a significant decrease in demand puts pricing pressure on our testing and assembly services and negatively affects our earnings.

Net Revenue

We conduct our business according to the following main business segments: (1) testing services for memory and logic/mixed-signal semiconductors; (2) assembly services for memory and logic/mixed-signal semiconductors; (3) LCD and other flat-panel display driver semiconductor testing and assembly services; and (4) bumping services for memory, logic/mixed-signal and LCD and other flat-panel display driver semiconductors. The following table sets forth, for the periods indicated, our consolidated net revenue for each segment.

 

     Six Months ended June 30,  
     2011      2012      2012  
     NT$      NT$      US$  
     (in millions)  

Testing

        

Memory

   $ 2,793.6       $ 2,457.3       $ 82.5   

Logic/mixed-signal

     242.3         229.6         7.7   

Total testing

     3,035.9         2,686.9         90.2   

Assembly

        

Memory

     2,451.4         2,743.3         92.1   

Logic/mixed-signal

     506.5         457.3         15.3   

Total assembly

     2,957.9         3,200.6         107.4   

LCD and other flat-panel display driver semiconductor testing and assembly

     2,003.6         2,006.1         67.3   

Bumping

     1,143.2         1,319.7         44.3   
  

 

 

    

 

 

    

 

 

 

Total

   $ 9,140.6       $ 9,213.3       $ 309.2   
  

 

 

    

 

 

    

 

 

 

 

3


Our net revenue consists primarily of service fees for testing and assembling semiconductors, and to a lesser extent, fees from equipment rentals to semiconductor manufacturers for engineering testing, less allowances for product returns. We offer testing and assembly services for memory semiconductors, logic/mixed-signal semiconductors, testing and assembly services for LCD and other flat-panel display driver semiconductors and bumping services.

Most of our customers do not place purchase orders far in advance and our contracts with customers generally do not require minimum purchases of our products or services. Our customers’ purchase orders have varied significantly from period to period because demand for their products is often volatile. We have strategically entered into long-term capacity agreements with some of our customers. Under certain of those long-term agreements, we have agreed to reserve capacity for our customers and our customers have agreed to place orders in the amount of the reserved capacity (which is subject in certain cases to reduction by the customers).

Our financial condition and results of operations have also been, and are likely to continue to be, affected by price pressures on our service fees, which tend to decline in tandem with the declining average selling prices of the products we test and assemble over the course of their product and technology life cycles. In order to maintain our margins, it is necessary to offset the fee erosion by continually improving our production efficiency and maintaining high capacity utilization rates.

Pricing

We price our testing fees primarily based on the cost of testing the products to our customers’ specifications, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, and with reference to prevailing market prices. Accordingly, the testing fee for a particular product would principally depend on the time taken to perform the tests, the complexity of the product and the testing process, and the cost of the equipment used to perform the test. For example, testing fees for memory semiconductors are significantly higher than those for other products because of the longer time required and the need for burn-in testing.

We price our assembly services on a per unit basis, taking into account the complexity of the package, our costs, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, prevailing market conditions, the order size, the strength and history of our relationship with the customer and our capacity utilization.

We price our testing and assembly services for LCD and other flat-panel display driver semiconductors and bumping services on the basis of our costs, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, and the price for comparable services.

We offer volume discounts to all customers who purchase large quantities of our services and special discounts to customers who use our vertically integrated services. On a case by case basis, we also may offer special payment terms, including longer payment cycles, to key customers during downturns in the market so as to retain business from such key customers.

Revenue Recognition

We generally recognize our revenue upon completion of testing and assembly services. We also recognize our revenue upon shipment of tested and assembled semiconductors to locations designated by our customers, including our internal warehouse for customers using our warehousing services. We submit invoices at the time of completion of service or shipment or delivery and generally require all customers to pay within 60 days after the last day of the month during which the invoice was sent.

Geography and Currency

The majority of our net revenue is generated from customers headquartered in Taiwan, which represented 77% and 66% of our net revenue in the six months ended June 30, 2011 and 2012, respectively. We also generate net revenue from customers in the United States, Singapore, Korea, Japan and other countries. Our service fees and revenue are generally denominated in the currency of the jurisdiction in which our facilities are located, for example NT dollars for our Taiwan operations and RMB for our Mainland China operations. As we generate most of our net revenue from Taiwanese customers using our Taiwanese operations, and since most of our labor and overhead costs are denominated in NT dollars, we consider the NT dollar to be our functional currency.

 

4


Cost of Revenue and Gross Profit (Loss)

Our cost of revenue consists primarily of the following: depreciation and amortization expenses, raw material costs, and labor and overhead expenses, which primarily include expendable equipments, sub-contracting fees and rental expenses. Our operations, in particular our testing, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses as a result of our previous and future acquisitions of testing and assembly equipment and facilities, including our investment in our Mainland China operations.

Our profitability depends in part not only on absolute pricing levels for our services, but also on our capacity utilization rates. Our average capacity utilization rate for testing of memory and logic/mixed-signal semiconductors was 62% and 67% in the six months ended June 30, 2011 and 2012, respectively. Our average capacity utilization rate for assembly of memory and logic/mixed-signal semiconductors was 81% and 81% in the six months ended June 30, 2011 and 2012, respectively. Our average capacity utilization rate for LCD and other flat-panel display driver semiconductor testing and assembly was 84% and 75% in the six months ended June 30, 2011 and 2012, respectively. In addition, our average capacity utilization rate for bumping was 94% and 81% in the six months ended June 30, 2011 and 2012, respectively.

For each period of time selected, we derived the capacity utilization rate for our testing operations by dividing the total number of hours of actual use of our facilities’ testing equipment units by the maximum number of hours that these equipment units were capable of being used. The testing capacity utilization rate generally increases in correlation to increases in the total volume of our customer orders, and generally decreases in correlation to decreases in the total volume of our customer orders.

For each period of time selected, we derived the capacity utilization rate for our assembly operations by dividing the total number of units actually produced by our assembly facilities by the maximum number of units that these facilities are capable of producing. The assembly capacity utilization rate generally increases in correlation to increases in the total volume of our customer orders, and generally decreases in correlation to decreases in the total volume of our customer orders.

Our gross revenue is generally the product of the total volume of our customer orders multiplied by the average selling price per deliverable unit from our assembly or testing services, as the case may be. As a result, in a period where the average selling prices do not fluctuate significantly, increases or decreases in our capacity utilization rates generally correlate to increases or decreases in our gross revenue. Periods with significant increases in the average selling prices reduce the negative impact on our gross revenue from any decreases in our capacity utilization rates. Similarly, periods with significant decreases in the average selling prices reduce the positive impact on our gross revenue from any increases in our capacity utilization rates.

The Company has significant fixed costs in operating our assembly and testing facilities. For this reason, decreases in our cost of goods sold during a period generally occur at a slower rate than decreases, during the same period, in our gross revenue due to lower capacity utilization rates, lower average selling prices, or both. Also, as a result, our gross margin and profitability generally decrease in correlation to decrease in our capacity utilization rates, decrease in our average selling prices, or both. Similarly, our gross margin and profitability generally increase in correlation to increase in our capacity utilization rates, increase in our average selling prices, or both. Due to the cyclical nature of the semiconductor industry, customer orders may change significantly, causing fluctuation in our capacity utilization rate and average selling price.

Most of our labor and overhead costs are denominated in NT dollars. However, we also incur costs of revenues and operating expenses associated with testing and assembly services in several other currencies, including Japanese yen, US dollars and RMB. In addition, a substantial portion of our capital expenditures, primarily for the purchase of testing and assembly equipment, has been, and is expected to continue to be, denominated in Japanese yen with much of the remainder denominated in US dollars.

 

5


The following table sets forth, for the periods indicated, our gross profit (loss) and our gross profit (loss) margin as a percentage of net revenue.

 

     Six Months ended June 30,  
     2011     2012     2012  
     NT$     NT$     US$  
     (in millions)  

Gross profit (loss):

      

Testing

      

Memory

   $ 210.3      $ 83.4      $ 2.8   

Logic/mixed-signal

     21.1        15.2        0.5   

Total testing

     231.4        98.6        3.3   

Assembly

      

Memory

     (15.3     66.9        2.2   

Logic/mixed-signal

     125.5        167.3        5.6   

Total assembly

     110.2        234.2        7.8   

LCD and other flat-panel display driver semiconductor testing and assembly

     459.0        491.5        16.5   

Bumping

     43.4        46.3        1.6   
  

 

 

   

 

 

   

 

 

 

Total

   $ 844.0      $ 870.6      $ 29.2   
  

 

 

   

 

 

   

 

 

 

Gross profit (loss) margin:

      

Testing

      

Memory

     7.5     3.4     3.4

Logic/mixed-signal

     8.7        6.6        6.6   

Total testing

     7.6        3.7        3.7   

Assembly

      

Memory

     (0.6     2.4        2.4   

Logic/mixed-signal

     24.8        36.6        36.6   

Total assembly

     3.7        7.3        7.3   

LCD and other flat-panel display driver semiconductor testing and assembly

     22.9        24.5        24.5   

Bumping

     3.8        3.5        3.5   

Overall

     9.2     9.4     9.4

Operating Expenses

Research and Development

Research and development expenses consist primarily of personnel expenses, amortization expenses relating to technology, expenditures to qualify our services for specific customers and other consulting fees and certification fees paid to third parties. Research and development expenses are recognized as they are incurred.

Sales and Marketing

Sales and marketing expenses consist primarily of shipping and handling expenses incurred in delivering products to our customers’ designated locations, advertising, corporate communications and other marketing expenses, salary expenses for sales and marketing personnel, sales commission, professional service fees, bad debt provision and service support expenses.

General and Administrative

General and administrative expenses consist of salaries and related expenses for executive, finance and accounting, and management information systems personnel, professional service fees, and other corporate expenses. They also include stock-based compensation that is expensed using the intrinsic value-based method and fair value method.

 

6


Other Income (Expenses), Net

Our other income principally consists of interest income, foreign exchange gains, warehouse space rental revenue, royalty income, gains on sale of investments, gains on disposal of property, plant and equipment, fair value gains on financial assets and gains on embedded derivative.

Our other expenses principally consist of interest expense, fair value loss on financial assets, financing costs, impairment losses, losses on disposal of property, plant and equipment, loss on embedded derivative and foreign exchange losses.

Noncontrolling Interests

Noncontrolling interests represent the portion of our income that is attributable to the shareholding in our consolidated subsidiaries that we do not own.

Net Income (Loss)

Our net loss was NT$125 million and net income was NT$115 million (US$4 million) in the six months ended June 30, 2011 and 2012.

Results of Operations

The following table presents selected operating data as a percentage of net revenue for the periods indicated:

 

     Six Months ended June 30,  
     2011     2012  

ROC GAAP:

    

Net revenue

     100.0     100.0

Cost of revenue

     90.8        90.6   
  

 

 

   

 

 

 

Gross profit margin

     9.2        9.4   
  

 

 

   

 

 

 

Operating expenses:

    

Research and development

     2.3        2.5   

General and administrative

     3.6        3.3   

Sales and marketing

     0.3        0.4   
  

 

 

   

 

 

 

Total operating expenses

     6.2        6.2   
  

 

 

   

 

 

 

Income from operations

     3.0        3.2   

Other income (expenses), net

     (3.4     (1.9
  

 

 

   

 

 

 

Income (Loss) before income tax and noncontrolling interests

     (0.4     1.3   

Income tax benefit (expense)

     (0.9     (0.5
  

 

 

   

 

 

 

Income (Loss) before noncontrolling interests

     (1.3     0.8   

Net (income) loss attributable to noncontrolling interests

     (0.1     0.5   
  

 

 

   

 

 

 

Net income (loss) attributable to ChipMOS

     (1.4 )%      1.3
  

 

 

   

 

 

 

 

7


Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

Net Revenue. Our net revenue increased by NT$72 million, or 1%, to NT$9,213 million (US$309 million) in the six months ended June 30, 2012 from NT$9,141 million in the six months ended June 30, 2011.

Net revenue from testing services for memory and logic/mixed-signal semiconductors decreased by NT$349 million, or 12%, to NT$2,687 million (US$90 million) in the six months ended June 30, 2012 from NT$3,036 million in the six months ended June 30, 2011. Net revenue from testing services for memory semiconductors decreased by NT$337 million, or 12%, to NT$2,457 million (US$82 million) in the six months ended June 30, 2012 from NT$2,794 million in the six months ended June 30, 2011, principally due to the lower customer demand and average selling price. Net revenue for testing services for logic/mixed-signal semiconductors decreased by NT$12 million, or 5%, to NT$230 million (US$8 million) in the six months ended June 30, 2012 from NT$242 million in the six months ended June 30, 2011, principally due to lower customer demand and average selling price.

Net revenue from assembly services for memory and logic/mixed-signal semiconductors increased by NT$242 million, or 8%, to NT$3,200 million (US$108 million) in the six months ended June 30, 2012 from NT$2,958 million in the six months ended June 30, 2011. Net revenue from assembly services for memory semiconductors increased by NT$292 million, or 12%, to NT$2,743 million (US$92 million) in the six months ended June 30, 2012 from NT$2,451 million in the six months ended June 30, 2011, primarily as a result of increased customer demand and average selling price. Net revenue from assembly services for logic/mixed-signal semiconductors decreased by NT$50 million, or 10%, to NT$457 million (US$16 million) in the six months ended June 30, 2012 from NT$507 million in the six months ended June 30, 2011, mainly attributable to lower customer demand.

Net revenue from LCD and other flat-panel display driver semiconductor testing and assembly services increased by NT$2 million, or 0.1%, to NT$2,006 million (US$67 million) in the six months ended June 30, 2012 from NT$2,004 million in the six months ended June 30, 2011. This increase was principally as a result of an increase of capacity for LCD and other flat-panel display products in the six months ended June 30, 2012.

Net revenue from bumping services increased by NT$177 million, or 15%, to NT$1,320 million (US$44 million) in the six months ended June 30, 2012 from NT$1,143 million in the six months ended June 30, 2011. This increase was principally as a result of an increased average selling price for bumping services in the six months ended June 30, 2012.

See “— Cost of Revenue and Gross Profit (Loss)” for more information concerning our testing and assembly capacity utilization rates and the impact on our gross revenue, gross margin and profitability from any increases or decreases in our capacity utilization rates.

Cost of Revenue and Gross Margin. Cost of revenue increased by NT$46 million, or 1%, to NT$8,343 million (US$280 million) in the six months ended June 30, 2012 from NT$8,297 million in the six months ended June 30, 2011, primarily due to increase of direct materials, direct labor, fringes and operating supplies of NT$315 million (US$11 million), NT$18 million (US$1 million), NT$33 million (US$1 million) and NT$56 million (US$2 million), respectively and partially offset by the decrease in depreciation expense and inventory valuation allowance of NT$234 million (US$8 million) and NT$146 million (US$5 million).

Our gross profit increased to NT$871 million (US$29 million) in the six months ended June 30, 2012 from NT$844 million in the six months ended June 30, 2011. Our gross margin remained at around 9% in the six months ended June 30, 2011 and 2012.

Our gross margin for testing services for memory and logic/mixed-signal semiconductors decreased to 4% in the six months ended June 30, 2012 from 8% in the six months ended June 30, 2011, primarily due to a lower customer demand and average selling price.

Our gross margin for assembly services for memory and logic/mixed-signal semiconductors increased to 7% in the six months ended June 30, 2012 from 4% in the six months ended June 30, 2011, primarily due to the increased sales of higher margin memory semiconductor assembly services.

Our gross margin for LCD and other flat-panel display driver semiconductor testing and assembly services increased to 25% in the six months ended June 30, 2012 from 23% in the six months ended June 30, 2011, primarily due to the increased sales of LCD and other flat-panel display driver semiconductor testing and assembly services.

Our gross margin for bumping services decreased to 3% in the six months ended June 30, 2012 from 4% in the six months ended June 30, 2011, primarily due to a lower capacity utilization rate, which decreased to 81% in the six months ended June 30, 2012 from 94% in the six months ended June 30, 2011.

 

8


See “— Cost of Revenue and Gross Profit (Loss)” for more information concerning our testing and assembly capacity utilization rates and the impact on our gross revenue, gross margin and profitability from any increases or decreases in our capacity utilization rates.

Research and Development Expenses. Research and development expenses increased by NT$24 million, or 11%, to NT$233 million (US$8 million) in the six months ended June 30, 2012 from NT$209 million in the six months ended June 30, 2011. This increase was primarily due to the increase of salary and fringes expenses.

General and Administrative Expenses. General and administrative expenses decreased by NT$24 million, or 7%, to NT$303 million (US$10 million) in the six months ended June 30, 2012 from NT$327 million in the six months ended June 30, 2011, primarily due to the decrease of professional services fees and depreciation expense by NT$38 million (US$1 million) and NT$7 million (US$235 thousand) and partially offset by the increase of fringes expenses by NT$18 million (US$604 thousand).

Sales and Marketing Expenses. Sales and marketing expenses increased by NT$6 million, or 18%, to NT$39 million (US$1 million) in the six months ended June 30, 2012 from NT$33 million in the six months ended June 30, 2011, primarily due to an increase of freight-out expenses, entertainment expenses, commissions and miscellaneous taxes.

Other Income (Expenses), Net. Other income (expenses), net, changed by NT$137 million, or 44%, to other expenses, net, of NT$176 million (US$6 million) in the six months ended June 30, 2012 from other expense, net, of NT$313 million in the six months ended June 30, 2011. This change was primarily due to the decrease of interest expense by NT$61 million (US$2 million), loss on partial disposal of ChipMOS Taiwan to Siliconware Precision by NT$75 million (US$3 million) and loss on derivative liability by NT$57 million (US$2 million) and partially offset by the increase of depreciation expense of idle assets by NT$33 million (US$1 million) and scrap loss of property, plant and equipment by NT$30 million (US$1 million).

Income (Loss) Before Income Tax and Noncontrolling Interests. As a result of the foregoing, loss before income tax and noncontrolling interests decreased by 418% to income before income tax and noncontrolling interests of NT$121 million (US$4 million) in the six months ended June 30, 2012 from loss before income tax and noncontrolling interests of NT$38 million in the six months ended June 30, 2011.

Income Tax Benefit (Expense). We had an income tax expense of NT$48 million (US$2 million) in the six months ended June 30, 2012 compared to income tax expense of NT$84 million in the six months ended June 30, 2011, primarily due to the decrease in income before income tax of ThaiLin.

Net (Income) Loss Attributable to Noncontrolling Interests. The net income less losses of ThaiLin and its wholly-owned subsidiaries, Modern Mind and ChipMOS Shanghai and of ChipMOS Taiwan attributable to noncontrolling interests amounted to NT$43 million (US$1 million) in the six months ended June 30, 2012, compared to the net income of ThaiLin and of ChipMOS Taiwan attributable to noncontrolling interests of NT$3 million in the six months ended June 30, 2011.

Net Income (Loss) Attributable to ChipMOS. As a result of the foregoing, the net income attributable to ChipMOS was NT$115 million (US$4 million) in the six months ended June 30, 2012, compared to a net loss attributable to ChipMOS of NT$125 million in the six months ended June 30, 2011.

Liquidity and Capital Resources

Since our inception, we have funded our operations and growth primarily through the issuance of equity, a mixture of short- and long-term loans and cash flow from operations. As of June 30, 2012, our primary sources of liquidity were cash and cash equivalents (excluding restricted cash and cash equivalents) of NT$6,597 million (US$221 million), and short-term loans of NT$561 million (US$19 million) available to us in undrawn facilities, which will expire before June 2013. To meet our liquidity, capital spending and other capital needs, we have taken certain steps discussed below.

 

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Liquidity

The following table sets forth our cash flows with respect to operating activities, investing activities, financing activities and the effect of exchange rate changes on cash for the periods indicated.

 

     Six Months ended June 30,  
     2011     2012     2012  
     NT$     NT$     US$  
     (in millions)  

Consolidated Statement of Cash Flows Data:

      

ROC GAAP:

      

Net cash provided by (used in):

      

Operating activities

   $ 2,407.5      $ 859.1      $ 28.8   

Investing activities

     (1,660.4     (1,462.6     (49.1

Financing activities

     (2,803.9     (151.3     (5.0

Effect of exchange rate changes on cash

     2.1        (6.5     (0.2
  

 

 

   

 

 

   

 

 

 

Net decrease in cash

   $ (2,054.7   $ (761.3   $ (25.5
  

 

 

   

 

 

   

 

 

 

Net Cash Provided by Operating Activities

Net cash provided by operating activities totaled NT$859 million (US$29 million) in the six months ended June 30, 2012, compared to NT$2,407 million in the six months ended June 30, 2011. The decrease in net cash provided by operating activities was primarily due to an increase of financial assets at fair value through profit or loss of NT$999 million (US$34 million) in the six months ended June 30, 2012 compared to an increase of financial assets at fair value through profit or loss of NT$6 million in the six months ended June 30, 2011 and a decrease of account payable of NT$114 million (US$4 million) in the six months ended June 30, 2012 compared to an increase of account payable of NT$160 million in the six months ended June 30, 2011. The decrease in net cash provided by operating activities was also attributable to a decrease in depreciation expense to NT$2,559 million (US$86 million) in the six months ended June 30, 2012 from NT$2,768 million in the six months ended June 30, 2011.

Net Cash Used in Investing Activities

Net cash used in investing activities totaled NT$1,463 million (US$49 million) in the six months ended June 30, 2012, compared to NT$1,660 million in the six months ended June 30, 2011. The decrease in net cash used in investing activities was primarily the result of a decrease in restricted cash and cash equivalents of NT$132 million (US$4 million) in the six months ended June 30, 2012 compared to an increase in restricted cash and cash equivalents of NT$391 million in the six months ended June 30, 2011, a decrease in capital expenditures which decreased to NT$1,584 million (US$53 million) in the six months ended June 30, 2012 from NT$2,025 million in the six months ended June 30, 2011 and partially offset by the proceeds from sales of ChipMOS Taiwan’s shares to Siliconware Precision of NT$487 million in the six months ended June 30, 2011 and decrease in proceeds from sales of property, plant and equipment which decreased to NT$4 million (US$134 thousand) in the six months ended June 30, 2012 from NT$292 million in the six months ended June 30, 2011.

Net Cash Used in Financing Activities

Net cash used in financing activities totaled NT$151 million (US$5 million) in the six months ended June 30, 2012, compared to NT$2,804 million in the six months ended June 30, 2011. The decrease in net cash used in financing activities was primarily the result of the net proceeds of short-term loans of NT$95 million (US$3 million) in the six months ended June 30, 2012, compared to the net payments of short-term loans of NT$531 million in the six months ended June 30, 2011 and the net payments of long-term loans of NT$324 million (US$11 million) in the six months ended June 30, 2012, compared to NT$2,148 million in the six months ended June 30, 2011.

 

10


Capital Resources

Capital expenditures in the six months ended June 30, 2012 were funded by NT$859 million (US$29 million) in cash flows from operating activities.

As of June 30, 2012, we had secured long-term loans of NT$8,845 million (US$297 million) (including current portions of such long-term loans of NT$1,421 million (US$48 million)), which will be due in January 2015 to March 2018. Our unused long-term credit facilities amounted to US$7 million (NT$209 million), as of June 30, 2012.

As of June 30, 2012, we had a secured short-term credit loan of NT$9 million (US$0.3 million), which was due in July 2012, and unsecured short-term loans in the total amount of NT$633 million (US$21 million), which were due or will be due from July 2012 to October 2012. Our unused credit lines for short-term loans, as of June 30, 2012, totaled NT$561 million (US$19 million), which were expired or will expire from July 2012 to June 2013.

As of June 30, 2012, certain of our land, buildings and land use right, machinery and restricted cash and cash equivalents with an aggregate net book value of NT$5,771 million (US$194 million), NT$3,094 million (US$104 million) and NT$153 million (US$5 million), respectively, were pledged as collateral in connection with our long-term and short-term bank loans.

Off-Balance Sheet Arrangements

As of June 30, 2012, we had no off-balance sheet arrangements.

US GAAP Reconciliation

Our consolidated financial statements are prepared in accordance with ROC GAAP, which differs in certain material respects from US GAAP. The following table sets forth a comparison of our net income (loss), total assets and shareholders’ equity (including noncontrolling interests) in accordance with ROC GAAP and US GAAP for the periods indicated:

 

     Six Months ended as of June 30  
     2011     2012      2012  
     NT$     NT$      US$  
     (in millions)  

Net income (loss) attributable to ChipMOS in accordance with:

       

ROC GAAP

   $ (124.5   $ 115.3       $ 3.9   

US GAAP

   $ (122.8   $ 130.4       $ 4.4   

 

11


     Year ended as of
December 31, 2011
     Six Months ended as of June 30, 2012  
     NT$      NT$      US$  
     (in millions)  

Total assets in accordance with:

        

ROC GAAP

   $ 28,281.1       $ 27,787.8       $ 932.5   

US GAAP

     27,964.2         27,438.5         920.8   

Total equity (including noncontrolling interests) in accordance with:

        

ROC GAAP

     14,983.3         15,144.7         508.2   

US GAAP

   $ 14,288.9       $ 14,482.7       $ 486.0   

Note 25 to our consolidated financial statements contained in the Annual Report on Form 20-F describes the principal differences between ROC GAAP and US GAAP as they relate to us, and a reconciliation to US GAAP for certain items, including net income (loss) and shareholders’ equity. Differences between ROC GAAP and US GAAP which have an effect on our net income (loss) as reported under ROC GAAP relate to, among other things, depreciation policy, uncertain tax positions, pension expenses, share-based compensation and accounting for our convertible notes.

Under Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 718, share-based compensation transactions are generally required to be accounted for using a fair-value-based method and recognized as expenses in the consolidated statements of operations. The standards became effective for the first interim period beginning after December 15, 2005.

Under FASB ASC 815, we are required to bifurcate and separately account for the conversion feature of our convertible notes as embedded derivatives contained in the convertible notes. Under US GAAP, we are required to carry these embedded derivatives on our balance sheet at fair value and changes in fair values of these embedded derivatives are reflected in the consolidated statement of operations.

 

12


ChipMOS TECHNOLOGIES (Bermuda) LTD.

and Subsidiaries

Unaudited Consolidated Financial Statements

for the Six Months Ended June 30, 2011 and 2012

 

13


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Consolidated Financial Statements

  

Unaudited Consolidated Balance Sheets

     F-2   

Unaudited Consolidated Statements of Operations

     F-4   

Unaudited Consolidated Statement of Changes in Equity

     F-6   

Unaudited Consolidated Statements of Cash Flows

     F-7   

Notes to Unaudited Consolidated Financial Statements

     F-9   

 

F-1


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

December 31, 2011 and June 30, 2012 (Notes 1 and 6)

(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)

 

     December 31,     June 30,  
     2011     2012  
     NT$     NT$     US$  
                 (Note 3)  

ASSETS

      

CURRENT ASSETS

      

Cash and cash equivalents

     7,357,902        6,596,611        221,363   

Restricted cash and cash equivalents (Note 8)

     285,133        152,830        5,129   

Financial assets at fair value through profit or loss

     —          1,000,659        33,579   

Notes receivable

     5,710        7,844        263   

Accounts receivable - net of allowance for doubtful receivables and sales return allowances

     3,666,507        3,954,239        132,693   

Other receivables - net of allowance for doubtful receivables and sales return allowances

     73,179        135,081        4,533   

Inventories - net (Note 4)

     1,533,866        1,579,665        53,009   

Deferred income tax - net

     76,559        60,931        2,044   

Prepaid expenses and other current assets

     92,335        155,446        5,216   
  

 

 

   

 

 

   

 

 

 

Total Current Assets

     13,091,191        13,643,306        457,829   
  

 

 

   

 

 

   

 

 

 

LONG-TERM INVESTMENTS

      

Financial assets carried at cost

     39,121        39,121        1,313   
  

 

 

   

 

 

   

 

 

 

PROPERTY, PLANT AND EQUIPMENT - NET (Note 8)

      

Cost

      

Land

     452,738        452,738        15,193   

Buildings and auxiliary equipment

     9,095,376        9,084,433        304,847   

Machinery and equipment

     38,698,624        39,099,028        1,312,048   

Furniture and fixtures

     1,401,278        1,430,351        47,998   

Transportation equipment

     36,819        38,897        1,305   

Tools

     3,056,053        3,155,025        105,873   

Leasehold improvements

     2,310        2,280        77   
  

 

 

   

 

 

   

 

 

 

Total cost

     52,743,198        53,262,752        1,787,341   

Accumulated depreciation

     (37,910,331     (40,020,285     (1,342,963

Accumulated impairment

     (1,417,109     (1,386,246     (46,518

Construction in progress and advance payments

     480,290        1,087,360        36,488   
  

 

 

   

 

 

   

 

 

 

Net Property, Plant and Equipment

     13,896,048        12,943,581        434,348   
  

 

 

   

 

 

   

 

 

 

INTANGIBLE ASSETS - NET (Note 8)

     100,498        97,752        3,280   
  

 

 

   

 

 

   

 

 

 

OTHER ASSETS

      

Employee dormitory buildings - net of accumulated depreciation

     248,429        234,991        7,886   

Refundable deposits

     21,364        21,214        712   

Prepaid pension

     33,541        35,617        1,195   

Deferred income tax – net

     600,351        570,833        19,155   

Others

     250,522        201,384        6,758   
  

 

 

   

 

 

   

 

 

 

Total Other Assets

     1,154,207        1,064,039        35,706   
  

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

     28,281,065        27,787,799        932,476   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-2


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS (Continued)

December 31, 2011 and June 30, 2012 (Notes 1 and 6)

(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)

 

     December 31,     June 30,  
     2011     2012  
     NT$     NT$     US$  
                 (Note 3)  

LIABILITIES AND EQUITY

      

CURRENT LIABILITIES

      

Bank loans (Note 8)

     546,916        641,845        21,538   

Current portion of long-term loans (Note 8)

     684,028        1,420,500        47,668   

Deferred credit

     2,383        2,346        79   

Accounts payable

     1,130,730        1,029,570        34,549   

Other payables

     1,081,530        908,957        30,502   

Income tax payable

     20,283        —          —     

Payables to contractors and equipment suppliers

     415,391        442,821        14,860   

Accrued expenses and other current liabilities

     830,903        673,647        22,605   
  

 

 

   

 

 

   

 

 

 

Total Current Liabilities

     4,712,164        5,119,686        171,801   
  

 

 

   

 

 

   

 

 

 

LONG-TERM LIABILITIES

      

Long-term loans (Note 8)

     8,484,300        7,424,168        249,133   
  

 

 

   

 

 

   

 

 

 

OTHER LIABILITIES

      

Deferred credit

     95,304        92,683        3,110   

Accrued pension cost

     4,250        4,495        151   

Guarantee deposits

     1,777        2,053        69   
  

 

 

   

 

 

   

 

 

 

Total Other Liabilities

     101,331        99,231        3,330   
  

 

 

   

 

 

   

 

 

 

Total Liabilities

     13,297,795        12,643,085        424,264   
  

 

 

   

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 9)

      

EQUITY (Note 6)

      

Capital stock NT$1.169 (US$0.04) par value

      

Authorized 62,500 thousand common shares and 18,750 thousand preferred shares

      

Issued 33,784 thousand common shares (2011: 33,398 thousand common shares)

      

Outstanding 27,310 thousand common shares (2011: 26,924 thousand common shares)

     39,041        39,498        1,325   

Capital surplus

     15,201,353        15,290,344        513,099   

Accumulated losses

     (3,787,431     (3,673,982     (123,288

Cumulative translation adjustments

     433,902        426,849        14,324   

Treasury stock

     (924,781     (919,849     (30,867
  

 

 

   

 

 

   

 

 

 

Total Shareholders’ Equity

     10,962,084        11,162,860        374,593   

Noncontrolling interests

     4,021,186        3,981,854        133,619   
  

 

 

   

 

 

   

 

 

 

Total Equity

     14,983,270        15,144,714        508,212   
  

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

     28,281,065        27,787,799        932,476   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-3


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Six Months Ended June 30, 2011 and 2012 (Notes 1 and 6)

(In Thousands of New Taiwan and U.S. Dollars, Except Earnings Per Share)

 

     Six Months Ended June 30,  
     2011      2012  
     NT$      NT$      US$  
                   (Note 3)  

NET REVENUE (Notes 7 and 12)

        

Related parties

     379,009         —           —     

Third parties

     8,761,639         9,213,262         309,170   
  

 

 

    

 

 

    

 

 

 

Total Net Revenue

     9,140,648         9,213,262         309,170   
  

 

 

    

 

 

    

 

 

 

COST OF REVENUE (Note 12)

        

Related parties

     446,609         —           —     

Third parties

     7,850,088         8,342,644         279,955   
  

 

 

    

 

 

    

 

 

 

Total Cost of Revenue

     8,296,697         8,342,644         279,955   
  

 

 

    

 

 

    

 

 

 

GROSS PROFIT

     843,951         870,618         29,215   
  

 

 

    

 

 

    

 

 

 

OPERATING EXPENSES

        

Research and development

     208,625         232,474         7,801   

General and administrative

     327,250         302,724         10,159   

Sales and marketing

     32,930         38,867         1,304   
  

 

 

    

 

 

    

 

 

 

Total Operating Expenses

     568,805         574,065         19,264   
  

 

 

    

 

 

    

 

 

 

INCOME FROM OPERATIONS

     275,146         296,553         9,951   
  

 

 

    

 

 

    

 

 

 

NON-OPERATING INCOME

        

Rental

     5,457         3,361         113   

Interest

     10,475         12,556         421   

Gain on disposal of property, plant and equipment

     33,154         14,868         499   

Gain on disposal of financial assets

     131         829         28   

Fair value gain on financial assets

     —           659         22   

Other

     40,066         59,055         1,982   
  

 

 

    

 

 

    

 

 

 

Total Non-Operating Income

     89,283         91,328         3,065   
  

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-4


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

For the Six Months Ended June 30, 2011 and 2012 (Notes 1 and 6)

(In Thousands of New Taiwan and U.S. Dollars, Except Earnings Per Share)

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
                 (Note 3)  

NON-OPERATING EXPENSES

      

Interest

     181,870        121,126        4,065   

Financing cost

     15,193        —          —     

Foreign exchange loss – net

     48,950        63,676        2,136   

Loss on disposal of property, plant and equipment

     5,102        2,892        97   

Impairment loss on other assets

     2,288        3,700        124   

Loss on embedded derivative

     57,188        —          —     

Loss on partial disposal of a subsidiary

     74,923        —          —     

Other

     16,975        75,601        2,537   
  

 

 

   

 

 

   

 

 

 

Total Non-Operating Expenses

     402,489        266,995        8,959   
  

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAX AND NONCONTROLLING INTERESTS

     (38,060     120,886        4,057   

INCOME TAX EXPENSE

     (83,549     (48,255     (1,619
  

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE NONCONTROLLING INTERESTS

     (121,609     72,631        2,438   

NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

     (2,931     42,599        1,429   
  

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO ChipMOS

     (124,540     115,230        3,867   
  

 

 

   

 

 

   

 

 

 

EARNINGS (LOSS) PER SHARE – BASIC

     (4.74     4.24        0.14   
  

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC

     26,256        27,169        27,169   
  

 

 

   

 

 

   

 

 

 

EARNINGS (LOSS) PER SHARE – DILUTED (Note 2)

     (4.74     4.11        0.14   
  

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – DILUTED (Note 2)

     26,256        28,022        28,022   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-5


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Six Months Ended June 30, 2012 (Notes 1 and 6)

(In Thousands of New Taiwan Dollars, Except Number of Shares)

 

    CAPITAL STOCK     CAPITAL     RETAINED
EARNINGS
(ACCUMULATED
    CUMULATIVE
TRANSLATION
    TREASURY     NON-
CONTROLLING
    TOTAL  
    Shares     Amount     SURPLUS     LOSSES)     ADJUSTMENTS     STOCK     INTERESTS     EQUITY  
    (Thousands)     NT$     NT$     NT$     NT$     NT$     NT$     NT$  

BALANCE, DECEMBER 31, 2011

    26,924        39,041        15,201,353        (3,787,431     433,902        (924,781     4,021,186        14,983,270   

Exercise of stock option

    433        512        84,833        —          —          —          —          85,345   

Issue of option warrants

    —          —          33,743        —          —          —          —          33,743   

Net income for the six months ended June 30, 2012

    —          —          —          115,230        —          —          (42,599     72,631   

Adjustment of equity method for long-term investments

    —          —          (18,724     (1,781     —          4,932        —          (15,573

Changes in noncontrolling interests

    —          —          —          —          —          —          3,267        3,267   

Shares repurchase

    —          —          —          —          —          (10,916     —          (10,916

Treasury stock cancel and retire

    (47     (55     (10,861     —          —          10,916        —          —     

Translation adjustments

    —          —          —          —          (7,053     —          —          (7,053
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2012

    27,310        39,498        15,290,344        (3,673,982     426,849        (919,849     3,981,854        15,144,714   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-6


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2011 and 2012 (Notes 1 and 6)

(In Thousands of New Taiwan and U.S. Dollars)

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
                 (Note 3)  

CASH FLOWS FROM OPERATING ACTIVITIES

      

Net income (loss) attributable to ChipMOS

     (124,540     115,230        3,867   

Adjustments to reconcile net income (loss) to net cash provided by operating activities

      

Depreciation

     2,767,781        2,558,549        85,857   

Amortization of intangible and other assets

     47,479        32,817        1,101   

Amortization of discount of convertible notes (“CN”)

     1,298        —          —     

Interest payment from conversion of CN

     39,780        —          —     

Allowance for doubtful receivables

     5,965        6,918        232   

Recovery of allowance for doubtful receivables

     (702     (113     (4

Deferred compensation

     13,024        33,743        1,132   

Gain on disposal of property, plant and equipment – net

     (28,052     (11,976     (402

Gain on disposal of financial assets

     (131     (829     (28

Loss on partial disposal of a subsidiary

     74,923        —          —     

Loss on embedded derivative

     57,188        —          —     

Impairment loss of other assets

     2,288        3,700        124   

Fair value gain on financial assets

     —          (659     (22

Accrued pension cost

     (1,314     (1,830     (61

Deferred income tax – net

     101,440        45,146        1,515   

Noncontrolling interests

     2,931        (42,599     (1,429

Changes in operating assets and liabilities

      

Financial assets at fair value through profit or loss

     (6,455     (999,171     (33,529

Notes receivable

     4,920        (2,134     (72

Accounts receivable

     (410,270     (297,566     (9,985

Other receivables

     127,643        (29,767     (999

Inventories

     (352,104     (47,307     (1,587

Prepaid expenses and other current assets

     51,325        (63,468     (2,130

Other assets

     (216     27,332        918   

Accounts payable

     160,422        (114,398     (3,839

Other payables

     30,476        (171,848     (5,767

Income tax payable

     (18,399     (20,283     (681

Accrued expenses and other liabilities

     (118,531     (159,201     (5,342

Deferred credit

     (20,684     (1,167     (39
  

 

 

   

 

 

   

 

 

 

Net Cash Provided by Operating Activities

     2,407,485        859,119        28,830   
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

      

Decrease (increase) in restricted cash and cash equivalents

     (390,571     132,223        4,437   

Proceeds from sales of property, plant and equipment

     291,921        3,669        123   

Proceeds from sales of employee dormitory buildings and other assets

     4,952        5,226        175   

Proceeds from partial disposal of a subsidiary

     486,859        —          —     

Acquisitions of:

      

Property, plant and equipment

     (2,024,588     (1,584,205     (53,161

Deferred assets

     (28,336     (18,857     (633

Employee dormitory building and other assets

     (137     (842     (28

Decrease (increase) in refundable deposits

     (485     150        5   
  

 

 

   

 

 

   

 

 

 

Net Cash Used in Investing Activities

     (1,660,385     (1,462,636     (49,082
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-7


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Six Months Ended June 30, 2011 and 2012 (Notes 1 and 6)

(In Thousands of New Taiwan and U.S. Dollars)

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
                 (Note 3)  

CASH FLOWS FROM FINANCING ACTIVITIES

      

Payments on:

      

Bank loans

     (530,950     —          —     

Long-term loans

     (2,148,299     (324,023     (10,873

Treasury stock

     —          (10,916     (367

Reverse stock split

     (239     —          —     

Proceeds from:

      

Bank loans

     —          94,879        3,184   

Issuance of capital stock

     14,871        85,345        2,864   

Changes in noncontrolling interests

     (137,966     3,267        110   

Increase (decrease) in guarantee deposits

     (1,324     113        4   
  

 

 

   

 

 

   

 

 

 

Net Cash used in Financing Activities

     (2,803,907     (151,335     (5,078
  

 

 

   

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

     2,067        (6,439     (216
  

 

 

   

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (2,054,740     (761,291     (25,546

Cash and cash equivalents, beginning of the period

     7,143,265        7,357,902        246,909   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of the period

     5,088,525        6,596,611        221,363   
  

 

 

   

 

 

   

 

 

 

SUPPLEMENTAL INFORMATION

      

Income tax paid

     20,468        23,868        801   
  

 

 

   

 

 

   

 

 

 

Interest paid

     155,893        122,455        4,109   
  

 

 

   

 

 

   

 

 

 

NON-CASH FINANCING ACTIVITIES

      

Current portion of long-term loans

     4,255,949        1,420,500        47,668   

Interest payment for CN in shares

     42,371        —          —     

PARTIAL CASH PAID FOR INVESTING ACTIVITIES

      

Cash paid for acquisition of property, plant and Equipment

      

Total acquisitions

     1,313,138        1,612,171        54,100   

Decrease (increase) in payables to contractors and equipment suppliers

     711,450        (27,966     (939
  

 

 

   

 

 

   

 

 

 
     2,024,588        1,584,205        53,161   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-8


ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1. ORGANIZATION AND BUSINESS

ChipMOS TECHNOLOGIES (Bermuda) LTD. (ChipMOS Bermuda) was incorporated under the laws of Bermuda on August 1, 2000, and its common shares have been traded on the NASDAQ Global Select Market since June 2001. In February 2010, ChipMOS Bermuda submitted an application to the NASDAQ Stock Market to transfer its listing to The NASDAQ Capital Market from The NASDAQ Global Select Market. The NASDAQ Stock Market has determined that the Company meets the NASDAQ Capital Market initial listing criteria set forth in Listing Rule 5505. Its common shares have been traded on the NASDAQ Capital Market since March 17, 2010. As of June 30, 2012, ChipMOS Bermuda was 19.16% owned by ThaiLin Semiconductor Corp. (ThaiLin). As of June 30, 2012, ChipMOS Bermuda owned 84.22% of the outstanding common shares of ChipMOS TECHNOLOGIES INC. (ChipMOS Taiwan).

 

LOGO

ChipMOS Taiwan was incorporated in Taiwan on July 28, 1997 as a joint venture company between Mosel Vitelic Inc. (MVI) and Siliconware Precision Industries Co. Ltd. (SPIL). Its operations consist of testing and assembly of semiconductors. In connection with a corporate restructuring on January 12, 2001, the holders of an aggregate of 583,419 thousand common shares of ChipMOS Taiwan executed a Purchase and Subscription Agreement whereby they transferred their shares of ChipMOS Taiwan to ChipMOS Bermuda in exchange for 14,585 thousand common shares in ChipMOS Bermuda. The selling shareholders, who previously held an aggregate of 70.25% of the entire outstanding common shares of ChipMOS Taiwan, thus became the holders of the entire outstanding common shares of ChipMOS Bermuda. Because 100% of the outstanding common shares of ChipMOS Bermuda were owned by former shareholders of ChipMOS Taiwan, the exchange of shares has been accounted for as a merger as if ChipMOS Bermuda was the acquirer. Equity and operations attributable to ChipMOS Taiwan shareholders not participating in the exchange offer were reflected as noncontrolling interests in the historical financial statements. In March 2007, ChipMOS Bermuda, ChipMOS Taiwan and SPIL completed a share purchase and subscription transaction whereby ChipMOS Bermuda purchased 100% of SPIL’s equity interest in ChipMOS Taiwan at US$0.75 per share. SPIL also subscribed to 3,043,749 newly issued common shares of ChipMOS Bermuda through a private placement of US$6.28 per share. After the transaction, ChipMOS Taiwan became a 99.14% subsidiary of ChipMOS Bermuda and SPIL owned 14.7% of ChipMOS Bermuda. In September 2007, another share exchange transaction was completed whereby ChipMOS Bermuda offered to exchange one share of ChipMOS Bermuda for 8.4 shares of ChipMOS Taiwan shares. The exchange was completed in September 2007 and ChipMOS Taiwan became a wholly-owned subsidiary of ChipMOS Bermuda. In February 2010, ChipMOS Bermuda entered into a Share Purchase Agreement with SPIL to sell to SPIL the holding of 133,000 thousand common shares of ChipMOS Taiwan for a consideration of NT$1,630,580 thousand. In January 2011, the transaction was completed. As of June 30, 2012, SPIL held a 15.78% interest in ChipMOS Taiwan and ChipMOS Bermuda held an 84.22% interest in ChipMOS Taiwan.

 

F-9


1. ORGANIZATION AND BUSINESS (continued)

 

ThaiLin was incorporated on May 15, 1996 and is listed on the GreTai Securities Market in Taiwan. ThaiLin is engaged in wafer and semiconductor testing services. On December 31, 2002, ChipMOS Taiwan acquired an equity interest of 41.8% in ThaiLin. On December 1, 2003, ChipMOS Taiwan obtained controlling influence over ThaiLin’s decisions on its operations, personnel and financial policies. Therefore, ThaiLin has been consolidated into these financial statements from December 1, 2003 in spite of the fact that ChipMOS Taiwan holds an equity interest of less than 50% in ThaiLin. ChipMOS Bermuda consolidates ThaiLin in reliance on Rule 3A-02(a) under Regulation S-X which requires a company to consolidate an entity, notwithstanding the lack of majority ownership, if such consolidation is necessary to present fairly its financial position and results of operations because of the existence of a parent-subsidiary relationship by means other than record ownership of voting stock. This is consistent with the guidance in Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 810-10. ChipMOS Bermuda has a parent-subsidiary relationship with ThaiLin by indirect ownership and by means other than record ownership of voting stock. This relationship is based on ChipMOS Bermuda’s power to direct or cause the direction of the management and policies of ThaiLin. As of June 30, 2012, ChipMOS Taiwan held a 42.87% equity interest in ThaiLin.

ChipMOS USA Inc. (ChipMOS USA) was incorporated in the United States of America in October 1999. ChipMOS USA engages in sales and customer services and all the expenses incurred from these activities are charged to current income. ChipMOS USA began generating revenue in 2001. As of June 30, 2012, ChipMOS Taiwan owned 100% of the outstanding shares of ChipMOS USA.

MODERN MIND TECHNOLOGY LIMITED (Modern Mind) was incorporated in the British Virgin Islands on January 29, 2002. Modern Mind conducts its operations through ChipMOS TECHNOLOGIES (Shanghai) LTD. (ChipMOS Shanghai). ChipMOS Bermuda acquired a 100% equity interest in Modern Mind on December 12, 2002, and then transferred it to Jesper Limited (Jesper) on December 31, 2002. In December 2002 and 2003, ChipMOS Bermuda acquired from Jesper and ChipMOS Taiwan, respectively, convertible notes issued by Modern Mind (MMT Notes) that are convertible into a controlling equity interest in Modern Mind if the repayment is not made when due. ChipMOS Bermuda consolidates Modern Mind and its wholly-owned subsidiary, ChipMOS Shanghai in reliance on Rule 3A-02(a) under Regulation S-X which requires a company to consolidate an entity, notwithstanding the lack of majority ownership, if such consolidation is necessary to present fairly its financial position and results of operations because of the existence of a parent-subsidiary relationship by means other than record ownership of voting stock. This is consistent with the guidance in FASB ASC 810-10. ChipMOS Bermuda has a parent-subsidiary relationship with Modern Mind by means other than record ownership of voting stock. This relationship is based on ChipMOS Bermuda’s power to direct or cause the direction of the management and policies of Modern Mind and ChipMOS Shanghai.

The parent-subsidiary relationship with and management and policies direction of Modern Mind and ChipMOS Shanghai is established through the MMT Notes. ChipMOS Bermuda has agreed to provide loans from time to time to Modern Mind pursuant to MMT Notes that can be converted into Modern Mind common shares at any time. Payment under the MMT Notes is fully and unconditionally guaranteed by Jesper and secured by a security interest in all outstanding equity interests in Modern Mind and ChipMOS Shanghai. Jesper has granted the Company an irrevocable option, exercisable at any time, to acquire all common shares of Modern Mind then owned by Jesper. These MMT Notes would represent, immediately after the conversion, almost 100% of the then outstanding common shares of Modern Mind. Accordingly, ChipMOS Bermuda is deemed to have a controlling interest in Modern Mind.

ChipMOS Shanghai, a wholly-owned subsidiary of Modern Mind, was established in the People’s Republic of China (PRC) on June 7, 2002. ChipMOS Shanghai is engaged in wafer testing, semiconductor assembly and testing, and module and subsystem manufacturing. ChipMOS Shanghai commenced commercial production in 2003.

Under an assignment and assumption agreement signed on April 22, 2011, ChipMOS Bermuda agreed to sell the MMT Notes to ThaiLin for a purchase price of US$39,950 thousand. On October 3, 2011, the transaction was completed.

As of October 3, 2011, ThaiLin converted the MMT notes into common shares of Modern Mind and purchased all of the remaining common shares of Modern Mind from Jesper. Modern Mind and its wholly-owned subsidiary, ChipMOS Shanghai, became wholly-owned subsidiaries of ThaiLin.

Since October 3, 2011, ChipMOS Bermuda’s interest in ChipMOS Shanghai was reduced from 100% to 36.11%.

 

F-10


1. ORGANIZATION AND BUSINESS (continued)

 

ChipMOS TECHNOLOGIES (H.K.) Limited (ChipMOS HK) was incorporated in Hong Kong on November 18, 2002. It is engaged in semiconductor testing and assembly services and trading of spare parts and tools. ChipMOS HK is a wholly-owned subsidiary of ChipMOS Bermuda. ChipMOS HK was liquidated in July 2011.

 

2. BASIS OF PREPARATION

The unaudited interim consolidated financial statements include the accounts of ChipMOS Bermuda and all subsidiaries in which ChipMOS Bermuda (hereinafter, referred to individually or collectively as the “Company”) holds a controlling interest or voting interests in excess of 50% in accordance with the requirements of ROC Statement of Financial Accounting Standards No. 7. All significant intercompany accounts and transactions have been eliminated.

The Company’s unaudited interim consolidated financial statements include for the six months ended June 30, 2011 and 2012, the financial results of ChipMOS Taiwan and its subsidiaries, ThaiLin, ChipMOS USA, and Modern Mind and its wholly-owned subsidiary, ChipMOS Shanghai, and ChipMOS HK up to its date of liquidation.

The results of operations for the interim periods are not necessarily indicative of the results to be expected on a full-year basis. These unaudited interim consolidated financial statements do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the ROC and should be read in conjunction with the audited consolidated financial statements of the Company as of December 31, 2011 and for the year then ended, including the notes thereto. In the opinion of management, all adjustments (consistent of normal recurring accruals) considered necessary in order to fairly present the unaudited interim consolidated financial information have been included.

Earnings (Loss) per share

Earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding in each period, adjusted retroactively for reverse stock split, stock dividends and stock bonuses issued subsequently. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock equivalents, including stock options and warrants, and convertible securities in the weighted average number of common shares outstanding for the year, if dilutive. The common stock equivalent was anti-dilutive for the six months ended June 30, 2011.

The following table reconciles the denominator to calculate basic and diluted earnings (loss) per share:

 

     June 30, 2012  
     (in thousands)  

Basic number of shares

     27,169   

Add: stock options

     853   
  

 

 

 

Diluted number of shares

     28,022   
  

 

 

 

 

3. TRANSLATION INTO U.S. DOLLAR AMOUNTS

The Company maintains its accounts and expresses its consolidated financial statements in New Taiwan dollars. For convenience purposes, U.S. dollar amounts presented in the accompanying consolidated financial statements have been translated from New Taiwan dollars to U.S. dollars at the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York as of June 29, 2012, which was NT$29.80 to US$1.00. These convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

 

F-11


4. INVENTORIES - NET

 

     December 31,     June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Finished goods

     107,137        59,151        1,985   

Work in progress

     218,871        202,397        6,792   

Raw materials

     1,328,441        1,424,962        47,817   
  

 

 

   

 

 

   

 

 

 
     1,654,449        1,686,510        56,594   

Less - allowance for losses

     (120,583     (106,845     (3,585
  

 

 

   

 

 

   

 

 

 
     1,533,866        1,579,665        53,009   
  

 

 

   

 

 

   

 

 

 

 

5. PENSION PLAN

Details of net pension costs are as follows:

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Service cost

     595        382        13   

Interest cost

     5,916        5,745        193   

Projected return on plan assets

     (3,546     (3,822     (128

Amortization

     27        27        1   

Net prior service cost

     (103     (103     (4

Curtailment loss

     6,131        5,353        179   
  

 

 

   

 

 

   

 

 

 
     9,020        7,582        254   
  

 

 

   

 

 

   

 

 

 

 

F-12


6. SHAREHOLDERS’ EQUITY

Stock Options

The Share Option plan provides that the directors, officers, employees and consultants of ChipMOS Bermuda and its affiliates may be granted options to purchase common shares of ChipMOS Bermuda at specified exercise prices.

The following table summarizes information about stock options outstanding at June 30, 2012.

 

Year

of Grant

  Exercise
Price
    Number
Outstanding
    Market
Price

at  Grant
    Market
Price
at Period
End
    Number
Exercisable
on

or after
  Number
Exercisable
on

or after
  Number
Exercisable
on

or after
  Number
Exercisable
on

or after
  Number
Exercisable
on

or after
    US$           US$     US$                      
2006    

 

19.244

~ 22.882

  

  

    350,543       

 

22.64

~ 26.92

  

  

    10.58      13,500

August

2006

  86,130

August ~

December

2007

  83,745

August ~

December

2008

  83,633

August ~

December

2009

  83,535

August ~

December

2010

2007    

 

14.552

~ 25.908

  

  

    309,310       

 

17.12

~ 30.48

  

  

    10.58      13,500

August

2007

  73,919

January ~

December

2008

  73,901

January ~

December

2009

  74,040

January ~

December

2010

  73,950

January ~

December

2011

2008    

 

0.748

~ 11.9

  

  

    335,448       

 

0.88

~ 14.00

  

  

    10.58      15,000

August ~

November

2008

  48,902

January ~

December

2009

  49,258

January ~

December

2010

  52,648

January ~

December

2011

  169,640

January ~

December

2012

2009    

 

0.8528

~ 2.55

  

  

    279,028       

 

1.0032

~ 3.00

  

  

    10.58      20,506

August ~

November

2009

  33,254

January ~

November

2010

  37,570

January ~

November

2011

  93,015

January ~

November

2012

  94,683

January ~

November

2013

2010    

 

2.448

~ 5.474

  

  

    151,386       

 

2.88

~ 6.44

  

  

    10.58      18,750

August

2010

  32,245

January ~

September

2011

  33,240

January ~

August

2012

  33,576

January ~

August

2013

  33,575

January ~

August

2014

2011    

 

4.59

~ 6.222

  

  

    661,115       

 

5.4

~ 7.32

  

  

    10.58      37,500

August

2011

  154,578

March ~

September

2012

  156,351

March ~

September

2013

  156,344

March ~

September

2014

  156,342

March ~

September

2015

2012     11.1095        12,940        13.07        10.58        3,235

February

2013

  3,235

February

2014

  3,235

February

2015

  3,235

February

2016

   

 

 

               
      2,099,770                 
   

 

 

               

NT$454,018 thousand (US$15,235 thousand) of compensation expense has been recognized with NT$33,868 thousand (US$1,137 thousand) (2011: NT$13,100 thousand) being accounted for through the statement of operations during the six months ended June 30, 2012. The Company issued 12,940 stock options during the six months ended June 30, 2012 to its employees. During the six months ended June 30, 2012, 41,965 stock options were forfeited and 433,377 stock options were exercised, leaving 2,099,770 stock options outstanding at June 30, 2012.

 

F-13


6. SHAREHOLDERS’ EQUITY (continued)

 

Share Appreciation Rights

The share appreciation rights plan provides that the directors, officers and employees of ChipMOS Bermuda and its affiliates may be granted cash-settled share appreciation rights.

The following table summarizes information about share appreciation rights outstanding at June 30, 2012.

 

Year

of Grant

  Exercise
Price
    Number
Outstanding
    Market
Price

at
Grant
    Market
Price
at
Period
End
    Number
Exercisable
on

Or after
  Number
Exercisable
on

or after
  Number
Exercisable
on

or after
  Number
Exercisable
on

or after
    US$           US$     US$                  
2006    

 

19.244

~ 22.882

  

  

    157,806       

 

22.64

~ 26.92

  

  

    10.58      39,527

August ~
December
2007

  39,523

August ~
December
2008

  39,392

August ~
December
2009

  39,364

August ~
December
2010

2007    

 

14.552

~ 25.908

  

  

    64,125       

 

17.12

~ 30.48

  

  

    10.58      16,071

January ~

December
2008

  16,071

January ~

December
2009

  15,992

January ~

December
2010

  15,991

January ~

November
2011

2008    

 

0.748

~ 11.9

  

  

    39,699       

 

0.88

~ 14.00

  

  

    10.58      6,081

January ~

December
2009

  6,080

January ~

December
2010

  6,482

January ~

December
2011

  21,056

January ~

December
2012

2009    

 

0.884

~ 2.55

  

  

    139,218       

 

1.04

~ 3.00

  

  

    10.58      6,725

January ~

August

2010

  8,250

January ~

August

2011

  62,045

January ~

August

2012

  62,198

January ~

August

2013

2010    

 

2.448

~ 3.06

  

  

    9,514       

 

2.88

~ 3.6

  

  

    10.58      533

March ~

August

2011

  2,615

March ~

August

2012

  3,189

March ~

August

2013

  3,177

March ~

August

2014

2011    

 

5.151

~ 6.222

  

  

    459,855       

 

6.06

~ 7.32

  

  

    10.58      113,857

March ~

August

2012

  115,349

March ~

August

2013

  115,328

March ~

August

2014

  115,321

March ~

August

2015

2012     11.1095        6,200        13.07        10.58      1,550

February

2013

  1,550

February

2014

  1,550

February

2015

  1,550

February

2016

   

 

 

             
      876,417               
   

 

 

             

During the six months ended June 30, 2012, 6,200 rights were granted, 39,548 rights were forfeited and 140,174 rights were exercised. As of June 30, 2012, there were 876,417 share appreciation rights outstanding.

The Company recognized compensation expense of NT$82,584 thousand (US$2,771 thousand) (2011: NT$23,634 thousand) in respect of share appreciation rights at fair value during the six months ended June 30, 2012.

 

F-14


7. RELATED PARTY TRANSACTIONS

The Company engages in business transactions with the following related parties:

 

  a. MVI: A major shareholder. (Note 1)

 

  b. ProMOS: An investee of MVI. (Note 1)

 

  c. SPIL: A major shareholder. (Note 2)

 

Note 1:   Since April 1, 2011, MVI’s interest in ChipMOS Bermuda was reduced to below 10%. Accordingly, MVI and ProMOS were not considered related parties of the Company. The transactions with these parties were disclosed till the end of March 2011 as related party transactions.
Note 2:   In March 2011, SPIL’s holding in ChipMOS Bermuda decreased to below 10% and SPIL was no longer regarded a major shareholder of ChipMOS Bermuda. From April 1, 2011 onwards, SPIL was not considered a related party of the Company. The transactions with SPIL were disclosed till the end of March 2011 as related party transactions.

The significant transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:

 

     Six Months Ended June 30,  
     2011      2012  
     NT$      NT$      US$  
     (in thousands)  

During the period

        

Revenue

        

ProMOS

     379,009         —           —     
  

 

 

    

 

 

    

 

 

 

Other expenses

        

MVI

     25         —           —     
  

 

 

    

 

 

    

 

 

 

Other revenue

        

ProMOS

     98         —           —     
  

 

 

    

 

 

    

 

 

 

The price of sales to ProMOS was agreed upon quarterly, based on the then fair market price. The collection term for ProMOS was originally 75 days after month end. In January 2011, the collection term was revised to 45 days after delivery.

Other related parties have normal collection terms of 60 days after month end. The selling price is the same as for other customers.

In February 2010, ChipMOS Taiwan entered into an Equipment Purchase Agreement with SPIL to purchase SPIL’s DRAM test and LCD driver assembly and test operation lines with purchase price of approximately NT$1,630,580 thousand. Under the terms and conditions of the Equipment Purchase Agreement, ChipMOS Taiwan will pay the purchase price in four installments to SPIL with the final installment scheduled to be paid on or before March 31, 2011. The transaction was early completed in January 2011.

At the same time, ChipMOS Bermuda also entered into a Share Purchase Agreement with SPIL to sell to SPIL its holding of 133,000 thousand common shares of ChipMOS Taiwan with a consideration of NT$1,630,580 thousand. Under the terms and conditions of the Share Purchase Agreement, SPIL will pay the purchase price in four installments to the Company with the final installment scheduled to be paid on or about March 31, 2011. The transaction was early completed in January 2011.

The Company consults its ROC counsel on certain related party transactions and obtains legal opinions, as appropriate, to ensure that such transactions do not violate relevant ROC laws and regulations.

 

F-15


8. PLEDGED OR MORTGAGED ASSETS

The Company provided certain assets as collateral mainly for short and long-term bank loans and customs duty guarantee, which were as follows:

 

     December 31      June 30,  
     2011      2012  
     NT$      NT$      US$  
     (in thousands)  

Restricted cash and cash equivalents

     285,133         152,830         5,129   

Land

     452,738         452,738         15,193   

Buildings

     5,474,164         5,220,203         175,175   

Machinery and equipment

     5,150,540         3,094,196         103,832   

Land use right

     100,498         97,752         3,280   
  

 

 

    

 

 

    

 

 

 
     11,463,073         9,017,719         302,609   
  

 

 

    

 

 

    

 

 

 

 

9. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

 

  a. As of June 30, 2012, ChipMOS Taiwan leased parcels of land from the Hsinchu and Southern Taiwan Science Park under several agreements expiring on various dates from 2017 to 2032, with renewal options.

The future minimum lease payments under the above-mentioned leases as of June 30, 2012 are as follows:

 

Year

   Amount  
     NT$      US$  
     (in thousands)  

2012 (from July to December)

     13,685         460   

2013

     27,370         918   

2014

     27,370         918   

2015

     27,370         918   

Thereafter

     150,320         5,045   
  

 

 

    

 

 

 

Total minimum lease payments

     246,115         8,259   
  

 

 

    

 

 

 

 

  b. As of June 30, 2012, ChipMOS USA leased its office under an agreement expiring in 2015. The future minimum lease payments as of June 30, 2012 are as follows:

 

Year

   Amount  
     NT$      US$  
     (in thousands)  

2012 (from July to December)

     1,549         52   

2013

     3,011         101   

2014

     2,919         98   

2015

     3,006         101   
  

 

 

    

 

 

 

Total minimum lease payments

     10,485         352   
  

 

 

    

 

 

 

 

  c. As of June 30, 2012, ChipMOS Taiwan had capital commitments in relation to purchase of plant and machinery in the amount of NT$710,930 thousand (US$23,857 thousand).

 

  d. As of June 30, 2012, ThaiLin had capital commitments in relation to purchase of plant and machinery in the amount of NT$64,416 thousand (US$2,162 thousand).

 

  e. As of June 30, 2012, ChipMOS Shanghai had capital commitments in relation to purchase of plant and machinery in the amount of NT$34,606 thousand (US$1,161 thousand).

 

F-16


9. SIGNIFICANT COMMITMENTS AND CONTINGENCIES (continued)

 

  f. On April 1, 1999, Motorola, Inc. (“Motorola”) and ChipMOS Taiwan entered into an immunity agreement (the “Agreement”), that each party covenanted not to sue each other for the use of certain Ball Grid Array (“BGA”) patents pursuant to the Agreement. In December 2004, Motorola spun off its semiconductor division and thereby formed Freescale Semiconductor, Inc. (“Freescale”). Subsequently, Freescale assumed Motorola’s rights and obligations under the Agreement. On October 16, 2006, Freescale unilaterally terminated the Agreement, alleging ChipMOS Taiwan breach of the Agreement. Under the Agreement, ChipMOS Taiwan agreed to pay running royalties for its manufacturing of certain BGA packages covered by Motorola (now Freescale) patents pursuant to the Agreement. As such, ChipMOS Taiwan argued Freescale’s unilateral termination of the Agreement has no legal effect. ChipMOS Taiwan has continued to accrue royalty payments for products it believes are covered by the Agreement. The payments previously returned by Freescale and accrued by ChipMOS Taiwan have been deposited in a separate escrow account. On July 13, 2009, Freescale alleged that ChipMOS Taiwan breached the Agreement by failing to pay royalties on certain BGA packages assembled by ChipMOS Taiwan. Freescale claims that such packages are covered by one or more Freescale patents identified in the Agreement while ChipMOS Taiwan contends that such packages are not covered by any of Freescale’s patents in the Agreement. ChipMOS Taiwan filed an answer to deny all allegations and also filed counterclaims against Freescale alleging Freescale engaged in patent misuse by seeking to obtain royalties on certain of ChipMOS Taiwan’s BGA products that were not covered by any Freescale patent included under the Agreement, and for declaratory judgement of patent non-infringement and invalidity. In response, on December 11, 2009, Freescale filed a motion to dismiss the declaratory judgment counterclaims filed by ChipMOS Taiwan and to stay all other patent related claims and issues until its breach of contract claims could be decided. That motion and the initial case management conference were held on March 5, 2010 and the motions were deemed submitted. A Summary Judgment granting in part and denying in part the motions of both Freescale and ChipMOS Taiwan was given by court on July 29, 2010. The above order finds that the Agreement constituted a “Total Sales Royalty” agreement, however, Freescale’s motion was partly denied for patent misuse. A mediation was held by both parties on October 28, 2010, but the mediation was unsuccessful. The fact discovery process regarding patent misuse issue closed in late April 2011. The expert discovery process regarding patent misuse issue closed in the middle of June 2011. On June 17, 2011, Freescale filed a motion for summary judgment on ChipMOS Taiwan’s patent misuse defense. ChipMOS Taiwan filed opposition to the above Freescale motion and also the cross-motion for summary judgment. An Order granting Freescale’s motion for partial summary judgment and denying ChipMOS Taiwan’s cross-motion for partial judgment was given on September 8, 2011. On September 13, 2011, ChipMOS Taiwan filed a Motion for Leave for Motion for Reconsideration. On October 17, 2011, ChipMOS Taiwan filed its opening brief in accordance with the Court Order dated September 22, 2011 granting ChipMOS Taiwan’s Motion for Leave for Motion for Reconsideration. Subsequently Freescale filed its response on October 31, 2011 and ChipMOS Taiwan replied on November 7, 2011. An Order granting in part and denying in part ChipMOS’ Motion for Reconsideration was issued on March 30, 2012. The above order finds that the Agreement constituted a “Total Sales Royalty” agreement, however, the patent misuse issue is a triable fact and ChipMOS is entitled to a jury trial. This case has been reassigned to Judge Edward Davila and set for a pre-trial conference on October 5, 2012. Freescale has refiled its motions to strike ChipMOS’ jury demand and for summary judgment on ChipMOS’ affirmative defences of exhaustion, mutual mistake and license. Those motions do not have a set hearing date, but may be addressed at the October 5, 2012 pre-trial conference. The Company’s counsel has not formed any opinion as to the outcome of the case. The Company considers that an unfavorable outcome for this matter is remote.

 

F-17


9. SIGNIFICANT COMMITMENTS AND CONTINGENCIES (continued)

 

  g. On April 20, 1999, ChipMOS Taiwan entered into a semiconductor packaging technology license agreement with Tessera Technologies, Inc. (Tessera). In February 2006, ChipMOS Taiwan and ChipMOS USA received notice of a patent infringement lawsuit brought by Tessera, alleging infringement of several Tessera patents and breach of an existing license agreement with ChipMOS Taiwan. The fact discovery has been stayed in accordance with a Northern District of California Court order issued on May 24, 2007. On April 21, 2008, Tessera requested that the International Trade Commission (ITC) investigate ChipMOS Bermuda, ChipMOS Taiwan and ChipMOS USA (collectively referred to as the Companies) on the basis of alleged violations of Section 337 of the Tariff Act of 1930. In its request for investigation (“ITC-649 Investigation”), Tessera alleged that the Companies infringed certain patents among which are three that were the subject of the stayed litigation in the Northern District of California. Tessera also requested that the ITC issue an exclusion order to enjoin the importation of accused products into the United States. On September 30, 2008, Judge of Northern District of California Court (“Judge”) granted a motion to extend the hearing date from March 16 to March 24, 2009 and target date from August 28 to November 2, 2009. On February 10, 2009, the Judge ordered the procedural schedule in the ITC-649 Investigation be stayed until the ITC issues its Final Determination in the ITC-605 Investigation. The target date of Initial Determination was also extended from December 7, 2009 to February 8, 2010. On March 13, 2009, after the close of discovery, Tessera submitted a request to terminate the ITC-649 Investigation. On July 17, 2009, the Judge issued an order granting the request to terminate the ITC-649 Investigation. No petitions for review were filed. The ITC had determined not to review the Initial Determination and issued an order to terminate the investigation on August 7, 2009. The ITC’s Final Determination for the ITC-605 Investigation issued in May 2009 was appealed to the Court of Appeals for the Federal Circuit (“CAFC”). CAFC confirmed ITC’s finding in May 2011. CAFC’s above decision was appealed to the United States Supreme Court. The United States Supreme Court denied the above petition for review of the 605 Investigation in December 2011. Due to the denial of the petition for review of the 605 Investigation by the United States Supreme Court, the stayed litigation in the Northern District of California Court resumed. A Case Management Conference was held on January 4, 2012. The date for jury trial was scheduled for April 2014. The litigation is currently in the discovery stage. On July 19, 2012, Tessera filed a stipulation with the court dismissing its breach of contract claim against ChipMOS. Accordingly, this litigation is now limited to only Tessera’s patent infringement allegations against ChipMOS. The Company’s counsel has not formed an opinion as to the outcome of the case. The Company considers that an unfavorable outcome for this matter is remote.

 

10. POST BALANCE SHEET EVENT

 

  a. On August 20, 2012, the Company effected its US$10 million share repurchase program with Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Shares will be repurchased pursuant to a written plan agreed to and entered into between the Company and its broker. The repurchased shares will be retired and cancelled. As of September 26, 2012, the Company had repurchased 235 thousand common shares.

 

  b. On September 24, 2012, the Company reduced its share premium account by NT$3,787,431 thousand and transferred the credit arising therefrom to the contributed surplus account, as required by the Companies Act 1981 of Bermuda (as amended). This transfer represented movements within capital surplus. Such amount of capital surplus was then used to set off against the accumulated losses of the Company.

 

F-18


11. DERIVATIVE FINANCIAL INSTRUMENTS

ChipMOS Taiwan has entered into forward exchange contracts and foreign currency options for the six months ended June 30, 2011 and 2012 to hedge its exchange rate risk on foreign-currency assets or liabilities and anticipated transactions. No derivative financial instrument was used during the six months ended June 30, 2011 and 2012. Information on the derivative transactions is as follows:

 

  a. Forward exchange contracts

As of December 31, 2011 and June 30, 2012, there were no outstanding forward contracts.

 

  b. Financial risk information

 

  1) Credit risk. Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade and other receivables). The Company performs ongoing credit evaluation of the debtors’ financial condition and maintains an allowance for doubtful receivables based on historical collection, write-off experience and individual examination of available information regarding the customers. The banks with which the Company has entered into the above contracts are reputable and, therefore, the Company is not expected to be exposed to significant credit risks.

 

  2) Market risk and hedge strategy. The Company’s financial assets at fair value through profit and loss are stated at market value, which is affected by the stock prices in the open stock market. Subject to turmoil in the global financial market, the Company has evaluated its financial instruments and the Company believed the exposure to market risk as of June 30, 2012 was not significant. The Company is exposed to market risks arising from changes in currency exchange rates due to U.S. dollar denominated accounts receivable, Yen denominated accounts payable and U.S. dollar denominated debt. In order to manage these exposures, the Company sometimes enters into forward contracts and option contracts.

 

  3) Liquidity risk. Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. Prudent liquidity risk management implies maintaining sufficient cash. The Company monitors and maintains a level of bank balances deemed adequate to finance its operations. The Company employs projected cash flow analysis to manage liquidity risk by forecasting the amount of cash required and monitoring the working capital of the group to ensure that all liabilities due and known funding requirements could be met. In addition, there are unused credit lines for contingency purposes.

 

  4) Cash flow interest rate risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s short and long term bank loans with floating interest rates. At June 30, 2012, it is estimated that a general increase or decrease of 1% in interest rates, with all other variables held constant, would increase or decrease the Company’s annual cash outflow by NT$94,865 thousand (US$3,183 thousand).

 

F-19


11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

 

  c. The estimated fair values of the Company’s financial instruments are as follows:

 

     December 31,      June 30,  
     2011      2012  
     Carrying
Value
     Fair
Value
     Carrying
Value
     Fair Value  
     NT$      NT$      NT$      NT$      US$  
     (in thousands)  

Assets

              

Cash and cash equivalents

     7,357,902         7,357,902         6,596,611         6,596,611         221,363   

Restricted cash and cash equivalents

     285,133         285,133         152,830         152,830         5,129   

Financial assets at fair value through profit or loss

     —           —           1,000,659         1,000,659         33,579   

Notes receivable

     5,710         5,710         7,844         7,844         263   

Accounts receivable

     3,666,507         3,666,507         3,954,239         3,954,239         132,693   

Other receivables

     73,179         73,179         135,081         135,081         4,533   

Long-term investments

     39,121         39,121         39,121         39,121         1,313   

Refundable deposits

     21,364         21,364         21,214         21,214         712   

Liabilities

              

Bank loans

     546,916         546,916         641,845         641,845         21,538   

Accounts payable

     1,130,730         1,130,730         1,029,570         1,029,570         34,549   

Other payables

     1,081,530         1,081,530         908,957         908,957         30,502   

Payables to contractors and equipment suppliers

     415,391         415,391         442,821         442,821         14,860   

Long-term loans (including current portion)

     9,168,328         9,168,328         8,844,668         8,844,668         296,801   

Guarantee deposits

     1,777         1,777         2,053         2,053         69   

Fair values of financial instruments were determined as follows:

 

  1) Short-term financial instruments – the carrying values approximate the fair values due to its short-term nature.

 

  2) Financial assets at fair value through profit or loss – open market values.

 

  3) Long-term investments – market value for listed companies and net equity value for the others.

 

  4) Refundable deposits and guarantee deposits – future values.

 

  5) Long-term liabilities – based on forecasted cash flows discounted at current interest rates of similar long-term liabilities.

The fair value of non-financial instruments was not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not equal the fair value of the Company.

 

  d. The following table details the Company’s exposure to foreign currency risk arising from recognized assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate:

 

     December 31,      June 30,  
     2011      2012  
     Foreign
Currency
     Exchange
Rate
     NT$      Foreign
Currency
     Exchange
Rate
     NT$  
     (in thousands)  

Financial Assets

                 

U.S. Dollar

     187,902         30.275         5,688,423         168,952         29.88         5,048,623   

Japanese Yen

     586,033         0.3906         228,895         555,203         0.3754         208,428   

Financial Liabilities

                 

U.S. Dollar

     15,808         30.275         478,273         21,582         29.88         645,074   

Japanese Yen

     1,626,183         0.3906         635,157         1,264,925         0.3754         474,894   

 

F-20


12. SEGMENT AND GEOGRAPHIC INFORMATION

The Company engages mainly in the research and development, manufacturing, assembly and testing of semiconductors. In accordance with FASB ASC 280-10-50, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews these segment results by Testing, Assembly, Testing and Assembly for LCD and other Flat-Panel Display Driver Semiconductors and Bumping when making decisions about allocating resources and assessing the performance of the Company. Financial segment information required by FASB ASC 280-10-50 is as follows:

 

  a. Semiconductor testing, assembly, LCD and other flat-panel display driver semiconductors and bumping services.

 

     Six Months Ended June 30, 2011  
    Testing     Assembly     LCD     Bumping     Segment
Totals
    Corporate  &
Other

Assets
    Consolidated
Totals
 
    NT$     NT$     NT$     NT$     NT$     NT$     NT$  
    (in thousands)  

Revenue from customers

    3,035,852        2,957,944        2,003,603        1,143,249        9,140,648        —          9,140,648   

Cost of revenues

    2,804,430        2,847,729        1,544,616        1,099,922        8,296,697        —          8,296,697   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment gross profit

    231,422        110,215        458,987        43,327        843,951        —          843,951   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total operating expenses

                (568,805

Gain on disposal of property, plant and equipment

                33,154   

Other non-operating income

                56,129   

Interest expense

                (181,870

Loss on partial disposal of a subsidiary

                (74,923

Loss on embedded derivative

                (57,188

Foreign exchange loss - net

                (48,950

Other non-operating expense

                (39,558
             

 

 

 

Loss before income tax and noncontrolling interests

                (38,060
             

 

 

 

Depreciation and amortization

    1,576,185        458,176        608,625        159,891        2,802,877        12,383        2,815,260   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenditure for segment assets

    181,307        171,164        717,750        242,917        1,313,138        —          1,313,138   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Six Months Ended June 30, 2012  
    Testing     Assembly     LCD     Bumping     Segment
Totals
    Corporate
&

Other
Assets
    Consolidated
Totals
 
    NT$     NT$     NT$     NT$     NT$     NT$     NT$     US$  
    (in thousands)  

Revenue from customers

    2,686,869        3,200,544        2,006,130        1,319,719        9,213,262        —          9,213,262        309,170   

Cost of revenues

    2,588,319        2,966,307        1,514,628        1,273,390        8,342,644        —          8,342,644        279,955   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment gross profit

    98,550        234,237        491,502        46,329        870,618        —          870,618        29,215   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total operating expenses

                (574,065     (19,264

Gain on disposal of property, plant and equipment

                14,868        499   

Other non-operating income

                76,460        2,566   

Interest expense

                (121,126     (4,065

Foreign exchange loss - net

                (63,676     (2,136

Other non-operating expense

                (82,193     (2,758
             

 

 

   

 

 

 

Income before income tax and noncontrolling interests

                120,886        4,057   
             

 

 

   

 

 

 

Segment assets

    4,918,169        2,729,523        3,449,271        1,846,618        12,943,581        —          12,943,581        434,348   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Long-term investment

                39,121        1,313   

Corporate and other assets

                14,805,097        496,815   
             

 

 

   

 

 

 

Total assets

                27,787,799        932,476   
             

 

 

   

 

 

 

Depreciation and amortization

    1,378,993        402,267        615,957        194,116        2,591,333        33        2,591,366        86,958   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenditure for segment assets

    224,300        216,049        771,142        400,680        1,612,171        —          1,612,171        54,100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The corporate and other assets consist of the total current assets, intangible assets and other assets.

 

F-21


12. SEGMENT AND GEOGRAPHIC INFORMATION (continued)

 

  b. Net revenue:

 

     Six Months Ended June 30,  
     2011      2012  
     NT$      NT$      US$  
     (in thousands)  

Area

        

ROC

     7,001,104         6,107,422         204,947   

Singapore

     57,259         1,582,873         53,117   

U.S.

     1,640,475         775,292         26,016   

Japan

     143,198         276,041         9,263   

Korea

     134,550         175,212         5,880   

Others

     164,062         296,422         9,947   
  

 

 

    

 

 

    

 

 

 
     9,140,648         9,213,262         309,170   
  

 

 

    

 

 

    

 

 

 

 

  c. Net sales to customers representing at least 10% of net total sales:

 

     Six Months Ended June 30,  
     2011      2012  
     Amount      %      Amount      %      Amount  
     NT$             NT$             US$  
     (in thousands)  

Customer

              

Novatek Microelectronics Corp.

     2,043,146         22         1,797,803         20         60,329   

Micron Technology, Inc.

     672,934         7         1,572,539         17         52,770   

 

F-22


13. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Republic of China (“ROC GAAP”), which differ in the following respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). Please refer to note 25 to the audited consolidated financial statements of the Company as of December 31, 2011 and for the year then ended for the summary of significant differences.

The following reconciles net income (loss) and equity under ROC GAAP as reported in the accompanying unaudited interim consolidated financial statements to net income (loss) and equity amounts determined under U.S. GAAP, giving effect to adjustments for the differences listed above.

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Net income (loss) attributable to ChipMOS

      

Net income (loss) based on ROC GAAP

     (124,540     115,230        3,867   

Adjustments:

      

Amortization of deferred charge

     (334     —          —     

Pension expenses

     251        62,226        2,088   

Gain on disposal of property, plant and equipment

     3,972        —          —     

Depreciation of property, plant and equipment and employee dormitory building

     (27,662     (24,026     (806

Transfer of building and facilities from MVI

     79        74        2   

Effect of U.S. GAAP adjustments on income taxes

     3,972        (9,701     (326

Adjustment for uncertain tax positions

     —          3,810        128   

Stock-based compensation

     15,095        7,435        250   

Noncontrolling interests

     6,331        (24,665     (828
  

 

 

   

 

 

   

 

 

 

Net increase in net income

     1,704        15,153        508   
  

 

 

   

 

 

   

 

 

 

Net income (loss) based on U.S. GAAP

     (122,836     130,383        4,375   
  

 

 

   

 

 

   

 

 

 

Income (loss) per share – basic

     (4.68     4.80        0.16   
  

 

 

   

 

 

   

 

 

 

Income (loss) per share – diluted

     (4.68     4.65        0.16   
  

 

 

   

 

 

   

 

 

 

Number of weighted average shares outstanding – basic

     26,256        27,169        27,169   
  

 

 

   

 

 

   

 

 

 

Number of weighted average shares outstanding – diluted

     26,256        28,022        28,022   
  

 

 

   

 

 

   

 

 

 

 

F-23


13. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

 

     December 31,     June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Equity

      

Equity based on ROC GAAP

     14,983,270        15,144,714        508,212   
  

 

 

   

 

 

   

 

 

 

Adjustments:

      

Technology transfer in payment of capital stock

      

Original cost

     (750,000     (750,000     (25,168

Accumulated amortization of technology transfer in payment of capital stocks

     750,000        750,000        25,168   

Depreciation of property, plant and equipment and employee dormitory building

     (391,995     (416,021     (13,960

Transfer of building and facilities from MVI

      

Original cost

     (173,174     (173,174     (5,811

Depreciation and gain on disposal of building and facilities from MVI

     170,835        170,908        5,735   

Net effect on inventories

     (3     (2     —     

Pension expenses

     (372,273     (310,047     (10,404

Gain on disposal of property, plant and equipment

     3,972        3,972        133   

Interest capitalization

     118,757        118,757        3,985   

Amortization of interest capitalization

     (143,781     (143,781     (4,825

Effect of U.S. GAAP adjustments on income taxes

     99,729        90,028        3,021   

Adjustment for uncertain tax positions

     (6,451     (2,641     (89

Equity component of convertible notes

     (466,151     —          —     

Loss on redemption of convertible notes

     (129,299     —          —     

Amortization of deferred charge

     (39,602     —          —     

Amortization of discount on convertible notes

     (607,569     —          —     

Gain on embedded derivative liabilities

     1,242,621        —          —     
  

 

 

   

 

 

   

 

 

 

Net decrease in equity

     (694,384     (662,001     (22,215
  

 

 

   

 

 

   

 

 

 

Equity based on U.S. GAAP

     14,288,886        14,482,713        485,997   
  

 

 

   

 

 

   

 

 

 
     Year Ended
December 31,
    Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Changes in equity based on U.S. GAAP

      

Balance, beginning of the year

     13,372,597        14,288,886        479,493   

Shares repurchase

     —          (10,916     (367

Interest payment for convertible notes

     5,408        —          —     

Convertible notes conversion

     305,569        —          —     

Issuance of option warrants

     48,979        33,743        1,133   

Exercise of option warrants

     15,982        85,345        2,864   

Stock-based compensation

     (23,036     (7,435     (250

Cumulative translation adjustments

     107,851        (7,053     (237

Net income for the year

     46,085        130,383        4,375   

Loss on partial disposal of a subsidiary while retaining control

     (74,923     —          —     

Reverse stock split

     (239     —          —     

Adjustment of equity method for long-term investments

     (6,619     (15,573     (522

Unrecognized pension expenses

     43,619        —          —     

Noncontrolling interests

     447,613        (14,667     (492
  

 

 

   

 

 

   

 

 

 

Balance, end of the period

     14,288,886        14,482,713        485,997   
  

 

 

   

 

 

   

 

 

 

 

F-24


13. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

 

A reconciliation of the significant balance sheet accounts to the approximate amounts determined under U.S. GAAP is as follows:

 

     December 31,     June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Current assets

      

As reported

     13,091,191        13,643,306        457,829   

U.S. GAAP adjustments

      

Effect of inventory adjustments:

      

Depreciation of property, plant and equipment

     1,005        737        25   

Transfer of building and facilities from MVI

     (3     (2     —     

Adjustments for uncertain tax position

     (6,207     —          —     
  

 

 

   

 

 

   

 

 

 

As adjusted

     13,085,986        13,644,041        457,854   
  

 

 

   

 

 

   

 

 

 

Property, plant and equipment – net

      

As reported

     13,896,048        12,943,581        434,348   

U.S. GAAP adjustments

      

Depreciation of property, plant and equipment

     (367,710     (390,653     (13,109

Transfer of building and facilities from MVI

     (2,339     (2,266     (76

Interest capitalization

     (25,024     (25,024     (840
  

 

 

   

 

 

   

 

 

 

As adjusted

     13,500,975        12,525,638        420,323   
  

 

 

   

 

 

   

 

 

 

Other assets

      

As reported

     1,154,207        1,064,039        35,706   

U.S. GAAP adjustments

      

Depreciation of employee dormitory building

     (21,318     (22,133     (743

Effect of U.S. GAAP adjustment on income tax

     99,729        90,028        3,021   

Adjustments for uncertain tax position

     4,961        —          —     
  

 

 

   

 

 

   

 

 

 

As adjusted

     1,237,579        1,131,934        37,984   
  

 

 

   

 

 

   

 

 

 

Other liabilities

      

As reported

     101,331        99,231        3,330   

U.S. GAAP adjustments

      

Pension

     372,273        310,047        10,404   

Adjustment for uncertain tax position

     5,205        2,641        89   
  

 

 

   

 

 

   

 

 

 

As adjusted

     478,809        411,919        13,823   
  

 

 

   

 

 

   

 

 

 

As a result of the adjustments presented above, the approximate amounts of total assets under U.S. GAAP were NT$27,964,159 thousand and NT$27,438,486 thousand (US$920,754 thousand) as of December 31, 2011, and June 30, 2012, respectively.

 

F-25


13. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

 

The following U.S. GAAP condensed statements of operations for the six months ended June 30, 2011 and 2012 have been derived from the unaudited interim consolidated financial statements and reflect the adjustments presented above. Certain accounts have been reclassified to conform to U.S. GAAP.

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  

Net revenue

     9,140,648        9,213,262        309,170   

Cost of revenue

     (8,323,166     (8,321,410     (279,242
  

 

 

   

 

 

   

 

 

 

Gross profit

     817,482        891,852        29,928   

Other operating income

     69,228        71,031        2,384   

Operating expenses

     (570,975     (628,891     (21,104
  

 

 

   

 

 

   

 

 

 

Income from operations

     315,735        333,992        11,208   

Non-operating expenses – net

     (362,394     (167,397     (5,617
  

 

 

   

 

 

   

 

 

 

Income (loss) before income tax and noncontrolling interests

     (46,659     166,595        5,591   
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to ChipMOS

     (122,836     130,383        4,375   
  

 

 

   

 

 

   

 

 

 

 

14. ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP

 

  a. Pension plans

In accordance with FASB ASC 715, pension information is disclosed bellow:

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Service cost

     595        382        13   

Interest cost

     5,916        5,745        193   

Projected return on plan assets

     (3,546     (3,822     (128

Amortization

     27        27        1   

Curtailment loss

     6,131        5,353        179   

Net prior service cost

     (103     (103     (4
  

 

 

   

 

 

   

 

 

 
     9,020        7,582        254   
  

 

 

   

 

 

   

 

 

 

The Company previously disclosed in the financial statements for the year ended December 31, 2011 that it was expected to contribute approximately NT$24,429 thousand (US$820 thousand) to its pension plan in 2012. As of June 30, 2012, NT$18,995 thousand (US$638 thousand) of contribution has been made. The Company anticipates contributing an additional NT$5,434 thousand (US$182 thousand) to fund the pension plan in 2012.

 

  b. Statements of cash flows

ROC SFAS No. 17, “Statement of Cash Flows” has been applied. Its objectives and principles are similar to those set out in FASB ASC 230, “Statement of Cash Flows. The principal differences between the standards relate to classification. Summarized cash flow data by operating, investing and financing activities are as follows:

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Net cash inflow (outflow) from:

      

Operating activities

     1,776,660        901,202        30,242   

Investing activities

     (1,660,385     (1,462,636     (49,082

Financing activities

     (2,803,907     (151,335     (5,078
  

 

 

   

 

 

   

 

 

 
     (2,687,632     (712,769     (23,918

Effect of changes in foreign exchange rate

     2,067        (6,439     (216

Cash and cash equivalents at the beginning of period

     6,749,865        7,246,056        243,156   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the end of period

     4,064,300        6,526,848        219,022   
  

 

 

   

 

 

   

 

 

 

 

F-26


  c. Statements of comprehensive income (loss)

 

     Six Months Ended June 30,  
     2011     2012  
     NT$     NT$     US$  
     (in thousands)  

Net income (loss) based on U.S. GAAP

     (122,836     130,383        4,375   

Other comprehensive income (loss):

      

Translation adjustment

     11,183        (7,053     (237

Unrecognized pension costs

     14,302        —          —     
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     (97,351     123,330        4,138   
  

 

 

   

 

 

   

 

 

 

 

  d. FASB ASC 820 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three broad levels as follows:

 

Level 1—

 

Quoted market prices in active markets for identical assets or liabilities

Level 2—

 

Inputs other than level 1 that are either directly or indirectly observable

Level 3—

 

Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

The following table sets forth the assets measured at fair value on a recurring basis, by input level, as of June 30, 2012:

 

     Level 1      Level 2      Level 3      Total  
     NT$      NT$      NT$      NT$  
     (in thousands)  

Financial assets at fair value through profit and loss

     1,000,659         —           —           1,000,659   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial assets at fair value through profit and loss include investments in open-ended funds, which are measured using quoted price in active markets and are classified as Level 1.

As of December 31, 2011, the Company did not hold any financial instruments recognized at fair value on a recurring basis.

 

F-27


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.

 

    ChipMOS TECHNOLOGIES (Bermuda) LTD.
                          (Registrant)
Date: September 28, 2012     By  

/S/ S. J. Cheng

    Name:   S. J. Cheng
    Title:   Chairman & Chief Executive Officer