EX-99.(A)(6) 8 dex99a6.htm ASAT'S QUARTERLY REPORT DATED OCTOBER 31, 2002. ASAT's Quarterly Report Dated October 31, 2002.
 
Exhibit (a)(6)
 
ASAT HOLDINGS LIMITED
 
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 2002 AND APRIL 30, 2002
 
    
October 31,
2002
     
April 30,
2002
  
    
$’000
     
$’000
  
    
(Unaudited)
         
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
24,160
 
   
$
34,499
 
Accounts receivable-trade (net of allowance for doubtful accounts of $148 thousand and $165 thousand at October 31, 2002 and April 30, 2002, respectively)
   
 
23,164
 
   
 
14,640
 
Inventories (Note 2)
   
 
9,644
 
   
 
11,050
 
Prepaid expenses and other current assets
   
 
5,675
 
   
 
5,919
 
    
  
Total current assets
   
 
62,643
 
   
 
66,108
 
Restricted cash (Note 5)
   
 
1,504
 
   
 
—  
 
Property, plant and equipment, net of accumulated depreciation
   
 
134,610
 
   
 
207,123
 
Assets held for disposal, net (Note 4)
   
 
659
 
   
 
—  
 
Deferred charges
   
 
3,702
 
   
 
4,167
 
    
  
Total assets
   
$
203,118
 
   
$
277,398
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
11,713
 
   
$
8,349
 
Accrued liabilities
   
 
7,358
 
   
 
7,593
 
Amount due to QPL
   
 
1,519
 
   
 
944
 
    
  
Total current liabilities
   
 
20,590
 
   
 
16,886
 
Deferred income taxes
   
 
3,212
 
   
 
15,180
 
12.5% senior notes due 2006
   
 
98,420
 
   
 
98,131
 
    
  
Total liabilities
   
 
122,222
 
   
 
130,197
 
    
  
Shareholders’ equity:
                  
Common stock
   
 
6,760
 
   
 
6,760
 
Treasury stock
   
 
(71
)
   
 
(71
)
Additional paid-in capital
   
 
228,009
 
   
 
228,009
 
Accumulated other comprehensive income
   
 
5
 
   
 
3
 
Accumulated deficit
   
 
(153,807
)
   
 
(87,500
)
    
  
Total shareholders’ equity
   
 
80,896
 
   
 
  147,201
 
    
  
Total liabilities and shareholders’ equity
   
$
203,118
 
   
$
277,398
 
    
  
 

1

 
ASAT HOLDINGS LIMITED
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS FOR THE THREE MONTHS AND SIX MONTHS
ENDED OCTOBER 31, 2002 AND 2001
(Unaudited)
 
    
Three months ended
     
Six months ended
  
    
October 31, 2002
     
October 31,
2001
     
October 31, 2002
     
October 31, 2001
  
    
$’000
     
$’000
     
$’000
     
$’000
  
Net sales
   
$
40,719
 
   
$
27,052
 
   
$
75,817
 
   
$
52,078
 
Total cost of sales (Notes 2 and 3)
   
 
34,753
 
   
 
37,327
 
   
 
73,431
 
   
 
71,145
 
    
  
  
  
Gross profit (loss)
   
 
5,966
 
   
 
(10,275
)
   
 
2,386
 
   
 
(19,067
)
    
  
  
  
Operating expenses:
                                    
Selling, general and administrative
   
 
5,848
 
   
 
7,712
 
   
 
12,819
 
   
 
15,814
 
Research and development
   
 
1,314
 
   
 
1,702
 
   
 
2,814
 
   
 
3,243
 
Reorganization charges
   
 
—  
 
   
 
485
 
   
 
128
 
   
 
2,316
 
Non-recoverable & unutilized architectural cost
   
 
—  
 
   
 
4,500
 
   
 
—  
 
   
 
4,500
 
Impairment of property, plant and equipment (Note 4)
   
 
—  
 
   
 
—  
 
   
 
59,189
 
   
 
—  
 
Assets written off in relation to ASAT SA
   
 
—  
 
   
 
24,285
 
   
 
—  
 
   
 
24,285
 
    
  
  
  
Total operating expenses
   
 
7,162
 
   
 
38,684
 
   
 
74,950
 
   
 
50,158
 
    
  
  
  
Loss from operations
   
 
(1,196
)
   
 
(48,959
)
   
 
(72,564
)
   
 
(69,225
)
Other income, net
   
 
551
 
   
 
770
 
   
 
902
 
   
 
1,642
 
Interest expense:
                                    
–  amortization of deferred charges
   
 
(233
)
   
 
(228
)
   
 
(466
)
   
 
(457
)
–  third parties
   
 
(3,293
)
   
 
(3,362
)
   
 
(6,144
)
   
 
(6,724
)
    
  
  
  
Loss before income taxes
   
 
(4,171
)
   
 
(51,779
)
   
 
(78,272
)
   
 
(74,764
)
Income tax benefit
   
 
294
 
   
 
2,284
 
   
 
11,965
 
   
 
4,931
 
    
  
  
  
Net loss
   
 
(3,877
)
   
 
(49,495
)
   
 
(66,307
)
   
 
(69,833
)
Other comprehensive income (loss):
                                    
Foreign currency translation
   
 
3
 
   
 
(2
)
   
 
2
 
   
 
1
 
    
  
  
  
Comprehensive loss
   
$
(3,874
)
   
$
(49,497
)
   
$
(66,305
)
   
$
(69,832
)
    
  
  
  

2

 
ASAT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS FOR THE THREE MONTHS AND SIX MONTHS
ENDED OCTOBER 31, 2002 AND 2001 – Continued
(Unaudited)
 
    
Three months ended
     
Six months ended
  
    
October 31,
2002
     
October 31,
2001
     
October 31,
2002
     
October 31,
2001
  
Net loss per ordinary share:
                                    
Basic and diluted
                                    
Net loss per ordinary share
   
$
(0.01
)
   
$
(0.07
)
   
$
(0.10
)
   
$
(0.10
)
    
  
  
  
Basic and diluted weighted average number of ordinary shares outstanding
   
 
668,947,000
 
   
 
669,311,864
 
   
 
668,947,000
 
   
 
669,477,788
 
    
  
  
  
Net loss per ADS:
                                    
Basic and diluted
                                    
Net loss per ADS
   
$
(0.03
)
   
$
(0.37
)
   
$
(0.50
)
   
$
(0.52
)
    
  
  
  
Basic and diluted weighted average number of ADSs outstanding
   
 
133,789,400
 
   
 
133,862,373
 
   
 
133,789,400
 
   
 
133,895,558
 
    
  
  
  
 

3

ASAT HOLDINGS LIMITED
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED OCTOBER 31, 2002 AND 2001
(Unaudited)
 
    
Three months ended
     
Six months ended
  
    
October 31,
2002
     
October 31,
2001
     
October 31,
2002
     
October 31,
2001
  
    
$’000
     
$’000
     
$’000
     
$’000
  
Operating activities:
                                    
Net loss
   
$
(3,877
)
   
$
(49,495
)
   
$
(66,307
)
   
$
(69,833
)
Adjustments to reconcile net loss to net cash used in operating activities:
                                    
Depreciation and amortization:
                                    
Property, plant and equipment
   
 
6,635
 
   
 
10,225
 
   
 
16,483
 
   
 
20,273
 
Deferred charges and debt discount
   
 
377
 
   
 
371
 
   
 
753
 
   
 
743
 
Deferred income taxes
   
 
(294
)
   
 
(2,284
)
   
 
(11,968
)
   
 
(4,931
)
(Gain) Loss on disposal of property, plant and equipment
   
 
(52
)
   
 
19
 
   
 
(52
)
   
 
7
 
Loss on assets written off
   
 
—  
 
   
 
24,285
 
   
 
—  
 
   
 
24,285
 
Loss on non-recoverable & unutilized architectural cost
   
 
—  
 
   
 
4,500
 
   
 
—  
 
   
 
4,500
 
Impairment of property, plant and equipment
   
 
—  
 
   
 
—  
 
   
 
59,189
 
   
 
—  
 
Provision for doubtful debts
   
 
—  
 
   
 
49
 
   
 
—  
 
   
 
21
 
Changes in operating assets and liabilities:
                                    
Accounts receivable-trade
   
 
(5,717
)
   
 
(2,078
)
   
 
(8,439
)
   
 
4,669
 
Inventories
   
 
(1,680
)
   
 
9,519
 
   
 
1,406
 
   
 
15,983
 
Prepaid expenses and other current assets
   
 
(655
)
   
 
616
 
   
 
444
 
   
 
1,480
 
Restricted cash
   
 
(1,504
)
   
 
—  
 
   
 
(1,504
)
   
 
—  
 
Accounts payable
   
 
4,456
 
   
 
(636
)
   
 
3,709
 
   
 
(4,812
)
Net (decrease) increase in amount due to QPL
   
 
(152
)
   
 
258
 
   
 
575
 
   
 
(397
)
Accrued liabilities
   
 
(3,173
)
   
 
(6,014
)
   
 
(235
)
   
 
(3,480
)
Amount due to a related company
   
 
—  
 
   
 
(255
)
   
 
—  
 
   
 
(361
)
    
  
  
  
Net cash used in operating activities
   
 
(5,636
)
   
 
(10,920
)
   
 
(5,946
)
   
 
(11,853
)
    
  
  
  
Investing activities:
                                    
Acquisition of property, plant and equipment
   
 
(2,065
)
   
 
(3,630
)
   
 
(4,521
)
   
 
(14,772
)
Proceeds from sale of property, plant and equipment
   
 
126
 
   
 
3
 
   
 
126
 
   
 
80
 
    
  
  
  
Net cash used in investing activities
   
 
(1,939
)
   
 
(3,627
)
   
 
(4,395
)
   
 
(14,692
)
    
  
  
  
Financing activities:
                                    
Repayment of capital lease obligation
   
 
—  
 
   
 
(51
)
   
 
—  
 
   
 
(95
)
Repurchase of shares
   
 
—  
 
   
 
(415
)
   
 
—  
 
   
 
(541
)
    
  
  
  
Net cash used infinancing activities
   
 
—  
 
   
 
(466
)
   
 
—  
 
   
 
(636
)
    
  
  
  
Net decrease in cash and cash equivalents
   
 
(7,575
)
   
 
(15,013
)
   
 
(10,341
)
   
 
(27,181
)
Cash and cash equivalents at beginning of the period
   
 
31,732
 
   
 
67,715
 
   
 
34,499
 
   
 
79,880
 
Effects on changes of foreign exchange rates
   
 
3
 
   
 
(2
)
   
 
2
 
   
 
1
 
    
  
  
  
Cash and cash equivalents at end of the period
   
$
24,160
 
   
$
52,700
 
   
$
24,160
 
   
$
52,700
 
    
  
  
  
Supplemental disclosure of cash flow information:
                                    
Cash paid during the period for:
                                    
Interest
   
$
6,297
 
   
$
6,297
 
   
$
6,297
 
   
$
6,297
 
Income taxes
   
 
—  
 
   
 
—  
 
   
 
2
 
   
 
19
 

4

ASAT HOLDINGS LIMITED
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
 
PRESENTATION OF INTERIM FINANCIAL STATEMENTS
 
The condensed consolidated financial statements have been prepared by ASAT Holdings Limited (the “Company”) in accordance with generally accepted accounting principles in the United States of America. The April 30, 2002 balance sheet date was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States of America. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the annual report of the Company on Form 20-F for the fiscal year ended April 30, 2002. The interim financial statements for fiscal 2002 and 2003 were not audited, but in the opinion of management reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented.
 
2.
 
INVENTORIES
 
The components of inventories were as follows:
 
    
October 31,
2002
   
April 30,
2002
    
$’000
   
$’000
    
(Unaudited)
     
Raw materials
   
$
8,327
   
$
10,405
Work-in-progress
   
 
1,317
   
 
645
    
  
    
$
9,644
   
$
11,050
    
  
 
Management continuously reviews slow-moving and obsolete inventory and assesses any inventory obsolescence based on inventory levels, material composition and expected usage as of that date. During the July 2002 quarter, there was a non-cash write-off of specific inventories of $3,007 thousand, due to the Company’s revised estimation on expected usage of raw materials. During the October 2002 quarter, there was a non-cash write-off of specific inventories of $270 thousand.
 
3.
 
RELATED PARTY TRANSACTIONS
 
The Company purchased raw materials from QPL International Holdings Limited (“QPL”) amounting to $5,789 thousand and $2,348 thousand for the three months ended October 31, 2002 and 2001, and $10,283 thousand and $4,460 thousand for the six months ended October 31, 2002 and 2001, respectively.
 
In the October 2001 quarter, the Company purchased packing materials of $296 thousand from Peak Plastic & Metal Products (International) Limited (“Peak Plastic”), which was a related company at that time. With effect from October 11, 2001, Peak Plastic ceased to be a related party of the Company.

5

 
4.
 
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
 
Each quarter the Company examines overall utilization of its assets and expected future cash flows. Several changes occurred during the July 2002 quarter, which triggered the Company to re-assess the recoverability of its property, plant and equipment by carefully examining the undiscounted cash flows expected to result from the use and eventual disposition of the asset groups. In the July 2002 quarter, the management re-examined the Company’s business strategy in the context of the changing industry and market conditions and revised the Company’s business strategy to reflect the growing market demand for finer pitch technologies and to focus on high-end and advanced packaging solutions. Therefore, the Company evaluated the future cash flows generated from the asset groups and concluded that certain older wire bonders are not capable of producing finer pitch technologies offered in today’s markets and will likely be unutilized. As a result, the Company determined that these equipment items should be either written off or held for disposal, resulting in a $20,126 thousand non-cash charge during the July 2002 quarter.
 
The Company also determined that certain other bonders and a few specific testers associated with selected package types will not likely generate sufficient future cash flows to justify their current carrying values on the Company’s balance sheet at July 31, 2002. The Company performed a discounted cash flow model to assess the potential impairment effect on its financial statements as well as seeking an independent appraiser to assess the fair value of these property, plant and equipment. As a result, the Company recorded a $39,063 thousand charge for the impairment of its property, plant and equipment in the July 2002 quarter based on discounted cash flow model relating to the Lead Advanced, BGA Standard, BGA Advanced, and Testing product categories.
 
The combined $59,189 thousand non-cash charge before taxes reduced the net book value of property, plant and equipment as of July 31, 2002 from $199,826 thousand before this impairment charge to $140,637 thousand after the impairment charge. Of the $140,637 thousand remaining net book value of property, plant and equipment, $932 thousand was classified as assets held for disposal on the July 31, 2002 balance sheet. These machines are separately identified for not being used in production and are intended to be disposed of by sale. Potential buyers have been identified and these machines, which were recorded at the lower of their depreciated cost or fair value less costs to sell, are expected to be sold in the near future.
 
In the October 2002 quarter, a machinery of $273 thousand included in the assets held for disposal account was reclassified to the Company’s property, plant and equipment. The Company received specific orders subsequent to the July 2002 quarter for testing business from an overseas customer, which required the use of this equipment. The Company therefore decided to upgrade this machinery and reuse it in the operations.
 
5.
 
RESTRICTED CASH
 
The restricted cash of $1,504 thousand as of October 31, 2002 represents bank deposit for securing a standby letter of credit with respect to a lease of a manufacturing plant in the People’s Republic of China (“PRC”).

6

 
6.
 
COMMITMENTS
 
    
 
As of October 31, 2002 and April 30, 2002, the Company had contracted for capital expenditure on property, plant and equipment of $1,236 thousand and $1,875 thousand, respectively.
 
    
 
The Company leases certain land and buildings and equipment and machinery, under operating lease agreements expiring at various times through October 2007. Most of these leases do not contain renewal options or escalation clauses.
 
    
 
Future minimum lease payments under operating leases as of October 31, 2002 are as follows:
 
    
$’000
Fiscal year ending April 30:
     
2003
   
2,293
2004
   
3,837
2005
   
1,610
2006
   
158
2007 and thereafter
   
70
    
Total
   
7,968
    
 
    
 
The Company also entered into a lease for a manufacturing plant in the PRC on August 8, 2002 of which the lessor is responsible for the design and construction of the factory facilities. The Company is obligated to pay monthly rental payment and management and services fees 30 days after the lessor hands over the newly constructed facilities to the Company, which is expected sometime in late calendar year 2003.
 
    
 
The minimum lease payments under the lease in respect of the PRC factory facilities are as follows:
 
    
$’000
First to Sixth rental years
   
12,924
Seventh to Eleventh rental years
   
2,690
Twelfth to Fifteenth rental years
   
2,368
    
Total
   
17,982
    
 
    
 
From October 30, 2004 and during the term of the lease, the Company will have an option and a right of first refusal to purchase the factory facilities and the land-use right at fair value. The Company is also required to pay approximately $779 thousand annually as management and services fees for a total of six years.
 
7.
 
STOCK OPTION PLAN
 
    
 
On May 28, 2002 and August 29, 2002, the Company issued 1,016,000 shares and 180,000 shares, respectively, of ADS options to directors and employees under the Stock Option Plan in effect on July 6, 2000 at an exercise price of $1.60 and $0.96 per share, respectively. The exercise price of all options granted under this plan was equal to or greater than the market value of ADS on the date granted. No compensation cost was recognized for the three months and six months ended October 31, 2002 and 2001, respectively, under Accounting Principles Board Opinion (“APB”) No. 25.

7