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• | We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradable. | |
• | You may withdraw tenders of outstanding notes at any time prior to the expiration date of the exchange offers. | |
• | The exchange offers expire at 12:00 midnight, New York City time, on February 7, 2007, unless extended. We do not currently intend to extend the expiration date. | |
• | The exchange of outstanding notes for exchange notes in the exchange offers will not be a taxable event for U.S. federal income tax purposes or Singapore tax purposes. | |
• | The terms of the exchange notes to be issued in the exchange offers are substantially identical to the outstanding notes, except that the exchange notes will be freely tradable. |
• | The exchange notes may be sold in theover-the-counter market, in negotiated transactions or through a combination of such methods. We do not plan to list the notes on a national market in the United States or elsewhere. |
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F-1 |
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ONFORM F-4
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• | Wireless Communications: We support the wireless industry with a broad variety of RF semiconductor devices, including diodes and discrete transistors, monolithic microwave integrated circuits (MMICs), filters and duplexers using our proprietary film bulk acoustic resonator (FBAR) technology, and front end modules that incorporate multiple die into multi-function RF devices. The broad range of our RF portfolio allows us to address applications ranging from mobile handsets and infrastructure to satellite communications,point-to-point communications, military communications, and wireless networking for computing applications. Our expertise in amplifier design, FBAR technology and module integration capability enables us to offer industry-leading efficiency in RF transmitter applications. Our proprietary gallium arsenide (GaAs) processes are critical to the production of low noise amplifier (LNA) products. In addition to RF devices, we provide a variety of peripheral devices for mobile handset applications. We were an early developer of complementary metal-oxide semiconductor (CMOS) image sensors for camera-phone applications and today supply image sensor components to camera module assemblers for integration into handsets. We also supply LEDs for camera-phone flashes and for backlighting applications in mobile handset keypads, as well as sensors for backlighting control and infrared transceivers to enable secure access of files in mobile phones and smartphones. |
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• | Wired Infrastructure: In the telecommunications, storage and Ethernet networking markets, we supply transceivers that receive and transmit information along optical fibers. We provide a range of options for customers to select the bandwidth desired, including options ranging from 125 MBd Fast Ethernet transmitters and receivers to 10 Gigabit storage transceivers. We also supply parallel optic transceivers with as many as 12 parallel channels. In metropolitan networking applications, we supply SONET-compliant transceivers ranging from OC-3 to OC-192 standards. We also supply components for networking and enterprise storage I/O applications, including serializers/deserializers (SerDes) integrated into application specific integrated circuits (ASICs). Our CMOS processes provide low power consumption and superior noise immunity. | |
• | Industrial/Automotive Electronics: We provide a broad variety of products for the general industrial, automotive and consumer appliance markets. LEDs and related integrated modules represent a significant product family, with a number of different colors, form factors and integration options. Our LEDs provide reliability, using aluminum indium gallium phosphide (AlInGaP), indium gallium nitride (InGaN) and gallium phosphide (GaP) materials, among others, to cover a wide spectrum of colors and brightness levels. Our LEDs offer high brightness and stable light output over thousands of hours, enabling us to support the electronic signs and signals market with LED assemblies for traffic signals, large commercial signs and other displays. We also offer optical isolators, or optocouplers, which provide electrical insulation and signal isolation for systems that are susceptible to electrical noise caused by crosstalk, power glitches or electrical interference. Our ability to integrate LEDs, detectors and communication ICs enables us to offer high performance with respect to isolation and power dissipation, as well as high speed digital optocouplers. Optocouplers are used in a diverse set of applications, including industrial motors, power generation and distribution systems, switching power supplies, medical equipment, telecommunications equipment, consumer appliances, computers and office equipment, plasma displays, and military electronics. Industrial motors and robotics require optical sensors for motion control. We supply optical encoders in module form and housed in ingress-protected enclosures, as well as ICs for the controller and decoder functions to accompany the motion sensors themselves. For industrial networking, we provide fast Ethernet transceivers using plastic optical fiber that enable quick and interoperable networking in industrial control links and factory automation and for medical equipment. | |
• | Computing Peripherals: We manufacture motion control encoders that control the paper feed and print head movement in printers and other office automation products. In addition, we were an early developer of image sensors for optical mouse applications, using LEDs and CMOS image sensors to create a subsystem that can detect motion over an arbitrary desktop surface. We are a leading supplier of image sensors for optical mice today, and have launched a new line of laser-based mouse products with improved precision. Many PCs incorporate infrared transceivers for “beaming” information to and from handheld devices or printers, and we supply transceivers that can be used for these applications. Computer displays, especially in notebook computer applications, use our products for LED backlighting and sensors to control display brightness based on ambient light conditions. |
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General | On December 1, 2005, Avago Technologies Finance Pte. Ltd. and the subsidiary co-issuers issued $500 million aggregate principal amount of the outstanding fixed rate senior notes, $250 million aggregate principal amount of the outstanding floating rate senior notes and $250 million aggregate principal amount of the outstanding senior subordinated notes in a private offering. In connection with the private offering, Avago Technologies Finance Pte. Ltd. and the subsidiary co-issuers and guarantors of the notes entered into a registration rights agreement with the initial purchasers in which we agreed, among other things, to deliver this prospectus to you and to complete the exchange offers within 360 days after the date of original issuance of the outstanding notes. You are entitled to exchange in the applicable exchange offer your outstanding notes for exchange notes which are identical in all material respects to the outstanding notes except: | |
• the exchange notes have been registered under the Securities Act; | ||
• the exchange notes are not entitled to any registration rights under the registration rights agreement; and | ||
• the liquidated damages provision of the registration rights agreement is no longer applicable. | ||
The Exchange Offers | We are offering to exchange: | |
• $500 million aggregate principal amount of exchange fixed rate senior notes which have been registered under the Securities Act for any and all of the outstanding fixed rate senior notes; | ||
• $250 million aggregate principal amount of exchange floating rate senior notes which have been registered under the Securities Act for any and all of the outstanding floating rate senior notes; and | ||
• $250 million aggregate principal amount of exchange senior subordinated notes which have been registered under the Securities Act for any and all of the outstanding senior subordinated notes. |
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You may only exchange outstanding notes with a minimum denomination of $2,000 or an integral multiple of $1,000 in excess thereof. | ||
Resale | Based on an interpretation by the staff of the Securities and Exchange Commission (the “SEC”) set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offers in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: | |
• you are acquiring the exchange notes in the ordinary course of your business; and | ||
• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes. | ||
If you are a broker-dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.” Any holder of outstanding notes that: | ||
• is our affiliate; | ||
• does not acquire exchange notes in the ordinary course of its business; or | ||
• tenders its outstanding notes in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes; | ||
cannot rely on the position of the staff of the SEC enunciated inMorgan Stanley & Co. Incorporated(available June 5, 1991) andExxon Capital Holdings Corporation(available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated available July 2, 1993, or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. | ||
Expiration Date | The exchange offers will expire at 12:00 midnight, New York City time, on February 7, 2007, unless extended by us. We do not currently intend to extend the expiration date. | |
Withdrawal | You may withdraw the tender of your outstanding notes at any time prior to the expiration of the applicable exchange offer. We will return to you any of your outstanding notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the applicable exchange offer. |
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Conditions to the Exchange Offers | Each exchange offer is subject to customary conditions, which we may waive. See “The Exchange Offers — Conditions to the Exchange Offers.” | |
Procedures for Tendering Outstanding Notes | If you are a record holder of notes and wish to participate in an exchange offer, you must complete, sign and date the applicable accompanying letter of transmittal, or a facsimile of such letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the applicable letter of transmittal, or a facsimile of such letter of transmittal, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. | |
If you hold outstanding notes through The Depository Trust Company (“DTC”) and wish to participate in the exchange offers, you must comply with the Automated Tender Offer Program procedures of DTC by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things: | ||
• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act; | ||
• you do not have an arrangement or understanding with any person or entity to participate in the distribution of the exchange notes; | ||
• you are acquiring the exchange notes in the ordinary course of your business; and | ||
• if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes. | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner of outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those outstanding notes in the applicable exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender those outstanding notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the applicable letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date of the exchange offers. | |
Guaranteed Delivery Procedures | If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the applicable letter of transmittal or any other required documents, or you cannot comply with the procedures under DTC’s Automated Tender Offer Program for transfer of |
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book-entry interests, prior to the expiration date, you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offers — Guaranteed Delivery Procedures.” | ||
Effect on Holders of Outstanding Notes | As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding notes pursuant to the terms of the exchange offers, we will have fulfilled a covenant under the registration rights agreement, and the payment of Additional Interest will cease. If you do not tender your outstanding notes in the applicable exchange offer, you will continue to be entitled to all the rights and limitations applicable to the outstanding notes as set forth in the applicable indenture, except Avago Technologies Finance Pte. Ltd. and the subsidiary co-issuers and guarantors of the notes will not have any further obligation to you to provide for the exchange and registration of the outstanding notes under the registration rights agreement. To the extent that outstanding notes are tendered and accepted in the exchange offers, the trading market for outstanding notes could be adversely affected. | |
Consequences of Failure to Exchange | All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the applicable indenture. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offers, we do not currently anticipate that we will register the outstanding notes under the Securities Act. | |
Tax Consequences | The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event for United States federal income tax purposes or Singapore tax purposes. See “Tax Consequences of the Exchange Offers.” | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of exchange notes in the exchange offers. See “Use of Proceeds.” | |
Exchange Agent | The Bank of New York is the exchange agent for the exchange offers. The addresses and telephone numbers of the exchange agent are set forth in the section captioned “The Exchange Offers — Exchange Agent.” |
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Issuer | Avago Technologies Finance Pte. Ltd., a Singapore private limited company | |
Subsidiary Co-Issuers | Avago Technologies U.S. Inc. and Avago Technologies Wireless (U.S.A.) Manufacturing Inc., each a Delaware corporation and an indirect wholly owned subsidiary of Avago Technologies Finance Pte. Ltd. | |
Securities Offered | We are offering: $500 million aggregate principal amount of 101/8% Senior Notes due 2013, which we refer to as the exchange fixed rate senior notes; $250 million aggregate principal amount of Senior Floating Rate Notes due 2013, which we refer to as the exchange floating rate senior notes; and $250 million aggregate principal amount of 117/8% Senior Subordinated Notes due 2015, which we refer to as the exchange senior subordinated notes. | |
Maturity | The exchange fixed rate senior notes will mature on December 1, 2013. The exchange floating rate senior notes will mature on June 1, 2013. The exchange senior subordinated notes will mature on December 1, 2015. | |
Interest Rate | The exchange fixed rate senior notes will bear interest at a rate of 101/8% per annum. The exchange floating rate senior notes will bear interest at a rate per annum equal to three-month LIBOR plus 5.5%. Interest on the exchange floating rate senior notes will be reset quarterly. The exchange senior subordinated notes will bear interest at a rate of 117/8% per annum. | |
Interest Payment Dates | Interest on the exchange fixed rate senior notes and the exchange senior subordinated notes will be payable on June 1 and December 1. Interest on the exchange floating rate senior notes will be payable on March 1, June 1, September 1 and December 1. Interest will accrue from the issue date of the notes. | |
Ranking | The exchange senior notes will be our senior unsecured obligations and will: | |
• rank senior in right of payment to our debt and other obligations that are, by their terms, expressly subordinated in right of payment to the exchange senior notes, including the senior subordinated notes; | ||
• rank equally in right of payment to all of our senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the exchange senior notes; and | ||
• be effectively subordinated in right of payment to all of our secured debt (including obligations under our senior credit |
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facilities), to the extent of the value of the assets securing such debt, and be structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the exchange senior notes. | ||
The exchange senior subordinated notes will be our unsecured senior subordinated obligations and will: | ||
• be subordinated in right of payment to our senior debt, including the senior credit facilities and the senior notes; | ||
• rank equally in right of payment to all of our future senior subordinated debt; | ||
• be effectively subordinated in right of payment to all of our secured debt (including the senior credit facilities), to the extent of the value of the assets securing such debt, and be structurally subordinated to all obligations of each of our subsidiaries that is not a co-obligor or guarantor of the exchange senior subordinated notes; and | ||
• rank senior in right of payment to all of our future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the exchange senior subordinated notes. | ||
As of October 31, 2006, (1) the outstanding senior notes and related guarantees ranked senior to the $250 million of outstanding senior subordinated notes, (2) the outstanding senior subordinated notes and related guarantees ranked junior to $750 million of senior indebtedness under the senior notes, and (3) we had $239 million available under our revolving credit facility (net of $11 million of outstanding letters of credit). | ||
Subsidiary Guarantors | Each of our subsidiaries that guarantees the obligations under our senior credit facilities, other than the subsidiary co-issuers of the exchange notes, will initially jointly and severally and unconditionally guarantee the exchange senior notes on a senior unsecured basis and the exchange senior subordinated notes on a senior subordinated unsecured basis. The guarantees of the exchange senior notes will rank equally with all other senior unsecured indebtedness of the guarantors. The guarantees of the exchange senior subordinated notes will be subordinated to all senior indebtedness of the guarantors. | |
Optional Redemption | At any time prior to December 1, 2009, we may redeem some or all of the exchange senior fixed rate notes for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium (as described in “Description of Exchange Senior Notes — Optional Redemption — Fixed Rate Senior Notes”) plus accrued and unpaid interest to the redemption date. At any time on or after December 1, 2009, we may redeem some or all of the exchange senior fixed rate notes at the redemption prices listed under “Description of Exchange Senior Notes — Optional Redemption — Fixed Rate Senior Notes” plus accrued interest on the senior fixed rate notes to the date of redemption. |
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At any time prior to December 1, 2007, we may redeem some or all of the exchange senior floating rate notes for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium (as described in “Description of Exchange Senior Notes — Optional Redemption — Floating Rate Senior Notes”) plus accrued and unpaid interest to the redemption date. At any time on or after December 1, 2007, we may redeem some or all of the exchange senior floating rate notes at the redemption prices listed under “Description of Exchange Senior Notes — Optional Redemption — Floating Rate Senior Notes” plus accrued interest on the senior floating rate notes to the date of redemption. | ||
At any time prior to December 1, 2010, we may redeem some or all of the exchange senior subordinated notes for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium (as described in “Description of Exchange Senior Subordinated Notes — Optional Redemption”) plus accrued and unpaid interest to the redemption date. At any time on or after December 1, 2010, we may redeem some or all of the exchange senior subordinated notes at the redemption prices listed under “Description of Exchange Senior Subordinated Notes — Optional Redemption” plus accrued interest on the senior subordinated notes to the date of redemption. | ||
Optional Redemption After Certain Equity Offerings and Designated Asset Sales | At any time (i) prior to December 1, 2008, we may redeem up to 35% of the exchange senior fixed rate notes with proceeds that we or one of our parent companies raise in one or more equity offerings and up to 35% of the exchange senior fixed rate notes with proceeds of Designated Asset Sales (as defined) at a redemption price equal to 110.125% of their principal amount, (ii) prior to December 1, 2007, we may redeem up to 35% of the exchange senior floating rate notes with proceeds that we or one of our parent companies raise in one or more equity offerings and up to 35% of the exchange senior floating rate notes with proceeds of Designated Asset Sales at a redemption price equal to 100% of their principal amount plus a premium equal to the rate per annum on the exchange senior floating rate notes applicable on the date on which notice of redemption is given, and (iii) prior to December 1, 2008, we may redeem up to 35% of the exchange senior subordinated notes with proceeds that we or one of our parent companies raise in one or more equity offerings and up to 35% of the exchange senior subordinated notes with proceeds of Designated Asset Sales at a redemption price equal to 111.875% of their principal amount, so long as, in each such case, at least 50% (and, in the case of the exchange senior subordinated notes, at least $150 million) of the aggregate principal amount of the exchange notes issued of the applicable series remains outstanding. See “Description of Exchange Senior Notes — Optional Redemption” and “Description of Exchange Senior Subordinated Notes — Optional Redemption.” | |
Change of Control Offer | Upon the occurrence of a change of control, we will be required to offer to repurchase the exchange notes at 101% of their principal |
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amount, plus accrued and unpaid interest to the repurchase date. See “Description of Exchange Senior Notes — Repurchase at the Option of Holders — Change of Control” and “Description of Exchange Senior Subordinated Notes — Repurchase at the Option of Holders — Change of Control.” | ||
Certain Indenture Provisions | The exchange senior notes and the exchange senior subordinated notes are governed by separate indentures. The indentures governing the exchange notes contain covenants limiting our ability and the ability of our restricted subsidiaries to: | |
• incur additional debt or issue certain preferred shares; | ||
• pay dividends on or make distributions in respect of our capital stock or make other restricted payments; | ||
• make certain investments; | ||
• sell certain assets; | ||
• create liens on certain assets to secure debt; | ||
• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; | ||
• enter into certain transactions with our affiliates; and | ||
• designate our subsidiaries as unrestricted subsidiaries. | ||
These covenants are subject to a number of important limitations and exceptions. During any period in which the exchange notes have an Investment Grade Rating (as defined) we will not be subject to many of the covenants in the indentures. See “Description of Exchange Senior Notes” and “Description of Exchange Senior Subordinated Notes.” | ||
No Public Market | The exchange notes will be freely transferable but will be new securities for which there will not initially be a market. Accordingly, we cannot assure you whether a market for the exchange notes will develop or as to the liquidity of any market. The initial purchasers in the private offering of the outstanding notes have advised us that they currently intend to make a market in the exchange notes. The initial purchasers are not obligated, however, to make a market in the exchange notes, and any such market-making may be discontinued by the initial purchasers in their discretion at any time without notice. |
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Predecessor(1) | Company | ||||||||||||||||||||
One | |||||||||||||||||||||
Month | Year | ||||||||||||||||||||
Ended | Ended | ||||||||||||||||||||
Year Ended October 31, | Nov. 30, | October 31, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006(2) | |||||||||||||||||
(In millions) | |||||||||||||||||||||
Statements of Operations Data: | |||||||||||||||||||||
Net revenue(3) | $ | 1,305 | $ | 1,783 | $ | 1,559 | $ | 125 | $ | 1,478 | |||||||||||
Costs and expenses: | |||||||||||||||||||||
Cost of products sold | 992 | 1,249 | 1,037 | 96 | 982 | ||||||||||||||||
Amortization of intangible assets | — | — | — | — | 56 | ||||||||||||||||
Total cost of products sold | 992 | 1,249 | 1,037 | 96 | 1,038 | ||||||||||||||||
Research and development | 232 | �� | 207 | 218 | 24 | 201 | |||||||||||||||
Selling, general and administrative | 256 | 250 | 256 | 28 | 246 | ||||||||||||||||
Amortization of intangible assets | — | — | — | — | 66 | ||||||||||||||||
Litigation settlement | — | — | — | — | 21 | ||||||||||||||||
Acquired in-process research and development | — | — | — | — | 2 | ||||||||||||||||
Total costs and expenses | 1,480 | 1,706 | 1,511 | 148 | 1,574 | ||||||||||||||||
Income (loss) from operations(3) | (175 | ) | 77 | 48 | (23 | ) | (96 | ) | |||||||||||||
Interest expense(4) | — | — | — | — | 143 | ||||||||||||||||
Other income, net | 1 | 4 | 7 | — | 12 | ||||||||||||||||
Income (loss) from continuing operations before income taxes | (174 | ) | 81 | 55 | (23 | ) | (227 | ) | |||||||||||||
Provision for income taxes | 10 | 25 | 33 | 2 | 3 | ||||||||||||||||
Income (loss) from continuing operations | (184 | ) | 56 | 22 | (25 | ) | (230 | ) | |||||||||||||
Income from discontinued operations, net of income taxes | 7 | 17 | 9 | 1 | 3 | ||||||||||||||||
Net income (loss) | $ | (177 | ) | $ | 73 | $ | 31 | $ | (24 | ) | $ | (227 | ) | ||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||
Total assets | $ | 2,217 | |||||||||||||||||||
Long-term debt and capital lease obligations | 1,004 | ||||||||||||||||||||
Total shareholder’s equity | 831 | ||||||||||||||||||||
Other Financial Data | |||||||||||||||||||||
Ratio of earnings to fixed charges(5) | — |
(1) | Predecessor refers to the Semiconductor Products Group business segment of Agilent Technologies, Inc. | |
(2) | We completed the Acquisition on December 1, 2005. The Acquisition was accounted for as a purchase business combination under United States generally accepted accounting principles (“U.S. GAAP”) and thus the financial results for all periods from and after December 1, 2005 are not necessarily comparable to the prior results of Predecessor. We did not have any operating activity prior to December 1, 2005. Accordingly, our results for the year ended October 31, 2006 represent only the eleven months of our operations since completion of the Acquisition. |
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(3) | The divestiture of the Camera Module Business by Predecessor on February 3, 2005 did not meet the criteria for discontinued operations treatment under U.S. GAAP and, as such, its historical results remain included in the results from continuing operations as presented in this prospectus. The following table presents the operating results of the Camera Module Business: |
Predecessor | Company | ||||||||||||||||||||
One | |||||||||||||||||||||
Month | |||||||||||||||||||||
Ended | Year Ended | ||||||||||||||||||||
Year Ended October 31, | November 30, | October 31, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
(In millions) | |||||||||||||||||||||
Net revenue | $ | 58 | $ | 296 | $ | 69 | — | — | |||||||||||||
Loss from operations | (37 | ) | (63 | ) | (7 | ) | — | — |
(4) | Interest expense for the year ended October 31, 2006 includes an aggregate of $30 million of amortization of debt issuance costs and commitment fees for expired facilities, including $19 million of unamortized debt issuance costs that were written off in conjunction with the repayment of the term loan facility during this period. As of October 31, 2006, we had permanently repaid all outstanding amounts under the term loan facility. | |
(5) | For purposes of computing this ratio of earnings to fixed charges, “fixed charges” consist of interest expense on all indebtedness plus amortization of debt issuance costs and an estimate of interest expense within rental expense. “Earnings” consist of pre-tax income (loss) from continuing operations plus fixed charges and unamortized capitalized debt issuance costs. For the year ended October 31, 2006, earnings were insufficient to cover fixed charges by $190 million. |
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As of October 31, 2006 | ||||
(In millions) | ||||
Revolving credit facility | $ | — | ||
Senior notes: | ||||
101/8% senior notes due 2013 | 500 | |||
Senior floating rate notes due 2013 | 250 | |||
117/8% senior subordinated notes due 2015 | 250 | |||
Long-term obligation for capital leases | 4 | |||
Total long-term indebtedness | $ | 1,004 | ||
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• | making it more difficult for us to satisfy our obligations with respect to the notes, including our repurchase obligations; | |
• | increasing our vulnerability to adverse general economic and industry conditions; | |
• | requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, execution of our business strategy and other general corporate purposes; | |
• | limiting our flexibility in planning for, or reacting to, changes in the economy and the semiconductor industry; | |
• | placing us at a competitive disadvantage compared to our competitors with less indebtedness; | |
• | exposing us to interest rate risk to the extent of our variable rate indebtedness; | |
• | limiting our ability to, or increasing the costs to, refinance indebtedness; and | |
• | making it more difficult to borrow additional funds in the future to fund working capital, capital expenditures and other purposes. |
• | incur additional indebtedness and issue disqualified stock or preferred shares; | |
• | pay dividends or make other distributions on, redeem or repurchase our capital stock or make other restricted payments; | |
• | make investments, acquisitions, loans or advances; | |
• | incur or create liens; | |
• | transfer or sell certain assets; | |
• | engage in sale and lease back transactions; | |
• | declare dividends or make other payments to us; | |
• | guarantee indebtedness; | |
• | engage in transactions with affiliates; and | |
• | consolidate, merge or transfer all or substantially all of our assets. |
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• | changes in end-user demand for the products manufactured and sold by our customers; | |
• | the timing of receipt, reduction or cancellation of significant orders by customers; | |
• | fluctuations in the levels of component inventories held by our customers; | |
• | the gain or loss of significant customers; | |
• | market acceptance of our products and our customers’ products; | |
• | our ability to develop, introduce and market new products and technologies on a timely basis; | |
• | the timing and extent of product development costs; | |
• | new product and technology introductions by competitors; | |
• | fluctuations in manufacturing yields; | |
• | significant warranty claims, including those not covered by our suppliers; | |
• | availability and cost of raw materials from our suppliers; |
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• | changes in our product mix or customer mix; | |
• | intellectual property disputes; | |
• | loss of key personnel or the shortage of available skilled workers; and | |
• | the effects of competitive pricing pressures, including decreases in average selling prices of our products. |
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• | cease the manufacture, use or sale of the infringing products, processes or technology; | |
• | pay substantial damages for past, present and future use of the infringing technology; | |
• | expend significant resources to develop non-infringing technology; | |
• | license technology from the third party claiming infringement, which license may not be available on commercially reasonable terms, or at all; | |
• | lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others; | |
• | pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology; or | |
• | relinquish intellectual property rights associated with one or more of our patent claims, if such claims are held invalid or otherwise unenforceable. |
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• | any of the patents and pending patent applications that we presently employ in our business, which currently consist primarily of those that Agilent assigned, licensed or sublicensed to us in connection with the Acquisition, will not lapse or be invalidated, circumvented, challenged, abandoned or licensed to others; | |
• | our intellectual property rights will provide competitive advantages to us; | |
• | rights previously granted by Agilent, Hewlett-Packard or others to intellectual property rights licensed or assigned to us, including portfolio cross-licenses, will not hamper our ability to assert our intellectual property rights against potential competitors or hinder the settlement of currently pending or future disputes; | |
• | any of our pending or future patent applications will be issued or have the coverage originally sought; | |
• | our intellectual property rights will be enforced in certain jurisdictions where competition may be intense; | |
• | any of the trademarks, copyrights, mask work rights, trade secrets, know-how or other intellectual property rights that Agilent has assigned, licensed or sublicensed to us in connection with the Acquisition will not lapse or be invalidated, circumvented, challenged, abandoned or licensed to others; or | |
• | any of our pending or future trademark or copyright applications will be issued or have the coverage originally sought. |
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• | inability of our manufacturers to develop manufacturing methods appropriate for our products and their unwillingness to devote adequate capacity to produce our products; | |
• | manufacturing costs that are higher than anticipated; | |
• | decline in product reliability; |
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• | inability to maintain continuing relationships with our suppliers; and | |
• | reduced control over delivery schedules and products costs. |
• | changes in political, regulatory, legal or economic conditions; | |
• | restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protection measures, including export duties and quotas and customs duties and tariffs; | |
• | disruptions of capital and trading markets; | |
• | changes in import or export licensing requirements; | |
• | transportation delays; | |
• | economic downturns, civil disturbances or political instability; | |
• | geopolitical turmoil, including terrorism, war or political or military coups; | |
• | changes in labor standards; | |
• | limitations on our ability under local laws to protect our intellectual property; | |
• | nationalization and expropriation; | |
• | changes in tax laws; | |
• | currency fluctuations, which may result in our products becoming too expensive for foreign customers; and | |
• | difficulty in obtaining distribution and support. |
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• | currency exchange risks resulting from changes in currency exchange rates and the implementation of exchange controls; and | |
• | limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries. |
• | any acquisitions would result in an increase in income; | |
• | any acquisitions would be successfully integrated into our operations; | |
• | any disposition would result in decreased earnings, revenue or cash flow; | |
• | any dispositions, investments, acquisitions or integrations would divert management resources; or | |
• | any dispositions, investments, acquisitions or integrations would result in a material adverse effect on our business, results of operations or financial condition. |
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• | changes in environmental or health and safety laws or regulations; | |
• | the manner in which environmental or health and safety laws or regulations will be enforced, administered or interpreted; | |
• | our ability to enforce and collect under indemnity agreements and insurance policies relating to environmental liabilities; or | |
• | the cost of compliance with future environmental or health and safety laws or regulations or the costs associated with any future environmental claims, including the cost ofclean-up of currently unknown environmental conditions. |
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• | costs and expenses of the winding up; | |
• | amounts due to employees of our company in respect of wages, retrenchment benefits, workmen’s compensation and provident funds; and | |
• | all taxes due from our company. |
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• | the subsidiary co-issuer issued the exchange notes or the subsidiary guarantor incurred the subsidiary guarantee with the intent to hinder, delay or defraud any present or future creditor or contemplated insolvency with a design to favor one or more creditors to the exclusion of others; or | |
• | the subsidiary co-issuer or subsidiary guarantor did not receive fair consideration or reasonably equivalent value for issuing the exchange notes or the subsidiary guarantee and, at the time it issued the exchange notes or the subsidiary guarantee, the subsidiary co-issuer or subsidiary guarantor: |
• | was insolvent or became insolvent as a result of issuing the exchange notes or the subsidiary guarantee; | |
• | was engaged or about to engage in a business or transaction for which the remaining assets of the subsidiary co-issuer or subsidiary guarantor constituted unreasonably small capital; | |
• | intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they matured; or | |
• | was a defendant in an action for money damages, or had a judgment for money damages declared against such subsidiary co-issuer or subsidiary guarantor if, after final judgment, the judgment is unsatisfied; |
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• | our substantial indebtedness; | |
• | certain covenants in our debt documents; | |
• | general economic and market conditions; | |
• | the overall condition of the semiconductor industry; | |
• | our separation from Agilent; | |
• | our transformation from a business segment of Agilent to a stand-alone company; | |
• | changes in tax laws; | |
• | the integration of acquired businesses, the performance of acquired businesses and the prospects for future acquisitions; | |
• | the effect of war, terrorism, natural disasters or other catastrophic events; | |
• | the effect of disruptions to our systems and infrastructure, including our IT infrastructure and enterprise resource planning system; | |
• | the timing and scope of technological advances; | |
• | the ability to retain and attract customers and key personnel; | |
• | risks relating to the transaction of business internationally; and | |
• | the other factors set forth under “Risk Factors.” |
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(1) | In connection with our equity capitalization, each of Parent, Holdings and our company issued to its shareholder(s) approximately $1,050 million of ordinary shares with substantially similar terms. | |
(2) | Avago Technologies Holding Pte. Ltd. and its material subsidiaries have guaranteed the senior credit facilities. Subsidiaries of Avago Technologies Finance Pte. Ltd. that have guaranteed the senior credit facilities (other than the subsidiary co-issuers) have also initially guaranteed the notes. | |
(3) | In connection with the financing of the Acquisition, we issued $1,000 million principal amount of notes and entered into senior credit facilities in an aggregate principal amount of $975 million, consisting of a six-year revolving credit facility in an aggregate principal amount of $250 million and a seven-year term loan facility in an aggregate principal amount of up to $725 million, of which $475 million was drawn at the closing of the Acquisition. Up to $250 million was available under our term loan facility on a delayed-draw basis until April 30, 2006. On January 26, 2006, as permitted by our senior credit agreement and the indentures governing the outstanding notes, we drew the full $250 million under the delayed-draw portion of our term loan facility to retire all of our redeemable convertible preference shares. We used $420 million of net proceeds from the sale of our Storage Business and $245 million of net proceeds from the sale of our Printer ASICs Business to permanently repay borrowings under our term loan facility. As of October 31, 2006, we had permanently repaid all outstanding amounts under the term loan facility. |
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As of October 31, 2006 | ||||
(In millions, | ||||
except share data) | ||||
Long-term debt: | ||||
Revolving credit facility(1) | $ | — | ||
101/8% senior notes due 2013 | 500 | |||
Senior floating rate notes due 2013(2) | 250 | |||
117/8% senior subordinated notes due 2015 | 250 | |||
Long-term obligation for capital leases | 4 | |||
Total long-term debt | 1,004 | |||
Shareholder’s equity: | ||||
Preference shares, no par value, none issued and outstanding | — | |||
Ordinary shares, no par value, 210,460,262 shares issued and outstanding | 1,058 | |||
Accumulated deficit | (227 | ) | ||
Total shareholder’s equity | 831 | |||
Total capitalization | $ | 1835 | ||
(1) | Excludes $11 million of outstanding letters of credit. | |
(2) | The senior floating rate notes due 2013 accrue interest at a rate equal to LIBOR plus 5.5%. The interest rate on the senior floating rate notes due 2013 was 10.9% as of October 31, 2006. |
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Predecessor(1) | Company | ||||||||||||||||||||
One | |||||||||||||||||||||
Month | Year | ||||||||||||||||||||
Ended | Ended | ||||||||||||||||||||
Year Ended October 31, | Nov. 30, | October 31, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006(2) | |||||||||||||||||
(In millions) | |||||||||||||||||||||
Statements of Operations Data: | |||||||||||||||||||||
Net revenue(3) | $ | 1,305 | $ | 1,783 | $ | 1,559 | $ | 125 | $ | 1,478 | |||||||||||
Costs and expenses: | |||||||||||||||||||||
Cost of products sold | 992 | 1,249 | 1,037 | 96 | 982 | ||||||||||||||||
Amortization of intangible assets | — | — | — | — | 56 | ||||||||||||||||
Total cost of products sold | 992 | 1,249 | 1,037 | 96 | 1,038 | ||||||||||||||||
Research and development | 232 | 207 | 218 | 24 | 201 | ||||||||||||||||
Selling, general and administrative | 256 | 250 | 256 | 28 | 246 | ||||||||||||||||
Amortization of intangible assets | — | — | — | — | 66 | ||||||||||||||||
Litigation settlement | — | — | — | — | 21 | ||||||||||||||||
Acquired in-process research and development | — | — | — | — | 2 | ||||||||||||||||
Total costs and expenses | 1,480 | 1,706 | 1,511 | 148 | 1,574 | ||||||||||||||||
Income (loss) from operations(3) | (175 | ) | 77 | 48 | (23 | ) | (96 | ) | |||||||||||||
Interest expense(4) | — | — | — | — | 143 | ||||||||||||||||
Other income, net | 1 | 4 | 7 | — | 12 | ||||||||||||||||
Income (loss) from continuing operations before income taxes | (174 | ) | 81 | 55 | (23 | ) | (227 | ) | |||||||||||||
Provision for income taxes | 10 | 25 | 33 | 2 | 3 | ||||||||||||||||
Income (loss) from continuing operations | (184 | ) | 56 | 22 | (25 | ) | (230 | ) | |||||||||||||
Income from discontinued operations, net of income taxes | 7 | 17 | 9 | 1 | 3 | ||||||||||||||||
Net income (loss) | $ | (177 | ) | $ | 73 | $ | 31 | $ | (24 | ) | $ | (227 | ) | ||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||
Total assets | $ | 861 | $ | 921 | $ | 840 | $ | 2,217 | |||||||||||||
Long-term debt and capital lease obligations | — | — | — | 1,004 | |||||||||||||||||
Total invested equity/shareholder’s equity | 609 | 650 | 529 | 831 | |||||||||||||||||
Other Financial Data: | |||||||||||||||||||||
Ratio of earnings to fixed charges(5) | — | 11.1 | 10.2 | — | — |
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(1) | Predecessor refers to the Semiconductor Products Group business segment of Agilent Technologies, Inc. | |
(2) | We completed the Acquisition on December 1, 2005. The Acquisition was accounted for as a purchase business combination under U.S. GAAP and thus the financial results for all periods from and after December 1, 2005 are not necessarily comparable to the prior results of Predecessor. We did not have any operating activity prior to December 1, 2005. Accordingly, our results for the year ended October 31, 2006 represent only the eleven months of our operations since completion of the Acquisition. | |
(3) | The divestiture of the Camera Module Business by the Predecessor on February 3, 2005 did not meet the criteria for discontinued operations treatment under U.S. GAAP and, as such, its historical results remain included in our results from continuing operations as presented in this prospectus. The following table presents the operating results of the Camera Module Business: |
Predecessor | Company | ||||||||||||||||||||
One | |||||||||||||||||||||
Month | Year | ||||||||||||||||||||
Ended | Ended | ||||||||||||||||||||
Year Ended October 31, | Nov. 30, | October 31, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
(In millions) | |||||||||||||||||||||
Net revenue | $ | 58 | $ | 296 | $ | 69 | — | — | |||||||||||||
Income (loss) from operations | (37 | ) | (63 | ) | (7 | ) | — | — |
(4) | Interest expense for the year ended October 31, 2006 includes an aggregate of $30 million of amortization of debt issuance costs and commitment fees for expired facilities, including $19 million of unamortized debt issuance costs that were written off in conjunction with the repayment of the term loan facility during this period. As of October 31, 2006, we had permanently repaid all outstanding amounts under the term loan facility. | |
(5) | For purposes of completing this ratio of earnings to fixed charges, “fixed charges” consist of interest expense on all indebtedness plus amortization of debt issuance costs and an estimate of interest expense within rental expense. “Earnings” consist of pre-tax income (loss) from continuing operations plus fixed charges and unamortized capitalized debt issuance costs. Earnings were insufficient to cover fixed charges by $174 million for the year ended October 31, 2003, $23 million for the one month ended November 30, 2005 and $190 million for the year ended October 31, 2006. |
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AND RESULTS OF OPERATIONS
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• | general economic and market conditions in the semiconductor industry and in our target markets; | |
• | our ability to specify, develop or acquire, complete, introduce and market new products and technologies in a cost effective and timely manner; | |
• | the timing, rescheduling or cancellation of expected customer orders and our ability to manage inventory; | |
• | the rate at which our present and future customers and end-users adopt our products and technologies in our target markets; and | |
• | the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products. |
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Predecessor | |||||||||||||||||||||||||
One | Company | Combined | Predecessor | Combined | Predecessor | ||||||||||||||||||||
Month | Year | Year | Year | Year | Year | ||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||
November 30, | October 31, | October 31, | October 31, | October 31, | October 31, | ||||||||||||||||||||
2005 | 2006 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||
(In millions) | As a Percentage of | ||||||||||||||||||||||||
Net Revenue | |||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||
Net revenue | $ | 125 | $ | 1,478 | $ | 1,603 | $ | 1,559 | 100 | % | 100 | % | |||||||||||||
Costs and expenses: | |||||||||||||||||||||||||
Cost of products sold | 96 | 982 | 1,078 | 1,037 | 67 | 67 | |||||||||||||||||||
Amortization of intangible assets | — | 56 | 56 | — | 4 | — | |||||||||||||||||||
Total cost of products sold | 96 | 1,038 | 1,134 | 1,037 | 71 | 67 | |||||||||||||||||||
Research and development | 24 | 201 | 225 | 218 | 14 | 14 | |||||||||||||||||||
Selling, general and administrative | 28 | 246 | 274 | 256 | 17 | 16 | |||||||||||||||||||
Amortization of intangible assets | — | 66 | 66 | — | 4 | — | |||||||||||||||||||
Litigation settlement | — | 21 | 21 | — | 1 | — | |||||||||||||||||||
Acquired in-process research and development | — | 2 | 2 | — | — | — | |||||||||||||||||||
Total costs and expenses | 148 | 1,574 | 1,722 | 1,511 | 107 | 97 | |||||||||||||||||||
Income (loss) from operations | (23 | ) | (96 | ) | (119 | ) | 48 | (7 | ) | 3 | |||||||||||||||
Interest expense | — | 143 | 143 | — | 9 | — | |||||||||||||||||||
Other income (expense), net | — | 12 | 12 | 7 | (1 | ) | — | ||||||||||||||||||
Income (loss) from continuing operations before income taxes | (23 | ) | (227 | ) | (250 | ) | 55 | (17 | ) | 4 | |||||||||||||||
Provision for income taxes | 2 | 3 | 5 | 33 | — | 2 | |||||||||||||||||||
Income (loss) from continuing operations | (25 | ) | (230 | ) | (255 | ) | 22 | (17 | ) | 1 | |||||||||||||||
Income from discontinued operations, net of income taxes | 1 | 3 | 4 | 9 | 1 | 1 | |||||||||||||||||||
Net income (loss) | $ | (24 | ) | $ | (227 | ) | $ | (251 | ) | $ | 31 | (16 | )% | 2 | % | ||||||||||
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Year Ended | ||||||||
October 31, | ||||||||
2004 | 2005 | |||||||
Net revenue | 100.0 | % | 100.0 | % | ||||
Total cost of products sold | 70.0 | 66.5 | ||||||
Research and development | 11.6 | 14.0 | ||||||
Selling, general and administrative | 14.0 | 16.4 | ||||||
Total costs and expenses | 95.6 | 96.9 | ||||||
Income from operations | 4.4 | 3.1 | ||||||
Other income, net | 0.2 | 0.4 | ||||||
Income from continuing operations before income taxes | 4.6 | 3.5 | ||||||
Provision for income taxes | 1.4 | 2.1 | ||||||
Income from continuing operations | 3.2 | 1.4 | ||||||
Income from discontinued operations, net of income taxes | 1.0 | 0.6 | ||||||
Net income | 4.2 | % | 2.0 | % | ||||
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• | incur additional debt or issue certain preferred shares; | |
• | create liens on assets; | |
• | enter into sale-leaseback transactions; | |
• | engage in mergers or consolidations; | |
• | sell assets; | |
• | pay dividends and distributions, repurchase our capital stock or make other restricted payments; | |
• | make investments, loans or advances; | |
• | make capital expenditures; | |
• | repay subordinated indebtedness (including the senior subordinated notes); | |
• | make certain acquisitions; | |
• | amend material agreements governing our subordinated indebtedness (including the senior subordinated notes); | |
• | change our lines of business; and | |
• | change the status of Holdings as a passive holding company. |
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• | incur additional indebtedness and issue disqualified stock or preferred shares; | |
• | pay dividends or make other distributions on, redeem or repurchase our capital stock or make other restricted payments; | |
• | make investments, acquisitions, loans or advances; | |
• | incur or create liens; | |
• | transfer or sell certain assets; | |
• | engage in sale and lease back transactions; | |
• | declare dividends or make other payments to us; | |
• | guarantee indebtedness; | |
• | engage in transactions with affiliates; and | |
• | consolidate, merge or transfer all or substantially all of our assets. |
2008 to | 2010 to | |||||||||||||||||||
Total | 2007 | 2009 | 2011 | Thereafter | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Short-term and long-term debt(1) | $ | 1,000 | $ | — | $ | — | $ | — | $ | 1,000 | ||||||||||
Estimated future interest expense payments(2) | 822 | 110 | 220 | 220 | 272 | |||||||||||||||
Operating leases(3) | 32 | 12 | 15 | 4 | 1 | |||||||||||||||
Capital leases(4) | 9 | 4 | 3 | 2 | — | |||||||||||||||
Commitments to contract manufacturers and other purchase obligations(5) | 29 | 29 | — | — | — | |||||||||||||||
Additional expected contractual obligations(6) | 319 | 42 | 75 | 64 | 138 |
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(1) | Represents our outstanding notes. | |
(2) | Represents interest payments on our outstanding notes assuming the same rate on the senior floating rate notes as was in effect on October 31, 2006, commitment fees and letter of credit fees. | |
(3) | Includes operating lease commitments for facilities and equipment that we have entered into with Agilent and other third parties. | |
(4) | Includes capital lease commitments for equipment that we have entered into with third parties. | |
(5) | We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. However, our agreements with these suppliers usually allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed. Typically purchase orders outstanding with delivery dates within 30 days are non-cancelable. |
(6) | We have entered into several agreements related to IT, human resources, financial advisory services and other services agreements. |
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• | Analog. All electrical signals fall into one of two categories: analog or digital. Analog signals represent real-world phenomena, such as temperature, pressure, sound, speed and motion. This information can be detected and measured using analog sensors or receivers, which generate continuously varying voltages that represent real-world phenomena. The signals from these sensors are initially processed using analog methods, such as amplification, filtering and shaping. Through the use of very specific voltages, these signals can be converted to digital form, represented by 1s and 0s, for further manipulation or storage. Digital signals are frequently converted back to analog form to enable a wide variety of real-world experiences such as voice communications, video display and audio output. In this way, analog semiconductors and mixed-signal semiconductors (which combine analog and digital capabilities) play a critical role in computing, communications and consumer electronics products and applications. |
• | Digital/Logic. In contrast to analog semiconductors, which process real-world signals, digital/logic semiconductor devices process digital data, which are represented by 1s and 0s. Digital/logic devices perform functions that are typically computational in nature. Examples of digital/logic devices include |
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microprocessors, digital signal processors and application specific integrated circuits (ASICs). In a cellular phone, for example, digital/logic components, such as baseband processors, compress the voice signal, converting the data into a less memory-intensive format so that wireless transmission can take place quickly. According to WSTS, digital/logic devices represented approximately 49%, or $112.4 billion, of global semiconductor industry sales in 2005. |
• | Memory. Memory devices store digital data. There are two major types of memory devices: non-volatile memory, such as flash; and volatile memory, such as dynamic random access memory (DRAM) or static random access memory. Non-volatile memory retains data once power is removed, whereas volatile memory loses its data once power is removed. According to WSTS, memory devices represented approximately 21%, or $48.5 billion, of global semiconductor industry sales in 2005. |
• | Degree of Integration. Integration refers to the combination of analog, digital and memory functions on a single chip. Integration can be achieved by combining two or more analog features on a single chip or by combining different elements, such as analog, digital and memory, on a single chip, often referred to as a“system-on-a-chip.” In addition to chip-level integration, semiconductors increasingly must be designed with system-level integration considerations, including die size and packaging requirements. System-level designs may use module-based techniques to reduce size, weight and power requirements, and may combine multiple semiconductors and discrete components into a single package. This approach ensures each component’s functional compatibility, provides upgrade flexibility and takes advantage of the design simplicity of separate semiconductors to minimize cost and design and test times. | |
• | Materials and Process Technologies. Semiconductors are manufactured using different materials and process technologies. Silicon is the most commonly used material, and complementary metal-oxide semiconductor (CMOS) is a common process technology. Other materials include gallium arsenide (GaAs), silicon germanium and indium phosphide, among others. Every material must undergo a process technology during fabrication in order to manufacture the device. Materials such as GaAs and indium phosphide are used for the fabrication of RF and optoelectronic devices, including lasers, LEDs, semiconductor optical amplifiers, modulators and photo-detectors. These materials have higher electrical conductivity than silicon, leading to increased performance and efficiency at high frequencies, thus making them ideally suited for wireless and fiber communications components. |
• | Outsourcing. Historically, the semiconductor industry was primarily comprised of integrated device manufacturers, or IDMs, that designed, manufactured, assembled and tested semiconductors at their own facilities. In recent years, there has been a trend to outsource various stages of the manufacturing process to reduce the high fixed costs and capital requirements associated with the complex design and manufacturing processes. As a result, new types of semiconductor companies have emerged, including fabless semiconductor companies, independent foundries and semiconductor assembly and test service providers. Fabless semiconductor suppliers design semiconductors but use independent foundries or |
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third party IDMs for manufacturing. Independent foundries produce semiconductor components for third parties on a contract, outsourced manufacturing basis. Assembly and test service providers assemble, test and package semiconductors to fit efficiently into electronic devices. |
• | Shift of Manufacturing Centers to the Asia/Pacific Region. Semiconductor manufacturers and assembly and test service providers have shifted a significant portion of their operations to low cost locations, such as Malaysia, Singapore, Taiwan and China. We expect that semiconductor production will increasingly be located in the Asia/Pacific region. Production of consumer electronics is undergoing a similar migration to the Asia/Pacific region, driven by low cost manufacturing and engineering resources. As a result, the global shift of semiconductor suppliers to the Asia/Pacific region not only offers substantial manufacturing cost savings benefits, but also provides close proximity to a large and growing customer base. | |
• | Globalization of Customers and Reliance on Global Semiconductor Suppliers. Historically, OEMs relied on multiple suppliers to support their semiconductor needs. Recently, however, the customer base for semiconductor suppliers has become more concentrated and global. These global customers require their semiconductor suppliers to demonstrate financial stability and maintain global supply chain management capabilities. These customers also demand a deep understanding of their increasingly complex technical requirements, which requires semiconductor suppliers to maintain design centers near the customers. As a result, semiconductor customers are relying on fewer suppliers to support their needs. We believe that semiconductor suppliers with design centers near customers with the ability to service a global supply chain with a broad product portfolio are best positioned to capitalize on this trend. | |
• | Growth in Semiconductor Components for Consumer Electronics. Historically, growth in the semiconductor industry has been driven by demand in the computing, networking and wireless markets and from a broad set of industrial and military applications. In recent years, demand for semiconductors has been increasingly driven by the growth in demand for consumer electronics, such as media players, game consoles and cellular phones. Aggregate semiconductor revenue generated by consumer electronics (including wireless, traditional consumer devices and automotive electronics) grew from $43.4 billion in 1998 to $106.1 billion in 2005, according to iSuppli. As uses for consumer electronics devices expand and demand for additional features, functionality and performance requirements in consumer electronics devices grows, we expect demand for semiconductors for consumer electronics devices to continue to grow faster than the overall semiconductor market. |
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Target Market | Major Product Families | Major Applications | Major Customers | |||
Wireless Communications | • RF Amplifiers • RF Filters • RF Front End Modules (FEMs) • Image Sensors • Infrared Transceivers • LEDs • Ambient Light Sensors | • Voice and data communications • Camera phone • Infrared file transfer (to PC or printer) • Keypad and display backlighting • Backlighting control | • BenQ/Siemens • LG • Motorola • Nokia • Samsung • Sony Ericsson | |||
Wired Infrastructure | • Fiber optic transceivers • Serializer/deserializer (Serdes) ASICs • LNA • mm-wave mixers • Diodes | • Telecommunications • Data communications • Storage area networking • Servers • Base stations | • Alcatel • Cisco • Ericsson • HP • Huawei • IBM • Nortel • Siemens | |||
Industrial/Automotive Electronics | • LEDs • Solid-state lighting assemblies • Motion control encoders and subsystems • Optocouplers | • In-car infotainment • Displays • Lighting • Factory automation • Motor controls • Power supplies | • ABB • General Electric • Mitsubishi Electric Corp • Rockwell Automation • Siemens | |||
Computing Peripherals | • Optical mouse sensors • Motion control encoders and subsystems • LNA | • Optical mice • Printers • Office automation • Optical disk drives • W-LAN • WiMAX | • Cisco • Epson • High Tech Computer Corp • HP • Intel • Konica Minolta • Logitech • Motorola |
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Wireless Communications | Citizen Electronics Company Ltd., Epcos AG, Infineon Technologies AG, Lite-On Technology Corporation, Nichia Corporation, Osram GmbH, RF Micro Devices, Inc., Rohm, Skyworks Solutions, Inc., STMicroelectronics, and Vishay Corporation. | |
Wired Infrastructure | Finisar Corporation, JDS Uniphase Corporation, NEC, STMicroelectronics and Texas Instruments Incorporated | |
Industrial/Automotive Electronics | Fairchild, Heidenhain, IBM Microelectronics, Kingbright/Everlight, Kodenshi, Lite-On Technology Corporation, NEC, Osram GmbH, Sharp, Stegmann, Toshiba, | |
Computing Peripherals | Kodenshi, Pixart, Rohm, Sharp, STMicroelectronics, Vishay |
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Site | Major Activity | Owned/Leased | Square Footage | |||
Yishun, Singapore | Administration, Manufacturing, Research and Development and Sales and Marketing | Leased | 234,000 | |||
Depot Road, Singapore | Manufacturing and Research and Development | Leased | 52,000 | |||
Senoko, Singapore | Manufacturing and Research and Development | Owned | 52,000 | |||
Seoul, Korea | Research and Development and Sales and Marketing | Leased | 28,000 | |||
Penang, Malaysia | Manufacturing and Research and Development, Administration | Owned and Leased | 399,000 Owned 116,000 Leased | |||
San Jose, CA, United States | Administration, Research and Development and Sales and Marketing | Leased | 183,000 | |||
Ft. Collins, CO, United States | Manufacturing and Research and Development | Owned | 1,058,000 | |||
Boeblingen, Germany | Administration, Research and Development and Sales and Marketing | Leased | 21,000 | |||
Turin, Italy | Research and Development | Leased | 59,000 |
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Name | Age | Position | ||||
Dick M. Chang | 67 | Chairman of the Board of Directors | ||||
Hock E. Tan | 55 | President, Chief Executive Officer and Director | ||||
Mercedes Johnson | 52 | Senior Vice President, Finance and Chief Financial Officer | ||||
Bian-Ee Tan | 59 | President, Asia | ||||
Rex S. Jackson | 46 | Senior Vice President and General Counsel | ||||
Jeffrey S. Henderson | 47 | Senior Vice President, Strategic Business Development | ||||
Adam H. Clammer | 36 | Director | ||||
James A. Davidson | 47 | Director | ||||
James Diller, Sr. | 71 | Director | ||||
James H. Greene, Jr. | 56 | Director | ||||
Kenneth Y. Hao | 38 | Director | ||||
John R. Joyce | 53 | Director | ||||
Michael E. Marks | 55 | Director | ||||
Bock Seng Tan | 63 | Director |
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• | the integrity of our financial statements; | |
• | our compliance with legal and regulatory requirements; | |
• | independent registered public accounting firm’s qualifications and independence; and | |
• | the performance of our internal audit function and independent registered public accounting firm. |
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Long-Term Compensation | ||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||
Annual | Securities | Payouts | ||||||||||||||||||||||
Compensation | Other Annual | Underlying | Long-Term | All Other | ||||||||||||||||||||
Salary | Bonus | Compensation | Options/SARs | Incentive Plans | Compensation | |||||||||||||||||||
Name and Principal Position | ($) | ($)(3) | ($) | (#) | ($) | ($)(6) | ||||||||||||||||||
Dick M. Chang (1) | 364,087 | 395,004 | — | 1,350,000 | — | 8,800 | ||||||||||||||||||
Chairman of the Board of Directors and former Chief Executive Officer | ||||||||||||||||||||||||
Hock E. Tan (2) | 352,308 | 706,849 | 50,000 | (4) | 2,350,000 | — | 8,800 | |||||||||||||||||
President and Chief Executive Officer | ||||||||||||||||||||||||
Mercedes Johnson | 347,532 | 525,000 | — | 415,000 | — | — | ||||||||||||||||||
Senior Vice President, Finance and Chief Financial Officer | ||||||||||||||||||||||||
Bian-Ee Tan | 494,372 | 607,704 | 71,318 | (5) | 1,800,000 | — | — | |||||||||||||||||
President, Asia | ||||||||||||||||||||||||
Jeffrey S. Henderson | 258,257 | 203,532 | — | 395,000 | — | 8,800 | ||||||||||||||||||
Senior Vice President, | ||||||||||||||||||||||||
Strategic Business Development |
(1) | Mr. Chang served as our Chief Executive Officer from December 2005 until March 2006. | |
(2) | Mr. Tan joined us as President and Chief Executive Officer in March 2006. | |
(3) | Represents bonus amounts for the year ended October 31, 2006 to be paid to executives on December 21, 2006. | |
(4) | Represents moving expenses paid to Mr. Tan in connection with the commencement of his employment. | |
(5) | Represents $38,054 in automobile allowance, $13,577 in lease payments for an apartment in Malaysia, $799 in health club membership, and $18,888 for losses in salary due to currency fluctuation. | |
(6) | Represents our contribution under the 401(K) plan. |
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Potential Realizable | ||||||||||||||||||||||||
Individual Grants | Value at | |||||||||||||||||||||||
% of Total | Assumed Annual Rates | |||||||||||||||||||||||
Number of | Options | of Stock Price | ||||||||||||||||||||||
Securities | Granted to | Exercise | Appreciation for | |||||||||||||||||||||
Underlying | Employees in Last | or Base | Expiration | Option Term | ||||||||||||||||||||
Name | Options Granted | Fiscal Year | Price | Date | 5% | 10% | ||||||||||||||||||
Dick M. Chang | 1,083,334 | 4.43 | % | $ | 5.00 | 11/30/2015 | $ | 3,406,515 | $ | 8,632,777 | ||||||||||||||
266,666 | (1) | 1.09 | 1.25 | 11/18/2012 | 1,539,941 | 2,257,232 | ||||||||||||||||||
Hock E. Tan | 2,350,000 | 9.61 | 5.00 | 11/30/2015 | 7,389,512 | 18,726,474 | ||||||||||||||||||
400,000 | (2) | 1.63 | 5.00 | 5/3/2006 | 5,619 | 10,991 | ||||||||||||||||||
Mercedes Johnson | 415,000 | 1.70 | 5.00 | 11/30/2015 | 1,304,956 | 3,307,016 | ||||||||||||||||||
60,000 | (2) | 0.25 | 5.00 | 1/18/2006 | 1,970 | 3,861 | ||||||||||||||||||
Bian-Ee Tan | 1,800,000 | 7.36 | 5.00 | 11/30/2015 | 5,660,052 | 14,343,682 | ||||||||||||||||||
400,000 | (2) | 1.63 | 5.00 | 1/18/2006 | 13,136 | 25,740 | ||||||||||||||||||
Jeffrey S. Henderson | 301,667 | 1.23 | 5.00 | 11/30/2015 | 948,584 | 2,403,898 | ||||||||||||||||||
15,979 | (1) | 0.07 | 1.25 | 1/14/2012 | 87,736 | 123,230 | ||||||||||||||||||
47,952 | (1) | 0.20 | 1.25 | 11/25/2011 | 261,138 | 364,233 | ||||||||||||||||||
5,992 | (1) | 0.02 | 1.25 | 11/13/2010 | 30,661 | 40,547 | ||||||||||||||||||
13,448 | (1) | 0.05 | 1.25 | 11/12/2010 | 68,801 | 90,973 | ||||||||||||||||||
5,992 | (1) | 0.02 | 1.25 | 10/22/2010 | 30,549 | 40,272 | ||||||||||||||||||
79 | (1) | 0.00 | 1.25 | 5/16/2010 | 392 | 505 | ||||||||||||||||||
3,891 | (1) | 0.02 | 1.25 | 2/3/2010 | 18,991 | 24,109 |
(1) | Represents option to purchase ordinary shares of Parent granted in substitution of options to purchase Agilent’s common stock. | |
(2) | Represents co-investment shares (right to purchase shares which expire if not purchased within a limited time frame). |
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Number of Securities | ||||||||||||||||
Underlying | Value of Unexercised | |||||||||||||||
Unexercised Options | In-the-money Options | |||||||||||||||
at Year-end (#) | at Year-end | |||||||||||||||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||
Dick M. Chang | 266,666 | 1,083,334 | $ | 1,394,663 | $ | 1,603,334 | ||||||||||
Hock E. Tan | — | 2,350,000 | — | 3,478,000 | ||||||||||||
Mercedes Johnson | — | 415,000 | — | 614,200 | ||||||||||||
Bian-Ee Tan | — | 1,800,000 | — | 2,664,000 | ||||||||||||
Jeffrey S. Henderson | 93,333 | 301,667 | 448,132 | 446,467 |
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• | each person who is known by us to beneficially own more than 5% of the equity securities of Parent; | |
• | each of our directors; | |
• | each of our named executive officers; and | |
• | all of our directors and executive officers as a group. |
Ordinary Shares Beneficially Owned(1) | ||||||||
Name and Address of Beneficial Owner | Number | Percent | ||||||
5% Shareholders | ||||||||
Bali Investments S.àr.l (2) | 172,676,402 | 80.6 | % | |||||
20, rue de la Poste L-2346 Luxembourg | ||||||||
Seletar Investments Pte. Ltd. | 22,670,917 | 10.6 | ||||||
60B Orchard Road #60-18, Tower 2 The Atrium @ Orchard Singapore 238891 | ||||||||
Geyser Investment Pte Ltd | 15,113,944 | 7.1 | ||||||
c/o GIC 168 Robinson Road #37-01 Capital Tower Singapore 068912 | ||||||||
Directors and Named Executive Officers | ||||||||
Dick M. Chang(3) | 483,333 | * | ||||||
Hock E. Tan(4) | 670,000 | * | ||||||
Mercedes Johnson(5) | 143,000 | * | ||||||
Bian-Ee Tan(6) | 760,000 | * | ||||||
Jeffrey S. Henderson(7) | 153,666 | * | ||||||
Adam H. Clammer(8) | 80,083,035 | 37.4 | ||||||
James A. Davidson(9) | 78,733,338 | 36.7 | ||||||
James Diller, Sr. | 150,000 | * | ||||||
James H. Greene Jr.(10) | 80,083,035 | 37.4 | ||||||
Kenneth Y. Hao(11) | 78,733,338 | 36.7 | ||||||
John R. Joyce(12) | 78,733,338 | 36.7 | ||||||
Michael E. Marks(13) | 80,083,035 | 37.4 | ||||||
Bock Seng Tan | — | — | ||||||
All 14 directors and executive officers as a group(14) | 161,346,372 | 75.29 | % |
(1) | Includes shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account. |
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(2) | Bali Investments S.àr.l. is a Luxembourg corporation, the shareholders of which include overseas investment funds affiliated with KKR and Silver Lake. As of August 31, 2006, the total number of ordinary shares of Avago Technologies Limited that are deemed held indirectly by (a) the KKR funds through Bali Investments S.àr.l. was 80,083,035, or 37.4% of the total ordinary shares outstanding, and (b) by the Silver Lake funds through Bali Investments S.àr.l. was 78,733,338, or 36.7% of the total ordinary shares outstanding, in each case based on the ownership interests of such entities in Bali Investments S.àr.l. | |
Shares deemed held indirectly by the KKR funds include (a) 17,782,701 shares held by KKR Millennium Fund (Overseas), Limited Partnership (“KKR Millennium Overseas Fund”), the general partner of which is KKR Associates Millennium (Overseas), Limited Partnership, the general partner of which is KKR Millennium Limited, (b) 35,407,740 shares held by KKR European Fund, Limited Partnership (“KKR Europe”), the general partner of which is KKR Associates Europe, Limited Partnership, the general partner of which is KKR Europe Limited, (c) 23,748,545 shares held by KKR European Fund II, Limited Partnership (“KKR Europe II”), the general partner of which is KKR Associates Europe II, Limited Partnership, the general partner of which is KKR Europe II Limited, and (d) 3,144,049 shares held by KKR Partners (International), Limited Partnership (“KKR International,” together with KKR Millennium Overseas Fund, KKR Europe and KKR Europe II, the “KKR Funds”), the general partner of which is KKR 1996 Overseas, Limited. Messrs. Henry R. Kravis, George R. Roberts, James H. Greene, Jr., Paul E. Raether, Michael W. Michelson, Perry Golkin, Johannes P. Huth, Todd A. Fisher, Alexander Navab, Marc Lipschultz, Jacques Garaialde and Reinhard Gorenflos, as shareholder of one or more of KKR Millennium Limited, KKR Europe Limited, KKR Europe II Limited, and KKR 1996 Overseas Limited, may be deemed to share beneficial ownership of any shares beneficially owned by the KKR Funds, respectively, but disclaim such beneficial ownership except to the extent of their pecuniary interest therein. The above referenced shares are indirectly owned through the KKR Funds’ investments in Bali Investments S.àr.l., which directly holds shares in Avago Technologies Limited. The address of each of the KKR Funds is Suite 500, 603 - 7th Avenue S.W., Calgary, Canada. | ||
Shares deemed held indirectly by the Silver Lake funds include (a) 78,510,144 shares held by Silver Lake Partners II Cayman, L.P. (“Silver Lake II”), the general partner of which is Silver Lake Technology Associate II Cayman, L.P., the general partner of which is Silver Lake (Offshore) AIV GP II, Ltd., and (b) 223,194 shares held by Silver Lake Technology Investors II Cayman, L.P. (“Silver Lake Technology II” and, together with Silver Lake II, the “Silver Lake Funds”), the general partner of which is Silver Lake (Offshore) AIV GP II, Ltd. Messrs. James A. Davidson, Glenn H. Hutchins, David J. Roux, Alan K. Austin, John R. Joyce, Michael J. Bingle and Kenneth Y. Hao, as Directors of Silver Lake (Offshore) AIV GP II, Ltd., may be deemed to share beneficial ownership of any shares beneficially owned by the Silver Lake Funds, but disclaim such beneficial ownership except to the extent of their pecuniary interest therein. The above referenced shares are indirectly owned through the Silver Lake Funds’ investments in Bali Investments S.àr.l., which directly holds shares in Avago Technologies Limited. The address of each of the Silver Lake Funds is Walker House, PO Box 908GT, Mary Street, George Town, Grand Cayman, Cayman Islands. | ||
(3) | Includes 483,333 shares that Mr. Chang has the right to acquire within 60 days after October 31, 2006 upon the exercise of share options. | |
(4) | Includes 470,000 shares that Mr. Tan has the right to acquire within 60 days after October 31, 2006 upon the exercise of share options. | |
(5) | Includes 83,000 shares that Ms. Johnson has the right to acquire within 60 days after October 31, 2006 upon the exercise of share options. | |
(6) | Includes 360,000 shares that Mr. Tan has the right to acquire within 60 days after October 31, 2006 upon the exercise of share options. | |
(7) | Includes 153,666 shares that Mr. Henderson has the right to acquire within 60 days after October 31, 2006 upon the exercise of share options. | |
(8) | Mr. Clammer is an interest holder in the general partners of the KKR Funds. Amounts disclosed for Mr. Clammer include shares beneficially owned by the KKR Funds. Mr. Clammer disclaims beneficial |
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ownership of any shares owned directly or indirectly by the KKR Funds, except to the extent of his pecuniary interest therein. | ||
(9) | Mr. Davidson is a Director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts disclosed for Mr. Davidson include shares beneficially owned by the Silver Lake Funds. Mr. Davidson disclaims beneficial ownership of any shares owned directly or indirectly by the Silver Lake Funds, except to the extent of his pecuniary interest therein. | |
(10) | Mr. Greene is an interest holder in the general partners of the KKR Funds. Amounts disclosed for Mr. Greene include shares beneficially owned by the KKR Funds. Mr. Greene disclaims beneficial ownership of any shares owned directly or indirectly by the KKR Funds, except to the extent of his pecuniary interest therein. | |
(11) | Mr. Hao is a Director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts disclosed for Mr. Hao include shares beneficially owned by the Silver Lake Funds. Mr. Hao disclaims beneficial ownership of any shares owned directly or indirectly by the Silver Lake Funds, except to the extent of his pecuniary interest therein. | |
(12) | Mr. Joyce is a Director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts disclosed for Mr. Joyce include shares beneficially owned by the Silver Lake Funds. Mr. Joyce disclaims beneficial ownership of any shares owned directly or indirectly by the Silver Lake Funds, except to the extent of his pecuniary interest therein. | |
(13) | Mr. Marks is an interest holder in the general partners of the KKR Funds. Amounts disclosed for Mr. Marks include shares beneficially owned by the KKR Funds. Mr. Marks disclaims beneficial ownership of any shares owned directly or indirectly by the KKR Funds, except to the extent of his pecuniary interest therein. | |
(14) | Includes 1,719,999 shares that officers have the right to acquire within 60 days after October 31, 2006 upon the exercise of share options. |
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• | three designees of KKR for so long as KKR and its affiliates either continue to own, directly or indirectly, at least 24% of Parent’s outstanding ordinary shares or have not transferred any shares to an unaffiliated third party, provided that KKR has the right to designate two directors for so long as KKR and its affiliates continue to own, directly or indirectly, at least 15% of Parent’s outstanding ordinary shares and one director for so long as KKR and its affiliates continue to own, directly or indirectly, at least 5% of Parent’s outstanding ordinary shares; | |
• | three designees of Silver Lake for so long as Silver Lake and its affiliates either continue to own, directly or indirectly, at least 24% of Parent’s outstanding ordinary shares or have not transferred any shares to an unaffiliated third party, provided that Silver Lake has the right to designate two directors for so long as Silver Lake and its affiliates continue to own, directly or indirectly, at least 15% of Parent’s outstanding ordinary shares and one director for so long as Silver Lake and its affiliates continue to own, directly or indirectly, at least 5% of Parent’s outstanding ordinary shares; | |
• | one designee of Seletar Investments Pte. Ltd., an affiliate of Temasek Capital (Private) Limited (“Seletar”), so long as it either continues to own, directly or indirectly, 2.5% of Parent’s outstanding shares and has not sold any of its shares, or continues to own, directly or indirectly, 5% of Parent’s outstanding shares; | |
• | Parent’s Chief Executive Officer; and | |
• | two directors mutually agreeable to the Sponsors (KKR and Silver Lake). |
• | changing the size or composition of Parent’s Board of Directors; | |
• | amending, modifying or waiving any provision of Parent’s memorandum of association or articles of association; | |
• | undertaking any share split, reverse stock split, recapitalization, exchange or any other combination in any manner of Parent’s equity securities in connection with which any Equity Investor would receive more than a de minimis amount of cash in lieu of fractional shares; | |
• | entering into a change of control transaction; | |
• | acquiring or disposing of assets or entering into joint ventures with a value in excess of $25 million; | |
• | undertaking an initial public offering; | |
• | issuing any equity securities or derivative equity securities, other than pursuant to employee benefit and incentive plans approved by the Sponsors; |
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• | repurchasing or redeeming any equity securities, other than from employees pursuant to arrangements approved by Parent’s Board of Directors; | |
• | declaring or paying any dividend or distributions to equityholders, other than payments by wholly owned subsidiaries; | |
• | creating or materially amending any material employee benefit or incentive compensation plan; | |
• | incurring indebtedness in excess of $25 million; | |
• | filing for voluntary liquidation, dissolution, receivership, bankruptcy or similar insolvency proceeding; | |
• | entering into transactions outside of the ordinary course of business or that are reasonably likely to require expenditures or generate proceeds in excess of $10 million; | |
• | hiring or firing the Chief Executive Officer or any other member of senior management, or approving the compensation arrangements of any of them; | |
• | commencing any litigation, dispute or claim involving amounts in dispute in excess of $5 million, or settling any litigation, dispute or claim for a payment or payments, or discounts on products or services, in excess of $5 million, whether pursuant to a license or otherwise, or which restrict the business of Parent or its subsidiaries in any material manner; | |
• | entering into certain transactions with the Sponsors or any of their affiliates; | |
• | approving or modifying annual operating budgets or capital expenditure budgets; | |
• | making material changes in the nature of the business of Parent or its subsidiaries; | |
• | replacing or removing independent auditors; and | |
• | amending, waiving or otherwise modifying certain shareholders agreements. |
• | pursuant to the exchange, conversion, or exercise terms of other equity or debt securities; | |
• | to employees, directors or consultants; | |
• | in connection with any acquisition, business combination or joint venture approved by the Sponsors; | |
• | in connection with an initial public offering; | |
• | in connection with any proportional stock split, stock dividend or stock recapitalization; | |
• | which take the form of “equity kickers” in debt financing transactions; | |
• | by a wholly owned subsidiary company to Parent or Holdings or another subsidiary of Parent or Holdings; or | |
• | for which the Sponsors have waived the preemptive rights. |
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• | a $725 million term loan facility, and | |
• | a $250 million equivalent revolving credit facility. |
• | a pledge of 100% of our capital stock and 100% of the capital stock of each of our material subsidiaries; and | |
• | a security interest in substantially all of our tangible and intangible assets and the tangible and intangible assets of each guarantor. |
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• | incur additional indebtedness or issue preferred shares; | |
• | create liens on assets; | |
• | enter into sale-leaseback transactions; | |
• | engage in mergers or consolidations; | |
• | sell assets; | |
• | pay dividends and distributions or repurchase our capital stock; | |
• | make investments, loans or advances; | |
• | make capital expenditures; | |
• | repay subordinated indebtedness (including the senior subordinated notes); | |
• | make certain acquisitions; | |
• | amend material agreements governing our subordinated indebtedness (including the senior subordinated notes); | |
• | change our lines of business; and | |
• | change the status of Holdings as a passive holding company. |
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• | if any changes in law, SEC rules or regulations or applicable interpretations thereof by the SEC do not permit us to effect the exchange offers as contemplated by the registration rights agreement; or | |
• | if any holder of the outstanding notes notifies us within 30 days after such holder becomes aware of the following restrictions: |
• | such holder is prohibited by applicable law or SEC rules or regulations from participating in any exchange offer, | |
• | such holder may not resell the exchange notes acquired by it in the exchange offers to the public without delivering a prospectus and that this prospectus is not appropriate or available for such resales by such holder, or | |
• | such holder is a broker-dealer who elects to exchange the outstanding notes acquired for its own account as a result of market-making activities or other trading activities for the exchange notes, and holds outstanding note acquired directly from us or one of our affiliates. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 of the Securities Act; | |
• | you have no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and |
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• | you are acquiring the exchange notes in the ordinary course of your business. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act; | |
• | you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and | |
• | you are acquiring the exchange notes in the ordinary course of your business. |
• | you cannot rely on the position of the SEC set forth inMorgan Stanley & Co. Incorporated(available June 5, 1991) andExxon Capital Holdings Corporation(available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and | |
• | in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. |
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• | to delay accepting for exchange any outstanding notes (if we amend or extend the applicable exchange offer); | |
• | to extend any exchange offer or to terminate any exchange offer if any of the conditions set forth below under “— Conditions to the Exchange Offers” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; and |
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• | subject to the terms of the registration rights agreement, to amend the terms of any exchange offer in any manner, provided that in event of a material change in the terms of any exchange offer, including the waiver of a material condition, we will extend the applicable offer period if necessary so that at least five business days remain in the applicable exchange offer following notice of the material change; |
• | the exchange offers or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offers that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offers. |
• | the representations described under “— Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or | |
• | any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the exchange notes under the Securities Act. |
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• | complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “— Exchange Agent” prior to the expiration date; or | |
• | comply with DTC’s Automated Tender Offer Program procedures described below. | |
• | In addition, either: |
• | the exchange agent must receive certificates for outstanding notes along with the applicable letter of transmittal prior to the expiration date; | |
• | the exchange agent must receive a timely confirmation of book-entry transfer of outstanding notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or | |
• | you must comply with the guaranteed delivery procedures described below. |
• | make appropriate arrangements to register ownership of the outstanding notes in your name; or | |
• | obtain a properly completed bond power from the registered holder of outstanding notes. |
• | by a registered holder of the outstanding notes who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the applicable letter of transmittal; or |
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• | for the account of an eligible guarantor institution. |
• | DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering outstanding notes that are the subject of the book-entry confirmation; | |
• | the participant has received and agrees to be bound by the terms of the applicable letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | we may enforce that agreement against such participant. |
• | outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at the book-entry transfer facility; and | |
• | a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act; | |
• | you do not have an arrangement or understanding with any person or entity to participate in a distribution of the exchange notes; and | |
• | you are acquiring the exchange notes in the ordinary course of your business. |
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• | the tender is made through an eligible guarantor institution; | |
• | prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets |
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forth your name and address, the certificate number(s) of such outstanding notes and the principal amount of outstanding notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and |
• | the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in proper form for transfer or a book-entry confirmation of transfer of the outstanding notes into the exchange agent’s account at DTC all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date. |
• | the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “— Exchange Agent”; or | |
• | you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system. | |
• | Any notice of withdrawal must: |
• | specify the name of the person who tendered the outstanding notes to be withdrawn; | |
• | identify the outstanding notes to be withdrawn, including the certificate numbers and principal amount of the outstanding notes; and | |
• | where certificates for outstanding notes have been transmitted, specify the name in which such outstanding notes were registered, if different from that of the withdrawing holder. |
• | the serial numbers of the particular certificates to be withdrawn; and | |
• | a signed notice of withdrawal with signatures guaranteed by an eligible institution unless your are an eligible guarantor institution. |
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By Registered Mail or Overnight Carrier: The Bank of New York Reorganization Section 101 Barclay Street, 7E New York, New York 10286 Attn: David Mauer | By Facsimile Transmission: (212) 298-1915 To Confirm by Telephone: (212) 815-3687 For Information Call: (212) 815-3687 | By Hand Delivery: The Bank of New York 101 Barclay Street Corporate Trust Services Window Ground level New York, New York 10286 Attn: David Mauer Reorganization Section |
• | certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered; | |
• | tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or | |
• | a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offers. |
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• | as set forth in the legend printed on the outstanding notes as a consequence of the issuance of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and | |
• | as otherwise set forth in the prospectus distributed in connection with the private offerings of the outstanding notes. |
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• | unsecured senior obligations of the Issuers; | |
• | pari passuin right of payment with all existing and future senior Indebtedness of the Issuers; | |
• | effectively subordinated to all secured Indebtedness (including the Senior Credit Facilities) of the Issuers; | |
• | senior in right of payment to any future Subordinated Indebtedness (as defined with respect to the senior notes) of the Issuers; and | |
• | guaranteed on a senior unsecured basis by each Restricted Subsidiary that guarantees the obligations under the Senior Credit Facilities. |
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Year | Percentage | |||
2009 | 105.063 | % | ||
2010 | 102.531 | % | ||
2011 and thereafter | 100.000 | % |
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Year | Percentage | |||
2007 | 102.000 | % | ||
2008 | 101.000 | % | ||
2009 and thereafter | 100.000 | % |
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• | the relevant court that rendered the judgment has jurisdiction over the Company, as recognized by the courts of Singapore and in compliance with Singapore’s conflict of laws rules and submission by the Company in the Senior Note Indenture to the jurisdiction of the New York court will be sufficient for this purpose; | |
• | the judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as that term is understood under the applicable laws of Singapore; | |
• | the enforcement of the judgment does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriatory, public or penal laws; and | |
• | the action to enforce the judgment is commenced within the applicable limitation period. |
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• | unsecured senior subordinated obligations of the Issuers; | |
• | subordinated in right of payment to all existing and future Senior Indebtedness (including the Senior Credit Facilities and the senior notes) of the Issuers; | |
• | pari passuin right of payment with any future senior subordinated Indebtedness of the Issuers; | |
• | effectively subordinated to all secured Indebtedness of the Issuers; and | |
• | guaranteed on a senior subordinated unsecured basis by each Restricted Subsidiary that guarantees the obligations under the Senior Credit Facilities. |
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Year | Percentage | |||
2010 | 105.938 | % | ||
2011 | 103.958 | % | ||
2012 | 101.979 | % | ||
2013 and thereafter | 100.000 | % |
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• | the relevant court that rendered the judgment has jurisdiction over the Company, as recognized by the courts of Singapore and in compliance with Singapore’s conflict of laws rules and submission by the Company in the Senior Subordinated Note Indenture to the jurisdiction of the New York court will be sufficient for this purpose; | |
• | the judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as that term is understood under the applicable laws of Singapore; | |
• | the enforcement of the judgment does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriatory, public or penal laws; and | |
• | the action to enforce the judgment is commenced within the applicable limitation period. |
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• | an individual that is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the “substantial presence” test under Section 7701(b) of the Code; | |
• | a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or a political subdivision thereof; | |
• | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or | |
• | a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial trust decisions, or, if the trust was an existence on August 20, 1996, a trust that has elected to continue to be treated as a United States person. |
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Page | ||||
Consolidated Financial Statements: | ||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9 |
F-1
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F-2
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June 5, 2006, except for the effects of discontinued operations discussed in Note 17, as to which the date is September 29, 2006
F-3
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Predecessor | Company | ||||||||||||||||||||
One Month | Year | ||||||||||||||||||||
Year Ended | Ended | Ended | |||||||||||||||||||
October 31, | November 30, | October 31, | |||||||||||||||||||
2004 | 2005 | 2005 | 2006 | ||||||||||||||||||
Net revenue | $ | 1,783 | $ | 1,559 | $ | 125 | $ | 1,478 | |||||||||||||
Costs and expenses: | |||||||||||||||||||||
Cost of products sold: | |||||||||||||||||||||
Cost of products sold | 1,249 | 1,037 | 96 | 982 | |||||||||||||||||
Amortization of intangible assets | — | — | — | 56 | |||||||||||||||||
Total cost of products sold | 1,249 | 1,037 | 96 | 1,038 | |||||||||||||||||
Research and development | 207 | 218 | 24 | 201 | |||||||||||||||||
Selling, general and administrative | 250 | 256 | 28 | 246 | |||||||||||||||||
Amortization of intangible assets | — | — | — | 66 | |||||||||||||||||
Litigation settlement (Note 20) | — | — | — | 21 | |||||||||||||||||
Acquired in-process research and development | — | — | — | 2 | |||||||||||||||||
Total costs and expenses | 1,706 | 1,511 | 148 | 1,574 | |||||||||||||||||
Income (loss) from operations | 77 | 48 | (23 | ) | (96 | ) | |||||||||||||||
Interest expense | — | — | — | 143 | |||||||||||||||||
Other income, net | 4 | 7 | — | 12 | |||||||||||||||||
Income (loss) from continuing operations before income taxes | 81 | 55 | (23 | ) | (227 | ) | |||||||||||||||
Provision for income taxes | 25 | 33 | 2 | 3 | |||||||||||||||||
Income (loss) from continuing operations | 56 | 22 | (25 | ) | (230 | ) | |||||||||||||||
Income from discontinued operations, net of income taxes | 17 | 9 | 1 | 3 | |||||||||||||||||
Net income (loss) | $ | 73 | $ | 31 | $ | (24 | ) | $ | (227 | ) | |||||||||||
F-4
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Predecessor | Company | ||||||||
October 31, | October 31, | ||||||||
2005 | 2006 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | — | $ | 272 | |||||
Trade accounts receivable, net | 219 | 187 | |||||||
Inventory | 178 | 169 | |||||||
Other current assets | 38 | 34 | |||||||
Total current assets | 435 | 662 | |||||||
Property, plant and equipment, net | 263 | 417 | |||||||
Goodwill | 95 | 116 | |||||||
Intangible assets, net | — | 973 | |||||||
Other long-term assets | 47 | 49 | |||||||
Total assets | $ | 840 | $ | 2,217 | |||||
LIABILITIES, INVESTED EQUITY AND SHAREHOLDER’S EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 124 | $ | 165 | |||||
Accrued interest | — | 38 | |||||||
Employee compensation and benefits | 80 | 68 | |||||||
Income taxes payable | 90 | 15 | |||||||
Capital lease obligations — current | — | 3 | |||||||
Other current liabilities | 12 | 62 | |||||||
Total current liabilities | 306 | 351 | |||||||
Long-term liabilities: | |||||||||
Long-term debt | — | 1,000 | |||||||
Capital lease obligations — non-current | — | 4 | |||||||
Other long-term liabilities | 5 | 31 | |||||||
Total liabilities | 311 | 1,386 | |||||||
Commitments and contingencies (Note 20) | |||||||||
Invested equity: | |||||||||
Invested equity, net of accumulated deficit | 518 | — | |||||||
Accumulated other comprehensive income | 11 | — | |||||||
Total invested equity | 529 | — | |||||||
Shareholder’s equity: | |||||||||
Redeemable convertible preference shares, no par value; none issued and outstanding on October 31, 2006 | — | — | |||||||
Ordinary shares, no par value; 210,460,262 shares issued and outstanding on October 31, 2006 | — | 1,058 | |||||||
Accumulated deficit | — | (227 | ) | ||||||
Total shareholder’s equity | — | 831 | |||||||
Total liabilities, invested equity and shareholder’s equity | $ | 840 | $ | 2,217 | |||||
F-5
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Predecessor | |||||||||||||||||
One Month | Company | ||||||||||||||||
Year Ended | Ended | Year Ended | |||||||||||||||
October 31, | November 30, | October 31, | |||||||||||||||
2004 | 2005 | 2005 | 2006 | ||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net income (loss) | $ | 73 | $ | 31 | $ | (24 | ) | $ | (227 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||
Depreciation and amortization | 74 | 63 | 6 | 210 | |||||||||||||
Amortization of debt issuance costs | — | — | — | 22 | |||||||||||||
Acquired in-process research and development | — | — | — | 2 | |||||||||||||
Excess and obsolete inventory-related charges | 17 | 11 | 5 | 7 | |||||||||||||
Non-cash restructuring and asset impairment charges | 7 | 9 | — | — | |||||||||||||
Net (gain) loss on disposal of property, plant and equipment | 1 | (13 | ) | — | 5 | ||||||||||||
Goodwill adjustment charge | — | 1 | — | — | |||||||||||||
Share-based compensation | — | 8 | 4 | 3 | |||||||||||||
Changes in assets and liabilities, net of acquisitions and dispositions: | |||||||||||||||||
Trade accounts receivable | (39 | ) | 37 | 1 | 136 | ||||||||||||
Inventory | (61 | ) | 28 | (8 | ) | 21 | |||||||||||
Accounts payable | (4 | ) | (11 | ) | (6 | ) | 32 | ||||||||||
Employee compensation and benefits | — | — | — | 53 | |||||||||||||
Income taxes payable | 16 | 44 | (2 | ) | 15 | ||||||||||||
Other current assets and current liabilities | 11 | (2 | ) | (17 | ) | 80 | |||||||||||
Other long-term assets and long-term liabilities | (23 | ) | 5 | 2 | 22 | ||||||||||||
Net cash provided by (used in) operating activities | 72 | 211 | (39 | ) | 381 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||
Purchases of property, plant and equipment | (34 | ) | (59 | ) | (6 | ) | (59 | ) | |||||||||
Acquisitions, net of cash acquired | — | (9 | ) | — | (2,707 | ) | |||||||||||
Proceeds from sale of property, plant and equipment | 2 | 14 | — | 1 | |||||||||||||
Proceeds from disposition of businesses | — | 3 | — | 665 | |||||||||||||
Net cash used in investing activities | (32 | ) | (51 | ) | (6 | ) | (2,100 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||||||
Proceeds from borrowings, net of financing costs | — | — | — | 1,666 | |||||||||||||
Debt repayments | — | — | — | (725 | ) | ||||||||||||
Issuance of ordinary shares, net of issuance costs | — | — | — | 1,051 | |||||||||||||
Issuance of redeemable convertible preference shares, net of issuance costs | — | — | — | 250 | |||||||||||||
Redemption of redeemable convertible preference shares | — | — | — | (249 | ) | ||||||||||||
Dividend paid on redeemable convertible preference shares | — | — | — | (1 | ) | ||||||||||||
Net invested equity — Predecessor | (40 | ) | (160 | ) | 45 | — | |||||||||||
Payment of capital lease obligations | — | — | — | (1 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (40 | ) | (160 | ) | 45 | 1,991 | |||||||||||
Net increase in cash and cash equivalents | — | — | — | 272 | |||||||||||||
Cash and cash equivalents at beginning of year | — | — | — | — | |||||||||||||
Cash and cash equivalents at end of year | $ | — | $ | — | $ | — | $ | 272 | |||||||||
and financing activities:
Predecessor | |||||||||||||||||||||
One Month | Company | ||||||||||||||||||||
Year Ended | Ended | Year Ended | |||||||||||||||||||
October 31, | November 30, | October 31, | |||||||||||||||||||
2004 | 2005 | 2005 | 2006 | ||||||||||||||||||
Cash paid for interest | $ | — | $ | — | $ | — | $ | 83 | |||||||||||||
Cash paid for income taxes | — | — | — | 1 | |||||||||||||||||
Acquisition of property, plant and equipment under capital leases | — | — | — | 8 | |||||||||||||||||
Issuance of share options in connection with the Acquisition | — | — | — | 4 |
F-6
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Redeemable | ||||||||||||||||||||||||
Convertible Cumulative | Total | |||||||||||||||||||||||
Preference Shares | Ordinary Shares | Accumulated | Shareholder’s | |||||||||||||||||||||
Shares | Amount | Shares | Amount | Deficit | Equity | |||||||||||||||||||
Balance as of November 1, 2005 | — | $ | — | — | $ | — | $ | — | $ | — | ||||||||||||||
Issuance of ordinary shares to Holdings | — | — | 1 | — | — | — | ||||||||||||||||||
Issuance of redeemable convertible cumulative preference shares | 250,000 | 250 | — | — | — | 250 | ||||||||||||||||||
Issuance of ordinary shares to Holdings | — | — | 209,840,061 | 1,049 | — | 1,049 | ||||||||||||||||||
Redemption of redeemable convertible cumulative preference shares and issuance of ordinary shares | (248,853 | ) | (249 | ) | 1,500 | — | — | (249 | ) | |||||||||||||||
Dividend on redeemable convertible cumulative preference shares | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Conversion of redeemable convertible cumulative preference shares to ordinary shares | (1,147 | ) | (1 | ) | 229,400 | 1 | — | — | ||||||||||||||||
Issuance of ordinary shares to Holdings | — | — | 389,300 | 2 | — | 2 | ||||||||||||||||||
Issuance of options in connection with the Acquisition | — | — | — | 4 | — | 4 | ||||||||||||||||||
Share based compensation, net of taxes | — | — | — | 3 | — | 3 | ||||||||||||||||||
Net loss and comprehensive loss | — | — | — | — | (227 | ) | (227 | ) | ||||||||||||||||
Balance as of October 31, 2006 | — | $ | — | 210,460,262 | $ | 1,058 | $ | (227 | ) | $ | 831 | |||||||||||||
F-7
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Accumulated Other | ||||||||||||
Agilent’s Net | Comprehensive | |||||||||||
Investment | Income/(Loss) | Total | ||||||||||
Invested equity as of November 1, 2003 | $ | 598 | $ | 11 | $ | 609 | ||||||
Components of comprehensive income: | ||||||||||||
Net income | 73 | — | 73 | |||||||||
Foreign currency translation, net of taxes | — | 7 | 7 | |||||||||
Unrealized gain on derivatives, net of taxes | — | 1 | 1 | |||||||||
Total comprehensive income | 81 | |||||||||||
Net return of investment to Agilent | (40 | ) | — | (40 | ) | |||||||
Invested equity as of October 31, 2004 | 631 | 19 | 650 | |||||||||
Components of comprehensive income: | ||||||||||||
Net income | 31 | — | 31 | |||||||||
Foreign currency translation, net of taxes | — | (9 | ) | (9 | ) | |||||||
Unrealized gain on derivatives, net of taxes | — | 1 | 1 | |||||||||
Total comprehensive income | 23 | |||||||||||
Stock-based compensation, net of taxes | 8 | — | 8 | |||||||||
Net book value of assets transferred by Agilent | 8 | — | 8 | |||||||||
Net return of investment to Agilent | (160 | ) | — | (160 | ) | |||||||
Invested equity as of October 31, 2005 | 518 | 11 | 529 | |||||||||
Components of comprehensive loss: | ||||||||||||
Net loss | (24 | ) | — | (24 | ) | |||||||
Foreign currency translation, net of taxes | — | (2 | ) | (2 | ) | |||||||
Total comprehensive loss | (26 | ) | ||||||||||
Stock-based compensation, net of taxes | 4 | — | 4 | |||||||||
Net return of investment to Agilent | 45 | — | 45 | |||||||||
Invested equity as of November 30, 2005 | $ | 543 | $ | 9 | $ | 552 | ||||||
F-8
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1. | Overview and Basis of Presentation |
F-9
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2. | Summary of Significant Accounting Policies |
F-10
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Year Ended | ||||
October 31, 2006 | ||||
(In millions) | ||||
Net loss — as reported | $ | (227 | ) | |
APB 25 share-based compensation, net of tax | 2 | |||
SFAS 123 compensation expense, net of tax | (2 | ) | ||
Net loss — pro forma | $ | (227 | ) | |
Share Option Plans | ||||
Year Ended | ||||
October 31, 2006 | ||||
Risk-free interest rate | 5.00 | % | ||
Dividend yield | 0.0 | % | ||
Volatility | 0.0 | % | ||
Expected term (in years) | 6.5 |
F-11
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F-12
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F-13
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F-14
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3. | The Acquisition |
Cash | $ | 2,660 | ||
Transaction costs | 51 | |||
Options assumed | 4 | |||
$ | 2,715 | |||
Current and other tangible assets: | ||||
Cash | $ | 4 | ||
Trade accounts receivable, net | 323 | |||
Inventory | 214 | |||
Property, plant and equipment, net | 452 | |||
Other assets | 72 | |||
Goodwill | 193 | |||
Assets held for sale — Storage Business, including purchased intangibles and goodwill of $404 million | 421 | |||
Amortizable intangible assets: | ||||
Purchased technology | 843 | |||
Customer relationships | 323 | |||
Distributor relationships | 24 | |||
Order backlog | 43 | |||
Total assets acquired | 2,912 | |||
Liabilities assumed | (196 | ) | ||
Liabilities held for sale | (1 | ) | ||
Net assets acquired | $ | 2,715 | ||
F-15
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Year Ended October 31, | ||||||||
2005 | 2006 | |||||||
(unaudited) | ||||||||
(In millions) | ||||||||
Pro forma net revenue | $ | 1,559 | $ | 1,603 | ||||
Pro forma loss from continuing operations | (268 | ) | (271 | ) |
4. | Transactions with Agilent |
F-16
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Year Ended | One Month | |||||||||||||||
October 31, | Ended | |||||||||||||||
2004 | 2005 | November 30, 2005 | ||||||||||||||
(In millions) | ||||||||||||||||
Cost of products sold | $ | 82 | $ | 80 | $ | 8 | ||||||||||
Research and development | 71 | 80 | 8 | |||||||||||||
Selling, general and administrative | 146 | 146 | 15 | |||||||||||||
Other income, net | (4 | ) | — | — | ||||||||||||
Total allocated costs | $ | 295 | $ | 306 | $ | 31 | ||||||||||
5. | Balance Sheet Components |
Predecessor | Company | ||||||||
October 31, | October 31, | ||||||||
2005 | 2006 | ||||||||
Finished goods | $ | 51 | $ | 50 | |||||
Work in progress | 48 | 109 | |||||||
Raw materials | 79 | 10 | |||||||
Total inventory | $ | 178 | $ | 169 | |||||
F-17
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Predecessor | Company | ||||||||
October 31, | October 31, | ||||||||
2005 | 2006 | ||||||||
Non-U.S. transaction tax receivable | $ | 12 | $ | 3 | |||||
Prepayments | 15 | 12 | |||||||
Other | 11 | 19 | |||||||
Total other current assets | $ | 38 | $ | 34 | |||||
Predecessor | Company | ||||||||
October 31, | October 31, | ||||||||
2005 | 2006 | ||||||||
Land | $ | 1 | $ | 12 | |||||
Buildings and leasehold improvements | 226 | 165 | |||||||
Machinery and equipment | 921 | 321 | |||||||
Total property, plant and equipment | 1,148 | 497 | |||||||
Accumulated depreciation and amortization | (885 | ) | (81 | ) | |||||
Total property, plant and equipment | $ | 263 | $ | 417 | |||||
Predecessor | Company | ||||||||
October 31, | October 31, | ||||||||
2005 | 2006 | ||||||||
Deferred revenue | $ | 1 | $ | 5 | |||||
Camera Module accrual at sale (see Note 16, “Sale of Camera Module Business”) | 5 | 1 | |||||||
Supplier liabilities | 2 | 3 | |||||||
Customer deposit | — | 12 | |||||||
Litigation settlements | — | 24 | |||||||
Due to Parent | — | 11 | |||||||
Other | 4 | 6 | |||||||
Total other current liabilities | $ | 12 | $ | 62 | |||||
F-18
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Predecessor | Company | ||||||||
Year Ended | Year Ended | ||||||||
October 31, 2005 | October 31, 2006 | ||||||||
Beginning balance | $ | 2 | $ | 2 | |||||
Payments | (27 | ) | (16 | ) | |||||
Charged to cost of products sold | 27 | 15 | |||||||
Ending balance | $ | 2 | $ | 1 | |||||
6. | Goodwill |
Predecessor | ||||
Balance as of October 31, 2004 | $ | 98 | ||
Foreign currency translation impact | (7 | ) | ||
Goodwill arising from acquisitions | 5 | |||
Adjustments to goodwill | (1 | ) | ||
Balance at October 31, 2005 | 95 | |||
Adjustments to goodwill | — | |||
Balance at November 30, 2005 | $ | 95 | ||
Company | ||||
Balance as of October 31, 2005 | $ | — | ||
2006 acquisitions: | ||||
Semiconductor Products Group (Note 3. “The Acquisition”) | 348 | |||
2006 divestitures: | ||||
Storage Business (Note 17. “Discontinued Operations”) | (155 | ) | ||
Printer ASICs Business (Note 17. “Discontinued Operations”) | (77 | ) | ||
Balance as of October 31, 2006 | $ | 116 | ||
F-19
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7. | Intangible Assets |
Gross Carrying | Accumulated | |||||||||||
Amount | Amortization | Net Book Value | ||||||||||
(In millions) | ||||||||||||
Predecessor | ||||||||||||
As of October 31, 2005: | ||||||||||||
Purchased technology | $ | 10 | $ | (8 | ) | $ | 2 | |||||
Customer relationships | 1 | — | 1 | |||||||||
Total | $ | 11 | $ | (8 | ) | $ | 3 | |||||
Company | ||||||||||||
As of October 31, 2006: | ||||||||||||
Purchased technology | $ | 796 | $ | (57 | ) | $ | 739 | |||||
Customer and distributor relationships | 266 | (33 | ) | 233 | ||||||||
Order backlog | 31 | (31 | ) | — | ||||||||
Other | 2 | (1 | ) | 1 | ||||||||
Total | $ | 1,095 | $ | (122 | ) | $ | 973 | |||||
Fiscal Year | Amount | |||
(In millions) | ||||
2007 | $ | 98 | ||
2008 | 91 | |||
2009 | 82 | |||
2010 | 82 | |||
2011 | 80 | |||
Thereafter | 540 | |||
$ | 973 | |||
Years | ||||
Amortizable intangible assets: | ||||
Purchased technology | 13.0 | |||
Customer and distributor relationships | 10.4 |
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8. | Retirement Plans and Post-Retirement Benefits |
Company | ||||||
Year Ended | ||||||
October 31, 2006 | ||||||
Non-U.S. | U.S. Post | |||||
Defined | Retirement | |||||
Benefit Plans | Medical Plans | |||||
(In millions) | ||||||
Change in plan assets: | ||||||
Fair value of assets transferred on December 1, 2005 | $ | 8 | $ | — | ||
Currency impact | 1 | — | ||||
Fair value of plan assets — end of period | $ | 9 | $ | — | ||
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Company | ||||||||
Year Ended | ||||||||
October 31, 2006 | ||||||||
Non-U.S. | U.S. Post | |||||||
Defined | Retirement | |||||||
Benefit Plans | Medical Plans | |||||||
(In millions) | ||||||||
Change in benefit obligation: | ||||||||
Obligations acquired on December 1, 2005 | $ | 12 | $ | 20 | ||||
Service cost | 2 | 1 | ||||||
Interest cost | — | 1 | ||||||
Actuarial (gain)/loss | 1 | (5 | ) | |||||
Currency impact | 1 | — | ||||||
Benefit obligation — end of period | $ | 16 | $ | 17 | ||||
Net accrued costs: | ||||||||
Plan assets less than benefit obligation | $ | (7 | ) | $ | (17 | ) | ||
Unrecognized net actuarial (gain)/loss | 2 | (5 | ) | |||||
Net accrued costs | $ | (5 | ) | $ | (22 | ) | ||
Non-U.S. | U.S. Post | |||||
Defined | Retirement | |||||
Fiscal Year | Benefit Plans | Medical Plans | ||||
(In millions) | ||||||
2007 | $ | — | $ | — | ||
2008 | — | — | ||||
2009 | — | — | ||||
2010 | — | — | ||||
2011 | 1 | 1 | ||||
2012 and through 2016 | 3 | 7 |
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Company | ||||
Year Ended | ||||
October 31, 2006 | ||||
Non-U.S. Defined Benefit Plans: | ||||
Discount rate | 2.00 | % - 4.25% | ||
Average increase in compensation levels | 0.00 | % - 3.00% | ||
Expected long-term return on assets | 0.00 | % - 6.75% | ||
U.S. Post-Retirement Medical Plan: | ||||
Discount rate | 5.250 | % | ||
Current medical cost trend rate | 9.000 | % | ||
Ultimate medical cost trend rate | 5.000 | % | ||
Medical cost trend rate decreases to ultimate trend rate in year | 2011 |
1% Increase | 1% Decrease | |||||||
Effect on post-retirement benefit obligation (in millions) | $ | 1 | ($ | 1 | ) | |||
Percentage effect on post-retirement benefit obligation | 8.894 | % | (7.440 | %) |
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Predecessor | ||||
Non-U.S Defined Benefit Plans | ||||
Year Ended | ||||
October 31, 2005 | ||||
(In millions) | ||||
Change in fair value of plan assets: | ||||
Fair value — beginning of period | $ | 9 | ||
Actual return on plan assets | 1 | |||
Employer contributions | — | |||
Participants’ contributions | — | |||
Benefits paid | — | |||
Currency impact | — | |||
Fair value — end of period | $ | 10 | ||
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Predecessor | ||||
Non-U.S Defined Benefit Plans | ||||
Year Ended | ||||
October 31, 2005 | ||||
(In millions) | ||||
Change in benefit obligation: | ||||
Projected benefit obligation — beginning of period | $ | 10 | ||
Service cost | 1 | |||
Interest cost | 1 | |||
Participants’ contributions | — | |||
Plan amendment | — | |||
Actuarial loss | — | |||
Benefits paid | — | |||
Currency impact | — | |||
Projected Benefit obligation — end of period | $ | 12 | ||
Plan assets less than benefit obligation | $ | (2 | ) | |
Unrecognized net actuarial loss | 1 | |||
Unrecognized net transition obligation | — | |||
Net accrued costs | $ | (1 | ) | |
Amounts recognized in the balance sheet as of October 31, 2005 consist of: | ||||
Prepaid defined benefit plan costs | $ | — | ||
Accrued defined benefit plan costs | (2 | ) | ||
Deferred tax asset | — | |||
Accumulated other comprehensive income | 1 | |||
Net accrued costs | $ | (1 | ) | |
Predecessor | ||||
October 31, 2005 | ||||
(In millions) | ||||
Aggregate accumulated benefit obligation (“ABO”) | $ | 9 | ||
Aggregate projected benefit obligation (“PBO”) | 12 | |||
Aggregate fair value of plan assets | 10 |
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Predecessor | ||||
Year Ended | ||||
October 31, 2005 | ||||
Non U.S. defined benefit plans: | ||||
Discount rate | 2.25-6.0 | % | ||
Average increase in compensation levels | 0-5.0 | % | ||
Expected long-term return on assets | 4.75-7.0 | % | ||
U.S. post-retirement benefits plans: | ||||
Discount rate | 5.75 | % | ||
Expected long-term return on assets | 8.50 | % | ||
Current medical cost trend rate | 10.00 | % | ||
Ultimate medical cost trend rate | 5.00 | % | ||
Medical cost trend rate decreases to ultimate rate in year | 2010 |
Predecessor | ||||
October 31, 2005 | ||||
Non-U.S. defined benefit plans: | ||||
Discount rate | 5.50 | % | ||
Average increase in compensation levels | 3.25 | % | ||
Expected long-term return on assets | 6.75 | % |
9. | Senior Credit Facilities and Borrowings |
Company | ||||
October 31, 2006 | ||||
Senior credit facilities: | ||||
Term loan facility | $ | — | ||
Revolving credit facility | — | |||
Notes: | ||||
101/8% senior notes due 2013 | $ | 500 | ||
Senior floating rates notes due 2013 | 250 | |||
117/8% senior subordinated notes due 2015 | 250 | |||
Total long-term debt | $ | 1,000 | ||
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• | incur additional debt or issue certain preferred shares; | |
• | create liens on assets; | |
• | enter into sale-leaseback transactions; | |
• | engage in mergers or consolidations; | |
• | sell assets; | |
• | pay dividends and distributions, or repurchase our capital stock or make other restrictive payments; | |
• | make investments, loans or advances; | |
• | make capital expenditures; | |
• | repay subordinated indebtedness (including the senior subordinated notes); |
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• | make certain acquisitions; | |
• | amend material agreements governing our subordinated indebtedness (including the senior subordinated notes); | |
• | change our lines of business; and | |
• | change the status of Holdings as a passive holding company. |
• | a pledge of 100% of our capital stock and 100% of the capital stock of each of our material subsidiaries; and | |
• | a security interest in substantially all of our tangible and intangible assets and the tangible and intangible assets of each guarantor. |
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10. | Fair Value of Financial Instruments |
Company | ||||||||
October 31, 2006 | ||||||||
Carrying | Fair | |||||||
Value | Value | |||||||
(In millions) | ||||||||
Variable rate debt | $ | 250 | $ | 263 | ||||
Fixed rate debt | 750 | 806 |
11. | Shareholder’s Equity |
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Awards Outstanding | ||||||||||||
Awards | Weighted-Average | |||||||||||
Available for | Number | Exercise Price | ||||||||||
Grant | Outstanding | Per Share | ||||||||||
Balance as of October 31, 2005 | — | — | $ | — | ||||||||
Shares authorized | 30 | — | — | |||||||||
Issued as part of the Acquisition (see Note 3. ‘‘The Acquisition”) | (1 | ) | 1 | 1.25 | ||||||||
Granted | (24 | ) | 24 | 5.06 | ||||||||
Exercised | — | (4 | ) | 5.01 | ||||||||
Cancelled | 3 | (3 | ) | 4.87 | ||||||||
Balance as of October 31, 2006 | 8 | 18 | 4.87 | |||||||||
Awards Outstanding | ||||||||||||||||||||
Weighted- | Weighted- | Awards Exercisable | ||||||||||||||||||
Average | Average | Weighted- | ||||||||||||||||||
Remaining | Exercise | Average | ||||||||||||||||||
Number | Contractual | Price Per | Number | Exercise Price | ||||||||||||||||
Exercise Prices | Outstanding | Life (in years) | Share | Exercisable | Per Share | |||||||||||||||
$1.25 | 1 | 6.34 | $ | 1.25 | 1 | $ | 1.25 | |||||||||||||
$5.00 | 16 | 9.19 | 5.00 | — | — | |||||||||||||||
$6.48 | 1 | 9.81 | 6.48 | — | — | |||||||||||||||
Total | 18 | 9.06 | 4.87 | 1 | 1.25 | |||||||||||||||
12. | Restructuring and Asset Impairment |
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Predecessor | ||||||||||||
Year Ended | One Month | |||||||||||
October 31, | Ended | |||||||||||
2004 | 2005 | November 30, 2005 | ||||||||||
(In millions) | ||||||||||||
Workforce management | $ | 23 | $ | 14 | $ | 1 | ||||||
Asset impairment | 7 | 3 | — | |||||||||
Consolidation of facilities | 6 | 3 | — | |||||||||
Total restructuring and asset impairment charges | $ | 36 | $ | 20 | $ | 1 | ||||||
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Predecessor | ||||
Workforce | ||||
Management | ||||
(In millions) | ||||
Balance as of October 31, 2004 | $ | 3 | ||
Total charge | 7 | |||
Cash payments | (9 | ) | ||
Balance as of October 31, 2005 | 1 | |||
Total charge | 1 | |||
Cash payments | (2 | ) | ||
Balance as of November 30, 2005 | $ | — | ||
Predecessor | ||||||||||||
Year Ended | One Month | |||||||||||
October 31, | Ended | |||||||||||
2004 | 2005 | November 30, 2005 | ||||||||||
(In millions) | ||||||||||||
Cost of products sold | $ | 10 | $ | 4 | $ | — | ||||||
Research and development | 7 | 7 | — | |||||||||
Selling, general and administrative | 19 | 9 | 1 | |||||||||
Total restructuring and asset impairment charges | $ | 36 | $ | 20 | $ | 1 | ||||||
Predecessor | ||||||||||||||||
Year Ended | One Month | |||||||||||||||
October 31, | Ended | |||||||||||||||
2004 | 2005 | November 30, 2005 | ||||||||||||||
(In millions) | ||||||||||||||||
Cost of products sold | $ | 3 | $ | — | $ | — | ||||||||||
Research and development | 1 | 4 | — | |||||||||||||
Selling, general and administrative | 10 | 7 | — | |||||||||||||
Total restructuring and asset impairment charges | $ | 14 | $ | 11 | $ | — | ||||||||||
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13. | Income Taxes |
Year Ended | ||||
Company | October 31, 2006 | |||
Domestic loss | $ | (240 | ) | |
Foreign income | 13 | |||
Loss from continuing operations before income taxes | $ | (227 | ) | |
Year Ended | One Month | |||||||||||||||
October 31, | Ended | |||||||||||||||
Predecessor | 2004 | 2005 | November 30, 2005 | |||||||||||||
(In millions) | ||||||||||||||||
Domestic loss | $ | (330 | ) | $ | (287 | ) | $ | (17 | ) | |||||||
Foreign income (loss) | 411 | 342 | (6 | ) | ||||||||||||
Income (loss) from continuing operations before income taxes: | $ | 81 | $ | 55 | $ | (23 | ) | |||||||||
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Predecessor | Company | ||||||||||||||||
Year Ended | One Month | Year | |||||||||||||||
October 31, | Ended | Ended | |||||||||||||||
2004 | 2005 | November 30, 2005 | October 31, 2006 | ||||||||||||||
Current tax expense: | |||||||||||||||||
Domestic | $ | — | $ | 17 | $ | — | $ | 2 | |||||||||
Foreign | 28 | 16 | 2 | 6 | |||||||||||||
$ | 28 | $ | 33 | $ | 2 | $ | 8 | ||||||||||
Deferred tax expense (benefit) | |||||||||||||||||
Domestic | $ | (3 | ) | $ | — | $ | — | $ | (1 | ) | |||||||
Foreign | — | — | — | (4 | ) | ||||||||||||
$ | (3 | ) | $ | — | $ | — | $ | (5 | ) | ||||||||
Total provision for income taxes | $ | 25 | $ | 33 | $ | 2 | $ | 3 | |||||||||
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Predecessor | Company | ||||||||||||||||
Year Ended | One Month | Year | |||||||||||||||
October 31, | Ended | Ended | |||||||||||||||
2004 | 2005 | November 30, 2005 | October 31, 2006 | ||||||||||||||
Expected statutory tax rate | 35.0% | 35.0% | (35.0)% | (20.0)% | |||||||||||||
Homeland Investment Act Dividend Repatriation | 0.0 | 30.7 | 0.0 | 0.0 | |||||||||||||
Foreign income taxed at different rates | (112.1) | (137.1) | 14.9 | (0.1) | |||||||||||||
Nondeductible goodwill | 1.5 | 1.1 | 0.3 | — | |||||||||||||
R&D credits | (3.4) | (4.5) | (1.3) | — | |||||||||||||
Tax Holidays and Concessions | 0.0 | 0.0 | 0.0 | 21.6 | |||||||||||||
Other, net | (6.1) | (4.6) | (1.6) | — | |||||||||||||
Valuation Allowance | 115.6 | 139.0 | 30.2 | — | |||||||||||||
Actual tax rate on income from continuing operations | 30.5% | 59.6% | 7.5% | 1.5% | |||||||||||||
Predecessor | Company | ||||||||||||
Year Ended | Year | ||||||||||||
October 31, | Ended | ||||||||||||
2004 | 2005 | October 31, 2006 | |||||||||||
Deferred income tax assets: | |||||||||||||
Inventory | $ | 1 | $ | — | $ | — | |||||||
Employee benefits, other than retirement | 11 | 11 | 3 | ||||||||||
Net operating loss carryovers and credit carryovers | 327 | 423 | 12 | ||||||||||
Depreciation and amortization | — | — | 5 | ||||||||||
Other deferred income tax assets | 3 | 4 | 2 | ||||||||||
Gross deferred tax assets | $ | 342 | $ | 438 | $ | 22 | |||||||
Less valuation allowance | (198 | ) | (293 | ) | (16 | ) | |||||||
Deferred income tax assets | $ | 144 | $ | 145 | $ | 6 | |||||||
Deferred income tax liabilities | |||||||||||||
Depreciation and amortization | $ | 31 | $ | 31 | $ | 1 | |||||||
Foreign earnings not permanently reinvested | 114 | 114 | — | ||||||||||
Deferred income tax liabilities | $ | 145 | $ | 145 | $ | 1 | |||||||
Net deferred income tax asset (liability) | $ | (1 | ) | $ | — | $ | 5 | ||||||
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Predecessor | Company | ||||||||||||
Year Ended | Year | ||||||||||||
October 31, | Ended | ||||||||||||
2004 | 2005 | October 31, 2006 | |||||||||||
Non-current asset | $ | 144 | $ | 145 | $ | 6 | |||||||
Non-current liability | (145 | ) | (145 | ) | (1 | ) | |||||||
Net non-current income tax asset (liability) | $ | (1 | ) | $ | — | $ | 5 | ||||||
14. | Interest Expense |
15. | Other Income, net |
Predecessor | Company | ||||||||||||||||||||
Year Ended | One Month | ||||||||||||||||||||
October 31, | Ended | Year Ended | |||||||||||||||||||
2004 | 2005 | November 30, 2005 | October 31, 2006 | ||||||||||||||||||
(In millions) | (In millions) | ||||||||||||||||||||
Other income | $ | 4 | $ | 18 | — | $ | 6 | ||||||||||||||
Interest income | — | — | — | 6 | |||||||||||||||||
Other expense | — | (11 | ) | — | — | ||||||||||||||||
Other income, net | $ | 4 | $ | 7 | — | $ | 12 | ||||||||||||||
16. | Sale of the Camera Module Business |
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Predecessor | ||||||||
Year Ended | ||||||||
October 31, | ||||||||
2004 | 2005 | |||||||
(In millions) | ||||||||
Net revenue | $ | 296 | $ | 69 | ||||
Costs of products sold | (316 | ) | (66 | ) | ||||
Total operating expenses | (43 | ) | (10 | ) | ||||
Operating loss | $ | (63 | ) | $ | (7 | ) | ||
17. | Discontinued Operations |
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�� | |||||||||||||||||
Predecessor | Company | ||||||||||||||||
One Month | Year | ||||||||||||||||
Year Ended October 31, | Ended | Ended | |||||||||||||||
2004 | 2005 | November 30, 2005 | October 31, 2006 | ||||||||||||||
(In millions) | |||||||||||||||||
Net revenue | $ | 113 | $ | 112 | $ | 8 | $ | 28 | |||||||||
Costs, expenses and other income, net | 101 | 102 | 6 | 26 | |||||||||||||
Income from discontinued operations, net of taxes | $ | 12 | $ | 10 | $ | 2 | $ | 2 | |||||||||
Company | ||||
(In millions) | ||||
Assets: | ||||
Inventory | $ | 5 | ||
Property, plant and equipment, net | 8 | |||
Other current assets | 4 | |||
Goodwill and intangible assets, net | 404 | |||
Total assets of discontinued operations | 421 | |||
Liabilities: | ||||
Current liabilities | 1 | |||
Net assets | $ | 420 | ||
Predecessor | |||||||||||||||||
One Month | Company | ||||||||||||||||
Year Ended October 31, | Ended | Year Ended | |||||||||||||||
2004 | 2005 | November 30, 2005 | October 31, 2006 | ||||||||||||||
(In millions) | |||||||||||||||||
Net revenue | $ | 132 | $ | 131 | $ | 10 | $ | 71 | |||||||||
Costs, expenses and other income, net | 127 | 132 | 11 | 70 | |||||||||||||
Income from discontinued operations, net of taxes | $ | 5 | $ | (1 | ) | $ | (1 | ) | $ | 1 | |||||||
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Company | ||||
(In millions) | ||||
Assets: | ||||
Inventory | $ | 17 | ||
Other current assets | 10 | |||
Property, plant and equipment, net | 15 | |||
Goodwill and intangible assets, net | 207 | |||
Total assets of discontinued operations | 249 | |||
Liabilities: | ||||
Current liabilities | 4 | |||
Net assets | $ | 245 | ||
18. | Segment Information |
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Malaysia and | United | Rest of the | Discontinued | |||||||||||||||||
Singapore | States | World | Operations | Total | ||||||||||||||||
Company | ||||||||||||||||||||
Net revenue: | ||||||||||||||||||||
Year ended October 31, 2006: | $ | 1,055 | $ | 315 | $ | 108 | — | $ | 1,478 | |||||||||||
Long-lived assets: | ||||||||||||||||||||
As of October 31, 2006 | 176 | 229 | 12 | — | 417 | |||||||||||||||
Predecessor | ||||||||||||||||||||
Net revenue: | ||||||||||||||||||||
Year ended October 31, 2004 | 1,093 | 459 | 476 | (245 | ) | 1,783 | ||||||||||||||
Year ended October 31, 2005 | 952 | 462 | 388 | (243 | ) | 1,559 | ||||||||||||||
One month ended November 30, 2005: | 84 | 31 | 28 | (18 | ) | 125 | ||||||||||||||
Long-lived assets: | ||||||||||||||||||||
As of October 31, 2005 | 100 | 158 | 5 | — | 263 |
19. | Related-Party Transactions |
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20. | Commitments and Contingencies |
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21. | Predecessor Change in Accounting Policies |
Predecessor | ||||||||
Year Ended | ||||||||
October 31, | ||||||||
2004 | 2005 | |||||||
(In millions) | ||||||||
Net income — as reported | $ | 73 | $ | 31 | ||||
APB 25 based compensation | — | 8 | ||||||
SFAS No. 123 stock based compensation(1) | (41 | ) | (44 | ) | ||||
Tax impact(2) | 3 | 2 | ||||||
Net income (loss) — pro forma | $ | 35 | $ | (3 | ) | |||
(1) | The pro forma results for the years ended October 31, 2004 and 2005 include approximately $11 million and $5 million, respectively, of compensation expense relating to Agilent’s Option Exchange Program (see below). The remainder of the expense for those periods related to options granted over the past five years. | |
(2) | Due to the valuation allowance provided on Predecessor’s net deferred tax assets as described in Note 13, “Income Taxes” Predecessor has not recorded any tax benefits attributable to pro forma stock option expenses for employees in the U.S. and certainnon-U.S. jurisdictions in all periods presented. |
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Predecessor | ||||||||||||
Year Ended October 31, | One Month Ended | |||||||||||
2004 | 2005 | November 30, 2005 | ||||||||||
Risk-free interest rate for options | 2.75-3.95 | % | 3.55 | % | 4.3 | % | ||||||
Risk-free interest rate for the 423(b) Plan | 1.04-1.31 | % | 2.42 | % | 4.3 | % | ||||||
Dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Volatility for options(1) | 53-64 | % | 39 | % | 29 | % | ||||||
Volatility for the 423(b) Plan(1) | 36-61 | % | 37 | % | 30 | % | ||||||
Expected option life(2) | 5.5 years | 4 years | 4.25 years | |||||||||
Expected life for the 423(b) Plan(2) | 6 months – 1 yr. | 6 months – 2 yrs. | 6 months – 1 yr. |
(1) | During 2004, Predecessor used historical volatility to estimate expected stock price volatility in the computation of stock-based compensation under the fair value method. During 2005, for Predecessor’s employee stock options, Predecessor used a4-year period, of equally weighted historical volatility and market-based implied volatility for the computation of stock-based compensation. For the year ended October 31, 2005, for the 423(b) Plan, Predecessor used a market-based implied volatility of the same term as the expected life. | |
(2) | In 2005, Predecessor refined the assumption for expected option life to 4 years, from Predecessor’s previous estimate of 5.5 years. In determining the estimate, Predecessor considered several factors, including the expected lives used by a peer group of companies and the historical option exercise behavior of Predecessor’s employees. |
22. | Subsequent Event |
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