Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended
September 27, 2003

or

For the transition period from       to

Commission file number 0-50397

AMIS Holdings, Inc.

(Exact name of registrant as specified in its charter)

2300 Buckskin Road
Pocatello, ID 83201

(Address of principal executive offices)

(208) 233-4690

(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days:

Yes x No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):

Yes o No x

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Table of Contents

AMIS Holdings, Inc.

TABLE OF CONTENTS

ii

Table of Contents

FORWARD-LOOKING STATEMENTS

     This quarterly report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future results, prospects, developments and business strategies.

     These forward-looking statements are identifiable by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. These statements are contained in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including the sub-section “Factors That May Affect Our Business and Future Results”.

     These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, the following:

	•		changes in general economic and business conditions and in the semiconductor industry in particular;
	•		changes in the conditions affecting our target markets;
	•		changes in the pricing of our products;
	•		changes in political, social and economic conditions and local regulations, particularly outside of the United States;
	•		changes in technology and development of new technology;
	•		reductions in sales to any significant customers;
	•		changes in the mix of products sold, industry capacity or competition;
	•		change in competitive conditions;
	•		disruptions of established supply channels;
	•		manufacturing capacity underutilization or constraints; and
	•		the availability, terms and deployment of capital.

     The factors listed above, together with other potential risks, are more specifically described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors that May Affect Our Business and Future Results.” If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.

     We do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.

iii

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

AMIS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

1

Table of Contents

See accompanying notes.

2

Table of Contents

AMIS HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

3

Table of Contents

AMIS HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

4

Table of Contents

AMIS HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 27, 2003

Note 1: Basis of Presentation and Significant Accounting Policies

     In the opinion of management of AMIS Holdings, Inc. (the “Company”), the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial information included therein. This financial data should be read in conjunction with the audited combined/consolidated financial statements and related notes thereto for the year ended December 31, 2002 contained in the Company’s registration statement on Form S-1, No. 333-108028, available on the website of the Securities and Exchange Commission at www.sec.gov.

     The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for any other period or the fiscal year ending on December 31, 2003. The current interim period ended on September 27, 2003.

     On September 26, 2003, the Company completed its initial public offering (the “IPO”) of 25,145,000 shares of common stock at a price to the public of $20 per share. Net of total offering expenses, some of which were included in accrued expenses as of September 27, 2003, the Company raised approximately $471,000,000. The Company used the proceeds from the IPO, together with the borrowings under a new $125,000,000 Senior Term Loan, to redeem all of its outstanding shares of preferred stock and options to purchase shares of such preferred stock, redeem 35% of the Senior Subordinated Notes and repay an existing Senior Term Loan. (See further discussion below.) The Company offset redemption payments to the stockholders with outstanding loans by the full amount of such loans.

Basis of Presentation

     The financial statements have been prepared on a consolidated basis in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated financial statements include the accounts of AMIS Holdings, Inc. and its majority controlled and owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

     On September 4, 2003, the Company’s board of directors and stockholders effected a one-for-three reverse split of the Company’s outstanding common stock. All share and per share amounts have been retroactively restated in the accompanying consolidated financial statements and notes for all periods presented.

New Accounting Pronouncements

     In November 2002, the FASB issued Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees or Indebtedness of Others.” FIN 45 elaborates on the existing disclosure requirements for most guarantees, including residual value guarantees issued in conjunction with operating lease agreements. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligation it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements were effective for financial statements of interim or annual periods ending after December 15, 2002. Adoption of the disclosure requirements and of the recognition and measurement provisions of FIN 45 did not have a material impact on the Company’s financial statements.

5

Table of Contents

     On December 31, 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition to SFAS No. 123’s fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 148’s amendment of the transition and annual disclosure requirements of SFAS No. 123 is effective for fiscal years ending after December 15, 2002. SFAS No. 148’s amendment of the disclosure requirements of APB Opinion No. 28 is effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of SFAS No. 148 did not have a material impact on the Company’s financial position or results of operations, but has resulted in incremental disclosures.

     The following table provides pro forma information for the three and nine months ended September 27, 2003, and the three and nine months ended September 28, 2002, respectively, that illustrates the net loss attributable to common stockholders, and net loss per common share (in thousands, except for per share data) as if the fair value method had been adopted under SFAS No. 123.

2. Inventories

     Inventories consist of the following (in thousands):

6

Table of Contents

3. Net Loss per Common Share

     The following table sets forth the computation of basic and diluted net loss per common share (in thousands, except for per share data):

     Options to purchase 5,293,831 and 4,996,356 shares of common stock and warrants to purchase 13,787,883 and 8,824,011 shares of common stock were outstanding at September 27, 2003 and September 28, 2002, respectively, but were not included in the computation of diluted earnings per share as the effect would be antidilutive because of the net loss attributable to common stockholders recorded during the period.

     During October 2003, warrants to purchase 9,113,148 shares of common stock, with an exercise price of $0.03 per share, were net exercised by reducing the number of shares issued to the holders by the number of shares having a fair market value equal to the exercise price. Net of the shares surrendered, 9,099,223 shares were issued in exchange for the exercise of these warrants.

4. Purchase of the Mixed Signal Business of Alcatel Microelectronics from STMicroelectronics

     On June 26, 2002, the Company acquired the assets and assumed certain liabilities of the mixed signal business (MSB) of Alcatel Microelectronics NV from STMicroelectronics NV (the MSB Acquisition) in a purchase that closed concurrently with STMicroelectronics’ purchase of 100% of the capital stock of Alcatel Microelectronics NV from Alcatel S.A. The results of MSB have been consolidated with the Company since the date of acquisition. The Company used existing cash along with the proceeds from the issuance of $75,000,000 of Series C Preferred Stock to finance the purchase price.

Following is a summary of the MSB purchase price (in thousands):

     The foregoing purchase price includes the allocation of certain operating liabilities between MSB and STMicroelectronics. Additionally, as part of the MSB Acquisition, the Company prepared and approved a plan of restructuring in connection with the integration of MSB into the Company and included the costs of those restructuring activities in the purchase price pursuant to EITF No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” The restructuring costs that have been accrued and included in the purchase price primarily include costs associated with relocating and combining MSB’s testing facilities with the Company’s existing facilities. The majority of these costs relate to employee severance. As of September 27, 2003, the Company had terminated 42 employees as part of this transfer of the testing facilities. This relocation was substantially completed during the quarter ended June 28, 2003, however, final costs were paid out in the quarter ended September 27, 2003. Additional costs, which were substantially paid in 2002, represent employee severance

7

Table of Contents

for 79 MSB employees that had duplicative responsibilities as those of the Company’s employees and were terminated as part of the Company’s plan.

     Following is a rollforward of the restructuring accrual from December 31, 2002 to September 27, 2003 (in thousands):

Following is a summary of the allocation of the MSB purchase price (in thousands):

     The foregoing allocation is based on the fair values of the assets acquired, including valuations of intangible assets completed by the Company’s independent financial consulting firm, LECG, LLC, and the final allocation of certain trade receivables between MSB and STMicroelectronics. The intangible assets acquired through the MSB Acquisition consist of licensed technology and a contract. The contract was amortized over six months, the life of the contract, and the licensed technology is being amortized over 15 years.

5. Long-Term Debt

     In conjunction with the Recapitalization Agreement entered into in December 2000, AMI Semiconductor, Inc. (AMIS), the Company’s wholly owned subsidiary, obtained $250,000,000 of Senior Secured Credit Facilities consisting of a $75,000,000 Revolving Credit Facility and a $175,000,000 Term Loan. At December 31, 2002 approximately $160,100,000 was outstanding under the Term Loan. The Company used proceeds from the issuance of the Senior Subordinated Notes (see discussion below) to pay approximately $111,800,000 on the Term Loan in January 2003 and proceeds from the IPO and the new Term Loan (see discussion below) to pay the balance outstanding under the Term Loan of approximately $39,900,000 in September 2003.

     On September 26, 2003, the Company and AMIS entered into amended and restated Senior Secured Credit Facilities (the Facilities) consisting of a $125,000,000 Term Loan and an extension of the Revolving Credit Facility, discussed above, increasing the amount available to $90,000,000. The new Term Loan requires a principal payment of $312,500, together with accrued and unpaid interest, on the last day of March, June, September and December, with the balance due on September 26, 2008. The Revolving Credit Facility ($20,000,000 of which may be in the form of letters of credit) is available for working capital and general corporate purposes. As of September 27, 2003, no amount was drawn on the Revolving Credit Facility.

     The interest rate on the new Term Loan at September 27, 2003 was 3.62%. The interest rate on the original Term Loan at December 31, 2002 was 5.2% with an effective rate of 6.5% after considering the impact of certain hedging arrangements associated with the Facilities. As discussed in Note 6, no hedging arrangements existed as of September 27, 2003.

     The Facilities require the Company to maintain a consolidated interest coverage ratio and a maximum senior leverage ratio and contain certain other nonfinancial covenants, all as defined within the credit agreement, as amended. The Facilities also generally restrict payment of dividends to parties outside of the consolidated entity. The Company was in compliance with these covenants as of September 27, 2003.

     On January 29, 2003, AMIS issued $200,000,000 aggregate principal amount of 10 3/4% Senior Subordinated Notes maturing on February 1, 2013 (Senior Subordinated Notes). The proceeds were used to repay approximately

8

Table of Contents

$111,800,000 of the original Term Loan and redeem the Series C Preferred Stock for a total, including cumulative dividends, of approximately $80,764,000. Interest on the Senior Subordinated Notes is payable semi-annually on February 1 and August 1 of each year, commencing August 1, 2003. The Senior Subordinated Notes are fully and unconditionally guaranteed by the Company and AMIS’ existing and future domestic restricted subsidiaries.

     AMIS cannot redeem the Senior Subordinated Notes before February 1, 2008 except that, until February 1, 2006 AMIS can choose to redeem up to an aggregate of 35% of the sum of the original principal amount of the Senior Subordinated Notes and the original principal amount of any other Senior Subordinated Notes issued under the same indenture, with money AMIS raises in certain equity offerings or receives as a capital contribution from the Company, as long as: (i) AMIS pays the holders of the Senior Subordinated Notes a redemption price of 110.75% of the principal amount of the Senior Subordinated Notes it redeems, plus accrued interest to the date of redemption; (ii) at least 65% of the original aggregate principal amount of the Senior Subordinated Notes and such other Senior Subordinated Notes issued remains outstanding after each such redemption; and (iii) AMIS redeems the Senior Subordinated Notes within 90 days of completing the equity offering or receiving the capital contribution. On or after February 1, 2008, AMIS can redeem some or all of the Senior Subordinated Notes at certain specified prices, plus accrued interest to the date of redemption.

     On November 1, 2003, the Company used proceeds from the IPO and the new Term Loan to redeem 35% of the Senior Subordinated Notes for $77,525,000, plus accrued interest to the date of redemption. This amount includes the aforementioned premium of 10.75% of the principal amount, which was charged to expense in November 2003. In connection with the repayment of the Senior Subordinated Notes, the Company wrote off approximately $2,800,000 of deferred financing costs, which was charged to expense in November 2003.

     If AMIS experiences a Change of Control (as such term is defined in the indenture governing the Senior Subordinated Notes), subject to certain conditions, AMIS must give holders of the Senior Subordinated Notes an opportunity to sell to AMIS the Senior Subordinated Notes at a purchase price of 101% of the principal amount of the Senior Subordinated Notes, plus accrued interest.

     The payment of the principal, premium and interest on the Senior Subordinated Notes is fully and unconditionally guaranteed on a senior subordinated basis by the Company and AMIS’ existing and future domestic restricted subsidiaries that have outstanding or incur certain indebtedness. The guaranty by the Company and AMIS’ domestic restricted subsidiaries is subordinated to all of the Company’s existing and future Senior Indebtedness (as such term is defined in the indenture governing the Senior Subordinated Notes) and the existing and future Senior Indebtedness of AMIS’ domestic restricted subsidiaries, including their guaranty of AMIS’ obligations under the Facilities.

     The indenture governing the Senior Subordinated Notes contains covenants that, among other things, (i) limit AMIS’ ability and certain of its subsidiaries’ ability to incur additional indebtedness; (ii) pay dividends on AMIS’ capital stock or redeem, repurchase or retire AMIS’ capital stock or subordinated indebtedness; (iii) make investments; (iv) engage in transactions with affiliates; (v) sell assets, including capital stock of subsidiaries; and (vi) consolidate, merge or transfer assets.

     The Senior Subordinated Notes are unsecured and subordinated to existing and future Senior Indebtedness (as such term is defined in the indenture governing the Senior Subordinated Notes) of AMIS. The Senior Subordinated Notes will rank pari passu in right of payment with any future senior subordinated indebtedness AMIS might issue and rank senior to any other subordinated indebtedness AMIS might issue.

     In connection with the issuance of the Senior Subordinated Notes, the Company paid underwriting fees and other transaction costs of approximately $7,300,000 that were capitalized as intangible assets and are being amortized over the term of the notes. In connection with the new Term Loan, the Company paid underwriting fees and other transaction costs of approximately $3,350,000 that were capitalized as intangible assets and are being amortized over the term of the loan. In connection with the repayment of the original Term Loan, the Company expensed approximately $3,700,000 of unamortized deferred financing costs in February 2003 and approximately $1,408,000 in September 2003.

9

Table of Contents

6. Derivatives and Hedging

     The Company paid a variable rate of interest under its original Term Loan. Under the terms of the Credit Agreement for the original Term Loan, the Company was required to enter into agreements to effectively “fix” the interest rate on one half of the outstanding balance of its Term Loan. On June 21, 2001, the Company entered into certain derivative instruments with major banks in order to manage its exposure to interest rate fluctuations. Such instruments were designated and qualified as cash flow hedges in accordance with SFAS No. 133.

     Two such instruments were interest rate swap agreements that effectively converted interest rate exposure from variable rates to fixed rates of interest. During the quarter ended March 29, 2003 in conjunction with the Company’s repayment of a portion of the Term Loan one of these swap agreements was settled. The Company was required to pay approximately $365,000 to settle the instrument before its scheduled maturity in June 2003. This amount is recorded as other expense in the accompanying statement of operations. The remaining swap agreement matured during the quarter ended June 28, 2003. At September 27, 2003 and December 31, 2002, the aggregate notional principal amount of these agreements was zero and $42,000,000, respectively. Under the swap agreements, the Company paid fixed rates of interest of 4.5% and 4.7% and received a floating rate of interest based on the three month LIBOR. The difference between amounts to be paid or received on the interest rate swap agreements was recorded as an increase or reduction of interest expense.

     The Company also entered into an interest rate cap agreement and an interest rate floor agreement on June 21, 2001 for a notional amount of $45,500,000. Both agreements were settled during the three months ended March 29, 2003 in conjunction with the Company’s repayment of a portion of the Term Loan. The interest rate cap agreement granted the Company the right to limit the LIBOR rate it would have paid on its variable rate debt to a maximum of 7.25%. The interest rate floor agreement restricted the Company from paying a LIBOR rate of less than 3.15% on its variable rate debt. The Company paid approximately $423,000 to settle the agreements. This is recorded as other expense in the statement of operations.

7. Comprehensive Income

     Comprehensive income for the three and nine month periods ended September 27, 2003 was approximately $1,919,000 and $695,000, respectively. Of these amounts, gains of approximately $0 and $628,000, respectively, related to the change in the fair value of derivatives. Additional gains of approximately $248,000 and $3,867,000, respectively, related to changes in the cumulative translation adjustment.

     Comprehensive income for the three and nine month periods ended September 28, 2002 was approximately $5,477,000 and $2,320,000, respectively. Of these amounts, losses of approximately $(42,000) and $(132,000), respectively, related to the change in the fair value of derivatives. The offsetting gains (losses) of approximately $(238,000) and $331,000, respectively, related to changes in the cumulative translation adjustment.

8. Stock Options

     The Company grants stock options pursuant to its Amended and Restated 2000 Equity Incentive Plan, which was originally adopted by AMIS on July 29, 2000. In general, options granted vest over three and a half to four years.

     In conjunction with AMIS’ recapitalization in December 2000, outstanding options to purchase common stock of AMIS were converted to options to purchase a unit consisting of the following shares of the Company: (a) two shares of Class A common stock, (b) .2588164 shares of Series A Senior Preferred Stock and (c) .2070531 shares of Series B Junior Preferred Stock. The components of the unit were permitted to be exercised separately. The exercise price of the preferred stock portion was subject to adjustment based on the accretion of dividends on the underlying preferred stock. Additional options have been issued that entitle the holder to purchase shares of common stock.

     As discussed above, using proceeds from the IPO and the new Term Loan, all options for preferred stock were redeemed during September 2003, with accrued amounts due being paid in October 2003. As part of this redemption, the Company recognized compensation expense of approximately $2,901,000 during the third quarter of 2003, which is included in nonrecurring charges on the accompanying statement of operations.

     During the quarters ended June 28, 2003 and September 27, 2003, the Company re-evaluated its prior estimates of the fair value of its common stock. As a result, the Company determined that certain options issued in each quarter were issued with exercise prices that were less than the deemed fair value of the Company’s common stock. As a result, deferred stock-based compensation and additional paid-in capital of approximately $186,000 and $333,000 for the quarters ended June 28, 2003 and September 27, 2003, respectively, were recorded. The deferred stock-based compensation has been recorded as a component of stockholders’ equity and is being recognized over

10

Table of Contents

the vesting period of the underlying stock options using the accelerated method under FIN 28 “Accounting for Stock Appreciation Rights and Other Variable Stock Options or Award Plans.”

9. Restructuring and Impairment Charges

     The Company entered into a non-compete agreement with GA-TEK and Japan Energy in conjunction with the December 21, 2000 Recapitalization pursuant to which each of Japan Energy and GA-TEK agreed to not engage in the custom semiconductor business anywhere in the world through December 2005. In connection with the Company’s second quarter review of the carrying value of its intangible assets, the Company reached a determination that the carrying value of the non-compete had been impaired based primarily on a change in Japan Energy’s and GA-TEK’s business focus and related capabilities. Effective June 26, 2003, the Company released each of Japan Energy and GA-TEK from all of its obligations under the non-compete agreement. Therefore, the Company wrote off the remaining unamortized balance of this non-compete agreement of approximately $20,028,000 as of the effective date. This amount is included in impairment charges in the accompanying statement of operations.

     Pursuant to EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” in 2002 and 2001, senior management and the Board of Directors approved plans to restructure certain of the Company’s operations. The 2002 plan involved the curtailment of redundant functions between the U.S. and Belgian entities resulting from the MSB Acquisition discussed in Note 4. In total 90 people employed by the Company prior to the MSB Acquisition were terminated in connection with this restructuring program. The Company recorded related restructuring expense of approximately $457,000, all of which had been paid as of September 27, 2003. Additionally, relationships with certain sales representative firms in Europe were terminated because their duties were transferred to MSB. The expense associated with these terminations was approximately $478,000, of which $275,000 had been paid out at September 27, 2003. The timing of the payment of the remaining accrual of $203,000, which is included in accrued expenses, is currently under negotiation.

     The 2001 plan involved the closure of certain offices and the termination of certain management and other employees. The objectives of the plan were to increase the competitiveness of the Company and manage costs during the semiconductor industry downturn that began in 2000. In total, 265 employees were terminated as part of this program. Such terminations affected virtually all departments within the Company’s business. All terminated employees were notified in the period in which the charge was recorded.

     Expenses relating to the plan totaled approximately $4,983,000 during the year ended December 31, 2001 and were comprised of approximately $3,643,000 for termination benefits and other related costs and approximately $1,340,000 for lease termination and other office closure costs. Such other office closure costs relate primarily to a loss on the sale of a significant portion of the assets of the Dresden, Germany office, which was sold to a third party in October 2001. The assets were sold for approximately $456,000. The Company realized a loss of approximately $331,000 on the sale of these assets. The Company also closed certain offices in California, Texas and North Carolina and accrued its remaining lease obligations related to these facilities.

     As of September 27, 2003, approximately $4,493,000 of the 2001 restructuring expenses had been paid or the fixed assets had been written off. The remaining accrual for the 2001 plan, which represents severance of approximately $17,000 and lease termination and other costs of approximately $186,000, is included in accrued expenses on the accompanying balance sheet as September 27, 2003. The timing of the payment of the remaining severance is currently under negotiation. The remaining lease termination costs will be paid over the remaining lease terms, which end in July 2005. During 2002, approximately $287,000 of the 2001 restructuring accrual was reversed because certain estimates were revised.

11

Table of Contents

     Following is a summary of the restructuring accrual relating to the 2001 and 2002 plans (in thousands):

10. Transactions with Related Parties

     Pursuant to the terms of the Recapitalization Agreement, the Company entered into advisory agreements with affiliates of Citigroup Venture Capital Equity Partners, L.P. (CVC) and Francisco Partners, L.P. (Francisco Partners) (the Sponsors) pursuant to which the Sponsors may provide financial, advisory and consulting services to the Company. For each of the three months ended September 27, 2003 and September 28, 2002, expenses totaling approximately $500,000 were recorded related to these advisory agreements. For each of the nine months ended September 27, 2003 and September 28, 2002, expenses totaling approximately $1,500,000 were recorded related to these advisory agreements. During September 2003, the Company entered into amendments to these advisory agreements whereby the annual advisory fees payable under these agreements ceased. Additionally, the amendments called for a one-time payment of $8,500,000 for investment banking and financial advisory services, which was paid in September 2003 and is included in nonrecurring charges in the accompanying statement of operations.

11. Segment Reporting

     The Company has three reportable segments: Integrated Mixed Signal Products, Mixed Signal Foundry Services and Structured Digital Products. Each segment comprises product families with similar requirements for design, development and marketing.

     Information about segments (in thousands):

Reconciliation of segment information to consolidated financial statements (in thousands):

12

Table of Contents

12. Condensed Consolidating Financial Statements

     The new Term Loan and the Senior Subordinated Notes are each fully and unconditionally guaranteed by the Company and each existing domestic subsidiary and by each subsequently acquired or organized domestic subsidiary of AMIS. The original Term Loan was also guaranteed on this basis. AMIS’ foreign subsidiaries do not provide these guarantees. Below are unaudited condensed consolidating balance sheets as of September 27, 2003 and December 31, 2002, and unaudited statements of operations for the three and nine months ended September 27, 2003 and September 28, 2002 and unaudited statements of cash flows for the nine months ended September 27, 2003 and September 28, 2002 of the Company, reflecting the financial position, results of operations and cash flows of the guarantor and non-guarantor entities.

13

Table of Contents

AMIS Holdings, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

September 27, 2003 (unaudited)