CHANDLER, Ariz., July 28 -- Amkor Technology, Inc. (Nasdaq: AMKR) reported second quarter sales of $378 million, up 10% sequentially and up 8% over the second quarter of 2002. Amkor's second quarter net loss was $51 million, or ($0.31) per share, compared with a loss of $384 million, or ($2.33) per share, in the second quarter of 2002.
Amkor's second quarter loss includes a charge, with no tax effect, for debt retirement costs of $31 million, or ($0.19) per share, principally in connection with the early redemption of $425 million in 91/4% Senior Notes due May 2006. Amkor's second quarter 2002 loss included an aggregate charge of $311 million ($298 million, or $1.81 per share, after taxes) for special charges and an impairment associated with Amkor's equity investment in Anam Semiconductor, Inc.
Second quarter revenue reflected strong business flow, partially offset by the impact of the May 26 earthquake in northern Japan, which disrupted the flow of fabricated wafers to our Iwate joint venture from Toshiba and other customers whose production facilities were affected.
"During the quarter we met our revenue and gross margin guidance despite the business disruption caused by the Japan earthquake and notwithstanding the general impact of SARS on the Asian electronics industry," said James Kim, Amkor's chairman and chief executive officer. "We are encouraged with the near and medium term outlook for the semiconductor industry and the outsourced assembly and test sector. Over the past two years we have undertaken a broad set of initiatives to reduce our cost structure and improve the efficiency of our operations. We currently expect to approach or exceed breakeven net income in the third quarter, and based on long-range customer forecasts, we expect a sequentially stronger Q4. We also agree with the broad analyst community that 2004 should be a year of meaningful recovery in our industry, and therefore expect our business to continue to grow into 2004, subject to normal seasonal patterns."
"We continue to see evidence that outsourcing is accelerating as IC suppliers and OEMs focus on companies like Amkor to satisfy their advanced package design, assembly and test requirements," said John Boruch, Amkor's president and chief operating officer. "There is clearly a technology transition occurring at the system level that is fueling demand for our advanced package solutions. Our second quarter business developed as expected, and as our customers' aggregate long-range forecasts strengthened, we accelerated our investment in leading-edge assembly and test equipment."
"Second quarter gross margin of 19.6% reflected the positive operating leverage in our business," said Ken Joyce, Amkor's chief financial officer. "Over the past two years we have made substantial progress increasing the profitability of our business by focusing on improving operating efficiencies while managing costs. During the second quarter of 2003 we enhanced our liquidity and capital structure. We refinanced our secured credit facility on more favorable terms, increasing our term loan from $97 million to $170 million with no significant principal amortization until June 30, 2005 and reducing our revolving line of credit (which remains unused) from $100 million to $30 million. In addition, we took advantage of favorable capital markets by extending the maturity of a significant portion of our long-term debt at a more favorable interest rate by issuing $425 million of 7 3/4% Senior Notes due 2013 and using the proceeds to redeem our $425 million in 9 1/4% Senior Notes due 2006."
"Our liquidity remained solid, with cash and equivalents of $346 million at June 30," said Joyce. "Short term debt totaled $49 million, principally relating to working capital lines of credit supporting our operations in Japan and Taiwan."
Selected operating data for the second quarter of 2003 is included on a separate page of this release.
Our customers' forecasts have generally been building since the beginning of the year. We expect operating expenses to increase modestly in connection with higher business levels in the second half of the year. On the basis of these factors we have the following expectations for the third quarter:
* Sequential revenue increase in the range of 8% to 10%. * Gross margin in the range of 21% to 24%. * Net loss of 2 cents per share to net income of 2 cents per share.
Our capital budget for 2003 remains $150 million. We currently anticipate capital expenditures in the third quarter to be approximately $40 million.
We will resume the recognition of deferred tax assets when Amkor returns to profitability. We anticipate recognizing approximately $3 million per quarter in foreign tax expense for the remainder of 2003. In connection with the ongoing assessment of probable income taxes and related accruals for prior years, we may recognize a tax benefit during the third quarter of 2003. This potential tax benefit is not included in the above earnings guidance. At June 30, 2003 our company had U.S. net operating losses totaling $425 million expiring between 2021 and 2022. Additionally, at June 30, 2003 we had $50 million of non-U.S. net operating losses available for carryforward, expiring between 2003 and 2012.
Amkor will hold a conference call on July 28, 2003 at 5:00 p.m. eastern time to discuss the results of the second quarter in more detail. The call will be webcast and can be accessed through the investor relations page of our web site: www.amkor.com as well as through CCBN's website, www.companyboardroom.com. An archive of the webcast can be accessed through the same links and will be available until the company's next quarterly earnings conference call. An audio replay of the call will be available for 48 hours following the conference call by dialing 303-590-3000 passcode: 540790#.
Amkor is the world's largest provider of contract semiconductor assembly and test services. The company offers semiconductor companies and electronics OEMs a complete set of microelectronic design and manufacturing services. More information on Amkor is available from the company's SEC filings and on Amkor's web site: www.amkor.com.
The statements by James Kim, John Boruch and Ken Joyce, and the above statements contained in our Business Outlook, are forward-looking statements that involve a number of risks and uncertainties. Factors that could affect future operating results and cause actual results to vary materially from historical and expected results include, but are not limited to: the highly unpredictable nature of the semiconductor industry; volatility of consumer demand for products incorporating our semiconductor packages; worldwide economic effects of terrorist attacks, military conflict in the Middle East and potential military conflict in Asia and Africa; potential effects of business disruption caused by SARS; competitive pricing and declines in average selling prices; reliance on a small group of principal customers; timing and volume of orders relative to the production capacity; availability of manufacturing capacity and fluctuations in manufacturing yields; availability of financing; competition; dependence on international operations and sales; dependence on raw material and equipment suppliers; exchange rate fluctuations; dependence on key personnel; difficulties in managing growth; enforcement of intellectual property rights; and environmental regulations.
Further information on risk factors that could affect the outcome of the events set forth in these statements and that could affect the company's operating results and financial condition is detailed in the company's filings with the Securities and Exchange Commission, including the Report on Form 10-K for the fiscal year ended December 31, 2002 and the Report on Form 10-Q for the fiscal quarter ended March 31, 2003.
For further information, please contact Jeffrey Luth, VP Corporate Communications of Amkor Technology, Inc., +1-480-821-2408, ext. 5130, firstname.lastname@example.org
Selected operating data for the second quarter of 2003 Quarter Year-to-date -- Capital expenditures: $68 million $85 million -- Depreciation and amortization: $55 million $113 million -- Free cash flow * ($43 million) ($30 million) * Reconciliation of free cash flow to the most directly comparable GAAP measure: Net cash provided by continuing operating activities $25 million $54 million Less purchases of property, plant and equipment ($68 million) ($84 million) Free cash flow from continuing operations ($43 million) ($30 million) -- We define free cash flow from continuing operations as net cash provided by continuing operating activities less purchases of property, plant and equipment. Free cash flow is not defined by generally accepted accounting principles, and our definition of free cash flow may not be comparable to similar companies. -- End market distribution (an approximation based on a sampling of programs with our largest customers) -- Communications 38% -- Computing 23% -- Consumer 28% -- Other 11% -- Combined assembly & test capacity utilization (based on front-of-line capacity) was approximately 70%. -- Assembly average selling price (calculated on a per pin basis) declined approximately 3% from Q1 2003. (Excludes results of Amkor Iwate joint venture) -- Assembly unit shipments were 1.31 billion, up 16% from Q1 2003. -- Percentage of assembly revenue: -- Advanced packages 76% -- Traditional packages 24% -- Test revenue as a proportion of total revenue was approximately 9%.