Returns to Profitability Following Extended Industry Downturn
Expecting Continued Growth in Fourth Quarter and 2004
CHANDLER, AZ. -October 27, 2003 -- Amkor Technology, Inc. (Nasdaq: AMKR) reported third quarter sales of $424 million, up 12% sequentially and up 8% over the third quarter of 2002. Amkor returned to profitability in the third quarter, with net income of $16 million, or $0.09 per share, compared with a loss of $59 million, or ($0.36) per share, in the third quarter of 2002.
Amkor's third quarter net income includes a non-cash gain of $10 million, or $0.06 per share, in connection with the reversal of a tax accrual related to tax periods that have closed. Third quarter results also include a charge, with no tax effect, of $2 million, or $0.01 per share, for debt retirement costs in connection with open market purchases of $28 million in 9¼% Senior Notes due 2008. Amkor's results for the third quarter of 2002 included $11 million in after-tax charges associated with factory consolidation and operating efficiency initiatives.
"This was a landmark quarter, in which we achieved record unit shipments in most of our ten factories and returned the corporation to positive net income after an unprecedented industry downturn," said James Kim, Amkor's chairman and chief executive officer.
"We believe the outsourced semiconductor assembly and test industry is poised for a period of sustainable growth, at a rate that will outpace the semiconductor industry. We are encouraged that strengthening customer forecasts may partially offset the seasonal weakness typical of our first calendar quarter. Looking broadly at 2004, we are positioning our organization to achieve annual revenues in the neighborhood of $2 billion, and to reach a peak quarterly gross margin of 27% to 30% during the second half of 2004. We remain committed to improve productivity and profitability, maintain strong liquidity, reduce debt and enhance shareholder value," said Kim.
"During the third quarter we saw accelerating demand, particularly from customers supplying the cell phone industry, for a wide range of advanced packages, including stacked CSP, ChipArray BGA, MicroLeadFrame and camera modules," said John Boruch, Amkor's president and chief operating officer. "Business strengthened as the quarter progressed, with a large number of customers over-supporting their forecasts as demand materialized faster than initially projected. As customer forecasts continued to strengthen, we accelerated our investment in leading-edge assembly and test equipment, and now expect total 2003 capital expenditures to exceed $200 million. As previously announced, Amkor's bank credit facility has been modified to accommodate this increased capital budget."
"Third quarter gross margin rose to 23.9% from 19.6% in the second quarter. Third quarter operating margin rose to 11.2% from 6.0% in the second quarter reflecting the positive operating leverage in our business and the continued high utilization of assets supporting our high growth package families," said Ken Joyce, Amkor's chief financial officer. "Over the past two years we have made substantial progress enhancing the profitability of our business by improving operating efficiencies, increasing manufacturing capacity in strategic growth areas and managing costs."
"Our liquidity remained solid, with cash and equivalents of $341 million at September 30," said Joyce. "During the quarter we received $19 million as the first scheduled payment of a $38 million receivable from Dongbu relating to the sale in 2002 of 20 million shares of Anam Semiconductor Inc. common stock. The remaining $19 million payment is scheduled for February 2004. In the third quarter we also sold an additional five million shares of ASI for net cash proceeds of $12 million. At September 30, short-term debt totaled $54 million, principally relating to working capital lines of credit supporting our operations in Japan and Taiwan. As noted earlier, during the third quarter we purchased and retired $28 million of our 9 ¼% Senior Notes due 2008."
"We are approaching the third anniversary of our successful joint venture with Toshiba, and in January 2004 we will purchase the remaining 40% of the JV with cash payments ranging from $10 million to $15 million. This amount includes a payment of $2 million to terminate our commitment to purchase a tract of land adjacent to the Amkor Iwate facility," said Joyce.
Selected operating data for the third quarter of 2003 is included on a separate page of this release.
Business outlook
Our customers' forecasts have continued to build through most of the third quarter. On the basis of these forecasts, we have the following expectations for the fourth quarter:
- Sequential revenue increase in the range of 5% to 8%.
- Gross margin around 25%.
- Net income in the range of 7 to 10 cents per diluted share.
The provision for U.S. taxes related to our positive earnings is offset by the use of net operating loss carryforwards. We anticipate recognizing approximately $3 million per quarter in foreign tax expense. At September 30, 2003 our company had U.S. net operating losses totaling $400 million expiring between 2021 and 2022. Additionally, at September 30, 2003 we had $53 million of non-U.S. net operating losses available for carryforward, expiring between 2003 and 2012.
Amkor will conduct a conference call on October 27, 2003 at 5:00 p.m. eastern time to discuss the results of the third quarter in more detail. The call can be accessed by dialing 303-262-2130 or by visiting the investor relations page of our web site: www.amkor.com or 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: 550705#.
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; 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 year ended December 31, 2002 and the Report on Form 10-Q for the quarter ended June 30, 2003.
Selected operating data for the third quarter of 2003
3rd Quarter Year-to-date
-- Capital expenditures: $64 million $148 million
-- Depreciation and amortization: $53 million $165 million
-- Free cash flow * ($19 million) ($49 million)
* Reconciliation of free cash flow to the most directly comparable GAAP
measure:
Net cash provided by continuing
operating activities $45 million $99 million
Less purchases of property, plant
and equipment ($64 million) ($148 million)
Free cash flow from continuing
operations ($19 million) ($49 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: 41%
-- Computing 24%
-- Consumer 23%
-- Other 12%
-- Combined assembly & test capacity utilization (based on front-of-line
capacity) was approximately 80%.
-- Assembly average selling price (calculated on a per pin basis) declined
approximately 1% from Q2 2003.(Excludes results of Amkor Iwate
joint venture)
-- Assembly unit shipments were 1.45 billion, up 10% from Q2 2003.
-- Percentage of assembly revenue:
-- Advanced packages 77%
-- Traditional packages 23%
-- Test revenue as a proportion of total revenue was approximately 9%.
(tables to follow)
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Three Months Ended
September 30,
2003 2002
(unaudited) (unaudited)
Net revenues $423,784 $393,563
Cost of revenues 322,369 346,053
Gross profit 101,415 47,510
Operating expenses:
Selling, general and administrative 45,023 45,118
Research and development 6,836 7,622
Gain on disposal of assets (148) (200)
Amortization of acquired intangibles 2,035 2,000
Special charges (1) -- 13,819
Total operating expenses 53,746 68,359
Operating income (loss) 47,669 (20,849)
Other (income) expense:
Interest expense, net 35,151 37,391
Foreign currency gain (895) (821)
Other expense, net 671 996
Debt retirement costs (2) 2,071 --
Total other expense 36,998 37,566
Income (loss) before income taxes,
equity investment losses, minority
interest and discontinued operations 10,671 (58,415)
Equity investment losses -- (14,299)
Minority interest income (expense) (1,809) 423
Income (loss) from continuing
operations before income taxes 8,862 (72,291)
Income tax benefit (6,908) (11,078)
Income (loss) from continuing
operations 15,770 (61,213)
Discontinued operations:
Income from wafer fabrication
services business, net of tax of
$969 for 2002 -- 1,906
Net income (loss) $15,770 $(59,307)
Per Share Data:
Basic and diluted income (loss) per
common share from continuing
operations $0.09 $(0.37)
Basic and diluted income per common
share from discontinued operations -- 0.01
Basic and diluted income (loss) per
common share $0.09 $(0.36)
Shares used in computing basic income
(loss) per common share 166,628 164,489
Shares used in computing diluted
income (loss) per common share 171,440 164,489
(1) Special charges include the
following:
Loss on facility shutdowns $-- $13,819
-- 13,819
(2) Debt retirement costs include the
following:
Call premium related
to redemption of
senior notes due
February 2008 $1,648 $--
Write-off of unamortized
deferred debt
acquisition costs 423 --
2,071 --
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Nine Months Ended
September 30,
2003 2002
(unaudited) (unaudited)
Net revenues $1,144,862 $1,032,989
Cost of revenues 922,617 998,557
Gross profit 222,245 34,432
Operating expenses:
Selling, general and administrative 131,828 137,639
Research and development 19,454 24,535
Loss (gain) on disposal of assets (870) 2,912
Amortization of acquired intangibles 6,103 4,995
Special charges (1) -- 281,985
Total operating expenses 156,515 452,066
Operating income (loss) 65,730 (417,634)
Other (income) expense:
Interest expense, net 107,494 111,010
Foreign currency (gain) loss (1,083) 1,881
Other (income) expense, net 2,076 (11)
Debt retirement costs (2) 32,632 --
Total other expense 141,119 112,880
Loss before income taxes, equity
investment losses, minority interest
and discontinued operations (75,389) (530,514)
Equity investment losses (3,555) (166,040)
Minority interest expense (2,135) (2,238)
Loss from continuing operations
before income taxes (81,079) (698,792)
Income tax benefit (6,072) (61,891)
Loss from continuing operations (75,007) (636,901)
Discontinued operations:
Income from wafer fabrication
services business, net of tax of
$419 and $3,791 3,047 6,258
Gain on sale of wafer fabrication
services business, net of tax of
$7,081 in 2003 51,519 --
Income from discontinued operations 54,566 6,258
Net loss $(20,441) $(630,643)
Per Share Data:
Basic and diluted loss per common
share from continuing operations $(0.45) $(3.89)
Basic and diluted income per common
share from discontinued operations 0.33 0.04
Basic and diluted net loss per common
share $(0.12) $(3.85)
Shares used in computing basic and
diluted income (loss) per common
share 165,883 163,854
(1) Special charges include the
following:
Loss on FAS 142 impairment $-- $73,080
Loss on FAS 144 impairment -- 190,266
Loss on facility shutdowns -- 18,639
-- 281,985
(2) Debt retirement costs include the
following:
Call premium related to redemption
of senior notes due May 2006
and February 2008 $21,304 $--
Write-off of unamortized deferred
debt acquisition costs 8,787 --
Other debt retirement costs 2,541 --
32,632 --
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2003 2002
(unaudited)
Assets
Current assets:
Cash and cash equivalents $340,503 $311,249
Accounts receivable
Trade, net of allowance for
doubtful accounts of $6,862
and $7,122 280,959 234,056
Other 6,452 8,532
Inventories 88,280 72,121
Other current assets 48,071 48,661
Total current assets 764,265 674,619
Property, plant and equipment, net 978,409 966,338
Investments 47,281 83,235
Other assets:
Goodwill 629,502 628,099
Acquired intangibles 39,504 45,033
Due from affiliates -- 20,852
Other 76,711 114,178
Assets of discontinued operations 247 25,630
Total other assets 745,964 833,792
Total assets $2,535,919 $2,557,984
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdraft $5,130 $4,633
Short-term borrowings and current
portion of long-term debt 54,240 71,023
Trade accounts payable 195,882 180,999
Due to affiliates 3,109 70,243
Accrued expenses 166,109 184,223
Total current liabilities 424,470 511,121
Long-term debt 1,785,765 1,737,690
Other noncurrent liabilities 79,418 67,661
Total liabilities 2,289,653 2,316,472
Minority Interest 11,224 10,145
Stockholders' equity:
Common stock 167 166
Additional paid-in capital 1,179,904 1,170,227
Accumulated deficit (954,175) (933,734)
Receivable from stockholder -- (2,887)
Accumulated other comprehensive
gains (losses) 9,146 (2,405)
Total stockholders' equity 235,042 231,367
Total liabilities and
stockholders' equity $2,535,919 $2,557,984
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months Ended
September 30,
2003 2002
(unaudited) (unaudited)
Cash flows from continuing operating
activities:
Income (loss) from continuing
operations $15,770 $(61,213)
Depreciation and amortization 52,660 76,048
Equity investment losses -- (127,004)
Other adjustments to reconcile loss
to net cash provided by operating
activities 16,297 141,216
Changes in assets and liabilities
excluding effects of acquisitions (39,739) 19,003
Net cash provided by operating
activities 44,988 48,050
Cash flows from investing activities:
Purchases of property, plant and
equipment (63,649) (20,202)
Other investing activities 14,600 46,420
Net cash provided by (used in)
investing activities (49,049) 26,218
Cash flows used in financing
activities (3,841) (16,977)
Effect of exchange rate fluctuations
on cash and cash equivalents related
to continuing operations 2,041 (1,554)
Cash flows provided by discontinued
operations 60 17,363
Net increase (decrease) in cash and
cash equivalents (5,801) 73,100
Cash and cash equivalents, beginning
of period 346,304 161,938
Cash and cash equivalents, end of
period $340,503 $235,038
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $32,105 $31,658
Income taxes $3,030 $3,054
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Nine Months Ended
September 30,
2003 2002
(unaudited) (unaudited)
Cash flows from continuing operating
activities:
Loss from continuing operations $(75,007) $(636,901)
Depreciation and amortization 165,360 264,108
Equity investment losses 3,555 24,737
Other adjustments to reconcile loss
to net cash provided by operating
activities 53,980 374,330
Changes in assets and liabilities
excluding effects of acquisitions (48,792) 23,148
Net cash provided by operating
activities 99,096 49,422
Cash flows from investing activities:
Purchases of property, plant and
equipment (148,230) (82,298)
Other investing activities 34,612 47,531
Net cash used in investing
activities (113,618) (34,767)
Cash flows provided by (used in)
financing activities 27,621 (13,798)
Effect of exchange rate fluctuations
on cash and cash equivalents related
to continuing operations 2,522 905
Cash flows provided by discontinued
operations 13,633 33,219
Net increase in cash and cash
equivalents 29,254 34,981
Cash and cash equivalents, beginning
of period 311,249 200,057
Cash and cash equivalents, end of
period $340,503 $235,038
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $107,869 $103,174
Income taxes $7,553 $5,754
Contact:
Jeffrey Luth
VP Corporate Communications
480-821-2408 ext. 5130
jluth@amkor.com