Increases Revenue Outlook for First Quarter and Full Year 2004
CHANDLER, Ariz., Jan. 28 -- Amkor Technology, Inc. (Nasdaq: AMKR) reported fourth quarter sales of $459 million, up 8% sequentially and up 23% over the fourth quarter of 2002. Amkor's fourth quarter net income was $23 million, or $0.13 per share, compared with a loss of $196 million, or ($1.19) per share, in the fourth quarter of 2002.
Amkor's fourth quarter 2003 net income includes a $7 million gain on the sale of a marketable security partially offset by $5 million in debt retirement costs associated with the repurchase of convertible notes. Amkor's $196 million loss in the fourth quarter of 2002 included $172 million in non-cash charges associated with (i) establishment of a $129 million valuation allowance against deferred tax assets; (ii) a $33 million impairment in Amkor's investment in Anam Semiconductor, Inc. and (iii) $10 million of estimated costs to consolidate two factories.
For the full year, revenue was $1.6 billion compared with $1.4 billion in 2002. Amkor's net income in 2003 was $2 million, or $0.01 per share, compared with a loss of $827 million, or ($5.04) per share, in 2002.
"We have completed a year of significant accomplishment and believe that 2004 will present exceptional growth opportunities for Amkor," said James Kim, Amkor's chairman and chief executive officer. "Our 2003 results exceeded our initial expectations and were achieved during a year in which we realigned our operating structure, enhanced our balance sheet and strengthened our product development, sales and support organizations. These strategic initiatives place Amkor in an excellent position to drive continued expansion of the outsourcing model for semiconductor assembly and test."
"Since 2001 we have cautiously managed our business in an environment of economic uncertainty and cloudy visibility," continued Kim. "This environment began to change during 2003 as customer demand improved. We believe the semiconductor industry is now entering a period of strong expansion. We are seeing strength in the communications, computer and consumer markets. During the fourth quarter our customer forecasts continued to strengthen, and we now expect to achieve revenue growth in the first quarter of 2004, which is a significant reversal of what is normally a seasonally down quarter. Historically, a sequential increase in our first quarter sales has always signaled a strong year for Amkor. Last quarter I said we were positioning Amkor to achieve $2 billion in revenue in 2004; I now believe we will exceed $2 billion."
"In response to broad-based customer demand we have re-ignited Amkor's growth engine and are aggressively moving to increase production capacity to meet demand that our customers are already forecasting," continued Kim. "We are focused on asserting our leadership position in key package technologies. We have budgeted first quarter capital expenditures of $200 million to accommodate robust customer demand and expand our operational footprint in Taiwan and China. We will most likely spend between $300 and $500 million for 2004."
"We see 2004 as a year of great promise for Amkor. We intend to accommodate growth opportunities while improving our capital structure, and we remain committed to de-levering the balance sheet," said Kim.
"Over the past year we've experienced unprecedented demand for stacked CSP, chip scale BGA, system-in-package, MicroLeadFrame®, camera modules and other advanced package families that are especially well suited for wireless and digital consumer electronic applications," said Bruce Freyman, Amkor's newly appointed president and chief operating officer. "We've also had exceptional demand for several legacy package families, and for strip test. During this period we've significantly increased manufacturing capacity and engineering support for the high-growth areas of our business. We are stepping up our product development and R&D activities to ensure that our packaging and test capabilities continue to keep pace with advances in the front end. We also are working on a variety of innovative design collaborations with several OEMs."
"Fourth quarter gross margin was 25%. As our business expansion program moves into high gear in Q1 and Q2, our goal will be to increase production capacity to get ahead of customer demand," said Ken Joyce, Amkor's chief financial officer. "We expect the associated depreciation expenses and to a lesser extent factory operating expenses to put some downward pressure on gross margin in the first quarter of 2004, with minimal impact on operating margin as first quarter SG&A expenses should increase only modestly."
"During 2003 we strengthened our capital structure -- reducing debt by $129 million and increasing shareholders equity by $147 million through the issuance of common stock. Our 2003 initiatives have yielded annualized interest expense savings of $15 million," said Joyce.
"As Jim Kim stated, we expect to grow significantly this year, and to support this robust growth we continue to evaluate strategies to further enhance our capital structure. We are prepared to supplement our cash resources with proceeds from capital market activities depending on the pace of our capital expenditure program," said Joyce.
Selected operating data for the fourth quarter and full year 2003 is included on a separate page of this release.
Our customers' forecasts have continued to build through most of the fourth quarter. On the basis of these forecasts, we have the following expectations for the first quarter of 2004:
-- Sequential revenue increase in the range of 2% to 4%. -- Gross margin around 24%. -- Net income in the range of 8 to 11 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 $6 million per quarter in foreign tax expense. At December 31, 2003 our company had U.S. net operating losses totaling $405 million expiring between 2021 and 2023. Additionally, at December 31, 2003 we had $49 million of non-U.S. net operating losses available for carryforward, expiring between 2003 and 2012.
Amkor will conduct a conference call on January 28, 2004 at 5:00 p.m. eastern time to discuss the results of the fourth 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: 561042#.
Amkor is a leading 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 .
This press release contains forward-looking statements within the meaning of federal securities laws, including, without limitation, statements regarding anticipated growth opportunities, expansion of the semiconductor industry, revenue and revenue growth, increased production capacity, expenditures, reduction of debt, product development and R&D activities, depreciation expense, operating expense, gross margin, operating margin, SG&A expense, net income, foreign tax expense and the statements contained under Business Outlook. These forward-looking statements are subject to a number of risks and uncertainties that could affect future operating results and cause actual results and events to differ materially from historical and expected results, including, but not limited to, the following: the highly unpredictable nature of the semiconductor industry; volatility of consumer demand for products incorporating our semiconductor packages; deterioration of the U.S. or other economies; worldwide economic effects of terrorist attacks; military conflict in the Middle East and potential military conflict in Asia, Africa and elsewhere; competitive pricing and declines in average selling prices; timing and volume of orders relative to the production capacity; incurrence of significant additional costs and expense necessary for the increase in our 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; the market price of our debt and equity securities; changes in foreign tax laws; 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 September 30, 2003.
Contact: Jeffrey Luth VP Corporate Communications 480-821-5000 ext. 5130 firstname.lastname@example.org Selected operating data for the fourth quarter and year ended of 2003 4th Quarter Year -- Capital expenditures: $82 million $231 million -- Depreciation and amortization: $54 million $220 million -- Free cash flow* ($8 million) ($57 million) *Reconciliation of free cash flow to the most directly comparable GAAP measure: Net cash provided by continuing operating activities $74 million $174 million Less purchases of property, plant and equipment ($82 million) ($231 million) Free cash flow from continuing operations ($8 million) ($57 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. Selected operating data for the fourth quarter of 2003 -- End market distribution (an approximation based on a sampling of programs with our largest customers) Communications 38% Computing 25% Consumer 27% Other 10% -- Combined assembly & test capacity utilization (based on front-of-line capacity) was approximately 90%. -- Assembly average selling price (calculated on a per pin basis) declined approximately 1% from Q3 2003. (Excludes results of Amkor Iwate joint venture) -- Assembly unit shipments were 1.6 billion, up 13% from Q3 2003. -- Percentage of assembly revenue: Advanced packages 80% Traditional packages 20% -- Test revenue as a proportion of total revenue was approximately 9%. AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) For the Three Months Ended December 31, 2003 2002 (unaudited) Net revenues $458,906 $373,189 Cost of revenues 344,685 312,006 Gross profit 114,221 61,183 Operating expenses: Selling, general and administrative 48,124 42,249 Research and development 6,330 6,654 Loss (gain) on disposal of fixed assets, net 284 (416) Amortization of acquired intangibles 2,080 1,997 Special charges, net (1) 125 9,985 Total operating expenses 56,943 60,469 Operating income 57,278 714 Other (income) expense: Interest expense, net 32,787 36,487 Foreign currency gain (1,939) (975) Other income, net (8,824) (1,003) Debt retirement costs (2) 5,168 -- Total other expense 27,192 34,509 Income (loss) before income taxes, equity investment gain (loss), minority interest and discontinued operations 30,086 (33,795) Equity investment gain (loss) 265 (42,125) Minority interest (1,873) 306 Income (loss) from continuing operations before income taxes 28,478 (75,614) Provision for income taxes 5,839 122,574 Income (loss) from continuing operations 22,639 (198,188) Discontinued operations: Income from wafer fabrication services business, net of tax of $1,323 in 2002 -- 2,072 Net income (loss) $22,639 $(196,116) Per Share Data: Basic and diluted income (loss) per common share from continuing operations $0.13 $(1.20) Basic and diluted income per common share from discontinued operations -- 0.01 Basic and diluted income (loss) per common share $0.13 $(1.19) Shares used in computing basic income (loss) per common share 170,910 164,927 Shares used in computing diluted income (loss) per common share 177,197 164,927 (1) Special charges include the following: Contract termination fee $2,011 $-- Loss (gain) on facility shutdown accruals (1,886) 9,985 $125 $9,985 (2) Debt retirement costs include the following: Call premium $2,844 $-- Unamortized deferred debt acquisition costs 2,324 -- $5,168 $-- AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) For the Year Ended December 31, 2003 2002 (unaudited) Net revenues $1,603,768 $1,406,178 Cost of revenues 1,267,302 1,310,563 Gross profit 336,466 95,615 Operating expenses: Selling, general and administrative 179,952 179,888 Research and development 25,784 31,189 Loss (gain) on disposal of fixed assets, net (586) 2,496 Amortization of acquired intangibles 8,183 6,992 Special charges, net (1) 125 291,970 Total operating expenses 213,458 512,535 Operating income (loss) 123,008 (416,920) Other (income) expense: Interest expense, net 140,281 147,497 Foreign currency (gain) loss (3,022) 906 Other income, net (6,748) (1,014) Debt retirement costs (2) 37,800 -- Total other expense 168,311 147,389 Loss before income taxes, equity investment losses, minority interest and discontinued operations (45,303) (564,309) Equity investment losses (3,290) (208,165) Minority interest (4,008) (1,932) Loss from continuing operations before income taxes (52,601) (774,406) Provision for income taxes (benefit) (233) 60,683 Loss from continuing operations (52,368) (835,089) Discontinued operations: Income from wafer fabrication services business, net of tax of $419 and $5,114 3,047 8,330 Gain on sale of wafer fabrication services business, net of tax of $7,081 in 2003 51,519 -- Income from discontinued operations 54,566 8,330 Net income (loss) $2,198 $(826,759) Per Share Data: Basic and diluted loss per common share from continuing operations $(0.31) $(5.09) Basic and diluted income per common share from discontinued operations 0.32 0.05 Basic and diluted income (loss) per common share $0.01 $(5.04) Shares used in computing basic and diluted income (loss) per common share 167,142 164,124 (1) Special charges include the following: Impairment of goodwill $-- $73,080 Impairment of long-lived assets -- 190,266 Contract termination fee 2,011 -- Loss (gain) on facility shutdown accruals (1,886) 28,624 $125 $291,970 (2) Debt retirement costs include the following: Call premium $24,148 $-- Unamortized deferred debt acquisition costs 11,111 -- Other debt retirement costs 2,541 -- $37,800 $-- AMKOR TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS (in thousands) December 31, December 31, 2003 2002 (unaudited) Assets Current assets: Cash and cash equivalents $313,259 $311,249 Accounts receivable: Trade, net of allowance of $6,514 in 2003 and $7,122 in 2002 318,051 234,056 Other 4,413 8,532 Inventories 92,439 72,121 Other current assets 49,606 48,661 Total current assets 777,768 674,619 Property, plant and equipment, net 1,007,648 966,338 Investments 51,181 83,235 Other assets: Goodwill 629,850 628,099 Acquired intangibles 37,730 45,033 Due from affiliates -- 20,852 Other 67,601 114,178 Assets of discontinued operations 96 25,630 735,277 833,792 Total assets $2,571,874 $2,557,984 Liabilities and Stockholders' Equity Current liabilities: Bank overdraft $2,690 $4,633 Short-term borrowings and current portion of long-term debt 28,665 71,023 Trade accounts payable 227,239 180,999 Due to affiliates 3,157 70,243 Accrued expenses 178,100 184,223 Total current liabilities 439,851 511,121 Long-term debt 1,650,707 1,737,690 Other noncurrent liabilities 78,974 67,661 Total liabilities 2,169,532 2,316,472 Minority interest 1,338 10,145 Stockholders' equity: Common stock 175 166 Additional paid-in capital 1,317,164 1,170,227 Accumulated deficit (931,536) (933,734) Receivable from stockholders -- (2,887) Accumulated other comprehensive gains (losses) 15,201 (2,405) Total stockholders' equity 401,004 231,367 Total liabilities and stockholders' equity $2,571,874 $2,557,984 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Three Months Ended December 31, 2003 2002 (unaudited) Cash flows from continuing operating activities: Income (loss) from continuing operations $22,639 $(198,188) Depreciation and amortization 54,375 59,157 Equity investment (gains) losses (265) 42,125 Other adjustments to reconcile income (loss) to net cash provided by operating activities 473 143,314 Changes in assets and liabilities excluding effects of acquisitions (3,390) 17,345 Net cash provided by operating activities 73,832 63,753 Cash flows from continuing investing activities: Purchases of property, plant and equipment (82,274) (12,806) Other investing activities 13,048 (6,992) Net cash used in investing activities (69,226) (19,798) Cash flows provided by (used in) continuing financing activities (30,467) 2,416 Effect of exchange rate fluctuations on cash and cash equivalents related to continuing operations (1,034) 428 Cash flows provided by (used in) discontinued operations (349) 29,412 Net increase (decrease) in cash and cash equivalents (27,244) 76,211 Cash and cash equivalents, beginning of period 340,503 235,038 Cash and cash equivalents, end of period $313,259 $311,249 Supplemental disclosures of cash flow information: Cash paid (received) during the period for: Interest $39,319 $39,125 Income taxes $286 $(6,599) AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2003 2002 (unaudited) Cash flows from continuing operating activities: Loss from continuing operations $(52,368) $(835,089) Depreciation and amortization 219,735 323,265 Equity investment losses 3,290 208,165 Other adjustments to reconcile loss to net cash provided by operating activities 54,453 376,341 Changes in assets and liabilities excluding effects of acquisitions (51,269) 40,493 Net cash provided by operating activities 173,841 113,175 Cash flows from continuing investing activities: Purchases of property, plant and equipment (230,504) (95,104) Other investing activities 65,913 40,539 Net cash used in investing activities (164,591) (54,565) Cash flows used in continuing financing activities (22,012) (11,382) Effect of exchange rate fluctuations on cash and cash equivalents related to continuing operations 1,488 1,333 Cash flows provided by discontinued operations 13,284 62,631 Net increase in cash and cash equivalents 2,010 111,192 Cash and cash equivalents, beginning of period 311,249 200,057 Cash and cash equivalents, end of period $313,259 $311,249 Supplemental disclosures of cash flow information: Cash paid (received) during the period for: Interest $147,188 $142,299 Income taxes $7,839 $(845)