CHANDLER, Ariz., April 27 -- Amkor Technology, Inc. (Nasdaq: AMKR) reported first quarter sales of $465 million, up 1% sequentially and up 36% over the first quarter of 2003. Amkor's first quarter net income was $12 million, or $0.07 per share, compared with $15 million, or $0.09 per share, in the first quarter of 2003.
Amkor's first quarter 2004 net income includes a pre-tax charge of $2.7 million, in connection with the prepayment of Amkor's term loan under its senior secured credit facility. In the first quarter 2003 Amkor's net income included a loss from continuing operations of $40 million, or ($0.24) per share, which was offset by income of $55 million, or $0.33 per share, in connection with its divested wafer fabrication services business.
"While first quarter revenue came in slightly below our forecasted range, we nonetheless were pleased to achieve sequential revenue growth, in contrast to what is normally a seasonally down first quarter," said James Kim, Amkor's chairman and chief executive officer. "The increase in Q1 revenue and continued growth in our customers' long range forecasts suggest that we are in the midst of a broad-based industry recovery, and we remain confident of exceeding $2 billion revenue in 2004. This recovery, combined with what we believe is an acceleration in the outsourcing of semiconductor assembly and test, presents compelling opportunities for Amkor to strengthen our operational capabilities and expand our customer penetration."
"Due to relative weakness in our cell phone products and production constraints at foundries, first quarter demand for some advanced package products did not materialize as forecast," said Bruce Freyman, Amkor's president and chief operating officer. "During the first quarter we increased capacity in several package products which were on allocation for much of 2003 in order to get ahead of demand, and we are now in a more favorable position to support expected growth of these package products through 2004. We also experienced strong growth in our legacy package products during the quarter, which further suggests that integrated device manufacturers (IDMs) have generally not invested in additional assembly capacity."
"First quarter gross margin of 24% was down 1% sequentially due principally to higher material costs," said Ken Joyce, Amkor's chief financial officer. "We anticipate that second quarter gross margin will remain at 24%, despite higher sales volume, due to higher depreciation and labor costs as we continue to expand production space, add equipment and increase factory workforce in advance of what we expect will be a strong second half. These costs include expenses associated with equipping lines and qualifying new business in our newly acquired facility in Taiwan. We currently expect gross margin to improve in the second half of 2004.
"First quarter SG&A expenses included $5 million in legal costs in connection with the epoxy mold compound litigation. As previously disclosed, this litigation relates to a certain mold compound used in the assembly of various IC packages which is claimed to have caused a number of package failures on the part of our customers. We expect the current level of legal costs will continue through 2004. We believe we have very good defenses to these claims and have asserted our own claims against the supplier of the compound," said Joyce.
"First quarter capital expenditures totaled $171 million, including $41 million associated with our previously announced purchase of a 354,000 square foot assembly and test facility in Taiwan. We continue to invest in key package and test areas where we see long-term growth and are currently budgeting second quarter capital expenditures of $125 - 150 million," said Joyce.
"In March we enhanced the company's liquidity by issuing $250 million in 7 1/8% senior notes due 2011 and using the net proceeds to repay amounts outstanding under our senior secured credit facility and for general corporate purposes," said Joyce. "This provides us with the additional financial flexibility to pursue our growth initiatives.
"In April we sold 10.1 million shares of common stock of Anam Semiconductor, Inc. for cash proceeds of approximately $50 million," said Joyce. "This transaction will result in an after-tax gain of approximately $20 million, or $0.11 per share, which will be included in our second quarter results. The incremental cash will be used to fund ongoing capital investments. Following this sale, our investment in ASI has been reduced to 4.6 million shares, or approximately 4% of the company."
Selected operating data for the first quarter of 2004 is included on a separate page of this release.
Business outlook
Our customer forecasts continue to rise for both advanced and legacy package products, however, it is possible that some customers will experience capacity constraints at their wafer foundries. On the basis of current forecasts, we have the following expectations for the second quarter of 2004:
-- Sequential revenue increase in the range of 5% to 8%.
-- Gross margin around 24%.
-- Net income in the range of 17 to 22 cents per diluted share, which
includes an after-tax gain of $20 million, or $0.11 per share, from
the sale of 10.1 million shares of ASI common stock.
The tax rate for the second quarter and full year 2004 is expected to be around 11%. At March 31, 2004 our company had U.S. net operating losses totaling $418 million expiring between 2021 and 2024. Additionally, at March 31, 2004 we had $45 million of non-U.S. net operating losses available for carryforward, expiring between 2004 and 2012.
Amkor will conduct a conference call on April 27, 2004 at 10:30 a.m. eastern time to discuss the results of the first quarter in more detail. The call can be accessed by dialing 303-205-0044 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 our 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: 574793#.
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, capacity expansion, capital expenditures, gross margin, legal costs, net income, tax rates, use of proceeds 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; changes in 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, 2003.
Contact:
Jeffrey Luth
VP Corporate Communications
480-821-5000, ext. 5130
jluth@amkor.com
Selected operating data for the first quarter of 2004
1st Quarter
-- Capital expenditures: $171 million
-- Depreciation and amortization: $52 million
-- Free cash flow * ($47 million)
* Reconciliation of free cash flow to the most directly comparable
GAAP measure:
Net cash provided by continuing
operating activities $124 million
Less purchases of property, plant and equipment ($171 million)
Free cash flow from continuing operations ($47 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 37%
Computing 24%
Consumer 30%
Other 9%
-- Capacity utilization, calculated as quarterly revenue divided by
revenue generating capacity (RGC) at quarter-end, was approximately
71%. We define RGC as 100% utilization of installed capacity (based
on the limiting equipment set on each production line), using
quarterly average selling price.
-- Assembly average selling price (calculated on a per pin basis)
declined approximately 3% from Q4 2003.
-- Assembly unit shipments were 1.8 billion, up 9% from Q4 2003.
-- Percentage of assembly revenue:
Advanced packages 79%
Traditional packages 21%
-- 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
March 31,
2004 2003
(unaudited)
Net revenues $464,646 $343,131
Cost of revenues 352,798 296,562
Gross profit 111,848 46,569
Operating expenses: (1)
Selling, general and administrative 52,178 41,423
Research and development 8,977 7,609
Loss on disposal of fixed assets, net 8 69
Amortization of acquired intangibles 1,328 2,030
Total operating expenses 62,491 51,131
Operating income (loss) 49,357 (4,562)
Other (income) expense:
Interest expense, net 33,290 35,862
Foreign currency loss (gain) 75 (925)
Other (income) expense, net (931) 1,229
Debt retirement costs (2) 2,720 --
Total other expense 35,154 36,166
Income (loss) before income taxes,
equity investment loss,
minority interest and
discontinued operations 14,203 (40,728)
Equity investment loss -- (3,628)
Minority interest (358) 149
Income (loss) from continuing operations
before income taxes 13,845 (44,207)
Provision for income taxes (benefit) 1,604 (4,177)
Income (loss) from continuing operations 12,241 (40,030)
Discontinued operations:
Income from wafer fabrication
services business,
net of tax of $419 in 2003 -- 3,047
Gain on sale of wafer fabrication
services business,
net of tax of $7,081 in 2003 -- 51,519
Net income $12,241 $14,536
Per Share Data:
Basic and diluted income (loss)
per common share from
continuing operations $0.07 $(0.24)
Basic and diluted income
per common share from
discontinued operations -- 0.33
Basic and diluted income
per common share $0.07 $0.09
Shares used in computing
basic income (loss)
per common share 174,622 165,156
Shares used in computing
diluted income (loss)
per common share 180,202 165,156
(1) Certain previously reported amounts have been reclassified to conform
with the current presentation
(2) Debt retirement costs include the following:
Call premium $1,687 $ --
Unamortized deferred debt
acquisition costs 1,033 --
$2,720 $ --
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2004 2003
(unaudited)
Assets
Current assets:
Cash and cash equivalents $345,496 $313,259
Accounts receivable:
Trade, net of allowance of $5,298 in 2004
and $6,514 in 2003 284,825 310,096
Other 5,636 4,413
Inventories 112,406 92,439
Other current assets 38,445 49,606
Total current assets 786,808 769,813
Property, plant and equipment, net 1,131,503 1,007,648
Investments 55,860 51,181
Other assets:
Goodwill 626,596 629,850
Acquired intangibles 39,877 37,730
Other 74,357 67,601
Assets of discontinued operations -- 96
740,830 735,277
Total assets $2,715,001 $2,563,919
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdraft $535 $2,690
Short-term borrowings and
current portion of long-term debt 22,488 28,665
Trade accounts payable 280,401 230,396
Accrued expenses 165,479 170,145
Total current liabilities 468,903 431,896
Long-term debt 1,734,407 1,650,707
Other noncurrent liabilities 87,296 78,974
Total liabilities 2,290,606 2,161,577
Minority interest 1,564 1,338
Stockholders' equity:
Common stock 175 175
Additional paid-in capital 1,319,010 1,317,164
Accumulated deficit (919,295) (931,536)
Accumulated other comprehensive gains 22,941 15,201
Total stockholders' equity 422,831 401,004
Total liabilities and
stockholders' equity $2,715,001 $2,563,919
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months Ended
March 31,
2004 2003
(unaudited)
Cash flows from continuing operating activities:
Income (loss) from continuing operations $12,241 $(40,030)
Depreciation and amortization 52,397 57,793
Equity investment loss -- 3,628
Other adjustments to reconcile income (loss)
to net cash provided by operating activities 5,262 4,186
Changes in assets and liabilities
excluding effects of acquisition 54,329 3,887
Net cash provided by operating activities 124,229 29,464
Cash flows from continuing investing activities:
Purchases of property, plant and equipment (170,838) (16,571)
Other investing activities 6,454 13,278
Net cash used in investing activities (164,384) (3,293)
Cash flows from continuing financing activities
Net proceeds from issuance of long-term debt 249,007 --
Payments of long-term debt (171,551) (5,899)
Other financing activity (5,704) (1,968)
Net cash provided by (used in)
financing activities 71,752 (7,867)
Effect of exchange rate fluctuations on
cash and cash equivalents related to
continuing operations 544 (207)
Cash flows provided by discontinued operations 96 22,139
Net increase in cash and cash equivalents 32,237 40,236
Cash and cash equivalents, beginning of period 313,259 311,249
Cash and cash equivalents, end of period $345,496 $351,485
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $27,519 $31,390
Income taxes $11,781 $4,028