CHANDLER, Ariz., July 27 / -- Amkor Technology, Inc. (Nasdaq: AMKR) reported second quarter 2005 sales of $489 million, up 17% sequentially and down 1% from the second quarter of 2004. Amkor's second quarter net loss was $52 million, or ($0.30) per share. For the second quarter of 2004, Amkor's net income was $10 million, or $0.06 per share, and included after-tax gains of $16.5 million, or $0.09 per share, from the sale of an equity investment and the settlement of litigation with a software provider.
"I am pleased with our revenue growth this quarter, which reflects implementation of the strategic business initiatives we put in place last year, together with a modest recovery in overall industry conditions," said James Kim, Amkor's chairman and chief executive officer. "We expect to achieve continued business momentum from these initiatives, and we are deploying what we believe are the appropriate resources to support this planned growth. We are building a critical mass of revenue in our newer factories, which have thus far hampered our performance. For the second half of this year we are focused on improving our profitability by increasing revenue, enriching our product mix and driving greater operational efficiencies throughout the organization."
"During the second quarter we executed on key programs, continued to ramp IBM-related business and leveraged our strong technology and operational capabilities in several areas, including 3D and chip-scale packaging, system-in-package, flip chip and test," said John Boruch, Amkor's president and chief operating officer.
"We expect to see continued growth in the second half as we support a seasonal build in consumer electronics and ramp newer turnkey programs involving a range of flip chip applications," said Boruch. "We expect that supply will continue to tighten over the next several quarters, which should lead to firmer pricing and an opportunity to improve product and customer mix."
"We shipped over 1.8 billion packages in Q2, an increase of 19% over Q1," said Ken Joyce, Amkor's chief financial officer. "Gross margin increased to 13.6%. Our second quarter profitability improvement was constrained by product mix and higher manufacturing costs, as well as lower pricing in our Japan factory."
"Second quarter SG&A expenses rose approximately $6 million over Q1, and included higher-than-anticipated legal billings in connection with the ongoing mold compound litigation, exit costs in connection with vacating our West Chester, PA administrative offices, and a loss accrual for potential foreign business taxes," said Joyce. "We expect legal expenses to moderate in the second half of the year."
During the second quarter we recorded in "Other expense" a non-cash impairment of $2.3 million on our equity investment in DongbuAnam Semiconductor.
Second quarter capital additions totaled $115 million. "Our capital investments are focused on customer opportunities driven by our strength in advanced assembly and test technologies, our Unitive acquisition and IBM collaboration," said Joyce. "We are currently budgeting third quarter capital additions of $90 million."
During the second quarter we paid a total of $45 million in connection with previously announced settlement agreements pertaining to the mold compound litigation.
Selected operating data for the second quarter of 2005 is included in a separate section of this release before the financial tables.
The third quarter is typically characterized by a seasonal build in consumer electronics. Our aggregate customer forecasts have increased, particularly for turnkey flip chip programs driven by our Unitive acquisition and IBM collaboration. On the basis of current forecasts, we have the following expectations for the third quarter of 2005:
-- Sequential revenue increase in the range of 8% to 10%. -- Gross margin in the range of 15% to 16%. -- Net loss in the range of 18 cents to 22 cents per diluted share.
We anticipate recognizing approximately $2 million per quarter in foreign tax expense during 2005. At June 30, 2005 our company had U.S. net operating loss carryforwards totaling $411 million expiring through 2025. Additionally, at June 30, 2005 we had $90 million of non-U.S. net operating loss carryforwards expiring through 2010.
Amkor will conduct a conference call on July 27, 2005 at 5:00 p.m. eastern time to discuss the results of the second quarter in more detail. The call can be accessed by dialing 303-262-2050 or by visiting the investor relations page of our website: www.amkor.com or Thompson 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: 11033022.
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 website: www.amkor.com.
Forward Looking Statement Disclaimer
This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the following: planned growth and continued business momentum; building a critical mass of revenue; achieving greater operating efficiencies; expectations of a seasonal build in consumer electronics; the ramp of turnkey programs involving flip chip applications; expectations of supply tightening, firmer pricing, improving product and customer mix, expanding margins and moderating legal expenses; Amkor's financial performance, including expected revenue, gross margin, and net loss; budgeted capital expenditures; customer forecasts; anticipated foreign tax expense; and the forward-looking statements contained under Business Outlook. These forward-looking statements are subject to a number of risks and uncertainties that could affect future 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; fluctuations in operating results; weakness in the forecasts of Amkor's customers; customer modification of and follow through with respect to forecasts provided to Amkor; deterioration of the U.S. or other economies; the highly unpredictable nature of litigation; our relationship with IBM; the satisfaction of conditions in the agreements entered into in connection with the IBM transaction; the incurrence of significant additional cost and expense necessary for an increase in Amkor's capacity, and Amkor's ability to finance capital expenditures and increase its capacity; worldwide economic effects of terrorist attacks and military conflict; competitive pricing and declines in average selling prices; timing and volume of orders relative to the production capacity; fluctuations in manufacturing yields; competition; the risk of adverse results of litigation against us; 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; environmental regulations and technological challenges.
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 reports on Form 10-K/A for the year ended December 31, 2004 and Form 10-Q/A for the quarter ended March 31, 2005. Amkor undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this document.
Contact: Jeffrey Luth VP Corporate Communications 480-821-5000 ext. 5130 firstname.lastname@example.org Selected operating data for the second quarter and six months of 2005 2nd Quarter Six Months -- Capital additions $115 million $161 million Net change in related accounts payable ($57 million) ($37 million) Payments for property, plant & equipment $58 million $124 million -- Depreciation and amortization $61 million $122 million -- Free cash flow * ($69 million) ($142 million) * Reconciliation of free cash flow to the most directly comparable GAAP measure: Net cash used in operating activities ($11 million) ($18 million) Payments for property, plant & equipment ($58 million) ($124 million) Free cash flow ($69 million) ($142 million) We define free cash flow as net cash (used in) provided by operating activities less payments for property, plant and equipment. Free cash flow is not defined by generally accepted accounting principles. However, we believe free cash flow to be relevant and useful information to our investors in assessing our liquidity, capital resources and financial operating results. Our management uses free cash flow in evaluating our liquidity, our ability to service debt and our ability to fund capital expenditures. However, this measure should be considered in addition to, and not as a substitute, or superior to, cash flows or other measures of financial performance prepared in accordance with generally accepted accounting principles, and our definition of free cash flow may not be comparable to similarly titled measures reported by other companies. -- Capacity utilization, calculated as quarterly revenue divided by revenue generating capacity (RGC) at quarter-end, was approximately 85%. We define RGC as 90% utilization of installed capacity (based on the limiting equipment set on each production line), using quarterly average selling price. -- Assembly unit shipments were 1.8 billion, up 19% from Q1 2005. -- Percentage of revenue (rounded to nearest whole percent): Leadframe packages 40% Laminate packages 46% Other 4% Test 9% AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) For the Three Months Ended June 30, 2005 2004 Net sales $489,335 $492,536 Cost of sales 422,837 397,761 Gross profit 66,498 94,775 Operating expenses: Selling, general and administrative 66,865 55,916 Research and development 9,924 9,900 Total operating expenses 76,789 65,816 Operating income (loss) (10,291) 28,959 Other expense (income): Interest expense, net 41,395 36,360 Foreign currency loss (gain) (1,773) 2,635 Other expense (income), net 2,063 (25,541) Total other expense 41,685 13,454 Income (loss) before income taxes and minority interest (51,976) 15,505 Minority interest 926 3 Income (loss) before income taxes (51,050) 15,508 Provision for income taxes 1,353 5,528 Net income (loss) $(52,403) $9,980 Per Share Data: Basic and diluted net income (loss) per common share $(0.30) $0.06 Shares used in computing basic net income (loss) per common share 176,371 175,304 Shares used in computing diluted net income (loss) per common share 176,371 175,872 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) For the Six Months Ended June 30, 2005 2004 Net sales $906,816 $957,182 Cost of sales 796,923 750,559 Gross profit 109,893 206,623 Operating expenses: Selling, general and administrative 127,331 109,422 Research and development 18,824 18,877 Provision for legal settlement and contingencies 50,000 1,500 Total operating expenses 196,155 129,799 Operating income (loss) (86,262) 76,824 Other expense (income): Interest expense, net 81,908 69,650 Foreign currency loss 459 2,710 Other expense (income), net 2,241 (23,744) Total other expense 84,608 48,616 Income (loss) before income taxes and minority interest (170,870) 28,208 Minority interest 1,937 (355) Income (loss) before income taxes (168,933) 27,853 Provision for income taxes 2,540 6,963 Net income (loss) $(171,473) $20,890 Per Share Data: Basic and diluted net income (loss) per common share $(0.97) $0.12 Shares used in computing basic net income (loss) per common share 176,045 174,961 Shares used in computing diluted net income (loss) per common share 176,045 178,028 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) June 30, December 31, 2005 2004 Assets Current assets: Cash and cash equivalents $228,204 $372,284 Accounts receivable: Trade, net of allowance of $5,164 in 2005 and $5,074 in 2004 294,918 265,547 Other 5,304 3,948 Inventories, net 116,719 111,616 Other current assets 30,276 32,591 Total current assets 675,421 785,986 Property, plant and equipment, net 1,427,915 1,380,396 Goodwill 655,940 656,052 Intangibles, net 42,863 47,302 Investments 11,101 13,762 Other assets 75,441 81,870 Total assets $2,888,681 $2,965,368 Liabilities and Stockholders' Equity Current liabilities: Bank overdraft $-- $102 Short-term borrowings and current portion of long-term debt 281,639 52,147 Trade accounts payable 307,344 211,706 Accrued expenses 159,857 175,075 Total current liabilities 748,840 439,030 Long-term debt 1,810,377 2,040,813 Other non-current liabilities 125,462 109,317 Total liabilities 2,684,679 2,589,160 Minority interest 4,937 6,679 Stockholders' equity: Common stock 178 176 Additional paid-in capital 1,326,310 1,323,579 Accumulated deficit (1,140,545) (969,072) Accumulated other comprehensive income 13,122 14,846 Total stockholders' equity 199,065 369,529 Total liabilities and stockholders' equity $2,888,681 $2,965,368 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) For the Three Months Ended June 30, 2005 2004 Cash flows from operating activities: Net income (loss) $(52,403) $9,980 Depreciation and amortization 61,186 58,264 Other non-cash items 5,016 (20,364) Changes in assets and liabilities excluding effects of acquisition (25,070) 4,575 Net cash provided by (used in) operating activities (11,271) 52,455 Cash flows from investing activities: Payments for property, plant and equipment (57,685) (140,331) Other investing activities 287 32,614 Net cash used in investing activities (57,398) (107,717) Cash flows provided by financing activities 9,822 5,393 Effect of exchange rate fluctuations on cash and cash equivalents 291 (1,032) Net decrease in cash and cash equivalents (58,556) (50,901) Cash and cash equivalents, beginning of period 286,760 345,496 Cash and cash equivalents, end of period $228,204 $294,595 Supplemental disclosures of cash flow information: Cash paid (refunded) during the period for: Interest $42,787 $34,083 Income taxes $(817) $2,670 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) For the Six Months Ended June 30, 2005 2004 Cash flows from operating activities: Net income (loss) $(171,473) $20,890 Depreciation and amortization 122,044 110,661 Other non-cash items 6,398 (15,102) Changes in assets and liabilities excluding effects of acquisitions 25,318 33,344 Net cash provided by (used in) operating activities (17,713) 149,793 Cash flows from investing activities: Payments for property, plant and equipment (124,397) (284,182) Other investing activities 443 39,068 Net cash used in investing activities (123,954) (245,114) Cash flows provided by (used in) financing activities (1,994) 77,145 Effect of exchange rate fluctuations on cash and cash equivalents (419) (488) Net decrease in cash and cash equivalents (144,080) (18,664) Cash and cash equivalents, beginning of period 372,284 313,259 Cash and cash equivalents, end of period $228,204 $294,595 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $82,957 $61,602 Income taxes $1,916 $14,451