CHANDLER, Ariz.---July 26, 2006--Amkor Technology, Inc. (NASDAQ: AMKR) reported record second quarter 2006 sales of $687 million, up 40% from the second quarter of 2005 and up 6% from the first quarter of 2006. Amkor's second quarter 2006 net income was $24 million, or $0.13 per diluted share, compared with a net loss of $52 million, or ($0.30) per share, in the second quarter of 2005. During the second quarter of 2006, in connection with refinancing transactions to address near-term debt maturities, Amkor recorded charges, with no net tax effect, of $28 million, or $0.14 per share.
"I am pleased with our performance this quarter, as we realized continued strong growth in flip chip, 3D packaging and test, consistent with the strategic investments we've made in these areas during the past two years," said James Kim, Chairman and Chief Executive Officer. "During the quarter, we continued to build on our industry leadership in a variety of advanced package applications."
"We expect that the robust year-over-year growth rates achieved over the past several quarters will begin to moderate," said Kim. "While there are signs that the U.S. economy is slowing, the global economy does not appear to be slowing as fast. Given the breadth of our customer base and end markets that we support, we believe that this should provide some stability with respect to overall demand."
"During the second quarter, we completed a series of financing transactions to address our near-term debt maturities and reduce ongoing interest expense. We also used available cash to retire $132 million in 5.75% convertible subordinated notes at maturity on June 1, 2006 and to repurchase $4 million in 5% convertible notes due March 2007," said Kim. "To put our improved liquidity into perspective, at the beginning of 2005, we had more than $1.1 billion of debt maturing through 2009. Today the amount is approximately $360 million."
"We remain committed to maintaining a disciplined approach to our business model, with rational capital investments, continued cost management, and a clear focus on driving operating efficiencies throughout the organization," said Kim. "I expect that we will make additional progress in utilizing free cash flow to reduce our remaining debt. Based on current forecasts, we believe we will have sufficient cash resources available to retire the remaining $142 million of 5% convertible notes due March 2007."
"We achieved record sales and units in the second quarter, driven by high performance applications, cell phones and other portable devices," said Ken Joyce, Amkor's Chief Financial Officer.
Second quarter gross margin rose to 25% from 24% in the first quarter. "During the second quarter, we commenced the build out of our new wafer bumping and test facility in Singapore and our new assembly and test factory in Shanghai," said Joyce. "Depreciation expense and other costs associated with these factories will continue to influence gross margin until we build a critical mass of revenue in these operations."
During the quarter, we recorded a $3 million impairment of an equity investment, which is reflected in Other (income) expense, net.
Capital expenditures totaled $93 million in the second quarter and $196 million for the first six months. "We currently plan to limit our full year 2006 capital additions to $300 million, which includes approximately $50 million for facilities principally for our new factories in China and Singapore," said Joyce. "Our 2006 capital equipment budget remains focused on strategic growth areas of wafer level processing, test, and flip chip assembly. We will continue to monitor business conditions and are prepared to adjust this estimate."
"During the quarter, we took several steps to strengthen our financial liquidity," said Joyce. "We issued $400 million of 9.25% senior notes due 2016 and used most of the net proceeds to repurchase $352 million of our 9.25% senior notes due 2008. In addition, we issued $190 million in 2.5% convertible senior subordinated notes due 2011 and used the net proceeds to redeem $178 million of our $200 million in 10.5% senior subordinated notes due 2009. In connection with the repurchased and redeemed notes, we recognized charges, with no net tax effect, totaling $28 million, or $0.14 per share. Going forward, we expect to realize substantial interest savings from refinancing most of the 10.5% senior subordinated notes with 2.5% senior subordinated convertible debt."
"We have achieved positive free cash flow for the past three quarters, and given our financial strategy and current view of business conditions, we anticipate that this trend should continue for the rest of the year," said Joyce.
For the full year 2006, we anticipate an effective tax rate of 7.8% which reflects the utilization of U.S. and foreign net operating loss carryforwards and tax holidays in certain of our foreign jurisdictions. At June 30, 2006, Amkor had U.S. net operating losses available for carryforward totaling $336 million expiring through 2025. Additionally, at June 30, 2006, we had $78 million of non-U.S. operating losses available for carryforward, expiring through 2011.
Selected operating data for the second quarter 2006 is included in a section before the financial tables.
Business Outlook
On the basis of our customers' forecasts, we have the following expectations for the third quarter of 2006:
- Sales flat to up 2% from the second quarter of 2006
- Gross margin in the range of 24% to 25%
- Net income in the range of $0.23 to $0.27 per diluted share
The Company also announced today that its Board of Directors has formed a special committee of independent directors to undertake a voluntary review of Amkor's historical stock option practices. The committee will be assisted by independent counsel.
Amkor will conduct a conference call on July 26, 2006 at 5:00 p.m. eastern time. The call can be accessed by dialing 303-205-0033 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: 11061882.
About Amkor
Amkor is a leading provider of advanced 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.
Forward Looking Statement Disclaimer
This press release contains forward-looking statements within the meaning of federal securities laws, including, without limitation, statements regarding the following: expectations regarding year-over-year growth rates; anticipated growth rates of the U.S. and global economies; expectations with respect to level of overall demand; expectations regarding the reduction of remaining debt from free cash flow; expectations regarding sufficiency of cash resources to satisfy the $142 million of 5% convertible notes due March 2007; expectations regarding impact of depreciation expense and other costs associated with new factories on gross margin; expectations regarding the level and focus of additional capital expenditures for 2006; expectations regarding the achievement of positive free cash flow for the rest of 2006; expectations regarding the effective tax rate for full year 2006 and the statements regarding sales, gross margin and net income 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; inability to achieve high capacity utilization rates; volatility of consumer demand for products incorporating our semiconductor packages; weakness in the forecasts of Amkor's customers; customer modification of and follow through with respect to forecasts provided to Amkor; curtailment of outsourcing by our customers; our high leverage and restrictive covenants; failure to realize sufficient cash flow to fund capital expenditures; deterioration of the U.S. or other economies; the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters; worldwide economic effects of terrorist attacks, natural disasters 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; 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 Form 10-K for the year ended December 31, 2005, and Form 10-Q for the quarter ended March 31, 2006, and current reports on Form 8-K. Amkor undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this document.
Selected operating data for the second quarter and six month 2006
2nd Quarter Six Months
-- Capital additions $ 93 million $196 million
Net decrease in related accounts
payable and deposits ($ 2 million) ($ 26 million)
------------- --------------
Payments for property, plant &
equipment $ 91 million $ 170 million
============ ==============
-- Depreciation and amortization $ 67 million $ 134 million
-- Free cash flow (1) $ 30 million $ 70 million
(1) Reconciliation of free cash flow to the most directly
comparable GAAP measure:
Net cash provided by
operating activities $ 121 million $ 240 million
Less payments for property,
plant and equipment ($ 91 million) ($ 170 million)
------------- --------------
Free cash flow from
continuing operations $ 30 million $ 70 million
============ ==============
We define free cash flow as net cash 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 because it provides them with
additional information 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.
-- Second quarter capacity utilization was approximately 84%.
-- Assembly unit shipments for Q2 2006 were 2.2 billion, up 2%
from Q1 2006.
-- For Q2 2006, our top ten customers accounted for 46% of net sales.
-- Q2 2006 end market distribution (an approximation based on a
sampling of programs with some of our largest customers):
Communications 35%
Computing 20%
Consumer 34%
Other 11%
-- Q2 2006 percentage of net sales:
Leadframe packages 39%
Laminate packages 47%
Other 4%
Test 10%
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except net income (loss) per share data)
(unaudited)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------------- ----------------------
2006 2005 2006 2005
--------- --------- ----------- ----------
(In thousands, except per share data)
Net sales $686,631 $489,335 $1,331,720 $906,816
Cost of sales 516,950 422,837 1,007,021 796,923
--------- --------- ----------- ----------
Gross profit 169,681 66,498 324,699 109,893
--------- --------- ----------- ----------
Operating expenses:
Selling, general and
administrative 59,155 66,865 119,406 127,331
Research and development 10,315 9,924 19,745 18,824
Provision for legal
settlements and
contingencies - - 1,000 50,000
--------- --------- ----------- ----------
Total operating
expenses 69,470 76,789 140,151 196,155
--------- --------- ----------- ----------
Operating income (loss) 100,211 (10,291) 184,548 (86,262)
--------- --------- ----------- ----------
Other (income) expense:
Interest expense, net 40,600 41,395 81,757 81,908
Interest expense, related
party 1,563 - 3,351 -
Foreign currency loss
(income) 1,079 (1,773) 5,007 459
Debt retirement costs,
net 27,860 - 27,389 -
Other (income) expense,
net 2,840 2,063 2,375 2,241
--------- --------- ----------- ----------
Total other expense,
net 73,942 41,685 119,879 84,608
--------- --------- ----------- ----------
Income (loss) before income
taxes and minority
interests 26,269 (51,976) 64,669 (170,870)
Income tax expense 1,867 1,353 5,479 2,540
--------- --------- ----------- ----------
Income (loss) before
minority interest income
(expense) 24,402 (53,329) 59,190 (173,410)
Minority interest income
(expense), net of tax (340) 926 (455) 1,937
--------- --------- ----------- ----------
Net income (loss) $24,062 $(52,403) $58,735 $(171,473)
========= ========= =========== ==========
Net income (loss) per
common share:
Basic $0.14 $(0.30) $0.33 $(0.97)
========= ========= =========== ==========
Diluted $0.13 $(0.30) $0.32 $(0.97)
========= ========= =========== ==========
Shares used in computing
net income (loss) per
common share:
Basic 177,689 176,371 177,245 176,045
========= ========= =========== ==========
Diluted 197,175 176,371 193,839 176,045
========= ========= =========== ==========
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, December 31,
2006 2005
----------- ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $143,507 $206,575
Restricted cash 2,413 -
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $4,764 and $4,947 402,773 381,495
Other 8,038 5,089
Inventories, net 163,982 138,109
Other current assets 32,305 35,222
----------- ------------
Total current assets 753,018 766,490
Property, plant and equipment, net 1,482,365 1,419,472
Goodwill 672,069 653,717
Intangibles, net 34,317 38,391
Investments 5,829 9,668
Other assets 52,818 67,353
----------- ------------
Total assets $3,000,416 $2,955,091
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion
of long-term debt $208,230 $184,389
Trade accounts payable 356,558 326,712
Accrued expenses 132,641 123,631
----------- ------------
Total current liabilities 697,429 634,732
Long-term debt 1,729,750 1,856,247
Long-term debt, related party 100,000 100,000
Other non-current liabilities 177,162 135,861
----------- ------------
Total liabilities 2,704,341 2,726,840
----------- ------------
Minority interests 3,879 3,950
----------- ------------
Stockholders' equity:
Common stock 178 178
Additional paid-in capital 1,333,303 1,326,426
Accumulated deficit (1,047,226) (1,105,961)
Accumulated other comprehensive income 5,941 3,658
----------- ------------
Total stockholders' equity 292,196 224,301
----------- ------------
Total liabilities and stockholders'
equity $3,000,416 $2,955,091
=========== ============
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Six Months Ended
June 30,
------------------------
2006 2005
----------- ----------
(In thousands)
Cash flows from operating activities:
Net income (loss) $58,735 $(171,473)
Depreciation and amortization 133,525 122,044
Other operating activities and non-cash
items 50,381 6,398
Changes in assets and liabilities (2,835) 25,318
----------- ----------
Net cash provided by (used in)
operating activities 239,806 (17,713)
----------- ----------
Cash flows from investing activities:
Payments for property, plant and
equipment (169,469) (124,397)
Proceeds from the sale of property, plant
and equipment 1,333 443
----------- ----------
Net cash used in investing activities (168,136) (123,954)
----------- ----------
Cash flows from financing activities:
Net change in bank overdrafts - (102)
Borrowings under revolving credit
facilities 111,185 111,760
Payments under revolving credit
facilities (95,462) (111,488)
Proceeds from issuance of long-term debt 590,000 12,722
Payments for debt issuance costs (14,852) -
Payments on long-term debt (731,634) (17,619)
Proceeds from issuance of stock through
stock compensation plans 4,959 2,733
----------- ----------
Net cash used in financing activities (135,804) (1,994)
----------- ----------
Effect of exchange rate fluctuations on
cash and cash equivalents 1,066 (419)
----------- ----------
Net decrease in cash and cash equivalents (63,068) (144,080)
Cash and cash equivalents, beginning of
period 206,575 372,284
----------- ----------
Cash and cash equivalents, end of period $143,507 $228,204
=========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $94,469 $82,957
Income taxes $3,216 $1,916
Non cash investing and financing
activities:
Application of deposit upon closing of
acquisition of minority interest $17,822 $-
Contact:
Amkor Technology, Inc. Jeffrey Luth VP Corporate Communications 480-821-5000, ext. 5130 jluth@amkor.com