Second Quarter 2011
- Net sales $688 million
- Gross margin 19%
- Net income $14 million (includes charges of $16 million related to debt refinancings)
- Earnings per diluted share $0.07 (include charges of $0.05 related to debt refinancings)
CHANDLER, Ariz. – July 27, 2011 – Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor assembly and test services, today announced financial results for the second quarter ended June 30, 2011, with net sales of $688 million, net income of $14 million, and earnings per diluted share of $0.07. Net income includes charges of $16 million, and earnings per diluted share include charges of $0.05, related to debt refinancings.
“We achieved strong results in the second quarter in the face of extraordinary supply chain challenges due to the tragic earthquake in Japan,” said Ken Joyce, Amkor’s president and chief executive officer. “Working closely with our customers and supply chain partners, we delivered sales and gross margin at the higher end of our expected range. However, as expected, our sales growth was constrained by the weakness in demand for wireless baseband chips by an OEM and the supply chain situation in Japan.”
Selected financial information for the second quarter 2011 is as follows:
- Net Sales: $688 million, up 3% from $665 million in the prior quarter, and down 8% from $749 million in the second quarter 2010
- Gross Margin: 19%, compared to 19% in the prior quarter and 24% in the second quarter 2010
- Net Income: $14 million, down from $25 million in the prior quarter, and down from $59 million in the second quarter 2010. Second quarter 2011 net income includes charges of $16 million related to debt refinancings
- Earnings Per Diluted Share: $0.07, down from $0.10 in the prior quarter, and down from $0.23 in the second quarter 2010. Second quarter 2011 earnings per diluted share include charges of $0.05 related to debt refinancings
“Gross margin of 19% was at the higher end of our anticipated range due primarily to the higher sales volume,” said Joanne Solomon, Amkor’s executive vice president and chief financial officer. “That said, we continue to experience significant margin pressure from unfavorable foreign currency exchange rate movements, higher gold prices, and lower than desired utilization rates.”
“We took advantage of favorable conditions in the capital markets to refinance high cost debt at a very attractive interest rate,” continued Solomon. “Our new 10 year note reduces our borrowing costs, extends our maturities, mitigates future refinancing and liquidity risks, and strengthens our balance sheet. We recognized charges of approximately $16 million, with no net tax effect, or $0.05 per diluted share, due primarily to premiums paid to retire the existing debt. Without these charges, our earnings per diluted share would have been at the higher end of our anticipated range.”
“Capital additions were $97 million during the second quarter, primarily in support of our newest and most advanced interconnect technologies for wireless communications packages including flip chip CSP, flip chip stacked CSP and fine pitch copper pillar flip chip,” said Solomon. “Our sales of these packages have more than doubled in the first half of 2011 compared to the same period in 2010.”
Cash and cash equivalents were $475 million, and net debt was $848 million, at June 30, 2011.
Selected operating data for the second quarter 2011 is included in a section before the financial statements.
“We expect third quarter sales growth to be consistent with our typical seasonal patterns,” said Joyce. “Strong demand for communications and the seasonal increase in gaming is expected to drive sequential revenue growth of 5% to 12%. To continue driving technology leadership and innovation and meet the capacity requirements of our leading customers, we are currently planning capital additions of approximately $225 million for the second half of 2011. This includes approximately $25 million for research and development initiatives including next generation interconnect technologies such as wafer-level fan out and Through Silicon Via.”
Based upon the currently available information, we have the following expectations for the third quarter 2011:
- Net sales of $720 million to $770 million, up 5% to up 12% from the prior quarter
- Gross margin between 17% and 20%
- Net income of $27 million to $52 million, or $0.11 to $0.20 per diluted share
- Capital additions of around $125 million for the third quarter, and capital additions of around $425 million for the full year
Conference Call Information
Amkor will conduct a conference call on July 27, 2011, at 5:00 p.m. Eastern Daylight Time. This call is being webcast and can be accessed at Amkor’s web site: www.amkor.com. You may also access the call by dialing 800-762-8779. A replay of the call will be made available at Amkor’s web site or by dialing 800-406-7325 (access pass code #4455478). The webcast is also being distributed over Thomson Reuters’ Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Reuters’ individual investor center at www.companyboardroom.com or by visiting any of the investor sites in Thomson Reuters’ Individual Investor Network. Institutional investors can access the call via Thomson Reuters’ password-protected event management site, Street Events (www.streetevents.com).
Amkor is a leading provider of semiconductor assembly and test services to semiconductor companies and electronics OEMs. 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 forward-looking statements within the meaning of federal securities laws. All statements other than statements of historical fact are considered forward-looking statements including, without limitation, statements made regarding: the impact of recent financing activities on our borrowing costs, debt maturities, future refinancing and liquidity risks, and the strength of our balance sheet, sales growth in the third quarter, demand for communications and gaming products and the associated impact on our revenue growth, the amount and timing of our capital additions in 2011, investment in research and development for next generation interconnect technologies such as wafer-level fan out and Through Silicon Via, continued margin pressure, and our current business outlook for the third quarter 2011, including our expected net sales, gross margin, net income, earnings per diluted share and capital additions. These forward-looking statements involve a number of risks, uncertainties, assumptions and other factors that could affect future results and cause actual results and events to differ materially from historical and expected results and those expressed or implied in the forward-looking statements, including, but not limited to, the following:
- Uncertainties in demand, disruptions in production and the electronic industry supply chain and potential increased costs arising out of the Japan earthquake and tsunami;
- the highly unpredictable nature of the semiconductor industry;
- the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers;
- timing and volume of orders relative to production capacity and inability to achieve high capacity utilization rates;
- volatility of consumer demand and weakness in forecasts from our customers for products incorporating our semiconductor packages;
- dependence on key customers;
- customer modification of and follow through with respect to forecasts provided to us;
- changes in tax rates and taxes as a result of changes in tax law, the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax audits and tax ruling requests, our ability to realize deferred tax assets and the expiration of tax holidays;
- curtailment of outsourcing by our customers;
- our substantial indebtedness and restrictive covenants;
- failure to realize sufficient cash flow to fund capital additions;
- the effects of a recession or other downturn in the U.S. and other economies worldwide;
- disruptions or deficiencies in our controls resulting from the implementation of our new enterprise resource planning system;
- 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;
- our ability to control costs;
- competition, competitive pricing and declines in average selling prices;
- fluctuations in manufacturing yields;
- dependence on international operations and sales;
- dependence on raw material and equipment suppliers and changes in raw material and precious metal costs;
- exchange rate fluctuations;
- dependence on key personnel;
- difficulties in managing growth;
- enforcement of intellectual property rights;
- environmental and other governmental regulations; and
- technological challenges.
Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2010 and in the company’s subsequent filings with the Securities and Exchange Commission made prior to or after the date hereof. Amkor undertakes no obligation to review or update any forward-looking statements to reflect events or circumstances occurring after the date of this press release.
Amkor Technology, Inc., Chandler
Executive Vice President & Chief Financial Officer