CHANDLER, AZ. -- January 29, 2003 -- Amkor Technology, Inc. (Nasdaq: AMKR) reported fourth quarter sales of $426 million and a net loss of $196 million, or ($1.19) per share. The net loss for the fourth quarter includes $172 million in non-cash charges incurred in the quarter as detailed below:
Excluding these charges, Amkor's fourth quarter net loss was $24 million, or ($0.15) per share. For the fourth quarter of 2001, Amkor's net loss, excluding goodwill amortization, was $108 million, or ($0.67) per share.
Fourth quarter 2002 revenue was in line with guidance provided in the company's third quarter earnings release, and gross margin exceeded the company's expectations. Assembly & test revenue was $373 million, up 26% over the year-ago period and down 5% from the third quarter. Wafer fab revenue was $53 million compared with $60 million in the third quarter. Total revenue was $426 million, up 21% from the year-ago period and down 6% from the third quarter. Fourth quarter gross margin increased to 15.6% from 11.5% in the third quarter and negative 2.4% in the year-ago period, due in part to lower levels of depreciation, ongoing cost efficiency programs, and higher capacity utilization. The reduced depreciation reflects the impact of the fixed asset impairment recorded in the second quarter and the change in estimated useful lives of certain assembly equipment from four years to seven years effective with the fourth quarter.
For the full year, revenue was $1.6 billion, an 8% increase over 2001. Amkor's net loss was $827 million, or ($5.04) per share, compared to a net loss, excluding goodwill amortization, of $335 million, or ($2.13) per share in 2001.
"We have completed a challenging, but productive year in which we've successfully addressed several key strategic initiatives," said James Kim, Amkor's chairman and chief executive officer. "For the past two and a half years we've undertaken a lengthy process of restructuring our interest in ASI. We achieved important progress this year by selling 20 million ASI shares for $95 million; we also negotiated the sale of our wafer fabrication services business for $62 million. This divestiture will allow Amkor to focus totally on our core competency of assembly and test."
"During this same period we've undertaken a continuous program of streamlining our assembly and test business to reduce costs and enhance operating efficiency, while also positioning Amkor for long-term growth. We've kept a sharp focus on improving our cash flow and overall liquidity in the face of the industry's worst-ever downturn," said Kim. Our cash balance has been steadily building, and we intend to continue to monetize our interest in ASI to further increase liquidity. We are making progress towards our goal of returning to bottom line profitability and are committed to enhancing shareholder value."
"Semiconductor technology continues to advance in a downturn, and we have invested heavily in the development of new package and test technology, including MicroLeadFrame", flip chip, system-in-package, stacked packaging, VisionPak" and strip test. We have reduced overall capital expenditures in the face of significant industry overcapacity, but have been adding capacity to support the growth areas of our business," said Kim. "For the past 34 years we have provided capacity to meet the growing needs of our customers, and that commitment will not change."
"Over the past two years we have positioned Amkor for the next phase of our growth by expanding into China, Japan and Taiwan. Each of these new markets offers exciting growth opportunities for Amkor."
"During 2002 our business recovered nicely from the trough level reached in late 2001, and our core assembly and test revenue growth rate outpaced the semiconductor industry, reflecting the strength of the outsourcing trend," said John Boruch, Amkor's president and chief operating officer. "The global economy remains sluggish, and we believe the semiconductor industry is in the midst of a pause that should last through at least the first quarter of 2003."
Fourth quarter EBITDA was $74 million compared with $71 million in the third quarter and $27 million in Q4 of 2001. Amkor calculates EBITDA as earnings before income taxes; special charges; equity in income (loss) of affiliates; minority interest; foreign currency gain or loss; interest expense, net; depreciation and amortization; loss on disposal of assets; and loss on impairment of equity investment. EBITDA is a common measure used by investors to evaluate a company's ability to service debt. EBITDA is not defined by generally accepted accounting principles, and Amkors definition of EBITDA may not be comparable to similar companies.
Capital expenditures were $13 million for the fourth quarter and $95 million for the year. Depreciation and amortization totaled $60 million for the fourth quarter and $325 million for the year.
"We ended the year with improved financial liquidity," said Ken Joyce, Amkor's chief financial officer. "During the year we extended our existing financial covenant framework under our bank agreement through December 31, 2003 and achieved positive cash flow for the second half of the year. We have $311 million in cash at December 31, compared with $235 million at September 30, 2002. The fourth quarter cash increase includes $26 million in processing fees payable to ASI under the foundry agreement, which Amkor has retained in anticipation of completing the sale of our wafer foundry business to ASI. This $26 million, along with other current payables owed to ASI, is expected to fully satisfy the $62 million purchase price that will be owed to Amkor for the sale of our wafer fabrication services business."
Agreement to Sell Wafer Fabrication Services Business; Transactions with ASI and Dongbu
As part of its strategy to monetize its investment in ASI and to divest its wafer fabrication services business, Amkor entered into a series of transactions beginning in the second half of 2002:
Each of the transactions with Dongbu, ASI and Anam Instruments are interrelated and it is possible that if each of the transactions were viewed on a stand-alone basis without regard to the other transaction, Amkor could have had different conclusions as to fair value.
In January 2003, Amkor reached final agreement with ASI to sell Amkor's wafer fabrication services business to ASI, subject to foreign regulatory approval. Additionally, Amkor is structuring a release from ASI's largest customer regarding Amkor's contractual obligations with respect to its wafer fabrication services. The sale of the wafer fabrication services business is expected to close during the first quarter of 2003, at which time Amkor expects to reflect its wafer fabrication services segment as a discontinued operation. In connection with the disposition of its wafer fabrication business, Amkor expects to incur an estimated $4 million in severance and other exit costs to close its operations in Boise, Idaho and Lyon, France. Amkor estimates that in the first quarter of 2003 it will recognize a net gain on the disposition of its wafer fabrication services business in excess of $50 million based on its current estimates of the carrying value of the net assets associated with the business and the severance and other exit costs.
At January 1, 2002 Amkor owned 47.7 million shares or 42% of ASI's voting stock and at December 31, 2002 Amkor owned 26.7 million shares of ASI or 21%. The carrying value of Amkor's remaining investment in ASI at December 31, 2002 was $77 million and could be subject to additional impairment charges if ASI's share price continues to decline. Although Amkor intends to monetize its remaining investment in ASI, the ultimate level of proceeds could be less than the current carrying value.
The first calendar quarter is typically a seasonally down quarter for Amkor. On the basis of customers' forecasts, we currently expect first quarter 2003 assembly & test revenue to be around 10% lower than the fourth quarter. We expect first quarter 2003 gross margin to be around 11%. As noted above, we anticipate that the wafer fabrication services business will be treated as a discontinued operation in the first quarter.
We will resume the recognition of deferred tax assets when Amkor returns to profitability. Additionally, until we utilize our NOLs, the income tax provision will reflect modest levels of foreign taxation. At December 31, 2002, our company has U.S. net operating losses totaling $408 million expiring between 2021 and 2022. We expect to utilize a portion of the NOLs to offset the tax associated with the gain on sale of the wafer foundry business. Additionally, at December 31, 2002, our company has non-U.S. net operating losses totaling $51 million expiring between 2003 and 2012.
Amkor will be holding a conference call on January 29 at 5:00 p.m. eastern time to discuss the results of its fourth quarter in more detail and to provide additional guidance for the first quarter of 2003. The call will be webcast and can be accessed through our web site: www.amkor.com, and through CCBN's website, www.companyboardroom.com.
Amkor Technology, Inc. is the world's largest 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.
The statements by James Kim, John Boruch and Ken Joyce, and the above statements contained in our Business Outlook, are forward-looking statements that involve a number of risks and uncertainties. Factors that could affect future operating results and cause actual results to vary materially from historical and expected results include, but are not limited to: the highly unpredictable nature of the semiconductor industry; volatility of consumer demand for products incorporating our semiconductor packages; worldwide economic effects of the recent terrorist attacks on the United States, potential military conflicts in the Middle East and Asia and the United States military actions in response; competitive pricing and declines in average selling prices; dependence on our relationship with ASI for all of our wafer fabrication output; reliance on a small group of principal customers; timing and volume of orders relative to the production 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; exchange rate fluctuations; dependence on key personnel; difficulties in managing growth; enforcement of intellectual property rights; environmental regulations; and the results of ASI through the equity method of accounting.
Further information on risk factors that could affect the outcome of the events set forth in these statements and that would 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-Q for the three months ended September 30, 2002.
Contact: Jeffrey Luth, VP Corporate Communications 480-821-2408 ext. 5130 firstname.lastname@example.org