CHANDLER, AZ. April 29, 2003 -- Amkor Technology, Inc. (Nasdaq: AMKR) reported first quarter sales of $343 million, down 8% sequentially and up 19% over the first quarter of 2002. Amkors first quarter net income was $14.5 million, or $0.09 per share, compared with a loss of $188 million, or ($1.15) per share, in the first quarter of 2002.
The results of the companys wafer fabrication services business, which was sold on February 28, 2003, have been reported separately as discontinued operations and include a net gain of $52 million in connection with the sale of that business. Prior period results have been restated to present the wafer fabrication services business as discontinued operations.
Amkors first quarter loss from continuing operations was $40 million, or ($0.24) per share, compared with a loss of $190 million, or ($1.17) per share in the first quarter of last year. First quarter 2002 results included a loss of $97 million, or ($0.59) per share, on impairment of equity investment in ASI.
First quarter revenue was slightly ahead of guidance, and gross margin exceeded the companys expectations. Gross margin rose to 13.6% from negative 6.8% in the year-ago period, due in part to lower levels of depreciation, ongoing cost efficiency programs, and higher utilization of assembly and test assets used to support advanced packages. The reduced depreciation reflects the impact of the fixed asset impairment recorded in the second quarter of 2002 and the change in estimated useful lives of certain assembly equipment from four years to seven years effective with the fourth quarter of 2002.
During the quarter we achieved several important strategic objectives designed to increase liquidity and focus management resources on our core business, said James Kim, Amkors chairman and chief executive officer. In February we completed the sale of our wafer fabrication services business for $62 million. We also continued to monetize our investment in ASI, selling an additional seven million shares in March, which reduced our ownership interest to 19.7 million shares, or 16% of ASIs voting stock. As of March 24 we ceased accounting for our investment in ASI under the equity method and now account for this investment as a marketable security. We intend to further monetize this investment.
Our first quarter revenue reflected seasonally weak demand and a conservative manufacturing posture among companies in the electronics supply chain, said John Boruch, Amkors president and chief operating officer. Our primary goals for 2003 are to prepare our operations for profitable growth and execute on an increasing number of customer program wins.
Our customers forecasts have begun to trend upward from the seasonally slow first quarter, said Boruch. During the downturn design engineers have focused on incorporating more functionality and higher levels of performance in their end products. These efforts are driving increased reliance on advanced packaging solutions such as flip chip, system in package, stacked chips, image sensing, MEMS, and MicroLeadFrameÔ, all of which fall into our core competency.
First quarter gross margin of 13.6% was better than we expected and reflects ongoing efforts to manage costs and enhance operating efficiencies, said Ken Joyce, Amkors chief financial officer. Looking back over the past several quarters, we have made excellent progress streamlining our manufacturing organization in support of our expected return to bottom line profitability during the second half of this year.
We continue to improve our financial liquidity, noted Joyce. Our cash balance increased to $351 million on March 31, reflecting positive cash flow from operations, completion of sale of our wafer fabrication services business, and the sale of additional shares of ASI. Early in the second quarter we refinanced our secured credit facility on more favorable terms, which is a strong vote of confidence from our lenders. The new $200 million credit facility replaces the previous $197 credit facility and will have no significant principal amortization until June 30, 2005.
Selected operating data for the first quarter of 2003 is included on a separate page of this release.
Our customers long-range forecasts have generally been building since the beginning of the year. On the basis of these forecasts we have the following expectations for the second quarter:
Our capital budget for 2003 has been increased to $150 million. During the year we expect to accelerate our purchases of fine pitch wire bonders, testers and related equipment in response to strengthening customer demand for advanced assembly and test solutions. Given this scenario, we expect second quarter capex to exceed $50 million.
We will resume the recognition of deferred tax assets when Amkor returns to profitability. We anticipate recognizing approximately $4 million per quarter in foreign tax expense for the remainder of 2003. At March 31, 2003 our company had U.S. net operating losses totaling $335 million expiring between 2021 and 2022. Additionally, at March 31, 2003 we had $50 million of non-U.S. net operating losses available for carryforward, expiring between 2003 and 2012.
Amkor will hold a conference call on April 29, 2003 at 5:00 p.m. eastern time to discuss the results of the first quarter in more detail. The call will be webcast and can be accessed through the investor relations page of our web site: www.amkor.com/ir as well as through CCBNs website, www.companyboardroom.com. An archive of the webcast can be accessed through the same links and will be available until the companys 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: 534350.
Amkor is the worlds 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 companys SEC filings and on Amkors 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 terrorist attacks, military conflict in the Middle East and potential military conflict in Asia; potential effects of business disruption caused by SARS; competitive pricing and declines in average selling prices; 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; 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 companys operating results and financial condition is detailed in the companys filings with the Securities and Exchange Commission, including the Report on Form 10-K for the fiscal year ended December 31, 2002.
Selected operating data for the first quarter of 2003: