Amkor Reports Third Quarter 2003 Results Returns to Profitability
Following Extended Industry Downturn CHANDLER, Ariz., Oct. 27
/PRNewswire-FirstCall/ -- Amkor Technology, Inc. reported third
quarter sales of $424 million, up 12% sequentially and up 8% over
the third quarter of 2002. Amkor returned to profitability in the
third quarter, with net income of $16 million, or $0.09 per share,
compared with a loss of $59 million, or ($0.36) per share, in the
third quarter of 2002. Amkor's third quarter net income includes a
non-cash gain of $10 million, or $0.06 per share, in connection
with the reversal of a tax accrual related to tax periods that have
closed. Third quarter results also include a charge, with no tax
effect, of $2 million, or $0.01 per share, for debt retirement
costs in connection with open market purchases of $28 million in 9
1/4% Senior Notes due 2008. Amkor's results for the third quarter
of 2002 included $11 million in after-tax charges associated with
factory consolidation and operating efficiency initiatives. "This
was a landmark quarter, in which we achieved record unit shipments
in most of our ten factories and returned the corporation to
positive net income after an unprecedented industry downturn," said
James Kim, Amkor's chairman and chief executive officer. "We
believe the outsourced semiconductor assembly and test industry is
poised for a period of sustainable growth, at a rate that will
outpace the semiconductor industry. We are encouraged that
strengthening customer forecasts may partially offset the seasonal
weakness typical of our first calendar quarter. Looking broadly at
2004, we are positioning our organization to achieve annual
revenues in the neighborhood of $2 billion, and to reach a peak
quarterly gross margin of 27% to 30% during the second half of
2004. We remain committed to improve productivity and
profitability, maintain strong liquidity, reduce debt and enhance
shareholder value," said Kim. "During the third quarter we saw
accelerating demand, particularly from customers supplying the cell
phone industry, for a wide range of advanced packages, including
stacked CSP, ChipArray(R) BGA, MicroLeadFrame(TM) and camera
modules," said John Boruch, Amkor's president and chief operating
officer. "Business strengthened as the quarter progressed, with a
large number of customers over-supporting their forecasts as demand
materialized faster than initially projected. As customer forecasts
continued to strengthen, we accelerated our investment in
leading-edge assembly and test equipment, and now expect total 2003
capital expenditures to exceed $200 million. As previously
announced, Amkor's bank credit facility has been modified to
accommodate this increased capital budget." "Third quarter gross
margin rose to 23.9% from 19.6% in the second quarter. Third
quarter operating margin rose to 11.2% from 6.0% in the second
quarter reflecting the positive operating leverage in our business
and the continued high utilization of assets supporting our high
growth package families," said Ken Joyce, Amkor's chief financial
officer. "Over the past two years we have made substantial progress
enhancing the profitability of our business by improving operating
efficiencies, increasing manufacturing capacity in strategic growth
areas and managing costs." "Our liquidity remained solid, with cash
and equivalents of $341 million at September 30," said Joyce.
"During the quarter we received $19 million as the first scheduled
payment of a $38 million receivable from Dongbu relating to the
sale in 2002 of 20 million shares of Anam Semiconductor Inc. common
stock. The remaining $19 million payment is scheduled for February
2004. In the third quarter we also sold an additional five million
shares of ASI for net cash proceeds of $12 million. At September
30, short-term debt totaled $54 million, principally relating to
working capital lines of credit supporting our operations in Japan
and Taiwan. As noted earlier, during the third quarter we purchased
and retired $28 million of our 9 1/4% Senior Notes due 2008." "We
are approaching the third anniversary of our successful joint
venture with Toshiba, and in January 2004 we will purchase the
remaining 40% of the JV with cash payments ranging from $10 million
to $15 million. This amount includes a payment of $2 million to
terminate our commitment to purchase a tract of land adjacent to
the Amkor Iwate facility," said Joyce. Selected operating data for
the third quarter of 2003 is included on a separate page of this
release. Business outlook Our customers' forecasts have continued
to build through most of the third quarter. On the basis of these
forecasts, we have the following expectations for the fourth
quarter: * Sequential revenue increase in the range of 5% to 8%. *
Gross margin around 25%. * Net income in the range of 7 to 10 cents
per diluted share. The provision for U.S. taxes related to our
positive earnings is offset by the use of net operating loss
carryforwards. We anticipate recognizing approximately $3 million
per quarter in foreign tax expense. At September 30, 2003 our
company had U.S. net operating losses totaling $400 million
expiring between 2021 and 2022. Additionally, at September 30, 2003
we had $53 million of non-U.S. net operating losses available for
carryforward, expiring between 2003 and 2012. Amkor will conduct a
conference call on October 27, 2003 at 5:00 p.m. eastern time to
discuss the results of the third quarter in more detail. The call
can be accessed by dialing 303-262-2130 or by visiting the investor
relations page of our web site: http://www.amkor.com/ or CCBN's
website, http://www.companyboardroom.com/ . An archive of the
webcast can be accessed through the same links and will be
available until the company's 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:
550705#. Amkor 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: http://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 and Africa; potential effects of business
disruption caused by SARS; competitive pricing and declines in
average selling prices; 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 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-K for the year ended December 31, 2002 and the Report on
Form 10-Q for the quarter ended June 30, 2003. For further
information, please contact: Jeffrey Luth, VP Corporate
Communications of Amkor Technology, +1-480-821-2408, ext. 5130, .
Selected operating data for the third quarter of 2003 3rd Quarter
Year-to-date -- Capital expenditures: $64 million $148 million --
Depreciation and amortization: $53 million $165 million -- Free
cash flow * ($19 million) ($49 million) * Reconciliation of free
cash flow to the most directly comparable GAAP measure: Net cash
provided by continuing operating activities $45 million $99 million
Less purchases of property, plant and equipment ($64 million) ($148
million) Free cash flow from continuing operations ($19 million)
($49 million) We define free cash flow from continuing operations
as net cash provided by continuing operating activities less
purchases of property, plant and equipment.Free cash flow is not
defined by generally accepted accounting principles, and our
definition of free cash flow may not be comparable to similar
companies. -- End market distribution (an approximation based on a
sampling of programs with our largest customers) -- Communications:
41% -- Computing 24% -- Consumer 23% -- Other 12% -- Combined
assembly & test capacity utilization (based on front-of-line
capacity) was approximately 80%. -- Assembly average selling price
(calculated on a per pin basis) declined approximately 1% from Q2
2003.(Excludes results of Amkor Iwate joint venture) -- Assembly
unit shipments were 1.45 billion, up 10% from Q2 2003. --
Percentage of assembly revenue: -- Advanced packages 77% --
Traditional packages 23% -- Test revenue as a proportion of total
revenue was approximately 9%. (tables to follow) AMKOR TECHNOLOGY,
INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per
share data) For the Three Months Ended September 30, 2003 2002
(unaudited) (unaudited) Net revenues $423,784 $393,563 Cost of
revenues 322,369 346,053 Gross profit 101,415 47,510 Operating
expenses: Selling, general and administrative 45,023 45,118
Research and development 6,836 7,622 Gain on disposal of assets
(148) (200) Amortization of acquired intangibles 2,035 2,000
Special charges (1) -- 13,819 Total operating expenses 53,746
68,359 Operating income (loss) 47,669 (20,849) Other (income)
expense: Interest expense, net 35,151 37,391 Foreign currency gain
(895) (821) Other expense, net 671 996 Debt retirement costs (2)
2,071 -- Total other expense 36,998 37,566 Income (loss) before
income taxes, equity investment losses, minority interest and
discontinued operations 10,671 (58,415) Equity investment losses --
(14,299) Minority interest income (expense) (1,809) 423 Income
(loss) from continuing operations before income taxes 8,862
(72,291) Income tax benefit (6,908) (11,078) Income (loss) from
continuing operations 15,770 (61,213) Discontinued operations:
Income from wafer fabrication services business, net of tax of $969
for 2002 -- 1,906 Net income (loss) $15,770 $(59,307) Per Share
Data: Basic and diluted income (loss) per common share from
continuing operations $0.09 $(0.37) Basic and diluted income per
common share from discontinued operations -- 0.01 Basic and diluted
income (loss) per common share $0.09 $(0.36) Shares used in
computing basic income (loss) per common share 166,628 164,489
Shares used in computing diluted income (loss) per common share
171,440 164,489 (1) Special charges include the following: Loss on
facility shutdowns $-- $13,819 -- 13,819 (2) Debt retirement costs
include the following: Call premium related to redemption of senior
notes due February 2008 $1,648 $-- Write-off of unamortized
deferred debt acquisition costs 423 -- 2,071 -- AMKOR TECHNOLOGY,
INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per
share data) For the Nine Months Ended September 30, 2003 2002
(unaudited) (unaudited) Net revenues $1,144,862 $1,032,989 Cost of
revenues 922,617 998,557 Gross profit 222,245 34,432 Operating
expenses: Selling, general and administrative 131,828 137,639
Research and development 19,454 24,535 Loss (gain) on disposal of
assets (870) 2,912 Amortization of acquired intangibles 6,103 4,995
Special charges (1) -- 281,985 Total operating expenses 156,515
452,066 Operating income (loss) 65,730 (417,634) Other (income)
expense: Interest expense, net 107,494 111,010 Foreign currency
(gain) loss (1,083) 1,881 Other (income) expense, net 2,076 (11)
Debt retirement costs (2) 32,632 -- Total other expense 141,119
112,880 Loss before income taxes, equity investment losses,
minority interest and discontinued operations (75,389) (530,514)
Equity investment losses (3,555) (166,040) Minority interest
expense (2,135) (2,238) Loss from continuing operations before
income taxes (81,079) (698,792) Income tax benefit (6,072) (61,891)
Loss from continuing operations (75,007) (636,901) Discontinued
operations: Income from wafer fabrication services business, net of
tax of $419 and $3,791 3,047 6,258 Gain on sale of wafer
fabrication services business, net of tax of $7,081 in 2003 51,519
-- Income from discontinued operations 54,566 6,258 Net loss
$(20,441) $(630,643) Per Share Data: Basic and diluted loss per
common share from continuing operations $(0.45) $(3.89) Basic and
diluted income per common share from discontinued operations 0.33
0.04 Basic and diluted net loss per common share $(0.12) $(3.85)
Shares used in computing basic and diluted income (loss) per common
share 165,883 163,854 (1) Special charges include the following:
Loss on FAS 142 impairment $-- $73,080 Loss on FAS 144 impairment
-- 190,266 Loss on facility shutdowns -- 18,639 -- 281,985 (2) Debt
retirement costs include the following: Call premium related to
redemption of senior notes due May 2006 and February 2008 $21,304
$-- Write-off of unamortized deferred debt acquisition costs 8,787
-- Other debt retirement costs 2,541 -- 32,632 -- AMKOR TECHNOLOGY,
INC. CONSOLIDATED BALANCE SHEETS (in thousands) September 30,
December 31, 2003 2002 (unaudited) Assets Current assets: Cash and
cash equivalents $340,503 $311,249 Accounts receivable? Trade, net
of allowance for doubtful accounts of $6,862 and $7,122 280,959
234,056 Other 6,452 8,532 Inventories 88,280 72,121 Other current
assets 48,071 48,661 Total current assets 764,265 674,619 Property,
plant and equipment, net 978,409 966,338 Investments 47,281 83,235
Other assets: Goodwill 629,502 628,099 Acquired intangibles 39,504
45,033 Due from affiliates -- 20,852 Other 76,711 114,178 Assets of
discontinued operations 247 25,630 Total other assets 745,964
833,792 Total assets $2,535,919 $2,557,984 Liabilities and
Stockholders' Equity Current liabilities: Bank overdraft $5,130
$4,633 Short-term borrowings and current portion of long-term debt
54,240 71,023 Trade accounts payable 195,882 180,999 Due to
affiliates 3,109 70,243 Accrued expenses 166,109 184,223 Total
current liabilities 424,470 511,121 Long-term debt 1,785,765
1,737,690 Other noncurrent liabilities 79,418 67,661 Total
liabilities 2,289,653 2,316,472 Minority Interest 11,224 10,145
Stockholders' equity: Common stock 167 166 Additional paid-in
capital 1,179,904 1,170,227 Accumulated deficit (954,175) (933,734)
Receivable from stockholder -- (2,887) Accumulated other
comprehensive gains (losses) 9,146 (2,405) Total stockholders'
equity 235,042 231,367 Total liabilities and stockholders' equity
$2,535,919 $2,557,984 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands) For the Three Months Ended
September 30, 2003 2002 (unaudited) (unaudited) Cash flows from
continuing operating activities: Income (loss) from continuing
operations $15,770 $(61,213) Depreciation and amortization 52,660
76,048 Equity investment losses -- (127,004) Other adjustments to
reconcile loss to net cash provided by operating activities 16,297
141,216 Changes in assets and liabilities excluding effects of
acquisitions (39,739) 19,003 Net cash provided by operating
activities 44,988 48,050 Cash flows from investing activities:
Purchases of property, plant and equipment (63,649) (20,202) Other
investing activities 14,600 46,420 Net cash provided by (used in)
investing activities (49,049) 26,218 Cash flows used in financing
activities (3,841) (16,977) Effect of exchange rate fluctuations on
cash and cash equivalents related to continuing operations 2,041
(1,554) Cash flows provided by discontinued operations 60 17,363
Net increase (decrease) in cash and cash equivalents (5,801) 73,100
Cash and cash equivalents, beginning of period 346,304 161,938 Cash
and cash equivalents, end of period $340,503 $235,038 Supplemental
disclosures of cash flow information: Cash paid during the period
for: Interest $32,105 $31,658 Income taxes $3,030 $3,054 AMKOR
TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) For the Nine Months Ended September 30, 2003 2002
(unaudited) (unaudited) Cash flows from continuing operating
activities: Loss from continuing operations $(75,007) $(636,901)
Depreciation and amortization 165,360 264,108 Equity investment
losses 3,555 24,737 Other adjustments to reconcile loss to net cash
provided by operating activities 53,980 374,330 Changes in assets
and liabilities excluding effects of acquisitions (48,792) 23,148
Net cash provided by operating activities 99,096 49,422 Cash flows
from investing activities: Purchases of property, plant and
equipment (148,230) (82,298) Other investing activities 34,612
47,531 Net cash used in investing activities (113,618) (34,767)
Cash flows provided by (used in) financing activities 27,621
(13,798) Effect of exchange rate fluctuations on cash and cash
equivalents related to continuing operations 2,522 905 Cash flows
provided by discontinued operations 13,633 33,219 Net increase in
cash and cash equivalents 29,254 34,981 Cash and cash equivalents,
beginning of period 311,249 200,057 Cash and cash equivalents, end
of period $340,503 $235,038 Supplemental disclosures of cash flow
information: Cash paid during the period for: Interest $107,869
$103,174 Income taxes $7,553 $5,754 DATASOURCE: Amkor Technology,
Inc. CONTACT: Jeffrey Luth, VP Corporate Communications of Amkor
Technology, +1-480-821-2408, ext. 5130, Web site:
http://www.amkor.com/
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