Amkor Report Second Quarter 2001 Results.Business Editors/Hi-Tech Writers CHANDLER Chandler, city (1990 pop. 90,533), Maricopa co., S central Ariz., in the Salt River valley; inc. 1920. It is both a residential community and a center for research and technology. Tourism is also important, and the San Marcos Golf Resort is in Chandler. , Ariz.--(BUSINESS WIRE)--July 24, 2001 Amkor Technology Amkor Technology, Inc. (NASDAQ: AMKR) is a high-tech semiconductor product manufacturer that includes Intel and IBM among its primary customers. Previously headquartered in West Chester, Pennsylvania, United States, Amkor recently announced that it will move to Chandler, , Inc. announced results for the second quarter ended June June: see month. 30, 2001. Total revenue was $350 million, compared with $547 million in the second quarter of 2000. Assembly & test revenue was $311 million, down 33% from $463 million in Q2 of 2000, and down 29% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . Second quarter wafer (1) A small, thin continuous-loop magnetic tape cartridge that has been used from time to time for data storage and specialized applications. (2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. fab revenue was $39 million compared with $84 million in Q2 of 2000 and $41 million in the first quarter of 2001. Excluding amortization of goodwill, acquired intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , and debt issuance costs, Amkor reported a second quarter net loss of $85 million, or ($0.55) per share, compared to a profit of $51 million, or $0.33 per share, in Q2 of 2000. Including amortization of goodwill and acquired intangibles, the second quarter 2001 net loss was $116 million, or ($0.76) per share, compared with a profit of $31 million, or $0.20 per share, for Q2 of 2000. There were 154 million weighted average shares outstanding on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis for the second quarter of 2001 compared with 157 million in the year-ago period. "During the current downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. , we have undertaken a three-pronged Adj. 1. three-pronged - having three prongs divided - separated into parts or pieces; "opinions are divided" strategy of moving forward prudently pru·dent adj. 1. Wise in handling practical matters; exercising good judgment or common sense. 2. Careful in regard to one's own interests; provident. 3. Careful about one's conduct; circumspect. with geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , investing carefully in next-generation technology, and enhancing our financial flexibility," said James Kim This article is about the CNET editor. For the Korean guitarist, see Kim Se Hwang. For the Korean-American physician, see Jim Kim. James Kim (August 9, 1971 – December 3/4, 2006) was an American television personality and technology analyst for the former , Amkor's Chairman and Chief Executive Officer. "Accordingly, we expect to emerge from this down-cycle in a stronger competitive position." "Due to the protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , we no longer expect a strong seasonal build in Q3," said John Boruch, Amkor's President. "Our customers are still experiencing weak demand, and have limited visibility into Q3. Conditions within the supply chain remain volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. ." Second quarter gross margin was 2.3%, compared with 25.5% in Q2 2000 and 17% in the first quarter of 2001, primarily due to sharply lower revenue and the high degree of operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. inherent in Amkor's business. Overall assembly capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 45% in the second quarter, compared with 73% in the second quarter of 2000 and 57% in the first quarter of 2001. Assembly unit shipments declined 36% from Q2 2000 and 26% sequentially. Average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. declined approximately 5% sequentially during the second quarter. Depreciation and amortization expenses were $110 million compared with $79 million in the second quarter of 2000. During the second quarter of 2001 the company's tax benefits increased due to a higher corporate income tax rate resulting from operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. incurred in high tax jurisdictions. Second quarter EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become was $36 million compared to $150 million in Q2 `00. We have calculated EBITDA as earnings before income taxes; equity in income (loss) of affiliates; foreign currency gain or loss; interest expense, net; depreciation and amortization. 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 The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . "Over the past several months we have taken a variety of measures to reduce operating costs operating costs npl → gastos mpl operacionales in line with lower-than-expected revenue levels and asset utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be rates," said Ken Joyce Joyce - A distributed language based on Pascal and CSP, by Per Brinch Hansen. ["Joyce - A Programming Language for Distributed Systems", Per Brinch Hansen, Soft Prac & Exp 17(1):29-50 (Jan 1987)]. , Amkor's Chief Financial Officer. "We achieved some cost savings in the second quarter and expect to realize more meaningful benefits from these measures in the third and fourth quarters. Given the protracted nature of this downturn, we are contemplating additional steps to reduce operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . In any case, we operate with a sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. fixed cost structure, and there are practical limits to the
savings that can be realized without compromising our ability to service
our customers when business conditions rebound rebound (rē´bownd),n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective ." "During the past six months, we have improved our liquidity, " noted Joyce. "In February February: see month. we issued $500 million in senior notes and repaid our $298 million amortizing term loan. In the process, we eliminated nearly $70 million in principal payments during 2001, and we increased our cash balances by $100 million. In May, we issued $250 million in convertible notes. Half the proceeds were used to repay term debt, and half to increase cash balances. On June 1, we successfully converted approximately $50 million in convertible notes into common stock. We have a solid cash position, with $339 million in cash and equivalents as of June 30, in addition to our unused $200 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility." Also, we have reduced planned capital expenditures to approximately $150 million for 2001, from $480 million in 2000, without sacrificing investments in next generation packaging and test technology. This translates into a total capex budget of less than $40 million for the second half of 2001." Business Highlights -- Our Japan initiatives are progressing well. Activity at our joint venture with Toshiba is down due to sluggish market conditions, however we are very encouraged with the way this factory has been integrated into Amkor's operational structure. Amkor Iwate represents a benchmark for large-scale assembly & test outsourcing in Japan and provides a terrific platform for further penetration in this large market. -- We are making excellent progress with our new factory in Shanghai. China is going to be a high growth market for microelectronics. We are moving forward with qualifications on several package technologies and expect to build revenues slowly through this year and then accelerate through 2002. We intend to build scale at Amkor China as quickly as market conditions will allow. -- In Taiwan, we have closed our acquisition of Sampo Semiconductor and should complete the TSTC transaction later this week. Amkor is now firmly established in this major market for microelectronics. Our plan is to supplement the existing capabilities at Amkor Taiwan with a broad range of advanced packaging technologies currently available at other Amkor locations. -- In the area of Flip Chip we now offer turnkey wafer bump, probe, assembly and test to a blue chip customer set. We recently received important design wins from a major IDM and a leading broadband communications company. Our Flip Chip development efforts should reap substantial dividends in 2002. -- Our System-in-Package business continues to develop as planned. We are in qualification with several new customers for a broad range of applications, including RF / wireless, memory storage, power supply management, ADSL and memory controllers. We are the first outsourced company with fully automated MultiMediaCard production, and we'll have automated Secure Digital card production soon. -- We are moving underutilized assembly and test equipment from Korea and the Philippines to other locations as appropriate. Business Outlook At the present time there is uncertainty as to when excess inventory throughout the supply chain will be absorbed Absorbed 1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices. 2. In underwriting, when an issue has been completely sold to the public. 3. , and when end market demand will rebound. These economic conditions are affecting customer forecasts and continue to impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. our visibility into the second half of 2001. The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially. These statements do not reflect the impact of any mergers, acquisitions or other business combinations that may take place later this year. -- Our best estimate is that total revenue for the third quarter will be flat to down 10% compared with the second quarter. -- We expect third quarter wafer fab revenue to be flat with the second quarter. We remain committed to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). our ownership interest in Anam and continue to explore opportunities. Amkor will be holding a conference call on July July: see month. 24 at 5:00 p.m. eastern time to discuss the results of the second quarter in more detail and to provide additional guidance for the third quarter of 2001. Participants can access the call at 312.470.7370. The call will also be webcast through our web site, http://www.amkor.com. Amkor is the world's largest provider of contract microelectronics microelectronics, branch of electronic technology devoted to the design and development of extremely small electronic devices that consume very little electric power. assembly and test services. The company offers semiconductor companies and electronics OEMs a complete set of microelectronic The miniaturization of electronic circuits. See chip. design and manufacturing services, including deep sub-micron wafer fabrication Wafer Fabrication is a procedure composed of many repeated sequential processes to produce complete electrical or photonic circuits. Examples include production of radio frequency (RF) amplifiers, LEDs, optical computer components, and CPUs for computers. ; wafer probe, wafer mapping, characterization A rather long and fancy word for analyzing a system or process and measuring its "characteristics." For example, a Web characterization would yield the number of current sites on the Web, types of sites, annual growth, etc. and reliability testing; IC packaging design and assembly; multi-chip module A Multi-Chip Module or MCM is a specialized electronic package where multiple integrated circuits (ICs), semiconductor dies or other modules are packaged in such a way as to facilitate their use as a single IC. design and assembly; and final testing. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve a number of risks and uncertainties. Factors that could affect future operating results and cause actual results to vary materially from historical results include, but are not limited to: dependence on the highly cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature the semiconductor industry; competitive pricing and declines in average selling prices; dependence on our relationship with ASI ASI, n See Anxiety Sensitivity Index. 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 Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. 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-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December December: see month. 31, 2000.
AMKOR TECHNOLOGY, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME EXCLUDING
AMORTIZATION OF GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES
AND THE WRITE-OFF OF DEFERRED DEBT ISSUANCE COSTS
(in thousands, except per share data)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
(unaudited) (unaudited)
---------------------- ----------------------
2001 2000 2001 2000
---- ---- ---- ----
Net revenues
Assembly and Test $ 311,423 $ 462,677 $ 750,836 $ 931,612
Wafer Fab 38,746 84,359 79,956 170,235
---------- ---------- ---------- ----------
Total 350,169 547,036 830,792 1,101,847
Cost of
revenues-including
purchases from ASI 342,158 407,441 740,996 847,221
---------- ---------- ---------- ----------
Gross profit 8,011 139,595 89,796 254,626
---------- ---------- ---------- ----------
Operating expenses:
Selling, general
and administrative 51,365 46,884 105,359 88,781
Research and
development 8,135 4,872 18,637 8,243
---------- ---------- ---------- ----------
Total operating
expenses 59,500 51,756 123,996 97,024
---------- ---------- ---------- ----------
Operating income
(loss) (51,489) 87,839 (34,200) 157,602
---------- ---------- ---------- ----------
Other (income)
expense:
Interest expense,
net 38,094 29,428 75,763 44,857
Foreign currency
loss 2,375 1,756 1,065 2,592
Other expense
(income), net (57) (322) 111 2,038
---------- ---------- ---------- ----------
Total other
expense 40,412 30,862 76,939 49,487
---------- ---------- ---------- ----------
Income (loss)
before
income taxes
and equity
in income of
investees (91,901) 56,977 (111,139) 108,115
Provision (benefit)
for
income taxes (25,673) 6,230 (30,983) 15,186
Equity in income
(loss)
of investees (17,450) 559 (34,835) 5,495
Minority Interest (828) - (828) -
---------- ---------- ---------- ----------
Net income (loss) $ (84,506) $ 51,306 $ (115,819) $ 98,424
========== ========== ========== ==========
Per Share Data:
Basic net income
(loss) per
common share ($0.55) $0.35 ($0.76) $0.70
========== ========== ========== ==========
Diluted net income
(loss) per common
share ($0.55) $0.33 ($0.76) $0.67
========== ========== ========== ==========
Shares used in
computing
basic net
income (loss)
per common share 153,950 148,530 153,068 139,701
========== ========== ========== ==========
Shares used in
computing
diluted net
income (loss)
per common share 153,950 157,617 153,068 148,078
========== ========== ========== ==========
The above supplemental consolidated statements of income exclude
the effects of the following:
During the three months and six months ended June 30, 2001, the
Company wrote off $2.3 million and $9.4 million, respectively,
of deferred debt issuance costs related to loan repayments.
During the three months and six months ended June 30, 2001, the
amortization of goodwill and other acquired intangibles excluded
from SGA was $20.6 million and 42.5 million, respectively.
During the three months and six months ended June 30, 2000, the
amortization of goodwill and other acquired intangibles excluded
from SGA was $15.4 million and 21.8 million, respectively.
During the three months and six months ended June 30, 2001, the
amortization of the difference between the cost of our equity
investments and our share of the underlying net assets of ASI
excluded from equity in income (loss) of investees was $8.9
million and 17.8 million, respectively.
During the three months and six months ended June 30, 2000, the
amortization of the difference between the cost of our equity
investments and our share of the underlying net assets of ASI
excluded from equity in income (loss) of investees was $4.9
million and 8.5 million, respectively.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2001 2000
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $ 339,135 $ 93,517
Accounts receivable--
Trade, net of allowance for doubtful
accounts of $1,838 and $2,426 229,192 301,915
Due from affiliates 2,504 1,634
Other 7,898 6,465
Inventories 83,801 108,613
Other current assets 46,437 36,873
----------- -----------
Total current assets 708,967 549,017
----------- -----------
Property, plant and equipment, net 1,453,275 1,478,510
----------- -----------
Investments 448,822 501,254
----------- -----------
Other assets:
Due from affiliates 22,143 25,013
Goodwill and acquired intangibles 717,475 737,593
Other 106,080 101,897
----------- -----------
Total other assets 845,698 864,503
----------- -----------
Total assets $ 3,456,762 $ 3,393,284
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdraft $ 13,784 $ 25,731
Short-term borrowings and current
portion of long-term debt 30,272 73,586
Trade accounts payable 142,375 133,047
Due to affiliates 8,829 32,534
Accrued expenses 123,606 129,301
Accrued income taxes 16,621 52,232
----------- -----------
Total current liabilities 335,487 446,431
Long-term debt 1,876,219 1,585,536
Other noncurrent liabilities 58,246 46,483
Minority Interest 2,406 -
----------- -----------
Total liabilities 2,272,358 2,078,450
----------- -----------
Stockholders' equity:
Common stock 156 152
Additional paid-in capital 1,030,857 975,026
Retained earnings 158,381 343,886
Receivable from stockholder (3,276) (3,276)
Accumulated other comprehensive
income (1,714) (954)
----------- -----------
Total stockholders' equity 1,184,404 1,314,834
----------- -----------
Total liabilities and stockholders'
equity $ 3,456,762 $ 3,393,284
=========== ===========
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
(unaudited) (unaudited)
----------------------- -------------------------
2001 2000 2001 2000
Net revenues
Assembly and
Test $311,423 $462,677 $750,836 $931,612
Wafer Fab 38,746 84,359 79,956 170,235
--------- --------- --------- ----------
Total 350,169 547,036 830,792 1,101,847
Cost of revenues
including
purchases from
ASI 342,158 407,441 740,996 847,221
--------- --------- --------- ----------
Gross profit 8,011 139,595 89,796 254,626
--------- --------- --------- ----------
Operating
expenses:
Selling, general
and
administrative 51,365 46,884 105,359 88,781
Amortization of
goodwill & other
acquired
intangibles 20,573 15,440 42,485 21,802
Research and
development 8,135 4,872 18,637 8,243
--------- --------- --------- ----------
Total operating
expenses 80,073 67,196 166,481 118,826
--------- --------- --------- ----------
Operating income
(loss) (72,062) 72,399 (76,685) 135,800
--------- --------- --------- ----------
Other (income)
expense:
Interest expense,
net 40,411 29,428 85,206 44,857
Foreign currency
loss 2,375 1,756 1,065 2,592
Other expense
(income), net (57) (322) 111 2,038
--------- --------- --------- ----------
Total other
expense 42,729 30,862 86,382 49,487
--------- --------- --------- ----------
Income (loss)
before income
taxes and equity
in income of
investees (114,791) 41,537 (163,067) 86,313
Provision
(benefit) for
income taxes (25,673) 6,230 (30,983) 15,186
Equity in (loss)
of investees (26,345) (4,371) (52,593) (3,035)
Minority
Interest (828) (828)
--------- --------- --------- ----------
Net income (loss) $(116,291) $30,936 $(185,505) $68,092
========= ========= ========== ==========
Per Share Data:
Basic net income
(loss) per
common share ($0.76) $0.21 ($1.21) $0.49
========= ========= ========== ==========
Diluted net
income (loss)
per common share ($0.76) $0.20 ($1.21) $0.47
========= ========= ========== ==========
Shares used in
computing basic
net income
(loss) per
common share 153,950 148,530 153,068 139,701
========= ========= ========== ==========
Shares used in
computing
diluted net
income (loss)
per common share 153,950 157,617 153,068 148,078
========= ========= ========== ==========
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