Amkor Reports Record Third Quarter Sales.CHANDLER, Ariz. -- 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. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : AMKR AMKR Amkor Technology ) reported record third quarter 2006 sales of $714 million, up 30% from the third quarter of 2005 and up 4% from the second quarter of 2006. Amkor's third quarter 2006 net income was $53 million, or $0.27 per 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. share, compared with a net loss of $19 million, or ($0.11) per share, in the third quarter of 2005. "We completed a historic third quarter, marking the first time that Amkor's quarterly sales have exceeded $700 million," 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 , Chairman and Chief Executive Officer. "Our strong operating performance reflected continued progress in our strategy to enrich our product mix, enhance operating efficiencies, and generate higher returns on our capital investments." "We achieved record sales and units in the third quarter, driven by seasonal builds for wireless and other mobile devices, and for high performance applications, including game consoles See video game console. and networking," said Kim. "We continue to enrich our product mix, focusing on applications that require flip chip A chip packaging technique in which the active area of the chip is "flipped over" facing downward. Instead of facing up and bonded to the package leads with wires from the outside edges of the chip, any surface area of the flip chip can be used for interconnection, which is typically done , 3D and chip scale packaging (hardware) Chip Scale Packaging - (CSP) A type of surface mount integrated circuit packaging that provides pre-speed-sorted, pre-tested and pre-packaged die without requiring special testing. An example is Motorola's Micro SMT packaging. , and other advanced products. We also continue to redeploy re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. production assets to support those parts of the business that generate higher returns. Our collaborations with leading silicon providers, technology partners, customers and OEMs are helping us to support existing growth opportunities and are giving Amkor better visibility to develop package solutions for strategic market applications." "Our third quarter performance reflected strength in our core package and test operations, successful execution of production ramps, continued strong adoption of flip chip and other advanced packaging, and a stable pricing environment," said Ken Joyce, Amkor's Chief Financial Officer. "Third quarter gross margin was 24.9%. During the quarter we commenced operations in our new Singapore wafer bump factory and our new assembly and test factory in Shanghai. Fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). associated with these new operations will be absorbed as we build revenue over the next several quarters. " "Third quarter SG&A expenses included approximately $10 million in professional fees associated with the review of our historical stock options granting practices and related activities, as conducted by the Special Committee of the Board of Directors and assisted by independent counsel," said Joyce. "Excluding these fees, third quarter SG&A expenses would have been slightly lower than in the second quarter of 2006, reflecting continued progress in controlling our core 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. . We currently estimate fourth quarter SG&A expenses will include approximately $5 million in professional fees associated with the options review and related activities." "Capital additions totaled $48 million in the third quarter and $244 million for the first nine months. Our capacity expansion has been focused on strategic growth areas, including wafer bump, wafer level packaging, flip chip and test," said Joyce. "We expect full year 2006 capital additions of approximately $300 million." "We have achieved positive free cash flow for the past four quarters, and given our current view of business conditions, we anticipate that this trend should continue for the fourth quarter and into 2007," said Joyce. "Earlier this year we took important steps to address our near-term debt maturities," said Joyce. "Based on current forecasts, we believe we will have sufficient cash resources available to retire the remaining $142 million of 5% convertible notes due March 2007. Looking ahead, we believe we will have sufficient resources to retire both the remaining $88 million in 9.25% senior notes due in 2008 and the remaining $22 million in 10.5% senior subordinated notes due 2009." For the full year 2006, we anticipate an effective tax rate of 7% which reflects the utilization of U.S. and foreign net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. and tax holidays in certain of our foreign jurisdictions. At September 30, 2006, Amkor had U.S. net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. available for carryforward totaling $350 million expiring through 2025. Additionally, at September 30, 2006, we had $65 million of non-U.S. 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. available for carryforward, expiring through 2011. Selected operating data for the third quarter 2006 is included in a section before the financial tables. Business Outlook On the basis of our customers' forecasts, we have the following expectations for the fourth quarter of 2006: * Sales down 3% to 5% from the third quarter of 2006 * Gross margin of approximately 24% * Net income in the range of $0.20 to $0.24 per diluted share Amkor will conduct a conference call on November 8, 2006 at 5:00 p.m. eastern time. The call can be accessed by dialing 303-205-0033 or by visiting the investor relations Investor relations The process by which the corporation communicates with its investors. page of our web site: www.amkor.com or CCBN's website, www.companyboardroom.com. An archive of the webcast can be accessed through the same links and will be available until our 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: 11071079. About Amkor Amkor is a leading provider of advanced 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. Forward Looking Statement Disclaimer This press release contains 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. within the meaning of federal securities laws, including, without limitation, statements regarding the following: expectations regarding product mix, operating efficiencies and return on capital investments; expectations regarding sufficiency of cash resources to satisfy the notes due 2007, 2008 and 2009; expectations regarding absorption of fixed costs associated with new factories; expectations regarding performance of the factories over the next several quarters; expectations regarding the level of professional fees to be included in fourth quarter SG&A expectations regarding the level and focus of additional capital expenditures and the deployment of production assets; expectations regarding the achievement of positive free cash flow for the fourth quarter and into 2007; expectations regarding the effective tax rate for full year 2006 and the statements regarding sales, gross margin and net income per diluted share contained under Business Outlook. These forward-looking statements are subject to a number of risks and uncertainties that could affect future results and cause actual results and events to differ materially from historical and expected results, including, but not limited to, the following: the highly unpredictable nature of the semiconductor industry; inability to achieve high capacity utilization rates Capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion. ; volatility of consumer demand for products incorporating our semiconductor packages; weakness in the forecasts of Amkor's customers; customer modification of and follow through with respect to forecasts provided to Amkor; curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. of outsourcing by our customers; our high leverage and restrictive covenants Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. ; failure to realize sufficient cash flow to fund capital expenditures; deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. of the U.S. or other economies; the highly unpredictable nature and costs of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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; competitive pricing and declines in average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. ; timing and volume of orders relative to the production capacity; fluctuations in manufacturing yields; 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 technological challenges. 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 Form 10-K/A for the year ended December 31, 2005, and Form 10-Q/A for the quarter ended March 31, 2006, Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 2006, and current reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. . Amkor undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this document.
Selected operating data for the third quarter and nine month 2006
3rd Quarter Nine Months
-- Capital additions $48 million $244 million
Net decrease in related accounts
payable and deposits $34 million $8 million
----------- ------------
Payments for property,
plant & equipment $82 million $252 million
=========== ============
-- Depreciation and amortization $69 million $203 million
-- Free cash flow (1) $59 million $129 million
(1) Reconciliation of free cash flow to the most directly
comparable GAAP measure:
Net cash provided by operating
activities $141 million $381 million
Less payments for property, plant
and equipment ($82 million) ($252 million)
------------- --------------
Free cash flow from continuing
operations $59 million $129 million
============= ==============
We define free cash flow as net cash provided by operating activities less payments for property, plant and equipment. Free cash flow 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 . However, we believe free cash flow to be relevant and useful information to our investors because it provides them with additional information in assessing our liquidity, capital resources and financial operating results. Our management uses free cash flow in evaluating our liquidity, our ability to service debt and our ability to fund capital expenditures. However, this measure should be considered in addition to, and not as a substitute, or superior to, cash flows or other measures of financial performance prepared in accordance with generally accepted accounting principles, and our definition of free cash flow may not be comparable to similarly titled measures reported by other companies.
For the Third Quarter of 2006:
-- Capacity utilization was approximately 81%
-- Assembly unit shipments were 2.2 billion, up slightly
from Q2 2006
-- Our top ten customers accounted for 46% of net sales
-- End market distribution (an approximation based on a sampling
of programs with some of our largest customers):
Communications 40%
Consumer 31%
Computing 17%
Other 12%
-- As a percentage of net sales:
Laminate packages 49%
Leadframe packages 36%
Other 5%
Test 10%
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