"We completed a historic third quarter, marking the first time that Amkor's quarterly sales have exceeded $700 million," said James Kim, 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 and networking," said Kim. "We continue to enrich our product mix, focusing on applications that require flip chip, 3D and chip scale packaging, and other advanced products. We also continue to redeploy 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 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. 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 and tax holidays in certain of our foreign jurisdictions. At September 30, 2006, Amkor had U.S. net operating losses available for carryforward totaling $350 million expiring through 2025. Additionally, at September 30, 2006, we had $65 million of non-U.S. operating losses 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 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 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; 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 of outsourcing by our customers; our high leverage and restrictive covenants; failure to realize sufficient cash flow to fund capital expenditures; deterioration of the U.S. or other economies; the highly unpredictable nature and costs of 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; timing and volume of orders relative to the production capacity; fluctuations in manufacturing yields; 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 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 for the quarter ended June 30, 2006, and current reports on Form 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. 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%
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
----------------------- -----------------------
2006 2005 2006 2005
(As (As
restated) restated)
----------- ----------- ----------- -----------
(In thousands, except per share data)
Net sales $713,829 $549,641 $2,045,549 $1,456,457
Cost of sales 536,062 459,342 1,543,721 1,256,357
----------- ----------- ----------- -----------
Gross profit 177,767 90,299 501,828 200,100
----------- ----------- ----------- -----------
Operating expenses:
Selling, general
and administrative 68,477 59,633 187,648 187,057
Research and
development 9,653 8,870 29,398 27,694
Provision for legal
settlements and
contingencies - - 1,000 50,000
----------- ----------- ----------- -----------
Total operating
expenses 78,130 68,503 218,046 264,751
----------- ----------- ----------- -----------
Operating income
(loss) 99,637 21,796 283,782 (64,651)
----------- ----------- ----------- -----------
Other (income)
expense:
Interest expense,
net 36,573 40,859 118,330 122,767
Interest expense,
related party 1,563 - 4,914 -
Foreign currency
loss (gain), net 6,465 4,171 11,472 4,630
Debt retirement
costs, net - - 27,389 -
Other (income)
expense, net (878) 394 1,497 2,635
----------- ----------- ----------- -----------
Total other
expense, net 43,723 45,424 163,602 130,032
----------- ----------- ----------- -----------
Income (loss) before
income taxes and
minority interests 55,914 (23,628) 120,180 (194,683)
Income tax expense
(benefit) 2,881 (2,865) 8,465 (325)
----------- ----------- ----------- -----------
Income (loss) before
minority interests 53,033 (20,763) 111,715 (194,358)
Minority interests,
net of tax (223) 1,250 (678) 3,187
----------- ----------- ----------- -----------
Net income (loss) $52,810 $(19,513) $111,037 $(191,171)
=========== =========== =========== ===========
Net income (loss) per
common share:
Basic $0.30 $(0.11) $0.63 $(1.08)
=========== =========== =========== ===========
Diluted $0.27 $(0.11) $0.60 $(1.08)
=========== =========== =========== ===========
Shares used in
computing net income
(loss) per common
share:
Basic 178,108 176,715 177,537 176,271
=========== =========== =========== ===========
Diluted 204,482 176,715 197,539 176,271
=========== =========== =========== ===========
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2006 2005
(As
restated)
-------------- ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $190,567 $206,575
Restricted cash 2,570 -
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $4,775 and $4,947 425,351 381,495
Other 6,557 5,089
Inventories, net 164,404 138,109
Other current assets 38,679 35,222
-------------- ------------
Total current assets 828,128 766,490
Property, plant and equipment, net 1,456,553 1,419,472
Goodwill 671,534 653,717
Intangibles, net 32,068 38,391
Investments 7,794 9,668
Restricted cash 1,755 1,747
Other assets 49,749 65,606
-------------- ------------
Total assets $3,047,581 $2,955,091
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $200,552 $184,389
Trade accounts payable 312,238 326,712
Accrued expenses 170,346 124,027
-------------- ------------
Total current liabilities 683,136 635,128
Long-term debt 1,727,200 1,856,247
Long-term debt, related party 100,000 100,000
Pension and severance obligations 155,677 129,752
Other non-current liabilities 30,933 6,109
-------------- ------------
Total liabilities 2,696,946 2,727,236
-------------- ------------
Commitments and contingencies (see Note
13)
Minority interests 4,066 3,950
-------------- ------------
Stockholders' equity:
Preferred stock, $0.001 par value,
10,000 shares authorized, designated
Series A, none issued - -
Common stock, $0.001 par value, 500,000
shares authorized, issued and
outstanding of 178,109 in 2006 and
176,733 in 2005 178 178
Additional paid-in capital 1,440,035 1,431,543
Accumulated deficit (1,100,437) (1,211,474)
Accumulated other comprehensive income 6,793 3,658
-------------- ------------
Total stockholders' equity 346,569 223,905
-------------- ------------
Total liabilities and
stockholders' equity $3,047,581 $2,955,091
============== ============
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended
September 30,
------------------------
2006 2005
(As
restated)
------------ -----------
(in thousands)
Cash flows from operating activities:
Net income (loss) $111,037 $(191,171)
Depreciation and amortization 203,065 184,711
Other non-cash items 56,889 6,944
Changes in assets and liabilities excluding
effects of acquisitions 9,665 (3,777)
------------ -----------
Net cash provided by (used in) operating
activities 380,656 (3,293)
------------ -----------
Cash flows from investing activities:
Payments for property, plant and equipment (252,401) (226,442)
Proceeds from the sale of property, plant
and equipment 2,524 530
Changes in restricted cash (2,578) -
------------ -----------
Net cash (used in) investing activities (252,455) (225,912)
------------ -----------
Cash flows provided from financing
activities:
Net change in bank overdrafts - (102)
Borrowings under the revolving credit
facility 143,659 127,494
Payments under the revolving credit facility (134,419) (116,811)
Proceeds from issuance of long-term debt 590,000 43,586
Payment of debt issuance costs (15,087) -
Payments of long-term debt, including
redemption discount (734,861) (38,036)
Proceeds from issuance of stock through
stock compensation plans 4,981 2,738
------------ -----------
Net cash (used in) provided by financing
activities (145,727) 18,869
Effect of exchange rate fluctuations on cash
and cash equivalents 1,518 (2,430)
------------ -----------
Net decrease in cash and cash equivalents (16,008) (212,766)
Cash and cash equivalents, beginning of
period 206,575 372,284
------------ -----------
Cash and cash equivalents, end of period $190,567 $159,518
============ ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $121,078 $124,825
Income taxes $6,123 $(501)
Noncash investing and financing activities:
Goodwill acquired upon closing of
acquisition of minority interest $17,822 $-
Contact:
Amkor Technology, Inc., Chandler
Jeffrey Luth
VP Corporate
Communications
480-821-5000 ext. 5130