Original Source: FD (FAIR DISCLOSURE) WIRE
. John Boruch, Amkor Technology, Inc., Vice Chairman . Ken Joyce, Amkor Technology, Inc., EVP & CFO . Bruce Freyman, Amkor Technology, Inc., President & COO
AMKR's revenue increased each month during 1Q04. March revenue tracked at an annual rate north of $2b. 2Q04 net income is expected in the range of $0.17-0.22 per share, which includes a net gain of $0.11 per share from the sale of the ASI stock. Q&A Focus: Depreciation, advanced packaging, and six-month outlook.
A. Key Data From Call 1. 2Q04 net income guidance = $0.17-0.22 per share. 2. 2Q04 GM = 24%. 3. 2H04 GM guidance = 26-28%.
S1. Financial Review (K.J.) 1. 1Q04 Results: 1. In 1Q03, AMKR sold its wafer fabrication service business. 1. Prior results have been restated to reflect this sale. 2. Revenue increased each month during 1Q04. 1. March was softer than expected. 3. AMKR believes that 1Q04 sales were impacted by supply limitations at the wafer foundries and absorption of excess inventory in the wireless and computing markets. 4. March revenue tracked at an annual rate north of $2b. 5. AMKR's 1.8b unit volume in 1Q04 is a record. 6. 1Q04 GM was negatively impacted by higher material costs for substrates, lead frames, and gold wire. 2. Future Expectation: 1. Looking ahead, AMKR ongoing investment and growth initiatives, including its new building in Taiwan, will increase
depreciation, labor, and factory overhead expenses as it
continues to expand production space, add equipment, and increase factory work force in advance of an expected strong
2H04. 1. These factors will constrain GM and cash flow this year, although the co. expects margins and cash flow to increase
in 2H04. 2. AMKR presently expects GM in the 26-28% range in 2H04. 3. ASP erosion of 3% in 1Q was in the normal range, but slightly
higher than the past few quarters, and a little higher than
the co. expected, due primarily due to a shift in product mix.
3. Production Allocation: 1. At various times last year, the co. was on production allocation for several package families.
2. During 4Q03, the co. accelerated its CAPEX program to get
ahead of demand and thus avoid having to go on allocation in
2004. 3. In 1Q04, AMKR ended up spending $171m or $29m less than forecast, as the demand for advanced packages softened a bit in 1Q. 4. The co. anticipates continued growth through 2004, and continues to build capacity in both advanced and traditional
packages including micro lead frames, stack chip, chip scale
BGA, flip chip, camera modules, PSSOP, SOIC, and strip tests.
4. Other Financials: 1. 1Q04 operating margin was impacted by $5m in legal costs, in connection with mold compound litigation.
1. The co. anticipates this level of legal costs will continue
through the balance of 2004. 2. Going forward, the co. would expect SG&A to rise at a lower rate than the rate of sales growth.
3. In April, the co. sold 10.1m shares of ASI for approx. $50m,
resulting in an after-tax gain of around $20m or $0.11 per
share, which will be recorded in 2Q04. 1. These funds will be used to support the growth initiatives. 2. With this sale, AMKR's investment in ASI has been reduced to 4.6m shares, or 4% of the co. 5. 2Q04 Guidance: 1. Revenue should be up between 5-8% sequentially. 2. GM should be around 24%. 3. 2Q04 net income is expected in the range of $0.17-0.22 per share, which includes a net gain of $0.11 per share from the sale of the ASI stock.
4. Because the co. is now recording taxable income in jurisdictions for which there are tax benefits available, commencing in 1Q04, AMKR will report quarterly net income tax expense, utilizing an effective annual tax rate of 11%.
S2. Operational Highlights (B.F.) 1. Overview: 1. Customer forecast suggests that business will be strong in 2Q04 and 3Q04. 2. Legacy package business was very strong in 1Q04 with units up
20% sequentially. 1. This reflects strong, underlying demand for legacy products and high utilization rates at IDMs. 2. This also suggests that the IDMs are generally not investing in additional capacity. 3. AMKR's six-month forecast increased during 1Q04 across a broad range of device technologies and end markets. 4. The co. is seeing considerable interests in several new products, such as camera modules, stack chip packages, flip chip and system and package. 5. Design activity is very strong. 6. AMKR's quarterly revenue generating capacity was approx. $650m at 03/31/04 and will grow through the year, as the co. add equipment and build out factory space. 7. AMKR anticipates continued growth through 2004 on most leading-edge packages, including micro lead frame, stacked packages, chip scale BGA, system end package, flip chip, and camera modules, as these products gain broader adoption.
8. Because the IDMs have not been investing in most of these
advanced packaging technologies, AMKR's available market
should expand at a faster rate than the overall semiconductor
industry. 2. Test Business: 1. Continues to strengthen.
2. Tested a record number of devices in 1Q04. 3. Expanding capacity on selected tester platforms. 3. Taiwan & China Business: 1. Due to rapid growth in AMKR's Taiwan and China business, it is
expanding its operational footprint in these important markets.
2. In March, the co. acquired a 354,000 sq. ft. building near the
Hsinchu Science Park in Taiwan, which will be equipped during
'04 and '05. 3. During the last two years, AMKR has experienced approx. 50% YoverY growth in Taiwan. 4. The new Taiwan factory will support continued strong growth in this market. 5. In response to strong demand for China-based assembly, AMKR is
in the process of equipping the second of two 75,000 sq. ft.
buildings that make the co.'s C1 factory in Shanghai. 6. Over the last four quarters, China business has grown more than five fold. 7. …