First quarter net sales of $389 million were down 29% sequentially from the fourth quarter of 2008 and down 44% from the first quarter of 2008. The first quarter net loss was $22 million or $0.12 per share compared to a net loss of $623 million or $3.40 per share in the prior quarter, which included a $671 million goodwill impairment charge. Net income for the first quarter of 2008 was $72 million, or $0.36 per diluted share.
Commenting on first quarter performance, James Kim, Amkor’s chairman and chief executive officer, said, "Our sales were adversely impacted by the sharp global economic downturn and weakness in consumer demand. Based on current customer forecasts, we expect second quarter 2009 net sales to increase 18% to 22% from the first quarter of 2009 reflecting customer inventory builds from historically low first quarter levels. However, there remains significant uncertainty regarding the full scope and duration of the current downturn, and it is difficult to predict future results in this very challenging economic environment.”
“Gross margin for the first quarter of 2009 was 12%, and we expect that gross margin for the second quarter of 2009 will be between 17% and 19%. In the current environment, we are focused on gross margin and cash flows. Starting in early 2008, we began implementing wide-ranging, but carefully selected cost reduction measures to align our cost structure with decreasing levels of demand. Our first quarter operating results compared to the fourth quarter of 2008 benefited by approximately $55 million from these cost reduction programs,” added Kim.
Unit shipments were down 33% sequentially while sales declined 29% in the same period, reflecting a shift in our mix to more advanced packages. Gross margin for the first quarter of 2009 was 12%, down sequentially from 18% in the fourth quarter of 2008, reflecting the impact of lower sales volume and a $6 million charge for workforce reductions. These declines were mitigated partially by the benefits of the cost reduction initiatives and the strength of the U.S. dollar against certain foreign currencies.
Selling, general and administrative expenses for the first quarter were $50 million, down 14% from $58 million in the fourth quarter of 2008. The decline was primarily attributable to reduced executive and other employee compensation and professional fees, but was partially offset by ERP (Enterprise Resource Planning) system implementation costs.
“We ended the first quarter with $291 million of cash,” said Joanne Solomon, Amkor’s chief financial officer. “We were free cash flow negative by $106 million in the first quarter primarily as a result of approximately $104 million of payments relating to the resolution of a patent license dispute and employee benefit and separation payments. We expect to be free cash flow positive in the second quarter of 2009.”
Commenting on the company’s recent capital market transactions, Solomon said, “After the quarter, we completed an offering of $250 million principal amount of 6% convertible senior subordinated notes due 2014 and extended our $100 million senior secured revolving credit facility through April 2013. These actions have significantly improved our liquidity. We have an aggregate of $113 million of debt coming due through the end of 2010, and in 2011 the remaining $254 million of 7.125% senior notes and 2.5% senior subordinated convertible notes mature.”
Solomon added, “During the first quarter of 2009, we repurchased $33 million principal amount of debt due in 2011 and recorded a related $9 million gain in the first quarter. In April 2009, we used $29 million of the proceeds from the convertible notes offering to repurchase $35 million principal amount of debt due in 2011 and expect to record a related $5 million gain in the second quarter.”
“First quarter 2009 capital additions totaled $24 million, which was less than expected due to the deferment of purchases into the second and third quarters of 2009. Capital additions are expected to be approximately $25 million in the second quarter of 2009. Because of the significantly reduced level of consumer demand, capital additions are focused on specific customer requirements, technology advancements and cost reduction programs. We reaffirm that we are estimating capital additions for the full year 2009 of approximately $100 million,” said Solomon.
Selected operating data for the first quarter of 2009 is included in a section before the financial tables.
Limited visibility due to significant uncertainties in the U.S. and global economies has increased the risk that our actual results may differ from our expectations. Based upon the latest available information, we have the following expectations for the second quarter of 2009: