Third Quarter Highlights

  • Net sales $1.09 billion, 18.4% sequential growth
  • Gross margin 19.7%
  • Net income $60 million, earnings per diluted share $0.25 and EBITDA $248 million
  • Notable strength in mobile communications across multiple tiers
  • Solid sales growth in Automotive, Greater China and advanced SiP


TEMPE, Ariz. - October 31, 2016 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the third quarter ended September 30, 2016.

"Third quarter results were at the high end of our guidance," said Steve Kelley, Amkor's president and chief executive officer. "We saw notable strength in smartphones across multiple tiers. Sales in Automotive, Greater China and advanced SiP were all up sequentially reflecting the continued success of our strategic initiatives in these key areas.  Our 18% sequential growth in sales generated substantial cash and profits for the quarter.”

Results

Q3 2016

Q2 2016

Q3 2015

 

($ in millions, except per share data)

Net sales

$1,086

$917

$734

Gross margin

19.7%

14.3%

17.2%

Net income (loss)

$60

$5

$28

Earnings per diluted share

$0.25

$0.02

$0.12

EBITDA*

$248

$168

$187

 

*EBITDA is a non-GAAP measure. The reconciliation to the comparable GAAP measure is included below under "Selected Operating Data."

Business Outlook

"Demand is solid in nearly all end markets," said Kelley.  "We expect Q4 revenue to be around $1.03 billion.  For 2016, we expect total revenue of about $3.9 billion, a $1 billion increase over 2015.”

Fourth quarter and full year 2016 outlook:

Fourth quarter

  • Net sales of $990 million to $1.07 billion, down 1% to 9% from the prior quarter
  • Gross margin of 19% to 23%
  • Net income of $46 million to $82 million, or $0.19 to $0.34 per share


Full year

  • Net sales of approximately $3.9 billion, up from $2.9 billion in 2015
  • Gross margin of approximately 17.5%, up from 16.6% in 2015
  • Net income of approximately $130 million, or around $0.55 per share, up from $0.22 in 2015
  • Capital expenditures of approximately $650 million, unchanged from our previous forecast


Our Q4 and full year guidance includes the anticipated receipt of approximately $30 million of insurance payments related to the Japan earthquakes.

Conference Call Information

Amkor will conduct a conference call on Monday, October 31, 2016, at 5:00 p.m. Eastern Time.  This call may include material information not included in this press release.  This call is being webcast and can be accessed at Amkor's website: www.amkor.com.  You may also access the call by dialing 1-877-645-6380 or 1-404-991-3911.  A replay of the call will be made available at Amkor's website or by dialing 1-855-859-2056 or 1-404-537-3406 (conference ID 94698432). The webcast is also being distributed over NASDAQ OMX's investor distribution network to both institutional and individual investors.  Institutional investors can access the call via NASDAQ OMX's password-protected event management site, Street Events (www.streetevents.com).

About Amkor Technology, Inc.

Amkor Technology, Inc. is one of the world’s largest providers of outsourced semiconductor packaging and test services. Founded in 1968, Amkor pioneered the outsourcing of IC packaging and test, and is now a strategic manufacturing partner for more than 250 of the world’s leading semiconductor companies, foundries and electronics OEMs. Amkor’s operating base includes more than 8 million square feet of floor space, with production facilities, product development centers, and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the U.S. For more information, visit www.amkor.com.
 

Contacts:

Amkor Technology, Inc.
Megan Faust
Corporate Vice President & Chief Financial Officer
480-786-7707
megan.faust@amkor.com

Greg Johnson
Vice President, Finance and Investor Relations
480-786-7594
greg.johnson@amkor.com
 

Selected Operating Data

 

Q3 2016

 

Q2 2016

 

Q3 2015*

Net Sales Data:

 

 

 

 

 

Net sales (in millions):

 

 

 

 

 

Advanced products**

$

480

 

 

$

394

 

 

$

365

 

Mainstream products***

606

 

 

523

 

 

369

 

Total net sales

$

1,086

 

 

$

917

 

 

$

734

 

 

 

 

 

 

 

Packaging services

82

%

 

83

%

 

85

%

Test services

18

%

 

17

%

 

15

%

 

 

 

 

 

 

Net sales from top ten customers

68

%

 

67

%

 

61

%

 

 

 

 

 

 

End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers):

 

 

 

 

 

Communications (smart phones, tablets, handheld devices, wireless LAN)

47

%

 

44

%

 

55

%

Automotive and industrial (infotainment, safety, performance, comfort)

24

%

 

25

%

 

13

%

Consumer (televisions, set top boxes, gaming, portable media, digital cameras)

14

%

 

14

%

 

12

%

Networking (servers, routers, switches)

9

%

 

11

%

 

12

%

Computing (PCs, hard disk drives, printers, peripherals, servers)

6

%

 

6

%

 

8

%

Total

100

%

 

100

%

 

100

%

 

 

 

 

 

 

Gross Margin Data:

 

 

 

 

 

Net sales

100.0

%

 

100.0

%

 

100.0

%

Cost of sales:

 

 

 

 

 

Materials

37.2

%

 

37.7

%

 

36.8

%

Labor

14.6

%

 

16.0

%

 

14.9

%

Other manufacturing

28.5

%

 

32.0

%

 

31.1

%

Gross margin

19.7

%

 

14.3

%

 

17.2

%

 

 

 *The data for 2015 does not include the results from J-Devices
**Advanced products include flip chip and wafer-level processing and related test services
***Mainstream products include wirebond packaging and related test services

In the press release above we provide EBITDA, which is not defined by U.S. GAAP.  We define EBITDA as net income before interest expense, income tax expense and depreciation and amortization.  We believe EBITDA to be relevant and useful information to our investors because it provides additional information in assessing our financial operating results. Our management uses EBITDA in evaluating our operating performance, our ability to service debt and our ability to fund capital expenditures.  However, EBITDA has certain limitations in that it does not reflect the impact of certain expenses on our consolidated statements of income, including interest expense, which is a necessary element of our costs because we have borrowed money in order to finance our operations, income tax expense, which is a necessary element of our costs because taxes are imposed by law, and depreciation and amortization, which is a necessary element of our costs because we use capital assets to generate income. EBITDA should be considered in addition to, and not as a substitute for, or superior to, operating income, net income or other measures of financial performance prepared in accordance with U.S. GAAP.  Furthermore our definition of EBITDA may not be comparable to similarly titled measures reported by other companies.  Below is our reconciliation of EBITDA to U.S. GAAP net income.

Non-GAAP Financial Measure Reconciliation:

 

 

 

 

 

 

Q3 2016

 

Q2 2016

 

Q3 2015

 

(in millions)

EBITDA Data:

 

 

 

 

 

Net income attributable to Amkor

$

60

 

 

$

5

 

 

$

28

 

Plus: Interest expense

23

 

 

22

 

 

19

 

Plus: Income tax expense

24

 

 

3

 

 

17

 

Plus: Depreciation & amortization

141

 

 

138

 

 

123

 

EBITDA

$

248

 

 

$

168

 

 

$

187

 

 

 

 

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

2016

 

2015

 

2016

 

2015

 

(In thousands, except per share data)

Net sales

$

1,086,014

 

 

$

734,362

 

 

$

2,872,022

 

 

$

2,213,959

 

Cost of sales

872,214

 

 

607,762

 

 

2,403,732

 

 

1,837,314

 

Gross profit

213,800

 

 

126,600

 

 

468,290

 

 

376,645

 

Selling, general and administrative

72,363

 

 

54,232

 

 

216,894

 

 

173,609

 

Research and development

26,822

 

 

21,073

 

 

84,145

 

 

59,119

 

Total operating expenses

99,185

 

 

75,305

 

 

301,039

 

 

232,728

 

Operating income

114,615

 

 

51,295

 

 

167,251

 

 

143,917

 

Interest expense

21,488

 

 

17,695

 

 

58,496

 

 

64,317

 

Interest expense, related party

1,243

 

 

1,243

 

 

3,727

 

 

3,727

 

Other (income) expense, net

6,657

 

 

(11,576

)

 

9,607

 

 

(4,784

)

Total other expense, net

29,388

 

 

7,362

 

 

71,830

 

 

63,260

 

Income before taxes and equity in earnings of unconsolidated affiliate

85,227

 

 

43,933

 

 

95,421

 

 

80,657

 

Income tax expense

24,086

 

 

16,568

 

 

29,319

 

 

27,198

 

Income before equity in earnings of unconsolidated affiliate

61,141

 

 

27,365

 

 

66,102

 

 

53,459

 

Equity in earnings of J-Devices

 

 

1,217

 

 

 

 

10,587

 

Net income

61,141

 

 

28,582

 

 

66,102

 

 

64,046

 

Net income attributable to non-controlling interests

(1,052

)

 

(847

)

 

(2,175

)

 

(2,386

)

Net income attributable to Amkor

$

60,089

 

 

$

27,735

 

 

$

63,927

 

 

$

61,660

 

 

 

 

 

 

 

 

 

Net income attributable to Amkor per common share:

 

 

 

 

 

 

 

Basic

$

0.25

 

 

$

0.12

 

 

$

0.27

 

 

$

0.26

 

Diluted

$

0.25

 

 

$

0.12

 

 

$

0.27

 

 

$

0.26

 

 

 

 

 

 

 

 

 

Shares used in computing per common share amounts:

 

 

 

 

 

 

 

Basic

237,353

 

 

236,888

 

 

237,157

 

 

236,813

 

Diluted

238,192

 

 

236,974

 

 

237,586

 

 

237,168

 

 

 

 

CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

September 30,
 2016

 

December 31,
 2015

 

(In thousands)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

549,836

 

 

$

523,172

 

Restricted cash

2,000

 

 

2,000

 

Accounts receivable, net of allowances

630,984

 

 

526,143

 

Inventories

272,589

 

 

238,205

 

Other current assets

31,637

 

 

27,960

 

Total current assets

1,487,046

 

 

1,317,480

 

Property, plant and equipment, net

2,619,469

 

 

2,579,017

 

Goodwill

27,908

 

 

23,409

 

Restricted cash

4,209

 

 

2,176

 

Other assets

102,482

 

 

104,346

 

Total assets

$

4,241,114

 

 

$

4,026,428

 

 

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

 

 

 

Short-term borrowings and current portion of long-term debt

$

30,834

 

 

$

76,770

 

Trade accounts payable

517,745

 

 

434,222

 

Capital expenditures payable

179,768

 

 

242,980

 

Accrued expenses

346,613

 

 

264,212

 

Total current liabilities

1,074,960

 

 

1,018,184

 

Long-term debt

1,473,214

 

 

1,435,269

 

Long-term debt, related party

75,000

 

 

75,000

 

Pension and severance obligations

191,615

 

 

167,197

 

Other non-current liabilities

86,265

 

 

113,242

 

Total liabilities

2,901,054

 

 

2,808,892

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock

 

 

 

Common stock

283

 

 

283

 

Additional paid-in capital

1,888,641

 

 

1,883,592

 

Accumulated deficit

(403,820

)

 

(467,747

)

Accumulated other comprehensive income (loss)

50,148

 

 

(2,084

)

Treasury stock

(214,204

)

 

(213,758

)

Total Amkor stockholders’ equity

1,321,048

 

 

1,200,286

 

Non-controlling interests in subsidiaries

19,012

 

 

17,250

 

Total equity

1,340,060

 

 

1,217,536

 

Total liabilities and equity

$

4,241,114

 

 

$

4,026,428

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

For the Nine Months Ended September 30,

 

2016

 

2015

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net income

$

66,102

 

 

$

64,046

 

Depreciation and amortization

416,517

 

 

371,968

 

Loss on debt retirement

 

 

9,560

 

Other operating activities and non-cash items

(4,382

)

 

(9,879

)

Changes in assets and liabilities

13,379

 

 

(5,299

)

Net cash provided by operating activities

491,616

 

 

430,396

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Payments for property, plant and equipment

(481,670

)

 

(352,644

)

Proceeds from sale of property, plant and equipment

13,687

 

 

5,212

 

Cash received on sale of subsidiary to J-Devices, net

 

 

8,355

 

Investment in J-Devices

 

 

(12,908

)

Other investing activities

(2,176

)

 

(869

)

Net cash used in investing activities

(470,159

)

 

(352,854

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Borrowings under revolving credit facilities

115,000

 

 

180,000

 

Payments under revolving credit facilities

(155,000

)

 

(100,000

)

Borrowings under short-term debt

27,594

 

 

 

Payments of short-term debt

(36,211

)

 

 

Proceeds from issuance of long-term debt

45,000

 

 

360,000

 

Payments of long-term debt

(12,955

)

 

(530,000

)

Payments for debt issuance costs

(156

)

 

 

Payments for the retirement of debt

 

 

(7,030

)

Payments for capital lease obligations

(1,691

)

 

 

Proceeds from the issuance of stock through share-based compensation plans

2,600

 

 

657

 

Payments of tax withholding for restricted shares

(446

)

 

(548

)

Payments of subsidiary dividends to non-controlling interests

(413

)

 

(123

)

Net cash used in financing activities

(16,678

)

 

(97,044

)

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

21,885

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

26,664

 

 

(19,502

)

Cash and cash equivalents, beginning of period

523,172

 

 

449,946

 

Cash and cash equivalents, end of period

$

549,836

 

 

$

430,444

 

 

 

Revision to Previously Reported Financial Information


In the second quarter of 2016, we identified an error in the provision for income taxes in the financial statements for J-Devices for the periods beginning in 2012 through the fourth quarter of 2015.  We believe that the error is not material to Amkor for the periods impacted and have elected to revise our previously issued consolidated financial statements. Periods presented herein are based on the revised financial results.  Please refer to the supplementary slides posted on our Investor Relations website for revised historical financial information.

Forward-Looking Statement Disclaimer


This press release contains forward-looking statements within the meaning of federal securities laws.  All statements other than statements of historical fact are considered forward-looking statements including, without limitation, statements regarding the success of our initiatives in key areas, demand in end markets and the possible receipt of insurance payments related to the earthquakes in Japan, and all of the other statements made under "Business Outlook" above.  These forward-looking statements involve a number of risks, uncertainties, assumptions and other factors that could affect future results and cause actual results and events to differ materially from historical and expected results and those expressed or implied in the forward-looking statements, including, but not limited to, the following:

  • there can be no assurance that the actual costs and financial impact from the earthquakes in Japan will be consistent with our current expectations, for example due to delays or shortfalls in insurance payments;
  • there can be no assurance that we will achieve our major growth objectives, including transitioning second wave customers to advanced packages, expanding our sales to customers in Greater China and increasing our share of the automotive market;
  • there can be no assurance regarding when our new K5 facility in Korea will be fully utilized, or that the actual scope, costs, timeline or benefits of the project will be consistent with our current expectations;
  • the highly unpredictable nature and cyclicality of the semiconductor industry;
  • timing and volume of orders relative to production capacity and the inability to achieve high capacity utilization rates, control costs and improve profitability;
  • volatility of consumer demand, double booking by customers and deterioration in forecasts from our customers for products incorporating our semiconductor packages, including any slowdown in demand or changes in customer forecasts for smartphones or other mobile devices and generally soft end market demand for electronic devices;
  • delays, lower manufacturing yields and supply constraints relating to wafers, particularly for advanced nodes and related technologies;
  • dependence on key customers and the impact of changes in our market share and prices for our services with those customers;
  • the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity and facilities to service customer demand and the availability of cash flow from operations or financing;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers, including the uncertain macroeconomic environment;
  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters and the impact of other legal proceedings;
  • changes in tax rates and taxes as a result of changes in U.S. or foreign tax law or the interpretation thereof, changes in our organizational structure, changes in the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax reviews, audits and ruling requests, our ability to realize deferred tax assets and the expiration of tax holidays;
  • curtailment of outsourcing by our customers;
  • our substantial indebtedness and restrictive covenants;
  • failure to realize sufficient cash flow or access to other sources of liquidity to fund capital expenditures;
  • the effects of an economic slowdown in major economies worldwide, particularly the recent slowdown in China;
  • disruptions in our business or deficiencies in our controls resulting from the integration of newly acquired operations, particularly J-Devices, or the implementation and security of, and changes to, our enterprise resource planning, factory shop floor systems and other management information systems;
  • economic effects of terrorist attacks, political instability, military conflict and natural disasters such as the earthquakes in Japan;
  • competition, competitive pricing and declines in average selling prices;
  • fluctuations in manufacturing yields;
  • dependence on international operations and sales and exchange rate fluctuations;
  • dependence on raw material and equipment suppliers and changes in raw material and precious metal costs, including any disruptions in the supply chain resulting from the earthquakes in Japan;
  • dependence on key personnel;
  • enforcement of and compliance with intellectual property rights;
  • environmental and other governmental regulations; and
  • technological challenges.


Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2015 and in the company's subsequent filings with the Securities and Exchange Commission made prior to or after the date hereof.  Amkor undertakes no obligation to review or update any forward-looking statements to reflect events or circumstances occurring after the date of this press release.