Fourth Quarter 2010

  • Net sales $751 million
  • Gross margin 21%
  • Net income $51 million
  • Earnings per diluted share $0.20

Full Year 2010

  • Net sales $2.94 billion
  • Gross margin 23%
  • Net income $232 million
  • Earnings per diluted share $0.91


CHANDLER, Ariz.-- February 9, 2011 -- Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor assembly and test services, today announced financial results for the fourth quarter ended December 31, 2010, with net sales of $751 million, net income of $51 million, and earnings per diluted share of $0.20. For the full year 2010, Amkor reported net sales of $2.94 billion, net income of $232 million, and earnings per diluted share of $0.91.

“We delivered record net sales and net income for the full year 2010,” said Ken Joyce, Amkor's president and chief executive officer. “Strong demand across all of our package families and end markets, particularly in our core markets for wireless communications, gaming and other consumer electronics, drove net sales growth of 35% and a 49% increase in net income. We also reduced our net debt by $79 million and delivered a 24% return on invested capital.”

“During the fourth quarter we saw solid growth in communications, a seasonal decline in gaming and inventory adjustments by some of our customers in the consumer electronics and networking areas,” said Joyce. “The lower business volumes in the quarter, along with unfavorable foreign currency exchange rate movements, reduced our gross margin from the prior quarter.”

Selected financial information for the fourth quarter 2010 is as follows:

  • Net Sales: $751 million, down 5% from $794 million in the prior quarter, and up 12% from $668 million in the fourth quarter of 2009
  • Gross Margin: 21%, compared to 24% in the prior quarter and 26% in the fourth quarter of 2009
  • Net Income: $51 million, down from $78 million in the prior quarter, and down from $88 million in the fourth quarter of 2009
  • Earnings Per Diluted Share: $0.20, down from $0.30 in the prior quarter, and down from $0.33 in the fourth quarter of 2009


Selected financial information for the full year 2010 is as follows:

  • Net Sales: $2.94 billion, up 35% from $2.18 billion in 2009
  • Gross Margin: 23%, compared to 22% in 2009
  • Net Income: $232 million, up 49% from $156 million in 2009
  • Earnings Per Diluted Share: $0.91, up from $0.67 in 2009



“Our fourth quarter earnings per diluted share were adversely impacted by approximately $0.04 as a result of unfavorable foreign currency exchange rate movements and $0.02 for an unanticipated reserve for foreign taxes,” said Joanne Solomon, Amkor’s executive vice president and chief financial officer. “Capital additions were $103 million during the fourth quarter, primarily in support of solid demand for wireless communications.”

Cash and cash equivalents were $405 million, and net debt was $959 million, at December 31, 2010. In January 2011, the company redeemed all $100 million of its 6.25% Convertible Subordinated Notes due 2013. The Notes were converted into 13.4 million shares of Amkor Common Stock and no cash was used for the redemption. As a consequence of this conversion, net debt would have been $859 million.

Selected operating data for the fourth quarter and full year 2010 are included in a section before the financial statements.

Business Outlook


“Looking ahead to the first quarter of 2011, our strong position in gaming is amplifying typical seasonal patterns and we see some carryover of the inventory adjustments that began in the fourth quarter,” said Joyce. “The corresponding decline in utilization is expected to compress our gross margin in the first quarter.”

“As we exit the first quarter, we are anticipating a rebound in customer demand and a year of solid growth driven primarily by strength in wireless communications and consumer electronics,” continued Joyce. “To meet the capacity requirements of our leading customers, we are currently planning capital additions of approximately $500 million for 2011, with spending weighted in the first half of the year to take advantage of the growth opportunities we see in the second quarter and the balance of the year.”

Based upon the currently available information, we have the following expectations for the first quarter of 2011:

  • Net sales of $660 million to $690 million, down 8% to down 12% from the prior quarter
  • Gross margin between 16% and 19%
  • Net income of $10 million to $35 million, or $0.05 to $0.14 per diluted share
  • Capital additions of approximately $135 million for the first quarter, and capital additions of approximately $500 million for the full year


Conference Call Information


Amkor will conduct a conference call on February 9, 2011, at 5:00 p.m. Eastern Daylight Time. This call is being webcast and can be accessed at Amkor’s web site: www.amkor.com. You may also access the call by dialing 877-941-1465. A replay of the call will be made available at Amkor’s web site or by dialing 800-406-7325 (access pass code #4406938). The webcast is also being distributed over Thomson Reuters’ Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Reuters’ individual investor center at www.companyboardroom.com or by visiting any of the investor sites in Thomson Reuters’ Individual Investor Network. Institutional investors can access the call via Thomson Reuters’ password-protected event management site, Street Events (www.streetevents.com).

About Amkor

 
Amkor is a leading provider of semiconductor assembly and test services to semiconductor companies and electronics OEMs. More information on Amkor is available from the company’s SEC filings and on Amkor’s website: www.amkor.com.

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, the following statements made regarding: our position in gaming and its impact on our typical seasonal patterns, some carryover of inventory adjustments into the first quarter, a decline in utilization and its expected impact on our gross margin in the first quarter, the anticipated rebound in customer demand and year of solid growth, expected strength in wireless communications and consumer electronics, the amount and timing of our capital additions in 2011, growth opportunities in the second quarter and the balance of the year, and our current business outlook for the first quarter of 2011, including our expected net sales, gross margin, net income, earnings per diluted share and capital additions. 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:

  • the highly unpredictable nature of the semiconductor industry;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers;
  • inability to achieve high capacity utilization rates;
  • volatility of consumer demand for products incorporating our semiconductor packages;
  • dependence on key customers;
  • weakness in the forecasts of our customers;
  • customer modification of and follow through with respect to forecasts provided to us;
  • changes in tax rates and taxes as a result of changes in tax law, the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax audits and tax 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 to fund capital additions;
  • the effects of a recession or other downturn in the U.S. and other economies worldwide;
  • disruptions or deficiencies in our controls resulting from the implementation of our new enterprise resource planning system;
  • 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;
  • our ability to control costs;
  • competitive pricing and declines in average selling prices;
  • timing and volume of orders relative to production capacity;
  • fluctuations in manufacturing yields;
  • competition;
  • dependence on international operations and sales;
  • dependence on raw material and equipment suppliers and changes in raw material and precious metal costs;
  • exchange rate fluctuations;
  • dependence on key personnel;
  • difficulties in managing growth;
  • enforcement of 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, 2009 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.

Contact:

Amkor Technology, Inc., Chandler
Joanne Solomon
Executive Vice President & Chief Financial Officer
480-786-7878
joanne.solomon@amkor.com

 

AMKOR TECHNOLOGY, INC.
Selected Operating Data
                       
Sales Data:   Q4 2010   Q3 2010   Q4 2009   2010   2009
                       
Packaging services (in millions):                    
Chip scale package   $ 272     $ 244     $ 224     $ 954     $ 695  
Ball grid array     186       212       142       747       500  
Leadframe     176       204       184       761       587  
Other packaging     46       52       47       188       152  
Packaging services     680       712       597       2,650       1,934  
Test services     71       82       71       289       245  
Total sales   $ 751     $ 794     $ 668     $ 2,939     $ 2,179  
                       
Packaging services:                    
Chip scale package     36 %     31 %     33 %     33 %     32 %
Ball grid array     25 %     27 %     21 %     25 %     23 %
Leadframe     24 %     26 %     28 %     26 %     27 %
Other packaging     6 %     6 %     7 %     6 %     7 %
Packaging services     91 %     90 %     89 %     90 %     89 %
Test services     9 %     10 %     11 %     10 %     11 %
Total sales     100 %     100 %     100 %     100 %     100 %
                       
Packaged units (in millions):                    
Chip scale package     590       618       519      

2,130

      1,652  
Ball grid array     61       72       53      

228

      205  
Leadframe     1,579       2,185       1,856      

7,466

      5,773  
Other packaging     4       8       7      

24

      24  
Total packaged units     2,234       2,883       2,435      

9,848

      7,654  
                       
Net sales from top ten customers     57 %     55 %     55 %     54 %     53 %
                       

Capacity Utilization (Packaging and test utilization separately presented beginning in Q4 2010. Prior periods were recalculated based on current methodology for comparability):

Packaging     78 %     85 %     87 %     82 %     76 %
Test     74 %     87 %     74 %     78 %     67 %
                       

End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers. Prior periods were revised for an expanded sampling methodology and refinement of our classifications):

                       
Communications (cell phones, Ethernet, WiMAX, wireless LAN, Bluetooth)     40 %     34 %     39 %     36 %     37 %
Consumer (gaming, set top boxes, TV, portable media)     26 %     30 %     26 %     28 %     28 %
Computing (PCs, servers, displays, hard disk drive, printers, other peripherals)     12 %     14 %     13 %     14 %     14 %
Networking (infrastructure, routers, network servers)     13 %     13 %     13 %     13 %     13 %
Other (auto, industrial)     9 %     9 %     9 %     9 %     8 %
Total     100 %     100 %     100 %     100 %     100 %
                       
Gross Margin Data:                    
Net sales     100 %     100 %     100 %     100 %     100 %

Cost of sales:

                   
Materials     43 %     43 %     40 %     43 %     40 %
Labor     13 %     12 %     13 %     12 %     13 %

Other manufacturing

    23 %     21 %     21 %     22 %     25 %
Gross margin     21 %     24 %     26 %     23 %     22 %
                                         
AMKOR TECHNOLOGY, INC.
Selected Operating Data
                     
                2010   2009
                (in millions)

Return on Invested Capital:

                 
Operating income             $ 374     $ 225  
Income tax (expense) benefit               (19 )     30  
Net operating profit after tax (NOPAT)             $ 355     $ 255  
                     
Invested capital:                  
Average debt             $ 1,399     $ 1,464  
Plus average equity               507       310  
Less average cash               (400 )     (410 )
Average invested capital             $ 1,506     $ 1,364  
                     

Return on invested capital (NOPAT / average invested capital)*

              24 %     19 %
                     
    Q4 2010   Q3 2010   Q4 2009   2010   2009
    (in millions, except per share data)

Capital Investment Data:

                 
Property, plant and equipment additions $ 103     $ 171     $ 69     $ 505     $ 198  
Net change in related accounts payable and deposits   66       (37 )     (7 )     (59 )     (24 )
Purchases of property, plant and equipment $ 169     $ 134     $ 62     $ 446     $ 174  
Depreciation and amortization $ 87     $ 83     $ 75     $ 324     $ 306  
                     

Free Cash Flow Data:

                 
Net cash provided by operating activities $ 176     $ 176     $ 106     $ 543     $ 262  
Less purchases of property, plant and equipment   (169 )     (134 )     (62 )     (446 )     (174 )
Free cash flow* $ 7     $ 42     $ 44     $ 97     $ 88  
                     

Earnings per Share Data:

                 

Net income attributable to Amkor - basic

$ 51     $ 78     $ 88     $ 232     $ 156  
Adjustment for dilutive securities on net income:                  
Interest on 2.5% convertible notes due 2011, net of tax   -       -       -       1       2  
Interest on 6.25% convertible notes due 2013, net of tax   2       2       2       7       7  
Interest on 6.0% convertible notes due 2014, net of tax   4       4       4       16       12  
Net income attributable to Amkor - diluted $ 57     $ 84     $ 94     $ 256     $ 177  
                     
Weighted average shares outstanding - basic   183       183       183       183       183  
Effect of dilutive securities:                  
Stock options and unvested restricted shares   1       -       -       1       -  
2.5% convertible notes due 2011   3       3       3       3       5  
6.25% convertible notes due 2013   13       13       13       13       13  
6.0% convertible notes due 2014   83       83       83       83       62  
Weighted average shares outstanding - diluted   283       282       282       283       263  
                     
Net income attributable to Amkor per common share:                  
Basic $ 0.28  

 

$ 0.42     $ 0.48     $ 1.26     $ 0.85  
Diluted $ 0.20     $ 0.30     $ 0.33     $ 0.91     $ 0.67  
                                       

* Return on invested capital (“ROIC”) is defined as net operating profit after tax divided by average invested capital (the sum of average debt plus average equity minus average cash). ROIC is not defined by generally accepted accounting principles (“GAAP”). We believe that ROIC is useful information for our investors in evaluating whether our capital investments are generating shareholder value.

We define free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. Free cash flow is not defined by GAAP. 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 additions.

However, these measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP, and our definitions of ROIC and free cash flow may not be comparable to similarly titled measures reported by other companies.

 

 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                   
                   
    For the Three Months    

For the Year

   

Ended December 31,

    Ended December 31,
    2010   2009     2010   2009
    (In thousands, except per share data)
                   
                   
Net sales   $ 750,609     $ 667,612       $ 2,939,483     $ 2,179,109  
Cost of sales     591,266       492,258         2,275,727       1,698,713  
Gross profit     159,343       175,354         663,756       480,396  
                   
Operating expenses:                  
Selling, general and administrative     62,037       54,640         242,424       210,626  
Research and development     11,097       10,907         47,534       44,453  
Total operating expenses     73,134       65,547         289,958       255,079  
Operating income     86,209       109,807         373,798       225,317  

Other (income) expense:

                 
Interest expense     19,202       23,434         85,595       102,396  
Interest expense, related party     3,813       3,813         15,250       13,000  
Interest income     (675 )     (841 )       (2,950 )     (2,367 )
Foreign currency loss     4,746       1,178         13,756       3,339  
Loss (gain) on debt retirement, net     -       570         18,042       (15,088 )
Equity in earnings of unconsolidated affiliate     (1,552 )     (2,373 )       (6,435 )     (2,373 )
Other income, net     (144 )     (36 )       (619 )     (113 )
Total other expense, net     25,390       25,745         122,639       98,794  
Income before income taxes     60,819       84,062         251,159       126,523  
Income tax expense (benefit)     10,058       (3,820 )       19,012       (29,760 )
Net income     50,761       87,882         232,147       156,283  
Net (income) loss attributable to noncontrolling interests     (157 )     104         (176 )     (303 )
Net income attributable to Amkor   $ 50,604     $ 87,986       $ 231,971     $ 155,980  
                   
Net income attributable to Amkor

per common share:

                 
Basic   $ 0.28     $ 0.48       $ 1.26     $ 0.85  
Diluted   $ 0.20     $ 0.33       $ 0.91     $ 0.67  
                   
Shares used in computing per common share amounts:                  
Basic     183,404       183,134         183,312       183,067  
Diluted     282,830       282,495         282,602       263,379  
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
         
    December 31,   December 31,
    2010   2009
    (In thousands)
ASSETS        
Current assets:        
Cash and cash equivalents   $ 404,998     $ 395,406  
Restricted cash     17,782       2,679  
Accounts receivable:        
Trade, net of allowances     392,327       328,252  
Other     17,970       18,666  
Inventories     191,072       155,185  
Other current assets     37,918       32,737  
Total current assets     1,062,067       932,925  
         
Property, plant and equipment, net     1,537,226       1,364,630  
Intangibles, net     13,524       9,975  
Investments     28,215       19,108  
Restricted cash     1,945       6,795  
Other assets     93,845       99,476  
Total assets   $ 2,736,822     $ 2,432,909  
         
LIABILITIES AND EQUITY        
Current liabilities:        
Short-term borrowings and current portion of long-term debt   $ 150,081     $ 88,944  
Trade accounts payable     443,333       361,263  
Accrued expenses     178,794       155,630  
Total current liabilities     772,208       605,837  
         
Long-term debt     964,219       1,095,241  
Long-term debt, related party     250,000       250,000  
Pension and severance obligations     103,543       83,067  
Other non-current liabilities     10,171       9,063  
Total liabilities     2,100,141       2,043,208  
         
Equity:        
Amkor stockholders' equity:        
Preferred stock     -       -  

Common stock, $0.001 par value, 500,000 shares authorized, 183,467 and 183,171 shares issued, and 183,420 and 183,171 shares outstanding, in 2010 and 2009, respectively

    183       183  
Additional paid-in capital     1,504,927       1,500,246  
Accumulated deficit     (890,270 )     (1,122,241 )
Accumulated other comprehensive income     15,457       5,021  
Treasury stock, at cost, 47 shares in 2010     (284 )     -  
Total Amkor stockholders’ equity     630,013       383,209  
Noncontrolling interests in subsidiaries     6,668       6,492  
Total equity     636,681       389,701  
Total liabilities and equity   $ 2,736,822     $ 2,432,909  
                 
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   

For the Year Ended

   

December 31,

    2010   2009
    (In thousands)
Cash flows from operating activities:        
Net income   $ 232,147     $ 156,283  
Depreciation and amortization     323,608       305,510  
Loss (gain) on debt retirement, net     10,562       (15,088 )
Other operating activities and non-cash items     11,522       (17,595 )
Changes in assets and liabilities     (35,244 )     (167,385 )
Net cash provided by operating activities     542,595       261,725  
         
Cash flows from investing activities:        
Purchases of property, plant and equipment     (445,669 )     (173,496 )
Proceeds from the sale of property, plant and equipment     3,125       3,116  
Purchase of equipment leased to unconsolidated affiliate     -       (44,681 )
Investment in unconsolidated affiliate     -       (16,735 )
Financing lease payment from unconsolidated affiliate     13,384       -  
Other investing activities     (15,761 )     (9,082 )
Net cash used in investing activities     (444,921 )     (240,878 )
         
Cash flows from financing activities:        
Borrowings under revolving credit facilities     3,261       41,410  
Payments under revolving credit facilities     (34,253 )     (10,171 )
Proceeds from issuance of short-term working capital facility     15,000       15,000  
Payments of short-term working capital facility     (15,000 )     -  
Proceeds from issuance of long-term debt     611,007       100,000  
Proceeds from issuance of long-term debt, related party     -       150,000  
Payments of long-term debt, net of redemption premiums and discounts     (663,433 )     (338,104 )
Payments for debt issuance costs     (7,487 )     (8,479 )
Proceeds from issuance of stock through stock compensation plans     1,048       693  
Net cash used in financing activities     (89,857 )     (49,651 )
         
Effect of exchange rate fluctuations on cash and cash equivalents     1,775       (106 )
         
Net increase (decrease) in cash and cash equivalents     9,592       (28,910 )
Cash and cash equivalents, beginning of period     395,406       424,316  
Cash and cash equivalents, end of period   $ 404,998     $ 395,406