Second Quarter 2012

  • Net sales $687 million
  • Gross margin 13%
  • Net income $1 million
  • Earnings per diluted share $0.00

 

Second Quarter 2012 Excluding $34 Million Charge for Loss Contingency Accrual

  • Adjusted gross margin 17%
  • Adjusted net income $33 million
  • Adjusted earnings per diluted share $0.15

 

CHANDLER, Ariz. - July 26, 2012 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the second quarter ended June 30, 2012, with net sales of $687 million, net income of $1 million, and earnings per diluted share of $0.00.

Second quarter results included a charge of $34 million ($32 million, net of tax), or $0.13 per diluted share (net of tax), relating to an accrual of the low end of Amkor's estimated loss for the previously announced interim order issued by an arbitration panel relating to Amkor's license agreement with Tessera, Inc.  Of the total accrual, $30 million was recorded as cost of goods sold and $4 million was recorded as interest expense.

"After adjusting for the loss contingency accrual, second quarter results were consistent with our expectations," said Ken Joyce, Amkor's president and chief executive officer.  "Amkor's strong position in communications continues to drive our business with notable strength in smartphones and tablets.  We also saw a seasonal increase in gaming, although lower than the levels we have seen in the past few years."

Selected financial information for the second quarter 2012, excluding the loss contingency accrual, is as follows:

  • Net Sales: $687 million, up 5% from $655 million in the prior quarter, and flat with $688 million in the second quarter of 2011
  • Adjusted Gross Margin: 17%, compared to 16% in the prior quarter, and 19% in the second quarter of 2011
  • Adjusted Net Income: $33 million, up from $12 million in the prior quarter, and up from $14 million in the second quarter of 2011
  • Adjusted Earnings Per Diluted Share: $0.15, up from $0.06 in the prior quarter, and up from $0.07 in the second quarter of 2011

 

The adjusted items presented above are non-GAAP measures. Selected operating data for the second quarter 2012, and a reconciliation of the non-GAAP measures presented above to the comparable GAAP measures, is included in a section below before the financial statements.

“Capital additions were $149 million during the second quarter, primarily in support of specific business for customers in smartphones and tablets,” said Joanne Solomon, Amkor's executive vice president and chief financial officer.  "This was about $50 million below our guidance as we saw some delays in the demand forecasts from several of our major customers that sell into smartphones and tablets."

Amkor's Board of Directors previously authorized $300 million for the repurchase of our common stock.  During the second quarter 2012 the company repurchased 7.1 million shares at a purchase price of $33.2 million, for a total of 36.7 million shares at a purchase price of $166.6 million since the program commenced.

Cash and cash equivalents were $351 million, and net debt was $1.0 billion, at June 30, 2012.

Business Outlook

"We expect to see sequential third quarter sales growth of 2% to 9% driven by a seasonal increase in gaming, solid demand for communications, and a continuing recovery in the networking sector,” said Joyce.  “Our growth in the third quarter is somewhat slower than anticipated due to worldwide macroeconomic uncertainties, the delay in the ramp of 28 nanometer wafer supply and the softness in end market demand by the less dominant OEMs that sell smartphones and tablets.”

"In light of these developments, we are lowering our full year 2012 capital additions expectations to around $500 million (excluding $100 million for the acquisition of land relating to our previously announced new factory and R&D center in Incheon, South Korea).  Our capital additions for the first half of 2012 totaled $273 million, and we are estimating capital additions of around $150 million for the third quarter 2012, although some of that spending could move to the fourth quarter if the ramp of 28 nanometer wafer supply is pushed out," continued Joyce.

Based upon the currently available information, we have the following expectations for the third quarter 2012:

  • Net sales of $700 million to $750 million, up 2% to 9% from the prior quarter
  •  Gross margin of 17% to 19%
  • Net income of $20 million to $44 million, or $0.10 to $0.20 per diluted share
  • Capital additions of around $150 million for the third quarter, and around $500 million for the full year (excluding $100 million for the acquisition of land relating to our previously announced new factory and R&D center in Incheon, South Korea)

 Conference Call Information

Amkor will conduct a conference call on July 26, 2012, at 5:00 p.m. Eastern Daylight 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 web site: www.amkor.com.  You may also access the call by dialing 1-877-947-1465.  A replay of the call will be made available at Amkor's web site or by dialing 1-800-406-7325 (access pass code #4553664).  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 packaging and test services to semiconductor companies and electronics OEMs.  More information about Amkor is available from the company's filings with the Securities and Exchange Commission 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, all of the 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:

  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters, including the final ruling by the arbitration panel and the impact of other proceedings involving Tessera, Inc.;
  • with respect to the interim order issued by the Tessera arbitration panel, we believe that $34 million is a reasonable estimate of the low end of the possible range of loss up to an amount in excess of $125 million claimed by Tessera, and that no amount in the range constitutes a better estimate than any other amount; however, the final award could be more than the amount currently accrued, and we expect to record our estimate of interest accruing with the passage of time and may record additional charges as information develops or upon the issuance of the final award;
  •  the highly unpredictable nature of the semiconductor industry;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers, including the increasingly uncertain macroeconomic environment;
  • timing and volume of orders relative to production capacity and inability to achieve high capacity utilization rates;
  • volatility of consumer demand and weakness in forecasts from our customers for products incorporating our semiconductor packages;
  • dependence on key 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 supply of 28 nanometer wafers;
  • customer modification of and follow through with respect to forecasts provided to us, including delays in forecasts with respect to smartphones and tablets;
  • 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 or access to other sources of liquidity 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;
  • worldwide economic effects of terrorist attacks, natural disasters and military conflict;
  • our ability to control costs and improve profitability;
  • competition, competitive pricing and declines in average selling prices;
  • fluctuations in manufacturing yields;
  • 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 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, 2011 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

 


 

Q2 2012

 

 

Q1 2012

 

 

Q2 2011

 

Sales Data (prior periods were revised for a refinement of our classifications):

 

 

 

 

 

 

 

 

Packaging services (in millions):

 

 

 

 

 

 

 

 

Chip scale package

$

244

 

 

 

$

250

 

 

 

$

211

 

 

Leadframe

176

 

 

 

168

 

 

 

187

 

 

Ball grid array

137

 

 

 

117

 

 

 

163

 

 

Other packaging

54

 

 

 

47

 

 

 

52

 

 

Packaging services

611

 

 

 

582

 

 

 

613

 

 

Test services

76

 

 

 

73

 

 

 

75

 

 

Total sales

$

687

 

 

 

$

655

 

 

 

$

688

 

 

 

 

 

 

 

 

 

 

 

Packaging services:

 

 

 

 

 

 

 

 

Chip scale package

35

 

%

 

38

 

%

 

31

 

%

Leadframe

26

 

%

 

26

 

%

 

27

 

%

Ball grid array

20

 

%

 

18

 

%

 

24

 

%

Other packaging

8

 

%

 

7

 

%

 

7

 

%

Packaging services

89

 

%

 

89

 

%

 

89

 

%

Test services

11

 

%

 

11

 

%

 

11

 

%

Total sales

100

 

%

 

100

 

%

 

100

 

%

 

 

 

 

 

 

 

 

 

Packaged units (in millions):

 

 

 

 

 

 

 

 

Chip scale package

480

 

 

 

409

 

 

 

442

 

 

Leadframe

1,589

 

 

 

1,457

 

 

 

1,671

 

 

Ball grid array

45

 

 

 

40

 

 

 

51

 

 

Other packaging

11

 

 

 

14

 

 

 

22

 

 

Total packaged units

2,125

 

 

 

1,920

 

 

 

2,186

 

 

 

 

 

 

 

 

 

 

 

Net sales from top ten customers

64

 

%

 

65

 

%

 

60

 

%

 

 

 

 

 

 

 

 

 

Capacity Utilization

 

 

 

 

 

 

 

 

Packaging

79

 

%

 

73

 

%

 

76

 

%

Test

80

 

%

 

78

 

%

 

78

 

%

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

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

45

 

%

 

47

 

%

 

38

 

%

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

23

 

%

 

20

 

%

 

26

 

%

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

12

 

%

 

13

 

%

 

12

 

%

Networking (network servers, routers, switches)

11

 

%

 

11

 

%

 

13

 

%

Other (auto, industrial)

9

 

%

 

9

 

%

 

11

 

%

Total

100

 

%

 

100

 

%

 

100

 

%

 

 

 

 

 

 

 

 

 

Gross Margin Data:

 

 

 

 

 

 

 

 

Net sales

100

 

%

 

100

 

%

 

100

 

%

Cost of sales:

 

 

 

 

 

 

 

 

Materials

43

 

%

 

45

 

%

 

43

 

%

Labor

15

 

%

 

14

 

%

 

15

 

%

Other manufacturing

25

 

%

 

25

 

%

 

23

 

%

Loss contingency accrual

4

 

%

 

 

%

 

 

%

Gross margin

13

 

%

 

16

 

%

 

19

 

%

 

 

Q2 2012

 

 

Q1 2012

 

 

Q2 2011

 

 

(In millions, except per share data)

 

Capital Investment Data:

 

 

 

 

 

 

 

 

Property, plant and equipment additions

$

149

 

 

 

$

124

 

 

 

$

97

 

 

Net change in related accounts payable and deposits

(38

)

 

 

(3

)

 

 

14

 

 

Purchases of property, plant and equipment

$

111

 

 

 

$

121

 

 

 

$

111

 

 

Depreciation and amortization

$

91

 

 

 

$

88

 

 

 

$

83

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow Data:

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

86

 

 

 

$

56

 

 

 

$

114

 

 

Less purchases of property, plant and equipment

(111

)

 

 

(121

)

 

 

(111

)

 

Free cash flow*

$

(25

)

 

 

$

(65

)

 

 

$

3

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share Data:

 

 

 

 

 

 

 

 

Net income attributable to Amkor - basic

$

1

 

 

 

$

12

 

 

 

$

14

 

 

 

 

 

 

 

 

 

 

 

Adjustment for dilutive securities on net income:

 

 

 

 

 

 

 

 

Interest on 6.0% convertible notes due 2014, net of tax

 

 

 

4

 

 

 

5

 

 

Net income attributable to Amkor - diluted

$

1

 

 

 

$

16

 

 

 

$

19

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic**

166

 

 

 

168

 

 

 

197

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Stock options and unvested restricted shares

 

 

 

 

 

 

 

 

6.0% convertible notes due 2014

 

 

 

83

 

 

 

83

 

 

Weighted average shares outstanding - diluted

166

 

 

 

251

 

 

 

280

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Amkor per common share:

 

 

 

 

 

 

 

 

Basic

$

 

 

 

$

0.07

 

 

 

$

0.07

 

 

Diluted

$

 

 

 

$

0.06

 

 

 

$

0.07

 

 

 

*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 U.S. GAAP.  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, free cash flow has certain limitations, including that it does not represent the residual cash flow available for discretionary expenditures since other, non-discretionary expenditures, such as mandatory debt service, are not deducted from the measure.  The amount of mandatory versus discretionary expenditures can vary significantly between periods.  This measure should be considered in addition to, and not as a substitute for, or superior to, other measures of liquidity or financial performance prepared in accordance with U.S. GAAP, such as net cash provided by operating activities.  Furthermore, our definition of free cash flow may not be comparable to similarly titled measures reported by other companies.

**Amkor's Board of Directors previously authorized $300 million for the repurchase of our common stock.  During the second quarter, we repurchased 7.1 million shares of common stock for a purchase price of $33.2 million.  As of June 30, 2012, we had repurchased a total of 36.7 million shares under the stock repurchase program for a purchase price of $166.6 million.  From July 1, 2012, through July 25, 2012, we repurchased an additional 5.6 million shares for a purchase price of $27.1 million, for a cumulative total of 42.3 million shares for a purchase price of $193.7 million.

In the press release above we provide adjusted gross margin, adjusted net income and adjusted earnings per diluted share.  We present these non-GAAP amounts to demonstrate the impact of the loss contingency accrual discussed above.  However, these measures have limitations, including that they exclude the accrual for the arbitration panel award, which is an amount that the company may ultimately have to pay in cash.  Furthermore, the factors affecting the calculation of the arbitration award are complex and subject to determination by the arbitration panel.  Therefore, the final amount of the loss may be more than the amount of the current accrual.  Accordingly, these measures that exclude the loss contingency accrual should be considered in addition to, and not as a substitute for, or superior to, gross margin, net income and earnings per diluted share prepared in accordance with U.S. GAAP.  Below is the reconciliation of adjusted gross margin, adjusted net income and adjusted earnings per diluted share to U.S. GAAP gross margin, net income and earnings per diluted share.

 

 

 

Q2 2012

 

 

Non-GAAP Reconciliation:

 

 

 

 

Gross margin

 

13

 

%

 

Plus: Loss contingency accrual divided by net sales

 

4

 

%

 

Adjusted gross margin

 

17

 

%

 

 

 

 

 

 

 

 

Q2 2012

 

 

 

(In millions)

 

Net income

 

$

1

 

 

 

Plus: Loss contingency accrual, net of tax

 

32

 

 

 

Adjusted net income

 

$

33

 

 

 

 

 

 

 

 

 

 

Q2 2012

 

 

Earnings per diluted share

 

$

 

 

 

Plus: Loss contingency accrual per diluted share

 

0.13

 

 

 

Plus: Adjustment for dilutive effect of interest on 6.0% convertible notes due 2014, net of tax

 

0.02

 

 

 

Adjusted earnings per diluted share

 

$

0.15

 

 

 

 


 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

(In thousands, except per share data)

Net sales

$

686,527

 

 

$

687,633

 

 

$

1,341,537

 

 

$

1,352,583

 

Cost of sales

597,207

 

 

557,816

 

 

1,147,236

 

 

1,096,080

 

Gross profit

89,320

 

 

129,817

 

 

194,301

 

 

256,503

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

53,489

 

 

61,284

 

 

110,744

 

 

125,842

 

Research and development

13,867

 

 

12,559

 

 

27,292

 

 

24,688

 

Total operating expenses

67,356

 

 

73,843

 

 

138,036

 

 

150,530

 

Operating income

21,964

 

 

55,974

 

 

56,265

 

 

105,973

 

Other expense (income):

 

 

 

 

 

 

 

Interest expense

22,452

 

 

19,609

 

 

41,038

 

 

38,398

 

Interest expense, related party

3,492

 

 

2,830

 

 

6,984

 

 

5,410

 

Interest income

(828

)

 

(553

)

 

(1,717

)

 

(1,140

)

Foreign currency loss

1,277

 

 

2,932

 

 

2,067

 

 

4,663

 

Loss on debt retirement, net

 

 

15,531

 

 

 

 

15,531

 

Equity in earnings of unconsolidated affiliate

(892

)

 

(2,089

)

 

(2,880

)

 

(3,607

)

Other income, net

(518

)

 

(325

)

 

(1,152

)

 

(469

)

Total other expense, net

24,983

 

 

37,935

 

 

44,340

 

 

58,786

 

(Loss) income before income taxes

(3,019

)

 

18,039

 

 

11,925

 

 

47,187

 

Income tax (benefit) expense

(3,891

)

 

3,594

 

 

(529

)

 

6,976

 

Net income

872

 

 

14,445

 

 

12,454

 

 

40,211

 

Net (income) loss attributable to noncontrolling interests

(291

)

 

43

 

 

(99

)

 

(620

)

Net income attributable to Amkor

$

581

 

 

$

14,488

 

 

$

12,355

 

 

$

39,591

 

 

 

 

 

 

 

 

 

Net income attributable to Amkor per common share:

 

 

 

 

 

 

 

Basic

$

 

 

$

0.07

 

 

$

0.07

 

 

$

0.20

 

Diluted

$

 

 

$

0.07

 

 

$

0.07

 

 

$

0.17

 

 

 

 

 

 

 

 

 

Shares used in computing per common share amounts:

 

 

 

 

 

 

 

Basic

165,956

 

 

197,084

 

 

166,911

 

 

195,584

 

Diluted

166,009

 

 

280,009

 

 

167,012

 

 

278,810

 

 


 

June 30,
2012

 

December 31, 2011

 

(In thousands)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

351,183

 

 

$

434,631

 

Restricted cash

2,680

 

 

2,680

 

Accounts receivable:

 

 

 

Trade, net of allowances

352,453

 

 

298,543

 

Other

18,632

 

 

27,197

 

Inventories

205,778

 

 

198,427

 

Other current assets

41,573

 

 

35,352

 

Total current assets

972,299

 

 

996,830

 

Property, plant and equipment, net

1,751,629

 

 

1,656,214

 

Intangibles, net

6,436

 

 

8,382

 

Investments

38,822

 

 

36,707

 

Restricted cash

2,214

 

 

4,001

 

Other assets

73,784

 

 

70,913

 

Total assets

$

2,845,184

 

 

$

2,773,047

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

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

$

69,358

 

 

$

59,395

 

Trade accounts payable

448,235

 

 

424,504

 

Accrued expenses

190,657

 

 

158,287

 

Total current liabilities

708,250

 

 

642,186

 

Long-term debt

1,085,545

 

 

1,062,256

 

Long-term debt, related party

225,000

 

 

225,000

 

Pension and severance obligations

130,993

 

 

129,096

 

Other non-current liabilities

18,129

 

 

13,288

 

Total liabilities

2,167,917

 

 

2,071,826

 

Equity:

 

 

 

Amkor stockholders' equity:

 

 

 

Preferred stock

 

 

 

Common stock

198

 

 

197

 

Additional paid-in capital

1,612,840

 

 

1,611,242

 

Accumulated deficit

(786,107

)

 

(798,462

)

Accumulated other comprehensive income

11,122

 

 

10,849

 

Treasury stock

(168,840

)

 

(130,560

)

Total Amkor stockholders' equity

669,213

 

 

693,266

 

Noncontrolling interests in subsidiaries

8,054

 

 

7,955

 

Total equity

677,267

 

 

701,221

 

Total liabilities and equity

$

2,845,184

 

 

$

2,773,047

 


 

For the Six Months Ended
June 30,

 

2012

 

2011

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net income

$

12,454

 

 

$

40,211

 

Depreciation and amortization

179,182

 

 

166,468

 

Loss on debt retirement, net

 

 

10,557

 

Other operating activities and non-cash items

(1,881

)

 

3,648

 

Changes in assets and liabilities

(47,292

)

 

13,013

 

Net cash provided by operating activities

142,463

 

 

233,897

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(232,682

)

 

(224,629

)

Proceeds from the sale of property, plant and equipment

998

 

 

14,643

 

Financing lease payment from unconsolidated affiliate

9,688

 

 

5,991

 

Other investing activities

1,533

 

 

(4,014

)

Net cash used in investing activities

(220,463

)

 

(208,009

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Borrowings under short-term credit facilities

30,000

 

 

20,000

 

Payments under short-term credit facilities

(20,000

)

 

(15,000

)

Proceeds from issuance of long-term debt

187,528

 

 

325,000

 

Proceeds from issuance of long-term debt, related party

 

 

75,000

 

Payments of long-term debt

(165,165

)

 

(354,693

)

Payments for debt issuance costs

(823

)

 

(5,875

)

Payments for repurchase of common stock

(35,652

)

 

 

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

162

 

 

907

 

Payments of tax withholding for restricted shares

(446

)

 

(744

)

Net cash (used in) provided by financing activities

(4,396

)

 

44,595

 

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

(1,052

)

 

(10

)

 

 

 

 

Net (decrease) increase in cash and cash equivalents

(83,448

)

 

70,473

 

Cash and cash equivalents, beginning of period

434,631

 

 

404,998

 

Cash and cash equivalents, end of period

$

351,183

 

 

$

475,471