Second Quarter 2013

  • Net sales $746 million
  • Gross margin 18.5%
  • Net income $30 million
  • Earnings per diluted share $0.14

CHANDLER, Ariz. - July 29, 2013 - 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, 2013, with net sales of $746 million, net income of $30 million, and earnings per diluted share of $0.14.

"Driven by strong results in mobile communications, sales for the quarter increased more than 8% sequentially and year over year with a corresponding improvement in our gross margin," said Steve Kelley, Amkor's president and chief executive officer.  "Since joining Amkor in May, I have been working closely with customers and management to assess our business and operations.  We are well positioned with solid investments in the right technologies, customers, and end markets, and I am optimistic about our long term prospects for sales growth and improved profitability."

Selected financial information for the second quarter 2013 is as follows:

  • Net Sales: $746 million, up 8.5% from $688 million in the prior quarter, and up 8.7% from $687 million in the  second quarter of 2012
  • Gross Margin: 18.5%, compared to 16.7% in the prior quarter, and adjusted gross margin of 17.4% in the second quarter of 2012
  • Net Income: $30 million, up from $13 million in the prior quarter, and down from adjusted net income of $33 million in the second quarter of 2012
  • Earnings Per Diluted Share: $0.14, up from $0.07 in the prior quarter, and down from adjusted earnings per diluted share of $0.15 in the second quarter of 2012

Second quarter 2013 results include a $12 million ($0.05 per diluted share) charge on the exchange of $194 million principal amount of our Convertible Senior Subordinated Notes due 2014 for cash and common stock, and a $15 million ($0.06 per diluted share) benefit from two discrete tax items relating to foreign operations.

The adjusted gross margin, adjusted net income, and adjusted earnings per diluted share presented above for the second quarter 2012 exclude a loss contingency of $34 million ($32 million, net of tax) relating to our pending patent license arbitration, and are non-GAAP measures.  Selected operating data for the second quarter 2013, and a reconciliation of the second quarter 2012 non-GAAP measures presented above to the comparable GAAP measures, are included in a section below before the financial statements.

“Capital additions were $159 million during the second quarter, primarily in support of customers in mobile communications,” said Joanne Solomon, Amkor's executive vice president and chief financial officer.

“We took advantage of favorable conditions in the capital markets to raise additional funding,” continued Solomon.  “The $225 million addition to our Senior Notes due 2022 provides resources for our investment initiatives.  We also completed a tender offer for our Convertible Senior Subordinated Notes due 2014 and exchanged approximately $194 million of these Notes for approximately 64 million shares of our common stock and approximately $12 million of cash."

Cash and cash equivalents were $636 million, and total debt was $1.7 billion, at June 30, 2013.

Business Outlook


“Looking ahead to the third quarter, our sales are expected to be flat as some customers are adjusting their inventory levels in response to the recent slowdown in demand for smartphones,” noted Kelley.  “In light of these developments, we are lowering our estimate of 2013 capital additions from around $525 million to around $450 million.  Although this slowdown in the smartphone market has reduced our expectations for the third quarter, we remain confident in the strong growth prospects for mobile communications."

Based upon currently available information, we have the following expectations for the third quarter 2013:

  • Net sales of $715 million to $765 million, down 4% to up 3% from the prior quarter
  • Gross margin of 16% to 19%
  • Net income of $8 million to $30 million, or $0.04 to $0.13 per diluted share
  • Capital additions of around $100 million for the third quarter, and around $450 million for the full year 2013. This excludes spending for the acquisition of land and construction relating to our previously announced new factory and R&D center in South Korea of $40 million in the third quarter and $140 million in the full year 2013.

Conference Call Information


Amkor will conduct a conference call on Monday, July 29, 2013, 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 1-877-941-9205 or 1-480-629-9771.  A replay of the call will be made available at Amkor's website or by dialing 1-800-406-7325 or 1-303-590-3030 (access pass code #4626101).  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 at 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, statements regarding sales growth and improving profitability, and 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 in the pending patent license arbitration and the impact of other legal proceedings;
  • 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, including the recent slowdown in demand for smartphones;
  • 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;
  • 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 in our business or deficiencies in our controls resulting from the implementation and security of, and changes to, our  enterprise resource planning and other management information systems;
  • 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 and consolidating and integrating operations;
  • 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, 2012 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.
 

Contacts:


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

Greg Johnson
Senior Director, Corporate Communications
480-786-7594
greg.johnson@amkor.com

Amkor Technology Inc.
Selected Operationg Data

Since the first quarter 2013, we have reported sales data for our packaging services by the following categories: flip chip and wafer-level processing and wirebond.  We have also provided quarterly and annual packaging services sales and packaged units for 2011 and 2012 under these revised sales reporting categories at the Investor Relations section of our website at www.amkor.com.

 

 

Q2 2013

 

 

Q1 2013

 

 

Q2 2012

 

Sales Data:

 

 

 

 

 

 

 

 

Packaging services (in millions):

 

 

 

 

 

 

 

 

Flip chip and wafer-level processing

$

339

 

 

 

$

320

 

 

 

$

273

 

 

Wirebond

308

 

 

 

274

 

 

 

338

 

 

Packaging services

647

 

 

 

594

 

 

 

611

 

 

Test services

99

 

 

 

94

 

 

 

76

 

 

Total sales

$

746

 

 

 

$

688

 

 

 

$

687

 

 

 

 

 

 

 

 

 

 

 

Packaging services:

 

 

 

 

 

 

 

 

Flip chip and wafer-level processing

46

 

%

 

46

 

%

 

40

 

%

Wirebond

41

 

%

 

40

 

%

 

49

 

%

Packaging services

87

 

%

 

86

 

%

 

89

 

%

Test services

13

 

%

 

14

 

%

 

11

 

%

Total sales

100

 

%

 

100

 

%

 

100

 

%

 

 

 

 

 

 

 

 

 

Packaged units (in millions):

 

 

 

 

 

 

 

 

Flip chip and wafer-level processing

704

 

 

 

579

 

 

 

298

 

 

Wirebond

1,976

 

 

 

1,722

 

 

 

1,827

 

 

Total packaged units

2,680

 

 

 

2,301

 

 

 

2,125

 

 

 

 

 

 

 

 

 

 

 

Net sales from top ten customers

63

 

%

 

63

 

%

 

64

 

%

 

 

 

 

 

 

 

 

 

Capacity Utilization:

 

 

 

 

 

 

 

 

Packaging

85

 

%

 

76

 

%

 

79

 

%

Test

81

 

%

 

83

 

%

 

80

 

%

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Communications (handsets, tablets, wireless LAN, handheld devices)

58

 

%

 

59

 

%

 

45

 

%

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

14

 

%

 

14

 

%

 

23

 

%

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

9

 

%

 

9

 

%

 

12

 

%

Networking (servers, routers, switches)

10

 

%

 

10

 

%

 

11

 

%

Other (automotive, industrial)

9

 

%

 

8

 

%

 

9

 

%

Total

100

 

%

 

100

 

%

 

100

 

%

 

 

 

 

 

 

 

 

 

Gross Margin Data:

 

 

 

 

 

 

 

 

Net sales

100

 

%

 

100

 

%

 

100

 

%

Cost of sales:

 

 

 

 

 

 

 

 

Materials

41

 

%

 

42

 

%

 

43

 

%

Labor

14

 

%

 

15

 

%

 

15

 

%

Other manufacturing

26

 

%

 

26

 

%

 

25

 

%

Loss contingency

 

%

 

 

%

 

4

 

%

Gross margin

19

 

%

 

17

 

%

 

13

 

%

 

 

Q2 2013

 

 

Q1 2013

 

 

Q2 2012

 

 

(In millions, except per share data)

 

Capital Investment Data:

 

 

 

 

 

 

 

 

Property, plant and equipment additions

$

159

 

 

 

$

124

 

 

 

$

149

 

 

Net change in related accounts payable and deposits

(49

)

 

 

(11

)

 

 

(38

)

 

Purchases of property, plant and equipment

$

110

 

 

 

$

113

 

 

 

$

111

 

 

Depreciation and amortization

$

99

 

 

 

$

97

 

 

 

$

91

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow Data:

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

102

 

 

 

$

99

 

 

 

$

86

 

 

Less purchases of property, plant and equipment

(110

)

 

 

(113

)

 

 

(111

)

 

Free cash flow (1)

$

(8

)

 

 

$

(14

)

 

 

$

(25

)

 

 

 

 

 

 

 

 

 

 

Earnings per Share Data:

 

 

 

 

 

 

 

 

Net income attributable to Amkor - basic

$

30

 

 

 

$

13

 

 

 

$

1

 

 

 

 

 

 

 

 

 

 

 

Adjustment for dilutive securities on net income:

 

 

 

 

 

 

 

 

Interest on 6.0% convertible notes due 2014, net of tax (2)

3

 

 

 

4

 

 

 

 

 

Net income attributable to Amkor - diluted

$

33

 

 

 

$

17

 

 

 

$

1

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

161

 

 

 

152

 

 

 

166

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

6.0% convertible notes due 2014 (2)

74

 

 

 

83

 

 

 

 

 

Weighted average shares outstanding - diluted

235

 

 

 

235

 

 

 

166

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Amkor per common share:

 

 

 

 

 

 

 

 

Basic

$

0.18

 

 

 

$

0.09

 

 

 

$

 

 

Diluted

$

0.14

 

 

 

$

0.07

 

 

 

$

 

 

(1)     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. generally accepted accounting principles ("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.

(2)     The potential shares of common stock and interest related to the 6.0% convertible notes due 2014 were excluded from earnings per diluted share for the three months ended June 30, 2012, because the effect of including these potential shares was antidilutive.

In the press release above we provide adjusted gross margin, adjusted net income and adjusted earnings per diluted share for the second quarter 2012.  We present these non-GAAP amounts to demonstrate the impact of the loss contingency we recognized related to our pending patent license arbitration.  These measures have limitations, including that they exclude the charges 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 we have recognized.  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.

 

Non-GAAP Financial Measures Reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2012

 

Gross margin

 

 

 

 

 

 

13

 

%

Plus: Loss contingency divided by net sales

 

 

 

 

 

 

4

 

%

Adjusted gross margin

 

 

 

 

 

 

17

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

Net income

 

 

 

 

 

 

$

1

 

 

Plus: Loss contingency, net of tax

 

 

 

 

 

 

32

 

 

Adjusted net income

 

 

 

 

 

 

$

33

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share

 

 

 

 

 

 

$

 

 

Plus: Loss contingency 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

 

 

 

Amkor Technology Inc.
Consolidated Statements of Income
(Unaudited)


 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

2013

 

2012

 

2013

 

2012

 

(In thousands, except per share data)

Net sales

$

746,059

 

 

$

686,527

 

 

$

1,433,588

 

 

$

1,341,537

 

Cost of sales

607,680

 

 

597,207

 

 

1,180,256

 

 

1,147,236

 

Gross profit

138,379

 

 

89,320

 

 

253,332

 

 

194,301

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

65,618

 

 

53,489

 

 

125,177

 

 

110,744

 

Research and development

14,308

 

 

13,867

 

 

28,614

 

 

27,292

 

Total operating expenses

79,926

 

 

67,356

 

 

153,791

 

 

138,036

 

Operating income

58,453

 

 

21,964

 

 

99,541

 

 

56,265

 

Other expense (income):

 

 

 

 

 

 

 

Interest expense

23,739

 

 

22,452

 

 

45,817

 

 

41,038

 

Interest expense, related party

3,192

 

 

3,492

 

 

6,684

 

 

6,984

 

Interest income

(676

)

 

(828

)

 

(1,503

)

 

(1,717

)

Foreign currency loss, net

2,041

 

 

1,277

 

 

875

 

 

2,067

 

Loss on debt retirement, net

11,619

 

 

 

 

11,619

 

 

 

Equity in earnings of unconsolidated affiliate

(1,445

)

 

(892

)

 

(1,500

)

 

(2,880

)

Other income, net

(108

)

 

(518

)

 

(337

)

 

(1,152

)

Total other expense, net

38,362

 

 

24,983

 

 

61,655

 

 

44,340

 

Income (loss) before income taxes

20,091

 

 

(3,019

)

 

37,886

 

 

11,925

 

Income tax benefit

(10,238

)

 

(3,891

)

 

(6,209

)

 

(529

)

Net income

30,329

 

 

872

 

 

44,095

 

 

12,454

 

Net income attributable to noncontrolling interests

(602

)

 

(291

)

 

(986

)

 

(99

)

Net income attributable to Amkor

$

29,727

 

 

$

581

 

 

$

43,109

 

 

$

12,355

 

 

 

 

 

 

 

 

 

Net income attributable to Amkor per common share:

 

 

 

 

 

 

 

Basic

$

0.18

 

 

$

 

 

$

0.27

 

 

$

0.07

 

Diluted

$

0.14

 

 

$

 

 

$

0.21

 

 

$

0.07

 

 

 

 

 

 

 

 

 

Shares used in computing per common share amounts:

 

 

 

 

 

 

 

Basic

160,886

 

 

165,956

 

 

156,672

 

 

166,911

 

Diluted

235,111

 

 

166,009

 

 

235,099

 

 

167,012

 

 

Amkor Technology Inc.
Consolidated Balance Sheets
(Unaudited)

 

 

June 30,
2013

 

December 31,
2012

 

(In thousands)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

636,007

 

 

$

413,048

 

Restricted cash

2,681

 

 

2,680

 

Accounts receivable:

 

 

 

Trade, net of allowances

411,699

 

 

389,699

 

Other

4,463

 

 

13,098

 

Inventories

231,974

 

 

227,439

 

Other current assets

50,331

 

 

45,444

 

Total current assets

1,337,155

 

 

1,091,408

 

Property, plant and equipment, net

1,885,203

 

 

1,819,969

 

Intangibles, net

5,009

 

 

4,766

 

Investments

103,308

 

 

38,690

 

Restricted cash

2,209

 

 

2,308

 

Other assets

83,449

 

 

68,074

 

Total assets

$

3,416,333

 

 

$

3,025,215

 

 

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

 

 

 

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

$

56,350

 

 

$

 

Trade accounts payable

499,508

 

 

439,663

 

Accrued expenses

217,845

 

 

212,964

 

Total current liabilities

773,703

 

 

652,627

 

Long-term debt

1,519,661

 

 

1,320,000

 

Long-term debt, related party

75,000

 

 

225,000

 

Pension and severance obligations

137,115

 

 

139,379

 

Other non-current liabilities

10,855

 

 

21,415

 

Total liabilities

2,516,334

 

 

2,358,421

 

Equity:

 

 

 

Amkor stockholders' equity:

 

 

 

Preferred stock

 

 

 

Common stock

262

 

 

198

 

Additional paid-in capital

1,810,295

 

 

1,614,143

 

Accumulated deficit

(713,535

)

 

(756,644

)

Accumulated other comprehensive income

4,307

 

 

11,241

 

Treasury stock

(211,155

)

 

(210,983

)

Total Amkor stockholders' equity

890,174

 

 

657,955

 

Noncontrolling interests in subsidiaries

9,825

 

 

8,839

 

Total equity

899,999

 

 

666,794

 

Total liabilities and equity

$

3,416,333

 

 

$

3,025,215

 

 

Amkor Technology Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 

 

For the Six Months Ended
June 30,

 

2013

 

2012

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net income

$

44,095

 

 

$

12,454

 

Depreciation and amortization

195,785

 

 

179,182

 

Loss on debt retirement, net

11,619

 

 

 

Other operating activities and non-cash items

(13,947

)

 

(1,881

)

Changes in assets and liabilities

(36,702

)

 

(47,292

)

Net cash provided by operating activities

200,850

 

 

142,463

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(222,674

)

 

(232,682

)

Proceeds from the sale of property, plant and equipment

25,093

 

 

998

 

Payments from unconsolidated affiliate

8,843

 

 

9,688

 

Investment in unconsolidated affiliate

(67,372

)

 

 

Other investing activities

(2,032

)

 

1,533

 

Net cash used in investing activities

(258,142

)

 

(220,463

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Borrowings under revolving credit facilities

5,000

 

 

 

Payments under revolving credit facilities

(5,000

)

 

 

Borrowings under short-term debt

 

 

30,000

 

Payments of short-term debt

 

 

(20,000

)

Proceeds from issuance of long-term debt

293,000

 

 

187,528

 

Payments of long-term debt, net

 

 

(165,165

)

Payments for debt issuance costs

(3,357

)

 

(823

)

Payments for the retirement of debt

(11,619

)

 

 

Payments for repurchase of common stock

 

 

(35,652

)

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

 

 

162

 

Payments of tax withholding for restricted shares

(172

)

 

(446

)

Net cash provided by (used in) financing activities

277,852

 

 

(4,396

)

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

2,399

 

 

(1,052

)

 

 

 

 

Net increase (decrease) in cash and cash equivalents

222,959

 

 

(83,448

)

Cash and cash equivalents, beginning of period

413,048

 

 

434,631

 

Cash and cash equivalents, end of period

$

636,007

 

 

$

351,183