Third Quarter 2011
• Net sales $740 million
• Gross margin 17%
• Net income $27 million
• Earnings per diluted share $0.11
CHANDLER, Ariz. - October 27, 2011 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor assembly and test services, today announced financial results for the third quarter ended September 30, 2011, with net sales of $740 million, net income of $27 million, and earnings per diluted share of $0.11.
“Sequential sales were up 8%, driven by solid demand in communications, particularly for smartphones and tablets, and the seasonal increase in the consumer area led by our strong position in gaming,” said Ken Joyce, Amkor's president and chief executive officer. “Although gross margin and earnings per share were within our guidance range, the profitability challenges we have been experiencing in 2011 continue to be an issue. We are committed to addressing these challenges and are currently focused on rationalizing our cost structure and improving utilization.”
Selected financial information for the third quarter 2011 is as follows:
• Net Sales: $740 million, up 8% from $688 million in the prior quarter, and down 7% from $794 million in the third quarter 2010
• Gross Margin: 17%, compared to 19% in the prior quarter, and 24% in the third quarter 2010
• Net Income: $27 million, up from $14 million in the prior quarter, and down from $78 million in the third quarter 2010
• Earnings Per Diluted Share: $0.11, up from $0.07 in the prior quarter, and down from $0.30 in the third quarter 2010
“Our third quarter gross margin of 17% declined from the second quarter due primarily to higher gold prices and restructuring costs associated with downsizing our work force as part of our ongoing cost reduction initiatives,” said Joanne Solomon, Amkor's executive vice president and chief financial officer. “We recorded a charge of $5 million in the quarter for the restructuring (or $0.02 per diluted share), with most of the cost being included in our cost of goods sold.”
“Capital additions were $123 million during the third quarter, primarily in support of our newest and most advanced interconnect technologies for wireless communications packages, including flip chip CSP, flip chip stacked CSP and fine pitch copper pillar flip chip,” said Solomon.
“On August 30, 2011, the Board of Directors authorized the repurchase of up to $150 million of our common stock,” continued Solomon. “During the third quarter we repurchased a total of 10.9 million shares for a purchase price of $49 million. We believe this investment in our company enhances stockholder value and reflects our confidence in Amkor's future.”
Cash and cash equivalents were $483 million, and net debt was $843 million, at September 30, 2011.
Selected operating data for the third quarter 2011 is included in a section before the financial statements.
Business Outlook
“Based on the current level of demand for smartphones and tablets, our wireless communications business is expected to remain strong in the fourth quarter,” said Joyce. “However, we see a general softening in demand in other areas during the fourth quarter driven by the uncertain macroeconomic environment coupled with the normal seasonal decline in gaming.”
“Capital additions for the fourth quarter are expected to be in the range of $100 million to $125 million. These investments are targeted to support specific opportunities for key customers in smartphones and tablets, for research and development of the next generation interconnect technologies such as wafer-level fan out and Through Silicon Via, and for cost-down initiatives in our factories,” added Joyce.
Based upon the currently available information, we have the following expectations for the fourth quarter 2011:
• Net sales of $650 million to $700 million, down 5% to 12% from the prior quarter
• Gross margin of 15% to 18%
• Net income of $3 million to $25 million, or $0.03 to $0.11 per diluted share
• Capital additions of $100 million to $125 million for the fourth quarter, and capital additions of $425 million to $450 million for the full year
Conference Call Information
Amkor will conduct a conference call on October 27, 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 877-941-0843. A replay of the call will be made available at Amkor's web site or by dialing 800-406-7325 (access pass code #4478852). 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 about 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, statements made regarding: our continuing challenges to profitability and our focus on rationalizing our cost structure and improving utilization, our ongoing cost reduction initiatives, the level of demand for smartphones and tablets and the strength of our wireless communications business in the fourth quarter, the demand in other business areas in the fourth quarter, the uncertain macroeconomic environment and demand for gaming in the fourth quarter, the amount and timing of our capital additions, the targeting of our capital additions to support specific opportunities for key customers in smartphones and tablets, for research and development of the next generation interconnect technologies, and for cost-down initiatives in our factories, and our current business outlook for the fourth quarter 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;
• 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;
• 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;
• 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 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, 2010 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
|
Q3 2011 |
|
|
Q2 2011 |
|
|
Q3 2010 |
|
|||||||
|
|
(In millions, except per share data) |
|
||||||||||||
|
Capital Investment Data: |
|
|
|
|
|
|
|
|
||||||
|
Property, plant and equipment additions |
$ |
123 |
|
|
|
$ |
97 |
|
|
|
$ |
171 |
|
|
|
Net change in related accounts payable and deposits |
(23 |
) |
|
|
14 |
|
|
|
(37 |
) |
|
|||
|
Purchases of property, plant and equipment |
$ |
100 |
|
|
|
$ |
111 |
|
|
|
$ |
134 |
|
|
|
Depreciation and amortization |
$ |
83 |
|
|
|
$ |
83 |
|
|
|
$ |
83 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Free Cash Flow Data: |
|
|
|
|
|
|
|
|
||||||
|
Net cash provided by operating activities |
$ |
142 |
|
|
|
$ |
114 |
|
|
|
$ |
176 |
|
|
|
Less purchases of property, plant and equipment |
(100 |
) |
|
|
(111 |
) |
|
|
(134 |
) |
|
|||
|
Free cash flow* |
$ |
42 |
|
|
|
$ |
3 |
|
|
|
$ |
42 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Earnings per Share Data: |
|
|
|
|
|
|
|
|
||||||
|
Net income attributable to Amkor - basic |
$ |
27 |
|
|
|
$ |
14 |
|
|
|
$ |
78 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Adjustment for dilutive securities on net income: |
|
|
|
|
|
|
|
|
||||||
|
Interest on 2.5% convertible notes due 2011, net of tax |
— |
|
|
|
— |
|
|
|
— |
|
|
|||
|
Interest on 6.25% convertible notes due 2013, net of tax |
— |
|
|
|
— |
|
|
|
2 |
|
|
|||
|
Interest on 6.0% convertible notes due 2014, net of tax |
4 |
|
|
|
5 |
|
|
|
4 |
|
|
|||
|
Net income attributable to Amkor - diluted |
$ |
31 |
|
|
|
$ |
19 |
|
|
|
$ |
84 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Weighted average shares outstanding - basic** |
195 |
|
|
|
197 |
|
|
|
183 |
|
|
|||
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
||||||
|
Stock options and unvested restricted shares |
— |
|
|
|
— |
|
|
|
— |
|
|
|||
|
2.5% convertible notes due 2011 |
— |
|
|
|
— |
|
|
|
3 |
|
|
|||
|
6.25% convertible notes due 2013 |
— |
|
|
|
— |
|
|
|
13 |
|
|
|||
|
6.0% convertible notes due 2014 |
83 |
|
|
|
83 |
|
|
|
83 |
|
|
|||
|
Weighted average shares outstanding - diluted |
278 |
|
|
|
280 |
|
|
|
282 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income attributable to Amkor per common share: |
|
|
|
|
|
|
|
|
||||||
|
Basic |
$ |
0.14 |
|
|
|
$ |
0.07 |
|
|
|
$ |
0.42 |
|
|
|
Diluted |
$ |
0.11 |
|
|
|
$ |
0.07 |
|
|
|
$ |
0.30 |
|
|
|
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. 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, this measure should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with U.S. GAAP, and our definition of free cash flow may not be comparable to similarly titled measures reported by other companies. |
|
|
|
|
** |
During the third quarter we repurchased a total of 10.9 million shares for a purchase price of $48.7 million. From October 1, 2011, through October 26, 2011, we repurchased an additional 6.2 million shares for a purchase price of $28.7 million, for a cumulative total of 17.1 million shares for a purchase price of $77.4 million. |
CONSOLIDATED STATEMENTS OF INCOME
|
For the Three Months Ended |
|
For the Nine Months Ended |
|||||||||||||
|
|
|
||||||||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
||||||||
|
|
(In thousands, except per share data) |
||||||||||||||
|
Net sales |
$ |
740,007 |
|
|
$ |
793,971 |
|
|
$ |
2,092,590 |
|
|
$ |
2,188,874 |
|
|
Cost of sales |
617,768 |
|
|
605,713 |
|
|
1,713,848 |
|
|
1,684,461 |
|
||||
|
Gross profit |
122,239 |
|
|
188,258 |
|
|
378,742 |
|
|
504,413 |
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative |
65,011 |
|
|
57,735 |
|
|
190,853 |
|
|
180,387 |
|
||||
|
Research and development |
13,233 |
|
|
12,669 |
|
|
37,921 |
|
|
36,437 |
|
||||
|
Total operating expenses |
78,244 |
|
|
70,404 |
|
|
228,774 |
|
|
216,824 |
|
||||
|
Operating income |
43,995 |
|
|
117,854 |
|
|
149,968 |
|
|
287,589 |
|
||||
|
Other expense (income): |
|
|
|
|
|
|
|
||||||||
|
Interest expense |
17,594 |
|
|
19,614 |
|
|
55,992 |
|
|
66,393 |
|
||||
|
Interest expense, related party |
3,492 |
|
|
3,812 |
|
|
8,902 |
|
|
11,437 |
|
||||
|
Interest income |
(648 |
) |
|
(695 |
) |
|
(1,788 |
) |
|
(2,275 |
) |
||||
|
Foreign currency (gain) loss |
(3,005 |
) |
|
8,456 |
|
|
1,658 |
|
|
9,010 |
|
||||
|
Loss on debt retirement, net |
— |
|
|
235 |
|
|
15,531 |
|
|
18,042 |
|
||||
|
Equity in earnings of unconsolidated affiliate |
(3,034 |
) |
|
(2,174 |
) |
|
(6,641 |
) |
|
(4,883 |
) |
||||
|
Other income, net |
(226 |
) |
|
(85 |
) |
|
(695 |
) |
|
(475 |
) |
||||
|
Total other expense, net |
14,173 |
|
|
29,163 |
|
|
72,959 |
|
|
97,249 |
|
||||
|
Income before income taxes |
29,822 |
|
|
88,691 |
|
|
77,009 |
|
|
190,340 |
|
||||
|
Income tax expense |
2,499 |
|
|
10,321 |
|
|
9,475 |
|
|
8,954 |
|
||||
|
Net income |
27,323 |
|
|
78,370 |
|
|
67,534 |
|
|
181,386 |
|
||||
|
Net loss (income) attributable to noncontrolling interests |
44 |
|
|
(350 |
) |
|
(576 |
) |
|
(19 |
) |
||||
|
Net income attributable to Amkor |
$ |
27,367 |
|
|
$ |
78,020 |
|
|
$ |
66,958 |
|
|
$ |
181,367 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income attributable to Amkor per common share: |
|
|
|
|
|
|
|
||||||||
|
Basic |
$ |
0.14 |
|
|
$ |
0.42 |
|
|
$ |
0.34 |
|
|
$ |
0.99 |
|
|
Diluted |
$ |
0.11 |
|
|
$ |
0.30 |
|
|
$ |
0.28 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Shares used in computing per common share amounts: |
|
|
|
|
|
|
|
||||||||
|
Basic |
195,364 |
|
|
183,340 |
|
|
195,510 |
|
|
183,280 |
|
||||
|
Diluted |
278,068 |
|
|
282,495 |
|
|
278,529 |
|
|
282,523 |
|
||||
|
September 30, 2011 |
|
December 31, 2010 |
|||||
|
|
|
||||||
|
|
(In thousands, except per share data) |
||||||
|
ASSETS |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
483,390 |
|
|
$ |
404,998 |
|
|
Restricted cash |
19,719 |
|
|
17,782 |
|
||
|
Accounts receivable: |
|
|
|
||||
|
Trade, net of allowances |
351,636 |
|
|
392,327 |
|
||
|
Other |
22,326 |
|
|
17,970 |
|
||
|
Inventories |
224,046 |
|
|
191,072 |
|
||
|
Other current assets |
35,332 |
|
|
37,918 |
|
||
|
Total current assets |
1,136,449 |
|
|
1,062,067 |
|
||
|
|
|
|
|
||||
|
Property, plant and equipment, net |
1,614,786 |
|
|
1,537,226 |
|
||
|
Intangibles, net |
9,725 |
|
|
13,524 |
|
||
|
Investments |
36,883 |
|
|
28,215 |
|
||
|
Restricted cash |
2,178 |
|
|
1,945 |
|
||
|
Other assets |
89,366 |
|
|
93,845 |
|
||
|
Total assets |
$ |
2,889,387 |
|
|
$ |
2,736,822 |
|
|
LIABILITIES AND EQUITY |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Short-term borrowings and current portion of long-term debt |
$ |
100,322 |
|
|
$ |
150,081 |
|
|
Trade accounts payable |
470,146 |
|
|
443,333 |
|
||
|
Accrued expenses |
204,807 |
|
|
178,794 |
|
||
|
Total current liabilities |
775,275 |
|
|
772,208 |
|
||
|
|
|
|
|
||||
|
Long-term debt |
1,000,638 |
|
|
964,219 |
|
||
|
Long-term debt, related party |
225,000 |
|
|
250,000 |
|
||
|
Pension and severance obligations |
118,492 |
|
|
103,543 |
|
||
|
Other non-current liabilities |
6,454 |
|
|
10,171 |
|
||
|
Total liabilities |
2,125,859 |
|
|
2,100,141 |
|
||
|
|
|
|
|
||||
|
Equity: |
|
|
|
||||
|
Amkor stockholders' equity: |
|
|
|
||||
|
Preferred stock |
— |
|
|
— |
|
||
|
Common stock |
197 |
|
|
183 |
|
||
|
Additional paid-in capital |
1,610,274 |
|
|
1,504,927 |
|
||
|
Accumulated deficit |
(823,312 |
) |
|
(890,270 |
) |
||
|
Accumulated other comprehensive income |
19,024 |
|
|
15,457 |
|
||
|
Treasury stock |
(49,899 |
) |
|
(284 |
) |
||
|
Total Amkor stockholders' equity |
756,284 |
|
|
630,013 |
|
||
|
Noncontrolling interests in subsidiaries |
7,244 |
|
|
6,668 |
|
||
|
Total equity |
763,528 |
|
|
636,681 |
|
||
|
Total liabilities and equity |
$ |
2,889,387 |
|
|
$ |
2,736,822 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Nine Months Ended |
|||||||
|
|
|||||||
|
|
2011 |
|
2010 |
||||
|
|
(In thousands) |
||||||
|
Cash flows from operating activities: |
|
|
|
||||
|
Net income |
$ |
67,534 |
|
|
$ |
181,386 |
|
|
Depreciation and amortization |
249,543 |
|
|
237,225 |
|
||
|
Loss on debt retirement, net |
10,557 |
|
|
10,562 |
|
||
|
Other operating activities and non-cash items |
1,537 |
|
|
(707 |
) |
||
|
Changes in assets and liabilities |
46,621 |
|
|
(61,504 |
) |
||
|
Net cash provided by operating activities |
375,792 |
|
|
366,962 |
|
||
|
|
|
|
|
||||
|
Cash flows from investing activities: |
|
|
|
||||
|
Purchases of property, plant and equipment |
(324,349 |
) |
|
(276,672 |
) |
||
|
Proceeds from the sale of property, plant and equipment |
15,333 |
|
|
2,399 |
|
||
|
Financing lease payment from unconsolidated affiliate |
7,741 |
|
|
10,087 |
|
||
|
Other investing activities |
(5,654 |
) |
|
(10,781 |
) |
||
|
Net cash used in investing activities |
(306,929 |
) |
|
(274,967 |
) |
||
|
|
|
|
|
||||
|
Cash flows from financing activities: |
|
|
|
||||
|
Borrowings under revolving credit facilities |
26,567 |
|
|
18,261 |
|
||
|
Payments under revolving credit facilities |
(21,567 |
) |
|
(49,253 |
) |
||
|
Proceeds from issuance of long-term debt |
348,236 |
|
|
611,007 |
|
||
|
Proceeds from issuance of long-term debt, related party |
75,000 |
|
|
— |
|
||
|
Payments of long-term debt, net of redemption premiums and discounts |
(373,655 |
) |
|
(643,793 |
) |
||
|
Payments for debt issuance costs |
(5,875 |
) |
|
(7,737 |
) |
||
|
Payments for repurchase of common stock |
(41,543 |
) |
|
— |
|
||
|
Proceeds from the issuance of stock through share-based compensation plans |
933 |
|
|
881 |
|
||
|
Payments of tax withholding for restricted shares |
(793 |
) |
|
— |
|
||
|
Net cash provided by (used in) financing activities |
7,303 |
|
|
(70,634 |
) |
||
|
|
|
|
|
||||
|
Effect of exchange rate fluctuations on cash and cash equivalents |
2,226 |
|
|
731 |
|
||
|
|
|
|
|
||||
|
Net increase in cash and cash equivalents |
78,392 |
|
|
22,092 |
|
||
|
Cash and cash equivalents, beginning of period |
404,998 |
|
|
395,406 |
|
||
|
Cash and cash equivalents, end of period |
$ |
483,390 |
|
|
$ |
417,498 |
|