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

AMKOR TECHNOLOGY, INC.

Selected Operating Data

 

Q3 2011

 

 

Q2 2011

 

 

Q3 2010

 

Sales Data:

 

 

 

 

 

 

 

 

Packaging services (in millions):

 

 

 

 

 

 

 

 

Chip scale package

$

247

 

 

 

$

211

 

 

 

$

244

 

 

Leadframe

180

 

 

 

188

 

 

 

204

 

 

Ball grid array

194

 

 

 

167

 

 

 

212

 

 

Other packaging

46

 

 

 

46

 

 

 

52

 

 

Packaging services

667

 

 

 

612

 

 

 

712

 

 

Test services

73

 

 

 

76

 

 

 

82

 

 

Total sales

$

740

 

 

 

$

688

 

 

 

$

794

 

 

 

 

 

 

 

 

 

 

 

Packaging services:

 

 

 

 

 

 

 

 

Chip scale package

34

 

%

 

31

 

%

 

31

 

%

Leadframe

24

 

%

 

27

 

%

 

26

 

%

Ball grid array

26

 

%

 

24

 

%

 

27

 

%

Other packaging

6

 

%

 

7

 

%

 

6

 

%

Packaging services

90

 

%

 

89

 

%

 

90

 

%

Test services

10

 

%

 

11

 

%

 

10

 

%

Total sales

100

 

%

 

100

 

%

 

100

 

%

 

 

 

 

 

 

 

 

 

Packaged units (in millions):

 

 

 

 

 

 

 

 

Chip scale package

459

 

 

 

440

 

 

 

618

 

 

Leadframe

1,511

 

 

 

1,671

 

 

 

2,185

 

 

Ball grid array

83

 

 

 

72

 

 

 

72

 

 

Other packaging

4

 

 

 

3

 

 

 

8

 

 

Total packaged units

2,057

 

 

 

2,186

 

 

 

2,883

 

 

 

 

 

 

 

 

 

 

 

Net sales from top ten customers

63

 

%

 

60

 

%

 

55

 

%

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Packaging

79

 

%

 

76

 

%

 

85

 

%

Test

76

 

%

 

78

 

%

 

87

 

%

 

 

 

 

 

 

 

 

 

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, tablets, Ethernet, WiMAX, wireless LAN)

40

 

%

 

38

 

%

 

34

 

%

Consumer (gaming, set top boxes, TV, portable media)

27

 

%

 

26

 

%

 

30

 

%

Computing (PCs, servers, displays, hard disk drive, printers)

12

 

%

 

12

 

%

 

14

 

%

Networking (infrastructure, routers, network servers)

12

 

%

 

13

 

%

 

13

 

%

Other (auto, industrial)

9

 

%

 

11

 

%

 

9

 

%

Total

100

 

%

 

100

 

%

 

100

 

%

 

 

 

 

 

 

 

 

 

Gross Margin Data:

 

 

 

 

 

 

 

 

Net sales

100

 

%

 

100

 

%

 

100

 

%

Cost of sales:

 

 

 

 

 

 

 

 

Materials

45

 

%

 

43

 

%

 

43

 

%

Labor

15

 

%

 

15

 

%

 

12

 

%

Other manufacturing

23

 

%

 

23

 

%

 

21

 

%

Gross margin

17

 

%

 

19

 

%

 

24

 

%

AMKOR TECHNOLOGY, INC.

Selected Operating Data

 

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.


 


AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

For the Three Months Ended
September 30,

 

For the Nine Months Ended
September 30,

 

 

 

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

 


 


AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

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

 


AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

For the Nine Months Ended
September 30,

 

 

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