Third Quarter Highlights

  • Net sales $1,135 million, up 15% sequentially
  • Gross margin 19.1%
  • Net income $54 million, earnings per diluted share $0.23
  • EBITDA $243 million
  • Redemption of $200 million of Senior Notes due 2021, with annualized interest savings of approximately $13 million


TEMPE, Ariz. - October 30, 2017 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the third quarter ended September 30, 2017.

"We achieved record sales in the third quarter, up 15% sequentially and 5% year-over-year," said Steve Kelley, Amkor's president and chief executive officer. "Demand was strong in nearly all end markets, and our factories executed well.”

Results

Q3 2017

 

Q2 2017

 

Q3 2016

 

($ in millions, except per share data)

Net sales

$1,135

 

$989

 

$1,086

Gross margin

19.1%

 

17.4%

 

19.7%

Net income attributable to Amkor

$54

 

$116

 

$60

Earnings per diluted share

$0.23

 

$0.48

 

$0.25

EBITDA**

$243

 

$316

 

$249

Net cash provided by operating activities

$214

 

$97

 

$219

Free cash flow**

$74

 

$43

 

$106

 

 **EBITDA and free cash flow are non-GAAP measures. The reconciliations to the comparable GAAP measures are included below under "Selected Operating Data."

"As part of our 2017 Japan factory consolidation plan, we incurred approximately $10 million of one-time costs in the third quarter,” said Megan Faust, Amkor’s corporate vice president and chief financial officer. “After completion of the plan in the fourth quarter, we expect annualized savings from this initiative of around $30 million, including a $25 million reduction in manufacturing costs."

"Our focus on CapEx discipline has driven improved free cash flow," added Faust. "During the quarter we redeemed $200 million of the outstanding $400 million of our Senior Notes due 2021 using cash on hand. This will result in annualized pre-tax interest savings of approximately $13 million."

Cash and cash equivalents were $519 million and total debt was $1.4 billion, at September 30, 2017.

Business Outlook

"We expect solid fourth quarter demand in mobile communications and our other end markets, leading to another year of record sales for Amkor," said Kelley.

Fourth quarter and full year 2017 outlook:

Fourth quarter

  • Net sales of $1.05 billion to $1.13 billion
  • Gross margin of 17% to 18.5%
  • Net income of $34 million to $54 million, or $0.14 to $0.23 per share


Full year

  • Net sales of approximately $4.13 billion
  • Gross margin of approximately 17.5%
  • Net income of approximately $205 million, or around $0.85 per share (including an after tax gain of $0.34 per share from sale of K1 factory in Korea)
  • Full year capital expenditures of approximately $550 million

 

Conference Call Information

Amkor will conduct a conference call on Monday, October 30, 2017, 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 1-877-645-6380 or 1-404-991-3911.  A replay of the call will be made available at Amkor's website or by dialing 1-855-859-2056 or 1-404-537-3406 (conference ID 98894733). The webcast is also being distributed over NASDAQ OMX's investor distribution network to both institutional and individual investors.  Institutional investors can access the call via NASDAQ OMX's password-protected event management site, Street Events (www.streetevents.com).

About Amkor Technology, Inc.

Amkor Technology, Inc. is one of the world’s largest providers of outsourced semiconductor packaging and test services. Founded in 1968, Amkor pioneered the outsourcing of IC packaging and test, and is now a strategic manufacturing partner for more than 250 of the world’s leading semiconductor companies, foundries and electronics OEMs. Amkor’s operating base includes 10 million square feet of floor space, with production facilities, product development centers, and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the U.S. For more information, visit www.amkor.com.
 

Contacts:

Amkor Technology, Inc.
Megan Faust
Corporate Vice President & Chief Financial Officer
480-786-7707
megan.faust@amkor.com

Greg Johnson
Vice President, Finance and Investor Relations
480-786-7594
greg.johnson@amkor.com

 

Q3 2017

 

Q2 2017

 

Q3 2016

Net Sales Data:

 

 

 

 

 

Net sales (in millions):

 

 

 

 

 

Advanced products*

$

554

 

 

$

431

 

 

$

480

 

Mainstream products**

581

 

 

558

 

 

606

 

Total net sales

$

1,135

 

 

$

989

 

 

$

1,086

 

 

 

 

 

 

 

Packaging services

82

%

 

81

%

 

82

%

Test services

18

%

 

19

%

 

18

%

 

 

 

 

 

 

Net sales from top ten customers

67

%

 

67

%

 

68

%

 

 

 

 

 

 

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

 

 

 

 

 

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

46

%

 

42

%

 

47

%

Automotive and industrial (infotainment, safety, performance, comfort)

24

%

 

26

%

 

24

%

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

13

%

 

14

%

 

14

%

Networking (servers, routers, switches)

10

%

 

10

%

 

9

%

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

7

%

 

8

%

 

6

%

Total

100

%

 

100

%

 

100

%

 

 

 

 

 

 

Gross Margin Data:

 

 

 

 

 

Net sales

100.0

%

 

100.0

%

 

100.0

%

Cost of sales:

 

 

 

 

 

Materials

37.1

%

 

35.3

%

 

37.2

%

Labor

15.2

%

 

16.4

%

 

14.6

%

Other manufacturing

28.6

%

 

30.9

%

 

28.5

%

Gross margin

19.1

%

 

17.4

%

 

19.7

%

 

 

 *     Advanced products include flip chip and wafer-level processing and related test services
**   Mainstream products include wirebond packaging and related test services

In the press release above we provide EBITDA, which is not defined by U.S. GAAP.  We define EBITDA as net income before interest expense, income tax expense and depreciation and amortization.  We believe EBITDA to be relevant and useful information to our investors because it provides additional information in assessing our financial operating results. Our management uses EBITDA in evaluating our operating performance, our ability to service debt and our ability to fund capital expenditures.  However, EBITDA has certain limitations in that it does not reflect the impact of certain expenses on our consolidated statements of income, including interest expense, which is a necessary element of our costs because we have borrowed money in order to finance our operations, income tax expense, which is a necessary element of our costs because taxes are imposed by law, and depreciation and amortization, which is a necessary element of our costs because we use capital assets to generate income. EBITDA should be considered in addition to, and not as a substitute for, or superior to, operating income, net income or other measures of financial performance prepared in accordance with U.S. GAAP.  Furthermore our definition of EBITDA may not be comparable to similarly titled measures reported by other companies.  Below is our reconciliation of EBITDA to U.S. GAAP net income.

Non-GAAP Financial Measure Reconciliation:

 

 

 

 

 

 

Q3 2017

 

Q2 2017

 

Q3 2016

 

(in millions)

EBITDA Data:

 

 

 

 

 

Net income

$

56

 

 

$

116

 

 

$

61

 

Plus: Interest expense

20

 

 

22

 

 

23

 

Plus: Income tax expense

19

 

 

33

 

 

24

 

Plus: Depreciation & amortization

148

 

 

145

 

 

141

 

EBITDA

$

243

 

 

$

316

 

 

$

249

 

 

In the press release above we refer to free cash flow, which is not defined by U.S. GAAP.  We define free cash flow as net cash provided by operating activities less payments for property, plant and equipment, plus proceeds from the sale of and insurance recovery for property, plant and equipment, if applicable.  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 expenditures.  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.  Below is our reconciliation of free cash flow to U.S. GAAP net cash provided by operating activities.

Non-GAAP Financial Measures Reconciliation:

 

 

 

 

 

 

Q3 2017

 

Q2 2017

 

Q3 2016

 

(in millions)

Free Cash Flow Data:

 

 

 

 

 

Net cash provided by operating activities

$

214

 

 

$

97

 

 

$

219

 

Less: Purchases of property, plant and equipment

(142

)

 

(183

)

 

(126

)

Plus: Proceeds from sale of property, plant and equipment

2

 

 

129

 

 

13

 

Free cash flow

$

74

 

 

$

43

 

 

$

106

 

 

 

 

 

For the Three Months Ended
September 30,

 

For the Nine Months Ended
September 30,

 

2017

 

2016

 

2017

 

2016

 

(In thousands, except per share data)

Net sales

$

1,135,027

 

 

$

1,086,014

 

 

$

3,038,074

 

 

$

2,872,022

 

Cost of sales

918,389

 

 

872,214

 

 

2,506,295

 

 

2,403,732

 

Gross profit

216,638

 

 

213,800

 

 

531,779

 

 

468,290

 

Selling, general and administrative

75,567

 

 

72,363

 

 

220,045

 

 

216,894

 

Research and development

42,834

 

 

26,822

 

 

128,658

 

 

84,145

 

Gain on sale of real estate

 

 

 

 

(108,109

)

 

 

Total operating expenses

118,401

 

 

99,185

 

 

240,594

 

 

301,039

 

Operating income

98,237

 

 

114,615

 

 

291,185

 

 

167,251

 

Interest expense

20,321

 

 

21,488

 

 

63,733

 

 

58,496

 

Interest expense, related party

180

 

 

1,243

 

 

1,715

 

 

3,727

 

Other (income) expense, net

3,354

 

 

6,657

 

 

11,028

 

 

9,607

 

Total other expense, net

23,855

 

 

29,388

 

 

76,476

 

 

71,830

 

Income before taxes

74,382

 

 

85,227

 

 

214,709

 

 

95,421

 

Income tax expense

18,752

 

 

24,086

 

 

51,764

 

 

29,319

 

Net income

55,630

 

 

61,141

 

 

162,945

 

 

66,102

 

Net income attributable to non-controlling interests

(1,195

)

 

(1,052

)

 

(3,009

)

 

(2,175

)

Net income attributable to Amkor

$

54,435

 

 

$

60,089

 

 

$

159,936

 

 

$

63,927

 

 

 

 

 

 

 

 

 

Net income attributable to Amkor per common share:

 

 

 

 

 

 

 

Basic

$

0.23

 

 

$

0.25

 

 

$

0.67

 

 

$

0.27

 

Diluted

$

0.23

 

 

$

0.25

 

 

$

0.67

 

 

$

0.27

 

 

 

 

 

 

 

 

 

Shares used in computing per common share amounts:

 

 

 

 

 

 

 

Basic

239,068

 

 

237,353

 

 

238,873

 

 

237,157

 

Diluted

239,640

 

 

238,192

 

 

239,610

 

 

237,586

 

 

 

 

 

September 30,
 2017

 

December 31,
 2016

 

(In thousands)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

519,449

 

 

$

549,518

 

Restricted cash

2,000

 

 

2,000

 

Accounts receivable, net of allowances

691,700

 

 

563,107

 

Inventories

314,207

 

 

267,990

 

Other current assets

39,116

 

 

27,081

 

Total current assets

1,566,472

 

 

1,409,696

 

Property, plant and equipment, net

2,706,715

 

 

2,564,648

 

Goodwill

25,076

 

 

24,122

 

Restricted cash

4,224

 

 

3,977

 

Other assets

109,782

 

 

89,643

 

Total assets

$

4,412,269

 

 

$

4,092,086

 

LIABILITIES AND EQUITY

Current liabilities:

 

 

 

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

$

117,970

 

 

$

35,192

 

Trade accounts payable

562,330

 

 

487,430

 

Capital expenditures payable

289,780

 

 

144,370

 

Accrued expenses

385,659

 

 

338,669

 

Total current liabilities

1,355,739

 

 

1,005,661

 

Long-term debt

1,243,697

 

 

1,364,638

 

Long-term debt, related party

 

 

75,000

 

Pension and severance obligations

179,112

 

 

166,701

 

Other non-current liabilities

50,871

 

 

76,682

 

Total liabilities

2,829,419

 

 

2,688,682

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock

 

 

 

Common stock

285

 

 

284

 

Additional paid-in capital

1,901,381

 

 

1,895,089

 

Accumulated deficit

(143,621

)

 

(303,557

)

Accumulated other comprehensive income (loss)

18,309

 

 

6,262

 

Treasury stock

(215,917

)

 

(214,490

)

Total Amkor stockholders’ equity

1,560,437

 

 

1,383,588

 

Non-controlling interests in subsidiaries

22,413

 

 

19,816

 

Total equity

1,582,850

 

 

1,403,404

 

Total liabilities and equity

$

4,412,269

 

 

$

4,092,086

 

 

 

 

 

For the Nine Months Ended
September 30,

 

2017

 

2016

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net income

$

162,945

 

 

$

66,102

 

Depreciation and amortization

435,667

 

 

416,517

 

Gain on sale of real estate

(108,109

)

 

 

Other operating activities and non-cash items

(9,763

)

 

(4,382

)

Changes in assets and liabilities

(66,829

)

 

13,379

 

Net cash provided by operating activities

413,911

 

 

491,616

 

Cash flows from investing activities:

 

 

 

Payments for property, plant and equipment

(413,974

)

 

(481,670

)

Proceeds from sale of property, plant and equipment

133,320

 

 

13,687

 

Acquisition of business, net of cash acquired

(43,771

)

 

 

Other investing activities

(1,600

)

 

(143

)

Net cash used in investing activities

(326,025

)

 

(468,126

)

Cash flows from financing activities:

 

 

 

Proceeds from revolving credit facilities

75,000

 

 

115,000

 

Payments of revolving credit facilities

 

 

(155,000

)

Proceeds from short-term debt

50,333

 

 

27,594

 

Payments of short-term debt

(52,068

)

 

(36,211

)

Proceeds from issuance of long-term debt

223,976

 

 

45,000

 

Payments of long-term debt

(398,755

)

 

(12,955

)

Payments of long-term debt, related party

(17,837

)

 

 

Payment of deferred consideration for purchase of facility

(3,890

)

 

 

Payments of capital lease obligations

(4,123

)

 

(1,691

)

Other financing activities

425

 

 

1,585

 

Net cash used in financing activities

(126,939

)

 

(16,678

)

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

9,231

 

 

21,885

 

Net increase (decrease) in cash, cash equivalents and restricted cash

(29,822

)

 

28,697

 

Cash, cash equivalents and restricted cash, beginning of period

555,495

 

 

527,348

 

Cash, cash equivalents and restricted cash, end of period

$

525,673

 

 

$

556,045

 

 

 

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 the expected timing for completion of and annualized savings from our factory consolidation plan, the amount of interest savings generated by the redemption of $200 million of our 2021 Senior Notes, 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, cyclicality, and rate of growth of the semiconductor industry;
  • timing and volume of orders relative to production capacity and the inability to achieve high capacity utilization rates, control costs and improve profitability;
  • volatility of consumer demand, double booking by customers and deterioration in forecasts from our customers for products incorporating our semiconductor packages, including any slowdown in demand or changes in customer forecasts for smartphones or other mobile devices and generally soft end market demand for electronic devices;
  • delays, lower manufacturing yields and supply constraints relating to wafers, particularly for advanced nodes and related technologies;
  • dependence on key customers, the impact of changes in our market share and prices for our services with those customers and the business and financial condition of those 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 effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers, including the uncertain macroeconomic environment;
  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters and the impact of other legal proceedings;
  • changes in tax rates and taxes as a result of changes in U.S. or foreign tax law or the interpretations thereof (including possible tax reforms proposed by new administrations), changes in our organizational structure, changes in the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax reviews, audits and 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 expenditures;
  • the effects of an economic slowdown in major economies worldwide;
  • disruptions in our business or deficiencies in our controls resulting from the integration of newly acquired operations, particularly J-Devices, or the implementation and security of, and changes to, our enterprise resource planning, factory shop floor systems and other management information systems;
  • there can be no assurance regarding when our new K5 factory and research and development center in Korea will be fully utilized, or that the actual scope, costs, timeline or benefits of the project will be consistent with our current expectations;
  • economic effects of terrorist attacks, political instability, natural disasters and military conflict;
  • competition, competitive pricing and declines in average selling prices;
  • fluctuations in manufacturing yields;
  • dependence on international operations and sales and fluctuations in foreign currency exchange rates, particularly in Japan;
  • dependence on raw material and equipment suppliers and changes in raw material and precious metal costs;
  • dependence on key personnel;
  • enforcement of and compliance with intellectual property rights;
  • environmental and other governmental regulations, including regulatory efforts by foreign governments to support local competitors; 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, 2016 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.