Amkor Technology Reports Financial Results for the Third Quarter 2012 Third Quarter 2012 *Net sales $695 million *Gross margin 17% *Net income $22 million *Earnings per diluted share $0.11 Business Wire CHANDLER, Ariz. -- October 25, 2012 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, 2012, with net sales of $695million, net income of $22million, and earnings per diluted share of $0.11. "Solid demand for wireless communications in both packaging and test was the key driver of our business in the third quarter," said Ken Joyce, Amkor's president and chief executive officer. "Lower than anticipated supply of 28 nanometer wafers in the early part of the quarter and the overall weakness in the semiconductor market and general economy constrained our growth." Selected financial information for the third quarter 2012, is as follows: *Net Sales: $695million, up 1% from $687million in the prior quarter, and down 6% from $740million in the third quarter of 2011 *Gross Margin: 17%, compared to adjusted gross margin of 17% in the prior quarter, and 17% in the third quarter of 2011 *Net Income: $22million, down from adjusted net income of $33million in the prior quarter, and down from $27million in the third quarter of 2011 *Earnings Per Diluted Share: $0.11, down from adjusted earnings per diluted share of $0.15 in the prior quarter, and flat with $0.11 in the third quarter of 2011 The adjusted gross margin, adjusted net income and adjusted earnings per diluted share presented above for the second quarter 2012 are non-GAAP measures. Selected operating data for the third quarter 2012, 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 $173 million during the third quarter, primarily in support of customers in smartphones and tablets,” said Joanne Solomon, Amkor's executive vice president and chief financial officer. "We accelerated the purchase of some 28 nanometer test equipment to meet the ramp in demand for communications at the end of the quarter. Capital additions for the year are expected to remain around $500 million as we continue to support the growing demand for communications in the fourth quarter and beyond." Amkor's Board of Directors previously authorized $300 million for the repurchase of our common stock. During the third quarter 2012 the company repurchased 8.3 million shares at a purchase price of $41.8 million, for a total of 45.0 million shares at a purchase price of $208.4 million since the program commenced. “We took advantage of favorable conditions in the capital markets to refinance certain debt of our subsidiaries,” continued Solomon. “Our new 10-year note extends our maturities and mitigates future refinancing and liquidity risks.” Cash and cash equivalents were $549 million, and net debt was $1.1 billion, at September 30, 2012. Business Outlook Based upon currently available information, we have the following expectations for the fourth quarter 2012: *Net sales of $675 million to $725 million, down 3% to up 4% from the prior quarter *Gross margin of 16% to 19% *Net income of $11million to $35million, or $0.07 to $0.16 per diluted share *Capital additions of around $50 million for the fourth 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) “We expect solid growth in wireless communications in the fourth quarter of 2012 as our investment in this market continues to gain momentum,” noted Joyce. “The anticipated growth in communications during the quarter is expected to offset the general softening in demand we see in the other end markets due to the weak and uncertain macroeconomic environment and the normal seasonal decline in gaming." Conference Call Information Amkor will conduct a conference call on Thursday, October 25, 2012, 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 1-877-941-8631 or 1-480-629-9723. 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 #4568999). 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, statements regarding our expectations for 2012 capital expenditures, growing demand for smartphones and tablets, the impact of our new 10-year note on future liquidity 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 Tessera arbitration and the impact of other proceedings involving Tessera, Inc.; *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 December31, 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. AMKOR TECHNOLOGY, INC. Selected Operating Data Q3 2012 Q2 2012 Q3 2011 Sales Data (prior periods were revised for a refinement of our classifications): Packaging services (in millions): Chip scale package $ 235 $ 244 $ 247 Leadframe 171 176 179 Ball grid array 148 137 190 Other packaging 62 54 52 Packaging services 616 611 668 Test services 79 76 72 Total sales $ 695 $ 687 $ 740 Packaging services: Chip scale package 34 % 35 % 33 % Leadframe 25 % 26 % 24 % Ball grid array 21 % 20 % 26 % Other packaging 9 % 8 % 7 % Packaging services 89 % 89 % 90 % Test services 11 % 11 % 10 % Total sales 100 % 100 % 100 % Packaged units (in millions): Chip scale package 603 480 461 Leadframe 1,499 1,589 1,511 Ball grid array 47 45 57 Other packaging 51 11 28 Total packaged units 2,200 2,125 2,057 Net sales from top ten customers 62 % 64 % 63 % Capacity Utilization Packaging 76 % 79 % 79 % Test 77 % 80 % 76 % End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers): Communications (cell phones, tablets, 44 % 45 % 40 % wireless LAN, handheld devices) Consumer (gaming, television, set top 24 % 23 % 27 % boxes, portable media, digital cameras) Computing (PCs, laptops, hard disk drives, 11 % 12 % 12 % servers, displays, printers, peripherals) Networking (network servers, routers, 12 % 11 % 12 % switches) Other (auto, industrial) 9 % 9 % 9 % Total 100 % 100 % 100 % Gross Margin Data: Net sales 100 % 100 % 100 % Cost of sales: Materials 43 % 43 % 45 % Labor 15 % 15 % 15 % Other manufacturing 25 % 25 % 23 % Loss contingency accrual — % 4 % — % Gross margin 17 % 13 % 17 % Q3 2012 Q2 2012 Q3 2011 (In millions, except per share data) Capital Investment Data: Property, plant and equipment additions $ 173 $ 149 $ 123 Net change in related accounts payable (25 ) (38 ) (23 ) and deposits Purchases of property, plant and $ 148 $ 111 $ 100 equipment Depreciation and amortization $ 94 $ 91 $ 83 Free Cash Flow Data: Net cash provided by operating $ 142 $ 86 $ 142 activities Less purchases of property, plant and (148 ) (111 ) (100 ) equipment Free cash flow* $ (6 ) $ (25 ) $ 42 Earnings per Share Data: Net income attributable to Amkor - $ 22 $ 1 $ 27 basic Adjustment for dilutive securities on net income: Interest on 6.0% convertible notes due 4 — 4 2014, net of tax Net income attributable to Amkor - $ 26 $ 1 $ 31 diluted Weighted average shares outstanding - 154 166 195 basic** Effect of dilutive securities: 6.0% convertible notes due 2014 83 — 83 Weighted average shares outstanding - 237 166 278 diluted Net income attributable to Amkor per common share: Basic $ 0.14 $ — $ 0.14 Diluted $ 0.11 $ — $ 0.11 *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. **Amkor's Board of Directors previously authorized $300 million for the repurchase of our common stock. During the third quarter, we repurchased 8.4 million shares of common stock for a purchase price of $41.8 million. As of September 30, 2012, we had repurchased a total of 45.0 million shares under the stock repurchase program for a purchase price of $208.4 million. 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 accrual for the second quarter 2012. However, these measures have limitations, including that they exclude the accrual for the Tessera 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. Non-GAAP Financial Measures Reconciliation: Q2 2012 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 0.02 6.0% convertible notes due 2014, net of tax Adjusted earnings per diluted share $ 0.15 AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For the Three Months Ended For the Nine Months Ended September 30, September 30, 2012 2011 2012 2011 (In thousands, except per share data) Net sales $ 695,353 $ 740,007 $ 2,036,890 $ 2,092,590 Cost of sales 578,566 617,768 1,725,802 1,713,848 Gross profit 116,787 122,239 311,088 378,742 Operating expenses: Selling, general and 49,297 65,011 160,041 190,853 administrative Research and 13,472 13,233 40,764 37,921 development Total operating 62,769 78,244 200,805 228,774 expenses Operating income 54,018 43,995 110,283 149,968 Other expense (income): Interest expense 19,689 17,594 60,727 55,992 Interest expense, 3,493 3,492 10,477 8,902 related party Interest income (772 ) (648 ) (2,489 ) (1,788 ) Foreign currency 2,394 (3,005 ) 4,461 1,658 loss (gain) Loss on debt — — — 15,531 retirement, net Equity in earnings of (2,541 ) (3,034 ) (5,421 ) (6,641 ) unconsolidated affiliate Other income, net (359 ) (226 ) (1,511 ) (695 ) Total other 21,904 14,173 66,244 72,959 expense, net Income before 32,114 29,822 44,039 77,009 income taxes Income tax 9,538 2,499 9,009 9,475 expense Net income 22,576 27,323 35,030 67,534 Net (income) loss attributable to (259 ) 44 (358 ) (576 ) noncontrolling interests Net income attributable to $ 22,317 $ 27,367 $ 34,672 $ 66,958 Amkor Net income attributable to Amkor per common share: Basic $ 0.14 $ 0.14 $ 0.21 $ 0.34 Diluted $ 0.11 $ 0.11 $ 0.19 $ 0.28 Shares used in computing per common share amounts: Basic 154,365 195,364 162,699 195,510 Diluted 237,060 278,068 245,431 278,529 AMKOR TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2012 2011 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 549,085 $ 434,631 Restricted cash 2,680 2,680 Accounts receivable: Trade, net of allowances 359,318 298,543 Other 14,550 27,197 Inventories 218,343 198,427 Other current assets 38,965 35,352 Total current assets 1,182,941 996,830 Property, plant and equipment, net 1,832,387 1,656,214 Intangibles, net 5,490 8,382 Investments 42,324 36,707 Restricted cash 2,264 4,001 Other assets 78,151 70,913 Total assets $ 3,143,557 $ 2,773,047 LIABILITIES AND EQUITY Current liabilities: Short-term borrowings and current portion of $ 40,475 $ 59,395 long-term debt Trade accounts payable 500,170 424,504 Accrued expenses 197,798 158,287 Total current liabilities 738,443 642,186 Long-term debt 1,361,665 1,062,256 Long-term debt, related party 225,000 225,000 Pension and severance obligations 141,062 129,096 Other non-current liabilities 17,561 13,288 Total liabilities 2,483,731 2,071,826 Equity: Amkor stockholders' equity: Preferred stock — — Common stock 198 197 Additional paid-in capital 1,613,471 1,611,242 Accumulated deficit (763,790 ) (798,462 ) Accumulated other comprehensive income 12,555 10,849 Treasury stock (210,921 ) (130,560 ) Total Amkor stockholders' equity 651,513 693,266 Noncontrolling interests in subsidiaries 8,313 7,955 Total equity 659,826 701,221 Total liabilities and equity $ 3,143,557 $ 2,773,047 AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended September 30, 2012 2011 (In thousands) Cash flows from operating activities: Net income $ 35,030 $ 67,534 Depreciation and amortization 272,891 249,543 Loss on debt retirement, net — 10,557 Other operating activities and non-cash items (724 ) 1,537 Changes in assets and liabilities (22,761 ) 46,621 Net cash provided by operating activities 284,436 375,792 Cash flows from investing activities: Purchases of property, plant and equipment (380,344 ) (324,349 ) Proceeds from the sale of property, plant and 3,759 15,333 equipment Financing lease payment from unconsolidated 13,684 7,741 affiliate Other investing activities 1,451 (5,654 ) Net cash used in investing activities (361,450 ) (306,929 ) Cash flows from financing activities: Borrowings under short-term debt 30,000 26,567 Payments of short-term debt (40,000 ) (21,567 ) Proceeds from issuance of long-term debt 562,528 348,236 Proceeds from issuance of long-term debt, related — 75,000 party Payments of long-term debt (272,976 ) (373,655 ) Payments for debt issuance costs (6,007 ) (5,875 ) Payments for repurchase of common stock (80,946 ) (41,543 ) Proceeds from the issuance of stock through 181 933 share-based compensation plans Payments of tax withholding for restricted shares (546 ) (793 ) Net cash provided by financing activities 192,234 7,303 Effect of exchange rate fluctuations on cash and (766 ) 2,226 cash equivalents Net increase in cash and cash equivalents 114,454 78,392 Cash and cash equivalents, beginning of period 434,631 404,998 Cash and cash equivalents, end of period $ 549,085 $ 483,390 Contact: Amkor Technology, Inc. Joanne Solomon Executive Vice President & Chief Financial Officer 480-786-7878 firstname.lastname@example.org Greg Johnson Senior Director, Corporate Communications 480-786-7594 email@example.com
Amkor Technology Reports Financial Results for the Third Quarter 2012
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