Amkor Technology Reports Financial Results for the Third Quarter 2012
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 $695 million, net income
of $22 million, 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: $695 million, up 1% from $687 million in the prior quarter, and
down 6% from $740 million 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: $22 million, down from adjusted net income of $33 million in
the prior quarter, and down from $27 million 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 $11 million to $35 million, 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 December 31, 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
joanne.solomon@amkor.com
Greg Johnson
Senior Director, Corporate Communications
480-786-7594
greg.johnson@amkor.com
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