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Amkor Technology Reports Financial Results for the Third Quarter 2014

Third Quarter 2014

CHANDLER, Ariz. — (BUSINESS WIRE) — October 27, 2014 — 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, 2014, with net sales of $813 million, net income of $47 million, and earnings per diluted share of $0.20.

"We delivered record sales this quarter, driven by gains in the mobile device market," said Steve Kelley, Amkor's president and chief executive officer. "Sales grew 6% sequentially and year-over-year, following 10% sequential growth in the second quarter. We had expected even stronger growth in Q3, but fell short of our goal, primarily due to reduced demand for high-end Android smartphones."

Selected financial information for the third quarter 2014 is as follows:

“Although we saw solid sales growth in the quarter, gross profit remained flat as we invested in our infrastructure ahead of the originally expected higher levels of demand,” said Joanne Solomon, Amkor's executive vice president and chief financial officer.

The adjusted gross margin, adjusted net income and adjusted earnings per diluted share information presented above excludes loss contingency charges relating to our pending patent license litigation and are non-GAAP measures. The loss contingency charge was $11 million ($10 million, net of tax) in the third quarter of 2013. Selected operating data for all periods discussed above, and a reconciliation to the comparable GAAP measures, are included in a section below before the financial statements.

Cash and cash equivalents were $486 million, and total debt was $1.5 billion, at September 30, 2014.

Business Outlook

“Looking ahead to the fourth quarter, we see growth in mobile communications, offset by seasonal declines in the consumer, computing and industrial end markets," noted Kelley.

Based upon currently available information, we have the following expectations for the fourth quarter 2014:

Conference Call Information

Amkor will conduct a conference call on Monday, October 27, 2014, 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 9026503). 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

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 at Amkor's website: www.amkor.com.

AMKOR TECHNOLOGY, INC.

Selected Operating Data

Since the fourth quarter 2013, we have reported net sales data by the following categories: advanced products and mainstream products. We have also provided quarterly and annual net sales and packaged units for 2012 and 2013 under these revised net sales reporting categories at the Investor Relations section of our website at www.amkor.com.

     
Q3 2014 Q2 2014 Q3 2013
Net Sales Data:
Net sales (in millions):
Advanced products* $ 411 $ 364 $ 349
Mainstream products** 402   403   419  
Total net sales $ 813   $ 767   $ 768  
 
Packaging services 86 % 86 % 85 %
Test services 14 % 14 % 15 %
 
Net sales from top ten customers 60 % 58 % 63 %
 
Packaged units (in millions):
Advanced products* 1,012 910 746
Mainstream products** 3,545   3,379   3,101  
Total packaged units 4,557   4,289   3,847  
 
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) 56 % 53 % 53 %
Consumer (television, set top boxes, gaming, portable media, digital cameras) 13 % 15 % 15 %
Automotive, industrial and other (infotainment, safety, performance, comfort) 11 % 12 % 10 %
Networking (servers, routers, switches) 11 % 11 % 11 %
Computing (PCs, hard disk drive, printers, peripherals, servers) 9   % 9   % 11   %
Total 100   % 100   % 100   %
 
Gross Margin Data:
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales:
Materials 37.5 % 37.2 % 39.0 %
Labor 14.1 % 14.0 % 14.1 %
Other manufacturing 29.6 % 29.2 % 27.2 %
Loss contingency   %   % 1.3   %
Gross margin 18.8   % 19.6   % 18.4   %
 
Earnings per Share Data:
Net income attributable to Amkor - basic $ 47 $ 50 $ 25
 
Adjustment for dilutive securities on net income:
Interest on 6.0% convertible notes due 2014, net of tax     1  
Net income attributable to Amkor - diluted $ 47   $ 50   $ 26  
 
Weighted average shares outstanding - basic 236 233 216
Effect of dilutive securities:
Stock options 1 1
6.0% convertible notes due 2014   3   19  
Weighted average shares outstanding - diluted 237   237   235  
 
Net income attributable to Amkor per common share:
Basic $ 0.20   $ 0.21   $ 0.12  
Diluted $ 0.20   $ 0.21   $ 0.11  
 

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

**Mainstream products include wirebond packaging and related test services and since August 1, 2013, include the results of our newly acquired power discrete business in Malaysia which has a high volume of units relative to revenue

In the press release above we provide adjusted gross margin, adjusted net income and adjusted earnings per diluted share for the third quarter 2013. We present these non-GAAP amounts to demonstrate the impact of the loss contingency we recognized related to our pending patent license litigation. These measures have limitations, including that they exclude the charges for the arbitration panel award, which is an amount that the company may ultimately have to pay in cash. Furthermore, the final outcome of our litigation relating to the patent license dispute depends on a number of complex factors, including whether we receive favorable rulings in pending proceedings and other factors. Therefore, the final amount of the loss may be more than the amount we have recognized. Accordingly, these measures should be considered in addition to, and not as a substitute for, or superior to, net sales, 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:
Q3 2013
Gross margin 18.4 %
Plus: Loss contingency divided by net sales 1.3   %
Adjusted gross margin 19.7   %
 
(In millions)
Net income $ 25
Plus: Loss contingency, net of tax 10  
Adjusted net income $ 35  
 
Earnings per diluted share $ 0.11
Plus: Loss contingency per diluted share 0.04  
Adjusted earnings per diluted share $ 0.15  
 
     

AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,

2014     2013 2014     2013
(In thousands, except per share data)
Net sales $ 812,824 $ 767,987 $ 2,276,327 $ 2,201,575
Cost of sales 659,607   626,979   1,843,576   1,807,235  
Gross profit 153,217   141,008   432,751   394,340  
Selling, general and administrative 61,600 64,347 191,698 189,524
Research and development 16,437   18,647   59,561   47,261  
Total operating expenses 78,037   82,994   251,259   236,785  
Operating income 75,180 58,014 181,492 157,555
Interest expense 23,780 26,104 70,039 71,921
Interest expense, related party 1,243 1,243 3,727 7,927
Other (income) expense, net (9,626 ) (4,328 ) (15,289 ) 6,326  
Total other expense, net 15,397   23,019   58,477   86,174  
Income before taxes and equity in earnings of unconsolidated affiliate 59,783 34,995 123,015 71,381
Income tax expense 14,985   12,170   32,425   5,961  
Income before equity in earnings of unconsolidated affiliate 44,798 22,825 90,590 65,420
Equity in earnings of J-Devices 3,372   3,179   29,169   4,679  
Net income 48,170 26,004 119,759 70,099
Net income attributable to noncontrolling interests (1,073 ) (655 ) (2,508 ) (1,641 )
Net income attributable to Amkor $ 47,097   $ 25,349   $ 117,251   $ 68,458  
 
Net income attributable to Amkor per common share:
Basic $ 0.20   $ 0.12   $ 0.51   $ 0.38  
Diluted $ 0.20   $ 0.11   $ 0.50   $ 0.33  
 
Shares used in computing per common share amounts:
Basic 236,337 216,499 228,733 176,839
Diluted 237,509 235,143 236,672 235,119
 
     

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

September 30,
2014

December 31,
2013

(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 485,592 $ 610,442
Restricted cash 2,681 2,681
Accounts receivable, net of allowances 483,330 385,542
Inventories 229,557 200,423
Other current assets 69,225   33,328  
Total current assets 1,270,385 1,232,416
Property, plant and equipment, net 2,258,870 2,006,553
Investments 128,444 105,214
Restricted cash 2,209 2,234
Other assets 100,033   80,881  
Total assets $ 3,759,941   $ 3,427,298  
 
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 10,000 $ 61,350
Trade accounts payable 626,609 365,334
Accrued expenses 292,619   264,252  
Total current liabilities 929,228 690,936
Long-term debt 1,450,969 1,516,390
Long-term debt, related party 75,000 75,000
Pension and severance obligations 158,793 165,073
Other non-current liabilities 14,881   14,959  
Total liabilities 2,628,871   2,462,358  
 
Amkor stockholders’ equity:
Preferred stock
Common stock 282 262
Additional paid-in capital 1,877,452 1,812,530
Accumulated deficit (530,097 ) (647,348 )
Accumulated other comprehensive loss (17,478 ) (255 )
Treasury stock (212,797 ) (211,449 )
Total Amkor stockholders’ equity 1,117,362 953,740
Noncontrolling interests in subsidiaries 13,708   11,200  
Total equity 1,131,070   964,940  
Total liabilities and equity $ 3,759,941   $ 3,427,298  
 
 

AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

For the Nine Months Ended
September 30,

2014     2013
(In thousands)
Cash flows from operating activities:
Net income $ 119,759 $ 70,099
Depreciation and amortization 340,089 302,007
Loss on debt retirement 11,619
Gain on sale of subsidiary to J-Devices (9,155 )
Other operating activities and non-cash items (27,811 ) (12,728 )
Changes in assets and liabilities (17,214 ) 4,248  
Net cash provided by operating activities 405,668   375,245  
 
Cash flows from investing activities:
Payments for property, plant and equipment (442,308 ) (402,004 )
Proceeds from sale of property, plant and equipment 2,170 26,505
Acquisition of business, net of cash acquired (41,865 )
Cash transferred on sale of subsidiary to J-Devices, net of proceeds (15,774 )
Payments from J-Devices 8,843
Investment in J-Devices (67,372 )
Other investing activities (389 ) (1,015 )
Net cash used in investing activities (456,301 ) (476,908 )
 
Cash flows from financing activities:
Borrowings under revolving credit facilities 5,000
Payments under revolving credit facilities (5,000 )
Proceeds from issuance of long-term debt 80,000 293,000
Payments of long-term debt (140,000 )
Payments for debt issuance costs (3,216 )
Payments for the retirement of debt (11,619 )
Payment of deferred consideration for an acquisition (18,763 )
Proceeds from the issuance of stock through share-based compensation plans 5,826
Payments of tax withholding for restricted shares (1,348 ) (234 )
Net cash (used in) provided by financing activities (74,285 ) 277,931  
 
Effect of exchange rate fluctuations on cash and cash equivalents 68 1,994
 
Net (decrease) increase in cash and cash equivalents (124,850 ) 178,262
Cash and cash equivalents, beginning of period 610,442   413,048  
Cash and cash equivalents, end of period $ 485,592   $ 591,310  
 

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, 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:

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, 2013 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.
Joanne Solomon
Executive Vice President & Chief Financial Officer
480-786-7878
Email Contact
or
Greg Johnson
Senior Director, Investor Relations and Corporate Communications
480-786-7594
Email Contact