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Amkor Technology Reports Financial Results for the Fourth Quarter and Full Year 2018

Fourth Quarter 2018 Highlights:

Full Year 2018 Highlights:

TEMPE, Ariz. — (BUSINESS WIRE) — February 11, 2019 — Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the fourth quarter and full year ended December 31, 2018.

“Both revenue and earnings were stronger than expected in the fourth quarter," said Steve Kelley, Amkor’s president and chief executive officer. “For full year 2018, sales increased 3% year over year to a record $4.3 billion. Broad customer engagement across multiple end markets drove our balanced growth.”

“Favorable product mix resulted in profitability that was above expectations for the quarter,” said Megan Faust, Amkor’s corporate vice president and chief financial officer. “We delivered $120 million of free cash flow in 2018, our fourth consecutive year of positive free cash flow. As a result, we ended the year with over $1 billion in liquidity, including $682 million of cash on hand.”

Results   Q4 2018   Q3 2018   Q4 2017     2018       2017  
  ($ in millions, except per share amounts)
Net sales $ 1,081   $ 1,144   $ 1,150   $ 4,316   $ 4,207
Gross margin 16.9 % 17.5 % 19.5 % 16.5 % 18.1 %
Net income attributable to Amkor (1) $ 28 $ 57 $ 100 $ 127 $ 264
Earnings per diluted share (1) $ 0.12 $ 0.24 $ 0.42 $ 0.53 $ 1.10
EBITDA (1)(2) $ 219 $ 235 $ 254 $ 837 $ 975
Annual free cash flow (1)(2) $ 120 $ 209

(1) Q4 2018 net income includes a $17 million discrete income tax charge, or $0.07 per diluted share, driven by finalizing the accounting for U.S. tax reform. Q4 2017 net income includes a $42 million discrete income tax benefit, or $0.17 per diluted share, due to the estimated impact of U.S. tax reform. Full year 2017 net income also includes an after-tax gain of $82 million, or $0.34 per diluted share, from the sale of our K1 factory in Korea.

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

Cash and cash equivalents were $682 million, and total debt was $1.3 billion, at December 31, 2018.

Business Outlook

“We expect first quarter 2019 revenues to be around $880 million. Our first quarter revenue guidance reflects the inventory correction currently underway in the smartphone market," said Kelley.

First quarter 2019 outlook (unless otherwise noted):

Conference Call Information

Amkor will conduct a conference call on Monday, February 11, 2019, 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 8157559). 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 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 operational base includes production facilities, product development centers and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the USA. For more information visit www.amkor.com.

AMKOR TECHNOLOGY, INC.

Selected Operating Data

 

         
Q4 2018 Q3 2018 Q4 2017 2018 2017
Net Sales Data:
Net sales (in millions):
Advanced products (1) $ 564 $ 582 $ 582 $ 2,118 $ 1,966
Mainstream products (2) 517   562   568   2,198   2,241  
Total net sales $ 1,081   $ 1,144   $ 1,150   $ 4,316   $ 4,207  
 
Packaging services 84 % 84 % 82 % 83 % 82 %
Test services 16 % 16 % 18 % 17 % 18 %
 
Net sales from top ten customers 61 % 62 % 67 % 62 % 67 %
 
End Market Distribution Data:
Communications (smartphones, tablets, handheld devices) 45 % 47 % 48 % 44 % 43 %
Automotive, industrial and other (driver assist, infotainment, safety, performance) 25 % 25 % 23 % 26 % 26 %
Computing (datacenter, infrastructure, PC/laptops, storage) 18 % 17 % 17 % 18 % 18 %
Consumer (set-top boxes, televisions, connected home, personal electronics, visual imaging) 12 % 11 % 12 % 12 % 13 %
Total 100 % 100 % 100 % 100 % 100 %
 
Gross Margin Data:
Net sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales:
Materials 38.8 % 40.3 % 37.5 % 38.7 % 36.4 %
Labor 16.0 % 15.1 % 14.6 % 16.1 % 15.6 %
Other manufacturing 28.3 % 27.1 % 28.4 % 28.7 % 29.9 %
Gross margin 16.9 % 17.5 % 19.5 % 16.5 % 18.1 %
 
(1) Advanced products include flip chip and wafer-level processing and related test services
(2) Mainstream products include wirebond packaging and related test services

AMKOR TECHNOLOGY, INC.
Selected Operating Data

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 Measures Reconciliation:        
Q4 2018 Q3 2018 Q4 2017 2018 2017
(in millions)
EBITDA Data:
Net income $ 29 $ 57 $ 101 $ 130 $ 268
Plus: Interest expense 18 20 20 79 85
Plus: Income tax expense (benefit) 29 14 (14 ) 56 40
Plus: Depreciation & amortization 143   144   147   572   582
EBITDA $ 219   $ 235   $ 254   $ 837   $ 975

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:    
2018 2017
 
Free Cash Flow Data:
Net cash provided by operating activities $ 663 $ 618
Less: Purchases of property, plant and equipment (547 ) (551 )
Plus: Proceeds from sale of and insurance recovery for property, plant and equipment (1) 4   142  
Free cash flow $ 120   $ 209  
 

(1) Full year 2017 includes proceeds from the sale of our K1 factory in Korea of $128 million.

 

AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

   

For the Three Months Ended
December 31,

For the Year Ended
December 31,

2018   2017 2018   2017
(In thousands, except per share data)
Net sales $ 1,081,271 $ 1,150,478 $ 4,316,466 $ 4,207,031
Cost of sales 898,901   926,137   3,605,901   3,445,952  
Gross profit 182,370   224,341   710,565   761,079  
Selling, general and administrative 69,353 77,386 295,239 297,021
Research and development 37,636 37,937 157,182 166,627
Gain on sale of real estate       (108,109 )
Total operating expenses 106,989   115,323   452,421   355,539  
Operating income 75,381   109,018   258,144   405,540  
Interest expense 18,038 20,106 78,946 83,839
Interest expense, related party 1,715
Other (income) expense, net (363 ) 1,340   (6,617 ) 12,490  
Total other expense, net 17,675   21,446   72,329   98,044  
Income before taxes 57,706 87,572 185,815 307,496
Income tax expense (benefit) 28,812   (13,613 ) 56,250   39,791  
Net income 28,894 101,185 129,565 267,705
Net income attributable to noncontrolling interests (599 ) (1,126 ) (2,473 ) (4,155 )
Net income attributable to Amkor $ 28,295   $ 100,059   $ 127,092   $ 263,550  
 
Net income attributable to Amkor per common share:
Basic $ 0.12   $ 0.42   $ 0.53   $ 1.10  
Diluted $ 0.12   $ 0.42   $ 0.53   $ 1.10  
Shares used in computing per common share amounts:
Basic 239,378 239,128 239,329 238,937
Diluted 239,596 239,814 239,741 239,651
 

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
December 31,
2018   2017
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 681,569 $ 596,364
Restricted cash 2,589 2,000
Accounts receivable, net of allowances 724,456 798,264
Inventories 230,589 213,649
Other current assets 32,005   33,727  
Total current assets 1,671,208 1,644,004
Property, plant and equipment, net 2,650,448 2,695,065
Goodwill 25,720 25,036
Restricted cash 3,893 4,487
Other assets 144,178   139,796  
Total assets $ 4,495,447   $ 4,508,388  
 
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 114,579 $ 123,848
Trade accounts payable 530,398 569,085
Capital expenditures payable 255,237 294,258
Accrued expenses 258,209   330,868  
Total current liabilities 1,158,423 1,318,059
Long-term debt 1,217,732 1,240,581
Pension and severance obligations 184,321 182,216
Other non-current liabilities 79,071   47,823  
Total liabilities 2,639,547   2,788,679  
 
Amkor stockholders’ equity:
Preferred stock
Common stock 285 285
Additional paid-in capital 1,909,425 1,903,357
Retained earnings (accumulated deficit) 113,189 (13,903 )
Accumulated other comprehensive income (loss) 23,812 22,519
Treasury stock (216,171 ) (215,982 )
Total Amkor stockholders’ equity 1,830,540 1,696,276
Noncontrolling interests in subsidiaries 25,360   23,433  
Total equity 1,855,900   1,719,709  
Total liabilities and equity $ 4,495,447   $ 4,508,388  
 

AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
For the Year Ended December 31,
2018   2017
(In thousands)
Cash flows from operating activities:
Net income $ 129,565 $ 267,705
Depreciation and amortization 571,961 581,940
Gain on sale of real estate (108,109 )
Proceeds from insurance recovery for property, plant and equipment (1,371 )
Deferred income taxes (13,110 ) (42,189 )
Other operating activities and non-cash items 16,889 424
Changes in assets and liabilities (40,524 ) (81,504 )
Net cash provided by operating activities 663,410   618,267  
 
Cash flows from investing activities:
Payments for property, plant and equipment (547,122 ) (550,943 )
Proceeds from sale of property, plant and equipment 2,841 141,530
Proceeds from insurance recovery for property, plant and equipment 1,371
Acquisition of business, net of cash acquired (43,771 )
Other investing activities 5,527   (1,648 )
Net cash used in investing activities (537,383 ) (454,832 )
 
Cash flows from financing activities:
Proceeds from revolving credit facilities 75,000
Payments of revolving credit facilities (75,000 )
Proceeds from short-term debt 23,341 77,781
Payments of short-term debt (46,631 ) (70,236 )
Proceeds from issuance of long-term debt 596,226 223,976
Payments of long-term debt (535,738 ) (405,269 )
Payments of long-term debt, related party (17,837 )
Payment of deferred consideration for purchase of facility (3,890 )
Payments of capital lease obligations (3,930 ) (5,340 )
Proceeds from issuance of stock through share-based compensation plans 1,050 3,124
Other financing activities 59   (2,195 )
Net cash used in financing activities (40,623 ) (124,886 )
 
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash (204 ) 8,807  
 
Net increase in cash, cash equivalents and restricted cash 85,200 47,356
Cash, cash equivalents and restricted cash, beginning of period 602,851   555,495  
Cash, cash equivalents and restricted cash, end of period $ 688,051   $ 602,851  
 

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 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, 2017 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.
Vincent Keenan
Vice President, Investor Relations
480-786-7594
Email Contact