Amkor Technology Reports Financial Results for the First Quarter 2013

             
AMKOR TECHNOLOGY, INC.
Selected Operating Data
 

Beginning this quarter, we will report sales data for our packaging services by the following categories: flip chip and wafer-level processing and wirebond. We are also providing quarterly and annual packaging services sales and packaged units for 2011 and 2012 under these revised sales reporting categories at the Investor Relations section of our website at www.amkor.com.

 
Q1 2013 Q4 2012 Q1 2012
Sales Data :
Packaging services (in millions):
Flip chip and wafer-level processing $ 320 $ 342 $ 251
Wirebond 274   289   331  
Packaging services 594 631 582
Test services 94   92   73  
Total sales $ 688   $ 723   $ 655  
 
Packaging services:
Flip chip and wafer-level processing 46 % 47 % 38 %
Wirebond 40   % 40   % 51   %
Packaging services 86 % 87 % 89 %
Test services 14   % 13   % 11   %
Total sales 100   % 100   % 100   %
 
Packaged units (in millions):
Flip chip and wafer-level processing 579 592 230
Wirebond 1,722   1,658   1,690  
Total packaged units 2,301   2,250   1,920  
 
Net sales from top ten customers 63 % 63 % 65 %
 
Capacity Utilization
Packaging 76 % 77 % 73 %
Test 83 % 80 % 78 %
 
End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers):
Communications (handsets, tablets, wireless LAN, handheld devices) 59 % 58 % 47 %
Consumer (gaming, television, set top boxes, portable media, digital cameras) 14 % 17 % 20 %
Computing (desk tops, PCs, hard disk drives, servers, displays, printers, peripherals) 9 % 9 % 13 %
Networking (servers, routers, switches) 10 % 9 % 11 %
Other (automotive, industrial) 8   % 7   % 9   %
Total 100   % 100   % 100   %
 
Gross Margin Data:
Net sales 100 % 100 % 100 %
Cost of sales:
Materials 42 % 42 % 45 %
Labor 15 % 14 % 14 %
Other manufacturing 26

%

26 % 25 %
Loss contingency  

%

 

2  

%

 

%

Gross margin 17   % 16   % 16   %
               
 
Q1 2013 Q4 2012 Q1 2012
(In millions, except per share data)
Capital Investment Data:
Property, plant and equipment additions $ 124 $ 86 $ 124
Net change in related accounts payable and deposits (11 ) 67   (3 )
Purchases of property, plant and equipment $ 113   $ 153   $ 121  
Depreciation and amortization $ 97 $ 97 $ 88
 
Free Cash Flow Data:
Net cash provided by operating activities $ 99 $ 105 $ 56
Less purchases of property, plant and equipment (113 ) (153 ) (121 )
Free cash flow (1) $ (14 ) $ (48 ) $ (65 )
 
Earnings per Share Data:
Net income attributable to Amkor - basic $ 13 $ 7 $ 12
 
Adjustment for dilutive securities on net income:

Interest on 6.0% convertible notes due 2014, net of tax (2)

4     4  
Net income attributable to Amkor - diluted $ 17   $ 7   $ 16  
 
Weighted average shares outstanding - basic (3) 152 152 168
Effect of dilutive securities:
6.0% convertible notes due 2014 (2) 83     83  
Weighted average shares outstanding - diluted 235   152   251  
 
Net income attributable to Amkor per common share:
Basic $ 0.09   $ 0.05   $ 0.07  
Diluted $ 0.07   $ 0.05   $ 0.06  
   
(1) 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.
 
(2) The potential shares of common stock and interest related to the 6.0% convertible notes due 2014 were excluded from earnings per diluted share for the three months ended December 31, 2012, because the effect of including these potential shares was antidilutive.
 
(3) Amkor's Board of Directors previously authorized $300 million for the repurchase of our common stock. During the first quarter 2013, we did not repurchase any shares; however, during 2012, we repurchased 16.5 million shares under the stock repurchase program for a purchase price of $79.5 million.
   
 

In the press release above we provide adjusted gross margin, adjusted net income and adjusted earnings per diluted share for the fourth quarter 2012. We present these non-GAAP amounts to demonstrate the impact of the loss contingency we recognized related to our pending patent license arbitration with Tessera, Inc. These measures have limitations, including that they exclude the charges 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 we have recognized. 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:
Q4 2012
Gross margin 16 %
Plus: Loss contingency divided by net sales 2   %
Adjusted gross margin 18   %
 
(In millions)
Net income $ 7
Plus: Loss contingency, net of tax 20  
Adjusted net income $ 27  
 
Earnings per diluted share $ 0.05
Plus: Loss contingency per diluted share 0.08  
Adjusted earnings per diluted share $ 0.13  
   
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended
March 31,
2013     2012
(In thousands, except per share data)
Net sales $ 687,529 $ 655,010
Cost of sales 572,576   550,029  
Gross profit 114,953 104,981
Operating expenses:
Selling, general and administrative 59,559 57,255
Research and development 14,306   13,425  
Total operating expenses 73,865   70,680  
Operating income 41,088   34,301  
Other expense (income):
Interest expense 22,078 18,586
Interest expense, related party 3,492 3,492
Interest income (827 ) (889 )
Foreign currency (gain) loss, net (1,166 ) 790
Equity in earnings of unconsolidated affiliate (55 ) (1,988 )
Other income, net (229 ) (634 )
Total other expense, net 23,293   19,357  
Income before income taxes 17,795 14,944
Income tax expense 4,029   3,362  
Net income 13,766 11,582
Net (income) loss attributable to noncontrolling interests (384 ) 192  
Net income attributable to Amkor $ 13,382   $ 11,774  
 
Net income attributable to Amkor per common share:
Basic $ 0.09   $ 0.07  
Diluted $ 0.07   $ 0.06  
 
Shares used in computing per common share amounts:
Basic 152,411 167,866
Diluted 235,087 250,688
       
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31, December 31,
2013 2012
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 466,702 $ 413,048
Restricted cash 2,680 2,680
Accounts receivable:
Trade, net of allowances 379,370 389,699
Other 2,853 13,098
Inventories 235,330 227,439
Other current assets 45,778   45,444  
Total current assets 1,132,713 1,091,408
Property, plant and equipment, net 1,825,161 1,819,969
Intangibles, net 4,226 4,766
Investments 35,560 38,690
Restricted cash 2,248 2,308
Other assets 74,823   68,074  
Total assets $ 3,074,731   $ 3,025,215  
 
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ $
Trade accounts payable 432,599 439,663
Accrued expenses 232,185   212,964  
Total current liabilities 664,784 652,627
Long-term debt 1,353,000 1,320,000
Long-term debt, related party 225,000 225,000
Pension and severance obligations 135,578 139,379
Other non-current liabilities 19,475   21,415  
Total liabilities 2,397,837   2,358,421  
Equity:
Amkor stockholders' equity:
Preferred stock
Common stock 198 198
Additional paid-in capital 1,614,677 1,614,143
Accumulated deficit (743,262 ) (756,644 )
Accumulated other comprehensive income 7,131 11,241
Treasury stock (211,073 ) (210,983 )
Total Amkor stockholders' equity 667,671 657,955
Noncontrolling interests in subsidiaries 9,223   8,839  
Total equity 676,894   666,794  
Total liabilities and equity $ 3,074,731   $ 3,025,215  
   
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Three Months Ended
March 31,
2013     2012
(In thousands)
Cash flows from operating activities:
Net income $ 13,766 $ 11,582
Depreciation and amortization 97,148 88,446
Other operating activities and non-cash items (840 ) (1,772 )
Changes in assets and liabilities (11,400 ) (42,150 )
Net cash provided by operating activities 98,674   56,106  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (112,543 ) (121,087 )
Proceeds from the sale of property, plant and equipment 24,614 621
Payments from unconsolidated affiliate 8,843 7,914
Other investing activities (249 ) 1,683  
Net cash used in investing activities (79,335 ) (110,869 )
 
Cash flows from financing activities:
Borrowings under short-term debt 20,000
Payments of short-term debt (15,000 )
Proceeds from issuance of long-term debt 33,000 158,742
Payments of long-term debt (156,357 )
Payments for repurchase of common stock (4,505 )
Proceeds from the issuance of stock through share-based compensation plans 69
Payments of tax withholding for restricted shares (90 ) (353 )
Net cash provided by financing activities 32,910   2,596  
 
Effect of exchange rate fluctuations on cash and cash equivalents 1,405 (1,332 )
 
Net increase (decrease) in cash and cash equivalents 53,654 (53,499 )
Cash and cash equivalents, beginning of period 413,048   434,631  
Cash and cash equivalents, end of period $ 466,702   $ 381,132  



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