Amkor Technology Reports Financial Results for the Third Quarter

Amkor Technology Reports Financial Results for the Third Quarter 2012

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, wireless LAN, handheld devices)	44		%	45		%	40		%
Consumer (gaming, television, set top boxes, portable media, digital cameras)	24		%	23		%	27		%
Computing (PCs, laptops, hard disk drives, servers, displays, printers, peripherals)	11		%	12		%	12		%
Networking (network servers, routers, switches)	12		%	11		%	12		%
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 and deposits	(25		)	(38		)	(23		)
Purchases of property, plant and equipment	$	148		$	111		$	100
Depreciation and amortization	$	94		$	91		$	83

Free Cash Flow Data:
Net cash provided by operating activities	$	142		$	86		$	142
Less purchases of property, plant and equipment	(148		)	(111		)	(100		)
Free cash flow*	$	(6	)	$	(25	)	$	42

Earnings per Share Data:
Net income attributable to Amkor - basic	$	22		$	1		$	27

Adjustment for dilutive securities on net income:
Interest on 6.0% convertible notes due 2014, net of tax	4			—			4
Net income attributable to Amkor - diluted	$	26		$	1		$	31

Weighted average shares outstanding - basic**	154			166			195
Effect of dilutive securities:
6.0% convertible notes due 2014	83			—			83
Weighted average shares outstanding - diluted	237			166			278

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 6.0% convertible notes due 2014, net of tax	0.02
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,
	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 administrative	49,297			65,011			160,041			190,853
Research and development	13,472			13,233			40,764			37,921
Total operating expenses	62,769			78,244			200,805			228,774
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, related party	3,493			3,492			10,477			8,902
Interest income	(772		)	(648		)	(2,489		)	(1,788		)
Foreign currency loss (gain)	2,394			(3,005		)	4,461			1,658
Loss on debt retirement, net	—			—			—			15,531
Equity in earnings of unconsolidated affiliate	(2,541		)	(3,034		)	(5,421		)	(6,641		)
Other income, net	(359		)	(226		)	(1,511		)	(695		)
Total other expense, net	21,904			14,173			66,244			72,959
Income before income taxes	32,114			29,822			44,039			77,009
Income tax expense	9,538			2,499			9,009			9,475
Net income	22,576			27,323			35,030			67,534
Net (income) loss attributable to noncontrolling interests	(259		)	44			(358		)	(576		)
Net income attributable to Amkor	$	22,317		$	27,367		$	34,672		$	66,958

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, 2012			December 31, 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 long-term debt	$	40,475		$	59,395
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 equipment	3,759			15,333
Financing lease payment from unconsolidated affiliate	13,684			7,741
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 party	—			75,000
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 share-based compensation plans	181			933
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 cash equivalents	(766		)	2,226

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

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