Amkor Technology Reports Financial Results for the First Quarter

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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