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Amkor Technology Reports Financial Results for the Second Quarter 2014

Second Quarter 2014

  • Net sales $767 million
  • Gross margin 19.6%
  • Net income $50 million (includes $18 million net gain related to sale of a subsidiary)
  • Earnings per diluted share $0.21 (includes $0.08 related to sale of a subsidiary)

CHANDLER, Ariz.--(BUSINESS WIRE)--Jul. 28, 2014-- Amkor Technology, Inc. (NASDAQ:AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the second quarter ended June 30, 2014, with net sales of $767 million, net income of $50 million, and earnings per diluted share of $0.21. Net income includes a net gain of $18 million ($0.08 per diluted share) related to the sale of Amkor's Japanese subsidiary to J-Devices, Amkor's 60% owned joint venture in Japan.

“We delivered solid second quarter results that were consistent with our expectations,” said Steve Kelley, Amkor's president and chief executive officer. “Sales were up 10% sequentially and 3% year-over-year, with a corresponding improvement in our gross margin. We are poised to grow faster than the semiconductor industry in 2014 and improve our profitability.”

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

  • Net Sales: $767 million, up 10% from $696 million in the prior quarter, and up 3% from $746 million in the second quarter of 2013
  • Gross Margin: 19.6%, compared to 18.5% in the prior quarter, and 18.5% in the second quarter of 2013
  • Net Income: $50 million, compared to net income of $21 million in the prior quarter, and $30 million in the second quarter of 2013. Second quarter 2014 net income includes a net gain of $18 million related to the sale of a subsidiary to J-Devices
  • Earnings Per Diluted Share: $0.21, compared to earnings per diluted share of $0.09 in the prior quarter, and $0.14 in the second quarter of 2013. Second quarter 2014 earnings per diluted share includes $0.08 related to the sale of a subsidiary to J-Devices

Cash and cash equivalents were $526 million, and total debt was $1.5 billion, at June 30, 2014.

Business Outlook

“We expect record sales for the third quarter and a strong second half of 2014,” noted Kelley. “The launch of flagship mobile devices with high Amkor content is expected to drive third quarter growth of 9% to 15%, both sequentially and year-over-year, after normalizing for the sale of our Japanese subsidiary.”

“We see further, customer driven opportunities to grow our sales in the first half of 2015, and are increasing our full year 2014 capital expenditures to around $675 million to capture these opportunities. Nearly all of the incremental investment will be for advanced package capacity and leading-edge testers. The demand for this capacity is spread across many customers, and we believe that these investments are the foundation for our long-term growth,” continued Kelley.

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

  • Net sales of $815 million to $865 million, up 6% to 13% from both the prior quarter and year-over-year. After normalizing for the sales of our divested Japanese subsidiary, net sales are expected to increase 9% to 15% from both periods
  • Gross margin of 20% to 22%
  • Net income of $47 million to $70 million, or $0.20 to $0.29 per diluted share
  • Full year 2014 capital expenditures of around $675 million

Conference Call Information

Amkor will conduct a conference call on Monday, July 28, 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 76870129). 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.
                         
      Q2 2014       Q1 2014       Q2 2013  
Net Sales Data:                              
Net sales (in millions):                              
Advanced products*     $ 364         $ 302         $ 387    
Mainstream products**     403         394         359    
Total net sales     $ 767         $ 696         $ 746    
                               
Packaging services     86   %     85   %     87   %
Test services     14   %     15   %     13   %
                               
Net sales from top ten customers     58   %     60   %     63   %
                               
Packaged units (in millions):                              
Advanced products*     910         650         704    
Mainstream products**     3,379         3,217         1,976    
Total packaged units     4,289         3,867         2,680    
                               
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)     53   %     53   %     58   %
Consumer (television, set top boxes, gaming, portable media, digital cameras)     15   %     15   %     14   %
Automotive, industrial and other (infotainment, safety, performance, comfort)     12   %     12   %     9   %
Networking (servers, routers, switches)     11   %     10   %     10   %
Computing (PCs, hard disk drive, printers, peripherals, servers)     9   %     10   %     9   %
Total     100   %     100   %     100   %
                               
Gross Margin Data:                              
Net sales     100.0   %     100.0   %     100.0   %
Cost of sales:                              
Materials     37.2   %     36.8   %     41.7   %
Labor    

14.0

   %     14.7   %     14.0   %
Other manufacturing    

29.2

   %     30.0   %     25.8   %
Gross margin     19.6   %     18.5   %     18.5   %
                               
Earnings per Share Data:                              
Net income attributable to Amkor - basic     $ 50         $ 20         $ 30    
                               
Adjustment for dilutive securities on net income:                              
Interest on 6.0% convertible notes due 2014, net of tax    

—

         1         3    
Net income attributable to Amkor - diluted     $ 50         $ 21         $ 33    
                               
Weighted average shares outstanding - basic     233         216         161    
Effect of dilutive securities:                              

Stock Options

    

1

        

—

        

—

    
6.0% convertible notes due 2014    

3

         19         74    
Weighted average shares outstanding - diluted     237         235         235    
                               
Net income attributable to Amkor per common share:                              
Basic     $ 0.21         $ 0.09         $ 0.18    
Diluted     $ 0.21         $ 0.09         $ 0.14    
                                     

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

**Mainstream products include wirebond packaging and related test services and since July 1, 2013, include the results of our newly acquired power discrete business in Malaysia which has a high volume of units relative to revenue
                                     
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
             
     

For the Three Months Ended

    

For the Six Months Ended
     

June 30,

    

June 30,
     

2014*

    

2013

    

2014*

    

2013
     

(In thousands, except per share data)
Net sales     $ 767,459       $ 746,059       $ 1,463,503       $ 1,433,588  
Cost of sales       616,745         607,680         1,183,969         1,180,256  
Gross profit       150,714         138,379         279,534         253,332  
Selling, general and administrative       67,674         65,618         130,098         125,177  
Research and development       22,079         14,308         43,124         28,614  
Total operating expenses       89,753         79,926         173,222         153,791  
Operating income       60,961         58,453         106,312         99,541  
Interest expense       22,537         23,739         46,259         45,817  
Interest expense, related party       1,242         3,192         2,484         6,684  
Other (income) expense, net       (5,699 )       12,876         (5,663 )       10,654  
Total other expense, net       18,080         39,807         43,080         63,155  

Income before taxes and equity in earnings of unconsolidated affiliate

       42,881         18,646         63,232         36,386  
Income tax expense (benefit)       12,511         (10,238 )       17,440         (6,209 )

Income before equity in earnings of unconsolidated affiliate

       30,370         28,884         45,792         42,595  
Equity in earnings of J-Devices       20,036         1,445         25,797         1,500  
Net income       50,406         30,329         71,589         44,095  
Net income attributable to noncontrolling interests       (885 )       (602 )       (1,435 )       (986 )
Net income attributable to Amkor     $ 49,521       $ 29,727       $ 70,154 $         43,109  
                   
Net income attributable to Amkor per common share:                                
Basic     $ 0.21       $ 0.18       $ 0.31 $         0.27  
Diluted     $ 0.21       $ 0.14       $ 0.30 $         0.21  
                                 
Shares used in computing per common share amounts:                                
Basic       232,891         160,886         224,868         156,672  
Diluted       236,872         235,111         236,182         235,099  
                                         

*Net income for the three and six months ended June 30, 2014 includes a net gain of $18 million ($0.08 per diluted share) related to the sale of Amkor's Japanese subsidiary to J-Devices, its 60% owned joint venture in Japan. In connection with the sale, Amkor recognized $9 million principally from the realization of accumulated foreign currency translation gains (reflected in Other (income) expense, net) and an additional $9 million from its 60% equity interest in the gain realized by J-Devices on the transaction (reflected in Equity in earnings of J-Devices).
 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
             
      June 30,     December 31,
      2014     2013
      (In thousands)
ASSETS
Current assets:                
Cash and cash equivalents     $ 525,935       $ 610,442  
Restricted cash     2,681       2,681  
Accounts receivable, net of allowances     455,838       385,542  
Inventories     205,668       200,423  
Other current assets     57,803       33,328  
Total current assets     1,247,925       1,232,416  
Property, plant and equipment, net     2,153,818       2,006,553  
Investments     134,717       105,214  
Restricted cash     2,247       2,234  
Other assets     70,666       80,881  
Total assets     $ 3,609,373       $ 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     555,805       365,334  
Accrued expenses     252,048       264,252  
Total current liabilities     817,853       690,936  
Long-term debt     1,451,111       1,516,390  
Long-term debt, related party     75,000       75,000  
Pension and severance obligations     159,936       165,073  
Other non-current liabilities     14,423       14,959  
Total liabilities     2,518,323       2,462,358  
                 
Amkor stockholders’ equity:                
Preferred stock     —       —  
Common stock     282       262  
Additional paid-in capital     1,875,533       1,812,530  
Accumulated deficit     (577,194 )     (647,348 )
Accumulated other comprehensive loss     (7,751 )     (255 )
Treasury stock     (212,455 )     (211,449 )
Total Amkor stockholders’ equity     1,078,415       953,740  
Noncontrolling interests in subsidiaries     12,635       11,200  
Total equity     1,091,050       964,940  
Total liabilities and equity     $ 3,609,373       $ 3,427,298  
                     
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
       
      For the Six Months Ended
      June 30,
      2014     2013
      (In thousands)
Cash flows from operating activities:                
Net income     $ 71,589       $ 44,095  
Depreciation and amortization     220,389       195,785  

Loss on debt retirement

     —       11,619  
Gain on sale of subsidiary to J-Devices     (9,155 )     —  
Other operating activities and non-cash items     (24,000 )     (13,947 )
Changes in assets and liabilities     (23,570 )     (36,702 )
Net cash provided by operating activities     235,253       200,850  
                 
Cash flows from investing activities:                
Payments for property, plant and equipment     (230,392 )     (222,674 )
Proceeds from sale of property, plant and equipment     1,634       25,093  
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 )
Purchase of short-term investment     (20,000 )     —  
Proceeds from short-term investment     20,000       —  
Other investing activities     (353 )     (2,032 )
Net cash used in investing activities     (244,885 )     (258,142 )
                 
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     —       (3,357 )
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     4,826       —  
Payments of tax withholding for restricted shares     (1,006 )     (172 )
Net cash (used in) provided by financing activities     (74,943 )     277,852  
                 
Effect of exchange rate fluctuations on cash and cash equivalents     68       2,399  
                 
Net (decrease) increase in cash and cash equivalents     (84,507 )     222,959  
Cash and cash equivalents, beginning of period     610,442       413,048  
Cash and cash equivalents, end of period     $ 525,935       $ 636,007  
                     

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, statements about our 2014 sales growth and profitability, 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:

  • the highly unpredictable nature and cyclicality of the semiconductor industry;
  • timing and volume of orders relative to production capacity and the inability to achieve high capacity utilization rates, control costs and improve profitability;
  • volatility of consumer demand, double booking by customers and deterioration in forecasts from our customers for products incorporating our semiconductor packages, including any slowdown in demand or changes in customer forecasts for smartphones or other mobile devices;
  • delays, lower manufacturing yields and supply constraints relating to wafers, particularly for advanced nodes and related technologies;
  • dependence on key customers and the impact of changes in our market share and prices for our services with those customers;
  • the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity and facilities to service customer demand and the availability of cash flow from operations or financing;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers, including the uncertain macroeconomic environment;
  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters, including the final outcome in the pending patent license litigation and the impact of other legal proceedings;
  • the negative impact on economic growth resulting from the action or inaction of the U.S. government relating to federal income tax increases for individuals or corporations, the federal debt ceiling, the federal deficit and government spending restrictions or shutdowns;
  • changes in tax rates and taxes as a result of changes in U.S. or foreign tax law, the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax audits and tax ruling requests, our ability to realize deferred tax assets and the expiration of tax holidays;
  • curtailment of outsourcing by our customers;
  • our substantial indebtedness and restrictive covenants;
  • failure to realize sufficient cash flow or access to other sources of liquidity to fund capital additions;
  • the effects of an economic slowdown in China, the U.S. and other major economies worldwide;
  • disruptions in our business or deficiencies in our controls resulting from the integration of newly acquired operations or the implementation and security of, and changes to, our enterprise resource planning, factory shop floor systems and other management information systems;
  • economic effects of terrorist attacks, natural disasters and military conflict;
  • competition, competitive pricing and declines in average selling prices;
  • fluctuations in manufacturing yields;
  • dependence on international operations and sales and exchange rate fluctuations;
  • dependence on raw material and equipment suppliers and changes in raw material and precious metal costs;
  • dependence on key personnel;
  • enforcement of and compliance with intellectual property rights;
  • environmental and other governmental regulations; and
  • technological challenges.

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.

 

Source: Amkor Technology, Inc.

Amkor Technology, Inc.
Joanne Solomon
Executive Vice President & Chief Financial Officer
480-786-7878
joanne.solomon@amkor.com
or
Greg Johnson
Senior Director, Investor Relations and Corporate Communications
480-786-7594
greg.johnson@amkor.com