PRESS RELEASE


Amkor Technology Reports Financial Results for the Second Quarter 2017

Second Quarter Highlights

  • Net sales $989 million, sequential and year-on-year growth 8%
  • Net income $116 million and earnings per diluted share $0.48 (includes after-tax gain of $82 million, or $0.34 per diluted share, from sale of K1 factory)
  • EBITDA $316 million
  • Completed Nanium acquisition

TEMPE, Ariz.--(BUSINESS WIRE)--Jul. 31, 2017-- 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, 2017.

“Second quarter revenues were up 8% sequentially,” said Steve Kelley, Amkor’s president and chief executive officer. “Our growth in the quarter reflected solid demand across most end markets.”

“In late May, we completed our acquisition of Nanium. This acquisition enhances Amkor’s leadership position in wafer-level packaging, a critical technology for smartphones, tablets and other small form-factor applications,” continued Kelley.

     
Results   Q2 2017   Q1 2017   Q2 2016
($ in millions, except per share data)
Net sales $ 989 $ 914 $ 917
Gross margin 17.4 % 15.6 % 14.3 %
Net income (loss) $ 116 ($10 ) $ 5
Earnings per diluted share $ 0.48 ($0.04 ) $ 0.02
EBITDA** $ 316 $ 154 $ 168
Net cash provided by operating activities $ 97 $ 103 $ 135
Free cash flow** $ 43 $ 17 ($22 )
 

**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 $658 million and total debt was $1.6 billion, at June 30, 2017.

“As expected, we completed the sale of our K1 factory in Korea in Q2,” said Megan Faust, Amkor’s corporate vice president and chief financial officer. “The sale price was $142 million, and we recognized an after-tax gain of $82 million ($0.34 per diluted share).”

“We also issued a redemption notice for $200 million of the outstanding $400 million of our Senior Notes due 2021,” added Faust. “The redemption was completed in July using cash on hand. The redemption will result in annualized interest savings of approximately $13 million.”

Business Outlook

“Looking ahead to Q3, we expect that revenues will increase around 9% sequentially, driven by the launch of flagship mobile devices,” said Kelley.

Third quarter 2017 outlook (unless otherwise noted):

  • Net sales of $1.04 billion to $1.12 billion, up 5% to 13% from the prior quarter
  • Gross margin of 17% to 20%
  • Net income of $24 million to $64 million, or $0.10 to $0.27 per share
  • Full year capital expenditures of around $525 million, up $25 million from our previous forecast

Conference Call Information

Amkor will conduct a conference call on Monday, July 31, 2017, 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 59359701). 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 Technology, Inc.

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 operating base includes 10 million square feet of floor space, with production facilities, product development centers, and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the U.S. For more information, visit www.amkor.com.

 
AMKOR TECHNOLOGY, INC.
Selected Operating Data
 
  Q2 2017   Q1 2017   Q2 2016
Net Sales Data:
Net sales (in millions):
Advanced products* $ 431 $ 383 $ 394
Mainstream products**   558     531     523  
Total net sales $ 989   $ 914   $ 917  
 
Packaging services 81 % 81 % 83 %
Test services 19 % 19 % 17 %
 
Net sales from top ten customers 67 % 67 % 67 %
 
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) 42 % 41 % 44 %
Automotive and industrial (infotainment, safety, performance, comfort) 26 % 26 % 25 %
Consumer (televisions, set top boxes, gaming, portable media, digital cameras) 14 % 14 % 14 %
Networking (servers, routers, switches) 10 % 11 % 11 %
Computing (PCs, hard disk drives, printers, peripherals, servers)   8 %   8 %   6 %
Total   100 %   100 %   100 %
 
Gross Margin Data:
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales:
Materials 35.3 % 35.4 % 37.7 %
Labor 16.4 % 16.5 % 16.0 %
Other manufacturing   30.9 %   32.5 %   32.0 %
Gross margin   17.4 %   15.6 %   14.3 %
 
*   Advanced products include flip chip and wafer-level processing and related test services
** 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 Measure Reconciliation:
Q2 2017 Q1 2017 Q2 2016
(in millions)
EBITDA Data:
Net income attributable to Amkor $ 116 $ (10 ) $ 5
Plus: Interest expense 22 22 22
Plus: Income tax expense 33 3
Plus: Depreciation & amortization 145   142   138
EBITDA $ 316   $ 154   $ 168
 

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:
Q2 2017 Q1 2017 Q2 2016
(in millions)
Free Cash Flow Data:
Net cash provided by operating activities $ 97 $ 103 $ 135
Less: Purchases of property, plant and equipment (183 ) (88 ) (157 )
Plus: Proceeds from sale of property, plant and equipment 129   2    
Free cash flow $ 43   $ 17   $ (22 )
 
 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
  For the Three Months Ended   For the Six Months Ended
June 30, June 30,
2017   2016 2017   2016
(In thousands, except per share data)
Net sales $ 989,447 $ 917,326 $ 1,903,047 $ 1,786,008
Cost of sales   817,212     785,720     1,587,906     1,531,518  
Gross profit   172,235     131,606     315,141     254,490  
Selling, general and administrative 67,783 70,896 144,478 144,531
Research and development 44,268 30,168 85,824 57,323
Gain on sale of real estate   (108,109 )       (108,109 )    
Total operating expenses   3,942     101,064     122,193     201,854  
Operating income 168,293 30,542 192,948 52,636
Interest expense 22,158 20,816 43,412 37,008
Interest expense, related party 293 1,242 1,535 2,484
Other (income) expense, net   (3,190 )   (242 )   7,674     2,950  
Total other expense, net   19,261     21,816     52,621     42,442  
Income before taxes 149,032 8,726 140,327 10,194
Income tax expense   32,573     3,360     33,012     5,233  
Net income 116,459 5,366 107,315 4,961
Net income attributable to non-controlling interests   (952 )   (653 )   (1,814 )   (1,123 )
Net income attributable to Amkor $ 115,507   $ 4,713   $ 105,501   $ 3,838  
 
Net income attributable to Amkor per common share:
Basic $ 0.48   $ 0.02   $ 0.44   $ 0.02  
Diluted $ 0.48   $ 0.02   $ 0.44   $ 0.02  
 
Shares used in computing per common share amounts:
Basic 238,863 237,090 238,774 237,058
Diluted 239,679 237,434 239,601 237,297
 
 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  June 30,   December 31,
2017 2016
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 657,627 $ 549,518
Restricted cash 2,000 2,000
Accounts receivable, net of allowances 604,366 563,107
Inventories 295,750 267,990
Other current assets   36,889     27,081  
Total current assets 1,596,632 1,409,696
Property, plant and equipment, net 2,645,810 2,564,648
Goodwill 25,161 24,122
Restricted cash 4,225 3,977
Other assets   112,303     89,643  
Total assets $ 4,384,131   $ 4,092,086  
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 313,004 $ 35,192
Current portion of long-term debt, related party 17,546
Trade accounts payable 477,191 487,430
Capital expenditures payable 231,481 144,370
Accrued expenses   348,869     338,669  
Total current liabilities 1,388,091 1,005,661
Long-term debt 1,220,236 1,364,638
Long-term debt, related party 17,454 75,000
Pension and severance obligations 170,554 166,701
Other non-current liabilities   60,842     76,682  
Total liabilities   2,857,177     2,688,682  
 
Stockholders’ equity:
Preferred stock
Common stock 285 284
Additional paid-in capital 1,899,970 1,895,089
Accumulated deficit (198,056 ) (303,557 )
Accumulated other comprehensive income (loss) 19,263 6,262
Treasury stock   (215,868 )   (214,490 )
Total Amkor stockholders’ equity 1,505,594 1,383,588
Non-controlling interests in subsidiaries   21,360     19,816  
Total equity   1,526,954     1,403,404  
Total liabilities and equity $ 4,384,131   $ 4,092,086  
 
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  For the Six Months Ended
June 30,
2017   2016
(In thousands)
Cash flows from operating activities:
Net income $ 107,315 $ 4,961
Depreciation and amortization 287,068 275,241
Gain on sale of real estate (108,109 )
Other operating activities and non-cash items (3,787 ) (6,177 )
Changes in assets and liabilities   (82,528 )   (826 )
Net cash provided by operating activities   199,959     273,199  
Cash flows from investing activities:
Payments for property, plant and equipment (271,651 ) (355,974 )
Proceeds from sale of property, plant and equipment 130,962 593
Acquisition of business, net of cash acquired (43,771 )
Other investing activities   (2,117 )   (830 )
Net cash used in investing activities   (186,577 )   (356,211 )
Cash flows from financing activities:

Proceeds from revolving credit facilities

75,000 115,000

Payments of revolving credit facilities

(100,000 )
Proceeds from short-term debt 41,228 24,630
Payments of short-term debt (32,110 ) (23,035 )
Proceeds from issuance of long-term debt 215,086 34,000
Payments of long-term debt (207,653 ) (8,582 )
Payment of deferred consideration for purchase of facility (3,890 )
Payments of capital lease obligations (2,665 ) (887 )
Other financing activities   561     (604 )
Net cash provided by financing activities   85,557     40,522  
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash   9,418     18,782  
Net increase (decrease) in cash, cash equivalents and restricted cash 108,357 (23,708 )
Cash, cash equivalents and restricted cash, beginning of period   555,495     527,348  
Cash, cash equivalents and restricted cash, end of period $ 663,852   $ 503,640  
 

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 regarding our position in wafer-level packaging as a result of the Nanium acquisition, the amount of interest savings generated by the redemption of $200 million of our 2021 Senior Notes, and 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:

  • there can be no assurance regarding when our new K5 factory and research and development center in Korea will be fully utilized, or that the actual scope, costs, timeline or benefits of the project will be consistent with our current expectations;
  • the highly unpredictable nature, cyclicality, and rate of growth 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 and generally soft end market demand for electronic devices;
  • delays, lower manufacturing yields and supply constraints relating to wafers, particularly for advanced nodes and related technologies;
  • dependence on key customers, the impact of changes in our market share and prices for our services with those customers and the business and financial condition of 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 and the impact of other legal proceedings;
  • changes in tax rates and taxes as a result of changes in U.S. or foreign tax law or the interpretations thereof (including possible tax reforms proposed by new administrations), changes in our organizational structure, changes in the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax reviews, audits and 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 expenditures;
  • the effects of an economic slowdown in major economies worldwide, particularly the recent slowdown in China;
  • disruptions in our business or deficiencies in our controls resulting from the integration of newly acquired operations, particularly J-Devices, 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, political instability, 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 fluctuations in foreign currency exchange rates, particularly in Japan;
  • 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, including regulatory efforts by foreign governments to support local competitors; 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, 2016 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.
Megan Faust
Corporate Vice President & Chief Financial Officer
480-786-7707
megan.faust@amkor.com
or
Greg Johnson
Vice President, Finance and Investor Relations
480-786-7594
greg.johnson@amkor.com