e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the Quarterly Period Ended September 30, 2007
|
or
|
|
|
|
|
|
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the transition period from to
|
Commission File Number
000-29472
AMKOR TECHNOLOGY,
INC.
(Exact name of registrant as
specified in its charter)
|
|
|
Delaware
|
|
23-1722724
|
(State of
incorporation)
|
|
(I.R.S. Employer
Identification Number)
|
1900 South Price Road
Chandler, AZ 85286
(480) 821-5000
(Address of principal executive
offices and zip code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a nonaccelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b 2 of the Exchange
Act). Yes o No þ
The number of outstanding shares of the registrants Common
Stock as of October 31, 2007 was 181,774,586.
QUARTERLY
REPORT ON
FORM 10-Q
September 30, 2007
TABLE OF
CONTENTS
1
PART I.
FINANCIAL INFORMATION
|
|
Item 1.
|
Financial
Statements
|
AMKOR
TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Net sales
|
|
$
|
689,083
|
|
|
$
|
713,829
|
|
|
$
|
1,992,557
|
|
|
$
|
2,045,549
|
|
Cost of sales
|
|
|
519,152
|
|
|
|
536,062
|
|
|
|
1,513,596
|
|
|
|
1,543,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
169,931
|
|
|
|
177,767
|
|
|
|
478,961
|
|
|
|
501,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
64,080
|
|
|
|
68,477
|
|
|
|
189,107
|
|
|
|
188,648
|
|
Research and development
|
|
|
10,282
|
|
|
|
9,653
|
|
|
|
30,930
|
|
|
|
29,398
|
|
Gain on sale of specialty test operations
|
|
|
(1,717
|
)
|
|
|
|
|
|
|
(1,717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
72,645
|
|
|
|
78,130
|
|
|
|
218,320
|
|
|
|
218,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
97,286
|
|
|
|
99,637
|
|
|
|
260,641
|
|
|
|
283,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
29,336
|
|
|
|
36,573
|
|
|
|
95,610
|
|
|
|
118,330
|
|
Interest expense, related party
|
|
|
1,563
|
|
|
|
1,563
|
|
|
|
4,688
|
|
|
|
4,914
|
|
Foreign currency loss
|
|
|
3,399
|
|
|
|
6,465
|
|
|
|
7,946
|
|
|
|
11,472
|
|
Debt retirement costs
|
|
|
|
|
|
|
|
|
|
|
15,875
|
|
|
|
27,389
|
|
Other (income) expense
|
|
|
254
|
|
|
|
(878
|
)
|
|
|
(964
|
)
|
|
|
1,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
34,552
|
|
|
|
43,723
|
|
|
|
123,155
|
|
|
|
163,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and minority interests
|
|
|
62,734
|
|
|
|
55,914
|
|
|
|
137,486
|
|
|
|
120,180
|
|
Income tax expense
|
|
|
1,194
|
|
|
|
2,881
|
|
|
|
9,573
|
|
|
|
8,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests
|
|
|
61,540
|
|
|
|
53,033
|
|
|
|
127,913
|
|
|
|
111,715
|
|
Minority interests, net of tax
|
|
|
(920
|
)
|
|
|
(223
|
)
|
|
|
(1,713
|
)
|
|
|
(678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
60,620
|
|
|
$
|
52,810
|
|
|
$
|
126,200
|
|
|
$
|
111,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.33
|
|
|
$
|
0.30
|
|
|
$
|
0.70
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
$
|
0.65
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
181,664
|
|
|
|
178,108
|
|
|
|
180,200
|
|
|
|
177,537
|
|
Diluted
|
|
|
209,868
|
|
|
|
204,482
|
|
|
|
208,812
|
|
|
|
197,539
|
|
The accompanying notes are an integral part of these statements.
2
AMKOR
TECHNOLOGY, INC.
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
334,955
|
|
|
$
|
244,694
|
|
Restricted cash
|
|
|
2,576
|
|
|
|
2,478
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
Trade, net of allowances
|
|
|
385,396
|
|
|
|
380,888
|
|
Other
|
|
|
5,568
|
|
|
|
5,969
|
|
Inventories, net
|
|
|
150,052
|
|
|
|
164,178
|
|
Other current assets
|
|
|
38,051
|
|
|
|
39,650
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
916,598
|
|
|
|
837,857
|
|
Property, plant and equipment, net
|
|
|
1,425,769
|
|
|
|
1,443,603
|
|
Goodwill
|
|
|
672,654
|
|
|
|
671,900
|
|
Intangibles, net
|
|
|
22,443
|
|
|
|
29,694
|
|
Investments
|
|
|
5,318
|
|
|
|
6,675
|
|
Restricted cash
|
|
|
1,703
|
|
|
|
1,688
|
|
Other assets
|
|
|
48,495
|
|
|
|
49,847
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,092,980
|
|
|
$
|
3,041,264
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
161,918
|
|
|
$
|
185,414
|
|
Trade accounts payable
|
|
|
320,585
|
|
|
|
291,847
|
|
Accrued expenses
|
|
|
163,639
|
|
|
|
145,501
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
646,142
|
|
|
|
622,762
|
|
Long-term debt
|
|
|
1,541,528
|
|
|
|
1,719,901
|
|
Long-term debt, related party
|
|
|
100,000
|
|
|
|
100,000
|
|
Pension and severance obligations
|
|
|
206,008
|
|
|
|
170,070
|
|
Other non-current liabilities
|
|
|
33,718
|
|
|
|
30,008
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,527,396
|
|
|
|
2,642,741
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (see Note 14)
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
6,282
|
|
|
|
4,603
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000 shares
authorized, designated Series A, none issued
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 500,000 shares
authorized, issued and outstanding of 181,720 in 2007 and
178,109 in 2006
|
|
|
182
|
|
|
|
178
|
|
Additional paid-in capital
|
|
|
1,480,401
|
|
|
|
1,441,194
|
|
Accumulated deficit
|
|
|
(915,190
|
)
|
|
|
(1,041,390
|
)
|
Accumulated other comprehensive loss
|
|
|
(6,091
|
)
|
|
|
(6,062
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
559,302
|
|
|
|
393,920
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,092,980
|
|
|
$
|
3,041,264
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
3
AMKOR
TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
126,200
|
|
|
$
|
111,037
|
|
Depreciation and amortization
|
|
|
215,679
|
|
|
|
203,065
|
|
Debt retirement costs
|
|
|
6,875
|
|
|
|
27,389
|
|
Other operating activities and non-cash items
|
|
|
8,769
|
|
|
|
29,492
|
|
Changes in assets and liabilities
|
|
|
56,945
|
|
|
|
9,673
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
414,468
|
|
|
|
380,656
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Payments for property, plant and equipment
|
|
|
(159,942
|
)
|
|
|
(252,401
|
)
|
Proceeds from the sale of property, plant and equipment
|
|
|
5,130
|
|
|
|
2,524
|
|
Other investing activities
|
|
|
(1,778
|
)
|
|
|
(2,578
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(156,590
|
)
|
|
|
(252,455
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Borrowings under revolving credit facilities
|
|
|
80,340
|
|
|
|
143,659
|
|
Payments under revolving credit facilities
|
|
|
(95,398
|
)
|
|
|
(134,419
|
)
|
Proceeds from issuance of long-term debt
|
|
|
300,000
|
|
|
|
590,000
|
|
Payments for debt issuance costs
|
|
|
(3,441
|
)
|
|
|
(15,087
|
)
|
Payments of long-term debt
|
|
|
(486,888
|
)
|
|
|
(734,861
|
)
|
Proceeds from issuance of stock through stock compensation plans
|
|
|
36,380
|
|
|
|
4,981
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(169,007
|
)
|
|
|
(145,727
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
1,390
|
|
|
|
1,518
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
90,261
|
|
|
|
(16,008
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
244,694
|
|
|
|
206,575
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
334,955
|
|
|
$
|
190,567
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
89,810
|
|
|
$
|
121,078
|
|
Income taxes
|
|
$
|
10,523
|
|
|
$
|
6,123
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Application of deposit upon closing of acquisition of minority
interest
|
|
$
|
|
|
|
$
|
17,822
|
|
The accompanying notes are an integral part of these statements.
4
AMKOR
TECHNOLOGY, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
1.
|
Interim
Financial Statements
|
Basis of Presentation. The Consolidated
Financial Statements and related disclosures as of
September 30, 2007 and for the three and nine months ended
September 30, 2007 and 2006 are unaudited, pursuant to the
rules and regulations of the Securities and Exchange Commission
(SEC). The December 31, 2006 Consolidated
Balance Sheet data was derived from audited financial
statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of
America (U.S.). Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations. In our opinion, these financial statements include
all adjustments (consisting only of normal recurring
adjustments) necessary for the fair statement of the results for
the interim periods. These financial statements should be read
in conjunction with the financial statements included in our
latest annual report for the year ended December 31, 2006
filed on
Form 10-K
with the SEC on February 26, 2007. The results of
operations for the three and nine months ended
September 30, 2007 are not necessarily indicative of the
results to be expected for the full year.
Use of Estimates. The Consolidated Financial
Statements have been prepared in conformity with accounting
principles generally accepted in the U.S., using
managements best estimates and judgments where
appropriate. These estimates and judgments affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements.
The estimates and judgments will also affect the reported
amounts for certain revenues and expenses during the reporting
period. Actual results could differ materially from these
estimates and judgments.
New
Accounting Standards
Recently
Adopted Standards
In February 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 155, Accounting for
Certain Hybrid Financial Instruments
(SFAS No. 155), which amends
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133)
and SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS No. 140).
SFAS No. 155 simplifies the accounting for certain
derivatives embedded in other financial instruments by allowing
them to be accounted for as a whole if the holder elects to
account for the whole instrument on a fair value basis.
SFAS No. 155 also clarifies and amends certain other
provisions of SFAS No. 133 and SFAS No. 140.
SFAS No. 155 is effective for all financial
instruments acquired, issued or subject to a remeasurement event
occurring in fiscal years beginning after September 15,
2006. We adopted the provisions of SFAS No. 155 on
January 1, 2007. The adoption of this statement did not
have an impact on our financial statements and disclosures.
In June 2006, the FASB ratified Emerging Issues Task Force
(EITF) Issue
No. 06-03,
How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross Versus Net Presentation)
(Issue
No. 06-03).
Under Issue
No. 06-03,
a company must disclose its accounting policy regarding the
gross or net presentation of certain taxes. If taxes included in
gross revenues are significant, a company must disclose the
amount of such taxes for each period for which an income
statement is presented (i.e., both interim and annual periods).
Taxes within the scope of this Issue are those that are imposed
on and concurrent with a specific revenue-producing transaction.
Taxes assessed on an entitys activities over a period of
time, such as gross receipts taxes, are not within the scope of
the issue. Issue
No. 06-03
is effective for the first annual or interim reporting period
beginning after December 15, 2006. We adopted the
provisions of EITF Issue
No. 06-03
on January 1, 2007. We present applicable taxes on a net
basis in our consolidated financial statements. The adoption of
Issue
No. 06-03
did not have an impact on our financial statements and
disclosures.
5
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In July 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which clarifies the accounting and
disclosure for uncertainty in income tax positions, as defined.
FIN 48 seeks to reduce the diversity in practice associated
with certain aspects of the recognition and measurement related
to accounting for income taxes. FIN 48 requires that we
recognize in our consolidated financial statements the impact of
a tax position, if that position is more likely than not of
being sustained on audit, based on the technical merits of the
position. The provisions of FIN 48 also provide guidance on
derecognition, classification, interest and penalties,
accounting in interim periods, and disclosures. This
interpretation is effective for fiscal years beginning after
December 15, 2006, with the cumulative effect of the change
in accounting principle recorded as an adjustment to the opening
balance of retained earnings. We adopted the provisions of
FIN 48 on January 1, 2007. The adoption of FIN 48
did not have an impact on the opening balance of retained
earnings. See Note 4 for more information.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an amendment of SFAS Statement
No. 87, Employers Accounting for Pensions,
SFAS No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and Termination Benefits, SFAS No. 106,
Employers Accounting for Postretirement Benefits Other
Than Pensions, and SFAS No. 132(R), Employers
Disclosure about Pensions and Other Postretirement Benefits
(SFAS No. 158). SFAS No. 158
requires the recognition of the funded status of a defined
benefit pension plan (other than a multi-employer plan) as an
asset or liability in the statement of financial position and
the recognition of changes in the funded status through
comprehensive income in the year in which such changes occur. We
adopted the recognition provisions of SFAS No. 158 and
initially applied those to the funded status of our defined
benefit pension plans as of December 31, 2006. The initial
recognition of the funded status of our defined benefit pension
plans resulted in a decrease in stockholders equity of
$11.8 million, which was net of a tax benefit of
$0.8 million.
SFAS No. 158 also requires that the funded status of a
plan be measured as of the date of the year-end statement of
financial position effective for fiscal years ending after
December 15, 2008. We currently measure our funded status
as of the balance sheet date. Accordingly, the adoption of the
measurement provisions of SFAS No. 158 will have no
impact on our financial statements.
Recently
Issued Standards
The FASB issued SFAS No. 157, Fair Value
Measurements (SFAS No. 157), which
provides guidance for using fair value to measure assets and
liabilities. The standard also responds to investors
requests for more information about (1) the extent to which
companies measure assets and liabilities at fair value,
(2) the information used to measure fair value, and
(3) the effect that fair value measurements have on
earnings. SFAS No. 157 will apply whenever another
standard requires (or permits) assets or liabilities to be
measured at fair value. The standard does not expand the use of
fair value to any new circumstances. SFAS No. 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. We are currently evaluating the
impact of this standard on our financial statements and
disclosures.
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159).
SFAS No. 159 provides the option to report certain
financial assets and liabilities at fair value, with the intent
to mitigate volatility in financial reporting that can occur
when related assets and liabilities are recorded on different
bases. SFAS No. 159 also amends
SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, by providing the option to
record unrealized gains and losses on held-for-sale and
held-to-maturity securities currently. SFAS No. 159 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. We are currently evaluating the
impact of this standard on our financial statements and
disclosures.
|
|
2.
|
Stock
Compensation Plans
|
We account for our stock option plans in accordance with
SFAS No. 123(R), Share-Based Payments
(SFAS No. 123(R)).
SFAS No. 123(R) requires that all share-based payments
to employees, including grants
6
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
of employee stock options, be measured at fair value and
expensed over the service period (generally the vesting period).
The following table presents stock-based employee compensation
expense included in the Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
Cost of sales
|
|
$
|
332
|
|
|
$
|
923
|
|
|
$
|
1,013
|
|
|
$
|
1,561
|
|
Selling, general, and administrative
|
|
|
667
|
|
|
|
293
|
|
|
|
1,817
|
|
|
|
1,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
$
|
999
|
|
|
$
|
1,216
|
|
|
$
|
2,830
|
|
|
$
|
3,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Plans. Substantially all of the
options granted are generally exercisable pursuant to a two,
three or four-year vesting schedule and the term of the options
granted is no longer than ten years. On August 6, 2007, the
shareholders approved a new stock plan (2007 Equity
Incentive Plan) that provides for the grant of the
following types of incentive awards: (i) stock options,
(ii) restricted stock, (iii) restricted stock units,
(iv) stock appreciation rights, (v) performance units
and performance shares, and (vi) other stock or cash
awards. The effective date of this plan is January 1, 2008
and there are 17,000,000 shares of our common stock
reserved for issuance under the 2007 Equity Incentive Plan.
A summary of the current stock option plans and the respective
plan termination dates and shares available for grant as of
September 30, 2007 is shown below.
|
|
|
|
|
|
|
|
|
1998 Director
|
|
1998 Stock
|
|
2003 Inducement
|
Stock Option Plans
|
|
Option Plan
|
|
Plan
|
|
Plan
|
|
Contractual Life (yrs)
|
|
10
|
|
10
|
|
10
|
Plan termination date
|
|
January 2008
|
|
January 2008
|
|
Board of Directors Discretion
|
Shares available for grant at September 30, 2007
|
|
71,666
|
|
7,342,211
|
|
380,000
|
In order to calculate the fair value of stock options at the
date of grant, we used the Black-Scholes option pricing model.
Expected volatilities are weighted based on the historical
performance of our stock. We also use historical data to
estimate the timing and amount of option exercises and
forfeitures within the valuation model. The expected term of the
options is based on evaluations of historical and expected
future employee exercise behavior and represents the period of
time that options granted are expected to be outstanding. The
risk-free interest rate for periods within the contractual life
of the option is based on the U.S. Treasury yield curve in
effect at the time of grant.
The following assumptions were used to calculate weighted
average fair values of the options granted for the three and
nine months ended September 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Expected life (in years)
|
|
|
5
|
|
|
|
5.8
|
|
|
|
5
|
|
|
|
5.8
|
|
Risk-free interest rate
|
|
|
4.6
|
%
|
|
|
4.9
|
%
|
|
|
4.6
|
%
|
|
|
4.6
|
%
|
Volatility
|
|
|
74
|
%
|
|
|
86
|
%
|
|
|
74
|
%
|
|
|
78
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value per option granted
|
|
$
|
6.91
|
|
|
$
|
4.35
|
|
|
$
|
6.91
|
|
|
$
|
4.82
|
|
7
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The intrinsic value of options exercised for the three and nine
months ended September 30, 2007 was $1.2 million and
$12.0 million, respectively. The intrinsic value of options
exercised for the three and nine months ended September 30,
2006 was less than $0.1 million and $1.5 million,
respectively.
The following is a summary of all option activity for the nine
months ended September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
per Share
|
|
|
(Years)
|
|
|
Value
|
|
|
Outstanding at December 31, 2006
|
|
|
15,334,089
|
|
|
$
|
10.47
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
170,000
|
|
|
|
11.01
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(3,611,361
|
)
|
|
|
10.07
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(733,521
|
)
|
|
|
12.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2007
|
|
|
11,159,207
|
|
|
|
10.50
|
|
|
|
4.77
|
|
|
$
|
20,484,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2007
|
|
|
9,547,385
|
|
|
|
11.18
|
|
|
|
4.23
|
|
|
$
|
12,331,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully vested and expected to vest at September 30, 2007
|
|
|
10,945,315
|
|
|
|
10.58
|
|
|
|
4.71
|
|
|
$
|
19,380,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized compensation expense from stock options,
excluding any forfeiture estimate, was $5.0 million as of
September 30, 2007, which is expected to be recognized over
a weighted-average period of 1.05 years beginning
October 1, 2007.
For the nine months ended September 30, 2007 and 2006, cash
received from option exercises under all share-based payment
arrangements was $36.4 million and $5.0 million,
respectively. There was no tax benefit realized. The related
cash receipts are included in financing activities in the
accompanying Condensed Consolidated Statements of Cash Flows.
The components of comprehensive income are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
Net income
|
|
$
|
60,620
|
|
|
$
|
52,810
|
|
|
$
|
126,200
|
|
|
$
|
111,037
|
|
Unrealized gain (loss) on investments, net of tax
|
|
|
|
|
|
|
2,018
|
|
|
|
(1,004
|
)
|
|
|
(553
|
)
|
Reclassification adjustment for losses included in net income
|
|
|
44
|
|
|
|
|
|
|
|
44
|
|
|
|
2,624
|
|
Change in unrecognized pension costs, net of tax
|
|
|
129
|
|
|
|
|
|
|
|
380
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
2,216
|
|
|
|
(1,166
|
)
|
|
|
551
|
|
|
|
1,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
63,009
|
|
|
$
|
53,662
|
|
|
$
|
126,171
|
|
|
$
|
114,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The components of accumulated other comprehensive loss consisted
of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Unrealized gains (losses) on securities
|
|
$
|
|
|
|
$
|
960
|
|
Unrecognized pension costs
|
|
|
(11,455
|
)
|
|
|
(11,835
|
)
|
Cumulative unrealized foreign currency translation gains
|
|
|
5,364
|
|
|
|
4,813
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
$
|
(6,091
|
)
|
|
$
|
(6,062
|
)
|
|
|
|
|
|
|
|
|
|
We operate in and file income tax returns in various
U.S. and foreign jurisdictions that are subject to
examination by tax authorities. Our estimated tax liability is
subject to change as examinations of our tax returns are
completed by the tax authorities in the respective
jurisdictions. We believe that any additional taxes or related
interest over the amounts accrued will not have a material
effect on our financial condition, results of operations or cash
flows, nor do we expect that such examinations will result in a
material favorable impact. However, resolution of these matters
involves uncertainties and there are no assurances that the
outcome will be favorable.
Income tax expense for the three and nine months ended
September 30, 2007 and 2006 is attributable to foreign
withholding taxes and income taxes at certain of our profitable
foreign operations. Our effective tax rate of 7.0% for the nine
months ended September 30, 2007 reflects the utilization of
foreign net operating loss carryforwards and tax holidays in
certain foreign jurisdictions. We also released a valuation
allowance during the three months ended September 30, 2007
related to deferred tax assets of certain international
locations which decreased income tax expense by
$5.1 million for the three and nine months ended
September 30, 2007. Management believes that sufficient
positive evidence now exists to release the remaining valuation
allowance for these deferred tax assets. The positive evidence
we considered was: (i) the consistent profitability of
these operations over a two year period; (ii) the increase
in profitability experienced in the third quarter of 2007 based
on demand for the products from these operations; and
(iii) the visibility we have over the next two years for
these operations which is the time frame we expect to realize
the deferred tax assets. At September 30, 2007, we had
U.S. net operating loss carryforwards totaling
$345.0 million, which expire at various times through 2027.
Additionally, at September 30, 2007, we had
$48.2 million of
non-U.S. operating
loss carryforwards, which expire at various times through 2012.
We maintain a valuation allowance on all of our U.S. net
deferred tax assets, including our net operating loss
carryforwards. We also have valuation allowances on certain
deferred tax assets in certain foreign jurisdictions. We will
release such valuation allowance as the related tax benefits are
realized on our tax returns or when sufficient net positive
evidence exists to conclude that the deferred tax assets will be
realized.
We adopted the provisions of FIN 48 on January 1,
2007. We recognized no cumulative effect of the adoption of
FIN 48 to the opening balance of retained earnings as a
result of the implementation of FIN 48. The gross amount of
unrecognized tax benefits upon adoption of FIN 48 was
$11.8 million. The gross amount of unrecognized tax
benefits resulting from prior periods increased by
$0.1 million during the three months ended
September 30, 2007. The total amount of unrecognized tax
benefits that, if recognized, would affect the effective tax
rate is $1.6 million as of January 1, 2007 and
$1.7 million as of September 30, 2007. It is
reasonably possible that the total amount of unrecognized tax
benefits will decrease within 12 months due to statutes of
limitations expiring in certain foreign jurisdictions which
would decrease our non-US unrecognized tax benefits related to
historical foreign revenue attribution by less than
$1.0 million.
We have recognized $0.1 million of interest and penalties
in the Consolidated Statement of Income for the nine months
ended September 30, 2007 in connection with our
unrecognized tax benefits. Interest and penalties are classified
as income taxes in the financial statements. The total amount of
interest and penalties included in long-
9
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
term liabilities in connection with our unrecognized tax
benefits is $0.3 million and $0.5 million as of
January 1, 2007 and September 30, 2007, respectively.
As of January 1, 2007 and September 30, 2007, the
following tax years remain subject to examination in the
following major tax jurisdictions:
China 2001 through 2006
Japan 2001 through 2006
Korea 2001 through 2006
Philippines 2003 through 2006
Singapore 2004 through 2006
Taiwan 2001 through 2006
United States (Federal) 2003 through 2006
Basic earnings per share (EPS) is computed by
dividing net income by the weighted average number of common
shares outstanding during the period. Diluted EPS adjusts net
income and the outstanding shares for the dilutive effect of
stock options and convertible debt. The following table
summarizes the computation of basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
(In thousands, except per share data)
|
|
|
Net income
|
|
$
|
60,620
|
|
|
$
|
52,810
|
|
|
$
|
126,200
|
|
|
$
|
111,037
|
|
Adjustment for dilutive securities on net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on 2.5% convertible notes due 2011, net of tax
|
|
|
1,491
|
|
|
|
1,187
|
|
|
|
3,866
|
|
|
|
1,636
|
|
Interest on 6.25% convertible notes due 2013, net of tax
|
|
|
1,592
|
|
|
|
1,563
|
|
|
|
4,717
|
|
|
|
4,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income diluted
|
|
$
|
63,703
|
|
|
$
|
55,560
|
|
|
$
|
134,783
|
|
|
$
|
117,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic
|
|
|
181,664
|
|
|
|
178,108
|
|
|
|
180,200
|
|
|
|
177,537
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,830
|
|
|
|
|
|
|
|
2,238
|
|
|
|
545
|
|
2.5% convertible notes due 2011
|
|
|
13,023
|
|
|
|
13,023
|
|
|
|
13,023
|
|
|
|
6,106
|
|
6.25% convertible notes due 2013
|
|
|
13,351
|
|
|
|
13,351
|
|
|
|
13,351
|
|
|
|
13,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
209,868
|
|
|
|
204,482
|
|
|
|
208,812
|
|
|
|
197,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.33
|
|
|
$
|
0.30
|
|
|
$
|
0.70
|
|
|
$
|
0.63
|
|
Diluted
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
$
|
0.65
|
|
|
$
|
0.60
|
|
10
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table summarizes the potential shares of common
stock that were excluded from diluted EPS, because the effect of
including these potential shares was antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
Stock options
|
|
|
4,172
|
|
|
|
14,223
|
|
|
|
2,124
|
|
|
|
12,652
|
|
5.0% convertible notes due 2007
|
|
|
|
|
|
|
2,484
|
|
|
|
673
|
|
|
|
2,484
|
|
5.75% convertible notes due 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potentially dilutive shares
|
|
|
4,172
|
|
|
|
16,707
|
|
|
|
2,797
|
|
|
|
17,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, trade consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Accounts receivable
|
|
$
|
392,633
|
|
|
$
|
392,370
|
|
Allowance for sales credits
|
|
|
(6,221
|
)
|
|
|
(9,247
|
)
|
Allowance for doubtful accounts
|
|
|
(1,016
|
)
|
|
|
(2,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
385,396
|
|
|
$
|
380,888
|
|
|
|
|
|
|
|
|
|
|
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Raw materials and purchased components
|
|
$
|
108,941
|
|
|
$
|
126,492
|
|
Work-in-process
|
|
|
39,611
|
|
|
|
34,676
|
|
Finished goods
|
|
|
1,500
|
|
|
|
3,010
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,052
|
|
|
$
|
164,178
|
|
|
|
|
|
|
|
|
|
|
We report inventories net of the allowance for excess and
obsolete inventory of $31.8 million and $25.5 million
at September 30, 2007 and December 31, 2006,
respectively.
|
|
8.
|
Property,
Plant and Equipment
|
Property, plant and equipment consists of the following:
11
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
110,364
|
|
|
$
|
110,730
|
|
Land use rights in China
|
|
|
19,945
|
|
|
|
19,945
|
|
Buildings and improvements
|
|
|
796,919
|
|
|
|
790,847
|
|
Machinery and equipment
|
|
|
2,154,781
|
|
|
|
2,057,939
|
|
Furniture, fixtures and other equipment
|
|
|
163,694
|
|
|
|
141,621
|
|
Construction and assets in progress
|
|
|
11,515
|
|
|
|
8,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,257,218
|
|
|
|
3,129,699
|
|
Less Accumulated depreciation and amortization
|
|
|
(1,831,449
|
)
|
|
|
(1,686,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,425,769
|
|
|
$
|
1,443,603
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles our activity related to property,
plant and equipment as presented on the Condensed Consolidated
Statements of Cash Flows to property, plant and equipment
additions as reflected in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Payments for property, plant, and equipment
|
|
$
|
159,942
|
|
|
$
|
252,401
|
|
Net increase (decrease) in related accounts payable and deposits
|
|
|
32,624
|
|
|
|
(8,234
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions
|
|
$
|
192,566
|
|
|
$
|
244,167
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Goodwill
and Other Intangibles Assets
|
The change in the carrying value of goodwill, all of which
relates to our packaging services segment, is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2006
|
|
$
|
671,900
|
|
Additions
|
|
|
782
|
|
Translation adjustments
|
|
|
(28
|
)
|
|
|
|
|
|
Balance as of September 30, 2007
|
|
$
|
672,654
|
|
|
|
|
|
|
In March 2007, we increased goodwill by $0.8 million for
additional consideration paid with respect to an earn-out
provision in connection with our investment in Unitive
Semiconductor Taiwan.
During the second quarter of 2007, in accordance with the
provisions of FASB Statement No. 142, Goodwill and Other
Intangible Assets, we performed our annual impairment test
on goodwill and concluded that goodwill was not impaired.
12
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Intangibles as of September 30, 2007 consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Patents and technology rights
|
|
$
|
75,241
|
|
|
$
|
(56,968
|
)
|
|
$
|
18,273
|
|
Customer relationship and supply agreements
|
|
|
8,858
|
|
|
|
(4,688
|
)
|
|
|
4,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
84,099
|
|
|
$
|
(61,656
|
)
|
|
$
|
22,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles as of December 31, 2006 consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Patents and technology rights
|
|
$
|
74,468
|
|
|
$
|
(50,167
|
)
|
|
$
|
24,301
|
|
Customer relationship and supply agreements
|
|
|
8,858
|
|
|
|
(3,465
|
)
|
|
|
5,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
83,326
|
|
|
$
|
(53,632
|
)
|
|
$
|
29,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of identifiable intangible assets was
$2.4 million for each of the three months ended
September 30, 2007 and 2006. Amortization of identifiable
intangible assets was $8.0 million and $7.1 million
for the nine months ended September 30, 2007 and 2006,
respectively.
Based on the amortizing intangible assets recognized in our
balance sheet at September 30, 2007, amortization for each
of the next five fiscal years is estimated as follows:
|
|
|
|
|
2007 Remaining
|
|
$
|
2,370
|
|
2008
|
|
|
9,482
|
|
2009
|
|
|
4,725
|
|
2010
|
|
|
2,756
|
|
2011
|
|
|
991
|
|
Thereafter
|
|
|
2,119
|
|
|
|
|
|
|
Total
|
|
$
|
22,443
|
|
|
|
|
|
|
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Payroll and benefits
|
|
$
|
71,203
|
|
|
$
|
63,222
|
|
Accrued interest
|
|
|
35,228
|
|
|
|
22,721
|
|
Customer advances
|
|
|
9,561
|
|
|
|
17,533
|
|
Income taxes payable
|
|
|
6,662
|
|
|
|
5,382
|
|
Other accrued expenses
|
|
|
40,985
|
|
|
|
36,643
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
163,639
|
|
|
$
|
145,501
|
|
|
|
|
|
|
|
|
|
|
13
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Following is a summary of short-term borrowings and long-term
debt:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Debt of Amkor Technology, Inc.
|
|
|
|
|
|
|
|
|
Senior secured credit facilities
|
|
|
|
|
|
|
|
|
$100 million revolving credit facility, LIBOR plus
1.5% 2.25%, due November 2009
|
|
$
|
|
|
|
$
|
|
|
Second lien term loan, LIBOR plus 4.5%, due October 2010
|
|
|
|
|
|
|
300,000
|
|
Senior notes
|
|
|
|
|
|
|
|
|
9.25% Senior notes due February 2008
|
|
|
88,206
|
|
|
|
88,206
|
|
7.125% Senior notes due March 2011
|
|
|
249,052
|
|
|
|
248,877
|
|
7.75% Senior notes due May 2013
|
|
|
425,000
|
|
|
|
425,000
|
|
9.25% Senior notes due June 2016
|
|
|
400,000
|
|
|
|
400,000
|
|
Senior subordinated notes
|
|
|
|
|
|
|
|
|
10.5% Senior subordinated notes due May 2009
|
|
|
|
|
|
|
21,882
|
|
2.5% Convertible senior subordinated notes due May 2011
|
|
|
190,000
|
|
|
|
190,000
|
|
Subordinated notes
|
|
|
|
|
|
|
|
|
5.0% Convertible subordinated notes due March 2007,
convertible at $57.34 per share
|
|
|
|
|
|
|
142,422
|
|
6.25% Convertible subordinated notes due December 2013,
convertible at $7.49 per share, related party
|
|
|
100,000
|
|
|
|
100,000
|
|
Debt of subsidiaries
|
|
|
|
|
|
|
|
|
Secured term loans
|
|
|
|
|
|
|
|
|
Term loan, Woori Bank base rate plus 0.5% due April 2014
|
|
|
289,278
|
|
|
|
|
|
Term loan, Taiwan
90-Day
Commercial Paper secondary market rate plus 2.25% due
June 20, 2008
|
|
|
6,833
|
|
|
|
8,411
|
|
Term loan, Taiwan
90-Day
Commercial Paper primary market rate plus 1.2%, due November 2010
|
|
|
39,117
|
|
|
|
45,024
|
|
Secured equipment and property financing
|
|
|
8,171
|
|
|
|
12,626
|
|
Revolving credit facilities
|
|
|
7,789
|
|
|
|
22,571
|
|
Other debt
|
|
|
|
|
|
|
296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,803,446
|
|
|
|
2,005,315
|
|
Less: Short-term borrowings and current portion of long-term debt
|
|
|
(161,918
|
)
|
|
|
(185,414
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt (including related party)
|
|
$
|
1,641,528
|
|
|
$
|
1,819,901
|
|
|
|
|
|
|
|
|
|
|
Debt
of Amkor Technology Inc.
Senior
Secured Credit Facilities
In November 2005, we entered into a $100.0 million first
lien revolving credit facility available through November 2009,
with a letter of credit sub-limit of $25.0 million.
Interest is charged under the credit facility at a floating rate
based on the base rate in effect from time to time plus the
applicable margins which range from 0.0% to 0.5% for base rate
revolving loans, or LIBOR plus 1.5% to 2.25% for LIBOR revolving
loans. The LIBOR-based
14
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
interest rate at September 30, 2007 was 6.73%; however, no
borrowings were outstanding on this credit facility. As of
September 30, 2007, we had utilized $0.2 million of
the available letter of credit sub-limit, and had
$99.8 million available under this facility. The borrowing
base for the revolving credit facility is based on the valuation
of our eligible accounts receivable. We incur commitment fees on
the unused amounts of the revolving credit facility ranging from
0.25% to 0.50%, based on our liquidity. This facility includes a
number of affirmative and negative covenants, which could
restrict our operations. If we were to default under the first
lien revolving credit facility, we would not be permitted to
draw additional amounts, and the banks could accelerate our
obligation to pay all outstanding amounts.
In October 2004, we entered into a $300.0 million second
lien term loan with a group of institutional lenders. The term
loan bore interest at a rate of LIBOR plus 450 basis points
(9.87% at December 31, 2006); and would have matured in
October 2010. The loan was secured by a second lien on
substantially all of our U.S. subsidiaries assets,
including a portion of the shares of certain of our foreign
subsidiaries. The second lien term loan was refinanced and paid
in full in April 2007 with the proceeds of the
$300.0 million,
7-year
secured credit facility with Woori Bank in Korea. In connection
with the prepayment of the second lien term loan, we recorded a
loss on debt retirement of $15.7 million in April 2007,
which included $9.0 million in prepayment fees and
$6.7 million of unamortized deferred debt issuance costs.
This repayment transaction fully discharged all of our
obligations under the second lien term loan and fully discharged
all subsidiary guarantees and releases all the collateral
securing the second lien term loan.
Senior
and Senior Subordinated Notes
In February 2001, we issued $500.0 million of
9.25% Senior Notes due February 2008 (the 2008
Notes). As of December 31, 2005, we had purchased
$29.5 million of these notes. In January 2006, we purchased
an additional $30.0 million of these notes and recorded a
gain on extinguishment of $0.7 million which is included in
debt retirement costs, net, which was partially offset by the
write-off of a proportionate amount of our deferred debt
issuance costs of $0.2 million. A portion of the 2008 Notes
are not redeemable prior to their maturity. In April 2006, we
announced a tender offer for the 2008 Notes. We used the net
proceeds from the 2016 Notes (described below) to purchase
$352.3 million in notes tendered. We recorded a
$20.2 million loss on extinguishment related to premiums
paid for the purchase of the 2008 Notes and a $2.2 million
charge for the associated unamortized deferred debt issuance
costs. Both charges are included in debt retirement costs, net
in the Consolidated Statements of Income.
In March 2004, we issued $250.0 million of
7.125% Senior Notes due March 2011 (the 2011
Notes). The 2011 Notes were priced at 99.321%, yielding an
effective interest rate of 7.25%. The 2011 Notes are redeemable
by us at any time provided we pay the holders a
make-whole premium.
In May 2003, we issued $425.0 million of 7.75% Senior
Notes due May 2013 (the 2013 Notes). The 2013 Notes
are not redeemable at our option until May 2008 whereupon the
notes become redeemable at specified prices.
In May 2006, we issued $400.0 million of 9.25% Senior
Notes due June 2016 (the 2016 Notes). The Notes are
redeemable by us prior to June 1, 2011 provided we pay the
holders a make-whole premium. After June 1,
2011, the 2016 Notes are redeemable at specified prices. In
addition, prior to June 1, 2009, we may redeem up to 35% of
the 2016 Notes at a specified price with the proceeds of certain
equity offerings. After deducting fees to the underwriter, the
net proceeds were used to purchase a portion of the 2008 Notes,
and to pay respective accrued interest and tender premiums.
In May 1999, we issued $200.0 million of 10.5% Senior
Subordinated Notes due May 2009 (the 2009 Notes). In
June 2006, we used the proceeds from the May 2011 Notes
(described below) in connection with a partial call of the 2009
Notes for which $178.1 million of the 2009 Notes were
repurchased. We recorded a $3.1 million loss on
extinguishment related to premiums paid for the purchase of the
2009 Notes and a $2.2 million charge for the associated
unamortized deferred debt issuance costs. Both charges are
included in debt retirement costs, net. In June 2007, we
redeemed the remaining $21.9 million of the 2009 Notes
outstanding with cash on hand,
15
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
and the indenture has been terminated. We recorded a charge of
$0.2 million to write-off the unamortized deferred debt
issuance costs in June 2007.
The senior notes contain a number of affirmative and negative
covenants, which could restrict our operations.
Senior
Subordinated and Subordinated Convertible Notes
In May 2006, we issued $190.0 million of our
2.5% Convertible Senior Subordinated Notes due May 2011
(the May 2011 Notes). The May 2011 Notes are
convertible at any time prior to the maturity date into our
common stock at a price of $14.59 per share, subject to
adjustment. The May 2011 Notes are subordinated to the prior
payment in full of all of our senior debt. After deducting fees
to the underwriter, the net proceeds from the issuance of the
May 2011 Notes were used to repurchase a portion of the 2009
Notes, pay respective accrued interest and call premiums. The
senior subordinated notes contain a number of affirmative and
negative covenants which could restrict our operations.
In March 2000, we issued $258.8 million of our
5.0% Convertible Subordinated Notes due March 2007 (the
2007 Notes). The 2007 Notes were subordinated to the
prior payment in full of all of our senior and senior
subordinated debt. In November 2003, we repurchased
$112.3 million of our 2007 Notes with the proceeds of an
equity offering. In June 2006, we repurchased $4.0 million
of our 2007 Notes at 99.875%. In March 2007, we repaid the
remaining balance of $142.4 million at the maturity date
with cash on hand.
In November 2005, we issued $100.0 million of our
6.25% Convertible Subordinated Notes due December 2013 (the
December 2013 Notes) in a private placement to James
J. Kim, our Chairman and Chief Executive Officer, and certain
Kim family members. The December 2013 Notes are presented as
long-term debt, related party on the Consolidated Balance
Sheets. The December 2013 Notes are convertible at any time
prior to the maturity date into our common stock at an initial
price of $7.49 per share (the market price of our common stock
on the date of issuance of the December 2013 Notes was $6.20 per
share), subject to adjustment. The December 2013 Notes are
subordinated to the prior payment in full of all of our senior
and senior subordinated debt. In March 2006, we filed a
registration statement with the SEC registering the notes and
the shares of common stock issuable upon conversion, pursuant to
the requirements of a registration rights agreement. The
proceeds from the sale of the December 2013 Notes were used to
purchase a portion of the 2006 Notes described above. The
December 2013 Notes are not redeemable at our option until
December 2010.
Debt
of Subsidiaries
Secured
Term Loans
In April 2007, Amkor Technology Korea, Inc., a Korean subsidiary
(ATK), entered into a $300.0 million,
7-year
secured term loan (Term Loan) with Woori Bank. The
Term Loan is guaranteed on an unsecured basis by Amkor
Technology, Inc (Amkor). The Term Loan is secured by
substantially all the land, factories, and equipment located at
our ATK facilities. The Term Loan bears interest at Wooris
base rate plus 50 basis points (6.61% as of
September 30, 2007) and amortizes in 28 equal
quarterly payments through April 2014. The proceeds of the Term
Loan were used to refinance Amkors existing
$300.0 million second lien term loan, due October 2010 (see
above). We incurred $3.4 million in debt issuance costs in
connection with the Woori loan, which amount was funded from
cash on hand.
In June 2005, Unitive Semiconductor Taiwan, a Taiwanese
subsidiary, entered into a New Taiwan Dollar (NT$)
400.0 million (approximately $12.2 million) term loan
due June 20, 2008 (the UST Note), which accrues
interest at the Taiwan
90-Day
Commercial Paper Secondary Market rate plus 2.25% (4.72% and
4.23% as of September 30, 2007 and December 31, 2006,
respectively). Interest payments are due monthly and principal
payments are due quarterly. The proceeds of the UST Note were
used to satisfy notes previously held by Unitive Semiconductor
Taiwan. Amkor has guaranteed the repayment of this loan. The
agreement governing the UST Note
16
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
includes a number of affirmative and negative covenants which
could restrict our operations. If we were to default under the
facility, the lenders could accelerate our obligation to pay all
outstanding amounts.
In November 2005, Amkor Technology Taiwan, Inc., a Taiwanese
subsidiary, entered into a NT$1.8 billion (approximately
$53.5 million) syndication loan due November 2010 (the
Syndication Loan), which accrues interest at the
Taiwan
90-Day
Commercial Paper Primary Market rate plus 1.2% (4.13% and 3.22%
as of September 30, 2007 and December 31, 2006,
respectively). Interest payments are due quarterly and principal
payments are due semi-annually. Amkor has guaranteed the
repayment of this loan. The agreement governing the Syndication
Loan includes a number of affirmative, negative and financial
covenants, which could restrict our operations. If we were to
default under the facility, the lenders could accelerate our
obligation to pay all outstanding amounts.
Secured
Equipment and Property Financing
Our secured equipment and property financing consists of loans
secured with specific assets at our Japanese, Singaporean and
Chinese subsidiaries. Our credit facility in Japan provides for
equipment financing on a three-year basis for each piece of
equipment purchased. The Japanese facility accrues interest at
3.59% on all outstanding balances and has maturities at various
times between 2006 and 2008. In December 2005, our Singaporean
subsidiary entered into a loan with a finance company for
$10.0 million, which accrues interest at 4.86% and is due
December 2008. The loan, guaranteed by Amkor is secured by a
monetary security deposit and certain equipment in our Singapore
facility. In May 2004, our Chinese subsidiary entered into a
$5.5 million credit facility secured with buildings at one
of our Chinese production facilities and is payable ratably
through January 2012. The interest rate for the Chinese
financing at September 30, 2007 and December 31, 2006,
was 6.73% and 6.14%, respectively. These equipment and property
financings contain affirmative and negative covenants, which
could restrict our operations, and, if we were to default on our
obligations under these financings, the lenders could accelerate
our obligation to repay amounts borrowed under such facilities.
Revolving
Credit Facilities
Amkor Iwate Corporation, a Japanese subsidiary
(AIC), had a revolving line of credit with a
Japanese bank for 2.5 billion Japanese yen (approximately
$21.2 million) that matured in September 2007. We renewed
this facility for 2.5 billion Japanese yen (approximately
$21.6 million). The line of credit matures in September
2008 and accrues interest at the Tokyo Interbank Offering Rate
(TIBOR) plus 0.6%. The interest rate at
September 30, 2007 ranged from 1.34% to 1.35%, and
December 31, 2006 ranged from 0.97% to 1.04%. Amounts drawn
on the line of credit were $6.9 million and
$7.6 million at September 30, 2007 and
December 31, 2006, respectively.
Additionally, AIC has a revolving line of credit at a Japanese
bank for 300.0 million Japanese yen (approximately
$2.4 million), maturing in June 2008, that accrues interest
at TIBOR plus 0.5%. The interest rate at September 30, 2007
and at December 31, 2006 was 1.24% and 0.92%, respectively.
There was $0.9 million drawn on the line of credit as of
September 30, 2007. There were no amounts outstanding at
December 31, 2006.
Our Philippine subsidiary has a revolving line of credit of
895.0 million Philippine peso (approximately
$18.5 million), maturing in October 2007, that accrues
interest at LIBOR plus 1.0% (6.23% at September 30, 2007
and December 31, 2006). There were no amounts outstanding
at September 30, 2007 and December 31, 2006.
In January 2006, Amkor Assembly & Test (Shanghai) Co.
Ltd., a Chinese subsidiary (AATS), entered into a
$15.0 million working capital facility which accrues
interest at LIBOR plus 1.25%, and was paid off at maturity in
January 2007 with cash on hand. The borrowings outstanding as of
December 31, 2006 were $15.0 million. At
December 31, 2006, the interest rate ranged from 6.62% to
6.81% based on the dates of borrowing.
Unitive Semiconductor Taiwan had a revolving line of credit with
a Taiwan bank for NT$60.0 million (approximately
$1.9 million) that matured in June 2007. We renewed this
facility for NT$20.0 million (approximately
$0.6 million) in August 2007. The line of credit matures in
June 2008 and accrues interest at a variable
17
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
interest rate. The interest rate at September 30, 2007 and
December 31, 2006 was 4.44% and 3.60%, respectively. There
were no amounts drawn on the line of credit as of
September 30, 2007 and December 31, 2006.
These lines of credit contain certain affirmative and negative
covenants, which could restrict our operations. If we were to
default on our obligations under any of these lines of credit,
we would not be permitted to draw additional amounts, and the
lenders could accelerate our obligation to pay all outstanding
amounts.
Other
Debt
Other debt includes debt related to our Taiwanese subsidiaries
with fixed and variable interest rates that matured in June
2007. The interest rate on this debt ranged from 3.14% to 4.5%
as of December 31, 2006.
Interest expense related to short-term borrowings and long-term
debt is presented net of interest income in the accompanying
Consolidated Statements of Income. Interest income for the three
and nine months ended September 30, 2007 was
$2.8 million and $6.6 million, respectively. For the
three and nine months ended September 30, 2006, interest
income was $1.3 million and $4.9 million, respectively.
Compliance
with Debt Covenants
We were in compliance with all of our covenants as of
September 30, 2007 and December 31, 2006.
|
|
12.
|
Pension
and Severance Plans
|
Our Philippine, Taiwanese and Japanese subsidiaries sponsor
defined benefit plans that cover substantially all of their
respective employees who are not covered by statutory plans.
Charges to expense are based upon costs computed by independent
actuaries. The components of net periodic pension cost for these
defined benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine
|
|
|
|
For the Three Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
Components of net periodic pension cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
1,597
|
|
|
$
|
1,102
|
|
|
$
|
4,666
|
|
|
$
|
3,285
|
|
Interest cost
|
|
|
926
|
|
|
|
713
|
|
|
|
2,688
|
|
|
|
2,080
|
|
Expected return on plan assets
|
|
|
(478
|
)
|
|
|
(405
|
)
|
|
|
(1,388
|
)
|
|
|
(1,181
|
)
|
Amortization of transitional obligation
|
|
|
16
|
|
|
|
17
|
|
|
|
54
|
|
|
|
51
|
|
Amortization of prior service cost
|
|
|
19
|
|
|
|
17
|
|
|
|
55
|
|
|
|
52
|
|
Recognized actuarial loss
|
|
|
102
|
|
|
|
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic pension cost
|
|
$
|
2,182
|
|
|
$
|
1,444
|
|
|
$
|
6,397
|
|
|
$
|
4,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and nine months ended September 30, 2007,
$0.5 million and $1.4 million, respectively, was
contributed to fund the pension plans. In the fourth quarter of
2007, we anticipate contributing an additional $8.0 million
to fund the pension plans.
Our Korean subsidiary participates in an accrued severance plan
that covers employees and directors with at least one year of
service. Eligible employees are entitled to receive a lump-sum
payment upon termination of their employment, based on their
length of service, seniority and rate of pay at the time of
termination. Accrued severance benefits are estimated assuming
all eligible employees were to terminate their employment at the
balance sheet date. Our contributions to the National Pension
Plan of the Republic of Korea are deducted from accrued
severance benefit liabilities. For the three months ended
September 30, 2007 and 2006, the provision recorded for
severance benefits was $9.7 million and $7.6 million,
respectively. For the nine months ended September 30, 2007
18
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
and 2006, the provision recorded for severance benefits was
$33.1 million and $24.7 million, respectively. The
balance recorded in pension and severance obligations for
accrued severance at our Korean subsidiary was
$170.2 million and $142.3 million at
September 30, 2007 and December 31, 2006, respectively.
|
|
13.
|
Other
Non-Current Liabilities
|
Other non-current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Customer advances
|
|
$
|
21,148
|
|
|
$
|
24,397
|
|
Other non-current liabilities
|
|
|
12,570
|
|
|
|
5,611
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,718
|
|
|
$
|
30,008
|
|
|
|
|
|
|
|
|
|
|
Customer advances relate to supply agreements with customers
where we commit capacity in exchange for customer prepayment of
services.
|
|
14.
|
Commitments
and Contingencies
|
As of September 30, 2007, we have outstanding
$0.2 million of standby letters of credit and have
available an additional $24.8 million. Such standby letters
of credit are used in the ordinary course of our business and
are collateralized by our cash balances.
We generally warrant that our services will be performed in a
professional and workmanlike manner and in compliance with our
customers specifications. We accrue costs for known
warranty issues. Historically, our warranty costs have been
immaterial.
Legal
Proceedings
We are involved in claims and legal proceedings and we may
become involved in other legal matters arising in the ordinary
course of our business. We evaluate these claims and legal
matters on a
case-by-case
basis to make a determination as to the impact, if any, on our
results of operations or financial condition. Except as
indicated below, we currently believe that the ultimate outcome
of these claims and proceedings, individually and in the
aggregate, will not have a material adverse impact on our
financial position, results of operations or cash flows. Our
evaluation of the potential impact of these claims and legal
proceedings on our financial position, results of operations or
cash flows could change in the future. We currently are party to
the legal proceedings described below. Attorney fees related to
legal matters are expensed as incurred.
Tessera,
Inc. v. Amkor Technology, Inc.
On March 2, 2006, Tessera, Inc. filed a Request for
Arbitration (the Request) with the International
Court of Arbitration of the International Chamber of Commerce,
captioned Tessera, Inc. v. Amkor Technology, Inc.
The subject matter of the arbitration is a Limited TCC License
Agreement (Agreement) entered into between Tessera
and our predecessor in 1996. The Agreement licenses certain
patents and know-how relating to semiconductor packaging. In
their Request, Tessera alleges breach of contract and asserts
Amkor owes Tessera royalties under the Agreement in an amount
between $85 and $115 million for semiconductor packages
assembled by us through 2005 and that Amkor has thereafter
continued to assemble semiconductor packages subject to
additional royalties, which Tessera alleges are substantial. In
our Answer and Counterclaim, we denied that any royalties were
owed, and asserted that we are not using any of the licensed
Tessera patents or know-how. We also asserted defenses and
counterclaims of invalidity and unenforceability of the four
patents identified by Tessera in their Request as the basis for
their claim (U.S. Patent Nos. 5,679,977, 5,852,326,
6,433,419 and 6,465,893). On November 10, 2006,
19
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Tessera provided their Preliminary Claim Charts and added two
additional patents to the proceeding, U.S. Patent Nos.
6,133,627 and 5,861,666.
On April 17, 2007, Tessera served notice to Amkor that it
has terminated the Agreement, which is the basis for the breach
of contract dispute in the ICC Arbitration. Amkor has disputed
Tesseras purported notice that it is entitled to terminate
the Agreement and the Arbitration Panel has denied
Tesseras pre-hearing motion to terminate the Agreement and
deferred that issue until the hearing. Also on April 17,
2007, Tessera instituted an action in Federal District Court for
the Eastern District of Texas against certain of Amkors
customers, and on May 15, 2007, at Tesseras request,
the United States International Trade Commission
(ITC) instituted an investigation of certain Amkor
customers. Both the ITC investigation and the Texas action
allege infringement of two of the same patents asserted by
Tessera in the arbitration, and Tessera may seek to include in
those actions some of the same products packaged by Amkor that
are at issue in the arbitration. Although Amkor has not been
named as a respondent in the ITC investigation or a defendant in
the Texas action, Amkor has received notification from a
customer of a request for indemnification in connection with
Tesseras claims in those actions. Amkor has not accepted
such request for indemnification.
The arbitration is currently set for a hearing beginning March
2008. Although we believe that we have meritorious defenses and
counterclaims in this matter and will seek a judgment in our
favor, it is not possible to predict the outcome of the
arbitration or the total cost of resolving this controversy
including the impact of possible future claims of additional
royalties by Tessera. The final resolution of this controversy
could result in significant liabilities and could have a
material adverse effect on our financial condition, results of
operations and cash flows.
Securities
Class Action Litigation
On January 23, 2006, a purported securities class action
suit entitled Nathan Weiss et al. v. Amkor Technology,
Inc. et al., was filed in U.S. District Court for the
Eastern District of Pennsylvania against Amkor and certain of
its current and former officers. Subsequently, other law firms
filed two similar cases, which were consolidated with the
initial complaint. In August 2006 and again in November 2006,
the plaintiffs amended the complaint. The plaintiffs added
additional officer, director and former director defendants and
allege improprieties in certain option grants. The amended
complaint further alleges that defendants improperly recorded
and accounted for the options in violation of generally accepted
accounting principles and made materially false and misleading
statements and omissions in its disclosures in violation of the
federal securities laws, during the period from July 2001 to
July 2006. The amended complaint seeks certification as a class
action pursuant to Fed. R. Civ. Proc. 23, compensatory damages,
costs and expenses, and such other further relief as the Court
deems just and proper. On December 28, 2006, pursuant to
motion by defendants, the U.S. District Court for the
Eastern District of Pennsylvania transferred this action to the
U.S. District Court for the District of Arizona.
On September 25, 2007, the U.S. District Court for the
District of Arizona dismissed this case with prejudice. On
October 23, 2007, plaintiffs filed a notice of appeal from
the dismissal in the U.S. Circuit Court of Appeals for the
Ninth Circuit.
Shareholder
Derivative Lawsuits
On February 23, 2006, a purported shareholder derivative
lawsuit entitled Scimeca v. Kim, et al. was filed in the
U.S. District Court for the District of Arizona against
certain of Amkors current and former officers and
directors. Amkor is named as a nominal defendant. In September
2006 and again in November 2006, the plaintiff amended the
complaint to add allegations relating to option grants and added
additional defendants, including the remaining members of the
current board, former board members, and former officers. The
complaint includes claims for violation of Section 14(a) of
the Exchange Act, breach of fiduciary duty, abuse of control,
waste of corporate assets, unjust enrichment and mismanagement,
and is generally based on the same allegations as in the
securities class action litigation described above.
20
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On August 29, 2007, the U.S. District Court for the
District of Arizona granted our motion to dismiss this case. We
do not know whether the plaintiffs will appeal the decision or
take further action.
On March 2, 2006, a purported shareholder derivative
lawsuit entitled Khan v. Kim, et al. was filed in
the Superior Court of the State of Arizona against certain of
Amkors current and former officers and directors. Amkor is
named as a nominal defendant. The complaint includes claims for
breach of fiduciary duty and unjust enrichment, and is based on
allegations similar to those made in the previously filed
federal shareholder derivative action. This action was stayed
pending resolution of the federal derivative suit referenced
above, and in July 2007, was dismissed by the court without
prejudice.
On or about October 10, 2006, a purported shareholder
derivative lawsuit entitled Feldgus v. Kim, et al.
was filed in the Superior Court of the State of Arizona against
certain of Amkors current and former officers and
directors. Amkor is named as a nominal defendant. The complaint
includes claims for breach of fiduciary duty and unjust
enrichment and contains allegations relating to option grants
similar to those made in the previously filed federal
shareholder derivative action referred to above. This action has
been stayed pending resolution of the federal derivative suit
referenced above.
The derivative complaints seek monetary damages, an order
directing us to take all necessary actions to improve corporate
governance as may be necessary, equitable
and/or
injunctive relief as permitted by law, disgorgement,
restitution, costs, fees, expenses and such other relief as the
Court deems just and proper.
Securities
and Exchange Commission Investigation
In August 2005, the Securities and Exchange Commission
(SEC) issued a formal order of investigation
regarding certain activities with respect to Amkor securities.
The primary focus of the investigation appears to be activities
during the period from June 2003 to July 2004. We believe that
the investigation continues to relate primarily to transactions
in our securities by certain individuals, and that the
investigation may in part relate to whether tipping with respect
to trading in our securities occurred. The matters at issue
involve activities with respect to Amkor securities during the
subject period by certain insiders or former insiders and
persons or entities associated with them, including activities
by or on behalf of certain current and former members of the
Board of Directors and Amkors Chief Executive Officer.
Amkor has cooperated fully with the SEC on the formal
investigation and the informal inquiry that preceded it. Amkor
cannot predict the outcome of the investigation. In late 2006,
our former general counsel, whose employment with us terminated
in March of 2005, was indicted by the United States
Attorneys Office for the Eastern District of Pennsylvania
for violation of securities laws, on charges that the former
general counsel traded in Amkor securities on the basis of
material non-public information. In October 2007, a jury
convicted the former general counsel on those charges. In April
2007, the SEC filed a civil action against our former general
counsel based on substantially the same allegations as contained
in the indictment.
As previously disclosed, in July 2006, the Board of Directors
established a Special Committee to review our historical stock
option practices and informed the SEC of these efforts. The SEC
informed us in 2006 that it expanded the scope of its
investigation and requested that we provide documentation
related to these matters. We intend to continue to cooperate
with the SEC.
Amkor
Technology, Inc. v. Motorola, Inc.
In August 2002, we filed a complaint against Motorola, Inc.
(Motorola) seeking declaratory judgment relating to
a controversy between us and Motorola concerning: (i) the
assignment by Citizen Watch Co., Ltd. (Citizen) to
us of a Patent License Agreement dated January 25, 1996
between Motorola and Citizen (the License Agreement)
and concurrent assignment by Citizen to us of Citizens
interest in U.S. Patents 5,241,133 and 5,216,278 (the
133 and 278 Patents) which patents
relate to ball grid array packages; and (ii) our obligation
to make certain payments pursuant to an immunity agreement (the
Immunity Agreement) dated June 30, 1993 between
us and Motorola, pending in the Superior Court of the State of
Delaware in and for New Castle County.
21
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
We and Motorola resolved the controversy with respect to all
issues relating to the Immunity Agreement, and all claims and
counterclaims filed by the parties in the case relating to the
Immunity Agreement were dismissed or otherwise disposed of
without further litigation. The claims relating to the License
Agreement and the 133 and 278 Patents remained
pending.
We and Motorola both filed motions for summary judgment on the
remaining claims, and oral arguments were heard in September
2003. On October 6, 2003, the Superior Court of Delaware
ruled in favor of us and issued an Opinion and Order granting
our motion for summary judgment and denying Motorolas
motion for summary judgment. Motorola filed an appeal in the
Supreme Court of Delaware. In May 2004, the Supreme Court
reversed the Superior Courts decision, and remanded for
further development of the factual record. The bench trial in
this matter was concluded on January 27, 2006. Post-trial
briefs were submitted and post-trial oral arguments were heard
by the Court in April 2006. Additional post-trial oral arguments
were heard by the Court on September 11, 2006. A decision
from the Court is still pending. Although we believe that we
have meritorious claims in this matter and will continue to seek
judgment in our favor, as of the date of this quarterly report,
it is not possible to predict the outcome of this litigation or
the total cost of resolving this controversy, including the
impact of possible future claims for royalties which may be made
by Motorola if the final outcome is unfavorable. The final
resolution of this controversy could result in potential
liabilities that could have a material adverse effect on our
financial condition, results of operations and cash flows.
Alcatel Business Systems v. Amkor Technology,
Inc., Anam Semiconductor, Inc.
On November 5, 1999, we agreed to sell certain
semiconductor parts to Alcatel Microelectronics, N.V.
(AME), a subsidiary of Alcatel S.A. The parts were
manufactured for us by Anam Semiconductor, Inc.
(ASI) and delivered to AME. AME transferred the
parts to another Alcatel subsidiary, Alcatel Business Systems
(ABS), which incorporated the parts into cellular
phone products. In early 2001, a dispute arose as to whether the
parts sold by us were defective.
Paris Commercial Court. On March 18,
2002, ABS and its insurer filed suit against us and ASI in the
Paris Commercial Court of France, claiming damages of
approximately 50.4 million Euros (approximately
$71.9 million based on the spot exchange rate at
September 30, 2007.) We denied all liability associated
with this claim. On March 27, 2007, the French Supreme
Court (the highest court in the French judicial system) issued a
final non-appealable ruling in our favor that the Paris
Commercial Court does not have jurisdiction over this matter.
Based on this ruling, we do not anticipate any further
proceedings in the French courts on this matter.
Arbitration. In December 2006, ABS filed a
demand with the American Arbitration Association
(AAA) for arbitration in Pennsylvania under the
November 1999 agreement, which demand is based on substantially
the same claims raised in the French lawsuit described above.
The arbitration filed with the AAA in December 2006 remains
pending, and is not affected by the French Supreme Courts
final ruling in our favor described above.
We previously entered into agreements with ASI whereby ASI
agreed to indemnify us against all costs, liabilities, damages,
expenses and judgments resulting from or arising out of the
claims of AME, ABS and ABS insurer in the above matters.
In January 2007, Dongbu Electronics (now known as Dongbu Hitek)
(Dongbu), successor in interest to ASI, acknowledged
that it is the indemnifying party with respect to claims against
us in the now-ended French proceeding described above, and in
this Arbitration matter, although Dongbu has subsequently
questioned the scope of their indemnity obligation. We continue
to believe that Dongbu is obligated to indemnify us for these
claims.
Amkor Technology, Inc. v. Carsem (M) Sdn
Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc.
In November 2003, we filed a complaint against Carsem
(M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc.
(collectively Carsem) with the International Trade
Commission (ITC) in Washington, D.C., alleging
infringement of our United States Patent Nos. 6,433,277;
6,455,356 and 6,630,728 (collectively the Amkor
Patents) and seeking an exclusionary order barring the
importation by Carsem of infringing products.
22
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Subsequently, we filed a complaint in the Northern District of
California, alleging infringement of the Amkor Patents and
seeking an injunction enjoining Carsem from further infringing
the Amkor Patents, treble damages plus interest, costs and
attorneys fees. We allege that by making, using, selling,
offering for sale, or importing into the U.S. the Carsem
Dual and Quad Flat No-Lead Package, Carsem has infringed on one
or more of our Micro LeadFrame packaging technology
claims in the Amkor Patents. The District Court action had been
stayed pending resolution of the ITC case. The ITC
Administrative Law Judge (ALJ) conducted an
evidentiary hearing during July and August of 2004 in Washington
D.C. and issued an initial determination that Carsem infringed
some of our patent claims relating to our Micro LeadFrame
package technology, that some of our 21 asserted patent claims
are valid, and that all of our asserted patent claims are
enforceable. However, the ALJ did not find a statutory violation
of the Tariff Act. We filed a petition in November 2004 to have
the ALJs ruling reviewed by the full International Trade
Commission. The ITC ordered a new claims construction related to
various disputed claim terms and remanded the case to the ALJ
for further proceedings. On November 9, 2005, the ALJ
issued an Initial Determination that Carsem infringed some of
our patent claims and ruled that Carsem violated
Section 337 of the Tariff Act. The ITC subsequently
authorized the ALJ to reopen the record on certain discovery
issues related to third party documents. On February 9,
2006, the ITC ordered a delay in issuance of the Final
Determination, pending resolution of the third party discovery
issues. The discovery issues are the subject of a subpoena
enforcement action which is pending in the District Court for
the District of Columbia. The case we filed in 2003 in the
Northern District of California remains stayed pending
completion of the ITC investigation.
|
|
15.
|
Related
Party Transactions
|
We purchase leadframe inventory from Acqutek
Semiconductor & Technology Co., Ltd. James J. Kim, our
Chairman and Chief Executive Officer, owns approximately 17.7%
of Acqutek Semiconductor & Technology Co., Ltd. The
purchases are arms length and on terms consistent with our
non-related party vendors. For the three months ended
September 30, 2007 and 2006, purchases from Acqutek
Semiconductor & Technology Co., Ltd. were
$5.0 million and $4.3 million, respectively. For the
nine months ended September 30, 2007 and 2006, purchases
from Acqutek Semiconductor and Technology Co., Ltd. were
$13.3 million and $11.7 million, respectively. Amounts
due to Acqutek Semiconductor & Technology Co., Ltd. at
September 30, 2007 and December 31, 2006 were
$1.8 million and $1.3 million, respectively.
Mr. JooHo Kim is an employee of Amkor and a brother of
Mr. James J. Kim, our Chairman and Chief Executive Officer.
Mr. JooHo Kim, together with his wife and children, own
96.1% of Jesung C&M, a company that provides cafeteria
services to Amkor Technology Korea, Inc. The services provided
by Jesung C&M are subject to competitive bid. For the three
months ended September 30, 2007 and 2006, purchases from
Jesung C&M were $1.6 million. For the nine months
ended September 30, 2007 and 2006, purchases from Jesung
C&M were $4.6 million and $4.9 million,
respectively. Amounts due to Jesung C&M at
September 30, 2007 and December 31, 2006 were
$0.5 million.
In accordance with SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, we have
determined we have two reportable segments, packaging and test.
Packaging and test are integral parts of the process of
manufacturing semiconductor devices and our customers will
engage with us for both packaging and test services, or just
packaging or test services. Our packaging services process
creates an electrical interconnect between the semiconductor
chip and the system board through wire bonding or bumping
technologies. In packaging, individual chips are separated from
the fabricated semiconductor wafers, attached to a substrate and
then encased in a protective material to provide optimal
electrical connectivity and thermal performance. Our test
services include the probing of fabricated wafers and testing of
packaged chips using sophisticated equipment to ensure that
design specifications are satisfied.
23
AMKOR
TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The accounting policies for segment reporting are the same as
those for our consolidated financial statements. We evaluate our
operating segments based on gross margin and gross property,
plant and equipment. We do not specifically identify and
allocate total assets by operating segment. Summarized financial
information concerning reportable segments is shown in the
following table. The other column includes other
corporate adjustments, sales office and corporate property,
plant and equipment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
Test
|
|
|
Other
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Three Months Ended Months September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
616,519
|
|
|
$
|
73,072
|
|
|
$
|
(508
|
)
|
|
$
|
689,083
|
|
Gross profit
|
|
|
147,767
|
|
|
|
22,623
|
|
|
|
(459
|
)
|
|
|
169,931
|
|
Three Months Ended Months September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
640,885
|
|
|
$
|
73,120
|
|
|
$
|
(176
|
)
|
|
$
|
713,829
|
|
Gross profit
|
|
|
155,144
|
|
|
|
22,815
|
|
|
|
(192
|
)
|
|
|
177,767
|
|
Nine Months Ended Months September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,779,061
|
|
|
$
|
214,243
|
|
|
$
|
(747
|
)
|
|
$
|
1,992,557
|
|
Gross profit
|
|
|
412,899
|
|
|
|
65,337
|
|
|
|
725
|
|
|
|
478,961
|
|
Nine Months Ended Months September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,841,102
|
|
|
$
|
205,042
|
|
|
$
|
(595
|
)
|
|
$
|
2,045,549
|
|
Gross profit
|
|
|
437,559
|
|
|
|
64,900
|
|
|
|
(631
|
)
|
|
|
501,828
|
|
Gross Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
$
|
2,512,028
|
|
|
$
|
619,592
|
|
|
$
|
125,598
|
|
|
$
|
3,257,218
|
|
December 31, 2006
|
|
|
2,421,171
|
|
|
|
596,079
|
|
|
|
112,449
|
|
|
|
3,129,699
|
|
|
|
17.
|
Restructuring
and Reduction in Force
|
During the second quarter of 2007, we commenced a phased
transition of wafer level processing production from our wafer
bumping facility in North Carolina to our facility in Taiwan as
part of our ongoing efforts to help our customers shorten
time-to-market and get closer to the upstream production
sources. The North Carolina facility will primarily focus on
research and development activities after the transition is
complete. We expect to complete the transition of production to
Taiwan by April 2008. In April 2007, the specific details
surrounding the related reduction in force were communicated to
the impacted employees at our North Carolina facility. The costs
associated with this activity are accounted for in accordance
with SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (as amended). We recorded
charges for termination benefits during the three and nine
months ended September 30, 2007, respectively of
$0.3 million and $0.7 million which were primarily
included in cost of goods sold. The amount recorded in accrued
expenses for termination benefits was $0.6 million as of
September 30, 2007. We currently anticipate that an
additional $0.4 million related to termination benefits
will be charged primarily to cost of goods sold over the
remaining employment service period through April 2008. We
anticipate total termination benefits of $1.0 million will
be paid through April 2008.
|
|
18.
|
Sale of
Specialty Test Operations
|
In October 2005, we divested a specialty test operation and
recognized a gain of $4.4 million. In the three months
ended September 30, 2007, we recognized an additional gain
of $1.7 million as a result of an earn-out provision
provided in the asset purchase agreement. We received the cash
in October 2007.
24
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the
meaning of the federal securities laws. All statements other
than statements of historical fact are considered forward
looking statements, including but not limited to statements
regarding: trends in outsourcing and inventory levels in the
supply chain, demand and selling prices for our services and
products; future capacity utilization rates, revenue, gross
margins and operating performance; our ability to focus capital
investments on increasing advanced laminate, test services,
wafer bump and flip chip packaging capacity and information
systems and technology; entry into supply agreements with
customers; forecasted customer demand; anticipated tax rate;
sufficient cash flows and liquidity to fund working capital,
estimated capital expenditures of $285 million to
$300 million, and debt service requirements; no declaration
of cash dividends; our substantial indebtedness; our
expectations regarding continued compliance with our debt
covenants; the continued service of key senior management and
technical personnel; increase in the scope and growth of our
operations and ability to implement expansion plans; our ability
to offset an increase in fixed commodity prices; the favorable
outcome of litigation proceedings; our ability to comply with
environmental regulations and foreign laws; our ability to
quickly respond to a natural disaster or terrorist attack; the
condition, growth and cyclical nature of the semiconductor
industry; our contractual obligations; and other statements that
are not historical facts. In some cases, you can identify
forward-looking statements by terminology such as
may, will, should,
expects, plans, anticipates,
believes, estimates,
predicts, potential,
continue, intend or the negative of
these terms or other comparable terminology. These
forward-looking statements involve a number of risks,
uncertainties, assumptions and other factors that could affect
future 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, those
set forth in the following discussion as well as in Risk
Factors that May Affect Future Operating Performance set
forth in this quarterly report on
Form 10-Q
in Part II, Item 1A Risk Factors. The
following discussion provides information and analysis of our
results of operations for the three and nine months ended
September 30, 2007 and our liquidity and capital resources.
You should read the following discussion in conjunction with our
Consolidated Financial Statements and the related notes included
elsewhere in this quarterly report, as well as other reports we
file with the Securities and Exchange Commission.
Results
of Operations
Overview
Amkor is one of the worlds largest subcontractors of
semiconductor packaging and test services. Packaging and test
are integral parts of the process of manufacturing semiconductor
devices. This process begins with silicon wafers and involves
the fabrication of electronic circuitry into complex patterns,
thus creating large numbers of individual chips on the wafers.
The fabricated wafers are then probed to ensure the individual
devices meet design specifications. The packaging process
creates an electrical interconnect between the semiconductor
chip and the system board. In packaging, individual chips are
separated from the fabricated semiconductor wafers, and
typically attached through wire bond or wafer bump technologies
to a substrate or leadframe, and then encased in a protective
material. Packages are designed to provide optimal electrical
connectivity and thermal performance. The packaged chips are
then tested using sophisticated equipment to ensure that each
packaged chip meets its design specifications. Increasingly,
packages are custom designed for specific chips and specific
end-market applications. We are able to provide turnkey
solutions including semiconductor wafer bump, wafer probe, wafer
backgrind, package design and assembly, test and drop shipment
services.
Our net income for the three months ended September 30,
2007 was $60.6 million, or $0.30 per diluted share, versus
net income for the three months ended September 30, 2006 of
$52.8 million, or $0.27 per diluted share. In the three
months ended September 30, 2007, sales decreased
$24.7 million or 3.5% to $689.1 million from
$713.8 million in the three months ended September 30,
2006 driven by a decrease in leadframe packages and modules
business partially offset by an increase in our advanced
laminate packages.
25
Gross margin for the three months ended September 30, 2007
was 24.7% compared to 24.9% for the three months ended
September 30, 2006 primarily resulting from higher labor
costs offset by lower material costs due to a change in product
mix.
We continue to manage our production lines, allocate assets and
selectively expand our capacity. Capital additions during the
three months ended September 30, 2007 totaled
$77.7 million. We expect that our full year 2007 capital
additions will be in the range of $285 million to
$300 million, which is subject to adjustment based on
business conditions. Our capital investments have been, and we
expect will continue to be, primarily focused on increasing our
advanced laminate, test services, wafer bump and flip chip
packaging capacity. In addition, we continue to make investments
in our information systems.
Cash provided by operating activities increased
$33.8 million to $414.5 million for the nine months
ended September 30, 2007 as compared to $380.7 million
for the nine months ended September 30, 2006. Cash flows
from operations generated during the nine months ended
September 30, 2007 funded capital purchases of
$159.9 million leaving $254.6 million of free cash
flow (defined below). Please see the Liquidity and Capital
Resources section below for a further analysis of the changes in
our financial position and cash flows during the first nine
months of 2007.
The following table sets forth certain operating data as a
percentage of net sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Gross profit
|
|
|
24.7
|
%
|
|
|
24.9
|
%
|
|
|
24.0
|
%
|
|
|
24.5
|
%
|
Operating income
|
|
|
14.1
|
%
|
|
|
14.0
|
%
|
|
|
13.1
|
%
|
|
|
13.9
|
%
|
Income before income taxes and minority interests
|
|
|
9.1
|
%
|
|
|
7.8
|
%
|
|
|
6.9
|
%
|
|
|
5.9
|
%
|
Net income
|
|
|
8.8
|
%
|
|
|
7.4
|
%
|
|
|
6.3
|
%
|
|
|
5.4
|
%
|
Three
Months Ended September 30, 2007 Compared to Three Months
Ended September 30, 2006
Net Sales. Sales decreased $24.7 million,
or 3.5%, to $689.1 million in the three months ended
September 30, 2007 from $713.8 million in the three
months ended September 30, 2006 driven by a decrease in
leadframe packages and modules business partially offset by an
increase in our advanced laminate packages.
Packaging Net Sales. Packaging net sales
decreased $24.4 million, or 3.8%, to $616.5 million in
the three months ended September 30, 2007 from
$640.9 million in the three months ended September 30,
2006. While net sales decreased 3.8%, packaging unit volume
increased 2.1% to 2.3 billion units in the three months
ended September 30, 2007 from 2.2 billion units in the
third quarter of 2006. The decrease in net sales is principally
driven by a change in product mix that reflects a decrease in
leadframe packages and our modules business partially offset by
an increase in our advanced laminate packages. To a lesser
extent, price reductions contributed to the decline in net sales.
Test Net Sales. Test net sales were unchanged
at $73.1 million for both the three months ended
September 30, 2007 and the three months ended
September 30, 2006.
Cost of Sales. Our cost of sales consists
principally of materials, labor, depreciation and manufacturing
overhead. Because a substantial portion of our costs at our
factories is fixed, relatively insignificant increases or
decreases in capacity utilization rates can have a significant
effect on our gross margin.
Material costs as a percent of revenue decreased to 37.3% for
the three months ended September 30, 2007 from 39.2% for
the three months ended September 30, 2006 because packages
with less material content accounted for a larger portion of our
sales resulting in lower overall material costs.
Labor costs as a percentage of net sales increased to 16.4% for
the three months ended September 30, 2007 from 14.4% for
the three months ended September 30, 2006 due to higher
labor and benefit costs attributable in part to wage increases
and the weakening of the U.S. dollar partially offset by a
net reduction in headcount.
26
As a percentage of net sales, other manufacturing costs were
essentially flat at 21.6% for the three months ended
September 30, 2007 and 21.5% for the three months ended
September 30, 2006.
Stock-based compensation included in cost of sales was
$0.3 million for the three months ended September 30,
2007 and $0.9 million for the three months ended
September 30, 2006.
Gross Profit. Gross profit decreased
$7.9 million to $169.9 million, or 24.7% of net sales
in the three months ended September 30, 2007 from
$177.8 million, or 24.9% of net sales, in the three months
ended September 30, 2006. The decrease in gross profit was
due primarily to higher labor costs at our factories, partially
offset by lower overall material costs due to a change in
product mix.
Packaging Gross Profit. Gross profit for
packaging decreased $7.3 million to $147.8 million, or
24.0% of packaging net sales, in the three months ended
September 30, 2007 from $155.1 million, or 24.2% of
packaging net sales, in the three months ended
September 30, 2006. The packaging gross profit decrease was
due primarily to higher labor costs at our factories, partially
offset by lower overall material costs from a change in product
mix.
Test Gross Profit. Gross profit for test
decreased $0.2 million to $22.6 million, or 30.9% of
test net sales, in the three months ended September 30,
2007 from $22.8 million, or 31.2% of test net sales, in the
three months ended September 30, 2006. This slight decrease
was primarily due to increased depreciation costs as a result of
our capital expenditures for test equipment.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses decreased $4.4 million, or 6.4%, to
$64.1 million for the three months ended September 30,
2007, from $68.5 million for the three months ended
September 30, 2006 principally reflecting higher spending
in the three months ended September 30, 2006 for
professional fees due to the stock option investigation and
other related matters. This is partially offset by increased
spending in the three months ended September 30, 2007 for
professional fees related to our global enterprise resource
planning implementation and increased legal costs.
Research and Development. Research and
development activities are currently focused on advanced
laminate, flip chip and wafer level packaging services. Research
and development expenses increased $0.6 million to
$10.3 million, or 1.5% of net sales for the three months
ended September 30, 2007 from $9.7 million, or 1.4% of
net sales in the three months ended September 30, 2006
primarily due to increased labor and benefits costs.
Gain on Sale of Specialty Test Operations. In
October 2005, we divested a specialty test operation and
recognized a gain of $4.4 million. In the three months
ended September 30, 2007, we recognized an additional gain
of $1.7 million as a result of an earn-out provision
provided in the asset purchase agreement. We received the cash
in October 2007.
Other (Income) Expense. Other expenses, net,
decreased $9.2 million from the three months ended
September 30, 2006 to the three months ended
September 30, 2007. This decrease is primarily driven by a
decrease of $7.2 million in net interest expense in the
three months ended September 30, 2007 compared to the three
months ended September 30, 2006, due to our continued focus
on strengthening our liquidity by reducing debt as well as
refinancing debt with lower interest rate borrowings.
Income Tax Expense. Income tax expense for the
three months ended September 30, 2007 and 2006 is
attributable to foreign withholding taxes and income taxes at
certain of our profitable foreign operations. For the full year
of 2007, we anticipate an effective income tax rate of
approximately 7.6%, which reflects the utilization of foreign
net operating loss carryforwards, tax holidays, and the release
of a valuation allowance in certain foreign jurisdictions. The
effective rate for the three months ended September 30,
2007 and 2006 was 1.9% and 5.2%, respectively. The decrease is
primarily attributable to the release of a valuation allowance
on certain foreign deferred tax assets during the three months
ended September 30, 2007. Management believes that
sufficient positive evidence now exists to release the remaining
valuation allowance for these deferred tax assets. The positive
evidence we considered was: (i) the consistent
profitability of these operations over a two year period;
(ii) the increase in profitability experienced in the third
quarter of 2007 based on demand for the products from these
operations; and (iii) the visibility we have over the next
two years for these operations which is the time frame we expect
to realize the deferred tax assets.
27
At September 30, 2007, we had U.S. net operating loss
carryforwards totaling $345.0 million, which expire at
various times through 2027. Additionally, at September 30,
2007, we had $48.2 million of
non-U.S. operating
loss carryforwards, which expire at various times through 2012.
We maintain a valuation allowance on substantially all of our
deferred tax assets, including our net operating loss
carryforwards, and will release such valuation allowance as the
related deferred tax benefits are realized on our tax returns or
when sufficient net positive evidence exists to conclude that
the deferred tax assets will be realized.
Nine
Months Ended September 30, 2007 Compared to Nine Months
Ended September 30, 2006
Net Sales. Net sales decreased
$53.0 million, or 2.6%, to $1,992.6 million for the
nine months ended September 30, 2007 from
$2,045.5 million for the nine months ended
September 30, 2006 principally driven by a decrease in
leadframe packages partially offset by an increase in our
advanced laminate packages.
Packaging Net Sales. Packaging net sales
decreased $62.0 million, or 3.4%, to $1,779.1 million
in the nine months ended September 30, 2007 from
$1,841.1 million in the nine months ended
September 30, 2006. Packaging unit volume decreased 4.1% to
6.3 billion units in the nine months ended
September 30, 2007 from 6.6 billion units in the 2006
period. The decrease in net sales and unit volume is principally
attributed to a decrease in leadframe packages partially offset
by an increase in our advanced laminate packages. To a lesser
extent, price reductions contributed to the decline in net sales.
Test Net Sales. Test net sales increased
$9.2 million, or 4.5%, to $214.2 million in the nine
months ended September 30, 2007 from $205.0 million in
the nine months ended September 30, 2006, principally due
to increased test times resulting from a change in product mix.
Cost of Sales. Our cost of sales consists
principally of materials, labor, depreciation and manufacturing
overhead. Because a substantial portion of our costs at our
factories is fixed, relatively insignificant increases or
decreases in capacity utilization rates can have a significant
effect on our gross margin.
Material costs as a percent of revenue decreased from 39.2% for
the nine months ended September 30, 2006 to 37.7% for the
nine months ended September 30, 2007 primarily due to a
change in product mix resulting in lower material costs per
product.
Labor as a percentage of net sales, increased to 16.5% for the
nine months ended September 30, 2007, from 14.8% for the
nine months ended September 30, 2006, due to increased
labor wages at our factories, and the depreciation of the
U.S. dollar, partially offset by a net reduction in
headcount.
Other manufacturing costs increased to 21.8% for the nine months
ended September 30, 2007, from 21.5% for the nine months
ended September 30, 2006, due to lower revenue. Other
manufacturing costs in absolute dollars decreased as a result of
the decreased volume partially offset by increased depreciation
costs as a result of our capital expenditures which are focused
on increasing our advanced laminate, test services, wafer bump
and flip chip packaging capacity.
Stock-based compensation included in cost of sales amount to
$1.0 million for the nine months ended September 30,
2007 compared to $1.6 million for the nine months ended
September 30, 2006.
Gross Profit. Gross profit decreased
$22.8 million to $479.0 million, or 24.0% of net sales
in the nine months ended September 30, 2007 from
$501.8 million, or 24.5% of net sales, in the nine months
ended September 30, 2006. This decrease in gross profit was
due primarily to higher labor costs at our factories partially
offset by lower overall material costs due to product mix.
Packaging Gross Profit. Gross profit for
packaging decreased $24.7 million to $412.9 million,
or 23.2% of packaging net sales, in the nine months ended
September 30, 2007 from $437.6 million, or 23.8% of
packaging net sales, in the nine months ended September 30,
2006. The packaging gross profit decrease was primarily due to
higher labor costs at our factories offset by lower overall
material costs due to a change in product mix.
Test Gross Profit. Gross profit for test
increased $0.4 million to $65.3 million, or 30.5% of
test net sales, in the nine months ended September 30, 2007
from $64.9 million, or 31.7% of test net sales, in the nine
months ended
28
September 30, 2006. This increase was primarily due to
increased test times resulting from a change in product mix
partially offset by increased depreciation costs as a result of
our capital expenditures.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses increased slightly by $0.5 million, or 0.2%, to
$189.1 million for the nine months ended September 30,
2007, from $188.6 million for the nine months ended
September 30, 2006. In the nine months ended,
September 30, 2007 we had increased spending on
professional fees related to our global enterprise resource
planning implementation and increased litigation activity. For
the nine months ended September 30, 2006, we had increased
spending for professional fees due to the stock option
investigation and other related matters.
Research and Development. Research and
development activities are currently focused on advanced
laminate, flip chip and wafer level packaging services. Research
and development expenses increased $1.5 million to
$30.9 million, or 1.6% of net sales for the nine months
ended September 30, 2007 from $29.4 million, or 1.4%
of net sales in the nine months ended September 30, 2006.
Our increase in our research and development expenses was
primarily related to increased labor and benefits costs.
Gain on Sale of Specialty Test Operations. In
October 2005, we divested a specialty test operation and
recognized a gain of $4.4 million. In the three months
ended September 30, 2007, we recognized an additional gain
of $1.7 million as a result of an earn-out provision
provided in the asset purchase agreement. We received the cash
in October 2007.
Other (Income) Expense. Other expenses, net,
decreased $40.4 million to $123.2 million, or 6.2% of
net sales, for the nine months ended September 30, 2007
from $163.6 million, or 8.0% of net sales, for the nine
months ended September 30, 2006. In the nine months ended
September 30, 2007 we recognized $15.9 million of debt
retirement costs compared to $27.4 million in the nine
months ended September 30, 2006. In addition, there was a
decrease of $22.9 million in net interest expense in the
nine months ended September 30, 2007 compared to the nine
months ended September 30, 2006, due to our continued focus
to strengthen our liquidity by reducing debt as well as
refinancing debt with lower interest rate instruments.
Income Tax Expense. Income tax expense for the
nine months ended September 30, 2007 and 2006 is
attributable to foreign withholding taxes and income taxes at
certain of our profitable foreign operations. For the full year
2007, we anticipate an effective income tax rate of
approximately 7.6%, which reflects the utilization of foreign
net operating loss carryforwards and tax holidays in certain
foreign jurisdictions. The effective rate for the nine months
ended September 30, 2007 and 2006 was 7.0%. The decrease
attributable to the release of a valuation allowance on certain
foreign deferred tax assets for the nine months ended
September 30, 2007 was offset by an increase in tax in
certain profitable foreign jurisdictions. Additionally, the
effective tax rate for the nine months ended September 30,
2007 reflects certain discrete period items recorded in the
first and second quarters of 2007.
At September 30, 2007, we had U.S. net operating loss
carryforwards totaling $345.0 million, which expire at
various times through 2027. Additionally, we had
$48.2 million of
non-U.S. net
operating loss carryforwards, which expire at various times
through 2012. We maintain a full valuation allowance on
substantially all of our deferred tax assets, including our net
operating loss carryforwards, and will release such valuation
allowance as the related deferred tax benefits are realized on
our tax returns or when sufficient net positive evidence exists
to conclude that the deferred tax assets will be realized.
Liquidity
and Capital Resources
We generated net income of $126.2 million and
$111.0 million for the nine months ended September 30,
2007 and 2006, respectively. During the nine months ended
September 30, 2007 and 2006, we recorded in connection with
refinancing transactions $15.9 million and
$27.4 million, respectively of net debt retirement costs in
connection with refinancing transactions. Our operating
activities provided cash totaling $414.5 million and
$380.7 million in the nine months ended September 30,
2007 and 2006, respectively. In March 2007, we used existing
cash resources to retire the remaining $142.4 million in 5%
convertible notes at maturity, and in June 2007 we redeemed the
remaining $21.9 million of the 2009 10.5% senior
subordinated notes outstanding with cash on hand.
29
In April 2007, we entered into a $300.0 million,
7-year
secured credit facility with Woori Bank (Term Loan).
The Term Loan is secured by substantially all the land,
factories, and equipment located at our Korean facilities. The
Term Loan bears interest at Wooris base rate plus
50 basis points (6.61% as of September 30,
2007) and amortizes in 28 equal quarterly payments through
April 2014. The proceeds of the Term Loan were used to refinance
a $300.0 million second lien term loan due October 2010,
which bore interest at a rate of LIBOR plus 450 basis
points (9.86% at March 31, 2007). This financing
transaction, together with payment of prepayment fees and
accrued and unpaid interest, fully discharged all of our
obligations under the second lien term loan and fully discharged
all subsidiary guarantees and releases all the collateral
securing the second lien term loan.
We have a significant level of debt, with $1,803.4 million
outstanding at September 30, 2007, of which
$161.9 million is current. The terms of our debt require
significant scheduled principal payments in the coming years,
including $27.7 million during the remainder of 2007,
$151.5 million in 2008, $54.6 million in 2009,
$54.7 million in 2010, $482.6 million in 2011 and
$1,032.3 million thereafter.
The interest payments required on our debt are also substantial.
For example, in the nine months ended September 30, 2007,
we paid $89.8 million of interest. (See Capital
Additions and Contractual Obligations below for a summary
of principal and interest payments.) We were in compliance with
all debt covenants at September 30, 2007 and expect to
remain in compliance with these covenants through
September 30, 2008.
In order to reduce leverage and future cash interest payments,
we may from time to time repurchase our outstanding notes for
cash or exchange shares of our common stock for our outstanding
notes. Any such transactions may be made in the open market or
through privately negotiated transactions and are subject to the
terms of our indentures and other debt agreements, market
conditions and other factors.
We operate in a capital intensive industry. Servicing our
current and future customers requires that we incur significant
operating expenses and continue to make significant capital
expenditures, which are generally made in advance of the related
revenues and without any firm customer commitments. During the
nine months ended September 30, 2007, we had capital
additions of $192.6 million and for all of 2007 we
currently anticipate making capital additions in the range of
$285 million to $300 million, which estimate is
subject to adjustment based on business conditions. Our 2007
capital additions budget remains focused on strategic growth
areas of advanced laminate, test services, wafer bump and flip
chip packaging capacity.
The source of funds for our operations, including making capital
expenditures and servicing principal and interest obligations
with respect to our debt, are cash flows from our operations,
current cash and cash equivalents, borrowings under available
debt facilities, or proceeds from any additional debt or equity
financing. As of September 30, 2007, we had cash and cash
equivalents of $335.0 million and $99.8 million
available under our senior secured revolving credit facility.
We assess our liquidity based on our current expectations
regarding sales, operating expenses, capital spending and debt
service requirements. Based on this assessment, we believe that
our cash flow from operating activities together with existing
cash and cash equivalents and availability under our senior
secured revolving credit facility will be sufficient to fund our
working capital, capital expenditure and debt service
requirements through at least September 30, 2008.
Thereafter, our liquidity will continue to be affected by, among
other things, the performance of our business, our capital
expenditure levels and our ability to either repay debt out of
operating cash flow or refinance debt with the proceeds of debt
or equity offerings at or prior to maturity. If our performance
or access to the capital markets differs materially from our
expectations, our liquidity may be adversely impacted.
If we fail to generate the necessary net income or operating
cash flows to meet the funding needs of our business beyond
September 30, 2008 due to a variety of factors, including
the cyclical nature of the semiconductor industry and the other
factors discussed in Part II, Item 1A Risk
Factors, our liquidity would be adversely affected. We
would consider taking a variety of actions, including:
attempting to reduce our high fixed costs (for example, closing
facilities and reducing the size of our work force), curtailing
or reducing planned capital additions, raising additional
equity, borrowing additional funds, refinancing existing
indebtedness or taking other actions. There can be no assurance,
however, that we will be able to successfully take any of these
actions, including adjusting our expenses sufficiently or in a
timely manner, or raising additional equity, increasing
borrowings or completing
30
refinancings on any terms or on terms which are acceptable to
us. Our inability to take these actions as and when necessary
would materially adversely affect our liquidity, results of
operations and financial condition.
Many of our debt agreements restrict our ability to pay
dividends. We have never paid a dividend to our shareholders and
we do not anticipate paying any cash dividends in the
foreseeable future. We expect cash flows, if any, to be used in
the operation and expansion of our business and the repayment of
debt.
Cash
flows
Cash provided by operating activities was $414.5 million
for the nine months ended September 30, 2007 compared to
$380.7 million for the nine months ended September 30,
2006. Free cash flow (defined below) increased by
$126.2 million to $254.5 million for the nine months
ended September 30, 2007 compared to $128.3 million
for the nine months ended September 30, 2006.
Net cash provided by (used in) operating, investing and
financing activities for the nine months ended
September 30, 2007 and 2006 was as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Operating activities
|
|
$
|
414,468
|
|
|
$
|
380,656
|
|
Investing activities
|
|
|
(156,590
|
)
|
|
|
(252,455
|
)
|
Financing activities
|
|
|
(169,007
|
)
|
|
|
(145,727
|
)
|
Operating activities: Our cash flow from
operating activities for the nine months ended
September 30, 2007 increased $33.8 million to
$414.5 million from $380.7 million for the nine months
ended September 30, 2006. This increase in operating cash
flows is a result of positive changes in assets and liabilities
and lower interest paid, partially offset by the payment of
prepayment fees in connection with refinancings. Our operating
income for the nine months ended September 30, 2007
compared to the nine months ended September 30, 2006 and
adjusted for depreciation and amortization and other operating
activities and non-cash items decreased $31.3 million
largely attributed to decreased utilization of our capacity and
our significant fixed costs at our factories. Net interest
expense for the nine months ended September 30, 2007
decreased by $22.9 million as compared with the nine months
ended September 30, 2006 as a result of reduced debt levels
as well as refinancing debt with lower interest rate
instruments. Operating cash flows for the nine months ended
September 30, 2007 were reduced by $9.0 million for
prepayment fees in connection with refinancing our second lien
term loan. Changes in assets and liabilities increased operating
cash flows by $47.3 million for the nine months ended
September 30, 2007 compared with the nine months ended
September 30, 2006 driven largely by reduced levels of
receivables, inventory and accounts payable in line with the
reduced unit volumes and changes in sales mix as well as an
increase in employee benefit liabilities. Other changes in
operating activities including foreign currency losses, other
income and expenses, taxes and minority interest accounted for
$3.8 million of the increase in operating cash flows.
Investing activities: Our cash flows used in
investing activities for the nine months ended
September 30, 2007 decreased by $95.9 million to
$156.6 million from $252.5 million for the nine months
ended September 30, 2006. This decrease was primarily due
to a $92.5 million decrease in payments for property, plant
and equipment from $252.4 million in the nine months ended
September 30, 2006 to $159.9 million in the nine
months ended September 30, 2007. Investing activities were
higher in 2006 principally as a result of our expansion of our
facilities in China and Singapore. Investing activities during
the nine months ended September 30, 2007 included increased
proceeds from the sale of property, plant and equipment of
$5.1 million primarily attributable to a sale of real
property in Korea that had been used for administrative purposes.
Financing activities: Our net cash used in
financing activities for the nine months ended
September 30, 2007 was $169.0 million, compared with
$145.7 million for the nine months ended September 30,
2006. The net cash used in financing activities for the nine
months ended September 30, 2007 was primarily driven by the
repayment of the $142.4 million of our 5% convertible notes
at maturity in March 2007, and the redemption of the remaining
$21.9 million 2009 10.5% senior subordinated notes in
June 2007. The net cash used in financing activities for the
nine months ended September 30, 2006 was primarily driven
by the repayment of the $132.0 million for our 5.75%
31
convertible subordinated notes at maturity in June 2006.
Proceeds from the issuance of stock through our stock
compensation plans for the nine months ended September 30,
2007 was $36.4 million, compared with $5.0 million for
the nine months ended September 30, 2006.
We provide the following supplemental data to assist our
investors and analysts in understanding our liquidity and
capital resources. Free cash flow represents net cash provided
by operating activities less investing activities related to the
acquisition of property, plant and equipment. Free cash flow is
not defined by generally accepted accounting principles
(GAAP) and our definition of free cash flow may not
be comparable to similar companies and should not be considered
a substitute for cash flow measures in accordance with GAAP. We
believe free cash flow provides our investors and analysts
useful information to analyze our liquidity and capital
resources.
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating activities
|
|
$
|
414,468
|
|
|
$
|
380,656
|
|
Less payments for property, plant and equipment
|
|
|
(159,942
|
)
|
|
|
(252,401
|
)
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
254,526
|
|
|
$
|
128,255
|
|
|
|
|
|
|
|
|
|
|
Debt
Instruments and Related Covenants
We now have, and for the foreseeable future will continue to
have, a significant amount of indebtedness. Our indebtedness
requires us to dedicate a substantial portion of our cash flow
from operations to service payments on our debt. (See table
included in Capital Additions and Contractual
Obligations below). Total debt decreased to
$1,803.4 million at September 30, 2007 from $2,005.3
at December 31, 2006. In March 2007, we used existing cash
resources to retire the remaining $142.4 million in 5%
convertible notes at maturity. In June 2007, we redeemed the
remaining $21.9 million of the 2009 10.5% Senior
Subordinated Notes outstanding with cash on hand. Amkor
Technology, Inc. also guarantees certain debt of our
subsidiaries.
We were in compliance with all our debt covenants contained in
our loan agreements at September 30, 2007. Additional
details about our debt are available in Note 11
accompanying the Consolidated Financial Statements included
within Part I, Item 1 of this quarterly report.
Capital
Additions and Contractual Obligations
Our capital additions were $192.6 million for the nine
months ended September 30, 2007. We expect that our full
year 2007 capital additions will be in the range of
$285 million to $300 million, as discussed above in
the Overview. Ultimately, the amount of our 2007
capital additions will depend on several factors including,
among others, the performance of our business, the need for
additional capacity to service anticipated customer demand and
the availability of suitable cash flow from operations or
financing. The following table reconciles our activity related
to property, plant and equipment payments as presented on the
Condensed Consolidated Statements of Cash Flow statement to
property, plant and equipment additions as reflected in the
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Payments for property, plant, and equipment
|
|
$
|
159,942
|
|
|
$
|
252,401
|
|
Net increase (decrease) in related accounts payable and deposits
|
|
|
32,624
|
|
|
|
(8,234
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions
|
|
$
|
192,566
|
|
|
$
|
244,167
|
|
|
|
|
|
|
|
|
|
|
32
The following table summarizes our contractual obligations at
September 30, 2007, and the effect such obligations are
expected to have on our liquidity and cash flow in future
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2007 Remaining
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Total debt(1)
|
|
$
|
1,803,446
|
|
|
$
|
27,746
|
|
|
$
|
151,463
|
|
|
$
|
54,638
|
|
|
$
|
54,679
|
|
|
$
|
482,600
|
|
|
$
|
1,032,320
|
|
Scheduled interest payment obligations(2)
|
|
|
692,582
|
|
|
|
30,993
|
|
|
|
118,222
|
|
|
|
114,005
|
|
|
|
110,672
|
|
|
|
89,811
|
|
|
|
228,879
|
|
Purchase obligations(3)
|
|
|
60,774
|
|
|
|
60,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
59,877
|
|
|
|
2,127
|
|
|
|
8,809
|
|
|
|
7,918
|
|
|
|
7,648
|
|
|
|
6,689
|
|
|
|
26,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
2,616,679
|
|
|
$
|
121,640
|
|
|
$
|
278,494
|
|
|
$
|
176,561
|
|
|
$
|
172,999
|
|
|
$
|
579,100
|
|
|
$
|
1,287,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The decrease in our total debt from the Annual Report on
Form 10-K
as of December 31, 2006, is primarily driven by the
repayment of $142.4 million of our 5% convertible notes at
maturity in March 2007, and $21.9 million for the
redemption of the remaining 10.5% Senior Subordinated 2009
Notes outstanding in June 2007. |
|
(2) |
|
Scheduled interest payment obligations were calculated using
stated coupon rates for fixed rate debt and interest rates
applicable at September 30, 2007 for variable rate debt. |
|
(3) |
|
Represents capital-related purchase obligations. |
In addition to the obligations identified in the table above,
non-current liabilities recorded in our Consolidated Balance
Sheet at September 30, 2007, include $206.0 million
related to pension and severance obligations, which the timing
of the ultimate payment of these obligations was uncertain at
September 30, 2007. Additionally, $21.1 million of
customer advances are included in non-current liabilities as of
September 30, 2007 and relate to supply agreements with
customers where we commit capacity in exchange for customer
prepayment of services. Generally customers forfeit the
prepayment if the capacity is not utilized per contract terms.
The table above excludes liabilities we have with respect to
unrecognized tax benefits. As discussed in Note 4 to our
Consolidated Financial Statements, we adopted the provisions of
FIN 48 on January 1, 2007. At September 30, 2007,
the gross amount of our unrecognized tax benefits was
approximately $11.7 million, which does not generally
represent future cash payments because of the interaction with
other tax attributes available such as net operating loss or tax
credit carryforwards. Due to the high degree of uncertainty
regarding the amount and the timing of any future cash outflows
associated with our FIN 48 liabilities, we are unable to
reasonably estimate the amount and period of ultimate settlement
with the various taxing authorities. As management would expect
cash outflows with respect to FIN 48 liabilities to occur
over an indeterminate number of future years, it is unlikely
that any payment of existing liabilities would have a material
adverse affect on liquidity in any future period.
Off-Balance
Sheet Arrangements
We had no off-balance sheet guarantees or other off-balance
sheet arrangements as of September 30, 2007. Operating
lease commitments are included in the contractual obligation
table above.
Contingencies,
Indemnifications and Guarantees
Details about our contingencies, indemnifications and guarantees
are available in Note 14 accompanying the Consolidated
Financial Statements included within Part I, Item 1 of
this quarterly report. As for our contingencies related to our
patent litigation, securities litigation, and other litigation
and legal matters, if an unfavorable ruling were to occur, there
exists the possibility of a material adverse impact on our
results of operations in the period in which the ruling occurs.
Our evaluation of the potential impact from the legal
proceedings, discussed in Note 14 accompanying the
Consolidated Financial Statements, on our financial position,
results of operations, or cash flows, could change in the future.
33
Critical
Accounting Policies
Our critical accounting policies are disclosed in our Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006. During the
nine months ended September 30, 2007, there have been no
significant changes in our critical accounting policies.
New
Accounting Pronouncements
For information regarding recent accounting pronouncements, see
Note 1 to the Consolidated Financial Statements included
within Part I, Item 1 of this quarterly report.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Market
Risk Sensitivity
We are exposed to market risks, primarily related to foreign
currency and interest rate fluctuations. In the normal course of
business, we employ established policies and procedures to
manage the exposure to fluctuations in foreign currency values
and changes in interest rates. Our use of derivative
instruments, including forward exchange contracts, has been
historically insignificant.
Foreign
Currency Risks
Our primary exposures to foreign currency fluctuations are
associated with transactions and related assets and liabilities
denominated in Chinese renminbi, Japanese yen, Korean won,
Philippine pesos, Singapore dollar, and Taiwanese dollar. The
objective in managing these foreign currency exposures is to
minimize the risk through minimizing the level of activity and
financial instruments denominated in those currencies. Our
foreign currency financial instruments primarily consist of
cash, trade receivables, deferred taxes, trade payables, accrued
expenses and debt.
For an entity with various financial instruments denominated in
a foreign currency in a net asset position, an increase in the
exchange rate would result in less net assets when converted to
U.S. dollars. Conversely, for an entity with various
financial instruments denominated in a foreign currency in a net
liability position, a decrease in the exchange rate would result
in more net liabilities when converted to U.S. dollars.
Changes period over period are caused by changes in our net
asset or net liability position and changes in currency exchange
rates. Based on our portfolio of foreign currency based
financial instruments at September 30, 2007 and
December 31, 2006, a 20% increase (decrease) in the foreign
currency to U.S. dollar spot exchange rate would result in
the following foreign currency risk for our entities in a net
asset (liability) position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chart of Foreign Currency Risk
|
|
|
Chinese
|
|
Japanese
|
|
Korean
|
|
Philippine
|
|
Singapore
|
|
Taiwanese
|
|
|
Renminbi
|
|
Yen
|
|
Won
|
|
Peso
|
|
Dollar
|
|
Dollar
|
|
|
(In thousands)
|
|
As of September 30, 2007
|
|
$
|
(1,144
|
)
|
|
$
|
2,384
|
|
|
$
|
(3,173
|
)
|
|
$
|
(4,020
|
)
|
|
$
|
(549
|
)
|
|
$
|
(8,876
|
)
|
As of December 31, 2006
|
|
|
(2,178
|
)
|
|
|
2,048
|
|
|
|
(4,750
|
)
|
|
|
(3,734
|
)
|
|
|
(992
|
)
|
|
|
(10,861
|
)
|
In addition, at September 30, 2007 and December 31,
2006, we had other foreign currency denominated liabilities,
including denominations of the Euro, Swiss franc and Great
Britain pound, whereby a 20% decrease in the related exchange
rates would result in an aggregate of less than
$0.4 million and $0.1 million, respectively, of
additional foreign currency risk.
Interest
Rate Risks
We have interest rate risk with respect to our long-term debt.
As of September 30, 2007, we had a total of
$1,803.4 million of debt of which 80.8% was fixed rate debt
and 19.2% was variable rate debt. Our variable rate debt
principally relates to our foreign borrowings and any amounts
outstanding under our $100.0 million revolving line of
credit, of which no amounts were drawn as of September 30,
2007 but which had been reduced by $0.2 million related to
outstanding letters of credit at that date. The fixed rate debt
consists of senior notes, senior subordinated notes and
subordinated notes. In April 2007, our second lien term loan was
refinanced with a new term loan which is
34
also a variable interest rate debt. As of December 31,
2006, we had a total of $2,005.3 million of debt of which
80.9% was fixed rate debt and 19.1% was variable rate debt.
Changes in interest rates have different impacts on our fixed
and variable rate portions of our debt portfolio. A change in
interest rates on the fixed portion of the debt portfolio
impacts the fair value of the instrument but has no impact on
interest incurred or cash flows. A change in interest rates on
the variable portion of the debt portfolio impacts the interest
incurred and cash flows but does not impact the fair value of
the instrument. The fair value of the convertible notes is also
impacted by changes in the market price of our common stock.
The table below presents the interest rates, maturities and fair
value of our fixed and variable rate debt as of
September 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate debt
|
|
$
|
833
|
|
|
$
|
91,539
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
439,052
|
|
|
$
|
925,000
|
|
|
$
|
1,456,424
|
|
|
$
|
1,518,335
|
|
Average interest rate
|
|
|
4.9
|
%
|
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
|
|
5.1
|
%
|
|
|
8.2
|
%
|
|
|
7.4
|
%
|
|
|
|
|
Variable rate debt
|
|
$
|
26,913
|
|
|
$
|
59,924
|
|
|
$
|
54,638
|
|
|
$
|
54,679
|
|
|
$
|
43,548
|
|
|
$
|
107,320
|
|
|
$
|
347,022
|
|
|
$
|
347,022
|
|
Average interest rate
|
|
|
4.3
|
%
|
|
|
6.0
|
%
|
|
|
6.1
|
%
|
|
|
6.1
|
%
|
|
|
6.6
|
%
|
|
|
6.6
|
%
|
|
|
6.2
|
%
|
|
|
|
|
Equity
Price Risks
We have convertible notes that are convertible into our common
stock. We currently intend to repay our remaining convertible
notes upon maturity, unless converted, repurchased or
refinanced. If investors were to decide to convert their notes
to common stock, our future earnings would benefit from a
reduction in interest expense but our common stock outstanding
would be increased. If we paid a premium to induce such
conversion, our earnings could include an additional charge.
Further, the trading price of our common stock has been and is
likely to continue to be highly volatile and could be subject to
wide fluctuations. Such fluctuations could impact our decision
or ability to utilize the equity markets as a potential source
of our funding needs in the future.
|
|
Item 4.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our
periodic reports to the Securities and Exchange Commission
(SEC) is recorded, processed, summarized and
reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and
communicated to our management, including the Chief Executive
Officer and the Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure, based on
the definition of disclosure controls and procedures
in
Rule 13a-15(e)
and
Rule 15d-15(e)
under the Securities Exchange Act of 1934. In designing and
evaluating the disclosure controls and procedures, management
recognizes that any disclosure controls and procedures, no
matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures.
We carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and
procedures as of September 30, 2007. Based on the
foregoing, our Chief Executive Officer and our Chief Financial
Officer concluded that our disclosure controls and procedures
were effective as of September 30, 2007.
Changes
in Internal Control Over Financial Reporting
During the nine months ended September 30, 2007, we
implemented several significant modules of SAP at our largest
subsidiary and enhanced the version of SAP being used at another
subsidiary. This began another phase of a
35
multi-year program to implement a fully integrated suite of SAP
application software on a company-wide basis. The implementation
of an enterprise resource planning system represents a change in
our internal control over financial reporting. Therefore, as
appropriate, we have modified the design and documentation of
internal control processes and procedures relating to the new
system to supplement and complement existing internal control
over financial reporting. Post-implementation reviews are being
conducted by management to test whether the internal controls
surrounding the system implementation processes, key
applications, and the financial close process were properly
designed and are operating effectively to prevent or detect
material financial statement errors. Although management
believes internal controls have been maintained or enhanced by
the systems implemented, there is a risk that deficiencies may
exist and not yet be identified that could constitute
significant deficiencies or in the aggregate, a material
weakness. Management will complete our evaluation and testing of
the internal control changes as of December 31, 2007.
PART II.
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
Information about legal proceedings is set forth in Note 14
to the Consolidated Financial Statements included in this
quarterly report.
RISK
FACTORS THAT MAY AFFECT FUTURE OPERATING PERFORMANCE
The factors discussed below are cautionary statements that
identify important factors that could cause actual results to
differ materially from those anticipated by the forward-looking
statements contained in this report. For more information
regarding the forward-looking statements contained in this
report, see the introductory paragraph to Part I,
Item 2 of this quarterly report. You should carefully
consider the risks and uncertainties described below, together
with all of the other information included in this quarterly
report, in considering our business and prospects. The risks and
uncertainties described below are not the only ones facing
Amkor. Additional risks and uncertainties not presently known to
us also may impair our business operations. The occurrence of
any of the following risks could affect our business, financial
condition, results of operations or cash flows.
The
matters relating to the Special Committees review of our
historical stock option granting practices and the restatement
of our consolidated financial statements has resulted in
expanded litigation and regulatory proceedings against us and
may result in future litigation, which could have a material
adverse effect on us.
On July 24, 2006, we established a Special Committee,
consisting of independent members of the Board of Directors, to
conduct a review of our historical stock option granting
practices during the period from our initial public offering on
May 1, 1998 through June 30, 2006. As previously
disclosed, the Special Committee identified a number of
occasions on which the measurement date used for financial
accounting and reporting purposes for stock options granted to
certain of our employees was different from the actual grant
date. To correct these accounting errors, we amended our Annual
Report on
Form 10-K
for the year ended December 31, 2005 and our quarterly
report on
Form 10-Q
for the three months ended March 31, 2006, to restate our
financial information from 1998 through March 31, 2006. The
review of our historical stock option granting practices,
related activities and the resulting restatements, required us
to incur substantial expenses for legal, accounting, tax and
other professional services and diverted our managements
attention from our business and could in the future adversely
affect our business, financial condition, results of operations
and cash flows.
Our historical stock option granting practices and the
restatement of our prior financial statements have exposed us to
greater risks associated with litigation and regulatory
proceedings. As described in Note 14 to our Consolidated
Financial Statements, the complaints in several of our existing
litigation matters were subsequently amended to include
allegations relating to stock option grants. In addition, the
scope of the existing SEC investigation that began in August
2005 has been expanded to include an investigation into our
historical stock option grant practices. We cannot assure you
that this litigation, the SEC investigation or any future
litigation or regulatory action will result in the same
conclusions reached by the Special Committee. The conduct and
resolution
36
of these matters will be time consuming, expensive and
distracting from the conduct of our business. Furthermore, if we
are subject to adverse findings in any of these matters, we
could be required to pay damages or penalties or have other
remedies imposed upon us which could have a material adverse
effect on our business, financial condition, results of
operations and cash flows.
Pending
SEC Investigation The Pending SEC Investigation
Could Adversely Affect Our Business and the Trading Price of Our
Securities.
In August 2005, the SEC issued a formal order of investigation
regarding certain activities with respect to Amkor securities.
We previously announced that the primary focus of the
investigation appears to be activities during the period from
June 2003 to July 2004. We believe that the investigation in
part relates to transactions in Amkors securities by
certain individuals, and that the investigation may in part
relate to whether tipping with respect to trading in Amkor
securities occurred. The matters at issue involve activities
with respect to Amkor securities during the subject period by
certain insiders or former insiders and persons or entities
associated with them, including activities by or on behalf of
certain current and former members of the Board of Directors and
Amkors Chief Executive Officer. In late 2006, our former
general counsel, whose employment with us terminated in March of
2005, was indicted by the United States Attorneys Office
for the Eastern District of Pennsylvania for violation of
securities laws, on charges that the former general counsel
traded in Amkor securities on the basis of material non-public
information. In October 2007, a jury convicted the former
general counsel on those charges. In April 2007, the SEC filed a
civil action against our former general counsel based on
substantially the same allegations as contained in the
indictment.
In July 2006, the Board of Directors established a Special
Committee to review Amkors historical stock option
practices and informed the SEC of these efforts. The SEC
informed us in 2006 that it expanded the scope of its
investigation and has requested that Amkor provide documentation
related to these matters. We have cooperated fully with the SEC
on the formal investigation and the informal inquiry that
preceded it. We cannot predict the outcome of the investigation.
In the event that the investigation leads to SEC action against
any current or former officer or director of Amkor, or Amkor
itself, our business (including our ability to complete
financing transactions) or the trading price of our securities
may be adversely impacted. In addition, if the SEC investigation
continues for a prolonged period of time, it may have the same
impact regardless of the ultimate outcome of the investigation.
Fluctuations
in Operating Results and Cash Flows Our Operating
Results and Cash Flows Have Varied and May Vary Significantly as
a Result of Factors That We Cannot Control.
Many factors could materially and adversely affect our net
sales, gross profit, operating results and cash flows, or lead
to significant variability of quarterly or annual operating
results. Our profitability and ability to generate cash from
operations is principally dependent upon demand for
semiconductors, the utilization of our capacity, semiconductor
package mix, the average selling price of our services and our
ability to control our costs including labor, material, overhead
and financing costs.
Our operating results and cash flows have varied significantly
from period to period. Our net sales, gross margins, operating
income and cash flows have historically fluctuated significantly
as a result of many of the following factors, for which we have
little or no control over and which we expect to continue to
impact our business:
|
|
|
|
|
Fluctuation in demand for semiconductors and conditions in the
semiconductor industry;
|
|
|
|
changes in our capacity utilization;
|
|
|
|
changes in average selling prices;
|
|
|
|
changes in the mix of semiconductor packages;
|
|
|
|
evolving package and test technology;
|
|
|
|
absence of backlog and the short-term nature of our
customers commitments and the impact of these factors on
the timing and volume of orders relative to our production
capacity;
|
37
|
|
|
|
|
changes in costs, availability and delivery times of raw
materials and components;
|
|
|
|
changes in labor costs to perform our services;
|
|
|
|
the timing of expenditures in anticipation of future orders;
|
|
|
|
changes in effective tax rates;
|
|
|
|
the availability and cost of financing;
|
|
|
|
intellectual property transactions and disputes;
|
|
|
|
high leverage and restrictive covenants;
|
|
|
|
warranty and product liability claims;
|
|
|
|
costs associated with litigation judgments and settlements;
|
|
|
|
international events or environmental or natural events, such as
earthquakes, that impact our operations;
|
|
|
|
difficulties integrating acquisitions; and
|
|
|
|
our ability to attract qualified employees to support our
geographic expansion.
|
We have historically been unable to accurately predict the
impact of these factors upon our results for a particular
period. These factors, as well as the factors set forth below
which have not significantly impacted our recent historical
results, may impair our future business operations and may
materially and adversely affect our net sales, gross profit,
operating results and cash flows, or lead to significant
variability of quarterly or annual operating results:
|
|
|
|
|
loss of key personnel or the shortage of available skilled
workers;
|
|
|
|
rescheduling and cancellation of large orders; and
|
|
|
|
fluctuations in our manufacturing yields.
|
Dependence
on the Highly Cyclical Semiconductor and Electronic Products
Industries We Operate in Volatile Industries, and
Industry Downturns Harm Our Performance.
Our business is tied to market conditions in the semiconductor
industry, which is cyclical by nature. The semiconductor
industry has experienced significant, and sometimes prolonged,
downturns. Because our business is, and will continue to be,
dependent on the requirements of semiconductor companies for
subcontracted packaging and test services, any downturn in the
semiconductor industry or any other industry that uses a
significant number of semiconductor devices, such as consumer
electronic products, telecommunication devices, or computing
devices could have a material adverse effect on our business and
operating results. If industry conditions deteriorate, we could
suffer significant losses, as we have in the past, which could
materially impact our business, results of operations and
financial condition.
High
Fixed Costs Due to Our High Percentage of Fixed
Costs, We Will Be Unable to Maintain Our Gross Margin at Past
Levels if We Are Unable to Achieve Relatively High Capacity
Utilization Rates.
Our operations are characterized by relatively high fixed costs.
Our profitability depends in part not only on pricing levels for
our products and services, but also on the utilization rates for
our testing and packaging equipment, commonly referred to as
capacity utilization rates. In particular, increases
or decreases in our capacity utilization rates can significantly
affect gross margins since the unit cost of packaging and test
services generally decreases as fixed costs are allocated over a
larger number of units. In periods of low demand, we experience
relatively low capacity utilization rates in our operations,
which lead to reduced margins during that period. From time to
time we have experienced lower than optimum utilization rates in
our operations due to a decline in worldwide demand for our
packaging and test services. This can lead to significantly
reduced margins during that period. Although our capacity
utilization rates at times have been strong, we cannot assure
you that we will be able to achieve or maintain relatively high
capacity utilization rates, and if we fail to do so, our gross
margins may
38
decrease. If our gross margins decrease, our results of
operations and financial condition could be materially adversely
affected.
In addition, our fixed operating costs have increased in part as
a result of our efforts to expand our capacity through
significant capital additions. In the event that forecasted
customer demand for which we have made and, on a more limited
basis, expect to make advance capital additions does not
materialize, our sales may not adequately cover our substantial
fixed costs resulting in reduced profit levels or causing
significant losses, both of which may adversely impact our
liquidity, results of operations and financial condition.
Additionally, we could suffer significant losses if current
industry conditions deteriorate, which could materially impact
our business including our liquidity.
Guidance
Our Failure to Meet Our Guidance or Analyst Projections Could
Adversely Impact the Trading Prices of Our
Securities.
We periodically provide guidance to investors with respect to
certain financial information for future periods. Securities
analysts also periodically publish their own projections with
respect to our future operating results. As discussed above
under Fluctuations in Operating Results and Cash
Flows Our Operating Results and Cash Flows Have
Varied and May Vary Significantly as a Result of Factors That We
Cannot Control, our operating results and cash flows vary
significantly and are difficult to accurately predict. To the
extent we fail to meet or exceed our own guidance or the analyst
projections for any reason, the trading prices of our securities
may be adversely impacted. Moreover, even if we do meet or
exceed that guidance or those projections, the analysts and
investors may not react favorably, and the trading prices of our
securities may be adversely impacted.
Declining
Average Selling Prices The Semiconductor Industry
Places Downward Pressure on the Prices of Our
Products.
Prices for packaging and test services have generally declined
over time. Historically, we have been able to partially offset
the effect of price declines by successfully developing and
marketing new packages with higher prices, such as advanced
leadframe and laminate packages, by negotiating lower prices
with our material vendors, recovering material cost increases
from our customers, and by driving engineering and technological
changes in our packaging and test processes which resulted in
reduced manufacturing costs. We expect general downward pressure
on average selling prices for our packaging and test services in
the future. If we are unable to offset a decline in average
selling prices, including developing and marketing new packages
with higher prices, reducing our purchasing costs, recovering
more of our material cost increases from our customers and
reducing our manufacturing costs, our future operating results
will suffer.
Decisions
by Our IDM Customers to Curtail Outsourcing May Adversely Affect
Our Business.
Historically, we have been dependent on the trend in outsourcing
of packaging and test services by integrated device
manufacturers (IDM). Our IDM customers continually
evaluate the outsourced services against their own in-house
packaging and test services. As a result, at any time, and for a
variety of reasons, IDMs may decide to shift some or all of
their outsourced packaging and test services to internally
sourced capacity.
The reasons IDMs may shift their internal capacity include:
|
|
|
|
|
their desire to realize higher utilization of their existing
test and packaging capacity, especially during downturns in the
semiconductor industry;
|
|
|
|
their unwillingness to disclose proprietary technology;
|
|
|
|
their possession of more advanced packaging and test
technologies; and
|
|
|
|
the guaranteed availability of their own packaging and test
capacity.
|
Furthermore, to the extent we continue to limit capacity
commitments for certain customers, these customers may begin to
increase their level of in-house packaging and test
capabilities, which could adversely impact our sales and
profitability and make it more difficult for us to regain their
business when we have available capacity. Any shift
39
or a slowdown in this trend of outsourcing packaging and test
services is likely to adversely affect our business, financial
condition and results of operations.
In a downturn in the semiconductor industry, IDMs may be
especially likely to respond by shifting some outsourced
packaging and test services to internally serviced capacity on a
short term basis. This would have a material adverse effect on
our business, financial condition and results of operations,
especially during a prolonged industry downturn.
High
Leverage and Restrictive Covenants Our Substantial
Indebtedness Could Adversely Affect Our Financial Condition and
Prevent Us from Fulfilling Our Obligations.
We now have, and for the foreseeable future will continue to
have, a significant amount of indebtedness. As of
September 30, 2007, our total debt balance was
$1,803.4 million, of which $161.9 million was
classified as a current liability. In addition, despite current
debt levels, the terms of the indentures governing our
indebtedness allow us or our subsidiaries to incur more debt,
subject to certain limitations. If new debt is added to our
consolidated debt level, the related risks that we now face
could intensify.
Covenants in the agreements governing our existing debt, and
debt we may incur in the future, may materially restrict our
operations, including our ability to incur debt, pay dividends,
make certain investments and payments, and encumber or dispose
of assets. The agreements also impose affirmative covenants on
us including financial reporting obligations. In addition,
financial covenants contained in agreements relating to our
existing and future debt could lead to a default in the event
our results of operations do not meet our plans and we are
unable to amend such financial covenants. Bondholder groups may
be aggressive and may attempt to call defaults for technical
violations of covenants that have little or nothing to do with
our financial performance in an effort to extract consent fees
from us or to force a refinancing. A default and acceleration
under one debt instrument may also trigger cross-acceleration
under our other debt instruments. A default or event of default
under one or more of our revolving credit facilities would also
preclude us from borrowing additional funds under such
facilities. An event of default under any debt instrument, if
not cured or waived, could have a material adverse effect on us.
For example, in August 2006 we received a default notice from
the trustees for holders of various tranches of our outstanding
notes for failure to provide certain financial information
required under our indentures. We cured the alleged defaults by
filing our quarterly report for the quarter ended June 30,
2006 within the requisite time period. However, had we not filed
our quarterly report as required, the bondholders may have been
able to accelerate all outstanding amounts under the above
listed notes and trigger acceleration under our other debt
agreements, which could have resulted in a material adverse
effect.
Our substantial indebtedness could:
|
|
|
|
|
Make it more difficult for us to satisfy our obligations with
respect to our indebtedness;
|
|
|
|
increase our vulnerability to general adverse economic and
industry conditions;
|
|
|
|
limit our ability to fund future working capital, capital
expenditures, research and development and other general
corporate requirements;
|
|
|
|
require us to dedicate a substantial portion of our cash flow
from operations to service payments on our debt;
|
|
|
|
limit our flexibility to react to changes in our business and
the industry in which we operate;
|
|
|
|
Place us at a competitive disadvantage to any of our competitors
that have less debt; and
|
|
|
|
limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds.
|
History
of Losses.
Although we achieved net income and positive operating cash flow
in 2006 and the first nine months of 2007, we have had net
losses in four of the previous five years and negative operating
cash flow in several previous
40
quarters. There is no assurance that we will be able to sustain
our current profitability or avoid net losses in the future.
Ability
to Fund Liquidity Needs.
We operate in a capital intensive industry. Servicing our
current and future customers requires that we incur significant
operating expenses and continue to make significant capital
expenditures, which are generally made in advance of the related
revenues and without any firm customer commitments. During 2006,
we had capital additions of $299 million and in 2007 we
currently anticipate making capital additions of approximately
$285 million to $300 million, which estimate is
subject to adjustment based on business conditions. In addition,
we have a significant level of debt, with $1,803.4 million
outstanding at September 30, 2007, $161.9 million of
which is current. The terms of such debt require significant
scheduled principal payments in the coming years, including
$27.7 million due during the remainder of 2007,
$151.5 million due in 2008, $54.6 million due in 2009,
$54.7 million due in 2010, $482.6 million due in 2011
and $1,032.3 million due thereafter. The interest payments
required on our debt are also substantial. For example, in the
nine months ended September 30, 2007, we paid
$89.8 million of interest. (See Part I,
Item 2 Managements Discussion and Analysis of
Financial Condition and Results of Operations
Capital Additions and Contractual Obligations for a
summary of principal and interest payments.) The source of funds
to fund our operations, including making capital expenditures
and servicing principal and interest obligations with respect to
our debt, are cash flows from our operations, current cash and
cash equivalents, borrowings under available debt facilities, or
proceeds from any additional debt or equity financing. As of
September 30, 2007, we had cash and cash equivalents of
$335.0 million and $99.8 million available under our
senior secured revolving credit facility.
We assess our liquidity based on our current expectations
regarding sales, operating expenses, capital spending and debt
service requirements. Based on this assessment, we believe that
our cash flow from operating activities together with existing
cash and cash equivalents and availability under our senior
secured revolving credit facility will be sufficient to fund our
working capital, capital expenditure and debt service
requirements through September 30, 2008. Thereafter, our
liquidity will continue to be affected by, among other things,
the performance of our business, our capital expenditure levels
and our ability to repay debt out of our operating cash flow or
refinance the debt with the proceeds of debt or equity offerings
at or prior to maturity. If our performance or access to the
capital markets differs materially from our expectations, our
liquidity may be adversely impacted.
If we fail to generate the necessary net income or operating
cash flows to meet the funding needs of our business beyond
September 30, 2008 due to a variety of factors, including
the cyclical nature of the semiconductor industry and the other
factors discussed in this Risk Factors section, our
liquidity would be adversely affected. We would consider taking
a variety of actions, including: attempting to reduce our high
fixed costs (for example, closing facilities and reducing the
size of our work force), curtailing or reducing planned capital
additions, raising additional equity, borrowing additional
funds, refinancing existing indebtedness or taking other
actions. There can be no assurance, however, that we will be
able to successfully take any of these actions, including
adjusting our expenses sufficiently or in a timely manner, or
raising additional equity, or increasing borrowings or
completing refinancings on any terms or on terms that are
acceptable to us. Our inability to take these actions as and
when necessary would materially adversely affect our liquidity,
results of operations and financial condition.
Absence
of Backlog The Lack of Contractually Committed
Customer Demand May Adversely Affect Our Sales.
Our packaging and test business does not typically operate with
any material backlog. Our quarterly net sales from packaging and
test services are substantially dependent upon our
customers demand in that quarter. None of our customers
have committed to purchase any significant amount of packaging
or test services or to provide us with binding forecasts of
demand for packaging and test services for any future period, in
any material amount. In addition, our customers often reduce,
cancel or delay their purchases of packaging and test services
for a variety of reasons including industry-wide,
customer-specific and Amkor-related reasons. Recently, our
customers demand for our services has been stable;
however, we cannot predict if this demand trend will continue.
Because a large portion of our costs is fixed and our expense
levels are based in part on our expectations of future revenues,
we may not be able to adjust costs in a timely manner to
compensate for any sales shortfall. If we are unable to do so,
it
41
would adversely affect our margins, operating results, cash
flows and financial condition. If customer demand does not
materialize as anticipated, our net sales, margins, operating
results, cash flows and financial condition will be materially
and adversely affected.
Risks
Associated With International Operations We Depend
on Our Factories and Operations in China, Japan, Korea, the
Philippines, Singapore and Taiwan. Many of Our Customers
and Vendors Operations Are Also Located Outside of the
U.S.
We provide packaging and test services through our factories and
other operations located in the China, Japan, Korea, the
Philippines, Singapore and Taiwan. Moreover, many of our
customers and vendors operations are located outside
the U.S. The following are some of the risks inherent in
doing business internationally:
|
|
|
|
|
regulatory limitations imposed by foreign governments;
|
|
|
|
fluctuations in currency exchange rates;
|
|
|
|
political, military and terrorist risks;
|
|
|
|
disruptions or delays in shipments caused by customs brokers or
government agencies;
|
|
|
|
unexpected changes in regulatory requirements, tariffs, customs,
duties and other trade barriers;
|
|
|
|
difficulties in staffing and managing foreign
operations; and
|
|
|
|
potentially adverse tax consequences resulting from changes in
tax laws.
|
Our
Management Information Systems May Prove Inadequate
We Face Risks in Connection With Our Current Project to Install
a New Enterprise Resource Planning System For Our
Business.
We depend on our management information systems for many aspects
of our business. Some of our key software has been developed by
our own programmers and this software may not be easily
integrated with other software and systems. We are implementing
a new enterprise resource planning system to replace many of our
existing systems at significant locations. We face risks in
connection with our current project to install a new enterprise
resource system for our business. These risks include:
|
|
|
|
|
we may face delays in the design and implementation of that
system;
|
|
|
|
the cost of the system may exceed our plans and
expectations; and
|
|
|
|
such system may damage our ability to process transactions or
harm our control environment.
|
Our business will be materially and adversely affected if our
management information systems are disrupted or if we are unable
to improve, upgrade, integrate or expand upon our systems,
particularly in light of our intention to implement a new
enterprise resource planning system.
Difficulties
Expanding and Evolving Our Operational Capabilities
We Face Challenges as We Integrate New and Diverse Operations
and Try to Attract Qualified Employees to Support Our
Operations.
We have experienced, and expect to continue to experience,
growth in the scope and complexity of our operations. For
example, each business we have acquired had, at the time of
acquisition, multiple systems for managing its own production,
sales, inventory and other operations. Migrating these
businesses to our systems typically is a slow, expensive process
requiring us to divert significant amounts of resources from
multiple aspects of our operations. This growth has strained our
managerial, financial, plant operations and other resources.
Future expansions may result in inefficiencies as we integrate
new operations and manage geographically diverse operations. Our
success depends to a significant extent upon the continued
service of our key senior management and technical personnel,
any of whom may be difficult to replace. Competition for
qualified employees is intense, and our business could be
adversely affected by the loss of the services of any of our
existing key personnel, including senior management, as a result
of competition or for any other reason. We evaluate our
management team and engage in long-term succession planning in
order to ensure orderly replacement of key personnel. We cannot
assure you that we will be successful in these efforts or in
hiring and properly training sufficient numbers of
42
qualified personnel and in effectively managing our growth. Our
inability to attract, retain, motivate and train qualified new
personnel could have a material adverse effect on our business.
Dependence
on Materials and Equipment Suppliers Our Business
May Suffer If The Cost, Quality or Supply of Materials or
Equipment Changes Adversely.
We obtain from various vendors the materials and equipment
required for the packaging and test services performed by our
factories. We source most of our materials, including critical
materials such as leadframes, laminate substrates and gold wire,
from a limited group of suppliers. Furthermore, we purchase the
majority of our materials on a purchase order basis. From time
to time, we enter into supply agreements, generally up to one
year in duration, to guarantee supply to meet projected demand.
Our business may be harmed if we cannot obtain materials and
other supplies from our vendors in a timely manner, in
sufficient quantities, in acceptable quality or at competitive
prices.
We need to purchase new test and packaging equipment if we
decide to expand our operations (sometimes in anticipation of
expected market demand), to manufacture some new types of
packaging, perform some different testing or to replace
equipment that breaks down or wears out. From time to time,
increased demand for new equipment may cause lead times to
extend beyond those normally required by equipment vendors. For
example, in the past, increased demand for equipment caused some
equipment suppliers to only partially satisfy our equipment
orders in the normal lead time frame or increase prices during
market upturns for the semiconductor industry. The
unavailability of equipment or failures to deliver equipment
could delay implementation of our future expansion plans and
impair our ability to meet customer orders. If we are unable to
implement our future expansion plans or meet customer orders, we
could lose potential and existing customers. Generally, we do
not enter into binding, long-term equipment purchase agreements
and we acquire our equipment on a purchase order basis, which
exposes us to substantial risks. For example, changes in foreign
currency exchange rates could result in increased prices for
equipment purchased by us, which could have a material adverse
effect on our results of operations.
We are a large buyer of gold and other commodity materials
including substrates and copper. The price of gold and other
commodities used in our business fluctuate. Historically, we
have been able to partially offset the effect of commodity price
increases through price adjustments to some customers and
changes in our product designs. Significant price increases may
adversely impact our gross margin in future quarters to the
extent we are unable to pass along past or future commodity
price increases to our customers.
Loss
of Customers The Loss of Certain Customers May Have
a Significant Adverse Effect on the Operations and Financial
Results.
The loss of a large customer or disruption of our strategic
partnerships or other commercial arrangements may result in a
decline in our sales and profitability. Although we have over
300 customers, we have derived and expect to continue to derive
a large portion of our revenues from a small group of customers
during any particular period due in part to the concentration of
market share in the semiconductor industry. Our five largest
customers together accounted for approximately 29.7%, 27.9% and
25.2% of our net sales in the first nine months of 2007, and the
years ended December 31, 2006 and 2005, respectively. No
customer accounts for more than 10% of our net sales.
The demand for our services from each customer is directly
dependent upon that customers level of business activity,
which could vary significantly from year to year. The loss of a
large customer may adversely affect our sales and profitability.
Our key customers typically operate in the cyclical
semiconductor business and, in the past, order levels have
varied significantly from period to period based on a number of
factors. Our business is likely to remain subject to this
variability in order levels, and we cannot assure you that these
key customers or any other customers will continue to place
orders with us in the future at the same levels as in past
periods. The loss of one or more of our significant customers,
or reduced orders by any one of them, and our inability to
replace these customers or make up for such orders could reduce
our profitability. For example, our facility in Iwate, Japan, is
primarily dedicated to a single customer, Toshiba Corporation.
If we were to lose Toshiba as a customer or if it were to
materially reduce its business with us, it could be difficult
for us to find one or more new customers to utilize the
capacity, which could have a material adverse effect on our
operations and financial results.
43
Capital
Additions We Believe We Need To Make Substantial
Capital Additions, Which May Adversely Affect Our Business If
Our Business Does Not Develop As We Expect.
We believe that our business requires us to make significant
capital additions in order to capitalize on what we believe is
an overall trend to outsource packaging and test services. The
amount of capital additions will depend on several factors,
including the performance of our business, our assessment of
future industry and customer demand, our capacity utilization
levels and availability, our liquidity position and the
availability of financing. Our ongoing capital addition
requirements may strain our cash and short-term asset balances,
and we expect that depreciation expense and factory operating
expenses associated with our recent capital additions to
increase production capacity will put downward pressure on our
gross margin, at least over the near term.
Furthermore, if we cannot generate or borrow additional funds to
pay for capital additions as well as research and development
activities, our growth prospects and future profitability may be
adversely affected. Our ability to obtain external financing in
the future is subject to a variety of uncertainties, including:
|
|
|
|
|
our future financial condition, results of operations and cash
flows;
|
|
|
|
general market conditions for financing activities by
semiconductor companies; and
|
|
|
|
economic, political and other global conditions.
|
The lead time needed to order, install and put into service
various capital additions is often significant, and as a result
we often need to commit to capital additions in advance of our
receipt of firm orders or advance deposits based on our view of
anticipated future demand with only very limited visibility.
Although we seek to limit our exposure in this regard, in the
past we have from time to time expended significant capital for
additions for which the anticipated demand did not materialize
for a variety of reasons, many of which were outside of our
control. To the extent this occurs in the future, our margins,
liquidity, results of operations and financial condition could
be materially adversely affected.
Impairment
Charges Any Impairment Charges Required Under
GAAP May Have a Material Adverse Effect on Our Net
Income.
Under GAAP, we review our long-lived assets for impairment when
events or changes in circumstances indicate the carrying value
may not be recoverable. In addition, goodwill and other
intangible assets with indefinite lives are tested for
impairment at least annually. We may be required in the future
to record a significant charge to earnings in our financial
statements during the period in which any impairment of our
long-lived assets is determined. Such charges have a significant
adverse impact on our results of operations and financial
condition.
Increased
Litigation Incident to Our Business Our Business May
Suffer as a Result of Our Involvement in Various
Lawsuits.
We are currently a party to various legal proceedings, including
those described in Note 14 to the Consolidated Financial
Statements included in the quarterly report. For example, we are
engaged in an arbitration proceeding entitled Tessera,
Inc. v. Amkor Technology, Inc. We were also named as a
party in a purported securities class action suit entitled
Nathan Weiss et al. v. Amkor Technology, Inc. et al.
(and several similar cases which have now been
consolidated), and in purported shareholder derivative lawsuits
entitled Scimeca v. Kim, et al., Khan v. Kim, et
al. and Feldgus v. Kim, et al. If an unfavorable ruling
or outcome were to occur in arbitration or litigation, there
exists the possibility of a material adverse impact on our
results of operations, financial condition or cash flows. An
unfavorable ruling or outcome could also have a negative impact
on the trading price of our securities. Our evaluation of the
potential impact from the legal proceedings referred to in this
quarterly report on our financial condition, results of
operations or cash flows could change in the future.
We
Could Suffer Adverse Tax and Other Financial Consequences if
Taxing Authorities Do Not Agree with Our Interpretation of
Applicable Tax Laws.
Our corporate structure and operations are based, in part, on
interpretations of various tax laws, including withholding tax
and other relevant laws of applicable taxing jurisdictions. From
time to time, the taxing authorities
44
of the relevant jurisdictions may conduct examinations of our
income tax returns and other regulatory filings. We cannot
assure you that the taxing authorities will agree with our
interpretations. To the extent they do not agree, we may seek to
enter into settlements with the taxing authorities which require
significant payments or otherwise adversely affect our results
of operations or financial condition. We may also appeal the
taxing authorities determinations to the appropriate
governmental authorities, but we can not be sure we will
prevail. If we do not prevail, we may have to make significant
payments or otherwise record charges (or reduce tax assets) that
adversely affect our results of operations or financial
condition.
For example, the Internal Revenue Service (IRS)
conducted examinations of our U.S. federal income tax
returns in prior years which resulted in various adjustments,
including reductions in our U.S. net operating loss
carry-forwards. Future examinations by the taxing authorities in
the United States or other jurisdictions may result in
additional adverse tax consequences.
Rapid
Technological Change Our Business Will Suffer If We
Cannot Keep Up With Technological Advances in Our
Industry.
The complexity and breadth of semiconductor packaging and test
services are rapidly increasing. As a result, we expect that we
will need to offer more advanced package designs in order to
respond to competitive industry conditions and customer
requirements. Our success depends upon our ability to acquire,
develop and implement new manufacturing processes and package
design technologies and tools. The need to develop and maintain
advanced packaging capabilities and equipment could require
significant research and development and capital expenditures
and acquisitions in future years. In addition, converting to new
package designs or process methodologies could result in delays
in producing new package types, which could adversely affect our
ability to meet customer orders and adversely impact our
business.
Technological advances also typically lead to rapid and
significant price erosion and may make our existing products
less competitive or our existing inventories obsolete. If we
cannot achieve advances in package design or obtain access to
advanced package designs developed by others, our business could
suffer.
Packaging
and Test The Packaging and Test Process Is Complex
and Our Production Yields and Customer Relationships May Suffer
from Defects in the Services We Provide.
Semiconductor packaging and test are complex processes that
require significant technological and process expertise. The
packaging process is complex and involves a number of precise
steps. Defective packages primarily result from:
|
|
|
|
|
contaminants in the manufacturing environment;
|
|
|
|
human error;
|
|
|
|
equipment malfunction;
|
|
|
|
changing processes to address environmental requirements;
|
|
|
|
defective raw materials; or
|
|
|
|
defective plating services.
|
Testing is also complex and involves sophisticated equipment and
software. Similar to most software programs, these software
programs are complex and may contain programming errors or
bugs. The testing equipment is also subject to
malfunction. In addition, the testing process is subject to
operator error by our employees who operate our testing
equipment and related software.
These and other factors have, from time to time, contributed to
lower production yields. They may also do so in the future,
particularly as we expand our capacity or change our processing
steps. In addition, to be competitive we must continue to expand
our offering of packages. Our production yields on new packages
typically are significantly lower than our production yields on
our more established packages.
45
Our failure to maintain high standards or acceptable production
yields, if significant and prolonged, could result in loss of
customers, increased costs of production, delays, substantial
amounts of returned goods and claims by customers relating
thereto. Any of these problems could have a material adverse
effect on our business, financial condition and results of
operations.
In addition, in line with industry practice, new customers
usually require us to pass a lengthy and rigorous qualification
process that may take several months, at a significant cost to
the customer. If we fail to qualify packages with potential
customers or customers with which we have recently become
qualified, our operating results and financial condition could
be adversely affected.
Competition
We Compete Against Established Competitors in the Packaging and
Test Business as Well as Internal Customer
Capabilities.
The subcontracted semiconductor packaging and test market is
very competitive. We face substantial competition from
established packaging and test service providers primarily
located in Asia, including companies with significant processing
capacity, financial resources, research and development
operations, marketing and other capabilities. These companies
also have established relationships with many large
semiconductor companies that are our current or potential
customers.
We also face competition from the internal capabilities and
capacity of many of our current and potential IDM customers.
In addition, we may in the future have to compete with a number
of companies that may enter the market and with companies that
may offer new or emerging technologies that compete with our
products and services.
We cannot assure you that we will be able to compete
successfully in the future against our existing or potential
competitors or that our customers will not rely on internal
sources for packaging and test services, or that our business,
financial condition and results of operations will not be
adversely affected by such increased competition.
Environmental
Regulations Future Environmental Regulations Could
Place Additional Burdens on Our Manufacturing
Operations.
The semiconductor packaging process uses chemicals, materials
and gases and generates byproducts that are subject to extensive
governmental regulations. For example, at our foreign facilities
we produce liquid waste when silicon wafers are diced into chips
with the aid of diamond saws, then cooled with running water. In
addition, semiconductor packages have historically utilized
metallic alloys containing lead (Pb) within the interconnect
terminals typically referred to as leads, pins or balls.
Federal, state and local regulations in the U.S., as well as
international environmental regulations, impose various controls
on the storage, handling, discharge and disposal of chemicals
used in our production processes and on the factories we occupy
and are increasingly imposing restrictions on the materials
contained in semiconductor products.
Increasingly, public attention has focused on the environmental
impact of semiconductor operations and the risk to neighbors of
chemical releases from such operations and to the materials
contained in semiconductor products. For example, the European
Unions recently enacted Directives on Waste Electrical and
Electronic Equipment (WEEE), and Restriction of Use
of Certain Hazardous Substances (RoHS) impose strict
restrictions on the use of lead and other hazardous substances
in electrical and electronic equipment. WEEE and RoHS became
effective on July 1, 2006. In response to these directives,
we have implemented changes in a number of our manufacturing
processes in an effort to achieve RoHS compliance across all of
our package types. Complying with existing and future
environmental regulations may impose upon us the need for
additional capital equipment or other process requirements,
restrict our ability to expand our operations, disrupt our
operations, subject us to liability or cause us to curtail our
operations.
Intellectual
Property We May Become Involved in Intellectual
Property Litigation.
We maintain an active program to protect our investment in
technology by augmenting and enforcing our intellectual property
rights. Intellectual property rights that apply to our various
products and services include patents, copyrights, trade secrets
and trademarks. We have filed and obtained a number of patents
in the U.S. and
46
abroad the duration of which varies depending on the
jurisdiction in which the patent is filed. While our patents are
an important element of our intellectual property strategy and
our success as a whole, we are not materially dependent on any
one patent or any one technology. We expect to continue to file
patent applications when appropriate to protect our proprietary
technologies, but we cannot assure you that we will receive
patents from pending or future applications.
Any patents we do obtain may be challenged, invalidated or
circumvented and may not provide meaningful protection or other
commercial advantage to us. The semiconductor industry is
characterized by frequent claims regarding patent and other
intellectual property rights. If any third party makes an
enforceable infringement claim against us or our customers, we
could be required to:
|
|
|
|
|
discontinue the use of certain processes;
|
|
|
|
cease to provide the services at issue;
|
|
|
|
pay substantial damages;
|
|
|
|
develop non-infringing technologies; or
|
|
|
|
acquire licenses to the technology we had allegedly infringed.
|
We may need to enforce our patents or other intellectual
property rights or defend ourselves against claimed infringement
of the rights of others through litigation, which could result
in substantial cost and diversion of our resources. Furthermore,
if we fail to obtain necessary licenses, our business could
suffer. We are currently involved in three legal proceedings
involving the acquisition of intellectual property rights, the
enforcement of our existing intellectual property rights or the
enforcement of the intellectual property rights of others. We
refer you to the matters of Tessera, Inc. v. Amkor
Technology, Inc., Amkor Technology, Inc. v.
Motorola, Inc., and Amkor Technology, Inc. v. Carsem, et
al., which are described in more detail in Note 14 to
the Consolidated Financial Statements included in this quarterly
report. Unfavorable outcomes in one or more of these matters
could result in significant liabilities and could have a
material adverse effect on our financial condition, results of
operations or cash flows. An unfavorable ruling or outcome could
also have a negative impact on the trading price of our
securities. The estimate of the potential impact from the legal
proceedings referred to in this report on our financial
condition, results of operations, or cash flows could change in
the future.
Fire,
Flood or Other Calamity With Our Operations
Conducted in a Limited Number of Facilities, a Fire, Flood or
Other Calamity at one of Our Facilities Could Adversely Affect
Us.
We conduct our packaging and test operations at a limited number
of facilities. Significant damage or other impediments to any of
these facilities, whether as a result of fire, weather, disease,
civil strife, industrial strikes, breakdowns of equipment,
difficulties or delays in obtaining materials and equipment,
natural disasters, terrorist incidents, industrial accidents or
other causes could temporarily disrupt or even shut down our
operations, which would have a material adverse effect on our
business, financial condition and results of operations. In the
event of such a disruption or shutdown, we may be unable to
reallocate production to other facilities in a timely or
cost-effective manner (if at all) and may not have sufficient
capacity to service customer demands in our other facilities.
For example, our operations in Asia are vulnerable to regional
typhoons that can bring with them destructive winds and
torrential rains, which could in turn cause plant closures and
transportation interruptions. In addition, some of the processes
that we utilize in our operations place us at risk of fire and
other damage. For example, highly flammable gases are used in
the preparation of wafers holding semiconductor devices for
flip-chip packaging. While we maintain insurance policies for
various types of property, casualty and other risks, we do not
carry insurance for all the above referred risks and with regard
to the insurance we do maintain, we cannot assure you that it
would be sufficient to cover all of our potential losses.
47
SARS,
Avian Flu and Other Contagious Diseases Any
Recurrence of SARS or Outbreak of Avian Flu or Other Contagious
Disease May Have an Adverse Effect on the Economies and
Financial Markets of Certain Asian Countries and May Adversely
Affect Our Results of Operations.
In the first half of 2003, various countries encountered an
outbreak of severe acute respiratory syndrome, or SARS, which is
a highly contagious form of atypical pneumonia. In addition,
there have been outbreaks of avian flu and other contagious
diseases in various parts of the world. There is no guarantee
that an outbreak of SARS, avian flu or other contagious disease
will not occur again in the future (and maybe with much more
widespread and devastating effects) and that any such future
outbreak of SARS, avian flu or other contagious disease, or the
measures taken by the governments of the affected countries
against such potential outbreaks, will not seriously disrupt our
production operations or those of our suppliers and customers,
including by resulting in quarantines or closures. In the event
of such a facility quarantine or closure, if we were unable to
quickly identify alternate manufacturing facilities, this would
have a material adverse effect on our financial condition and
results of operations, as would the inability of our suppliers
to continue to supply us and our customers continuing to
purchase from us.
Continued
Control By Existing Stockholders Mr. James J.
Kim and Members of His Family Can Substantially Control The
Outcome of All Matters Requiring Stockholder
Approval.
As of September 30, 2007, Mr. James J. Kim, our Chief
Executive Officer and Chairman of the Board, and certain Family
trusts beneficially owned approximately 45% of our outstanding
common stock. This percentage includes beneficial ownership of
the securities underlying our 6.25% convertible subordinated
notes due 2013. Mr. James J. Kims family, acting
together, have the ability to effectively determine matters
(other than interested party transactions) submitted for
approval by our stockholders by voting their shares, including
the election of all of the members of our Board of Directors.
There is also the potential, through the election of members of
our Board of Directors, that Mr. Kims family could
substantially influence matters decided upon by the Board of
Directors. This concentration of ownership may also have the
effect of impeding a merger, consolidation, takeover or other
business consolidation involving us, or discouraging a potential
acquirer from making a tender offer for our shares, and could
also negatively affect our stocks market price or decrease
any premium over market price that an acquirer might otherwise
pay.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
At our Annual Meeting of Stockholders held on August 6,
2007, the following proposals were adopted by the margins
indicated.
1. Election of a Board of Directors to hold office until
the next Annual Meeting of Stockholders or until their
respective successors have been elected or appointed.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
Voted For
|
|
|
Withheld
|
|
|
James J. Kim
|
|
|
144,065,179
|
|
|
|
25,252,541
|
|
Roger A. Carolin
|
|
|
143,515,786
|
|
|
|
25,801,934
|
|
Winston J. Churchill
|
|
|
107,254,566
|
|
|
|
62,063,154
|
|
John F. Osborne
|
|
|
161,343,852
|
|
|
|
7,973,868
|
|
John T. Kim
|
|
|
144,111,057
|
|
|
|
25,206,663
|
|
Constantine N. Papadakis
|
|
|
138,200,667
|
|
|
|
31,117,053
|
|
James W. Zug
|
|
|
140,212,851
|
|
|
|
29,104,869
|
|
|
|
|
2. |
|
Approval of the 2007 Executive Incentive Bonus Plan. Votes
totaled 149,794,366 for, 1,714,031 against, and 57,038
abstaining, with 17,752,285 broker non-votes. |
|
3. |
|
Approval of the 2007 Equity Incentive Plan. Votes totaled
90,789,793 for, 60,711,329 against, and 64,313 abstaining, with
17,752,285 broker non-votes. |
|
4. |
|
Ratification of the appointment of PricewaterhouseCoopers LLP as
our independent registered public accounting firm for the fiscal
year ending December 31, 2007. Votes totaled 165,351,139
for, 3,920,222 against, and 46,359 abstaining. |
48
Item 5. Other
Information
On November 7, 2007, our Board of Directors adopted amended
and restated bylaws of Amkor (the Bylaws) effective
as of the same date. The Bylaws were amended and restated to
reflect, among other things, the following changes:
|
|
|
|
|
Article I, Section 1.1 (Annual Meetings): This section
was amended to clarify that annual meetings of stockholders may
be held by means of remote communication.
|
|
|
|
Article I, Section 1.2 (Special Meetings): This
section was amended to clarify that special meetings of
stockholders may be held by means of remote communication.
|
|
|
|
Article I, Section 1.3 (Notice of Meetings): This
section was amended to clarify that notice of stockholder
meetings may be given by electronic transmission and, if so
given, the manner in which notice by electronic transmission may
be given.
|
|
|
|
Article I, Section 1.4 (Nominations): This section was
amended to modify the information and timing requirements for
notice of director nominations to be brought before an annual or
special meeting of stockholders. In the case of an annual
meeting, for notice to be timely, it must be delivered not later
than the ninetieth
(90th)
day nor earlier than the one hundred and twentieth
(120th)
day prior to the first anniversary of the preceding years
annual meeting, provided that if the meeting is scheduled more
than thirty (30) days prior to or sixty (60) days
following such anniversary, then notice must be delivered no
later than the tenth
(10th)
day following the earlier of mailing of notice of the meeting or
public announcement thereof. In the case of a special meeting,
where permitted, for notice to be timely, it must be delivered
no later than the tenth
(10th)
day following the earlier of mailing of notice of the meeting or
public announcement thereof. Additionally, the amended provision
stipulates the information that must be included in the
stockholders notice of any nominations.
|
|
|
|
Article I, Section 1.5 (Notice of Stockholder Business
(New)): This section was added to stipulate the information and
timing requirements for notice of any business to be brought
before a meeting of stockholders other than nominations for
directors. For stockholder notice of business to be brought
before an annual meeting, to be timely, such notice must be
delivered not later than the ninetieth
(90th)
day nor earlier than the one hundred and twentieth
(120th)
day prior to the first anniversary of the preceding years
annual meeting, provided that if the meeting is scheduled more
than thirty (30) days prior to or sixty (60) days
following such anniversary, then notice must be delivered no
later than the tenth
(10th)
day following the earlier of mailing of notice of the meeting or
public announcement thereof. Additionally, the new provision
stipulates the information that must be included in the
stockholders notice of any business to be brought before a
meeting.
|
|
|
|
Article I, Section 1.6 (Adjournments): This section
was amended to clarify the power of the Chairman and the
stockholders to adjourn a meeting of stockholders.
|
|
|
|
Article I, Section 1.7 (Quorum): This section was
amended to clarify the requisite vote required to adjourn a
meeting of stockholders to the extent that a quorum is not
present.
|
|
|
|
Article I, Section 1.8 (Organization): This section
was amended to clarify the manner and rules pursuant to which
meetings of stockholders will be conducted.
|
|
|
|
Article I, Section 1.10 (Remote Communication (New)):
This section was added to clarify the manner by which
stockholders may participate in a meeting of stockholders by
means of remote communication.
|
|
|
|
Article I, Section 1.11 (Fixing Date for Determination
of Stockholders of Record): This section was amended to clarify
the manner of setting a record date for actions of stockholders
to be taken by written consent.
|
|
|
|
Article I, Section 1.12 (List of Stockholders Entitled
to Vote): This section was amended to modify the manner in which
we shall make available to stockholders the list of Amkors
stockholders in conjunction with a meeting of stockholders.
|
49
|
|
|
|
|
Article II, Section 2.1 (Powers; Number;
Qualifications): This section was amended to clarify the powers
of the board of directors.
|
|
|
|
Article II, Section 2.2 (Election; Resignation;
Vacancies): This section was amended to clarify that directors
shall hold office until
his/her
successor is elected and qualified or until such directors
earlier resignation or removal.
|
|
|
|
Article II, Section 2.4 (Special Meetings): This
section was amended to clarify the persons who may call a
special meeting of the board of directors.
|
|
|
|
Article IV, Section 4.1 (Executive Officers; Election;
Qualifications; Term of Office; Resignation; Removal;
Vacancies): This section was amended to clarify the authority of
the board of directors to appoint executive officers of Amkor,
the standing offices of Amkor unless otherwise determined by the
board of directors and the power of the Chairman and the Chief
Executive Officer, in their respective capacities, to appoint
vice presidents of Amkor.
|
|
|
|
Article V, Section 5.1 (Certificates): This section
was amended to clarify Amkors authority to issue shares of
stock in uncertificated form.
|
|
|
|
Article VII, Section 7.6 (Amendment of Bylaws): This
section was amended to stipulate that the Bylaws may be amended
by an affirmative vote of a majority of the voting power
entitled to vote thereon.
|
The foregoing summary of the Bylaws is not complete and is
qualified in its entirety by reference to the full text of the
Bylaws, a copy of which is filed as Exhibit 3.1 to this
report and incorporated herein by reference.
50
The following exhibits are filed as part of this report:
|
|
|
|
|
Exhibit
|
|
Description of
|
Number
|
|
Exhibit
|
|
|
3
|
.1
|
|
Restated Bylaws, amended and restated as of November 6,
2007.
|
|
10
|
.1
|
|
2007 Executive Incentive Bonus Plan, incorporated by reference
to the Current Report on
Form 8-K
filed with the Commission on August 10, 2007.
|
|
10
|
.2
|
|
2007 Equity Incentive Plan, incorporated by reference to the
Current Report on Form 8-K filed with the Commission on
August 10, 2007.
|
|
12
|
.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
31
|
.1
|
|
Certification of James J. Kim, Chief Executive Officer of Amkor
Technology, Inc., pursuant to Rule 13a 14(a)
under the Securities Exchange Act of 1934.
|
|
31
|
.2
|
|
Certification of Kenneth T. Joyce, Executive Vice President and
Chief Financial Officer of Amkor Technology, Inc., pursuant to
Rule 13a 14(a) under the Securities Exchange
Act of 1934.
|
|
32
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
51
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
AMKOR TECHNOLOGY, INC.
Kenneth T. Joyce
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer, Chief Accounting
Officer and Duly Authorized Officer)
Date: November 8, 2007
52
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
Description of
|
Number
|
|
Exhibit
|
|
|
3
|
.1
|
|
Restated Bylaws, amended and restated as of November 6,
2007.
|
|
10
|
.1
|
|
2007 Executive Incentive Bonus Plan, incorporated by reference
to the Current Report on
Form 8-K
filed with the Commission on August 10, 2007.
|
|
10
|
.2
|
|
2007 Equity Incentive Plan, incorporated by reference to the
Current Report on Form 8-K filed with the Commission on
August 10, 2007.
|
|
12
|
.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
31
|
.1
|
|
Certification of James J. Kim, Chief Executive Officer of Amkor
Technology, Inc., pursuant to Rule 13a 14(a)
under the Securities Exchange Act of 1934.
|
|
31
|
.2
|
|
Certification of Kenneth T. Joyce, Executive Vice President and
Chief Financial Officer of Amkor Technology, Inc., pursuant to
Rule 13a 14(a) under the Securities Exchange
Act of 1934.
|
|
32
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
exv3w1
Exhibit 3.1
RESTATED BYLAWS
OF
AMKOR TECHNOLOGY, INC.
(as of November 6, 2007)
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
ARTICLE I STOCKHOLDERS |
|
|
1 |
|
1.1 |
|
ANNUAL MEETINGS |
|
|
1 |
|
1.2 |
|
SPECIAL MEETINGS |
|
|
1 |
|
1.3 |
|
NOTICE OF MEETINGS |
|
|
1 |
|
1.4 |
|
NOMINATIONS |
|
|
2 |
|
1.5 |
|
NOTICE OF STOCKHOLDER BUSINESS |
|
|
3 |
|
1.6 |
|
ADJOURNMENTS |
|
|
4 |
|
1.7 |
|
QUORUM |
|
|
5 |
|
1.8 |
|
ORGANIZATION |
|
|
5 |
|
1.9 |
|
VOTING; PROXIES |
|
|
6 |
|
1.10 |
|
REMOTE COMMUNICATION |
|
|
6 |
|
1.11 |
|
FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD |
|
|
7 |
|
1.12 |
|
LIST OF STOCKHOLDERS ENTITLED TO VOTE |
|
|
7 |
|
1.13 |
|
STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING |
|
|
8 |
|
ARTICLE II BOARD OF DIRECTORS |
|
|
8 |
|
2.1 |
|
POWERS; NUMBER; QUALIFICATIONS |
|
|
8 |
|
2.2 |
|
ELECTION; RESIGNATION; REMOVAL; VACANCIES |
|
|
9 |
|
2.3 |
|
REGULAR MEETINGS |
|
|
9 |
|
2.4 |
|
SPECIAL MEETINGS |
|
|
9 |
|
2.5 |
|
TELEPHONIC MEETINGS PERMITTED |
|
|
9 |
|
2.6 |
|
QUORUM; VOTE REQUIRED FOR ACTION |
|
|
9 |
|
2.7 |
|
ORGANIZATION |
|
|
10 |
|
2.8 |
|
BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
|
|
10 |
|
ARTICLE III COMMITTEES |
|
|
10 |
|
3.1 |
|
COMMITTEES |
|
|
10 |
|
3.2 |
|
COMMITTEE RULES |
|
|
10 |
|
ARTICLE IV OFFICERS |
|
|
11 |
|
4.1 |
|
EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS;
TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES |
|
|
11 |
|
ARTICLE V STOCK |
|
|
11 |
|
5.1 |
|
CERTIFICATES |
|
|
11 |
|
5.2 |
|
LOST, STOLEN OR DESTROYED STOCK CERTIFICATES;
ISSUANCE OF NEW CERTIFICATES |
|
|
12 |
|
-i-
TABLE OF CONTENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
ARTICLE VI INDEMNIFICATION |
|
|
12 |
|
6.1 |
|
THIRD PARTY ACTIONS |
|
|
12 |
|
6.2 |
|
ACTIONS BY OR IN THE RIGHT OF THE CORPORATION |
|
|
12 |
|
6.3 |
|
SUCCESSFUL DEFENSE |
|
|
13 |
|
6.4 |
|
DETERMINATION OF CONDUCT |
|
|
13 |
|
6.5 |
|
PAYMENT OF EXPENSES IN ADVANCE |
|
|
13 |
|
6.6 |
|
INDEMNITY NOT EXCLUSIVE |
|
|
13 |
|
6.7 |
|
INSURANCE INDEMNIFICATION |
|
|
13 |
|
6.8 |
|
THE CORPORATION |
|
|
14 |
|
6.9 |
|
EMPLOYEE BENEFIT PLANS |
|
|
14 |
|
6.10 |
|
INDEMNITY FUND |
|
|
14 |
|
6.11 |
|
INDEMNIFICATION OF OTHER PERSONS |
|
|
14 |
|
6.12 |
|
SAVINGS CLAUSE |
|
|
15 |
|
6.13 |
|
CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES |
|
|
15 |
|
ARTICLE VII MISCELLANEOUS |
|
|
15 |
|
7.1 |
|
FISCAL YEAR |
|
|
15 |
|
7.2 |
|
SEAL |
|
|
15 |
|
7.3 |
|
WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS,
DIRECTORS AND COMMITTEES |
|
|
15 |
|
7.4 |
|
INTERESTED DIRECTORS; QUORUM |
|
|
16 |
|
7.5 |
|
FORM OF RECORDS |
|
|
16 |
|
7.6 |
|
AMENDMENT OF BYLAWS |
|
|
16 |
|
-ii-
RESTATED BYLAWS
OF
AMKOR TECHNOLOGY, INC.
ARTICLE I
STOCKHOLDERS
1.1 ANNUAL MEETINGS
An annual meeting of stockholders shall be held for the election of directors at such date,
time and place, either within or without the state of Delaware, as may be designated by resolution
of the Board of Directors from time to time. Any other proper business may be transacted at the
annual meeting. In lieu of holding an annual meeting of stockholders at a designated place, the
Board of Directors may, in its sole discretion, determine that any annual meeting of stockholders
may be held solely by means of remote communication.
1.2 SPECIAL MEETINGS
Special meetings of stockholders for any purpose or purposes may be called at any time by the
Board of Directors, or by a committee of the Board of Directors which has been duly designated by
the Board of Directors and whose powers and authority, as expressly provided in a resolution of the
Board of Directors, include the power to call such meetings. In lieu of holding a special meeting
of stockholders at a designated place, the Board of Directors may, in its sole discretion,
determine that any special meeting of stockholders may be held solely by means of remote
communication.
1.3 NOTICE OF MEETINGS
Whenever stockholders are required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place, date and hour of the meeting, the
means of remote communications, if any, by which stockholders and proxy holders may be deemed to be
present and in person and vote at such meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Unless otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the written notice of any meeting shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting. Notice to stockholders may be given by personal delivery, mail, or, with the
consent of the stockholder entitled to receive notice, by facsimile or other means of electronic
transmission. If mailed, such notice shall be deemed to be given when deposited in the
mail, postage prepaid, directed to the stockholder at his address as it appears on the records
of the corporation. Notice given by electronic transmission pursuant to this subsection shall be
deemed given: (1) if by facsimile telecommunication, when directed to a facsimile telecommunication
number at which the stockholder has consented to receive notice; (2) if by electronic mail, when
directed to an electronic mail address at which the stockholder has consented to receive notice;
(3) if by posting on an electronic network together with separate notice to the stockholder of such
specific posting, upon the later of (A) such posting and (B) the giving of such separate notice;
and (4) if by any other form of electronic transmission, when directed to the stockholder. An
affidavit of the Secretary or an Assistant Secretary, the transfer agent or other agent of the
corporation that the notice has been given by personal delivery, by mail, or by a form of
electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
1.4 NOMINATIONS
Only persons who are nominated in accordance with the procedures set forth in these Bylaws
shall be eligible to serve as directors of the corporation. Nominations of persons for election to
the Board of Directors of the corporation may be made at a meeting of stockholders at which
directors are to be elected (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 1.4, who shall be entitled to vote for the election of directors at
the meeting and who complies with the notice procedures set forth in this Section 1.4.
Nominations by stockholders shall be made pursuant to timely notice in writing to the
Secretary of the corporation. To be timely, a stockholders notice shall be delivered to or mailed
and received at the principal executive offices of the corporation (a) in the case of an annual
meeting, not later than the close of business on the ninetieth (90th ) calendar day, nor
earlier than the close of business on the one hundred and twentieth (120th ) calendar
day, prior to the first anniversary of the preceding years annual meeting; provided, however, that
if the date of the annual meeting is advanced more than thirty (30) calendar days prior to, or
delayed by more than sixty (60) calendar days after, the anniversary of the preceding years annual
meeting, notice by the stockholder to be timely must be received not later than the close of
business on the tenth (10th) calendar day following the earlier of the day on which
notice of the date of the meeting was first mailed or public disclosure of the date of the meeting
was first made, and (b) in respect of nominations to be brought before a special meeting, where
permitted, notice by the stockholder to be timely must be so delivered not later than the close of
business on the tenth (10th) calendar day following the earlier of the day on which
notice of the date of the meeting was first mailed or public disclosure of the date of the meeting
was first made. Such stockholders notice shall set forth (i) (A) the name, age, business address
and residence address of each proposed nominee, (B) the principal occupation of each proposed
nominee, (C) a representation that the notifying stockholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice, (D) if known, the
class and total number of shares of the corporation that are beneficially owned by the proposed
nominee, (E) the total number of shares of the corporation that will be voted by the notifying
stockholder for each proposed nominee, (F) a description of all arrangements or understandings
between the notifying stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be made by the notifying
stockholder, and (G) as to each proposed nominee all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors, or is otherwise
required,
-2-
in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, applicable listing standards and other applicable law (including such persons written
consent to being named in the proxy statement as a nominee and to serving as a director if elected
and including information as to the purpose of such nomination); and (ii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the nomination is made (A) the
name and address of such stockholder, as they appear on the corporations books, and of such
beneficial owner, (B) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner and (C) a representation
whether the stockholder or the beneficial owner, if any, intends or is part of a group which
intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage
of the corporations outstanding capital stock required to elect the nominee and/or (y) otherwise
to solicit proxies from stockholders in support of such nomination. At the request of the Board of
Directors, any person nominated by a stockholder for election as a director shall furnish to the
Secretary of the corporation that information required to be set forth in a stockholders notice of
nomination which pertains to the nominee. The corporation may request any proposed nominee to
furnish such other information as may reasonably be required by the corporation to determine the
qualifications of the proposed nominee to serve as a director of the corporation.
No person shall be eligible to serve as a director of the corporation unless nominated in
accordance with the procedures set forth in this Section 1.4. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 1.4, and if the Chairman of the meeting
should so determine, shall so declare to the meeting and the defective nomination shall be
disregarded. Any such decision by the Chairman of the meeting shall be final, binding and
conclusive upon all parties in interest. In addition to the foregoing provisions of this Section
1.4, a stockholder shall also comply with and shall be subject to all applicable requirements and
provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, applicable listing standards and other applicable law, with respect to the matters set
forth in this Section 1.4.
1.5 NOTICE OF STOCKHOLDER BUSINESS
At an annual or special meeting of the stockholders, only such business shall be conducted as
shall have been brought before the meeting (i) pursuant to the corporations notice of meeting,
(ii) by or at the direction of the Board of Directors or (iii) as to an annual meeting, by any
stockholder of
the corporation who is a stockholder of record at the time of giving of the notice provided
for in this Section 1.5, who shall be entitled to vote at such meeting and who complies with the
notice procedures set forth in this Section 1.5.
For business to be properly brought before an annual meeting by a stockholder pursuant to
clause (iii) of the immediately preceding paragraph of this Section 1.5, the stockholder must have
given timely notice thereof in writing to the Secretary of the corporation, and any such proposed
business must constitute a proper matter for stockholder action. To be timely, a stockholders
notice shall be delivered to or mailed and received at the principal executive offices of the
corporation not
-3-
later than the close of business on the ninetieth (90th) calendar day,
nor earlier than the close of business on the one hundred and twentieth (120th) calendar
day, prior to the first anniversary of the preceding years annual meeting; provided, however, that
if the date of the annual meeting is advanced more than thirty (30) calendar days prior to, or
delayed by more than sixty (60) calendar days after, the first anniversary of the preceding years
annual meeting, notice by the stockholder to be timely must be so delivered not later than the
close of business on the tenth (10th) calendar day following the earlier of the day on
which notice of the date of the meeting was first mailed or public disclosure of the date of the
meeting was first made. A stockholders notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such business at the
meeting, and if a specific action is to be proposed, the text of the resolution or resolutions
which the stockholder proposes that the corporation adopt, (ii) the name and address, as they
appear on the corporations books, of the stockholder proposing such business, and the name and
address of the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and
number of shares of the corporation which are owned beneficially and of record by such stockholder
of record and by the beneficial owner, if any, on whose behalf the proposal is made, (iv) any
material interest of such stockholder of record and the beneficial owner, if any, on whose behalf
the proposal is made in such business, (v) a representation that the stockholder intends to appear
in person or by proxy at the meeting to bring before the meeting the business specified in the
notice, (vi) the total number of shares of the corporation that will be voted by the notifying
stockholder for such proposal, and (vii) a representation whether the stockholder or the beneficial
owner, if any, intends or is part of a group which intends (x) to deliver a proxy statement and/or
form of proxy to holders of at least the percentage of the corporations outstanding capital stock
required to approve or adopt the proposal and/or (y) otherwise to solicit proxies from stockholders
in support of such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an
annual or special meeting except in accordance with the procedures set forth in Section 1.5. The
Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with the procedures
prescribed by this Section 1.5, and if the Chairman of the meeting should so determine, shall so
declare to the meeting and any such business not properly brought before the meeting shall not be
transacted. Any such decision by the Chairman shall be final, binding and conclusive upon all
parties in interest. In addition to the foregoing provisions of this Section 1.5, a
stockholder shall also comply with and be subject to all applicable requirements and provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder,
applicable listing standards and other applicable law, with respect to the matters set forth in
this Section 1.5.
1.6 ADJOURNMENTS
Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at
the same or some other place, and notice need not be given of any such adjourned meeting if the
date, time and place if any, thereof and the means of remote communication, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at such adjourned
meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting
-4-
the corporation may transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. The Chairman of the meeting shall have the
power to adjourn any meeting of stockholders for any reason and the stockholders shall have the
power to adjourn any meeting of stockholders by a majority vote of the shares present at such
meeting in accordance with this Section 1.6.
1.7 QUORUM
Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each
meeting of stockholders the presence in person or by proxy of the holders of shares of stock having
a majority of the votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the
absence of a quorum, the stockholders so present may, by majority vote of shares present, adjourn
the meeting from time to time in the manner provided in Section 1.6 of these Bylaws until a quorum
shall attend. Shares of its own stock belonging to the corporation or to another corporation, if a
majority of the shares entitled to vote in the election of directors of such other corporation is
held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the right of the
corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
1.8 ORGANIZATION
Meetings of stockholders shall be presided over by (a) the Chairman of the Board of Directors
or, in the absence thereof, (b) any director or officer of the corporation designated by the Board
of Directors. In the absence of the Secretary of the corporation, the secretary of the meeting
shall be such person as the Chairman of the meeting appoints.
The Board of Directors shall, in advance of any meeting of stockholders, appoint one (1) or
more inspector(s), who may include individual(s) who serve the corporation in other capacities,
including without limitation as officers, employees or agents, to act at the meeting of
stockholders and make a written report thereof. The Board may designate one (1) or more persons as
alternate inspector(s) to replace any inspector, who fails to act. If no inspector or alternate has
been appointed or is able to act at a meeting of stockholders, the Chairman of the meeting shall
appoint one (1) or more inspector(s) to act at the meeting. Each inspector, before discharging his
or her duties, shall take and sign an oath to faithfully execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The inspector(s) or
alternate(s) shall have the duties prescribed pursuant to Section 231 of the Delaware General
Corporation Law or other applicable law.
The Board of Directors shall be entitled to make such rules or regulations for the conduct of
meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such
rules and regulations, if any, the Chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures and to do all acts
as, in the judgment of such Chairman of the
-5-
meeting, are necessary, appropriate or convenient for the proper conduct of the
meeting, including without limitation establishing an agenda of business of the meeting, rules or
regulations to maintain order, restrictions on entry to the meeting after the time fixed for
commencement thereof and the fixing of the date and time of the opening and closing of the polls
for each matter upon which the stockholders will vote at a meeting (and shall announce such at the
meeting).
1.9 VOTING; PROXIES
Except as otherwise provided by the Certificate of Incorporation or by law, each stockholder
entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of
stock held by such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders may authorize another person or persons
to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy
which is not irrevocable by attending the meeting and voting in person or by filing an instrument
in writing revoking the proxy or another duly executed proxy bearing a later date with the
Secretary of the corporation. Voting at meetings of stockholders need not be by written ballot and
need not be conducted by inspectors of election unless so determined by the holders of shares of
stock having a majority of the votes which could be cast by the holders of all outstanding shares
of stock entitled to vote thereon which are present in person or by proxy at such meeting.
At a stockholders meeting at which directors are to be elected, a stockholder shall not be
entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number
of votes which such stockholder normally is entitled to cast). The candidates receiving the
highest number of affirmative votes, up to the number of directors to be elected, shall be elected;
votes against any candidate and votes withheld shall have no legal effect.
1.10 REMOTE COMMUNICATION
For the purposes of these Bylaws, if authorized by the Board of Directors in its sole
discretion, and subject to such guidelines and procedures as the Board of Directors may adopt,
stockholders and proxyholders may, by means of remote communication:
(A) participate in a meeting of stockholders; and
(B) be deemed present in person and vote at a meeting of stockholders whether such meeting is
to be held at a designated place or solely by means of remote communication, provided that (i) the
corporation shall implement reasonable measures to verify that each person deemed present and
permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder,
(ii) the corporation shall implement reasonable measures to provide
-6-
such stockholders and
proxyholders a reasonable opportunity to participate in the meeting and to vote on matters
submitted to the stockholders, including an opportunity to read or hear the proceedings of the
meeting substantially concurrently with such proceedings, and (iii) if any stockholder or
proxyholder votes or takes other action at the meeting by means of remote communication, a record
of such vote or other action shall be maintained by the corporation.
1.11 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
In order that the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which record date: (1)
in the case of determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than sixty (60) nor less
than ten (10) days before the date of such meeting; (2) in the case of determination of
stockholders entitled to express consent to corporate action in writing without a meeting, shall
not be more than ten (10) days from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than
sixty (60) days prior to such other action. If no
record date is fixed: (1) the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the day next preceding
the day on which notice is given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting, when no prior action
of the Board of Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to the Corporation in
accordance with applicable law, or, if prior action by the Board of Directors is required by law,
shall be at the close of business on the day on which the Board of Directors adopts the resolution
taking such prior action; and (3) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
1.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Secretary shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either (a) on a reasonably accessible electronic network,
provided that the
-7-
information required to gain access to such list is provided with the notice of
the meeting, or (b) during ordinary business hours, at the principal place of business of the
corporation. In the event that the corporation determines to make the list available on an
electronic network, the corporation may take reasonable steps to ensure that such information is
available only to stockholders of the corporation. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof and may be inspected by any stockholder
who is present. If the meeting is to be held solely by means of remote communication, then the list
shall also be open to the examination of any stockholder during the whole time of the meeting on a
reasonably accessible electronic network, and the information required to access such list shall be
provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
1.13 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action required by this
chapter to be taken at any annual or special meeting of stockholders of a corporation, or any
action that may be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in writing. If the
action which is consented to is such as would have required the filing of a certificate under any
section of the Delaware General Corporation Law if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in lieu of any
statement required by such section concerning any vote of stockholders, that written notice and
written consent have been given as provided in Section 228 of the Delaware General Corporation Law.
ARTICLE II
BOARD OF DIRECTORS
2.1 POWERS; NUMBER; QUALIFICATIONS
The business and affairs of the corporation shall be managed by or under the direction of the
Board of Directors. In addition to the power and authorities these Bylaws expressly confer upon
them, the Board of Directors may exercise all such powers of the corporation and do all such lawful
acts and things as are not required by statute, the Certificate of Incorporation or these Bylaws to
be exercised or done by the stockholders. The Board of Directors shall consist of one or more
members, the number thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
-8-
2.2 ELECTION; RESIGNATION; VACANCIES
The Board of Directors shall initially consist of the persons named as directors in the
Certificate of Incorporation, and each director so elected shall hold office until the first annual
meeting of stockholders or until his successor is elected and qualified. At the first annual
meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect
directors each of whom shall hold office until his successor is elected and qualified or until such
directors earlier resignation or removal. Any director may resign at any time upon written notice
to the corporation. Any newly created directorship or any vacancy occurring in the Board of
Directors for any cause may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum, or by a sole remaining director, or by a
plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold
office until the expiration of the term of office of the director whom he has replaced or until his
successor is elected and qualified.
2.3 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held at such places within or without the
State of Delaware and at such times as the Board of Directors may from time to time determine, and
if so determined notices thereof need not be given.
2.4 SPECIAL MEETINGS
Special meetings of the Board of Directors may be held at any time or place within or without
the State of Delaware whenever called by the Chief Executive Officer, President, Chief Financial
Officer, or by any member of the Board of Directors. Notice of a special meeting of the Board of
Directors shall be given by the person or persons calling the meeting at least twenty-four hours
before the special meeting.
2.5 TELEPHONIC MEETINGS PERMITTED
Members of the Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Bylaw shall constitute presence in person at such
meeting.
2.6 QUORUM; VOTE REQUIRED FOR ACTION
At all meetings of the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. Except in cases in which the Certificate of
Incorporation or these Bylaws otherwise provide, the vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of Directors.
-9-
2.7 ORGANIZATION
Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if
any, or in his absence by the Vice Chairman of the Board, if any, or in their absence by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the meeting.
2.8 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board of Directors or such committee,
as the case may be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such committee.
ARTICLE III
COMMITTEES
3.1 COMMITTEES
The Board of Directors may, by resolution passed by a majority of the whole Board of
Directors, designate one or more committees, each committee to consist of one or more of the
directors of the corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of the committee, the
member or members thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in place of any such absent or disqualified member. Any such committee, to the
extent permitted by law and to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it.
3.2 COMMITTEE RULES
Unless the Board of Directors otherwise provides, each committee designated by the Board of
Directors may make, alter and repeal rules for the conduct of its business.
-10-
ARTICLE IV
OFFICERS
|
4.1 |
|
EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION;
REMOVAL; VACANCIES |
(a) Unless otherwise determined by the Board of Directors, the officers of the corporation
shall consist of a chief executive officer, a president, a chief financial officer, one or more
vice presidents, a secretary, one or more assistant secretaries, a treasurer or one or more
assistant treasurers as are elected by the Board of Directors and such other officers as the Board
of Directors may determine, who will be elected in such manner and hold their offices for such
terms as the Board of Directors may prescribe. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next succeeding his
election, and until his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such removal shall be
without prejudice to the contractual rights of such officer, if any, with the corporation. Any
number of offices may be held by the same person. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of
the term by the Board of Directors at any regular or special meeting.
(b) In addition to officers elected by the Board of Directors, the corporation may have one or
more appointed vice presidents. Such appointed vice presidents may be appointed by the Board of
Directors, the chairman of the Board of Directors or the chief executive officer and will have such
duties as may be established by the Board of Directors, the chairman of the Board of Directors or
the chief executive officer.
ARTICLE V
STOCK
5.1 CERTIFICATES
Shares of stock of the corporation may be certificated or uncertificated as provided by the
Delaware General Corporation Law. Every holder of stock, upon written request, shall be entitled
to have a certificate signed by or in the name of the corporation by the Chairman or Vice Chairman
of the Board of Directors, if any, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, of the corporation,
certifying the number of shares owned by him in the corporation. Any of or all the signatures on
the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such
officer, transfer
-11-
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
|
5.2 |
|
LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES |
The corporation may issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may
require the owner of the lost, stolen or destroyed certificate, or his legal representative, to
give the corporation a bond sufficient to indemnify it against any claim that may be made against
it on account of the alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
ARTICLE VI
INDEMNIFICATION
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation, or that such
director or officer is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise
(collectively Agent), against expenses (including attorneys fees), judgments, fines and amounts
paid in settlement (if such settlement is approved in advance by the Company, which approval shall
not be unreasonably withheld) actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or was an Agent (as defined in
Section 6.1) against expenses (including attorneys fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests of the corporation
and
-12-
except that no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that an Agent of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys
fees) actually and reasonably incurred by him in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by
the corporation only as authorized in the specific case upon a determination that the
indemnification of the Agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the
Board of Directors or an executive committee by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable
or, even if obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by
the corporation in advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified by the corporation
as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted pursuant to the other
subsections of this section shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on behalf of any
person who is or was an Agent of the corporation, or is or was serving at the request of the
-13-
corporation, as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to the corporation shall include, in addition to
the resulting corporation, any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors and officers, so that any person who is or was a
director or Agent of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same position under and
subject to the provisions of this Article VI (including, without limitation, the provisions of
Section 6.4) with respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to other enterprises shall include employee
benefit plans; references to fines shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to serving at the request of the corporation
shall include any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to
the best interests of the corporation as referred to in this Article VI.
6.10 INDEMNITY FUND
Upon resolution passed by the Board of Directors, the corporation may establish a trust or
other designated account, grant a security interest or use other means (including, without
limitation, a letter of credit), to ensure the payment of certain of its obligations arising under
this Article VI and/or agreements which may be entered into between the corporation and its
officers and directors from time to time.
6.11 INDEMNIFICATION OF OTHER PERSONS
The provisions of this Article VI shall not be deemed to preclude the indemnification of any
person who is not an Agent (as defined in Section 6.1), but whom the corporation has the power or
obligation to indemnify under the provisions of the Delaware General Corporation Law or otherwise.
The corporation may, in its sole discretion, indemnify an employee, trustee or other agent as
-14-
permitted by the Delaware General Corporation Law. The corporation shall indemnify an employee,
trustee or other agent where required by law.
6.12 SAVINGS CLAUSE
If this Article or any portion thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the corporation shall nevertheless indemnify each Agent against
expenses (including attorneys fees), judgments, fines and amounts paid in settlement with respect
to any action, suit, proceeding or investigation, whether civil, criminal or administrative, and
whether internal or external, including a grand jury proceeding and an action or suit brought by or
in the right of the corporation, to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated, or by any other applicable law.
|
6.13 |
|
CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES |
The indemnification and advancement of expenses provided by, or granted pursuant to, this
Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII
MISCELLANEOUS
7.1 FISCAL YEAR
The fiscal year of the corporation shall be determined by resolution of the Board of
Directors.
7.2 SEAL
The corporate seal shall have the name of the corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors.
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES
Any written waiver of notice, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of any regular or special meeting of the stockholders, directors, or
members of a committee of directors need be specified in any written waiver of notice. If such a
waiver is given
-15-
by electronic transmission, the electronic transmission must either set forth or be
submitted with information from which it can be determined that the electronic transmission was
authorized by the stockholder.
7.4 INTERESTED DIRECTORS; QUORUM
No contract or transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically approved in good faith by
vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or
the stockholders. Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or
transaction.
7.5 FORM OF RECORDS
Any records maintained by the corporation in the regular course of its business, including its
stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information storage device,
provided that the records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of any person entitled
to inspect the same.
7.6 AMENDMENT OF BYLAWS
These Bylaws may be amended, altered or repealed, and new Bylaws adopted, by (i) the Board of
Directors or (ii) the stockholders upon the affirmative vote of a majority of the voting power of
the shares of capital stock entitled to vote thereon.
-16-
exv12w1
Exhibit 12.1
AMKOR TECHNOLOGY, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months |
|
|
|
Year Ended December 31, |
|
|
Ended September 30, |
|
|
|
2002 |
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes,
minority interests
and discontinued
operations |
|
$ |
(825,403 |
) |
|
$ |
(55,833 |
) |
|
$ |
(28,868 |
) |
|
$ |
(145,288 |
) |
|
$ |
182,494 |
|
|
$ |
137,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investment losses |
|
|
(208,165 |
) |
|
|
(3,290 |
) |
|
|
(2 |
) |
|
|
(55 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes,
equity investment
losses, minority
interests and
discontinued
operations |
|
|
(617,238 |
) |
|
|
(52,543 |
) |
|
|
(28,866 |
) |
|
|
(145,233 |
) |
|
|
182,494 |
|
|
|
137,486 |
|
Interest expense |
|
|
143,441 |
|
|
|
138,775 |
|
|
|
145,897 |
|
|
|
163,125 |
|
|
|
160,909 |
|
|
|
102,742 |
|
Amortization of debt
issuance costs |
|
|
8,251 |
|
|
|
7,428 |
|
|
|
6,182 |
|
|
|
7,948 |
|
|
|
7,250 |
|
|
|
4,137 |
|
Interest portion of rent |
|
|
4,995 |
|
|
|
5,463 |
|
|
|
5,928 |
|
|
|
6,215 |
|
|
|
5,583 |
|
|
|
4,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(460,551 |
) |
|
$ |
99,123 |
|
|
$ |
129,141 |
|
|
$ |
32,055 |
|
|
$ |
356,236 |
|
|
$ |
249,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
143,441 |
|
|
$ |
138,775 |
|
|
$ |
145,897 |
|
|
$ |
163,125 |
|
|
$ |
160,909 |
|
|
$ |
102,742 |
|
Amortization of debt
issuance costs |
|
|
8,251 |
|
|
|
7,428 |
|
|
|
6,182 |
|
|
|
7,948 |
|
|
|
7,250 |
|
|
|
4,137 |
|
Interest portion of rent |
|
|
4,995 |
|
|
|
5,463 |
|
|
|
5,928 |
|
|
|
6,215 |
|
|
|
5,583 |
|
|
|
4,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
156,687 |
|
|
$ |
151,666 |
|
|
$ |
158,007 |
|
|
$ |
177,288 |
|
|
$ |
173,742 |
|
|
$ |
111,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to
fixed charges |
|
|
x |
1 |
|
|
x |
1 |
|
|
x |
1 |
|
|
x |
1 |
|
|
2.05 |
|
|
|
2.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The ratio of earnings to fixed charges was less than 1:1 for 2005. In order to achieve a ratio of earnings to fixed charges of 1:1, we would have had to generate an additional $145.2 million of earnings in 2005. The ratio of earnings to fixed charges was less than 1:1 for the year ended December 31, 2004. In order to achieve a ratio of earnings to fixed charges of 1:1, we would have had to generate an additional $28.9 million of earnings for the year ended December 31, 2004. The
ratio of earnings to fixed charges was less than 1:1 for the year ended December 31, 2003. In order to achieve a ratio of earnings to fixed charges of 1:1, we would have had to generate an additional $52.5 million of earnings in the year ended December 31, 2003. The ratio of earnings to fixed charges was less than 1:1 for the year ended December 31, 2002. In order to achieve a ratio of earnings to fixed charges of 1:1, we would have had to generate
an additional $617.2 million of earnings in the year ended December 31, 2002. |
exv31w1
Exhibit 31.1
SECTION 302(a) CERTIFICATION
I, James J. Kim, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Amkor Technology, Inc.; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to
the period covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in
this report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
|
a) |
|
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this report is being prepared; |
|
|
b) |
|
Designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under our supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
and |
|
|
d) |
|
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants
internal control over financial reporting. |
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and
the audit committee of the registrants board of directors (or persons performing the
equivalent functions): |
|
a) |
|
All significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrants ability to record,
process, summarize and report financial information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrants internal controls over financial
reporting. |
|
|
|
|
|
|
|
|
November 8, 2007 |
/s/ JAMES J. KIM
|
|
|
James J. Kim |
|
|
Chief Executive Officer |
|
exv31w2
Exhibit 31.2
SECTION 302(a) CERTIFICATION
I, Kenneth T. Joyce, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Amkor Technology, Inc.; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and |
|
|
d) |
|
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting. |
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and
the audit committee of the registrants board of directors (or persons performing the
equivalent functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and
report financial information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrants internal controls over financial
reporting. |
|
|
|
|
|
|
|
|
November 8, 2007 |
/s/ KENNETH T. JOYCE
|
|
|
|
Kenneth T. Joyce |
|
|
Executive Vice President and
Chief Financial Officer |
|
exv32
Exhibit 32
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Amkor Technology, Inc. (the Company) on Form 10-Q
for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the
date hereof (the Report), I, James J. Kim, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
|
(1) |
|
The Report fully complies with the
requirements of section 13(a) or 15(d)
of the Securities Exchange Act of
1934, as amended; and |
|
|
(2) |
|
The information contained in the
Report fairly presents, in all
material respects, the financial
condition and results of operations of
the Company. |
|
|
|
|
|
|
|
|
November 8, 2007 |
/s/ JAMES J. KIM
|
|
|
James J. Kim |
|
|
Chief Executive Officer |
|
|
In connection with the quarterly report of Amkor Technology, Inc. (the Company) on Form 10-Q
for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the
date hereof (the Report), I, Kenneth T. Joyce, Executive Vice President and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
|
The Report fully complies with the
requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as
amended; and |
|
|
(2) |
|
The information contained in the Report
fairly presents, in all material respects,
the financial condition and results of
operations of the Company. |
|
|
|
|
|
|
|
|
November 8, 2007 |
/s/ KENNETH T. JOYCE
|
|
|
Kenneth T. Joyce |
|
|
Executive Vice President and
Chief Financial Officer |
|
|