Market Overview

Amkor Technology Reports Financial Results for the Second Quarter 2018

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Second Quarter Highlights

  • Record second quarter net sales $1,066 million, up 4% sequentially
  • Net Income $33 million, earnings per diluted share $0.14
  • EBITDA $208 million, up 19% sequentially
  • Advanced SiP $226 million, up 14% sequentially

Amkor Technology, Inc. (NASDAQ:AMKR), a leading provider of
semiconductor packaging and test services, today announced financial
results for the second quarter ended June 30, 2018.

"Second quarter results exceeded expectations, with sequential growth in
net sales, operating margin and earnings per share," said Steve Kelley,
Amkor's CEO. "Demand was higher across all of our end markets.
Communications was especially strong."

Results   Q2 2018   Q1 2018   Q2 2017
  ($ in millions, except per share data)
Net sales $1,066   $1,025   $1,008
Gross margin 15.9% 15.4% 17.5%
Net income attributable to Amkor1 $33 $10 $119
Earnings per diluted share1 $0.14 $0.04 $0.50
EBITDA1,2 $208 $175 $321
 

1) Q2 2017 net income included the sale of our K1 factory in
Korea. The sale price was $142 million, and we recognized an
after-tax gain of $82 million ($0.34 per diluted share).

2) EBITDA is a non-GAAP measure. The reconciliation to the
comparable GAAP measure is included below under "Selected
Operating Data."

"Net sales growth drove sequentially higher profits and EBITDA," said
Megan Faust, Amkor's CFO. "In addition, we are in the process of
refinancing the remaining $200 million 6.625% Senior Notes due 2021 with
proceeds from a recently completed foreign bank loan. This refinancing
is expected to generate net annualized interest savings of approximately
$11 million."

Business Outlook

"We expect third quarter 2018 net sales to be about $1.14 billion, up 7%
sequentially, primarily due to seasonal strength in the communications
market," said Kelley.

Third quarter 2018 outlook (unless otherwise noted):

  • Net sales of $1.10 billion to $1.18 billion
  • Gross margin of 15% to 17%
  • Net income of $28 million to $55 million, or $0.12 to $0.23 per
    diluted share
  • Full year capital expenditures of approximately $600 million

Conference Call Information

Amkor will conduct a conference call on Monday, July 30, 2018, at 5:00
p.m. Eastern Time. This call may include material information not
included in this press release. This call is being webcast and can be
accessed at Amkor's website: www.amkor.com.
You may also access the call by dialing 1-877-645-6380 or
1-404-991-3911. A replay of the call will be made available at Amkor's
website or by dialing 1-855-859-2056 or 1-404-537-3406 (conference ID
5995127). The webcast is also being distributed over NASDAQ OMX's
investor distribution network to both institutional and individual
investors. Institutional investors can access the call via NASDAQ OMX's
password-protected event management site, Street Events (www.streetevents.com).

About Amkor Technology, Inc.

Amkor Technology, Inc. is one of the world's largest providers of
outsourced semiconductor packaging and test services. Founded in 1968,
Amkor pioneered the outsourcing of IC packaging and test, and is now a
strategic manufacturing partner for more than 250 of the world's leading
semiconductor companies, foundries and electronics OEMs. Amkor's
operational base includes production facilities, product development
centers, and sales and support offices located in key electronics
manufacturing regions in Asia, Europe and the USA. For more information,
visit www.amkor.com.

AMKOR TECHNOLOGY, INC.
Selected Operating Data
 
  Q2 2018   Q1 2018   Q2 2017
Net Sales Data:
Net sales (in millions):
Advanced products* $ 496 $ 476 $ 445
Mainstream products**   570     549     563  
Total net sales $ 1,066   $ 1,025   $ 1,008  
 
Packaging services 83 % 81 % 81 %
Test services 17 % 19 % 19 %
 
Net sales from top ten customers 65 % 69 % 67 %
 
End Market Data:
Communications (smartphones, tablets, handheld devices) 42 % 42 % 40 %
Automotive, industrial and other (driver assist, infotainment,
safety, performance)
26 % 26 % 27 %
Computing (datacenter, infrastructure, PC/laptop, storage) 19 % 19 % 19 %
Consumer (set-top boxes, televisions, connected home, personal
electronics, visual imaging)
  13 %   13 %   14 %
Total   100 %   100 %   100 %
 
Gross Margin Data:
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales:
Materials 38.9 % 36.9 % 35.3 %
Labor 16.0 % 17.5 % 16.4 %
Other manufacturing   29.2 %   30.2 %   30.8 %
Gross margin   15.9 %   15.4 %   17.5 %
 
*   Advanced products include flip chip and wafer-level processing and
related test services
** Mainstream products include wirebond packaging and related test
services

In the press release above we provide EBITDA, which is not defined by
U.S. GAAP. We define EBITDA as net income before interest expense,
income tax expense and depreciation and amortization. We believe EBITDA
to be relevant and useful information to our investors because it
provides additional information in assessing our financial operating
results. Our management uses EBITDA in evaluating our operating
performance, our ability to service debt and our ability to fund capital
expenditures. However, EBITDA has certain limitations in that it does
not reflect the impact of certain expenses on our consolidated
statements of income, including interest expense, which is a necessary
element of our costs because we have borrowed money in order to finance
our operations, income tax expense, which is a necessary element of our
costs because taxes are imposed by law, and depreciation and
amortization, which is a necessary element of our costs because we use
capital assets to generate income. EBITDA should be considered in
addition to, and not as a substitute for, or superior to, operating
income, net income or other measures of financial performance prepared
in accordance with U.S. GAAP. Furthermore our definition of EBITDA may
not be comparable to similarly titled measures reported by other
companies. Below is our reconciliation of EBITDA to U.S. GAAP net income.

Non-GAAP Financial Measure Reconciliation:
  Q2 2018   Q1 2018   Q2 2017
(in millions)
EBITDA Data:
Net income $ 33 $ 10 $ 120
Plus: Interest expense 21 20 22
Plus: Income tax expense 11 2 34
Plus: Depreciation & amortization   143   143   145

EBITDA*

$ 208 $ 175 $ 321
 

* Q2 2017 EBITDA included a pretax gain of $108 million related to
the sale of our K1 factory in Korea.

 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
  For the Three Months Ended   For the Six Months Ended
June 30, June 30,
  2018      

2017*

    2018      

2017*

 
(In thousands, except per share data)
Net sales $ 1,065,684 $ 1,008,385 $ 2,091,003 $ 1,907,669
Cost of sales   895,967     831,769     1,763,515     1,594,819  
Gross profit   169,717     176,616     327,488     312,850  
Selling, general and administrative 74,700 67,785 155,423 144,067
Research and development 41,076 44,281 82,005 85,849
Gain on sale of real estate       (108,109 )       (108,109 )
Total operating expenses   115,776     3,957     237,428     121,807  
Operating income 53,941 172,659 90,060 191,043
Interest expense 21,127 22,158 41,138 43,412
Interest expense, related party 293 1,535
Other (income) expense, net   (11,001 )   (3,288 )   (7,569 )   7,893  
Total other expense, net   10,126     19,163     33,569     52,840  
Income before taxes 43,815 153,496 56,491 138,203
Income tax expense   10,631     33,466     13,112     32,141  
Net income 33,184 120,030 43,379 106,062
Net income attributable to non-controlling interests   (593 )   (1,017 )   (1,244 )   (1,835 )
Net income attributable to Amkor $ 32,591   $ 119,013   $ 42,135   $ 104,227  
 
Net income attributable to Amkor per common share:
Basic $ 0.14   $ 0.50   $ 0.18   $ 0.44  
Diluted $ 0.14   $ 0.50   $ 0.18   $ 0.44  
 
Shares used in computing per common share amounts:
Basic 239,351 238,863 239,283 238,774
Diluted 239,804 239,679 239,805 239,601
 

* Effective January 1, 2018, we adopted Accounting Standards
Update (ASU) No. 2014-09, Revenue from Contracts with Customers
(Topic 606)
, utilizing the full retrospective transition
method. The prior periods presented here have been revised to
reflect this change.

 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  June 30,   December 31,
  2018     2017  
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 380,262 $ 596,364
Restricted cash 2,000 2,000
Accounts receivable, net of allowances 795,750 798,264
Inventories 243,019 213,649
Other current assets   37,148     33,727  
Total current assets 1,458,179 1,644,004
Property, plant and equipment, net 2,754,960 2,695,065
Goodwill 25,472 25,036
Restricted cash 3,503 4,487
Other assets   139,567     139,796  
Total assets $ 4,381,681   $ 4,508,388  
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 115,057 $ 123,848
Trade accounts payable 553,475 569,085
Capital expenditures payable 238,772 294,258
Accrued expenses   254,348     330,868  
Total current liabilities 1,161,652 1,318,059
Long-term debt 1,214,535 1,240,581
Pension and severance obligations 184,072 182,216
Other non-current liabilities   51,264     47,823  
Total liabilities   2,611,523     2,788,679  
 
Stockholders' equity:
Preferred stock
Common stock 285 285
Additional paid-in capital 1,906,936 1,903,357
Retained earnings (accumulated deficit) 28,232 (13,903 )
Accumulated other comprehensive income (loss) 26,385 22,519
Treasury stock   (216,087 )   (215,982 )
Total Amkor stockholders' equity 1,745,751 1,696,276
Non-controlling interests in subsidiaries   24,407     23,433  
Total equity   1,770,158     1,719,709  
Total liabilities and equity $ 4,381,681   $ 4,508,388  
 
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  For the Six Months Ended June 30,
  2018       2017  
(In thousands)
Cash flows from operating activities:
Net income $ 43,379 $ 106,062
Depreciation and amortization 285,515 287,068
Gain on sale of real estate (108,109 )
Other operating activities and non-cash items (3,239 ) (4,659 )
Changes in assets and liabilities   (119,276 )   (80,403 )
Net cash provided by operating activities   206,379     199,959  
Cash flows from investing activities:
Payments for property, plant and equipment (389,568 ) (271,651 )
Proceeds from sale of property, plant and equipment 603 130,962
Acquisition of business, net of cash acquired (43,771 )
Other investing activities   2,647     (2,117 )
Net cash used in investing activities   (386,318 )   (186,577 )
Cash flows from financing activities:
Proceeds from revolving credit facilities 75,000
Proceeds from short-term debt 7,264 41,228
Payments of short-term debt (31,546 ) (32,110 )
Proceeds from issuance of long-term debt 64,000 215,086
Payments of long-term debt (77,015 ) (207,653 )
Payment of deferred consideration for purchase of facility (3,890 )
Payments of capital lease obligations (1,689 ) (2,665 )
Other financing activities   492     561  
Net cash provided by (used in) financing activities   (38,494 )   85,557  
Effect of exchange rate fluctuations on cash, cash equivalents and
restricted cash
  1,347     9,418  
Net increase (decrease) in cash, cash equivalents and restricted cash (217,086 ) 108,357
Cash, cash equivalents and restricted cash, beginning of period   602,851     555,495  
Cash, cash equivalents and restricted cash, end of period $ 385,765   $ 663,852  

Forward-Looking Statement Disclaimer

This press release contains forward-looking statements within the
meaning of federal securities laws. All statements other than statements
of historical fact are considered forward-looking statements including,
without limitation, statements regarding the refinancing of our Senior
Notes due 2021 and associated interest savings, and all of the
statements made under "Business Outlook" above. These forward-looking
statements involve a number of risks, uncertainties, assumptions and
other factors that could affect future results and cause actual results
and events to differ materially from historical and expected results and
those expressed or implied in the forward-looking statements, including,
but not limited to, the following:

  • the highly unpredictable nature, cyclicality, and rate of growth of
    the semiconductor industry;
  • timing and volume of orders relative to production capacity and the
    inability to achieve high capacity utilization rates, control costs
    and improve profitability;
  • laws, rules, regulations and policies imposed by the U.S. or foreign
    governments in areas such as tariffs, customs, duties and other
    restrictive trade barriers, national security, data privacy and
    cybersecurity, antitrust and competition, tax, currency and banking,
    privacy, labor, environmental, health and safety, and in particular
    the recent increase in protectionist measures considered or adopted by
    the U.S. and foreign governments;
  • laws, rules, regulations and policies within China and other countries
    that may favor domestic companies over non-domestic companies,
    including customer or government supported efforts to promote the
    development and growth of local competitors;
  • volatility of consumer demand, double booking by customers and
    deterioration in forecasts from our customers for products
    incorporating our semiconductor packages, including any slowdown in
    demand or changes in customer forecasts for smartphones or other
    mobile devices and generally soft end market demand for electronic
    devices;
  • delays, lower manufacturing yields and supply constraints relating to
    wafers, particularly for advanced nodes and related technologies;
  • dependence on key customers, the impact of changes in our market share
    and prices for our services with those customers and the business and
    financial condition of those customers;
  • the performance of our business, interest rate fluctuations and other
    economic and market conditions, the cash needs and investment
    opportunities for the business, the need for additional capacity and
    facilities to service customer demand and the availability of cash
    flow from operations or financing;
  • the effect of the global economy on credit markets, financial
    institutions, customers, suppliers and consumers, including the
    uncertain macroeconomic environment;
  • the highly unpredictable nature and costs of litigation and other
    legal activities and the risk of adverse results of such matters and
    the impact of other legal proceedings;
  • changes in tax rates and taxes as a result of changes in U.S. or
    foreign tax law or the interpretations thereof (including the impact
    of recent U.S. tax reform), changes in our organizational structure,
    changes in the jurisdictions in which our income is determined to be
    earned and taxed, the outcome of tax reviews, audits and ruling
    requests, our ability to realize deferred tax assets and the
    expiration of tax holidays;
  • curtailment of outsourcing by our customers;
  • our substantial indebtedness and restrictive covenants;
  • failure to realize sufficient cash flow or access to other sources of
    liquidity to fund capital expenditures;
  • the effects of an economic slowdown in major economies worldwide;
  • disruptions in our business or deficiencies in our controls resulting
    from the integration of acquired operations, particularly J-Devices,
    or the implementation and security of, and changes to, our enterprise
    resource planning, factory shop floor systems and other management
    information systems;
  • there can be no assurance regarding when our new K5 factory and
    research and development center in Korea will be fully utilized, or
    that the actual scope, costs, timeline or benefits of the project will
    be consistent with our current expectations;
  • economic effects of terrorist attacks, political instability, natural
    disasters and military conflict;
  • competition, competitive pricing and declines in average selling
    prices;
  • fluctuations in packaging and test manufacturing yields;
  • dependence on international operations and sales and fluctuations in
    foreign currency exchange rates, particularly in Japan and Korea;
  • dependence on raw material and equipment suppliers and changes in raw
    material and precious metal costs;
  • dependence on key personnel;
  • enforcement of and compliance with intellectual property rights; and
  • technological challenges.

Other important risk factors that could affect the outcome of the events
set forth in these statements and that could affect our operating
results and financial condition are discussed in the company's Annual
Report on Form 10-K for the year ended December 31, 2017 and in the
company's subsequent filings with the Securities and Exchange Commission
made prior to or after the date hereof. Amkor undertakes no obligation
to review or update any forward-looking statements to reflect events or
circumstances occurring after the date of this press release.

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