Amkor Technology Reports Financial Results for the Second Quarter 2013

Amkor Technology Reports Financial Results for the Second Quarter 2013

Second Quarter 2013

  • Net sales $746 million
  • Gross margin 18.5%
  • Net income $30 million
  • Earnings per diluted share $0.14

CHANDLER, Ariz.--(BUSINESS WIRE)-- Amkor Technology, Inc. (NAS: AMKR) , a leading provider of semiconductor packaging and test services, today announced financial results for the second quarter ended June 30, 2013, with net sales of $746 million, net income of $30 million, and earnings per diluted share of $0.14.


"Driven by strong results in mobile communications, sales for the quarter increased more than 8% sequentially and year over year with a corresponding improvement in our gross margin," said Steve Kelley, Amkor's president and chief executive officer. "Since joining Amkor in May, I have been working closely with customers and management to assess our business and operations. We are well positioned with solid investments in the right technologies, customers, and end markets, and I am optimistic about our long-term prospects for sales growth and improved profitability."

Selected financial information for the second quarter 2013 is as follows:

  • Net Sales: $746 million, up 8.5% from $688 million in the prior quarter, and up 8.7% from $687 million in the second quarter of 2012
  • Gross Margin: 18.5%, compared to 16.7% in the prior quarter, and adjusted gross margin of 17.4% in the second quarter of 2012
  • Net Income: $30 million, up from $13 million in the prior quarter, and down from adjusted net income of $33 million in the second quarter of 2012
  • Earnings Per Diluted Share: $0.14, up from $0.07 in the prior quarter, and down from adjusted earnings per diluted share of $0.15 in the second quarter of 2012

Second quarter 2013 results include a $12 million ($0.05 per diluted share) charge on the exchange of $194 million principal amount of our Convertible Senior Subordinated Notes due 2014 for cash and common stock, and a $15 million ($0.06 per diluted share) benefit from two discrete tax items relating to foreign operations.

The adjusted gross margin, adjusted net income, and adjusted earnings per diluted share presented above for the second quarter 2012 exclude a loss contingency of $34 million ($32 million, net of tax) relating to our pending patent license arbitration, and are non-GAAP measures. Selected operating data for the second quarter 2013, and a reconciliation of the second quarter 2012 non-GAAP measures presented above to the comparable GAAP measures, are included in a section below before the financial statements.

"Capital additions were $159 million during the second quarter, primarily in support of customers in mobile communications," said Joanne Solomon, Amkor's executive vice president and chief financial officer.

"We took advantage of favorable conditions in the capital markets to raise additional funding," continued Solomon. "The $225 million addition to our Senior Notes due 2022 provides resources for our investment initiatives. We also completed a tender offer for our Convertible Senior Subordinated Notes due 2014 and exchanged approximately $194 million of these Notes for approximately 64 million shares of our common stock and approximately $12 million of cash."

Cash and cash equivalents were $636 million, and total debt was $1.7 billion, at June 30, 2013.

Business Outlook

"Looking ahead to the third quarter, our sales are expected to be flat as some customers are adjusting their inventory levels in response to the recent slowdown in demand for smartphones," noted Kelley. "In light of these developments, we are lowering our estimate of 2013 capital additions from around $525 million to around $450 million. Although this slowdown in the smartphone market has reduced our expectations for the third quarter, we remain confident in the strong growth prospects for mobile communications."

Based upon currently available information, we have the following expectations for the third quarter 2013:

  • Net sales of $715 million to $765 million, down 4% to up 3% from the prior quarter
  • Gross margin of 16% to 19%
  • Net income of $8 million to $30 million, or $0.04 to $0.13 per diluted share
  • Capital additions of around $100 million for the third quarter, and around $450 million for the full year 2013. This excludes spending for the acquisition of land and construction relating to our previously announced new factory and R&D center in South Korea of $40 million in the third quarter and $140 million in the full year 2013.

Conference Call Information

Amkor will conduct a conference call on Monday, July 29, 2013, 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 1-877-941-9205 or 1-480-629-9771. A replay of the call will be made available at Amkor's website or by dialing 1-800-406-7325 or 1-303-590-3030 (access pass code #4626101). The webcast is also being distributed over Thomson Reuters' Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Reuters' individual investor center at www.companyboardroom.com or by visiting any of the investor sites in Thomson Reuters' Individual Investor Network. Institutional investors can access the call via Thomson Reuters' password-protected event management site, Street Events (www.streetevents.com).

About Amkor

Amkor is a leading provider of semiconductor packaging and test services to semiconductor companies and electronics OEMs. More information about Amkor is available from the company's filings with the Securities and Exchange Commission and at Amkor's website: www.amkor.com.

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 sales growth and improving profitability, 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 and costs of litigation and other legal activities and the risk of adverse results of such matters, including the final ruling in the pending patent license arbitration and the impact of other legal proceedings;
  • the highly unpredictable nature of the semiconductor industry;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers, including the increasingly uncertain macroeconomic environment;
  • timing and volume of orders relative to production capacity and inability to achieve high capacity utilization rates;
  • volatility of consumer demand and weakness in forecasts from our customers for products incorporating our semiconductor packages, including the recent slowdown in demand for smartphones;
  • dependence on key customers;
  • the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity and facilities to service customer demand and the availability of cash flow from operations or financing;
  • customer modification of and follow through with respect to forecasts provided to us, including delays in forecasts with respect to smartphones and tablets;
  • changes in tax rates and taxes as a result of changes in tax law, the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax audits and tax ruling requests, our ability to realize deferred tax assets and the expiration of tax holidays;
  • curtailment of outsourcing by our customers;
  • our substantial indebtedness and restrictive covenants;
  • failure to realize sufficient cash flow or access to other sources of liquidity to fund capital additions;
  • the effects of a recession or other downturn in the U.S. and other economies worldwide;
  • disruptions in our business or deficiencies in our controls resulting from the implementation and security of, and changes to, our enterprise resource planning and other management information systems;
  • economic effects of terrorist attacks, natural disasters and military conflict;
  • our ability to control costs and improve profitability;
  • competition, competitive pricing and declines in average selling prices;
  • fluctuations in manufacturing yields;
  • dependence on international operations and sales;
  • dependence on raw material and equipment suppliers and changes in raw material and precious metal costs;
  • exchange rate fluctuations;
  • dependence on key personnel;
  • difficulties in managing growth and consolidating and integrating operations;
  • enforcement of and compliance with intellectual property rights;
  • environmental and other governmental regulations; and
  • technological challenges.

Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2012 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.

AMKOR TECHNOLOGY, INC.
Selected Operating Data

Since the first quarter 2013, we have reported sales data for our packaging services by the following categories: flip chip and wafer-level processing and wirebond. We have also provided quarterly and annual packaging services sales and packaged units for 2011 and 2012 under these revised sales reporting categories at the Investor Relations section of our website at www.amkor.com.

   Q2 2013   Q1 2013   Q2 2012
Sales Data:
Packaging services (in millions):
Flip chip and wafer-level processing$339$320$273
Wirebond308 274 338 
Packaging services647594611
Test services99 94 76 
Total sales$746 $688 $687 
 
Packaging services:
Flip chip and wafer-level processing46%46%40%
Wirebond41 %40 %49 %
Packaging services87%86%89%
Test services13 %14 %11 %
Total sales100 %100 %100 %
 
Packaged units (in millions):
Flip chip and wafer-level processing704579298
Wirebond1,976 1,722 1,827 
Total packaged units2,680 2,301 2,125 
 
Net sales from top ten customers63%63%64%
 
Capacity Utilization:
Packaging85%76%79%
Test81%83%80%
 
End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers):
Communications (handsets, tablets, wireless LAN, handheld devices)58%59%45%
Consumer (gaming, television, set top boxes, portable media, digital cameras)14%14%23%
Computing (desk tops, PCs, hard disk drives, servers, displays, printers, peripherals)9%9%12%
Networking (servers, routers, switches)10%10%11%
Other (automotive, industrial)9 %8 %9 %
Total100 %100 %100 %
 
Gross Margin Data:
Net sales100%100%100%
Cost of sales:
Materials41%42%43%
Labor14%15%15%
Other manufacturing26%26%25%
Loss contingency % %4 %
Gross margin19 %17 %13 %
 
 
         
Q2 2013Q1 2013Q2 2012
(In millions, except per share data)
Capital Investment Data:
Property, plant and equipment additions$159$124$149
Net change in related accounts payable and deposits(49)(11)(38)
Purchases of property, plant and equipment$110 $113 $111 
Depreciation and amortization$99$97$91
 
Free Cash Flow Data:
Net cash provided by operating activities$102$99$86
Less purchases of property, plant and equipment(110)(113)(111)
Free cash flow (1)$(8)$(14)$(25)
 
Earnings per Share Data:
Net income attributable to Amkor - basic$30$13$1
 
Adjustment for dilutive securities on net income:
Interest on 6.0% convertible notes due 2014, net of tax (2)3 4  
Net income attributable to Amkor - diluted$33 $17 $1 
 
Weighted average shares outstanding - basic161152166
Effect of d
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