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Amkor Technology Reports First Quarter 2011 Financial Results

First Quarter 2011
  • Net sales $665 million
  • Gross margin 19%
  • Net income $25 million
  • Earnings per diluted share $0.10

CHANDLER, Ariz., Apr 28, 2011 (BUSINESS WIRE) -- Amkor Technology, Inc. (NASDAQ:AMKR), a leading provider of semiconductor assembly and test services, today announced financial results for the first quarter ended March 31, 2011, with net sales of $665 million, net income of $25 million, and earnings per diluted share of $0.10.

"First quarter results were consistent with our expectations even though sales were reduced by approximately $6 million due to the impact of the Japan earthquake on our Kitakami operations," said Ken Joyce, Amkor's president and chief executive officer. "Gross margin of 19% was at the top of our expected range. We saw typical seasonal softness during the quarter, and our strong position in gaming amplified these seasonal patterns. We also saw weakness in networking and certain consumer electronics due to inventory adjustments by some of our customers."

Selected financial information for the first quarter 2011 is as follows:

  • Net Sales: $665 million, down 11% from $751 million in the prior quarter, and up 3% from $646 million in the first quarter 2010
  • Gross Margin: 19%, compared to 21% in the prior quarter and 21% in the first quarter 2010
  • Net Income: $25 million, down from $51 million in the prior quarter, and down from $44 million in the first quarter 2010
  • Earnings Per Diluted Share: $0.10, down from $0.20 in the prior quarter, and down from $0.18 in the first quarter 2010

"We delivered a solid gross margin of 19% despite the challenging demand environment, continued pressure from unfavorable foreign currency exchange rate movements, higher gold prices and the events in Japan," said Joanne Solomon, Amkor's executive vice president and chief financial officer. "We kept a tight focus on labor and other manufacturing costs during this seasonally slower time of the year."

"Capital additions were $105 million during the first quarter, primarily in support of the communications area. We also delivered positive free cash flow results," continued Solomon.

Cash and cash equivalents were $393 million, and net debt was $851 million, at March 31, 2011. In January 2011, all $100 million of our 6.25% Convertible Notes due 2013 were converted into 13.4 million shares of Amkor Common Stock.

Selected operating data for the first quarter 2011 are included in a section before the financial statements.

Business Outlook

"We remain optimistic about solid growth in the second half 2011, although there is less visibility due to the situation in Japan," said Joyce. "Because of the current uncertainties in the electronics industry supply chain, we have reduced our sales expectations for the second quarter 2011 by $50 million," added Joyce. "Our guidance for the second quarter is also negatively impacted by unexpected weakness in demand for wireless baseband chips by a single OEM."

Based upon the currently available information, we have the following expectations for the second quarter 2011:

  • Net sales of $650 million to $700 million, down 2% to up 5% from the prior quarter
  • Gross margin between 16% and 20%
  • Net income of $8 million to $37 million, or $0.04 to $0.15 per diluted share
  • Capital additions of around $125 million for the second quarter, and capital additions of around $450 million for the full year

Conference Call Information

Amkor will conduct a conference call on April 28, 2011, at 5:00 p.m. Eastern Daylight Time. This call is being webcast and can be accessed at Amkor's web site: www.amkor.com. You may also access the call by dialing 877-941-1465. A replay of the call will be made available at Amkor's web site or by dialing 800-406-7325 (access pass code #4435872). 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 assembly and test services to semiconductor companies and electronics OEMs. More information on Amkor is available from the company's SEC filings and on 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 made regarding: visibility and uncertainties in the electronics industry supply chain and reductions in our sales expectations due to the situation in Japan, weakness in demand for wireless baseband chips, the amount and timing of our capital additions in 2011, growth in the second half of the year, and our current business outlook for the second quarter 2011, including our expected net sales, gross margin, net income, earnings per diluted share and capital additions. 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:

  • Uncertainties in demand, disruptions in production and the electronic industry supply chain and potential increased costs arising out of the Japan earthquake and tsunami;
  • the highly unpredictable nature of the semiconductor industry;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers;
  • inability to achieve high capacity utilization rates;
  • volatility of consumer demand for products incorporating our semiconductor packages;
  • dependence on key customers;
  • weakness in the forecasts of our customers;
  • customer modification of and follow through with respect to forecasts provided to us;
  • 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 to fund capital additions;
  • the effects of a recession or other downturn in the U.S. and other economies worldwide;
  • disruptions or deficiencies in our controls resulting from the implementation of our new enterprise resource planning system;
  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters;
  • worldwide economic effects of terrorist attacks, natural disasters and military conflict;
  • our ability to control costs;
  • competitive pricing and declines in average selling prices;
  • timing and volume of orders relative to production capacity;
  • fluctuations in manufacturing yields;
  • competition;
  • 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;
  • enforcement of 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, 2010 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
Sales Data: Q1 2011 Q4 2010 Q1 2010
Packaging services (in millions):
Chip scale package $ 231 $ 272 $ 205
Leadframe 170 176 179
Ball grid array 148 186 155
Other packaging 49 46 42
Packaging services 598 680 581
Test services 67 71 65
Total sales $ 665 $ 751 $ 646
Packaging services:
Chip scale package 35 % 36 % 31 %
Leadframe 26 % 24 % 28 %
Ball grid array 22 % 25 % 24 %
Other packaging 7 % 6 % 7 %
Packaging services 90 % 91 % 90 %
Test services 10 % 9 % 10 %
Total sales 100 % 100 % 100 %
Packaged units (in millions):
Chip scale package 475 590 455
Leadframe 1,573 1,579 1,954
Ball grid array 62 61 50
Other packaging 3 4 8
Total packaged units 2,113 2,234 2,467
Net sales from top ten customers 57 % 57 % 54 %
Capacity Utilization (Packaging and test utilization separately presented beginning in Q4 2010. Prior periods were recalculated based on current methodology for comparability):
Packaging 71 % 78 % 84 %
Test 71 % 74 % 68 %

End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers. Prior periods were revised for an expanded sampling methodology and refinement of our classifications):

Communications (cell phones, Ethernet, WiMAX, wireless LAN, Bluetooth) 43 % 40 % 37 %
Consumer (gaming, set top boxes, TV, portable media) 23 % 26 % 26 %
Computing (PCs, servers, displays, hard disk drive, printers, other peripherals) 12 % 12 % 14 %
Networking (infrastructure, routers, network servers) 12 % 13 % 14 %
Other (auto, industrial) 10 % 9 % 9 %
Total 100 % 100 % 100 %
Gross Margin Data:
Net sales 100 % 100 % 100 %
Cost of sales:
Materials 43 % 43 % 42 %
Labor 14 % 13 % 13 %
Other manufacturing 24 % 23 % 24 %
Gross margin 19 % 21 % 21 %
AMKOR TECHNOLOGY, INC.
Selected Operating Data
Q1 2011 Q4 2010 Q1 2010
(in millions, except per share data)
Capital Investment Data:
Property, plant and equipment additions $ 105 $ 103 $ 73
Net change in related accounts payable and deposits 9 66 (6 )
Purchases of property, plant and equipment $ 114 $ 169 $ 67
Depreciation and amortization $ 83 $ 87 $ 76
Free Cash Flow Data:
Net cash provided by operating activities $ 120 $ 176 $ 104
Less purchases of property, plant and equipment (114 ) (169 ) (67 )
Free cash flow* $ 6 $ 7 $ 37
Earnings per Share Data:
Net income attributable to Amkor - basic $ 25 $ 51 $ 44
Adjustment for dilutive securities on net income:
Interest on 2.5% convertible notes due 2011, net of tax - - -
Interest on 6.25% convertible notes due 2013, net of tax - 2 2
Interest on 6.0% convertible notes due 2014, net of tax 4 4 4
Net income attributable to Amkor - diluted $ 29 $ 57 $ 50
Weighted average shares outstanding - basic 194 183 183
Effect of dilutive securities:
Stock options and unvested restricted shares 1 1 1
2.5% convertible notes due 2011 - 3 3
6.25% convertible notes due 2013 - 13 13
6.0% convertible notes due 2014 83 83 83
Weighted average shares outstanding - diluted 278 283 283
Net income attributable to Amkor per common share:
Basic $ 0.13 $ 0.28 $ 0.24
Diluted $ 0.10 $ 0.20 $ 0.18

* We define free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. Free cash flow is not defined by GAAP. However, we believe free cash flow to be relevant and useful information to our investors because it provides them with additional information in assessing our liquidity, capital resources and financial operating results. Our management uses free cash flow in evaluating our liquidity, our ability to service debt and our ability to fund capital additions.

However, this measure should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP, and our definition of free cash flow may not be comparable to similarly titled measures reported by other companies.

AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months
Ended March 31,
2011 2010
(In thousands, except per share data)
Net sales $ 664,950 $ 645,738
Cost of sales 538,264 508,782
Gross profit 126,686 136,956
Operating expenses:
Selling, general and administrative 64,558 56,296
Research and development 12,129 11,673
Total operating expenses 76,687 67,969
Operating income 49,999 68,987
Other (income) expense
Interest expense 18,789 22,369
Interest expense, related party 2,580 3,812
Interest income (587 ) (733 )
Foreign currency loss 1,731 975
Equity in earnings of unconsolidated affiliate (1,518 ) (1,101 )
Other income, net (144 ) (241 )
Total other expense, net 20,851 25,081
Income before income taxes 29,148 43,906
Income tax expense (benefit) 3,382 (167 )
Net income 25,766 44,073
Net (income) loss attributable to noncontrolling interests (663 ) 224
Net income attributable to Amkor $ 25,103 $ 44,297
Net income attributable to Amkor per common share:
Basic $ 0.13 $ 0.24
Diluted $ 0.10 $ 0.18
Shares used in computing per common share amounts:
Basic 194,067 183,226
Diluted 277,585 282,509
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2011 2010
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 392,951 $ 404,998
Restricted cash 19,712 17,782
Accounts receivable:
Trade, net of allowances 349,398 392,327
Other 19,152 17,970
Inventories 185,642 191,072
Other current assets 43,928 37,918
Total current assets 1,010,783 1,062,067
Property, plant and equipment, net 1,558,835 1,537,226
Intangibles, net 12,236 13,524
Investments 29,473 28,215
Restricted cash 1,940 1,945
Other assets 88,306 93,845
Total assets $ 2,701,573 $ 2,736,822
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 132,620 $ 150,081
Trade accounts payable 406,110 443,333
Accrued expenses 165,388 178,794
Total current liabilities 704,118 772,208
Long-term debt 960,908 964,219
Long-term debt, related party 150,000 250,000
Pension and severance obligations 109,779 103,543
Other non-current liabilities 12,336 10,171
Total liabilities 1,937,141 2,100,141
Equity:
Amkor stockholders' equity:
Preferred stock - -

Common stock, $0.001 par value, 500,000 shares authorized, 197,178

and 183,467 shares issued, and 197,061 and 183,420 shares outstanding,

in 2011 and 2010, respectively

197 183
Additional paid-in capital 1,607,942 1,504,927
Accumulated deficit (865,167 ) (890,270 )
Accumulated other comprehensive income 14,991 15,457
Treasury stock, at cost, 117 and 47 shares in 2011 and 2010, respectively (862 ) (284 )
Total Amkor stockholders' equity 757,101 630,013
Noncontrolling interests in subsidiaries 7,331 6,668
Total equity 764,432 636,681
Total liabilities and equity $ 2,701,573 $ 2,736,822
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended March 31,
2011 2010
(In thousands)
Cash flows from operating activities:
Net income $ 25,766 $ 44,073
Depreciation and amortization 83,442 75,805
Other operating activities and non-cash items 4,896 (1,419 )
Changes in assets and liabilities 6,123 (14,730 )
Net cash provided by operating activities 120,227 103,729
Cash flows from investing activities:
Purchases of property, plant and equipment (113,881 ) (67,092 )
Proceeds from the sale of property, plant and equipment 278 364
Financing lease payment from unconsolidated affiliate 3,020 4,896
Other investing activities (1,057 ) (6,168 )
Net cash used in investing activities (111,640 ) (68,000 )
Cash flows from financing activities:
Borrowings under revolving credit facilities - 3,261
Payments under revolving credit facilities - (34,253 )
Proceeds from issuance of short-term working capital facility 15,000 15,000
Payments of short-term working capital facility (15,000 ) (15,000 )
Proceeds from issuance of long-term debt - 38,824
Payments of long-term debt (20,413 ) (13,661 )
Payments for debt issuance costs - (166 )
Proceeds from issuance of stock through stock compensation plans 627 399
Payments of minimum tax withholding for restricted shares (696 ) -
Net cash used in financing activities (20,482 ) (5,596 )
Effect of exchange rate fluctuations on cash and cash equivalents (152 ) (66 )
Net (decrease) increase in cash and cash equivalents (12,047 ) 30,067
Cash and cash equivalents, beginning of period 404,998 395,406
Cash and cash equivalents, end of period $ 392,951 $ 425,473

SOURCE: Amkor Technology, Inc.

Amkor Technology, Inc., Chandler
Joanne Solomon
Executive Vice President & Chief Financial Officer
480-786-7878
joanne.solomon@amkor.com