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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
Form 10-Q

 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the Quarterly Period Ended
March 31, 2020
or
 
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)
2045 East Innovation Circle
Tempe, AZ 85284
(Address of principal executive offices and zip code)
(480821-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
AMKR
The NASDAQ Global Select Market
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   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer

Accelerated filer

Non-accelerated filer 

Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No
The number of outstanding shares of the registrant’s Common Stock as of April 24, 2020 was 241,149,312.
 




QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2020

TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 

This report contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding (1) the amount, timing and focus of our expected capital investments in 2020 including expenditures in support of advanced packaging and test equipment, (2) our ability to fund our operating activities and financial requirements for the next twelve months, (3) the effect of changes in revenue levels and capacity utilization on our gross margin, (4) the impact of the novel coronavirus disease, or Covid-19, pandemic on our operations and financial results, (5) the focus of our research and development activities, (6) the anticipated impact of the Tax Cuts and Jobs Act (the “Tax Act”) and tax law changes in the jurisdictions in which we operate, (7) the grant and expiration of tax holidays in jurisdictions in which we operate and expectations regarding our effective tax rate and the availability of tax incentives, (8) the creation or release of valuation allowances related to taxes in the future, (9) our repurchase or repayment of outstanding debt, (10) payment of dividends, (11) compliance with our covenants, (12) expected contributions to foreign pension plans, (13) liability for unrecognized tax benefits and the potential impact of our unrecognized tax benefits on our effective tax rate, (14) expected timing of and charges related to restructuring activities, (15) the effect of foreign currency exchange rate exposure on our financial results, (16) the volatility of the trading price of our common stock, (17) changes to our internal controls related to integration of acquired operations and implementation of an enterprise resource planning system, (18) our efforts to enlarge our customer base in certain geographic areas and markets, (19) demand for advanced packages in mobile and automotive devices and our technology leadership and potential growth in this market, (20) projects to install and integrate new information technology systems or upgrade our existing systems and (21) 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. Because such statements include risks and uncertainties, actual results may differ materially from those anticipated in such forward-looking statements as a result of various factors, including those set forth in the following report as well as in Part II, Item 1A of this Quarterly Report on Form 10-Q.


-1-


PART I. FINANCIAL INFORMATION


Item 1.        Financial Statements

AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands, except per share data)
Net sales
$
1,152,616

 
$
894,964

Cost of sales
963,708

 
774,203

Gross profit
188,908

 
120,761

Selling, general and administrative
72,582

 
71,587

Research and development
32,253

 
35,754

Total operating expenses
104,835

 
107,341

Operating income
84,073

 
13,420

Interest expense
17,045

 
19,273

Other (income) expense, net
(2,315
)
 
(4,565
)
Total other expense, net
14,730

 
14,708

Income (loss) before taxes
69,343

 
(1,288
)
Income tax expense
4,846

 
21,380

Net income (loss)
64,497

 
(22,668
)
Net income attributable to non-controlling interests
(608
)
 
(211
)
Net income (loss) attributable to Amkor
$
63,889

 
$
(22,879
)
 
 
 
 
Net income (loss) attributable to Amkor per common share:
 
 
 
Basic
$
0.27

 
$
(0.10
)
Diluted
$
0.26

 
$
(0.10
)
 
 
 
 
Shares used in computing per common share amounts:
 
 
 
Basic
240,919

 
239,414

Diluted
241,333

 
239,414


The accompanying notes are an integral part of these statements.


- 2-


AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)


 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Net income (loss)
$
64,497

 
$
(22,668
)
Other comprehensive income (loss), net of tax:
 
 
 
Adjustments to net unrealized gains (losses) on available-for-sale debt investments
108

 

Adjustments to unrealized components of defined benefit pension plans
11

 
(132
)
Foreign currency translation
475

 
(2,224
)
Total other comprehensive income (loss)
594

 
(2,356
)
Comprehensive income (loss)
65,091

 
(25,024
)
Comprehensive income attributable to non-controlling interests
(608
)
 
(211
)
Comprehensive income (loss) attributable to Amkor
$
64,483

 
$
(25,235
)

The accompanying notes are an integral part of these statements.


- 3-


AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)


 
March 31,
2020
 
December 31,
2019
 
(In thousands, except per share data)
ASSETS
Current assets:
 

 
 

Cash and cash equivalents
$
941,447

 
$
894,948

Restricted cash
610

 
610

Short-term investments (amortized cost of $58,139 in 2020)
58,263

 
6,348

Accounts receivable, net of allowances
880,629

 
850,753

Inventories
238,201

 
220,602

Other current assets
34,553

 
28,272

Total current assets
2,153,703

 
2,001,533

Property, plant and equipment, net
2,367,746

 
2,404,850

Operating lease right of use assets
147,985

 
148,549

Goodwill
26,235

 
25,976

Restricted cash
3,267

 
2,974

Other assets
112,701

 
111,733

Total assets
$
4,811,637

 
$
4,695,615

LIABILITIES AND EQUITY
Current liabilities:
 

 
 

Short-term borrowings and current portion of long-term debt
$
141,521

 
$
144,479

Trade accounts payable
562,633

 
571,054

Capital expenditures payable
107,131

 
77,044

Accrued expenses
236,464

 
267,226

Total current liabilities
1,047,749

 
1,059,803

Long-term debt
1,371,501

 
1,305,755

Pension and severance obligations
178,084

 
176,971

Long-term operating lease liabilities
89,733

 
91,107

Other non-current liabilities
65,945

 
71,740

Total liabilities
2,753,012

 
2,705,376

Commitments and contingencies (Note 14)


 


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; 287,093 and 286,877 shares issued; and 241,016 and 240,805 shares outstanding in 2020 and 2019, respectively
287

 
287

Additional paid-in capital
1,931,088

 
1,927,739

Retained earnings
297,966

 
234,077

Accumulated other comprehensive income (loss)
19,709

 
19,115

Treasury stock, at cost, 46,077 and 46,072 shares, in 2020 and 2019, respectively
(217,533
)
 
(217,479
)
Total Amkor stockholders’ equity
2,031,517

 
1,963,739

Non-controlling interests in subsidiaries
27,108

 
26,500

Total equity
2,058,625

 
1,990,239

Total liabilities and equity
$
4,811,637

 
$
4,695,615


The accompanying notes are an integral part of these statements.


- 4-


AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

 
 
 
 
 
Additional Paid-
In Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
 
 
 
 
Total Amkor
Stockholders’
Equity
 
Noncontrolling
Interest in
Subsidiaries
 
Total
Equity
 
Common Stock
 
 
 
 
Treasury Stock
 
 
 
 
Shares
 
Par Value
 
 
 
 
Shares
 
Cost
 
 
 
 
(In thousands)
Balance at December 31, 2019
286,877

 
$
287

 
$
1,927,739

 
$
234,077

 
$
19,115

 
(46,072
)
 
$
(217,479
)
 
$
1,963,739

 
$
26,500

 
$
1,990,239

Net income (loss)

 

 

 
63,889

 

 

 

 
63,889

 
608

 
64,497

Other comprehensive income (loss)

 

 

 

 
594

 

 

 
594

 

 
594

Treasury stock acquired through surrender of shares for tax withholding

 

 

 

 

 
(5
)
 
(54
)
 
(54
)
 

 
(54
)
Issuance of stock through share-based compensation plans
216

 

 
1,519

 

 

 

 

 
1,519

 

 
1,519

Share-based compensation

 

 
1,830

 

 

 

 

 
1,830

 

 
1,830

Balance at March 31, 2020
287,093

 
$
287

 
$
1,931,088

 
$
297,966

 
$
19,709

 
(46,077
)
 
$
(217,533
)
 
$
2,031,517

 
$
27,108

 
$
2,058,625

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
285,352

 
$
285

 
$
1,909,425

 
$
113,189

 
$
23,812

 
(45,967
)
 
$
(216,171
)
 
$
1,830,540

 
$
25,360

 
$
1,855,900

Net income (loss)

 

 

 
(22,879
)
 

 

 

 
(22,879
)
 
211

 
(22,668
)
Other comprehensive income (loss)

 

 

 

 
(2,356
)
 

 

 
(2,356
)
 


 
(2,356
)
Treasury stock acquired through surrender of shares for tax withholding

 

 

 

 

 
(5
)
 
(48
)
 
(48
)
 

 
(48
)
Issuance of stock through share-based compensation plans
78

 

 
286

 

 

 

 

 
286

 

 
286

Share-based compensation

 

 
1,468

 

 

 

 

 
1,468

 

 
1,468

Balance, March 31, 2019
285,430

 
$
285

 
$
1,911,179

 
$
90,310

 
$
21,456

 
(45,972
)
 
$
(216,219
)
 
$
1,807,011

 
$
25,571

 
$
1,832,582


The accompanying notes are an integral part of these statements.




- 5-



AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Cash flows from operating activities:
 

 
 

Net income (loss)
$
64,497

 
$
(22,668
)
Depreciation and amortization
123,657

 
135,835

Other operating activities and non-cash items
8,287

 
15,928

Changes in assets and liabilities
(99,852
)
 
(77,038
)
Net cash provided by operating activities
96,589

 
52,057

Cash flows from investing activities:
 

 
 

Payments for property, plant and equipment
(55,888
)
 
(203,216
)
Proceeds from sale of property, plant and equipment
1,887

 
180

Proceeds from insurance recovery for property, plant and equipment

 
1,538

Payments for short-term investments
(55,754
)
 

Other investing activities
5,163

 
(569
)
Net cash used in investing activities
(104,592
)
 
(202,067
)
Cash flows from financing activities:
 

 
 

Proceeds from revolving credit facilities
201,000

 

Proceeds from short-term debt
14,086

 
29,781

Payments of short-term debt
(9,409
)
 
(10,588
)
Proceeds from issuance of long-term debt
24,000

 
572,375

Payments of long-term debt
(172,336
)
 
(63,636
)
Payments of finance lease obligations
(2,355
)
 
(1,376
)
Other financing activities
109

 
(2,848
)
Net cash provided by financing activities
55,095

 
523,708

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash
(300
)
 
(829
)
Net increase in cash, cash equivalents and restricted cash
46,792

 
372,869

Cash, cash equivalents and restricted cash, beginning of period
898,532

 
688,051

Cash, cash equivalents and restricted cash, end of period
$
945,324

 
$
1,060,920

Non-cash investing and financing activities:
 
 
 
Property, plant and equipment included in capital expenditures payable
$
107,344

 
$
124,547


The accompanying notes are an integral part of these statements.


- 6-


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 March 31, 2020, and for the three months ended March 31, 2020 and 2019, are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The December 31, 2019 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 U.S. generally accepted accounting principles (“U.S. GAAP”) 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 Annual Report for the year ended December 31, 2019, filed on Form 10-K with the SEC on February 19, 2020. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year. Unless the context otherwise requires, all references to “Amkor,” “we,” “us,” “our” or the “company” are to Amkor Technology, Inc. and our subsidiaries. Certain prior year amounts have been reclassified to conform to current year presentation.

Use of Estimates. The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP, using management’s 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, including the impact of Covid-19 and any worsening of the global business and economic environment.

Goodwill. The balance of goodwill in our Consolidated Balance Sheets reflects adjustments for foreign currency translation.

Unbilled Receivables. Total unbilled receivables as of March 31, 2020 and December 31, 2019 were $131.3 million and $125.4 million, respectively.

2.    Net Sales by Product Group and End Market

Net sales by product group consist of the following:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Advanced products (1)
$
705,158

 
$
422,446

Mainstream products (2)
447,458

 
472,518

Total net sales
$
1,152,616

 
$
894,964


(1)
Advanced products include flip chip and wafer-level processing and related test services.
(2)
Mainstream products include wirebond packaging and related test services.


- 7-


AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Net sales by end market consist of the following:
 
For the Three Months Ended March 31,
 
2020
 
2019
Communications (handheld devices, smartphones, tablets)
38
%
 
38
%
Consumer (connected home, set-top boxes, televisions, visual imaging, wearables)
24
%
 
14
%
Automotive, industrial and other (driver assist, infotainment, performance, safety)
23
%
 
28
%
Computing (datacenter, infrastructure, PC/laptop, storage)
15
%
 
20
%
Total net sales
100
%
 
100
%


3.    Other Income and Expense

Other income and expense consists of the following:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Interest income
$
(2,258
)
 
$
(2,064
)
Foreign currency (gain) loss, net
(229
)
 
(2,013
)
Loss on debt retirement
428

 

Other
(256
)
 
(488
)
Other (income) expense, net
$
(2,315
)
 
$
(4,565
)


4.    Income Taxes

Income tax expense of $4.8 million for the three months ended March 31, 2020 reflects income taxes, foreign withholding taxes and minimum taxes.

ASC 740 generally requires we provide for income taxes during interim periods based on the estimated annual effective tax rate (“AETR”) for the full year. For the three months ended March 31, 2020, we have excluded a jurisdiction from the AETR calculation and used a discrete method to calculate the income tax provision for that jurisdiction. We believe inclusion of this jurisdiction in the AETR calculation is impractical at this time given that normal deviations in the projected pre-tax net income (loss) would result in a disproportionate and unreliable annual effective tax rate under the AETR method.

We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.

We maintain a valuation allowance on certain U.S. and foreign deferred tax assets. Such valuation allowances are released as the related tax benefits are realized or when sufficient evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized.

Unrecognized tax benefits represent reserves for potential tax deficiencies or reductions in tax benefits that could result from federal, state or foreign tax audits. Gross unrecognized tax benefits decreased from $26.2 million at December 31, 2019 to $23.1 million as of March 31, 2020, primarily due to the lapse of statutes of limitations in foreign jurisdictions. All of our unrecognized tax benefits would reduce our effective tax rate if recognized. Our unrecognized tax benefits are subject to change for effective settlement of examinations, changes in the recognition threshold of tax positions, the expiration of statutes of limitations and other factors.


- 8-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



We have tax returns that are open to examination in various jurisdictions for tax years 2012-2019. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. There can be no assurance that the outcome of the examinations will be favorable. In certain circumstances where we elect to appeal the results of an examination, we may be required to make tax assessment payments to proceed with the administrative appeal process.

5.    Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income attributable to Amkor common stockholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding is reduced for treasury stock.

Diluted EPS is computed based on the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period. Dilutive potential common shares include outstanding stock options and unvested restricted shares.

The following table summarizes the computation of basic and diluted EPS:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands,
except per share data)
Net income (loss) attributable to Amkor common stockholders
$
63,889

 
$
(22,879
)
 
 
 
 
Weighted-average number of common shares outstanding - basic
240,919

 
239,414

Effect of dilutive securities:
 

 
 

Stock options and restricted share awards
414

 

Weighted-average number of common shares outstanding - diluted
241,333

 
239,414

Net income (loss) attributable to Amkor per common share:
 

 
 

Basic
$
0.27

 
$
(0.10
)
Diluted
0.26

 
(0.10
)


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 anti-dilutive:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Stock options and restricted share awards
4,321

 
7,123





- 9-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



6.    Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), net of tax, consist of the following:
 
Unrealized Gains (Losses) on Available-for-Sale Debt Investments
 
Defined Benefit Pension (1)
 
Foreign Currency Translation
 
Total
 
 
 
(In thousands)
Accumulated other comprehensive income (loss) at December 31, 2019
$

 
$
(4,820
)
 
$
23,935

 
$
19,115

Other comprehensive income (loss) before reclassifications
108

 

 
475

 
583

Amounts reclassified from accumulated other comprehensive income (loss)

 
11

 

 
11

Other comprehensive income (loss)
108

 
11

 
475

 
594

Accumulated other comprehensive income (loss) at March 31, 2020
$
108

 
$
(4,809
)
 
$
24,410

 
$
19,709

 
Defined Benefit Pension (1)
 
Foreign Currency Translation
 
Total
 
(In thousands)
Accumulated other comprehensive income (loss) at December 31, 2018
$
2,659

 
$
21,153

 
$
23,812

Other comprehensive income (loss) before reclassifications

 
(2,224
)
 
$
(2,224
)
Amounts reclassified from accumulated other comprehensive income (loss)
(132
)
 

 
$
(132
)
Other comprehensive income (loss)
(132
)
 
(2,224
)
 
(2,356
)
Accumulated other comprehensive income (loss) at March 31, 2019
$
2,527

 
$
18,929

 
$
21,456



(1)
Amounts reclassified out of accumulated other comprehensive income (loss) are included as a component of net periodic pension cost (Note 12) or other (income) expense, net.

7.    Investments

We classify our short-term investments in fixed income securities as available-for-sale debt investments, except for one foreign government security classified as held-to-maturity. The held-to-maturity debt security matured in the first quarter ended March 31, 2020. All of our available-for-sale debt investments as of March 31, 2020 will be available to fund current operations and are recorded at fair value (Note 13). Unrealized gains and losses on our available-for-sale debt investments are included as a separate component of accumulated other comprehensive income (loss), net of tax. Realized gains and losses on our available-for-sale debt investments and declines in value judged to be an impairment are included in other (income) expense, net. The cost of short-term investments matured or sold is based on the average cost method.
  
In determining if and when a decline in value below the adjusted cost of our available-for-sale debt investments is an impairment, we evaluate on an ongoing basis the market conditions, trends of earnings, financial condition, credit ratings, any underlying collateral and other key measures for our short-term investments. An impairment is considered if (i) we have the intent to sell the security, (ii) it is more likely than not that we will be required to sell the security before recovery of the entire amortized cost basis or (iii) we do not expect to recover the entire amortized cost basis of the security. If impairment is considered on condition (i) or (ii) above, the entire difference between the amortized cost and the fair value


- 10-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



of the debt security is recognized in earnings. If an impairment is considered based on condition (iii), the amount representing credit losses will be recognized in earnings and as an allowance for credit losses, and the amount relating to all other factors will be recognized in other comprehensive income.

The following table summarizes our cash equivalents and available-for-sale debt investments:
 
March 31, 2020
 
 
 
Fair Value Level
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses (1)
 
Total Fair Value
 
Level 1
 
Level 2
 
(In thousands)
Cash equivalents
$
351,965

 
$
16

 
$
(11
)
 
$
351,970

 
$
314,676

 
$
37,294

Short-term investments:
 
 
 
 
 
 


 
 
 
 
Asset-backed securities
6,064

 
19

 
(5
)
 
6,078

 

 
6,078

Commercial paper
1,986

 

 

 
1,986

 

 
1,986

Corporate bonds
25,297

 
111

 
(42
)
 
25,366

 

 
25,366

Municipal bonds
2,762

 
7

 

 
2,769

 

 
2,769

U.S. government agency bonds
7,482

 
12

 
(1
)
 
7,493

 

 
7,493

U.S. government bonds
13,991

 
23

 

 
14,014

 
14,014

 

Variable rate demand notes
557

 

 

 
557

 

 
557

Total (2) (3)
$
410,104

 
$
188

 
$
(59
)
 
$
410,233

 
$
328,690

 
$
81,543


(1)
All unrealized losses have been in a continuous loss position for less than 12 months. We do not intend to sell the investments in an unrealized loss position, and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost bases.
(2)
We have available-for-sale debt investments of $6.1 million with contractual maturities from 1 year to 5 years. Expected maturities can differ from contractual maturities because the issuers may have the right to call or prepay obligations without call or prepayment penalties, and we view our available-for-sale debt investments as available for current operations.
(3)
In April 2020, we increased our available-for-sale debt investments by $130.0 million.
The following table summarizes our debt investments as of December 31, 2019:
    
 
December 31, 2019
 
(In thousands)
Cash equivalent money market funds (Level 1) (1)
$
384,474

Short-term investment government bond (Level 2) (2)
6,348


(1)
The cash equivalent money market funds (Level 1) at December 31, 2019 have been corrected to include $286.7 million of cash equivalents that were excluded in previously reported amounts. There was no change to total cash and cash equivalents reported on our consolidated balance sheet. We determined this was immaterial to the prior period but have presented the balance as revised for comparability.
(2)
The fair market value of the security is $6.3 million. The carrying value of the security represents the amortized cost.


- 11-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



8.    Factoring of Accounts Receivable

For certain accounts receivable, we use non-recourse factoring arrangements with third-party financial institutions to manage our working capital and cash flows. Under this program, we sell receivables to a financial institution for cash at a discount to the face amount. As part of the factoring arrangements, we perform certain collection and administrative functions for the receivables sold. For the three months ended March 31, 2020 and 2019, we sold receivables totaling $170.5 million and $155.7 million, net of discounts and fees of $1.0 million and $1.2 million, respectively.

9.    Property, Plant and Equipment

Property, plant and equipment consist of the following:
 
March 31,
2020
 
December 31, 2019
 
(In thousands)
Land
$
220,076

 
$
219,785

Buildings and improvements
1,575,352

 
1,571,653

Machinery and equipment
5,335,424

 
5,303,729

Finance lease assets
34,401

 
34,158

Software and computer equipment
222,459

 
220,264

Furniture, fixtures and other equipment
19,844

 
19,740

Construction in progress
24,618

 
12,593

Total property, plant and equipment
7,432,174

 
7,381,922

Accumulated depreciation and amortization
(5,064,428
)
 
(4,977,072
)
Total property, plant and equipment, net
$
2,367,746

 
$
2,404,850



The following table summarizes our depreciation expense:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Depreciation expense
$
123,501

 
$
135,493




- 12-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



10.    Accrued Expenses

Accrued expenses consist of the following:
 
March 31,
2020
 
December 31,
2019
 
(In thousands)
Payroll and benefits
$
90,561

 
$
115,693

Short-term operating lease liabilities
42,082

 
40,972

Income taxes payable
18,587

 
11,661

Deferred revenue and customer advances
13,881

 
16,177

Accrued severance plan obligations
11,192

 
13,408

Short-term finance lease liabilities
9,168

 
9,121

Accrued interest
3,629

 
11,638

Other accrued expenses
47,364

 
48,556

Total accrued expenses
$
236,464

 
$
267,226




- 13-


AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



11.    Debt

Following is a summary of short-term borrowings and long-term debt:
 
March 31,
2020
 
December 31,
2019
 
(In thousands)
Debt of Amkor Technology, Inc.:
 

 
 

Senior notes:
 

 
 

6.625% Senior notes, due September 2027
$
525,000

 
$
525,000

Debt of subsidiaries:
 

 
 

Amkor Technology Korea, Inc. (8):
 
 
 
$30 million revolving credit facility, LIBOR plus the applicable bank rate (1)
15,000

 

Term loan, fund floating rate plus 1.60%, due June 2020 (2)

 
24,000

Term loan, applicable bank rate plus 2.03%, due July 2022
40,000

 
40,000

Term loan, applicable bank rate plus 2.03%, due September 2022 (3)
60,000

 
60,000

Term loan, LIBOR plus 2.56%, due December 2023 (4)
80,000

 
200,000

Term loan, applicable bank rate plus 1.98%, due December 2028 (2)
90,000

 
66,000

Amkor Technology Japan, Inc.:
 
 
 
Short-term term loans, variable rate (5)
12,005

 
7,071

Term loan, fixed rate at 0.86%, due June 2022
20,923

 
23,018

Term loan, fixed rate at 0.60%, due July 2022
4,649

 
5,064

Term loan, fixed rate at 1.30%, due July 2023
169,239

 
179,541

Term loan, fixed rate at 1.35%, due December 2024 (4)
251,767

 
262,407

Amkor Assembly & Test (Shanghai) Co., Ltd.:
 
 
 
Term loan, LIBOR plus 1.60%, due March 2022
29,000

 
29,000

Term loan, LIBOR Plus 1.40%, due March 2022
19,250

 
19,250

Other:
 
 
 
$250 million senior secured revolving credit facility, LIBOR plus 1.25%-1.75%, due July 2023 (Singapore) (6)
150,000

 

Revolving credit facility, TAIFX plus the applicable bank rate, due December 2024 (Taiwan) (7)
56,000

 
20,000

 
1,522,833

 
1,460,351

Less: Unamortized discount and deferred debt costs, net
(9,811
)
 
(10,117
)
Less: Short-term borrowings and current portion of long-term debt
(141,521
)
 
(144,479
)
Long-term debt
$
1,371,501

 
$
1,305,755


(1)
In October 2019, we renewed our revolving credit facility agreement with availability of $30.0 million. Interest is payable monthly in arrears (2.97% as of March 31, 2020). In March 2020, we borrowed $15.0 million with the principal due in September 2020. As of March 31, 2020, $15.0 million was available to be drawn. In April 2020, we borrowed the remaining $15.0 million with the principal due in October 2020.
(2)
In May 2015, we entered into a term loan agreement pursuant to which we may borrow up to $150.0 million for capital expenditures. Principal is payable at maturity in June 2020. Interest is payable quarterly in arrears, at a fund floating rate plus 1.60%. During the three months ended March 31, 2020, we repaid the full $24.0 million outstanding on this term loan using the proceeds from our term loan due December 2028.


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AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



(3)
In July 2019, we entered into a $140.0 million term loan due September 2022. Principal is payable at maturity and interest is payable quarterly in arrears (3.59% as of March 31, 2020). As of March 31, 2020, $80.0 million was available to be drawn. In April 2020, we borrowed an additional $40.0 million.
(4)
In January 2020, we used proceeds from our term loan due December 2024 to repay $120.0 million of our term loan due December 2023.
(5)
We entered into various short-term term loans which mature semiannually. Principal and interest are payable in monthly installments. Interest as of March 31, 2020 is at TIBOR plus 0.10% to 0.20% (weighted average of 0.21% as of March 31, 2020). As of March 31, 2020, $6.5 million was available to be drawn.
(6)
In July 2018, our subsidiary, Amkor Technology Singapore Holding Pte, Ltd., entered into a $250.0 million senior secured revolving credit facility, which is guaranteed by Amkor Technology, Inc. The availability for our revolving credit facility is based on the amount of eligible accounts receivable. Principal is payable at maturity. Interest is payable monthly at LIBOR plus 1.25% to 1.75% (2.85% as of March 31, 2020). As of March 31, 2020, $100.0 million was available to be drawn.
(7)
In December 2019, we entered into a $56.0 million revolving credit facility. Interest is payable monthly at TAIFX plus the applicable bank rate (3.41% as of March 31, 2020). In December 2019, we borrowed $20.0 million with the principal payable at maturity of the facility in December 2024. In the first quarter of 2020, we borrowed the remaining $36.0 million. In April 2020, we repaid $36.0 million of the revolving credit facility and immediately borrowed $36.0 million under the same agreement at a lower interest rate, with the principal payable in December 2024, based on incurring a certain level of qualified eligible transactions.
(8)
In April 2020, we entered into a term loan agreement pursuant to which we may borrow up to KRW 150.0 billion (approximately US $123 million). Principal is payable at maturity and the variable interest is payable monthly. We immediately borrowed $123.0 million at an interest rate of 2.87%.
Certain of our foreign debt is collateralized by the land, buildings, equipment and accounts receivable in the respective locations. The carrying value of all collateral exceeds the carrying amount of the collateralized debt.
The debt of Amkor Technology, Inc. is structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries. From time to time, Amkor Technology, Inc. and Amkor Technology Singapore Holding Pte, Ltd. guarantee certain debt of our subsidiaries. The agreements governing our indebtedness contain affirmative and negative covenants which restrict our ability to pay dividends and could restrict our operations. We have never paid a dividend to our stockholders, and we do not have any present plans for doing so. We were in compliance with all debt covenants at March 31, 2020.



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AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



12.    Pension Plans

Foreign Defined Benefit Pension Plans

Our subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit pension plans. Charges to expense are based upon actuarial analyses. The components of net periodic pension cost for these defined benefit pension plans are as follows:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Service cost
$
7,536

 
$
7,977

Interest cost
1,247

 
1,324

Expected return on plan assets
(1,374
)
 
(1,618
)
Recognized actuarial gain
14

 
(94
)
Net periodic pension cost
$
7,423

 
$
7,589



The components of net periodic pension cost other than the service cost component are included in other (income) expense, net in our Consolidated Statements of Income.

Defined Contribution Pension Plans

We sponsor defined contribution pension plans in Korea, Malaysia, Taiwan and the U.S. The following table summarizes our defined contribution expense:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Defined contribution expense
$
4,816

 
$
4,405



13.    Fair Value Measurements

The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data.

The fair values of cash, accounts receivable, trade accounts payable, capital expenditures payable, and certain other current assets and accrued expenses approximate carrying values because of their short-term nature. The carrying value of certain other non-current assets and liabilities approximates fair value. Our assets and liabilities recorded at fair value on a recurring basis include restricted cash money market funds and short-term investments, including investments classified as cash equivalents. We also review goodwill for impairment annually during the fourth quarter of each year. Cash equivalent money market funds and restricted cash money market funds are invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts, which are due on demand or carry a maturity date of less than three months when purchased. No restrictions have been imposed on us regarding withdrawal of balances with respect to our cash equivalents as a result of liquidity or other credit market issues affecting the money market funds we invest in or the


- 16-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



counterparty financial institutions holding our deposits. Short-term investments, including money market funds (Note 7), are valued as follows:
Level 1: using quoted market prices in active markets for identical assets.
Level 2: using quoted market prices for similar instruments or non-binding market prices that are corroborated by observable market data. We use inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, and independent pricing vendors to determine the fair value of these assets and liabilities.
Our derivative financial instruments are valued using quoted market prices for similar assets. Counterparties to these derivative contracts are highly rated financial institutions.

We also measure certain assets and liabilities, including property, plant and equipment and goodwill, at fair value on a nonrecurring basis.

We measure the fair value of our debt for disclosure purposes. The following table presents the fair value of financial instruments that are not recorded at fair value on a recurring basis:
 
March 31, 2020
 
December 31, 2019
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
(In thousands)
Senior notes (Level 1)
$
488,701

 
$
519,355

 
$
576,875

 
$
519,211

Revolving credit facilities and term loans (Level 2)
980,901

 
993,667

 
940,756

 
931,023

Total debt
$
1,469,602

 
$
1,513,022

 
$
1,517,631

 
$
1,450,234



The estimated fair value of our senior notes is based primarily on quoted market prices reported on or near the respective balance sheet dates. The estimated fair value of our revolving credit facilities and term loans is calculated using a discounted cash flow analysis, which utilizes market-based assumptions including forward interest rates adjusted for credit risk.

14.    Commitments and Contingencies

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 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 business, liquidity, results of operations, financial condition or cash flows. Although the outcome of these matters is uncertain, we believe that the ultimate outcome of these claims and proceedings, individually and in the aggregate, will not have a material adverse impact to us. Our evaluation of the potential impact of these claims and legal proceedings on our business, liquidity, results of operations, financial condition or cash flows could change in the future.

In accordance with the accounting guidance for loss contingencies, including legal proceedings, lawsuits, pending claims and other legal matters, we accrue for a loss contingency when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. We adjust our accruals from time to time as we receive additional information, but the loss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if we believe they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.



- 17-



AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



15.    Restructuring and Other Exit Activities

As part of our ongoing efforts to improve our manufacturing operations and manage costs, we regularly evaluate our staffing levels and facility requirements compared to business needs. The following table summarizes our exit activities associated with these efforts. “Charges” represents the initial charge related to the exit activity. “Cash Payments” consists of the utilization of “Charges.” “Non-cash Amounts” consists of translation adjustments.
 
Japan Consolidation Activities

During the three months ended March 31, 2020, we recorded restructuring charges of $1.9 million associated with our Japan footprint consolidation efforts. We recorded these charges to selling, general and administrative expenses within the Consolidated Statements of Income. All amounts accrued at March 31, 2020 are classified as current liabilities. We expect to complete our restructuring actions in the first half of fiscal 2021.

 
Facility Costs (1)
 
Employee
Separation
Costs
 
Other Exit Costs (2)
 
Total
 
 
 
 
 
(In thousands)
 
 
Accrual at December 31, 2019
$
2,196

 
$
271

 
$
174

 
$
2,641

Charges
1,310

 
30

 
579

 
1,919

Cash Payments
(2,482
)
 
(300
)
 
(660
)
 
(3,442
)
Non-cash Amounts
(12
)
 
(1
)
 
(2
)
 
(15
)
Accrual at March 31, 2020
$
1,012

 
$

 
$
91

 
$
1,103

 
 
 
 
 
 
 
 
Total cumulative charges incurred to date
$
5,809

 
$
2,740

 
$
1,325

 
$
9,874

Estimated additional charges to be incurred
$
11,000

 
$
5,000

 
$
3,000

 
$
19,000


(1)
Facility costs primarily consist of equipment relocation costs directly resulting from the restructuring actions.
(2)
Other exit costs primarily consist of employee relocation an