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AMKR 8-K Earnings Release 10.27.11


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
October 27, 2011
AMKOR TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
DELAWARE
 
000-29472
 
23-1722724
 
 
 
 
 
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

1900 SOUTH PRICE ROAD
CHANDLER, AZ 85286
(Address of Principal Executive Offices, including Zip Code)

(480) 821-5000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 





Item 2.02. Results of Operations and Financial Condition.
Attached hereto as Exhibit 99.1 and incorporated by reference herein is financial information for Amkor Technology, Inc. for the three and nine months ended September 30, 2011 and forward-looking statements relating to the fourth quarter of 2011 as presented in a press release dated October 27, 2011. The information in this Form 8-K and the exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Exhibit 99.1 discloses free cash flow for the three months ended September 30, 2011. Free cash flow is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles. We define free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. 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 U.S. GAAP and may not be comparable to similarly titled measures reported by other companies. The non-GAAP measure included in our press release has been reconciled to the nearest U.S. GAAP measure as required under SEC rules regarding the use of non-GAAP financial measures.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
 
 
 
99.1
 
Text of Press Release dated October 27, 2011, which is furnished (not filed) herewith.

SIGNATURES
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 hereunto duly authorized.
 
AMKOR TECHNOLOGY, INC.
 
 
 
By:  
/s/ Joanne Solomon  
 
 
 
Joanne Solomon 
 
 
 
Executive Vice President and Chief Financial Officer 
 
 
Date: October 27, 2011





EXHIBIT INDEX:
Exhibit
 
Description
99.1
 
Text of Press Release dated October 27, 2011


AMKR 8-K Earnings Release Ex-99.1 10.27.11




 
News Release


Amkor Technology Reports Third Quarter 2011 Financial Results

Third Quarter 2011

•
Net sales $740 million
•
Gross margin 17%
•
Net income $27 million
•
Earnings per diluted share $0.11

CHANDLER, Ariz. - October 27, 2011 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor assembly and test services, today announced financial results for the third quarter ended September 30, 2011, with net sales of $740 million, net income of $27 million, and earnings per diluted share of $0.11.

“Sequential sales were up 8%, driven by solid demand in communications, particularly for smartphones and tablets, and the seasonal increase in the consumer area led by our strong position in gaming,” said Ken Joyce, Amkor's president and chief executive officer. “Although gross margin and earnings per share were within our guidance range, the profitability challenges we have been experiencing in 2011 continue to be an issue. We are committed to addressing these challenges and are currently focused on rationalizing our cost structure and improving utilization.”

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

•
Net Sales: $740 million, up 8% from $688 million in the prior quarter, and down 7% from $794 million in the third quarter 2010
•
Gross Margin: 17%, compared to 19% in the prior quarter, and 24% in the third quarter 2010
•
Net Income: $27 million, up from $14 million in the prior quarter, and down from $78 million in the third quarter 2010
•
Earnings Per Diluted Share: $0.11, up from $0.07 in the prior quarter, and down from $0.30 in the third quarter 2010

“Our third quarter gross margin of 17% declined from the second quarter due primarily to higher gold prices and restructuring costs associated with downsizing our work force as part of our ongoing cost reduction initiatives,” said Joanne Solomon, Amkor's executive vice president and chief financial officer. “We recorded a charge of $5 million in the quarter for the restructuring (or $0.02 per diluted share), with most of the cost being included in our cost of goods sold.”

“Capital additions were $123 million during the third quarter, primarily in support of our newest and most advanced interconnect technologies for wireless communications packages, including flip chip CSP, flip chip stacked CSP and fine pitch copper pillar flip chip,” said Solomon.





“On August 30, 2011, the Board of Directors authorized the repurchase of up to $150 million of our common stock,” continued Solomon. “During the third quarter we repurchased a total of 10.9 million shares for a purchase price of $49 million. We believe this investment in our company enhances stockholder value and reflects our confidence in Amkor's future.”

Cash and cash equivalents were $483 million, and net debt was $843 million, at September 30, 2011.

Selected operating data for the third quarter 2011 is included in a section before the financial statements.

Business Outlook

“Based on the current level of demand for smartphones and tablets, our wireless communications business is expected to remain strong in the fourth quarter,” said Joyce. “However, we see a general softening in demand in other areas during the fourth quarter driven by the uncertain macroeconomic environment coupled with the normal seasonal decline in gaming.”

“Capital additions for the fourth quarter are expected to be in the range of $100 million to $125 million. These investments are targeted to support specific opportunities for key customers in smartphones and tablets, for research and development of the next generation interconnect technologies such as wafer-level fan out and Through Silicon Via, and for cost-down initiatives in our factories,” added Joyce.

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

•
Net sales of $650 million to $700 million, down 5% to 12% from the prior quarter
•
Gross margin of 15% to 18%
•
Net income of $3 million to $25 million, or $0.03 to $0.11 per diluted share
•
Capital additions of $100 million to $125 million for the fourth quarter, and capital additions of $425 million to $450 million for the full year

Conference Call Information

Amkor will conduct a conference call on October 27, 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 877-941-0843. A replay of the call will be made available at Amkor's web site or by dialing 800-406-7325 (access pass code #4478852). 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 about 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: our continuing challenges to profitability and our focus on rationalizing our cost structure and improving utilization, our ongoing cost reduction initiatives, the level of demand for smartphones and tablets and the strength of our wireless communications business in the fourth quarter, the demand in other business areas in the fourth quarter, the uncertain macroeconomic environment and demand for gaming in the fourth quarter, the amount and timing of our capital additions, the targeting of our capital additions to support specific opportunities for key customers in smartphones and tablets, for research and development of the next generation interconnect technologies, and for cost-down initiatives in our factories, and our current business outlook for the fourth 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:

•
the highly unpredictable nature of the semiconductor industry;
•
the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers;
•
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;
•
dependence on key 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;
•
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;
•
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.





Contact:

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



 




AMKOR TECHNOLOGY, INC.
Selected Operating Data
 
Q3 2011
 
 
Q2 2011
 
 
Q3 2010
 
Sales Data:
 
 
 
 
 
 
 
 
Packaging services (in millions):
 
 
 
 
 
 
 
 
Chip scale package
$
247

 
 
$
211

 
 
$
244

 
Leadframe
180

 
 
188

 
 
204

 
Ball grid array
194

 
 
167

 
 
212

 
Other packaging
46

 
 
46

 
 
52

 
Packaging services
667

 
 
612

 
 
712

 
Test services
73

 
 
76

 
 
82

 
Total sales
$
740

 
 
$
688

 
 
$
794

 
 
 
 
 
 
 
 
 
 
Packaging services:
 
 
 
 
 
 
 
 
Chip scale package
34

%
 
31

%
 
31

%
Leadframe
24

%
 
27

%
 
26

%
Ball grid array
26

%
 
24

%
 
27

%
Other packaging
6

%
 
7

%
 
6

%
Packaging services
90

%
 
89

%
 
90

%
Test services
10

%
 
11

%
 
10

%
Total sales
100

%
 
100

%
 
100

%
 
 
 
 
 
 
 
 
 
Packaged units (in millions):
 
 
 
 
 
 
 
 
Chip scale package
459

 
 
440

 
 
618

 
Leadframe
1,511

 
 
1,671

 
 
2,185

 
Ball grid array
83

 
 
72

 
 
72

 
Other packaging
4

 
 
3

 
 
8

 
Total packaged units
2,057

 
 
2,186

 
 
2,883

 
 
 
 
 
 
 
 
 
 
Net sales from top ten customers
63

%
 
60

%
 
55

%
 
 
 
 
 
 
 
 
 
Capacity Utilization (Packaging and test utilization separately presented beginning in Q4 2010. Prior periods were recalculated based on current methodology for comparability):
 
 
 
 
 
 
 
 
Packaging
79

%
 
76

%
 
85

%
Test
76

%
 
78

%
 
87

%
 
 
 
 
 
 
 
 
 
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, tablets, Ethernet, WiMAX, wireless LAN)
40

%
 
38

%
 
34

%
Consumer (gaming, set top boxes, TV, portable media)
27

%
 
26

%
 
30

%
Computing (PCs, servers, displays, hard disk drive, printers)
12

%
 
12

%
 
14

%
Networking (infrastructure, routers, network servers)
12

%
 
13

%
 
13

%
Other (auto, industrial)
9

%
 
11

%
 
9

%
Total
100

%
 
100

%
 
100

%
 
 
 
 
 
 
 
 
 
Gross Margin Data:
 
 
 
 
 
 
 
 
Net sales
100

%
 
100

%
 
100

%
Cost of sales:
 
 
 
 
 
 
 
 
Materials
45

%
 
43

%
 
43

%
Labor
15

%
 
15

%
 
12

%
Other manufacturing
23

%
 
23

%
 
21

%
Gross margin
17

%
 
19

%
 
24

%




AMKOR TECHNOLOGY, INC.
Selected Operating Data
 
Q3 2011
 
 
Q2 2011
 
 
Q3 2010
 
 
(In millions, except per share data)
 
Capital Investment Data:
 
 
 
 
 
 
 
 
Property, plant and equipment additions
$
123

 
 
$
97

 
 
$
171

 
Net change in related accounts payable and deposits
(23
)
 
 
14

 
 
(37
)
 
Purchases of property, plant and equipment
$
100

 
 
$
111

 
 
$
134

 
Depreciation and amortization
$
83

 
 
$
83

 
 
$
83

 
 
 
 
 
 
 
 
 
 
Free Cash Flow Data:
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
142

 
 
$
114

 
 
$
176

 
Less purchases of property, plant and equipment
(100
)
 
 
(111
)
 
 
(134
)
 
Free cash flow*
$
42

 
 
$
3

 
 
$
42

 
 
 
 
 
 
 
 
 
 
Earnings per Share Data:
 
 
 
 
 
 
 
 
Net income attributable to Amkor - basic
$
27

 
 
$
14

 
 
$
78

 
 
 
 
 
 
 
 
 
 
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

 
Interest on 6.0% convertible notes due 2014, net of tax
4

 
 
5

 
 
4

 
Net income attributable to Amkor - diluted
$
31

 
 
$
19

 
 
$
84

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic**
195

 
 
197

 
 
183

 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
Stock options and unvested restricted shares
—

 
 
—

 
 
—

 
2.5% convertible notes due 2011
—

 
 
—

 
 
3

 
6.25% convertible notes due 2013
—

 
 
—

 
 
13

 
6.0% convertible notes due 2014
83

 
 
83

 
 
83

 
Weighted average shares outstanding - diluted
278

 
 
280

 
 
282

 
 
 
 
 
 
 
 
 
 
Net income attributable to Amkor per common share:
 
 
 
 
 
 
 
 
Basic
$
0.14

 
 
$
0.07

 
 
$
0.42

 
Diluted
$
0.11

 
 
$
0.07

 
 
$
0.30

 
 

*
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 U.S. 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 U.S. GAAP, and our definition of free cash flow may not be comparable to similarly titled measures reported by other companies.
 
 
**
During the third quarter we repurchased a total of 10.9 million shares for a purchase price of $48.7 million. From October 1, 2011, through October 26, 2011, we repurchased an additional 6.2 million shares for a purchase price of $28.7 million, for a cumulative total of 17.1 million shares for a purchase price of $77.4 million.





AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
 
 
 
2011
 
2010
 
2011
 
2010
 
(In thousands, except per share data)
Net sales
$
740,007

 
$
793,971

 
$
2,092,590

 
$
2,188,874

Cost of sales
617,768

 
605,713

 
1,713,848

 
1,684,461

Gross profit
122,239

 
188,258

 
378,742

 
504,413

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
65,011

 
57,735

 
190,853

 
180,387

Research and development
13,233

 
12,669

 
37,921

 
36,437

Total operating expenses
78,244

 
70,404

 
228,774

 
216,824

Operating income
43,995

 
117,854

 
149,968

 
287,589

Other expense (income):
 
 
 
 
 
 
 
Interest expense
17,594

 
19,614

 
55,992

 
66,393

Interest expense, related party
3,492

 
3,812

 
8,902

 
11,437

Interest income
(648
)
 
(695
)
 
(1,788
)
 
(2,275
)
Foreign currency (gain) loss
(3,005
)
 
8,456

 
1,658

 
9,010

Loss on debt retirement, net
—

 
235

 
15,531

 
18,042

Equity in earnings of unconsolidated affiliate
(3,034
)
 
(2,174
)
 
(6,641
)
 
(4,883
)
Other income, net
(226
)
 
(85
)
 
(695
)
 
(475
)
Total other expense, net
14,173

 
29,163

 
72,959

 
97,249

Income before income taxes
29,822

 
88,691

 
77,009

 
190,340

Income tax expense
2,499

 
10,321

 
9,475

 
8,954

Net income
27,323

 
78,370

 
67,534

 
181,386

Net loss (income) attributable to noncontrolling interests
44

 
(350
)
 
(576
)
 
(19
)
Net income attributable to Amkor
$
27,367

 
$
78,020

 
$
66,958

 
$
181,367

 
 
 
 
 
 
 
 
Net income attributable to Amkor per common share:
 
 
 
 
 
 
 
Basic
$
0.14

 
$
0.42

 
$
0.34

 
$
0.99

Diluted
$
0.11

 
$
0.30

 
$
0.28

 
$
0.70

 
 
 
 
 
 
 
 
Shares used in computing per common share amounts:
 
 
 
 
 
 
 
Basic
195,364

 
183,340

 
195,510

 
183,280

Diluted
278,068

 
282,495

 
278,529

 
282,523






AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30, 2011
 
December 31, 2010
 
 
 
(In thousands, except per share data)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
483,390

 
$
404,998

Restricted cash
19,719

 
17,782

Accounts receivable:
 
 
 
Trade, net of allowances
351,636

 
392,327

Other
22,326

 
17,970

Inventories
224,046

 
191,072

Other current assets
35,332

 
37,918

Total current assets
1,136,449

 
1,062,067

 
 
 
 
Property, plant and equipment, net
1,614,786

 
1,537,226

Intangibles, net
9,725

 
13,524

Investments
36,883

 
28,215

Restricted cash
2,178

 
1,945

Other assets
89,366

 
93,845

Total assets
$
2,889,387

 
$
2,736,822

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term borrowings and current portion of long-term debt
$
100,322

 
$
150,081

Trade accounts payable
470,146

 
443,333

Accrued expenses
204,807

 
178,794

Total current liabilities
775,275

 
772,208

 
 
 
 
Long-term debt
1,000,638

 
964,219

Long-term debt, related party
225,000

 
250,000

Pension and severance obligations
118,492

 
103,543

Other non-current liabilities
6,454

 
10,171

Total liabilities
2,125,859

 
2,100,141

 
 
 
 
Equity:
 
 
 
Amkor stockholders' equity:
 
 
 
Preferred stock
—

 
—

Common stock
197

 
183

Additional paid-in capital
1,610,274

 
1,504,927

Accumulated deficit
(823,312
)
 
(890,270
)
Accumulated other comprehensive income
19,024

 
15,457

Treasury stock
(49,899
)
 
(284
)
Total Amkor stockholders' equity
756,284

 
630,013

Noncontrolling interests in subsidiaries
7,244

 
6,668

Total equity
763,528

 
636,681

Total liabilities and equity
$
2,889,387

 
$
2,736,822





AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Nine Months Ended
September 30,
 
 
2011
 
2010
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
67,534

 
$
181,386

Depreciation and amortization
249,543

 
237,225

Loss on debt retirement, net
10,557

 
10,562

Other operating activities and non-cash items
1,537

 
(707
)
Changes in assets and liabilities
46,621

 
(61,504
)
Net cash provided by operating activities
375,792

 
366,962

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(324,349
)
 
(276,672
)
Proceeds from the sale of property, plant and equipment
15,333

 
2,399

Financing lease payment from unconsolidated affiliate
7,741

 
10,087

Other investing activities
(5,654
)
 
(10,781
)
Net cash used in investing activities
(306,929
)
 
(274,967
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings under revolving credit facilities
26,567

 
18,261

Payments under revolving credit facilities
(21,567
)
 
(49,253
)
Proceeds from issuance of long-term debt
348,236

 
611,007

Proceeds from issuance of long-term debt, related party
75,000

 
—

Payments of long-term debt, net of redemption premiums and discounts
(373,655
)
 
(643,793
)
Payments for debt issuance costs
(5,875
)
 
(7,737
)
Payments for repurchase of common stock
(41,543
)
 
—

Proceeds from the issuance of stock through share-based compensation plans
933

 
881

Payments of tax withholding for restricted shares
(793
)
 
—

Net cash provided by (used in) financing activities
7,303

 
(70,634
)
 
 
 
 
Effect of exchange rate fluctuations on cash and cash equivalents
2,226

 
731

 
 
 
 
Net increase in cash and cash equivalents
78,392

 
22,092

Cash and cash equivalents, beginning of period
404,998

 
395,406

Cash and cash equivalents, end of period
$
483,390

 
$
417,498