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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 | June 30, 2019 |
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)
(480) 821-5000
(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 July 26, 2019 was 239,704,033.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2019
TABLE OF CONTENTS
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 2019 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 focus of our research and development activities, (5) the anticipated impact of the Tax Cuts and Jobs Act (the “Tax Act”) on our taxes, (6) 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, (7) the creation or release of valuation allowances related to taxes in the future, (8) our repurchase or repayment of outstanding debt, (9) payment of dividends, (10) compliance with our covenants, (11) expected contributions to foreign pension plans, (12) liability for unrecognized tax benefits and the potential impact of our unrecognized tax benefits on our effective tax rate, (13) the effect of foreign currency exchange rate exposure on our financial results, (14) the volatility of the trading price of our common stock, (15) changes to our internal controls related to integration of acquired operations and implementation of an enterprise resource planning system, (16) our efforts to enlarge our customer base in certain geographic areas and markets, (17) demand for advanced packages in mobile and automotive devices and our technology leadership and potential growth in this market, and (18) 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.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In thousands, except per share data) |
Net sales | $ | 895,305 |
| | $ | 1,065,684 |
| | $ | 1,790,269 |
| | $ | 2,091,003 |
|
Cost of sales | 771,851 |
| | 895,967 |
| | 1,546,054 |
| | 1,763,515 |
|
Gross profit | 123,454 |
| | 169,717 |
| | 244,215 |
| | 327,488 |
|
Selling, general and administrative | 64,758 |
| | 74,700 |
| | 136,345 |
| | 155,423 |
|
Research and development | 36,186 |
| | 41,076 |
| | 71,940 |
| | 82,005 |
|
Total operating expenses | 100,944 |
| | 115,776 |
| | 208,285 |
| | 237,428 |
|
Operating income | 22,510 |
| | 53,941 |
| | 35,930 |
| | 90,060 |
|
Interest expense | 18,653 |
| | 21,127 |
| | 37,926 |
| | 41,138 |
|
Other (income) expense, net | 6,966 |
| | (11,001 | ) | | 2,401 |
| | (7,569 | ) |
Total other expense, net | 25,619 |
| | 10,126 |
| | 40,327 |
| | 33,569 |
|
Income (loss) before taxes | (3,109 | ) | | 43,815 |
| | (4,397 | ) | | 56,491 |
|
Income tax expense | 5,897 |
| | 10,631 |
| | 27,277 |
| | 13,112 |
|
Net income (loss) | (9,006 | ) | | 33,184 |
| | (31,674 | ) | | 43,379 |
|
Net income attributable to non-controlling interests | (444 | ) | | (593 | ) | | (655 | ) | | (1,244 | ) |
Net income (loss) attributable to Amkor | $ | (9,450 | ) | | $ | 32,591 |
| | $ | (32,329 | ) | | $ | 42,135 |
|
| | | | | | | |
Net income (loss) attributable to Amkor per common share: | | | | | |
| | |
|
Basic | $ | (0.04 | ) | | $ | 0.14 |
| | $ | (0.14 | ) | | $ | 0.18 |
|
Diluted | $ | (0.04 | ) | | $ | 0.14 |
| | $ | (0.14 | ) | | $ | 0.18 |
|
| | | | | | | |
Shares used in computing per common share amounts: | | | | | |
| | |
Basic | 239,508 |
| | 239,351 |
| | 239,461 |
| | 239,283 |
|
Diluted | 239,508 |
| | 239,804 |
| | 239,461 |
| | 239,805 |
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In thousands) |
Net income (loss) | $ | (9,006 | ) | | $ | 33,184 |
| | $ | (31,674 | ) | | $ | 43,379 |
|
Other comprehensive income (loss), net of tax: | | | | | | | |
Adjustments to unrealized components of defined benefit pension plans | (57 | ) | | (42 | ) | | (189 | ) | | (81 | ) |
Foreign currency translation | 5,918 |
| | (11,144 | ) | | 3,694 |
| | 3,947 |
|
Total other comprehensive income (loss) | 5,861 |
| | (11,186 | ) | | 3,505 |
| | 3,866 |
|
Comprehensive income (loss) | (3,145 | ) | | 21,998 |
| | (28,169 | ) | | 47,245 |
|
Comprehensive income attributable to non-controlling interests | (444 | ) | | (593 | ) | | (655 | ) | | (1,244 | ) |
Comprehensive income (loss) attributable to Amkor | $ | (3,589 | ) | | $ | 21,405 |
| | $ | (28,824 | ) | | $ | 46,001 |
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| | | | | | | |
| June 30, 2019 | | December 31, 2018 |
| (In thousands, except per share data) |
ASSETS |
Current assets: | |
| | |
|
Cash and cash equivalents | $ | 551,438 |
| | $ | 681,569 |
|
Restricted cash | 2,590 |
| | 2,589 |
|
Accounts receivable, net of allowances | 702,466 |
| | 724,456 |
|
Inventories | 217,638 |
| | 230,589 |
|
Other current assets | 38,988 |
| | 32,005 |
|
Total current assets | 1,513,120 |
| | 1,671,208 |
|
Property, plant and equipment, net | 2,515,533 |
| | 2,650,448 |
|
Operating lease right of use asset | 132,763 |
| | — |
|
Goodwill | 26,159 |
| | 25,720 |
|
Restricted cash | 2,878 |
| | 3,893 |
|
Other assets | 118,831 |
| | 144,178 |
|
Total assets | $ | 4,309,284 |
| | $ | 4,495,447 |
|
LIABILITIES AND EQUITY |
Current liabilities: | |
| | |
|
Short-term borrowings and current portion of long-term debt | $ | 198,230 |
| | $ | 114,579 |
|
Trade accounts payable | 459,548 |
| | 530,398 |
|
Capital expenditures payable | 134,500 |
| | 255,237 |
|
Accrued expenses | 246,615 |
| | 258,209 |
|
Total current liabilities | 1,038,893 |
| | 1,158,423 |
|
Long-term debt | 1,109,945 |
| | 1,217,732 |
|
Pension and severance obligations | 174,897 |
| | 184,321 |
|
Long-term operating lease liability | 80,049 |
| | — |
|
Other non-current liabilities | 74,324 |
| | 79,071 |
|
Total liabilities | 2,478,108 |
| | 2,639,547 |
|
Commitments and contingencies (Note 15) |
|
| |
|
|
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; 285,510 and 285,352 shares issued; and 239,532 and 239,385 shares outstanding in 2019 and 2018, respectively | 285 |
| | 285 |
|
Additional paid-in capital | 1,913,103 |
| | 1,909,425 |
|
Retained earnings | 80,860 |
| | 113,189 |
|
Accumulated other comprehensive income (loss) | 27,317 |
| | 23,812 |
|
Treasury stock, at cost, 45,978 and 45,967 shares, in 2019 and 2018, respectively | (216,254 | ) | | (216,171 | ) |
Total Amkor stockholders’ equity | 1,805,311 |
| | 1,830,540 |
|
Non-controlling interests in subsidiaries | 25,865 |
| | 25,360 |
|
Total equity | 1,831,176 |
| | 1,855,900 |
|
Total liabilities and equity | $ | 4,309,284 |
| | $ | 4,495,447 |
|
The accompanying notes are an integral part of these statements.
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 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 |
|
Net income (loss) | — |
| | — |
| | — |
| | (9,450 | ) | | — |
| | — |
| | — |
| | (9,450 | ) | | 444 |
| | (9,006 | ) |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 5,861 |
| | — |
| | — |
| | 5,861 |
| | — |
| | 5,861 |
|
Treasury stock acquired through surrender of shares for tax withholding | — |
| | — |
| | — |
| | — |
| | — |
| | (6 | ) | | (35 | ) | | (35 | ) | | — |
| | (35 | ) |
Issuance of stock through share-based compensation plans | 80 |
| | — |
| | 150 |
| | — |
| | — |
| | — |
| | — |
| | 150 |
| | — |
| | 150 |
|
Share-based compensation | — |
| | — |
| | 1,774 |
| | — |
| | — |
| | — |
| | — |
| | 1,774 |
| | — |
| | 1,774 |
|
Subsidiary dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (150 | ) | | (150 | ) |
Balance at June 30, 2019 | 285,510 |
| | $ | 285 |
| | $ | 1,913,103 |
| | $ | 80,860 |
| | $ | 27,317 |
| | (45,978 | ) | | $ | (216,254 | ) | | $ | 1,805,311 |
| | $ | 25,865 |
| | $ | 1,831,176 |
|
| | | | | | | | | | | | | | | | | | | |
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) | — |
| | — |
| | — |
| | (32,329 | ) | | — |
| | — |
| | — |
| | (32,329 | ) | | 655 |
| | (31,674 | ) |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 3,505 |
| | — |
| | — |
| | 3,505 |
| | — |
| | 3,505 |
|
Treasury stock acquired through surrender of shares for tax withholding | — |
| | — |
| | — |
| | — |
| | — |
| | (11 | ) | | (83 | ) | | (83 | ) | | — |
| | (83 | ) |
Issuance of stock through share-based compensation plans | 158 |
| | — |
| | 436 |
| | — |
| | — |
| | — |
| | — |
| | 436 |
| | — |
| | 436 |
|
Share-based compensation | — |
| | — |
| | 3,242 |
| | — |
| | — |
| | — |
| | — |
| | 3,242 |
| | — |
| | 3,242 |
|
Subsidiary dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (150 | ) | | (150 | ) |
Balance at June 30, 2019 | 285,510 |
| | $ | 285 |
| | $ | 1,913,103 |
| | $ | 80,860 |
| | $ | 27,317 |
| | (45,978 | ) | | $ | (216,254 | ) | | $ | 1,805,311 |
| | $ | 25,865 |
| | $ | 1,831,176 |
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Additional Paid- In Capital | | Retained Earnings (Accumulated Deficit) | | 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 March 31, 2018 | 285,284 |
| | $ | 285 |
| | $ | 1,905,666 |
| | $ | (4,359 | ) | | $ | 37,571 |
| | (45,950 | ) | | $ | (216,038 | ) | | $ | 1,723,125 |
| | $ | 23,949 |
| | $ | 1,747,074 |
|
Net income | — |
| | — |
| | — |
| | 32,591 |
| | — |
| | — |
| | — |
| | 32,591 |
| | 593 |
| | 33,184 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | (11,186 | ) | | — |
| | — |
| | (11,186 | ) | | — |
| | (11,186 | ) |
Treasury stock acquired through surrender of shares for tax withholding | — |
| | — |
| | — |
| | — |
| | — |
| | (6 | ) | | (49 | ) | | (49 | ) | | — |
| | (49 | ) |
Issuance of stock through share-based compensation plans | 38 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
Share-based compensation | — |
| | — |
| | 1,269 |
| | — |
| | — |
| | — |
| | — |
| | 1,269 |
| | — |
| | 1,269 |
|
Subsidiary dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (135 | ) | | (135 | ) |
Balance at June 30, 2018 | 285,322 |
| | $ | 285 |
| | $ | 1,906,936 |
| | $ | 28,232 |
| | $ | 26,385 |
| | (45,956 | ) | | $ | (216,087 | ) | | $ | 1,745,751 |
| | $ | 24,407 |
| | $ | 1,770,158 |
|
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2017 | 285,129 |
| | $ | 285 |
| | $ | 1,903,357 |
| | $ | (13,903 | ) | | $ | 22,519 |
| | (45,945 | ) | | $ | (215,982 | ) | | $ | 1,696,276 |
| | $ | 23,433 |
| | $ | 1,719,709 |
|
Net income | — |
| | — |
| | — |
| | 42,135 |
| | — |
| | — |
| | — |
| | 42,135 |
| | 1,244 |
| | 43,379 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 3,866 |
| | — |
| | — |
| | 3,866 |
| | — |
| | 3,866 |
|
Treasury stock acquired through surrender of shares for tax withholding | — |
| | — |
| | — |
| | — |
| | — |
| | (11 | ) | | (105 | ) | | (105 | ) | | — |
| | (105 | ) |
Issuance of stock through share-based compensation plans | 193 |
| | — |
| | 1,023 |
| | — |
| | — |
| | — |
| | — |
| | 1,023 |
| | — |
| | 1,023 |
|
Share-based compensation | — |
| | — |
| | 2,556 |
| | — |
| | — |
| | — |
| | — |
| | 2,556 |
| | — |
| | 2,556 |
|
Subsidiary dividends to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (270 | ) | | (270 | ) |
Balance at June 30, 2018 | 285,322 |
| | $ | 285 |
| | $ | 1,906,936 |
| | $ | 28,232 |
| | $ | 26,385 |
| | (45,956 | ) | | $ | (216,087 | ) | | $ | 1,745,751 |
| | $ | 24,407 |
| | $ | 1,770,158 |
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| | | | | | | |
| For the Six Months Ended June 30, |
| 2019 | | 2018 |
| (In thousands) |
Cash flows from operating activities: | |
| | |
|
Net income (loss) | $ | (31,674 | ) | | $ | 43,379 |
|
Depreciation and amortization | 268,819 |
| | 285,515 |
|
Other operating activities and non-cash items | 33,112 |
| | (3,239 | ) |
Changes in assets and liabilities | (101,329 | ) | | (119,276 | ) |
Net cash provided by operating activities | 168,928 |
| | 206,379 |
|
Cash flows from investing activities: | |
| | |
|
Payments for property, plant and equipment | (273,672 | ) | | (389,568 | ) |
Proceeds from sale of property, plant and equipment | 8,247 |
| | 603 |
|
Proceeds from insurance recovery for property, plant and equipment | 1,538 |
| | — |
|
Other investing activities | 2,864 |
| | 2,647 |
|
Net cash used in investing activities | (261,023 | ) | | (386,318 | ) |
Cash flows from financing activities: | |
| | |
|
Proceeds from revolving credit facilities | 85,000 |
| | — |
|
Payments of revolving credit facilities | (5,000 | ) | | — |
|
Proceeds from short-term debt | 29,781 |
| | 7,264 |
|
Payments of short-term debt | (25,548 | ) | | (31,546 | ) |
Proceeds from issuance of long-term debt | 614,375 |
| | 64,000 |
|
Payments of long-term debt | (732,178 | ) | | (77,015 | ) |
Payments of finance lease obligations | (2,746 | ) | | (1,689 | ) |
Other financing activities | (3,865 | ) | | 492 |
|
Net cash used in financing activities | (40,181 | ) | | (38,494 | ) |
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash | 1,131 |
| | 1,347 |
|
Net decrease in cash, cash equivalents and restricted cash | (131,145 | ) | | (217,086 | ) |
Cash, cash equivalents and restricted cash, beginning of period | 688,051 |
| | 602,851 |
|
Cash, cash equivalents and restricted cash, end of period | $ | 556,906 |
| | $ | 385,765 |
|
Non-cash investing and financing activities: | | | |
Property, plant and equipment included in capital expenditures payable | $ | 135,126 |
| | $ | 239,460 |
|
Right of use assets acquired through finance lease liabilities | 2,304 |
| | 6,477 |
|
Right of use assets acquired through operating lease liabilities | 21,238 |
| | — |
|
The accompanying notes are an integral part of these statements.
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 June 30, 2019, and for the three and six months ended June 30, 2019 and 2018, are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The December 31, 2018 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, 2018, filed on Form 10-K with the SEC on February 22, 2019. The results of operations for the three and six months ended June 30, 2019 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.
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.
Goodwill. The balance of goodwill in our Consolidated Balance Sheets reflects adjustments for foreign currency translation.
Unbilled Receivables. Total unbilled receivables as of June 30, 2019 and December 31, 2018 were $88.7 million and $89.3 million, respectively.
2. New Accounting Standards
Recently Adopted Standards
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which was subsequently amended and clarified. Topic 842 requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. The standard also requires the lessee to recognize a right-of-use asset and a corresponding lease liability for both finance leases and operating leases. For finance leases, the lessee recognizes interest expense and amortization of the right-of-use asset, and for operating leases, the lessee recognizes a straight-line lease expense. The standard permits the use of two alternative transition approaches, either with application in all comparative periods presented, or with application beginning with the effective date without restating comparative period financial statements.
Effective January 1, 2019, we adopted the requirements of Topic 842 using the modified transition approach without restating the comparative period financial statements. The new standard resulted in increases in our operating lease right of use asset, accrued expenses and long-term operating lease liability account balances to record our operating leases on our Consolidated Balance Sheet. The new standard also resulted in additional disclosures for our operating and finance leases (Note 10).
In accordance with Topic 842, we applied practical expedients permitted under the transition guidance, which allowed us to not:
| |
• | Reassess whether any existing contracts are or contain a lease, |
| |
• | Reassess the lease classification for any existing contracts, |
| |
• | Reassess initial direct costs for any existing leases, and |
| |
• | Separate non-lease components from lease components and instead to account for them as a single lease component for all asset classes. |
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
3. Net Sales by Product Group and End Market
Net sales by product group consist of the following:
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In thousands) | | (In thousands) |
Advanced products (1) | $ | 432,639 |
| | $ | 496,241 |
| | $ | 855,084 |
| | $ | 971,993 |
|
Mainstream products (2) | 462,666 |
| | 569,443 |
| | 935,185 |
| | 1,119,010 |
|
Total net sales | $ | 895,305 |
| | $ | 1,065,684 |
| | $ | 1,790,269 |
| | $ | 2,091,003 |
|
| |
(1) | Advanced products include flip chip and wafer-level processing and related test services. |
| |
(2) | Mainstream products include wirebond packaging and related test services. |
Net sales by end market consist of the following:
|
| | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
Communications (handheld devices, smartphones, tablets) | 37 | % | | 42 | % | | 38 | % | | 42 | % |
Automotive, industrial and other (driver assist, infotainment, performance, safety) | 29 | % | | 26 | % | | 29 | % | | 26 | % |
Computing (datacenter, infrastructure, PC/laptop, storage) | 19 | % | | 19 | % | | 19 | % | | 19 | % |
Consumer (connected home, set-top boxes, televisions, visual imaging, wearables) | 15 | % | | 13 | % | | 14 | % | | 13 | % |
Total net sales | 100 | % | | 100 | % | | 100 | % | | 100 | % |
4. Other Income and Expense
Other income and expense consists of the following:
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In thousands) |
Interest income | $ | (1,598 | ) | | $ | (955 | ) | | $ | (3,662 | ) | | $ | (1,943 | ) |
Foreign currency (gain) loss, net | 606 |
| | (7,110 | ) | | (1,407 | ) | | (2,397 | ) |
Loss on debt retirement | 8,356 |
| | 18 |
| | 8,356 |
| | 18 |
|
Other | (398 | ) | | (2,954 | ) | | (886 | ) | | (3,247 | ) |
Other (income) expense, net | $ | 6,966 |
| | $ | (11,001 | ) | | $ | 2,401 |
| | $ | (7,569 | ) |
5. Income Taxes
Income tax expense of $27.3 million for the six months ended June 30, 2019 reflects income taxes, foreign withholding taxes and minimum taxes. Income tax expense for the six months ended June 30, 2019 also includes a $14.9 million non-cash discrete tax expense primarily for the recognition of a valuation allowance for certain deferred tax assets.
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
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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. Based on current projections of future taxable income in foreign jurisdictions, foreign deferred tax assets of $14.9 million are not expected to be realized, including certain tax credit carryforwards that are expected to expire unused.
We maintain a valuation allowance on a portion of our U.S. net deferred tax assets for deferred interest expense carryforwards, net operating loss carryforwards and foreign tax credit carryforwards that are expected to expire unused. 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 were $25.3 million at December 31, 2018 and $25.7 million as of June 30, 2019. 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.
We have tax returns that are open to examination in various jurisdictions for tax years 2012-2018. 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. Current examinations include income tax returns in the Philippines (2012-2013), Singapore (2014-2016) and Korea (2015-2018).
6. 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 June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In thousands, except per share data) |
Net income (loss) attributable to Amkor common stockholders | $ | (9,450 | ) | | $ | 32,591 |
| | $ | (32,329 | ) | | $ | 42,135 |
|
| | | | | | | |
Weighted-average number of common shares outstanding — basic | 239,508 |
| | 239,351 |
| | 239,461 |
| | 239,283 |
|
Effect of dilutive securities: | |
| | |
| | |
| | |
|
Stock options and restricted share awards | — |
| | 453 |
| | — |
| | 522 |
|
Weighted-average number of common shares outstanding — diluted | 239,508 |
| | 239,804 |
| | 239,461 |
| | 239,805 |
|
Net income (loss) attributable to Amkor per common share: | |
| | |
| | |
| | |
|
Basic | $ | (0.04 | ) | | $ | 0.14 |
| | $ | (0.14 | ) | | $ | 0.18 |
|
Diluted | (0.04 | ) | | 0.14 |
| | (0.14 | ) | | 0.18 |
|
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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 June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In thousands) |
Stock options and restricted share awards | 7,618 |
| | 3,644 |
| | 7,618 |
| | 3,524 |
|
7. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss), net of tax, consist of the following:
|
| | | | | | | | | | | |
| Defined Benefit Pension | | 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 | — |
| | 3,694 |
| | 3,694 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | (189 | ) | | — |
| | (189 | ) |
Other comprehensive income (loss) | (189 | ) | | 3,694 |
| | 3,505 |
|
Accumulated other comprehensive income (loss) at June 30, 2019 | $ | 2,470 |
| | $ | 24,847 |
| | $ | 27,317 |
|
|
| | | | | | | | | | | |
| Defined Benefit Pension | | Foreign Currency Translation | | Total |
| (In thousands) |
Accumulated other comprehensive income (loss) at December 31, 2017 | $ | 6,303 |
| | $ | 16,216 |
| | $ | 22,519 |
|
Other comprehensive income (loss) before reclassifications | — |
| | 3,947 |
| | 3,947 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | (81 | ) | | — |
| | (81 | ) |
Other comprehensive income (loss) | (81 | ) | | 3,947 |
| | 3,866 |
|
Accumulated other comprehensive income (loss) at June 30, 2018 | $ | 6,222 |
| | $ | 20,163 |
| | $ | 26,385 |
|
Amounts reclassified out of accumulated other comprehensive income (loss) are included as a component of net periodic pension cost (Note 13).
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 and six months ended June 30, 2019, we sold receivables totaling $149.1 million and $304.8 million, net of discounts and fees of $1.1 million and $2.2 million, respectively. For the three and six months ended June 30, 2018, we sold receivables totaling $203.1 million and $428.6 million, net of discounts and fees of $2.0 million and $3.8 million, respectively.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
9. Property, Plant and Equipment
Property, plant and equipment consist of the following:
|
| | | | | | | |
| June 30, 2019 | | December 31, 2018 |
| (In thousands) |
Land | $ | 219,991 |
| | $ | 222,884 |
|
Land use rights (1) | — |
| | 26,845 |
|
Buildings and improvements | 1,569,785 |
| | 1,523,065 |
|
Machinery and equipment | 5,266,111 |
| | 5,196,930 |
|
Finance lease assets | 26,414 |
| | 25,874 |
|
Software and computer equipment | 218,268 |
| | 213,440 |
|
Furniture, fixtures and other equipment | 18,877 |
| | 17,204 |
|
Construction in progress | 16,753 |
| | 44,381 |
|