SEC Filing | Amkor Technology

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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

September 30, 2019

☐

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 October 25, 2019 was 239,783,075.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2019

TABLE OF CONTENTS

Page

PART I. Financial Information

Item 1.

Financial Statements (unaudited)

Consolidated Statements of Income - Three and Nine Months Ended September 30, 2019 and 2018

Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2019 and 2018

Consolidated Balance Sheets - September 30, 2019 and December 31, 2018

Consolidated Statements of Stockholders’ Equity — Three and Nine Months Ended September 30, 2019 and 2018

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2019 and 2018

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II. Other Information

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

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 debt 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.

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands, except per share data)
Net sales	$	1,083,917	$	1,144,192	$	2,874,186	$	3,235,195
Cost of sales	901,677		943,485		2,447,731		2,707,000
Gross profit	182,240		200,707		426,455		528,195
Selling, general and administrative	70,458		70,463		206,803		225,886
Research and development	32,927		37,541		104,867		119,546

Total operating expenses	103,385		108,004		311,670		345,432
Operating income	78,855		92,703		114,785		182,763
Interest expense	16,988		19,770		54,914		60,908

Other (income) expense, net	(1,760)		1,315		641		(6,254)
Total other expense, net	15,228		21,085		55,555		54,654
Income before taxes	63,627		71,618		59,230		128,109
Income tax expense	9,141		14,326		36,418		27,438
Net income	54,486		57,292		22,812		100,671
Net income attributable to non-controlling interests	(416)		(630)		(1,071)		(1,874)
Net income attributable to Amkor	$	54,070	$	56,662	$	21,741	$	98,797

Net income attributable to Amkor per common share:
Basic	$	0.23	$	0.24	$	0.09	$	0.41
Diluted	$	0.23	$	0.24	$	0.09	$	0.41

Shares used in computing per common share amounts:
Basic	239,586		239,370		239,503		239,312
Diluted	239,937		239,766		239,858		239,783

The accompanying notes are an integral part of these statements.

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Table of Contents

AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Net income	$	54,486	$	57,292	$	22,812	$	100,671
Other comprehensive income (loss), net of tax:
Adjustments to unrealized components of defined benefit pension plans	(125)		(45)		(314)		(126)
Foreign currency translation	51		(6,611)		3,745		(2,664)

Total other comprehensive income (loss)	(74)		(6,656)		3,431		(2,790)
Comprehensive income	54,412		50,636		26,243		97,881
Comprehensive income attributable to non-controlling interests	(416)		(630)		(1,071)		(1,874)
Comprehensive income attributable to Amkor	$	53,996	$	50,006	$	25,172	$	96,007

The accompanying notes are an integral part of these statements.

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Table of Contents

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2019		December 31, 2018
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	598,753	$	681,569
Restricted cash	2,590		2,589
Accounts receivable, net of allowances	803,104		724,456
Inventories	216,663		230,589
Other current assets	41,891		32,005
Total current assets	1,663,001		1,671,208
Property, plant and equipment, net	2,466,067		2,650,448
Operating lease right of use asset	141,467		—
Goodwill	26,104		25,720
Restricted cash	2,874		3,893
Other assets	106,417		144,178
Total assets	$	4,405,930	$	4,495,447
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt	$	102,952	$	114,579
Trade accounts payable	477,900		530,398
Capital expenditures payable	157,527		255,237
Accrued expenses	253,876		258,209
Total current liabilities	992,255		1,158,423
Long-term debt	1,195,005		1,217,732
Pension and severance obligations	178,530		184,321
Long-term operating lease liability	85,094		—
Other non-current liabilities	67,426		79,071
Total liabilities	2,518,310		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; 285,607 and 285,352 shares issued; and 239,624 and 239,385 shares outstanding in 2019 and 2018, respectively	286		285
Additional paid-in capital	1,915,481		1,909,425
Retained earnings	134,930		113,189
Accumulated other comprehensive income (loss)	27,243		23,812
Treasury stock, at cost, 45,983 and 45,967 shares, in 2019 and 2018, respectively	(216,301)		(216,171)
Total Amkor stockholders’ equity	1,861,639		1,830,540
Non-controlling interests in subsidiaries	25,981		25,360
Total equity	1,887,620		1,855,900
Total liabilities and equity	$	4,405,930	$	4,495,447

The accompanying notes are an integral part of these statements.

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Table of Contents

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 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
Net income	—	—		—		54,070		—		—	—			54,070		416			54,486
Other comprehensive income (loss)	—	—		—		—		(74)		—	—			(74)		—			(74)


Treasury stock acquired through surrender of shares for tax withholding	—	—		—		—		—		(5)	(47)			(47)		—			(47)
Issuance of stock through share-based compensation plans	97	1		434		—		—		—	—			435		—			435
Share-based compensation	—	—		1,944		—		—		—	—			1,944		—			1,944
Subsidiary dividends to noncontrolling interests	—	—		—		—		—		—	—			—		(300)			(300)
Balance at September 30, 2019	285,607	$	286	$	1,915,481	$	134,930	$	27,243	(45,983)	$	(216,301)		$	1,861,639	$	25,981		$	1,887,620

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	—	—		—		21,741		—		—	—			21,741		1,071			22,812
Other comprehensive income (loss)	—	—		—		—		3,431		—	—			3,431		—			3,431


Treasury stock acquired through surrender of shares for tax withholding	—	—		—		—		—		(16)	(130)			(130)		—			(130)
Issuance of stock through share-based compensation plans	255	1		870		—		—		—	—			871		—			871
Share-based compensation	—	—		5,186		—		—		—	—			5,186		—			5,186
Subsidiary dividends to noncontrolling interests	—	—		—		—		—		—	—			—		(450)			(450)
Balance at September 30, 2019	285,607	$	286	$	1,915,481	$	134,930	$	27,243	(45,983)	$	(216,301)		$	1,861,639	$	25,981		$	1,887,620

The accompanying notes are an integral part of these statements.

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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 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
Net income	—	—		—		56,662		—		—	—			56,662		630			57,292
Other comprehensive income (loss)	—	—		—		—		(6,656)		—	—			(6,656)		—			(6,656)


Treasury stock acquired through surrender of shares for tax withholding	—	—		—		—		—		(5)	(48)			(48)		—			(48)
Issuance of stock through share-based compensation plans	13	—		—		—		—		—	—			—		—			—
Share-based compensation	—	—		1,235		—		—		—	—			1,235		—			1,235
Subsidiary dividends to noncontrolling interests	—	—		—		—		—		—	—			—		(140)			(140)
Balance at September 30, 2018	285,335	$	285	$	1,908,171	$	84,894	$	19,729	(45,961)	$	(216,135)		$	1,796,944	$	24,897		$	1,821,841

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	—	—		—		98,797		—		—	—			98,797		1,874			100,671
Other comprehensive income (loss)	—	—		—		—		(2,790)		—	—			(2,790)		—			(2,790)


Treasury stock acquired through surrender of shares for tax withholding	—	—		—		—		—		(16)	(153)			(153)		—			(153)
Issuance of stock through share-based compensation plans	206	—		1,023		—		—		—	—			1,023		—			1,023
Share-based compensation	—	—		3,791		—		—		—	—			3,791		—			3,791
Subsidiary dividends to noncontrolling interests	—	—		—		—		—		—	—			—		(410)			(410)
Balance at September 30, 2018	285,335	$	285	$	1,908,171	$	84,894	$	19,729	(45,961)	$	(216,135)		$	1,796,944	$	24,897		$	1,821,841

The accompanying notes are an integral part of these statements.

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AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
	2019		2018
	(In thousands)
Cash flows from operating activities:
Net income	$	22,812	$	100,671
Depreciation and amortization	398,013		429,181


Other operating activities and non-cash items	51,533		(2,006)
Changes in assets and liabilities	(189,026)		(100,628)
Net cash provided by operating activities	283,332		427,218
Cash flows from investing activities:
Payments for property, plant and equipment	(328,497)		(478,036)
Proceeds from sale of property, plant and equipment	8,495		1,606
Proceeds from insurance recovery for property, plant and equipment	1,538		—





Other investing activities	(353)		3,160
Net cash used in investing activities	(318,817)		(473,270)
Cash flows from financing activities:
Proceeds from revolving credit facilities	172,700		—
Payments of revolving credit facilities	(92,700)		(75,000)
Proceeds from short-term debt	51,434		23,341
Payments of short-term debt	(42,067)		(35,125)
Proceeds from issuance of long-term debt	714,375		372,226

Payments of long-term debt	(847,155)		(279,697)




Payments of finance lease obligations	(4,358)		(2,669)




Other financing activities	(1,963)		(2,482)
Net cash provided by (used in) financing activities	(49,734)		594
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	1,385		(3,273)
Net decrease in cash, cash equivalents and restricted cash	(83,834)		(48,731)
Cash, cash equivalents and restricted cash, beginning of period	688,051		602,851
Cash, cash equivalents and restricted cash, end of period	$	604,217	$	554,120
Non-cash investing and financing activities:
Property, plant and equipment included in capital expenditures payable	$	157,959	$	254,244
Right of use assets acquired through finance lease liabilities	7,628		13,272
Right of use assets acquired through operating lease liabilities	42,217		—

The accompanying notes are an integral part of these statements.

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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 September 30, 2019, and for the three and nine months ended September 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 nine months ended September 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 September 30, 2019 and December 31, 2018 were $109.7 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.

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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 September 30,						For the Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Advanced products (1)	$	588,975	$	582,165	$	1,444,059	$	1,554,158
Mainstream products (2)	494,942		562,027		1,430,127		1,681,037
Total net sales	$	1,083,917	$	1,144,192	$	2,874,186	$	3,235,195

(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 September 30,			For the Nine Months Ended September 30,
	2019	2018	2019	2018
Communications (handheld devices, smartphones, tablets)